CHAPTER 6

Drill Exercises

For each of the following items, indicate the following:

Exempt for entity exempt from business tax

% tax for those specifically subject to percentage tax
Vatable - for those subject to either VAT or general percentage tax

1. Seller of agricultural food product EXEMPT

2. Furniture shop VATABLE

3. Vegetable trader EXEMPT

4. A private high college EXEMPT

5. A private hospital EXEMPT

6. A dentist VATABLE

7. Hospital drug store VATABLE

8. A non- profit elementary school EXEMPT

9. A government college EXEMPT

10. Restaurant VATABLE

11. Bus operator % TAX

12. Hotel VATABLE

13. Operator of domestic sea vessel VATABLE

14. Life insurance company % TAX

15. Mall VATABLE

16. Domestic airliner VATABLE

17. Lessor vessels or aircraft VATABLE

18. Banks % TAX

19. Operator of taxi % TAX

20. International carriers % TAX

21. Keepers of garage % TAX

22. Book publishers EXEMPT

23. Quasi-banks VATABLE

24.Dealer of household appliances VATABLE

25. Dealer of commercial lot VATABLE

26. Insurance agent VATABLE

27. Employee EXEMPT

28. Contractor VATABLE

29. Processor of sardines VATABLE

30. Auto parts dealer VATABLE

31. Manufacturer of hog feeds EXEMPT

32. Seller of fertilizer and seeds EXEMPT

33. Fisherman EXEMPT

34. Fish vendor EXEMPT

35. Textile manufacturer VATABLE

True or False 1

1. A person who exceeded the VAT-threshold in any 12-month period must register as a VAT-
taxpayer. TRUE

2. The VAT applies on receipts or sales other than those exempted and those specifically subject to
percentage tax. TRUE

3. A person with vatable sales or receipts not exceeding the VAT-threshold may register as a non-VAT
taxpayers. TRUE

4. A person with vatable sales or receipts not exceeding the VAT-threshold may register as a VAT-
taxpayer. TRUE

5. A person who commences business with an expectation to exceed the VAT threshold must register
as a VAT taxpayer. TRUE

6. A registrable person is exempt from VAT.FALSE

7. A VAT-registered person is exempt from VAT on VAT-exempt sales. TRUE

8. A non-VAT taxpayer shall not bill VAT on his sale. TRUE

9. A VAT-registered person is liable to VAT on exempt sales and services specifically subject to
percentage tax. FALSE

10. The threshold for franchise grantees of electricity is P10,000,000FALSE

11. The VAT threshold for sellers of goods or services is P3,000,000TRUE

12. The VAT threshold for franchise grantees of gas and water is P10,000,000 TRUE

13. The VAT threshold applicable to professional practitioners is P10,000,000 TRUE

14. Exempt sales shall not be billed with an output VAT.TRUE

 15. A sale to the government shall not be billed with output VAT since it is

exempt from VAT.FALSE

True or False 2

1. Export sales shall be billed with output VAT.FALSE

2. The export sale of a VAT-taxpayer is an exempt sale.FALSE

3. A non-VAT-registered person who invoiced VAT on his sale shall be subject to 12% VAT without
the benefit of an input VAT 3% percentage tax, and 25% surcharge.FALSE

4. Exempt sales which are billed as regular sales shall be considered as regular vatable sales.TRUE

5. The VAT payable of a VAT-registrable person is the output VAT without benefit of Input VAT plus
3% percentage tax.FALSE

6. No input VAT traceable to exempt can be claimed sales as tax credit.TRUE

7. No input VAT traceable to government sales is claimable as tax credit. FALSE

8. A VAT-registered person shall be subject to a final withholding VAT of 12% on sales to the
government.FALSE

9. The VAT payable of any person is always 3% of the value-added on the sales of goods.FALSE

10. The claimable input VAT on government sales is 7% of the sales.TRUE

11. The VAT payable on zero-rated sales is always zero.TRUE

12. There is no way VAT payable could be negative in a particular month or quarter.FALSE

13. VAT is paid in three monthly installments similar to the percentage tax.FALSE

14. Exempt sales must be indicated as such; otherwise, they will be regarded as regular sales.TRUE

15. The standard input VAT is 5% of government sales.FALSE

Multiple Choice - Theory: Part 1

1. All of these are vatable, except

a) Engineering contractors c.
b) Lawyers
c) Employee
d) d. Brokers
2. Which is not VAT-exempt?

a) Importation of agricultural or marine food products

b) Gross receipts of professional practitioners
c) Receipts from taxicabs
d) Gross receipts of hospitals
3. Which is vatable?

a) Sale of fertilizers
 b) Sales of fruit
c) Sale of bamboo handicrafts
d) Sale of bamboo handicrafts
4. All of these businesses are vatable, except

a) Non-life insurance business

b) Banks
c) Security dealers
d) Merchandisers
5. Which is vatable?

a) Fruit dealer
b) Department stored.
c) Cooperative
d) Meat vendor
6. Which of the following will pay VAT?

a) Farmer
b) Food processor
c) Rice or corn miller
d) Fruit dealer
7. Which will not pay VAT?

a) International carrier
b) Domestic air carrier
c) Domestic sea carrier
d) All these

8. Which of the following is vatable?

a) An operator of cockpits
b) A disco
c) A bowling alley
d) An operator of a race track
9. Which is vatable?

a. Local water districts c. Internet service providers

b. Gasoline stations d. Schools

10. Which is vatable?

a) Sale of buses and jeepneys

b) Sale of vessels
c) Sale of aircraft
d) d. Lease of vessels or aircraft
11. Which will not pay VAT on its receipts?

a) Hospitals
b) Real Property dealers
c) Bookstores
 d) Taxicab Operators
12. Which sales is vatable

a) sales of agricultural or marine food products

b) gross receipts of medical practitioners
c) sales of book
d) sale of fertilizer, seeds, and seedlings
13. Which statement is correct?
a) Husband and wife are considered separate taxpayers for business tax
b) For purposes of the VAT threshold, both exempt sales and receipts from services subject to
percentage tax must be included.
c) VAT-registered taxpayer must pay VAT on services subject to percentage tax.
d) All of these
14. What is the general lock-in period (or those who voluntarily register as VAT

a) 3 years
b) 5 years
c) 1 year
d) perpetual

15. To franchise grantees of radio or television, the VAT-registration shall be c

a) Revocable in 3 years
b) irrevocable in 3 years
c) revocable in 1 year,
d) d. irrevocable perpetually,

16. Which is not vatable as a separate entity?

a) A branch
b) A subsidiary company
c) A spouse
d) A parent company

17. Statement 1: Sellers of services are subject to VAT on gross receipts.

Statement 2: Sellers of goods are subject to VAT on gross selling price
Which is correct?

a) Both statements
b) Neither statement
c) Statement 1
d) Statement 2

18. Statement 1: As a rule, percentage tax is paid monthly.

Statement 2: VAT is paid monthly and quarterly.
Which is false?

a) Both statements
b) Neither statement
 c) Statement 1
d) Statement 2

19. Statement 1: "Gross receipt" means collections and advances by clients.

Statement 2: "Gross selling price" means gross sales including delivery charges and excise tax on the
sales if any.
Which is correct?

a) Both statements
b) Neither statement
c) Statement 1
d) Statement 2

20. Statement 1: Discounts that are contingent to a future event are deductible from gross selling price.
Statement 2: Expenses of the service provider that are reimbursed by theclient forms part of the gross
receipt.
Which is incorrect? I

a) Both statements
b) Neither statement
c) Statement 1
d) Statement 2

Multiple Choice Theory: Part 2

1. Which is non-vatable?

a) Exempt sales billed as regular sales by VAT persons

b) Export sales of VAT-registered persons
c) Regular sales of registrable persons
d) Export sales of non-VAT-registered persons

2. Statement 1: Input VAT is creditable only by VAT-registered taxpayers.

Statement 2: Input VAT is deductible by non-VAT taxpayers against their gross income for purposes of
income tax.
Which statement is correct?

a. Statement 1 c. Both statements

b. Statement 2 d. Neither statement

3. Statement 1: A VAT taxpayer who purchases goods from non-VAT suppliers will effectively pay a VAT
equivalent to the output VAT.
Statement 2: No output VAT shall be billed on export sales and exempt sales.
Which is incorrect?

a. Statement 1 c. Both statements

b. Statement 2d. Neither statement

4. What is the tax payable by a non-VAT taxpayer who issues a VAT invoice Or VAT official receipt?
 a) Output VAT plus 3% percentage tax
b) Output VAT less input VAT, plus 3% percentage tax and 50% surcharge
c) Output VAT plus 3% percentage tax and 50% surcharge
d) 3% percentage tax

5. What is the business tax payable by a person who js VAT-registrable?

a) The output VAT

b) The input VAT
c) Output VAT less Input VAT
d) Output VAT plus 3% percentage tax

6. The claimable input VAT is 12% of purchases from

a) VAT-registered taxpayers.
b) Non-VAT-registered taxpayers.
c) Aor B
d) None of these
7. Which is a source of input VAT?
a) Purchase of agricultural or marine food products from VAT-sellers
b) Purchase of agricultural or marine food products from non-VAT sellers
c) Purchase ofvatable goods or services from non-VAT suppliers
d) Purchase of vatable goods or services from VAT suppliers

