TAXATION

FINAL EXAMINATION
A/Y 2020 - 2021

I. TRUE OR FALSE

1. The EFPS is a manual mode of filing tax returns and payment of taxes.

2. Taxes withheld on income payments covering the expanded withholding taxes and final
withholding taxes are creditable in nature.

3. All income earned by persons are subject to withholding tax.

4. The employee who opts to file the income tax return shall file the same not later than
April 15 of the year immediately following the taxable year.

5. The obligation of the payor to withhold tax arises at the same time an income is paid or
payable.

6. An individual whose sole income has been subjected to final withholding tax is still
required to file an income tax return.

7. An individual deriving compensation income from two or more employers within the
taxable year is not qualified for substituted filing.

8. Individuals engaged in business or practice of profession, regardless of amount of

sales/receipts, are required to file income tax returns for four quarters and an annual
income tax return.

II. MULTIPLE CHOICE

1. Which of the following surcharges is not correct?

a. 25% of basic amount of tax due for simple neglect

b. 25% of basic amount of tax due for unintentional failure to file and pay tax return on
prescribe date
c. 50% of the basic amount of tax due for filing of return with wrong RDO
d. 50% of the basic amount of tax due for false or fraudulent tax return
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FINAL EXAMINATION
A/Y 2020 - 2021

2. Among the nature of taxation are the following. Which one is not?

a. It is inherent in sovereignty
b. The citizenry benefits on it.
c. The government solely benefits from it
d. It is a mean by which the government raises income.

3. It is a tax of fixed proportion of the value of the property with respect to which the tax is
assessed and requires the intervention of assessors or appraisers to estimate the value
of such property.

a. Specific
b. Ad valorem
c. Special or regulatory
d. None of the above

4. It is the proportional contribution by persons and property levied by the lawmaking

body of the state virtue of its sovereignty for the support of the government and all
public needs.

a. Taxes
b. License fee
c. Special assessment
d. None of the above

5. One characteristic of tax is that

a. It is generally assignable
b. It is generally based on contract
c. It is generally payable in money
d. None of the above

6. The following statement is correct except one. Which one?

a. For the exercise of the power of taxation, the State can tax anything at any time.
b. The provisions of taxation in the Philippine Constitution are grants of power and not
limitations on taxing power.
c. Taxes may be imposed to raise revenues or to provide disincentives to certain
activities within the state.
d. The state can have the power of taxation even if the Constitution does not expressly
give it the power to tax.
TAXATION
FINAL EXAMINATION
A/Y 2020 - 2021

7. Passive income includes income derived from an activity in which the earner does not
have any substantial participation. This type of income is

a. Usually subject to a final tax.

b. Exempt from income taxation.
c. Taxable only if earned by a citizen.
d. Included in the income tax return

8. Which statement is wrong? The deduction for premiums on hospitalization and health
insurance is

a. Not to exceed P200 per month.

b. Not exceed P2,400 a year per family.
c. Not allowed if the family income exceeds P250,000.
d. In the case of married persons, can be claimed by either spouse.

9. What is the rule of taxability of income that a government educational institution

derives from its school operations? Such income is

a. Subject to 10% tax on its net taxable income as if it is a proprietary educational

institution.
b. Exempt from income taxation if it is actually, directly, and exclusively used for
educational purposes.
c. Subject to the ordinary income tax rates with respect to incomes derived from
educational activities.
d. Exempt from income taxation in the same manner as government-owned and
controlled corporations.

10. Which of the following domestic corporations is exempt from income tax?

a. Non-stock and non-profit educational institution

b. Labor, agricultural or horticultural organizations organized principally for profit.
c. Cemetery company owned and operated not exclusively for the benefits of its
members.
d. Civic league or organization organized for profit and operated not exclusively for the
promotion of social welfare

11. The normal tax of an ordinary corporation is

a. 30%
b. 32%
c. 35%
TAXATION
FINAL EXAMINATION
A/Y 2020 - 2021

d. All of the above

12. Which of the following may not be deducted from gross receipts to arrive at gross
income for purposes of computing the MCT of a tax payer engaged in the sale of
services under the cash basis?

a. Sales discounts
b. Cost of services
c. Sales returns and allowances
d. None of the above

13. The minimum corporate income tax of a domestic or resident trading or manufacturing
corporation is

a. 2% of gross income
b. 2% of gross sales
c. 15% of gross income
d. 15% of gross sales

14. Top withholding agents, classified and duly notified by the Commisioner, include

a. Large taxpayers under Revenue Regulations (RR) No 1-98, as amended.

b. Top 20,000 private corporations under RR No 6-2009
c. Top 5,000 individuals under RR No. 6-2009
d. All of the above
e. Both A and B

15. Income payment subject to withholding tax on compensation

a. Compensation income of minimum wage earners (MWE)

b. Holiday pay, overtime pay, night shift differential pay and hazard pay earned by
MWE.
c. Commissions, honoraria, fringe benefits, and other additional compensation in
excess of the allowable statutory amount of P90,000.

