Taxation Principle

No. 125 Brgy.
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : www.icarecpareview@gmail.com
Income Taxation of Corporation TAX03-04

1. For purposes of income taxation, the following are considered “Corporation”,
except:
a. One person corporation
b. Ordinary Partnership
c. General Professional Partnership
d. Joint Venture
e. Joint stock companies
f. Joint accounts ( cuentas en participacion)
g. Associations
h. Insurance companies
2. The following are not “Corporation” under the National Internal Revenue Code,
except:
a. General Professional Partnership
b. Joint venture or consortium formed for the purpose of undertaking construction
projects
c. Joint venture or consortium formed for the purpose of engaging in petroleum,
coal, geothermal and other energy operations pursuant to an operating or
consortium agreement under a service contract with the Government
d. Joint venture formed between two transport corporations granted their
respective franchise to operate public utility of transportation.
3. Technotronics Energy Corporation, a corporation registered in Belgium, has a 50

MW electric power plant in Ibaan, Bataan. Aside from Technotronic’s income from
its power plant, which among the following is considered as part of its taxable
income from sources within the Philippines?
a. Gains from the sale to an Ilocos Norte power plant of generator delivered in
the United States.
b. Interests earned on its dollar deposits in a Philippine bank under the
Expanded Foreign Currency Deposit system.
c. Dividends from a three-year old Norwegian subsidiary with operations in the
Philippines and derives 60% of its gross income from the Philippines.
d. Royalties from the use in Brazil of generator sets designed in the Philippines
by its engineers.
4. Villasis, Inc. bought a parcel of land in 2019 for P7 million as part of its inventory
of real properties. In 2020, it sold the land for P12 million which was its zonal
valuation. In the same year, it incurred a loss of P6 million for selling another parcel
of land in its inventory. These were the only transactions it had in its real estate
business. Which of the following is the applicable tax treatment?
a. Villasis shall be subject to a tax of 6% CGT of P12 million.
b. Villasis could deduct its P6 million loss from its P5 million gain.
c. Villasis’ gain of P5 million shall be subject to the holding period being held
for less than a year.
d. Villasis’ P6 million loss could not be deducted from its P5 million gain.
1|P a g e AESCARTIN/TLOPEZ/JPAPA
No. 125 Brgy. San Sebastian
Mobile : 0927 283 8234
Telephone : (043) 723 8412
5. Samsang Tech Corporation is registered under the laws of the British Virgin
Islands. It has extensive operations in Asia. In the Philippines, its products are
imported and sold at a mark-up by its exclusive distributor, Somewell, Inc. The BIR
complied a record of all the imports of Somewell from Samsang and imposed a tax
on Samsang’s net income derived from its exports to Somewell. Is the BIR correct?
a. Yes. Samsang is a resident foreign corporation engaged in trade or
business in the Philippines.
b. No. The tax should have been computed on the basis of gross income and
not net income.
c. No. Samsang is a non-resident foreign corporation not engaged in trade or
business in the Philippines.
d. Yes. Samsang is doing business in the Philippines through its exclusive
distributor Somewell.
6. The following government owned and controlled corporations are exempt from
income tax, except:
a. Social Security System
b. Philippine Health Insurance Corporation (Philhealth)
c. Government Service Insurance System
d. Local Water Districts
e. Philippine Amusement and Gaming Corporation
7. The following are classified as non-resident foreign corporation, except:

a. Non-resident owner of vessel chartered by Philippine nationals
b. Non-resident owner of aircraft leased and used in the Philippines
c. Non-resident owner of cinematographic Films
d. Non-resident airline, with no landing right in the Philippines, whereby tickets
of its flight originating abroad are regularly sold by Philippine travel agents
in the Philippines.
8. All of the following are taxable on income derived from sources within the
Philippines only, except:
a. Non-resident foreign corporation
b. Resident foreign corporation
c. Domestic Corporation
d. Foreign corporation
9. 1st Statement: Non-Resident Foreign Corporations are not required to file any
income tax return.
2nd Statement: Tax exempt corporations are also required to file an ITR for
administrative purposes only.
a. True, True
b. False, True
c. False, False
d. True, False
Mobile : 0927 283 8234
Telephone : (043) 723 8412
10. The following passive income, from sources within the Philippines, received by a
domestic corporation shall be subject to 20% final withholding tax, except:
a. Interest income from peso bank deposit
b. Yield from deposit substitutes
c. Interest income from foreign currency denominated deposit under the Foreign
Currency Deposit System
d. Royalties
11. A depository bank under Foreign Currency Deposit System has the following
income from foreign currency transactions (Exchange Rate $1=P50):
Other income From Nonresidents $50,000
Interest income from residents $30,000
Other income- BPI (FCDU) $2,000
How much is the final withholding tax applicable on the above income?
a. P225,500
b. c. P95,000
c. P150,000
d. P545,000
12. Interest income of a domestic commercial bank derived from a peso loan to a domestic
corporation in 2020 is:
a. Subject to the 30% income tax based on its net taxable income
b. Subject to the 20% final withholding tax.
c. Subject to the 15% final withholding tax.
d. Subject to 10% final withholding tax.
Numbers 13 to 15 are based on the following:

On April 15, 2021, Aishin Corporation sold shares of stocks of Abu Co., a domestic
corporation. It was sold at its fair market value of Php5,000,000 when its cost to the seller
was Php2,000,000
13. Assuming Aishin Corporation is a domestic corporation, the capital gains tax on the
transaction is:
a. Php450,000
b. Php295,000
c. Php750,000
d. Php345,000
14. Assuming Aishin Corporation is a foreign corporation, the capital gains tax on the
transaction is:
a. Php450,000
b. Php295,000
c. Php750,000
d. Php345,000
15. Assuming Aishin Corporation is a domestic corporation and the shares were sold at a
price of Php4,000,000, when its fairmarket value at the time was Php5,000,000. The
cost of the shares remain at Php2,000,000. The total tax liability of the seller is:
a. Php450,000
b. Php295,000
c. Php750,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
d. Php345,000
Corporate income tax under CREATE
The higher between the “Regular” or “Minimum
Type of Corporation Corporate Income Tax (MCIT)” rates
Regular MCIT
Rate Effectivity Rate Effectivity
Domestic Corporation:
Domestic corporations, in general 25% July 1, 2020 1% July 1, 2020 to
June 30, 2023
2% July 1, 2023
For corporations with net taxable 20% July 1, 2020 1% July 1, 2020 to
income not exceeding Five June 30, 2023
Million Pesos (P5,000,000) AND
total assets not exceeding One
Hundred Million (P 100,000,000), 2% July 1, 2023
excluding the land on which the
particular business
entity’s office, plant and
equipment are situated
Proprietary Educational Institutions 1% July 1, Not Applicable
2020
and Hospitals to June 30,
2023
10% July 1, 2023

Foreign Corporation [on taxable income(e.g., net or gross income,as
applicable) derived from all sources within the Philippines]:
Resident Foreign Corporation 25% July 1, 2020 1% July 1, 2020 to
June 30, 2023
2% July 1, 2023
The higher between the “Regular” or “Minimum
Type of Corporation Corporate Income Tax (MCIT)” rates
Regular MCIT
Rate Effectivity Rat Effectivity
e
Offshore Banking Unit (OBUs) 25% Upon the 1% Upon the effectivity of
(Note: OBUs shall now be taxed effectivity the CREATE until
as resident foreign corporation of the June 30,
upon effectivity of the CREATE) CREATE 2023
2% July 1, 2023
Regional Operating Headquarters 25% January 1, 1% January 1, 2022

(ROHQ) 2022 to June 30,
2023
2% July 1, 2023
Non-Resident Foreign Corporation 25% January 1, Not applicable