8. Which is not a sales category for VAT taxpayers?

a) Exempt sales
b) Zero-rated sales
c) Sales to the government
d) Sales to non-profit institutions

9. What is the VAT due and payable on regular sales?

a) Output VAT less Input VAT

b) Output VAT less Input VAT plus 3% percentage tax
c) Output VAT + 3% percentage tax
d) Output Vat + 3% percentage tax plus surcharge

10. Which is subject to withholding VAT?

a) Regular sales of real properties

b) Zero-rated sales
c) Sales to the government
d) Exempt sales

11. AVAT taxpayer cannot claim input VAT credit on

 a. Regular sales c. Government sales

b. Zero-rated sales d. Exempt sales

12. Which is a possible source of input VAT?

a) Importation
b) Purchase from VAT-sellers
c) Purchase from non-VAT sellers
d) A and B

13. AVAT taxpayer can claim the actual input VAT credit on

a. Regular sales c. Government sales

b. Zero-rated sales d. A and B

14. A VAT taxpayer may claim only partial or full input VAT credit on

a. Regular sales c. Government sales

b. Zero-rated sales d. A and B

15. The output VAT on government sales is

a. 12% of sales c. None

b. 0% of sales d. 12% of value added

16. The output VAT on export sales is

a. 12% of sales c. None

b. 0% of sales d. 12% of value added

17. The output VAT on exempt sales is

a. 12% of sales c. None

b. 0% of sales d. 12% of value added

18. No input VAT is creditable on

a. Government sales c. Export sales

b. Regular salesd. Exempt sales

19. The claimable input VAT on government sales is

a) 12 %of purchases from VAT suppliers

b) 12% of purchases from non-VAT suppliers or VAT supplier
c) 7% of purchases from VAT suppliers
d) 7% of sales
20. Statement 1: The VAT due and payable on regular sales is always positive.

Statement 2: The VAT due and payable on export sales is always negative
 Which statement is generally correct?

a) Both statements
b) Neither statement
c) Statement 1
d) Statement 2
21. Statement 1: Sellers always pay VAT on government sales.
Statement2: Sellers will not pay VAT on export sales.
Which is incorrect?

a. Statement I c. Both statements

b. Statement 2 d. Neither statement

22. Which is a correct statement regarding the VAT?

a) The taxable quarter of any taxpayer must be aligned to the calendar year.
b) The taxable quarter of an individual taxpayer must be aligned to the calendar year.
c) The taxable quarter of a corporate taxpayer must be aligned to the calendar year.
d) All of these

23. Statement 1: The VAT returns for the first two months of the quarter are prepared on a monthly basis.
Statement 2: The VAT return on the third month of the quarter reflects a monthly balance.
Which is incorrect?

a) Statement 1
b) Statement 2
c) Both statements
d) Neither statement

24. Statement 1: VAT paid in the first two months of the quarter is deductible against the Output VAT for
the entire quarter.
Statement 2: The VAT paid in a quarter is deductible against the outputVAT of future quarters of the
taxable year.
Which is correct?

a) Statement 1
b) Statement 2
c) Both statements
d) Neither statement

25. The monthly VAT return is referred to as

a) BIR Form 2551M

b) BIR Form 2550M
c) BIR Form 25510
d) d, BIR Form 25500
Multiple Choice - Problems: Part 1

1. An agricultural supplier had the following sales during the last 12-month

Sales of fertilizers and corn seeds 1,200,000

Sales of seedlings 400,000
Farm equipment 700,000

What is the business tax liability of this taxpayer?

a) VAT on all these categories of sale

b) VAT on equipment and seedlings
c) Percentage tax on equipment and seedlings
d) Percentage tax on farm equipment

2. Mrs. Escala had the following sources of income in the past 12 months:
Salaries 1,200,000
Professional fees 800,000
Which is correct?

a) She shall be subject to VAT on the salaries and professional fees.

b) She shall be subject to percentage tax on the salaries and professional fees.
c) She shall pay percentage tax on the professional fees only.
d) She shall pay VAT on the professional fees only.
3. Aciga Corporation had the following sales in the past 12-month period:
Home office sales 2,000,000
Branch 1 sales 1,200,000
Branch 2 sales 1,000,000
Total company sales 4,200,000
Which is correct?

a) Home office shall pay VAT.

b) Branch 1 and branch 2 shall pay percentage tax.
c) The home office and branches shall all pay VAT.
d) A and B

4. Assuming Aciga Corporation is a parent corporation with two subsidiaries with the following sales in
the past 12-month.

Aciga Corporation 2,000,000

Subsidiary 1 sales 1,200,000
Subsidiary 2 sales 1 000 000
Total group sales 4,200,000
Which is incorrect?

a) Aciga Corporation shall pay VAT.

b) Subsidiary 1 and Subsidiary 2 shall pay percentage taxes.
c) All companies in the group shall pay VAT.
d) A and B
5. Mr. and Mrs. Lallo had the following sales in the past 12 months:
 Mr. Lailo Mrs. Lallo TQÄL-
Fruits and vegetables sales P 1,400,000 P 1,400,000
Fish and meat sales 1,200,000 1,200,000
Grocery sales 800,000 600,000 1,400,00
Which is correct?

a) Both Mr. and Mrs. Lallo shall pay VAT.

b) Both Mr. and Mrs. Lallo shall pay percentage tax.
c) Mr. Lallo shall pay VAT, but Mrs. Lallo shall pay percentage tax.
d) Mrs. Lallo shall pay VAT, but Mr. Lallo shall pay percentage tax.
6. Mr. Vegetta, a VAT-registered taxpayer, owns a mini-store with the following sales in the past 12
months:

Sales of meat and vegetables 1,800,000

Sales of cooked rice and viands 1,200,000
Sales of snacks and softdrinks 500,000
Total sales 3,500,000
Which is correct?

a) Mr. Vegetta shall pay percentage tax on the sales of rice, viands, softdrinks and snacks.
b) Mr. Vegetta shall pay VAT on the sale of rice, viands, snacks and softdrinks.
c) Mr. Vegetta shall pay VAT on all sales.
d) Mr. Vegetta shall pay percentage tax on all sales.

7. A non-VAT realty lessor had the following receipts during a month:

Bed spacers' rooms with P2,000 monthly rental each P 120,000

Houses for rent with P10,000 monthly rental each 1,000,000
Commercial spaces with P5,000 monthly rental each 900,000
Which is correct?
a) The taxpayer shall pay VAT on all receipts.
b) The taxpayer shall pay VAT on the commercial spaces.
c) The taxpayer shall pay percentage tax on all receipts.
d) The taxpayer shall pay percentage tax on the commercial spaces.

8. A service provider had the following data during the month:

Revenue, including VAT P 268,800

Gross receipts, including VAT 180,000
Input VAT 12,000
Assuming the taxpayer is VAT-registered, compute the VAT payable.

a. P7,283 c. P 16,800
b. P9,600 d. P 19,286
(Closest answer)
Output VAT (P180,000 x 12/112) P 19,286
Input VAT 12,000
VAT payable P 7,286
Note: A seller of goods is taxable on “gross receipts” not on revenues.
Professors may accept an “E” answer if students indicated the P7, 286 answer .
 9. Assuming the taxpayer is a VAT-registrable person, compute the VAT payable?

a. P7,283 c. P 16,800

b. 9,600 d. P 19,286

10. A seller of goods had the following data during the month:

Sales invoice (total billed prices) P 436,800

Total cash collections 380,800
Sales returns and allowances, billed price 11,200
Input VAT 14,000
Assuming the taxpayer is VAT-registered, compute the VAT payable.

a. 0 c. P 31,600

b. P 26,800 d. P 35,600

Output VAT (P436, 800-P11, 200) x 12/112 P 45,600

Input VAT 14,000
VAT payable P 31,600
Note: billed prices are inclusive of VAT.
11. Assuming the taxpayer is a VAT-registrable person, compute the VAT payable.

a. 0 c. P45,600

b. P26, 800 d. P 46,800

12. The following sales and purchases were taken from the books ofaccounts of a VAT taxpayer:

Sales April May June

Sales P 625,000 P 400,000 P 600,000
Purchases 400,000 420,000 200,000
What is the VAT payable in April?

a) 75,000
b) P 48,000
c) 27,000
d) 0
Data from the books of accounts are exclusive of VAT. Sales and purchases accounts exclude VAT.
April May June
Output VAT (12% of sales) P 75,000 P 48,000 P 195,000
Input VAT (12% of purchases) 48,000 50,400 122,400
VAT due P 27,000 -P 2,400 P 72,600
Less VAT due on monthly return 27,000
Quarterly VAT due P 45,600
Note: The quarterly balance composes of cumulative balances. Negative VAT due means no VAT payable.
13. What is the VAT payable in June?

a. P 72,600 c. P 48,000

b. P 72,000 d. P45,600
A VAT taxpayer had the following sales and purchases during the month:

Sales, excluding VAT P 300,000

Purchases, inclusive of P 14,000 VAT 280,000
Compute the gross income under each of the following independent cases:

14. The sale is VAT-exempt

a. P 20,000 c. P 50,000

b. P 34,000 d. P 57,000

Note: The input VAT on exempt sales will be part of costs. Thus, (P300,000 – P280,000) = P20,000.

