1

CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

CORPORATIONS De Vera /Llamado

1. One of the following does not fall under the definition of a “corporation” for income tax purposes:
a. General partnership
b. One-person corporation
c. Insurance company
d. Sole proprietorship

2. For income taxation purposes, the term “corporation” excludes one of the following:
a. Ordinary partnership
b. An incorporated business organization
c. General professional partnership
d. One-person corporation

3. A corporation organized and created under the laws of a foreign country and is authorized to do
business/ trade in the Philippines is:
a. Domestic corporation
b. Resident foreign corporation
c. Government owned and controlled corporation
d. Non-profit hospital

4. One of the general principles of income taxation:

a. A foreign corporation engaged in business in the Philippines is taxable on all income derived from
sources within and without the Philippines.
b. A foreign corporation engaged in business in the Philippines is taxable on all income derived from
sources within the Philippines only
c. A domestic corporation is taxable on income derived from sources within the Philippines only.
d. A domestic corporation is taxable on income derived from sources without the Philippines only.

5. A domestic corporation or resident foreign 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 or fiscal yea

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6. A corporation files a quarterly return within

a. 30 days after the end 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 after the end of each of the first 4 quarters

7. A final or annual return is filed on or before the 15th day of the

a. Month following the close of the taxable year
b. 2nd month following the close of the taxable year.
c. 3rd month following the close of the taxable year
d. 4th month following the close of the taxable year

8. DEF, a corporation registered in Germany, operates a 1,000 ton steel milling plant in Quezon province.
Which among the following shall be taxable under the Tax Code?
a) Its income from a steel-forging plant located in the Netherlands
b) Its gain from the sale of its non-operational smelting plant in Indonesia.
c) Royalties from the use in the Philippines of its proprietary software which was developed and
patented in Germany.
d) Interest income from a Euro deposit with a French bank in Paris.
e) None of the above.

9. Aplets Corporation is registered under the laws of the Virgin Islands. It has extensive operations in
Southeast Asia. In the Philippines, its products are imported and sold at a mark-up by its exclusive
distributor, Kim’s Trading, Inc. The BIR compiled a record of all the imports of Kim from Aplets and
imposed a tax on Aplets’s net income derived from its exports to Kim. Is the BIR correct?
a. Yes. Aplets is a non-resident foreign corporation engaged in trade or business in the Philippines.
b. No. The tax should have been computed on the basis of gross revenues and not net income.
c. No. Aplets is a non-resident foreign corporation not engaged in trade or business in the Philippines.
d. Yes, Aplets is doing business in the Philippines through its exclusive distributor Kim’s Trading Inc.

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10. ABC Inc., a corporation registered and holding office in Australia, not operating in the Philippines, may
be subject to Philippine income taxation on
a. Gains it derived from sale in Australia of an ore crusher it bought from the Philippines with the
proceeds converted to pesos.
b. Gains it derived from sale in Australia of shares of stock of Philex Mining Corporation, a Philippine
corporation.
c. Dividends earned from investment in a foreign corporation that derived 40% of its gross income
from Philippine sources.
d. Interest derived from its dollar deposits in a Philippine bank under the Expanded Foreign Currency
Deposit System.

11. 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.

12. The Philippine Health Insurance Corporation (Philhealth), and the Home Development Mutual Fund
(Pagibig) are government-owned corporations which are
a. Exempt from the corporate income tax.
b. Subject to the preferential corporate income tax for special corporations.
c. Subject to the basic corporate income tax
d. Subject to final tax

13. Public educational institutions, like the University of the Philippines, is deemed by law:
a. Subject to the preferential corporate income tax for special corporations.
b. Subject to the basic corporate income tax.
c. Subject to both the preferential income tax and the basic corporate income tax.
d. Exempt from the corporate income tax.

14. Which is not correct? The following are exempt from the corporate income tax:
a. Local water districts
b. Bureau of Internal Revenue
c. Government owned or controlled corporations
d. Social Security System

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15. Which of the following may be subject to the corporate income tax?
a. A non-stock and non-profit educational institution
b. A public educational institution
c. A private educational institution
d. Government Service Insurance System

16. Which of the following statements is not correct?

a. MCIT is not applicable to resident foreign corporations.
b. The corporate quarterly return shall be filed within 60 days following the close of each of the first
three quarters of the taxable year.
c. Resident foreign corporations would be taxed on net income from within the Philippines only.
d. Non-resident foreign corporations are taxed on gross income from within the Philippines only.

17. The following income are subject to final tax, except

a. Royalty income received by a domestic corporation from a domestic corporation.
b. Cash dividends received by a non-resident foreign corporation from a domestic corporation
c. Cash dividends received by a domestic corporation from a domestic corporation.
d. Interest income from a Peso deposit received by resident foreign corporation from a Philippine bank.
e. Branch profit remitted by a branch to the head office of a resident foreign corporation.