2021
Mobile : 0927 283 8234
Telephone : (043) 723 8412
16. A Domestic Corporation was registered with the Bureau of Internal Revenue. Its
Certificate of Registration (BIR Form 2313) indicates it was registered on December
27, 2020. It had a soft opening and made its first sale on January 7, 2021. It can be
liable to the Minimum Corporate Income Tax on the year:
a. 2022
b. 2023
c. 2024
d. 2025
17. The following corporations are exempt from the MCIT, except
a. Non-resident owner of cinematographic Films
b. Off shore banking unit
c. Resident International Carrier
d. Ordinary partnership in the Philippines
18. One of the following is not a ground for exemption from MCIT:
a. Prolonged labor dispute
b. Force majeure problems
c. Legitimate business reverse
d. Law suits filed by the company
Numbers 19 to 21 are based on the following

19. Corporation A, a retailer, has a gross sales of P1,400,000,000.00 with a cost
of sales of P560,000,000.00 and allowable deductions of 150,000,000.00 for
the calendar year 2021. Its total assets of P180,000,000.00 as of December
31, 2021 per Audited Financial Statements includes the land costing
P50,000,000.00 and the building of P25,000,000.00 in which the business
entity is situated, with an aggregate amount of P75,000,000.00 as Fixed
Assets. Assuming CY 2021 is the 5th year of operation of Corporation A,
Corporation A’s regular corporate income tax for CY 2021 is

a. Php172,500,000
b. Php8,400,000
c. Php138,000,000
d. Php0
20. Corporation A’s minimum corporate income tax for the CY 2021 is:
a. Php172,500,000
b. Php8,400,000
c. Php138,000,000
d. Php0
21. The amount of tax Corporation A is liable for the CY 2021 is:
a. Php172,500,000
b. Php8,400,000
c. Php138,000,000
d. Php0
Mobile : 0927 283 8234
Telephone : (043) 723 8412
22. Took Mall Corporation, a domestic corporation and in its 7th year of operation in
2018, provided you with the following data:
2018 2019 2020

Gross sales P2,040,000 P2,800,000 P3,000,000
Sales returns 40,000 100,000 -
Cost of sales 1,000,000 700,000 1,500,000
Business expenses 950,000 2,100,000 1,200,000
Assuming that for the year ended 2020, Took Mall’s total asset is amounting to
Php250,000. The income tax due after tax credit, if any for taxable year 2020 is:
a. P10,000
b. P60,000
c. P30,000
d. P90,000
Items 23 to 26 are based on the following: Jiff Free Corporation has the following
information for the taxable year ended December 31, 2019:
QUARTER RCIT MCIT Creditable

Withholding
Tax
First 200,000 160,000 40,000
Second 240,000 500,000 60,000
Third 500,000 150,000 80,000
Fourth 300,000 200,000 70,000
Additional Information:
a) Excess MCIT for 2018, Php60,000;
b) Excess tax credits from 2018 amounts to Php20,000.
23. How much was the income tax payable for the first quarter?
a. Php200,000
b. Php120,000
c. Php160,000
d. Php80,000
24. How much was the income tax payable for the second quarter?
a. Php660,000
b. Php200,000
c. Php460,00
d. Php60,000
25. How much was the income tax payable for the third quarter?
a. Php860,000
b. Php600,000
c. Php120,000
d. Php140,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
26. How much was the annual income tax payable?

a. Php1,260,000
b. Php230,000
c. Php390,000
d. P930,000
27. If the gross income from unrelated activity exceeds 50% of the total gross income
derived by any private educational institution, the rate shall be 30% based on the entire
taxable income. This principle is known as
a. Constructive receipt
b. Tax benefit rule
c. End result doctrine
d. Predominance test

28. Smurf University, a proprietary educational institution organized in 2014, had the
following data for 2020.
Tuition Fees P850,000.00