15. The sale is made to the government

a. P 20,000 c. P41,000

b. P 34,000 d. P41,000

(P300,000 sales – P280,000 – 7% x P300,000) = P41,000

16. The sale is made to regular customers

a. P 20,000 c. P41,000

b. P 34,000 d. P 50,000
The input VAT must be removed from the purchases (cost of sales). Hence, [P300,000 sales – (P280,000 purchases – P14,000
input VAT)] = P34,000.

17. The sale is made by a registrable person

a. P 20,000 c. P 41,000

b.P 34,000 d. P 50,000

Input VAT on sales of registrable persons cannot be claimed as input VAT. Since, there is no express provision that disallowed
tax credits can be claimed as a deduction, it is safe to treat it as non-deductible against gross income. It must be emphasized that
the claim of deductions and tax credits are construed against the taxpayer.

Multiple-Choice - Problems: Part 2

1. A sale was invoiced by a VAT-seller at P500,000. Compute for the OutputVAT.

a. 0 c. P53,571

b. P50,000 d. P60,000

(P500,000 x 12/112) = P53,571

2. A VAT-registered seller wishes to bill the sale of unprocessed meat for P 50,000. At what amount should
the sale be billed?

a. P50,000 c. P53,571

b. P51,500 d. P56,000
 3. A VAT-registered department store had an un-invoiced sale with the following selling prices:

1 cavan rice 2,500

Vegetables 1,500
Cooking oil 200
Noodles 1,300
Total sales 5,500
What should be the invoice price?

a. P5,500 c. P5,665

b. P5,545 d. P5,680

4. The sale of a residential lot was invoiced for P1,680,000

What is the Output VAT?

a. P0 c. P200,000

b. P180,000 d. P201,600

5. The sale of a residential dwelling was invoiced for P3,920,000

What is the Output VAT?

a. 0
b. P462,000
c. P420,000
d. P470,400
6. The sale of fruits was invoiced in a VAT invoice at P24,000.

What is the output VAT?

a. P0 c. P2,880

b. P2,571 d. P4,000

7. A taxpayer had the following purchases of vatable goods, exclusive of VAT:

Purchases from non-VAT suppliers P 180,000

Purchases from VAT-suppliers 1,000,000
Total purchases 1,180,000
What is the input VAT?

a. P107,143 c. P126,429

b. P2,120,000 d. P141,600

8. A non-VAT registered taxpayer purchased goods which was invoiced by the seller as follows:
 Selling price 50,000
Output VAT 6,000
Total invoice 56,000
What is the claimable input VAT?

a) 0
b) b, P 6,000
c) P 6,720
d) P 7,200

9. In the immediately preceding problem, what is the claimable input VAT if purchaser is a VAT-
registered taxpayer?

a. P0 c. P 6,720

b. P 6,000 d. P 7,200

10. An insurance company had the following gross receipts:

Last Current
12-months month
Premiums from life insurance P 4,600,000 P 700,000
Premium from non-life insurance 1,920,000 200,000
Input VAT- non-life products 140,000 10,000
The insurance company did not register as a VAT taxpayer.

What is the VAT payable for the current month?

a. P0 c. P 24,000

b. P 14,000 d. P 108,000

11. A VAT-registered taxpayer with several businesses had the following sales

Last 12 months Current Month

Sales of fertilizers and seeds 1,800,000 P 200,000

Sales of equipment 1,500,000 150,000
Input VAT on processed foods 140,000 13,000
Compute the VAT payable for the current month.

a. PO c. P 18,000

b. P 5,000 d. P 29,000

12. AVAT taxpayer is engaged in mixed transactions:

EXEMPT EXPORT REGULAR

SALES SALES SALES
Output VAT N/A - P300,000
Input VAT 12,000 36,000 200,000
What is the creditable input VAT?

a. 0 c. P236,000

b. P200,000 d. P248,000

13. In the immediately preceding problem, what is the VAT payable?

a. P 100,000 c. P 52,000

b. P 64,000 d. PO

14. The taxpayer made a sale of P400,000 to the government from goods he purchased for P300,000 from
VAT taxpayers.

What is the actual input VAT?

a. PO c. P28,000

b. P 20,000 d. P36,000

15. A VAT taxpayer sold goods to the government for P 1,000,000 and paid P40,000 input VAT traceable to
the sale. What is the creditable input VAT on government sale?

a. P0 c. P 50,000

b. P 40,000 d. P 70,000

16. A VAT-taxpayer exported P 1,000,000 worth of goods. It incurred P36,000 input VAT on such sales.
What is the creditable input VAT?

a. P 0 c. P 50,000

b. P36,000 d. P 70,000

17. A non-VAT-taxpayer exported P 1,000,000 worth of goods. It incurred P36,000 input VAT on such
sales. What is the creditable input VAT?

a. P0 c. P 50,000

b. P36,000 d. P 70,000

18. A taxpayer collected the following from lessors of commercial spaces:

Billing for rentals 1,500,000

Less: Creditable withholding tax 75,000
Net receipt 1,425,000
Compute the output VAT.

a. P 0 c. P180,000

b. P160,714 d. P200,000

19. A VAT taxpayer received a 5% creditable withholding tax plus P48,150 cash from a VAT invoice. What
is the output VAT?

a. P5,159 c. P 5,373
 b. P 5,778 d. P 5,400

20. AVAT taxpayer received a sum of P74,900 and a P3,500 certificate of creditable withholding tax. What
is the output VAT?

a. P 9,396 c. P 8,400

b. P 8,568 d, P 8,988

CHAPTER 7

True or False 1

1. Sellers of services are subject to VAT on their gross sales or receipts. FALSE (GR only)
2. Sellers of goods are subject to VAT on gross receipts. FALSE (Gross Selling Price)
3. Sellers of properties are subject to VAT on the fair market value of the property sold or disposed of.
FALSE (FMV or GSP)
4. Gross receipts include agency monies and bank loans received by the taxpayer. FALSE
5. When the discount exceeds 30% of the actual market value, the selling price is considered
unreasonably lower. TRUE
6. If the selling price exceeds the fair value, the basis of the output VAT is the fair value. FALSE
7. If the selling price is below fair value, the basis of the output VAT is the fair value. FALSE
8. If the selling price is unreasonably lower, the basis of the output VAT is the selling price. FALSE
(FMV)
9. "Gross receipt" means collections including evidences of indebtedness such as promissory notes
given by the client. FALSE (except notes)
10. Advances given by the client are included in gross receipts. TRUE
11. Client expenses reimbursed by the client to the business taxpayer are part of gross receipt. FALSE
12. Out-of-pocket expenses of the service provider reimbursed by the client are part of gross receipt.
TRUE
13. Only dealers in real properties are subject to VAT on the sale of real properties. FALSE (ordinary
assets are also vatable)
14. A person not engaged in business is not subject to VAT on his sale of goods or properties. TRUE
15. For purposes of the VAT, fair value of real property means the higher of independent appraisal value
and zonal value. FALSE (AV or ZV whichever higher)
16. If the VAT is based on the fair value of the property, the same is presumed to be inclusive of the
VAT. FALSE(exclusive)
17. The VAT on the installment sale of goods may be reported in installment. FALSE (only real
property)
18. The VAT on the sale of real property is always reported in installment. FALSE
19. The installment reporting of output VAT on services is as allowed so long as the initial payments do
not exceed 25% of the agreed contract price. FALSE (not services, real property only)
20. The installment reporting of VAT must be over the estimated life of the property in months or 60
months whichever is lower. FALSE (over the collection period)

True or False 2
1. The sale of properties considered ordinary assets is subject to Output VAT. TRUE
2. The sale of real property on the deferred payment basis, not on the installment basis, shall be
subject to VAT similar to a cash sale. TRUE
3. Interest and penalties are subject to VAT in the months they are collected. TRUE
 4. The sale of capital assets such as investments is not subject to Output VAT. TRUE
5. The donation of business properties considered ordinary assets by the business owner is a
transaction "deemed sale". TRUE
6. The distribution of cash dividends is a deemed sale subject to Output VAT. FALSE
7. The distribution of property dividend in the form of stocks of another corporation is subject to
output VAT. FALSE (unless taxpayer is dealer in securities)
8. The sales of all ordinary assets are exempt from VAT. FALSE
9. The exchange of investments in payment of debt is a deemed sales transaction subject to VAT.
FALSE
10. The exchange of residence in payment of debt is subject to VAT as a deemed sale transaction.
FALSE
11. Consignment is deemed sold if not returned by the consignee in 30 days. FALSE (60 days)
12. The consignee is subject to VAT on the commission income on sales of consigned goods. TRUE
13. The consignor is subject to VAT on the sales of consigned goods by its consignees. TRUE
14. The vatable inventories and properties of a VAT taxpayer upon retirement or cessation of
business are subject to VAT as deemed sales.TRUE
15. The output VAT on deemed sales upon retirement or cessation of business shall be based on the
market price or cost of goods whichever is lower. TRUE
16. The commissioner shall determine the market value in cases of transactions deemed sales and
sales with unreasonably lower gross selling prices. TRUE
17. The change in corporate control over a corporation is considered a deemed sale transaction.
FALSE
18. When a business changes its trade name, vatable items or properties in its possession shall be
deemed sold at the date of change. FALSE
19. The consolidation of a corporation with another corporation is not considered a deemed sale
transaction. TRUE
20. The merger between two corporations shall result in a deemed sale transaction. FALSE