16. Which statement is true?

a. Income subject to income tax may be subject to withholding tax.

b. Income exempt from income tax is consequently exempt from withholding tax.
c. Income not subject to withholding tax may be subject to income tax.
d. All of the above
e. A and B
TAXATION
FINAL EXAMINATION
A/Y 2020 - 2021

17. Which of the following contractors is not subject to the 1% credible withholding tax?

a. General engineering contractors

b. General building contractors
c. Specialty contractors
d. Other contractors
e. All of the above
f. None of the above

18. All of the following except one are subject to the same rate of final withholding tax?

a. Professional fees, talent fees, etc. for services of taxable juridical persons
b. Rentals
c. Cinematographic film rentals and other payments
d. Professional fees, talent fees, etc., for services rendered by individuals

19. Who are required to deduct and withhold creditable tax on income payments?

a. In general, any juridical person, whether or not engaged in trade or business.

b. An individual, with respect to payments made in connection with his trade or
business.
c. All government offices including government-owned or controlled corporations, as
well as provincial, city and municipal governments.
d. All of the above
e. None of the above

20. Which is not true about final withholding tax on income payments to a citizen or
resident alien individual?
a. Final withholding tax on interest from any peso bank deposit, and yield or any other
monetary benefit from deposit substitutes and from trust funds and similar
arrangements is 20%.
b. Final withholding tax on royalties on books, as well as other literary works and
musical compositions is 20%
c. Final withholding tax on interest income received by a resident individual taxpayer
from depository bank under the Foreign Currency Deposit System is 7.5%.
d. Final withholding tax on prizes amounting to P10,000 or less is 20%.

21. Who is not required to file income tax return?

a. Individual deriving compensation concurrently from two or more employers at any

time during the taxable year
TAXATION
FINAL EXAMINATION
A/Y 2020 - 2021

b. Individual receiving a combination of compensation and business income (mixed

income)
c. Employee who’s total compensation income, regardless of the amount, the income
tax of which has not been withheld correctly.
d. All of the above
e. None of the above

22. Who among the following individuals are exempt from filing their income tax return?

a. An individual who’s gross income does not exceed his total personal and additional
exemption and dependents, except a citizen of the Philippines and an alien
individual engaged in business on practice of profession in the Philippines.
b. An individual whose sole income has been subjected with final withholding tax.
c. An individual who is exempt from income tax
d. All of the above
e. None of the above

23. Generally, the following individuals are required to file an income tax return. Who is not?

a. Every Filipino citizen residing in the Philippines

b. Every Filipino citizen residing outside the Philippines, on his income from sources
within the Philippines
c. Every alien residing in the Philippines on income derived from sources within the
Philippines
d. Every non-resident alien engaged in trade or business or in the exercise of
profession in the Philippines
e. All of the above
f. None of the above

24. When will compromise penalties is not allowed?

a. Failure to preserve or keep books of accounts and accounting records

b. Failure to keep books of accounts or records in a native language or in English
c. Failure to have books of accounts audited and have financial statements attached to
income tax return certified by an independent CPA.
d. Keeping two (2) sets of books of accounts or records

25. For filing a false or fraudulent return, a surchange is imposed at:

a. 25% as criminal penalty

b. 25% as administrative penalty
c. 50% as criminal penalty
TAXATION
FINAL EXAMINATION
A/Y 2020 - 2021

d. 50% administrative penalty

26. Alegre Trading is reporting its income on accrual basis of accounting. Under calendar
year period of reporting, when should be the last day of filing and payment of its income
tax for the year 200A?

a. April 15, 200A

b. April 15, 200B
c. December 31, 200A
d. January 15, 200B

Problem Solving. 2 points. Show your Solution

1. A certain taxpayer has a basic tax due amounting to 10,000 pertaining to his 200A ITR but
was filed only on June 30,200B to wrong Revenue District Office. How much would be the
total amount due by the taxpayer inclusive of surcharge and interest?

a. P12,500
b. P15,000
c. P15,417
d. P17,417

2. A Philippine National chartered a foreign vessel of nonresident lessor for P500,000. How
much should be paid to nonresident lessor, net of withholding tax?

a. P450,000
b. P462,500
c. P477,500
d. P500,000

3. A tax informer earned P1,000,000 reward. How much should be paid to the tax informer,
net of withholding tax?

a. P950,000
b. 900,000
c. 850,000
d. 800,000

4. A’s income tax liability for 2016 was P75,000. She filed the return and paid the total
amount due on July, 15, 2017 but not with proper internal revenue district office. The
amount payable by A is
TAXATION
FINAL EXAMINATION
A/Y 2020 - 2021

a. P97,500
b. P116,250
c. P135,000
d. 112,500

For taxable year 2014, the company’s sixth year of operations, the records of mega Specialties
Corp., a domestic corporation, show the following:

Gross sales P2,463,500

Sales returns and allowances 27,500
Sales discounts 42,750
Cost of goods manufactured & sold 1,313,600
Operating expenses 586,040

5. Net sales

a. P2,463,500
b. P2,436,000
c. P2,420,750
d. P2,393,250

6. Gross income

a. P2,463,500
b. P2,393,250
c. P1,313,600
d. P1,079,650

7. Minimum corporate income tax

a. P21,593
b. P26,272
c. P47,865
TAXATION
FINAL EXAMINATION
A/Y 2020 - 2021

d. P49,270

8. Complete name of the Instructor. 2 points.