Rental Income (net of 5% cwt) 142,500.00
School related expenses 820,000.00
The income tax still due for 2020 is

a. P2,400
b. P5,700
c. P10,500
d. P46,500
29. Assuming the year is 2021, the income tax due is:
a. P2,400
b. (P5,700)
c. P10,500
d. P46,500
a. P2,400
b. (P5,700)
c. P10,500
d. P46,500
a. P2,400
b. (P5,700)
c. P10,500
d. P46,500
Mobile : 0927 283 8234
Telephone : (043) 723 8412
32. Gargamel Technological Institute, a proprietary educational institution organized

in 2004, had the following data for 2020.
Tuition Fees P480,000.00

Rental Income (net of 5% cwt) 494,000.00
School related expenses 945,000.00
The income tax still due for 2020, assuming GTI’s total assets is Php500,000,000.
a. Php16,500.00
b. (Php9,500.00)
c. (Php10,875)
d. Php20,000.00
The Legacy Corporation provided the following data for the calendar year ending
December 31, 2021 ($1=P50).
Philippines USA
Gross Income P4,000,000.00 $40,000.00
Deductions 2,500,00.00 15,000.00
Income Tax Paid 3,000.00
33. If it is a domestic corporation, its income tax after tax credit is

a. P812,500
b. P537,500
c. P962,500
d. P400,000
34. If it is a domestic corporation and its total assets amount to Php95,000,000, its
income tax after tax credit is.
a. P812,500
b. P537,500
c. P962,500
d. P400,000
35. If it is a resident foreign corporation and its total assets amount to Php95,000,000,
its income tax is
a. P40,000.00
b. P450,000.00
c. P375,000.00
d. P525,000.00
36. If it is a non-resident foreign corporation, its income tax is

a. P 730,000.00
b. P1,280,000.00
c. P1,000,000.00
d. P1,400,000.00
Mobile : 0927 283 8234
Telephone : (043) 723 8412
37. If it is a domestic corporation, but it opts to claim the tax paid abroad as deduction
from gross income, its income tax is
a. P910,000.00
b. P832,000.00
c. P237,000.00
d. P650,000.00
38. If it is a resident international carrier, assuming the gross income from the
Philippines is the gross Philippine billing, its income tax is
a. P100,000.00
b. P 10,000.00
c. P 37,000.00
d. P125,000.00
39. If it is a non-resident cinematographic film owner/lessor, its income tax is

a. P1,000,000.00
b. P 100,000.00
c. P 300,000.00
d. P 128,000.00
40. If it is a non-resident lessor of vessels, its income tax is

a. P100,000.00
b. P180,000.00
c. P300,000.00
d. P128,000.00
41. If it is a non-resident lessor of aircrafts, machineries, and equipment, its income

tax is
a. P100,000.00
b. P180,000.00
c. P300,000.00
d. P128,000.00
42. If it is a resident foreign corporation but its expenses within and outside the
Philippines is P3M, unallocated (disregard original data on expense) its income tax
is
a. P640,000.00
b. P700,000.00
c. P480,000.00
d. P500,000.00
43. If it is a resident foreign corporation and it remitted 60% of its net profit to its head
office abroad, its total tax liability is (Original data)
a. P480,000.00
b. P571,800.00
c. 476.250.00
d. P612,750.00
Mobile : 0927 283 8234
Telephone : (043) 723 8412
44. Banco De Adamantium, a domestic corporation had the following data for the
taxable year ended December 31, 2020:
Regular Banking Unit:

Interest Income from loans P10,000,000
Interest Income from peso deposit with Bank of Gapan, a 1,000,000
domestic corp.
Dividend Income from various domestic corporations 1,500,000
Foreign Currency Deposit Unit:

Interest Income from loans to residents 2,000,000
Interest Income from loans to nonresidents 500,000
Additional Information: Banco De Adamantium had total operating expenses of