Multiple Choice - Theory: Part 1

1. What is the tax basis of the output VAT on sales of services?
a. Gross selling price
b. Gross receipts
c. Fair value
d. Fair value or gross selling price whichever is higher
2. What is the tax basis of the output VAT on sales of goods?
a. Gross selling price
b. Gross receipts
c. Fair value
d. Fair value or gross selling price whichever is higher
3. What is the tax basis of the output VAT on exchange of properties?
a. Gross selling price
b. Gross receipts
c. Fair value of properties received
d. Fair value or gross selling price whichever is higher
4. What is the tax basis of the output VAT on sales of real properties?
a. Selling price
b. Gross receipts
c. Fair value
d. Fair value or selling price whichever is higher
5. What is the tax basis of the output VAT on sales of goods with unreasonably lower selling price?
a. Gross selling price
b. Gross receipts
 c. Fair value
d. Fair value or gross selling price whichever is higher
6. What is the tax basis of the output VAT on installment sales?
a. Gross selling price
b. Installment received
c. Fair value of property sold
d. Fair value or gross selling price whichever is higher
7. What is the tax basis of the output VAT on deemed sales?
a. Gross selling price
b. Gross receipts
c. Fair value
d. Fair value or gross selling price whichever is higher
8. Which of the following selling prices is considered unreasonably lower?
Fair value Selling price Discount
a. P 200,000 P 240,000 -None-
b. P 250,000 P 172,500 P 77,500
c. P 400,000 P 300,000 P 100,000
d. P 500,000 P 380,000 P 120,000
9. Which of these is excluded in the gross selling price?
a. Excise tax
b. Output tax
c. Contract price
d. Delivery charges
10. Which of the following is excluded in gross receipts?
a. Cash collection
b. Check collection
c. Promissory note given by the buyer
d. None of these
11. Which is not considered in the determination of the tax base of the VAT on sale of real properties?
a. Selling price
b. Zonal value
c. Assessed value
d. Appraisal value
12. Which of the following is subject to the Output tax?
a. Sale of books
b. Sale of agricultural or marine food products
c. Sale of non-food agricultural or marine products
d. Sale of educational services by a school
13. Which is subject to Output tax?
a. Gross receipts of domestic common carriers by land
b. Gross receipts of international common carriers
c. Gross receipts of banks
d. Gross receipts of non-life insurance companies
14. Which is subject to the 12% regular output tax?
a. Sale of residential dwelling with P 1,500,000 unit price
b. Gross receipts from residential dwelling with P 15,000 monthly rental
c. Receipts from publishing of books
d. Gross receipts of hospital
15. Which is not subject to the 12% output tax?
a. Gross receipts from restaurant
b. Gross receipts from professional practice
c. Gross receipts from race track operations
d. Sale of medicines

Multiple Choice - Theory: Part 2

1. Which of the following is subject to output tax if sold by a person not engaged in business?
a. Sale of personal residence
b. Sale of car
c. Sale of investment in stocks
d. None of these
2. Which of the following when sold will result in an output VAT?
a. Vegetables
b. Furniture
c. Fruits
d. Rice
3. A real property is sold by a dealer for P 1,900,000. The property had a zonal value of P 2,000,000,
assessed value of P 1,800,000 and independent appraisal value of P2,400,000. What is the "gross
selling price" for VAT purposes?
a. P 1,800,000
b. P 1,900,000
c. P 2,000,000
d. P 2,400,000
4. Which of the following is not subject to output tax when sold by a realty dealer?
a. Sale of properties held for sale
b. Sale of properties used in business
c. Sale of investment in stocks
d. Exchange of properties held for sale in settlement of debt
5. The output VAT on the installment sale of property may be reported in installment if
a. the ratio of initial payment exceeds 25% of the selling price.
b. the ratio of initial payment exceeds 25% of the fair value.
c. the ratio of initial payment does not exceed 25% of the selling price.
d. the ratio of initial payment does not exceed 25% of the fair value.
6. Which is not a deemed sales transaction?
a. Distribution of property dividend
b. Dacion en pago
c. Consignment of goods when actual sale is made within 60 days
d. Cessation of status as VAT taxpayer
7. Which is a deemed sales transaction subject to VAT?
a. Retirement of business by a non-VAT taxpayer
b. Dacion en pago of properties by a person not engaged in business
c. Distribution of property dividend by a VAT taxpayer
d. All of these
8. Which of the following dividend declaration is a deemed sale subject to VAT?
a. Distribution of stock dividends
b. Distribution of investments as property dividends
c. Distribution of cash dividends
d. Distribution of properties held for sale as dividends
9. Which of the following properties is not subject to VAT in a foreclosure sale (i.e. dacion en pago)?
a. Cars held for sale
b. Machineries
c. Corporate building
d. Vacant lot not used in business
10. Which is a deemed sale transaction?
a. Change in corporate name
b. Merger or consolidation of corporations
c. Sale of the entire business
d. Placement of an investment by a shareholder
11. Statement 1: If the output VAT is erroneously billed, the amount shown in the invoice is deemed
exclusive of VAT.
 Statement 2: If the output VAT is not separately indicated in the invoice, it shall be computed as
12/112 of the invoice prices.
Which statement is false?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement
12. Statement 1: By revenue regulation, the VAT shall be displayed separately from the selling price in
the invoice.
Statement 2: If the seller failed to indicate the VAT on the invoice, the sale shall be presumed
exempt.
Which statement is correct?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement
13. Statement I: Only VAT taxpayers are generally subject to the output tax
Statement 2: Non-VAT taxpayers never pay the 12% output tax.
Which statement is correct?
a. Statement 1b. Statement 2 c. Both statements d. Neither statement

14. Which is subject to the 12% regular output VAT?

a. Sale of silver to the BangkoSentralngPilipinas
b. Sale of services to a non-resident person
c. Sale of office supplies to the Asian Development Bank
d. Export sale by a non-VAT taxpayer
15. Which of the following receipts from a domestic common carrier are not subject to regular output
tax?
a. Receipts from transport of passengers by land
b. Receipts from transport of cargoes by land
c. Receipts from transport of passengers by sea
d. Receipts from transport of cargoes by air

Multiple-Choice - Problems: Part 1

1. A non-VAT taxpayer sold goods for P20,000, half of which are paid by the buyer who gave a
promissory note for the balance. The output VAT is
a. 0 (non-VAT taxpayer is not subject to VAT)
b. P 1,200
c. P 2,400
d. P 4,800
2. A VAT-taxpayer sold goods for P40, 000 which excludes a P 1,000 delivery charge and VAT. The
buyer paid P30, 000downpayment and promised to pay the P 11,000 balance plus the VAT in 30
days. What is the output VAT?
a. P4,920(P40,000 + P1,000) x 12%
b. P4,800
c. P 3,600
d. P 0
3. A VAT-taxpayer compiled the following for the purpose of filing his BIR Form 2550M:
Sales to VAT taxpayers P 200,000
Sales to non-VAT taxpayersP 150, 000
Total P 350, 000
What is the output VAT?
a. 0
b. P 18, 000
c. P 24, 000
 d. P 42,000(P350,000 x 12%)
4. A VAT-registered car dealer sold the following goods to a relative:
Selling price P 300,000
Fair market value 500,000
What is the output VAT?
a. P 0
b. P 36, 000
c. P 42, 000
d. P 60,000 (P500,000 x 12% - unreasonably lower SP)
5. A VAT-registered realty dealer sold a parking lot on the following terms.
Zonal value (fair value) P 2000000
Less: 10% discount (200000)
Selling priceP 1800000
Compute the output VAT.
a. P 0
b. P 168,000
c. P 216,000
d. P 240,000(P2M x 12%, basis is FMV as fixed by law)
6. A VAT-registered seller sold various merchandise at wholesale price, exclusive of VAT: Product
total retail price P 300,000
Less: Trade discount (10%) 30, 000
Product wholesale price P 270,000
Less: Cash discount (5%)* 13, 500
Net price due in 15 days P256, 500
*If customer pays in 15 days
What is the output VAT?
a. P 0
b. P 30,780
c. P 32,400(P270,000 x 12%, cash discount is contingent)
d. P 36,000
7. A non-VAT taxpayer prepared the following summary of sales for the purpose of filing his BIR
Form 2551 Q:
Sales to VAT taxpayers P 200, 000
Sales to non-VAT taxpayers P 150, 000
Total P 350, 000
Compute the output VAT.
a. P 0 (Non-VAT taxpayer)
b. P 18, 000
c. P 24,000
d. P 42,000
8. Mr. Venta is a VAT-registered seller of "Hot Siopao". During the month, it sold a total of P 400,000
out of which P300,000 were paid by customers. During the month he made a total collection of
P420,000 inclusive of collection of past accounts.
Compute the output VAT.
a. P 50,400
b. P 48,000(P400,000 x 12% - this is sales of goods)
c. P 36,000
d. P 0
9. A VAT-registered practicing lawyer disclosed the following during a month:
Total professional fees billed P 800, 000
Total professional fees collected 600,000
Advances by certain clients 200,000
Compute the output VAT.
a. P 120,000
b. P 96,000
 c. P 72,000
d. P 88,286 (P600K x 12/112 + P200K x 12%); “collected” is inclusive of VAT; advances are
VAT-exclusive
10. A VAT-registered service provider prepared the following list of cash collections during a month:
Gross receipts inclusive of VATP 504,000
Client advances 200,000
Proceeds of bank loan 300, 000
Total P 1, 014, 000
Compute the output VAT.
a. P 54,000
b. P 78,000(P504K x 12%/112%+ P200K x 12%)
c. P 84,480
d. 108,643

Multiple-Choice - Problems: Part 2

1. A VAT-registered seller of goods billed a customer the following:
List price P 800,000
Trade discount (125, 000)
Net price P 675,000
The credit term for the sale was 2%/ 15, n/60 days.
What is the output VAT?
a. P 96,000
b. P 81, 000(P675,000 x 12%)
c. P 79, 380
d. P 70,875
2. A VAT-registered seller of goods reported the following during a month:
Gross sales P 500,000
Less: Cash discount for early payment P 50,000
Sales returns 20, 00070 000
Net sales P 430,000
What is the output VAT for the month?
a. P51,600
b. P 54, 000
c. P 57,600(P500,000 – P 20,000) x 12%
d. P 60,000
3. A restaurant which also caters for special events had the following data which may be relevant in
filing its BIR Form 2550M:
Gross receipts from customers P 500,000
Gross receipts from advanced reservations 50,000
Client balances evidenced by promissory notes 70, 000
Total P 620, 000
Compute the output VAT.
a. P 60, 000
b. P 66, 000(P500,000 + P50,000) x 12%
c. P 68,400
d. P 74,400
4. A VAT-registered seller merely indicated an amount of P300, 000 on a bill without separately
indicating the VAT thereon. What is the output VAT?
a. P 0
b. P 32,143(P300,000 x 12%/112%, presumption: invoice is inclusive of VAT)
c. P 36,000
d. P 40,000
5. A VAT-registered seller indicated the following in a VAT invoice evidencing the sale of vegetables:
Selling price5,000
Output VAT600
 Total amount due 5600
What is the output VAT?
a. P 0
b. P 600(The O-VAT is correctly billed, hence, it is the output VAT). The sale of exempt goods
which is subjected to VAT by the seller shall nevertheless be subject to VAT. The
government will take the VAT. The same shall not accrue to the pocket of the business
taxpayer.
c. P 6,520
d. P 6,720
6. In the immediately preceding problem, compute the output VAT assuming the sale is made by a non-
VAT seller.
a. P 0
b. P 600(Non-VAT sellers billing VAT are nevertheless subject to VAT. A separate surcharge
of 50% is imposed by the law plus the 3% percentage tax that would have been paid on the
sale.)
c. P 6, 520
d. P 6,720
7. A VAT taxpayer had the following invoiced sales during the first quarter of 2020:
January P 280,000
February 347,200
March 313,600
What is the reportable output VAT respectively in January, February and March?
a. P33,600; P 41,664; P 37,632
b. P33,600; P 41,664; P 112,896
c. P 30, 000; P 37,200; P 33,600
d. P30,000; P 37,200; P 100,800 (monthly, monthly and quarterly)
8. A real property dealer sold an agricultural lot for with the following values:
Appraisal value P 3, 000, 000
Zonal value 2, 000, 000
Assessed value 1, 500, 000
Compute the output VAT.
a. P 180,000
b. P 240,000
c. P 300,000 (P2,500,000 x 12%, appraisal is not used)
d. P 360,000
9. A VAT-registered building contractor who reports under the calendar year basis had the following
billings and collections (inclusive of VAT) regarding its construction contracts:
BillCollection
June P 448,000 P 403,200
July 504,000 453,600
August 336,000 302,400
What is the output VAT respectively in June and July?
a. P 53,760; P 114,240
b. P 48, 000; P 54,000
c. P 43,200; P 91,800
d. P 43,200; P 48,600 (Note: June is end of second quarter, July and August are months of third
quarter, hence, monthly reporting applies)
10. In the immediately preceding problem, what is the output VAT in August?
a. P 138,000
b. P 124, 200
c. P 36,000
d. P 32,400