P12,000,000.
How much was the normal income tax for the year?
a. Php600,000
b. Php550,000
c. Php400,000
d. Php0
45. Generally, dividend income received by a domestic corporation from a foreign

corporation is includible as gross income of the recipient domestic corporation and
subject to corporate income tax. However, said foreign corporation dividend is
exempt from income tax provided the following requisites are met, except:
a. The dividends actually received or remitted into the Philippines are
reinvested in the business operations of the domestic corporation
within the next taxable year from the time the foreign-source dividends
were received or remitted;
b. The dividends received shall only be used to fund the working capital
requirements, capital expenditures, dividend payments, investment in
domestic subsidiaries, and infrastructure project;
c. The domestic corporation holds directly or indirectly at least twenty
percent (20%) in value of the outstanding shares of the foreign
corporation
d. The domestic corporation has held the shareholdings uninterruptedly for
a minimum of two (2) years at the time of the dividends distribution. In
case the foreign corporation has been in existence for less than two(2)
years at the time of dividends distribution, then the domestic corporation must
have continuously held directly at least twenty percent (20%) in value of the
foreign corporation's outstanding shares during the entire existence of the
corporation.
46. The following are exempt from the Improperly Accumulated Earnings Tax, except?
a. Banks and other non-bank financial intermediaries
b. Publicly-held corporations
c. Insurance companies
d. Closely-held corporation
10 | P a g e AESCARTIN/TLOPEZ/JPAPA
Mobile : 0927 283 8234
Telephone : (043) 723 8412
47. It is a test used in determining the reasonable needs of a business to justify the
accumulation of earnings which will exempt the corporation from paying Improperly
Accumulated Earnings Tax:
a. Urgency test
b. Immediacy test
c. Reasonable needs test
d. Control test
48. JCU Corporation, a domestic corporation had the following data for taxable year 2020:
Sales P5,000,000
Cost of goods sold 2,000,000
General selling and administrative
expenses 500,000
Interest income from Philippine bank
deposit 100,000
Rental income (net of 5% withholding
tax) 190,000
Dividend Income:
From domestic corporation 60,000
From foreign corporation 50,000
Capital gains from sale of domestic
shares of stocks sold Directly to buyer
75,000
Dividend declared and paid during the
year 500,000
Retained earnings, 12/31/2019 1,000,000
Par Value of outstanding shares 500,000
The income tax payable was:

a. Php825,000
b. Php899,200
c. Php815,000
d. Php819,200
49. Based on the foregoing problem, the Improperly accumulated earnings tax was:
a. Php208,125
b. Php213,625
c. Php108,125
d. P105,125
50. MNC Corporation, a domestic corporation, has unappropriated retained earnings in excess of
its paid-up capital stock amounting to P20,000,000 and P50,000,000 as of the fiscal years
ending June 30, 2020 and June 30, 2021, respectively. MNC Corporation shall be subject to
the 10% improperly accumulated earnings tax on the following fiscal years ending, except:
a. June 30, 2018
b. June 30, 2019
c. June 30, 2020
d. June 30, 2021
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Asian Spirit, an international air carrier showed the following gross receipts for 2019:
Point of Destination Gross
Origin receipts
Philippines United States of 8,000,000
America
Korea Malaysia 4,000,000
Thailand Philippines 3,750,000
Philippines Philippines 2,100,000
Additional information:
▪ Thirty Five percent (35%) of the shipments from the Philippines to the United
States were later shipped to the Soviet Union.
▪ 25% of all its revenues were from transport of cargoes and goods.
51. The income tax payable for 2019 is

a. Php127,500
b. Php200,000
c. Php170,000
d. Php150,000
52. How much is the income tax payable for 2019 assuming the Philippines and U.S.
entered into a tax treaty subjecting international carriers to 1% income tax rate?
a. Php68,000
b. Php60,000
c. Php80,000
d. Php150,000
53. How much is the income tax payable for 2019 assuming that Philippine carriers are
exempt from payment of income tax in the United States?
a. Php125,000
b. Php60,000
c. Php0
d. Php80,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
A corporation has the following data for 2016:

Gross income, Phil. P1,000,000
Gross income, USA 500,000
Gross income, Japan 500,000
Expenses, Phil. 300,000
Expenses, USA 200,000
Expenses, Japan 100,000
Other income:
Dividend from San Miguel Corp. 70,000
Dividend from Ford Motors, USA 120,000
Gain on sale of San Miguel shares

directly to buyers 150,000
Royalties, Phils. 50,000
Royalties, USA 100,000
Interest from receivables in the 60,000
Philippines
Rent Income, land in USA 250,000
Rent income, Building in the 100,000
Philippines
The Company also sold a land classified as capital asset for P2,000,000. The cost
of the land is P1,000,000 while its Zonal Value is P3,000,000.
54 . Its income tax on all income as a domestic corporation is:

a. Php578,000
b. Php963,600
c. Php683,500
d. Php821,500
55. Based on the above problem, its income tax on all income if it is a resident foreign
corporation, ignoring sale of land:
a. Php278,000
b. Php663,600
c. Php383,500
d. Php509,000
56. And if it is a non-resident foreign corporation and there is tax sparing, its income
tax on all income is (ignore sale of land):
a. Php378,000
b. Php663,600
c. Php383,500
d. Php509,000
Mobile : 0927 283 8234
Telephone : (043) 723 8412
57. A domestic corporation may employ, as a basis for filing its annual corporate income
tax return the:
a. Calendar year only
c. Either calendar or fiscal year .
b. Fiscal year only
d. Neither calendar nor fiscal year
58. A corporation files a, quarterly return within

a. 30 days following the close of each of the first 3 quarters
b. 60 days after the end of each of the first 3 quarters
c. 30 days, after the end of each of the first 4 quarters
d. 60 days following the end of each of the first 4 quarters.
59. Which of the following is subject to the income tax?

a. A non-stock and non-profit educational institution
b. Public educational institution
c. Civic league or organization not organized for profit and operated exclusively for
the promotion of social welfare
d. Mutual savings bank and cooperative bank having a capital stock represented by
shares organized and operated for mutual purposes and profit
That in all things, God will be glorifed
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No. 125 Brgy.

Income Taxation of Corporation TAX03-04

3. Technotronics Energy Corporation, a corporation registered in Belgium, has a 50

7. The following are classified as non-resident foreign corporation, except:

Numbers 13 to 15 are based on the following:

10% July 1, 2023

Regional Operating Headquarters 25% January 1, 1% January 1, 2022

Non-Resident Foreign Corporation 25% January 1, Not applicable

Numbers 19 to 21 are based on the following

Corporation A’s regular corporate income tax for CY 2021 is

2018 2019 2020

QUARTER RCIT MCIT Creditable

26. How much was the annual income tax payable?

Numbers 28 to 31 are based on the following

Tuition Fees P850,000.00

The income tax still due for 2020 is

32. Gargamel Technological Institute, a proprietary educational institution organized

Tuition Fees P480,000.00

Numbers 33 to 43 are based on the following

33. If it is a domestic corporation, its income tax after tax credit is

36. If it is a non-resident foreign corporation, its income tax is

39. If it is a non-resident cinematographic film owner/lessor, its income tax is

40. If it is a non-resident lessor of vessels, its income tax is

41. If it is a non-resident lessor of aircrafts, machineries, and equipment, its income

Regular Banking Unit:

Foreign Currency Deposit Unit:

Additional Information: Banco De Adamantium had total operating expenses of

45. Generally, dividend income received by a domestic corporation from a foreign

The income tax payable was:

Numbers 51 to 53 are based on the following

51. The income tax payable for 2019 is

Numbers 54 to 56 are based on the following

A corporation has the following data for 2016:

Dividend from Ford Motors, USA 120,000

Gain on sale of San Miguel shares

54 . Its income tax on all income as a domestic corporation is:

58. A corporation files a, quarterly return within

59. Which of the following is subject to the income tax?

That in all things, God will be glorifed

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