Multiple-Choice - Problems: Part 3

1. In June 2019, a realty dealer sold a residential lot for P 2, 000, 000. The lot had a fair value of P 2,
500, 000 at the date of sale. The buyer agreed to pay in P 100,000 monthly installments starting June
2019. What is the output VAT respectively in June 2019 and July 2019?
a. P 300, 000 ; P 0 (Note: IP/SP = P100Kx7/P2M = 35%, failed installment test)
b. P 240,000; P 0
c. P 15,000; P 15,000
d. P 12000; P 12,000
2. On April, 2020, a VAT-registered realty developer sold a condominium unit at a selling price of
P3,600,000. The buyer agreed to pay in 36 monthly installments. The property had a zonal value of P
4,000, 000 and assessed value of P3, 000,000 at the date of sale.
What is the output VAT on every installment?
a. P13, 333(Note: IP/SP = 25%; hence, P4M x 12% x 1/36)
b. P12, 000
c. P 10,000
d. P 0
3. A VAT-registered realtor sold a commercial building at a selling price of P20, 000,000 payable over
20 monthly installments of P 1,000,000. A sample monthly bill of the realtor depicts the following:
Installment due P 1, 000, 000
Plus: Output VAT 144, 000
Invoice priceP 1, 144, 000
What is the fair value of the property sold?
a. P 20, 000, 000
b. P 22, 000, 000
c. P 24, 000, 000[(P144,000/12%) divided by (1/20))
d. P 30, 000, 000
4. A realtor sold a commercial land for P 1,500,000 on November 2020. A 20% downpayment was
required and the balance was due in 20 monthly installment of P 60,000 starting December 2020.
What is the output VAT respectively for November and the quarter ending December 2020?
a. P 180,000; P 180,000
b. P 36,000; P 43,200(IP = 20% x P1.5M + P60K = 360K); P360K/1.5M = 24%; Output VAT =
P1.5M x 12% = P180K
November = 300K/1.5M x P180K = P36K
December = P60K/1.5M x 180K = P7.2K; but December is end of quarter; hence,
P36K+P7.2K = P43.2K
c. P 36,000; P7,200
d. P180, 000; P 0
5. A real property developer exchanged one of its land inventories with a zonal value of P2, 000,000
and assessed value of P1, 500,000 for the stocks of another corporation. What is the output VAT on
the exchange?
a. P 0
b. P 180,000
c. P 214,286
d. P 240,000(P2M x 12%)
6. A VAT-registered seller of goods reported the following in a month:
Cash sales P 200,000
Credit sales 300,000
Installment sales 400,000
Consignment sales (30 days old) 100, 000
Total P 1, 000, 000
Compute the output VAT.
a. P 24,000
b. P 60,000
c. P 72,000
d. P 108,000(P200K+P300K+P400K) x 12%
 7. A VAT-registered seller received the following statement from its consignees:
Gross price P 500,000
Less: Commission (20%) 100,000
Freight charges 20, 000
Net remittance P 380, 000
What should be the output VAT on the sales?
a. P 44,000
b. P 45,600
c. P 57,600
d. P 60,000(P500K x 12%)
8. A VAT-registered seller had the following summary of sales and consignments in April: Cash sales
P 200,000
Credit sales 150,000
Sales reported by consignees 250,000
Unsold January consignment 50,000
Unsold February consignment 30,000
Unsold March consignment 40,000
Unsold April consignment 65,000
Assuming that the rules on deemed sale was properly applied in prior months, what is the output
VAT for April?
a. P 42,000
b. P 75,600(P200K + P150K + P250K + 30K) x 12%; Note the January unsold must have been
deemed sold in March. They should not be included again as deemed sold in April.
c. P 78,000
d. P 81,600
9. Delfin Corporation, a security dealer, declared the following dividends in March 2020:
Cash dividend P 1, 200,000
Property dividend 800,000
The property dividend represents various merchandise inventories.
Compute the output VAT.
a. P 0
b. P 96,000(P800,000 x 12%)
c. P 144,000
d. P 240,000
10. After consecutive years of persistent losses, Luigi Corporation decided to liquidate its business. It
had the following items in its possession upon termination of operations:
Book value Fair value
Receivables 1,200,000 1,200,000
Investments 200,000 400,000
Inventories 600,000 700,000
Properties and equipment 1,200,000 800,000
Compute the output VAT on the deemed sale transaction.
a. P 0
b. P 168,000(P600K + P800,000) x 12%; note lower rule on retirement or cessation from
business
c. P216,000
d. P240, 000
Multiple-Choice - Problems: Part 4
1. Mr. Yaobang is a VAT-registered professional. He also owns a hotel and has a professional practice.
He instructed his accounting staff to indicate zero-rated sales in hotel receipts. During the month, he
had the following receipts from his business and exercise of profession: Gross receipts from
profession P 1, 000, 000
Gross receipts from hotel 800,000
Total P 1, 800, 000
 Compute the Output VAT.
a. P 0
b. P 96,000
c. P 120,000
d. P 216,000(P1,800,000 x 12%)
2. Mang Juan applied for the cancellation of his VAT registration. His application was granted by the
BIR. At that time, he had the following inventories of vatable goods:
Supplies, bought from non-VAT suppliers P 50,000
Supplies, bought from VAT suppliers 80,000
Merchandise, bought from VAT suppliers 100,000
Merchandise, bought from non-VAT suppliers 20, 000
Total P 250,000
Compute the output VAT on the deemed sales.
a. P 0
b. P 8,400
c. P 21,600
d. P 30,000(P250K x 12%)
3. A VAT-registered farm supply dealer sold the following during a month:
Fertilizers P 200,000
Corn seeds 250,000
Farm equipment1,200,000
Pesticides 300,000
Total 1,950,000
What is the output VAT?
a. P 234,000
b. P204,000
c. P 180,000(P1,200,000+P300,000) x 12%
d. P 144,000
4. A VAT-registered bookstore had the following revenues during a month:
Commission income on sales of books P 300,000
Sales of books held as inventory 400,000
Sales of school supplies 900,000
Total P 1,600,000
Compute the output VAT.
a. P 192,000
b. P 156,000
c. P 144,000 (P300K + P900K) x 12% (The commission on the sale of books is a sale of service not
sale of books (an exempt goods). Selling of goods for others is not one of those exempt sales of
services. Only publishing or printing of books is exempt.
d. P 108,000
5. A VAT taxpayer made the following sales during the quarter:
Domestic sales:
Sales of VAT-exempt goods P 1,200,000
Sales of vatable goods 900,000
Export sales 800,000
What is the output VAT?
a. P 348,000
b. P 252,000
c. P 204,000
d. P 108,000 (P900K x 12%), zero-rated sales do not result in any output VAT
6. Oval Corporation owns a coliseum which caters to large indoor events. The coliseum had the
following receipts during a month:
Source of Gross Receipts Amount
Professional Basketball games P 400, 000
Professional boxing competitions 500, 000
 Amateur Basketball games 100, 000
Amateur boxing competitions 150, 000
Musical Concerts 250, 000
Religious Gatherings 50, 000
Other special events or gatherings 120, 000
Total P 1, 570, 000
What is the output VAT?
a. P 188,400
b. P 168,214
c. P 80,400 (P100K+P150K+P250K+P50K+P120K) x 12%; prof. basketball and boxing are subject
to % taxes
d. P 71,786
7. King Bank presented the following gross receipts during the quarter:
Interest income short term loans P 4,000,000
Interest income long-term loans 1,200,000
Rental of ROPA 800,000
Processing fees 200, 000
TotalP 6,200,000
Compute the output VAT.
a. P 0(Banks are subject to % tax)
b. P 107,143
c. P 120,000
d. P 744,000
8. Phil-Air is a domestic air carrier with both domestic and international operations. During a month, it
had the following gross receipts:
Domestic operations
Transport of passengers P 40, 000, 0000
Transport of cargoes 12, 000, 000
International operations
Transport of passengers P 30, 000, 000
Transport of cargoes 8, 000, 000
Compute the output VAT.
a. P 1, 440, 000
b. P 4, 800, 000
c. P 6, 240, 000(P40M+P12M) x 12%, international operations is zero-rated
d. P 10, 800, 000
9. Cebu Ferries has a fleet of ships traversing the islands of Bohol and Cebu. It reported the following
total receipts during a month:
Transport of passengers P 8, 000, 000
Transport of cargoes and baggage1, 000, 000
Total P 9,000,000
Compute the output VAT.
a. P 0
b. P 120,000
c. P 960,000
d. P 1,080,000(P9M x 12%)
10. Victor Lines is a VAT-registered operator of buses. During the month, it had the following total
receipts:
Transport of passengers P 14, 000, 000
Transport of cargoes and baggage 1, 000, 000
Total P 15,000,000
Compute the output VAT.
a. P 0
b. P 120,000 (P1M x 12%); the passenger receipts is subject to 3% tax
c. P 1, 680, 000
 d. P 1, 800, 000
11. Mr. Asuncion is a non-VAT registered operator of 40 taxis. During a month, he collected a total
receipt of P 1,300,000 under the "boundary" system. Compute the output VAT.
a. P 0(non-VAT taxpayer, taxi operators are subject to % tax)
b. P278,572
c. P 312,000
d. P 321,000
12. A non-VAT registered radio broadcasting company collected a total of P800, 000 during a month.
Compute the output VAT.
a. P 0 (subject to % tax)
b. P 48,000
c. P 85,714
d. P 96,000
13. A VAT-registered real property dealer sold the following during a quarter:
House and Lot - 2B-A P 2,000,000
House and Lot - 2B-D 3,000,000
House and Lot - 2C-E 4,000,000
Residential Lot - IA 1,000,000
Residential Lot - 2B 2,000,000
Total sales P 12,000,000
Compute the total output VAT.
a. P 0
b. P 720,000 (P4M+P2M) x 12%; remember the exemption limits on house & lot = P3,199,200 and
residential lot = P1,919,500
c. P 1,080,000
d. P 1,320,000
14. A VAT-registered dealer sold two residential units to the same buyer with the following separate
prices:
House and Lot - IC-A P 1,500,000
House and Lot - IC-B 2, 000,000
What is the output VAT?
a. P 0
b. P 180,000
c. P 240,000
d. P 420,000 (P1.5M +P2M) x 12%; adjacent lots are consolidated for purposes of the exemption
threshold
15. A VAT-registered realty dealer sold the following adjacent residential lots to the same buyer. The
separate deeds of sale had the following respective prices:
Residential lot - 2A P 800,000
House and Lot — 2B 900,000
What is the output VAT?
a. P 0(The consolidation/aggregation rules applies to house and lot and house and lot and residential
lot and residential lot)
b. P96,000
c. P 108,000
d. P 204,000
16. An insurance company had the following gross receipts during a month:
Cash collections from life premiums P 1,800,000
Notes receivable for life premiums 200,000
Cash collections from non-life premiums 1,100,000
Notes receivable for non-life premiums 300,000
What is the Output VAT?
a. P 0
b. P 360,000
c. P 180,000
 d. P 132,000(P1.1M x 12%), life premiums is subject to % tax. There is a regulatory provision that
subjects promissory notes of non-life insurance companies to VAT. However, there is no P1.4M
x 12% answer in the problem. The intended answer therefore is D based on purely statutory
provision.

CHAPTER 8

True or False 1
1. To be zero-rated, all forms of export sales must be paid for in acceptable foreign
currencies.FALSE(This onlyapplies on exports, excluding effectively zero-rated sales)
2. VAT exemption results in total tax relief while zero-rating results in tax relief. FALSE
3. Input taxes on zero-rated sales are deductible as part of costs or expenses FALSE
4. Input taxes on zero-rated sales are claimable as tax credit or tax refund. TRUE
5. As a rule, effectively zero-rated sales require prior application with the BIR for zero-rating. TRUE
6. Sales to tax-exempt persons will be subject to 12% VAT in default of an approved application for
zero-rating. FALSE (zero-rated if with approved application, exempt if otherwise)
7. The foreign currencies must be inwardly remitted and accounted for under the rules of the BSP to be
zero-rated. TRUE
8. The 60-day rule on deemed sales of consignment applies to export sales.FALSE
9. The sale of gold to the BSP must be paid for in acceptable foreign currencies to be subject to zero-
rating.FALSE
10. The sale to a local export oriented enterprise is subject to zero-rating only if paid for in acceptable
foreign currencies. FALSE
11. Legal title over exported goods must pass abroad to be subject to zero-rating.FALSE
12. Export sales that are not paid for in acceptable foreign currencies are subject to the 12% VAT. FALSE
(treated as exempt)
13. The export sales by non-VAT registered person are exempt from VAT but are subject to the 3%
percentage tax.FALSE (exempt from % tax)
14. When the remittance of the foreign currency-denominated sale is not accounted for under BSP rules,
the same shall be considered VAT-exempt.TRUE
15. An export-oriented enterprise is an entity that exports at least 70% of its total annual
production.FALSE (more than 70%)
True or False 2
1. The direct export by an export trader shall be considered an export subject to 12% VAT.FALSE (0%
VAT)
2. The sale of an export trader to a fellow export trader is subject to zero-rated VAT. TRUE
3. The commission income from export sales by export traders is exempt from VAT. FALSE (subject to
0% VAT)
4. The sale to a bonded manufacturing warehouse of an export-oriented enterprise is subject to effective
zero-rating.TRUE
5. The sales of goods or services to export-processing zones are subject to an automatic zero-rating
without the need for a BIR application for effective zero-rating. TRUE
6. The sales to diplomatic missions are exempt from VAT. FALSE (0-rated)
7. The sales to a BOI-registered manufacturer are subject to zero-rated VAT as long as 100% of its
annual production is actually exported. TRUE
8. The sale of goods or services to a domestic carrier for its international operations is subject to zero-
rated VAT. TRUE
9. The sale of goods or services to a domestic carrier for its domestic operations is exempt from VAT.
FALSE(12 % VAT)
10. The transport of domestic carriers of passengers, baggage and mails from the Philippines to a foreign
country is subject to zero-rated VAT. TRUE
11. The transport of passengers by an international carrier from the Philippines to a foreign country is
exempt. TRUE (Exempt from % tax and VAT)
 12. The transport of cargoes, baggage or mails by an international carrier from the Philippines to a foreign
country is subject to zero-rated VAT. FALSE (subject to % tax)
13. The sale of locally manufactured goods to overseas Filipinos is subject to an effective zero-rating if
paid for in acceptable foreign currencies. TRUE
14. Sales to the Asian Development Bank are subject to zero-rated VAT. TRUE
15. The sale to embassies with VEC and embassy personnel with VEIC is not subject to the zero-rated
VAT. FALSE

Multiple Choice - Theory: Part 1

1. Which statement is correct?
a. Zero-rated sales are taxable, but will not result in an output VAT.
b. Zero-rated sales are non-taxable; hence, these will not result in an output VAT.
c. VAT zero-rating and VAT exemption are synonymous concepts.
d. All of these
2. Which is correct regarding the treatment of input VAT?
a. Input VAT on zero-rated sales is deductible from gross income.
b. Input VAT on zero-rated sales is creditable against output VAT or refundable
c. Input VAT on zero-rated sales is both deductible from gross income and creditable against
output VAT.
d. Input VAT on exempt sales is refundable or creditable.
3. Which of the following requires prior BIR application for effective zeros rating?
a. Sales to PEZA locators
b. Direct export sales
c. Foreign currency denominated sales
d. Sales to export-oriented enterprises
4. What sale is not subject to zero-rating?
a. Sale to a senior citizen
b. Sale to a registered export trader
c. Sale to a bonded manufacturing warehouse of an export trader
d. Sale to an export processing zone
5. Which is not a constructive export?
a. Direct export to a foreign country
b. Sale to ecozones
c. Sales to diplomatic missions
d. Sales to export-oriented enterprises
6. Which is non-vatable?
a. Sales to a domestic shipping company
b. Sales to an international carrier
c. Sale of goods to a BOI-registered manufacturer which exports 80% of its annual production
d. Sales to senior citizens
7. Statement 1: The export of VAT-exempt goods is subject to zero-rated VAT.
Statement 2: The domestic sale of VAT-exempt goods is subject 12% VAT.
Which is incorrect?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement
8. Which is subject to a zero-rated VAT?
a. Sale of fruits and vegetable to an embassy personnel with VEIC
b. Sale of fruits and vegetables to senior citizens
 c. Sale of fruits and vegetables to persons with disability
d. Sales of any goods to the government
9. What is the requirement for zero-rating of sales to BOI-registered enterprises?
a. At least 70% of production must be exported
b. More than 70% of production must be exported
c. 100% of production must be exported
d. More than 100% of production must be exported
10. What is the requirement for zero-rating of sales to a PEZA-registered enterprise?
a. The goods must be actually imported
b. Export sales must exceed 70% of annual production
c. Production must be 100% exported
d. None
11. What is the requirement for zero-rating of sales to an export-oriented enterprise?
a. The goods must be actually imported
b. Export sales must exceed 70% of annual production
c. At least 70% of production must be exported
d. Production must be 100% exported
12. Which is not subject to zero-rating?
a. Sale under the internal export program of the government
b. Export of automobiles to a local export-oriented enterprise
c. Sale of goods to an international transport operator
d. Sale to the USAID
13. Which is correct with constructive export?
a. Must be paid for in acceptable foreign currencies
b. Must be actually exported
c. Must be sold to a non-resident
d. None of these
14. Which of the following is not subject to zero-rated VAT?
a. Sales to diplomatic missions
b. Sale of gold to the BSP
c. Export sales paid for in the local currency
d. All of these
15. Prior BIR application for effective zero-rating is not required for
a. direct export to a foreign country
b. sales to tax exempt persons
c. sales to international air transport operations
d. sales to an export-oriented enterprise
16. Which of the following may not qualify as export sale?
a. Export by an export producer
b. Export by an export producer to another export producer
c. Sale to an export trader
d. None of these
17. What is not a constructive export?
a. Sale to a bonded manufacturing warehouse of an export-oriented enterprise
b. Sale to export processing zones
c. Sales to diplomatic missions
d. Sale to a foreign customer abroad
18. A non-large taxpayer shall file the application for effective zero-rating with the
 a. Regional director where the taxpayer is registered
b. Revenue district officer having jurisdiction over their principal place of business
c. Audit Information, Tax Exemption and Incentive Division
d. International Tax Affairs Division
19. An approved application for effective zero-rating is given
a. a retrospective effect
b. a prospective effect
c. A and B
d. no effect
20. An approved application for zero-rating is valid for
a. one quarter only
b. 2 years
c. 3 years
d. 5 years

Multiple Choice - Theory: Part 2

1. The sale of services to the following cannot qualify for zero-rating

a. Sale to a resident person doing business in the Philippines
b. Sale to a non-resident person engaged in business abroad
c. Sale to a non-resident not engaged in business abroad
d. Sale to a resident export-oriented enterprise
2. Statement 1: Services to non-residents are always subject to zero-rated VAT if rendered abroad.
Statement 2: Services to residents may be subject to zero-rating if paid for in acceptable foreign
currencies. Which is incorrect?
a. Statement 1
b. Statement 2
c. Both statements
d. Neither statement

3. Which is correct?
a. All service rendered in the custom's territory is subject to the 12% VAT'
b. Service rendered to an ecozoneentity is subject to 12% VAT
c. Service rendered abroad is subject to 0% VAT.
d. Service rendered abroad is exempt from any business tax.
4. Which is subject to zero-rating?
Customer Place rendered Amount
a. Resident alien Philippines € 150,000
b. Non-resident foreign corp. Philippines $ 10,000
c. Non-resident alien Abroad P 1,000,000
d. Non-resident citizen Abroad ¥ 2,000,000
5. Which is not required in the zero-rating of services rendered to a non-resident?
a. The services must be performed in the Philippines
b. The non-resident alien must be a resident in the Philippines at the time the services were rendered
c. The services must be paid in acceptable foreign currencies
d. The payment must be accounted for under the rules and regulations of the BSP
6. Sale of services to this entity is subject to the 12% VAT.
a. Development Bank of the Philippines
 b. International Rice Research Institute Philippine
c. National Red Cross
d. Philippine Amusement and Gaming Corporation
7. Which is not subject to zero-rating?
a. Services to an export-oriented enterprise
b. Sale of services to a BOI-registered enterprise
c. Sale of services to PEZA locators
d. Sale of services to embassies with VEC
8. To which of the following is a sale not subject to zero-rated VAT?
a. Philippine Amusement and Gaming Corporation
b. Philippine National Red Cross
c. Ecozone entities
d. Government agencies
9. Which is not subject to zero-rating?
a. Sale to a domestic air carrier on its international operations
b. Sale to a domestic sea carrier on its domestic operations
c. Sale to an international air carrier
d. Sale to an international sea carrier
10. Which is incorrect with effectively zero-rated sales?
a. The sale must be rendered in the Philippines
b. The sale must be rendered to a person with indirect tax exemption
c. The sale need not be paid for in acceptable foreign currencies
d. The sale must be made by a VAT-exempt person
11. Which is incorrect with foreign currency-denominated sales?
a. The goods must be destined for consumption abroad
b. Title to the goods must pass to the buyer outside Philippine territory
c. The sale must be paid for in acceptable foreign currency
d. The remittance of the proceeds of the sale must be accounted for under Central bank rules
12. Which is subject to zero-rating?
a. Outgoing transport of passengers by an international carrier
b. Outgoing transport of mails, cargoes or baggage by an international carrier
c. Outgoing transport of passengers, cargoes, excess baggage or mails by a domestic carrier
d. Incoming transport of passengers, cargoes, excess baggage or mails by a domestic carrier

13. Which of these services is subject to zero-rating?

a. Incoming transport by an international sea carrier
b. Incoming transport by a domestic sea carrier
c. Incoming transport by a domestic air carrier
d. None of these
14. Which of these entities is subject to zero-rating on the sale of renewable sources of energy?
a. Generation companies
b. Transmission companies
c. Distribution companies
d. All of these
15. Which of the following power generation plants is not qualified to a zero-rating treatment on the sale
of electricity?
a. Geothermal power plant
b. Hydro power plant
 c. Solar power plant
d. Coal power plant

Multiple-Choice - Problems 1

1. A business payer reported the following sale during a period:

Domestic sales P 200,000
Deemed sales 100,000
Export sales 300,000
Total P 600,000
Compute the zero-rated sales assuming the seller is respectively a VAT taxpayer and a non-VAT
taxpayer?
a. P 600,000; P 0
b. P 300,000; P 0
c. P 600,000; P 300,000
d. P 300,000; P 300,000
2. VAT-registered export trader purchased and sold an equipment. The details of the purchase and sale
are as follows:
Export sales P 400,000
Purchases 200,000
Input VAT 12,000
Compute the gross income for taxation purposes.
a. P 188,000
b. P 200,000(P400,000 – P200,000 = P200,000. The input VAT is claimable as tax credit or tax
refund.)
c. P 212,000
d. P 224,000
3. For a taxpayer subject to a 30% tax rate, compute respectively the tax benefits of a P60, 000 input
VAT deduction and a P 40,000 input VAT credit.
a. P 60,000; P40,000
b. P 18,000; P40,000(Tax benefit: P60,000 deduction x 30% = P18,000, P40,000 tax credit x 100% =
P40,000)
c. P 60,000; P12,000
d. P 18,000; P12,000
4. A Philippine company exported goods for $140,000 to a non-resident customer. The payment;
however, was not inwardly remitted. The same was remitted to its home office abroad. Which is
correct?
a. The sale is a zero-rated sale.
b. The sale is an exempt sale. (To be subject to zero-rating, an proceeds of an export sales must be
inwardly remitted and accounted for under the rules of the BSP. Export sales that do not conform
to zero-rating requirements are exempt.)
c. The sale is subject to 12% VAT.
d. The sale is subject to 3% percentage tax.
5. A VAT-registered taxpayer made the following sales:
Sales destination Terms Payment
China FOB destination $ 10,000
Malaysia FOB destination P 450,000
Hong KongFOB shipping point ¥ 800,000
Philippines FOB shipping point P 300,000
 The applicable exchange rate to the Peso was $1:P42 and ¥1: P0.50.
Compute the total zero-rated sales.
a. P 420,000
b. P 820,000
China ($10,000 x P42) P 420,000
Hong Kong (¥ 800,000 x P0.50) 400,000
Total zero-rated sales P 820,000
Note: As a rule, export sales must be a foreign consumption (sales to non-resident) and is paid for
in acceptable foreign currency to be considered for zero-rating.
c. P 1,270,000
d. P 1,570,000
6. Compute the output VAT.
a. P0
b. P 36,000(There is no output VAT on export sales. But the P300,000 domestic sales has P300,000
x 12% = P36,000 output VAT.)
c. P 54,000
d. P90 ,000
7. An exporter entered into the following transactions during the month:
Type of Transaction Amount Unsold Portion
Export sales P 1,000,000 -
Export sales $ 100,000 -
60-day Consignment abroad $ 50,000 40%
Forex rate = $1: P 42.50.
Compute the zero-rated sales.
a. P 0 c. P 6,100,000
b. P 4,250,000 d. P 5,525,000
Direct export sales ($100,000 x P42.50) P 4,250,000
Consignment ($ 50,000 x 60% sold x P42.50) 1,275,000
Total zero-rated sales P 5,525,000
Consignment sales abroad are not deemed sold even if it exceeds 60 days on consignment. Hence, only the
actual portion sold can be considered for zero-rating. Export sales denominated in Pesos cannot be
considered export sales.
8. Export Co. made the following export and foreign consignments:
Type of transaction Amount
Export sales 1 P 1,000,000
Export sales 2 $ 80,000
Consignment 1 $ 50,000
Consignment 2 $ 10,000
Export sales 2 pertains to goods owned by another entity where Export Co. was granted 10% export
commission. Consignment 1 was sold by foreign consignees during the month. Consignment 2
remained unsold 75 days as of the end of the current month. The applicable exchange rate is P43:$1.
Compute the total zero-rated sales or receipts.
a. P 2,494,000 c. P 3,494,000
b. P 2,924,000 d. P 5,590,000
Export sales 2 commission ($80,000 x P43.00 x 10%) P 344,000
Consignment 1 ($50,000 x P43) 2,150,000
Total zero-rated salesP 2,494,000
Export commissions are considered for zero-rating
9. APEZA locator sold scraps to a domestic business for $ 12,000. Which is correct?
a. The sale is subject to zero-rated VAT.
b. The sale is subject to the regular 12% VAT.
c. The sale is exempt from VAT.
d. The sale is subject to the VAT on importation to the domestic business.
 10. Which is an export-oriented enterprise in 2018?
2017 2018
Production Export cost Production Export cost
Exporter cost of sale cost of sale
a. ABC Co. P 200M P 120M P 400M P 300M
b. BCD Co. P400M P280M P 500M P 350M
c. CDE co. P 150M P 108M P 180M P 126M
d. DEF co. P 250M P 125M P 300M P 300M
(The test for being an export oriented enterprise is when an enterprise exported more than 70% of its
production in the preceding year.)

Multiple-Choice - Problems 2
1. Johnny Company, a maintenance contractor, had the following receipt from the following clients in June
2019:
Receipt from Development Bank of the Philippines P 1,000,000
Receipts from Oceania, an international carrier 1,200,000
Receipts from International Rice Research Institute 800,000
Compute the total zero-rated sales or receipts.
a. P 0 c. P 2,000,000(P1,200,000 + P800,000)
b. P 800,000 d. P 3,000,000
2. A BSP assay report on a sale of gold nuggets discloses the following:
Gold content (850 x P1, 800/gram) P 1,530,000
Silver content (250 x P38/gram) 9,500
Total P 1,539,500
What is the total vatable sales and the output VAT?
a. P 1,539,500; P 184,740 c. P 9,500; P 1,140
b. P 1,539,500; P 1,140 d. P 1,530,000; P183,600
(Both sales components are vatable. The sale of gold is subject to zero-rated VAT. The sale of silver is
subject to 12% output VAT. The output VAT is P9,500 x 12% = P1,140.)
3. A non-VAT taxpayer had the following sales during the month:
Direct export sales $ 2,000
Domestic sales P 250,000
Assuming the exchange rate is P43.20: $1, compute the zero-rated sales.
a. P 0 c. P 250,000
b. P 86,400 d. P 336,400
(Note that the taxpayer is non-VAT hence its export sales are exempt rather than zero-rated sales.)
4. Carefree, a security service provider, had the following receipts during the month:
Receipts from clients inside PEZA P 3,000,000
Receipts from clients in the customs territory:
- From the government agencies and GOCCs 1,000,000
- From the Asian Development Bank 1,200,000
- From non-profit clients 1,500,000
- From private clients 2,000,000
What is the total amount of zero-rated sales?
a. P 3,000,000 c. P 4,200,000(P3,000,000 + P1,200,000)
b. P 4,000,000 d. P 5,200,000
5. A VAT-registered service provider had the following receipts from services rendered in the Philippines
in February 2015:
Paid for in foreign currencies (Peso equivalent)
Services rendered to non-residents P 500,000
Services rendered to residents 400,000
Paid for in the local currency
Services rendered to non-residents P 800,000
Services rendered to residents 1,200,000
 What is the total zero-rated sale?
a. P 400,000 c. P 900,000
b. P 500,000 d. P 1,300,000
6. Legazpi Corporation had the following sales in March 2015:
Sale to an export-oriented enterprise P 2,000,000
Sale to a BOI-registered enterprise 3,000,000
Assuming that the new VAT refund system is already in place, compute the total effectively zero-rated
sales.
a. P 2,000,000 c. P3,800,000
b. P 3,000,000 d. P 5,000,000
(The sale to an export-oriented enterprise is a constructive export even if not exported actually exported.
The sales to a BOI enterprise is considered an export sales if the latter exports 100% of its produce.)
7. A domestic enterprise made the following sales:
Sale to diplomatic missions P 2,000,000
Sale to an ecozone-registered enterprise $ 50,000
Conversion rate = P42.00: $1
Compute the zero-rated sales.
a. P 0 c. P2,100,000
b. P 2,000,000 d. P 4,100,000
Sales to diplomatic missions P 2,000,000
Sales to ecozones ($50,000 x P42) 2,100,000
Total zero-rated sales P 4,100,000
8. DrimPhil Enterprises, a VAT taxpayer, sold the following to various exporters in July 2018:
Sale to BOI-registered entity with domestic sales P 2,000,000
Sale to BOI-registered entity with no domestic sales 2,500,000
Sale to export-oriented enterprise (with 60% export last year) 1,000,000
Sale to export-oriented enterprise (with 90% export last year) 1,500,000
Total P 7,000,000
Assuming that the BIR and DOF has not yet fully implemented the new VAT refund system, Compute
the zero-rated sale.
a. P 1,500,000 c. P 4,000,000
b. P 2,500,000 d. P 5,000,000
Sale to BOI-registered entity with no domestic sales 2,500,000
Sale to export-oriented enterprise (with 90% export last year) 1,500,000
Total P 4,000,000
9. A PEZA locator made the following sales to entities within the custom territories:
Sale of goods to a Philippine firm P 4,000,000
Sale of scrap materials to a Philippine firm $ 100,000
Forex rate: P43.00: $1
What is the zero-rated sales?
a. P0 c. P 4,300,000
b. P 4,000,000 d. P 8,300,000
(The sale is not treated as zero-rated sale to the selling PEZA locator but an import sale to the
purchasing buyer in the custom’s territory.)
10. An electric cooperative sold the following during the month:
Sale of electricity from renewable sources of energy P 2,000,000
Sale of electricity generated from coal and natural gas 1,000,000
What is the zero-rated sale of the electric cooperative?
a. P 0 c. P 2,000,000
b. P 1,000,000 d. P 3,000,000
(The tax incentive on zero-rated treatment on sales of electricity pertains to generation company not to a
distribution (electric cooperative) company.