18. The MCIT shall not apply to the following resident foreign corporations, except
a. RFC engaged in business as international carrier subject to 2 1/2 % of their Gross Philippine Billings
b. RFC engaged in business as ROHQ before January 1, 2022
c. Offshore banking units
d. None of the above

19. Beginning July 1, 2020, the RCIT rate for domestic corporations shall be 25%. However, a lower
RCIT rate of 20% shall be imposed if the following conditions is/are present:
a. The domestic corporation’s net taxable income is not more than ₱5.0 Million
b. The domestic corporation’s net assets (excluding the land on which its office, plant, or equipment
are situated) are not more than ₱100 Million.
c. All of the above.
d. None of the above.

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20. The MCIT is 2% of gross income. However, the MCIT rate to be imposed shall be 1%
a. From January 1, 2021 to June 30, 2023
b. From October 8, 2021 to June 30, 2023
c. From July 1, 2020 to June 30, 2023.
d. None of the above.

21. CPG Corporation had the following data for calendar year ending December 2021, its first year of
operations:
Gross sales, Philippines ₱ 8,000,000
Gross sales, US 5,100,000
Cost of sales, Philippines 3,300,000
Cost of sales, US 2,300,000
Allowable deductions, Philippines 800,000
Allowable deductions, US 700,000
The corporation’s audited financial statements as of December 31, 2021 includes the following
accounts:
Land, Philippines ₱ 50,000,000
Building, Philippines 25,000,000
Total Assets 180,000,000
Compute the income tax due if the taxpayer is a domestic corporation:
(a) ₱1,500,000
(b) ₱ 1,200,000
(c) ₱1,800,000
(d) None of the above

22. Compute the income tax due in number 21 if the taxpayer is a foreign corporation with a branch in the
Philippines (RFC).
(a) ₱ 780,000
(b) ₱ 975,000
(c) ₱1,170,000
(d) None of the above

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23. Compute the income tax due in number 21if the taxpayer is a foreign corporation with no branch or
office in the Philippines (NRFC).
(a) ₱940,000
(b) ₱ 1,410,000
(c) ₱1,175,000
(d) None of the above

24. MVP Corporation, domestic corporation, had the following financial data for taxable year ending April
30, 2021:
Gross sales ₱15,000,000
Cost of sales 8,500,000
Allowable deductions 2,500,000
Compute the corporation’s income tax due for taxable year?
(a) ₱866,667
(b) ₱1,200,000
(c) ₱800,000
(d) None of the above.

25. The records of Acme Corporation, domestic, organized in 2014, engaged in retail, show the following
in calendar years 2019, 2020, 2021:

2019 2020 2021

Sales 1,800,000 1,740,000 2,100,200
Cost of Sales 430,000 110,000 510,100
Operating Expenses 1,740,200 1,600,000 1,300,400
Non-operating income 400,000 70,000 230,000
CWT per BIR Form 2307 18,000 2,500 21,002

The corporation had excess tax credits at the end of 2018 in the amount of ₱15,000. The corporation
chooses to credit in future years any excess tax credits it may have in a taxable year.

Compute the tax due and tax payable for 2019.

a. ₱35,400, ₱2,400
b. ₱35,400, ₱17,400
c. ₱8,940; ₱0
d. None of the above

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26. In number 25, what would be the tax payable of Acme Corporation for taxable years 2020?
a) ₱23,000;
b) ₱25,500;
c) ₱25,000;
d) ₱30,500;

27. In number 25, what would be the tax payable of Acme Corporation for taxable years 2021?
a) ₱82,438
b) ₱134,908
c) ₱131,908
d) ₱103,940

28. The records of CAMEL Corporation, domestic, show the following for calendar year 2021.

1st Q 2nd Q 3rd Q 4th Q

Sales 4,000,000 12,400,000 5,500,000 5,200,000
Cost of Sales 50,000 50,000 245,000 45,000
Operating Expenses 3,700,000 12,100,000 4,000,000 4,500,000
Non-operating income 30,000 120,000 70,000 45,000
Excess tax credit (previous year) 10,000
CWT 20,000 30,000 40,000 35,000
Excess MCIT (previous year) 30,000
The income tax payable for the first quarter:
a. ₱84,000
b. ₱70,000
c. ₱39,800
d. ₱10,000

29. The income tax payable for the second quarter:

a. ₱162,500
b. ₱164,500
c. ₱245,000
d. ₱94,500

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30. The income tax payable for the 3rd quarters:

a. ₱493,750
b. ₱217,750
c. ₱289,250
d. ₱259,250

31. The income tax payable for the annual return:

a. ₱668,750
b. ₱269,750
c. ₱175,000
d. ₱140,000

32. If the gross income from unrelated activity exceeds 50% of the total gross income derived by any
proprietary educational institution, the tax rate shall be the RCIT rate (25%/20%) based on the entire
taxable income. This is known as the
a. Constructive receipt
b. Tax benefit rule
c. End trust doctrine
d. Predominance test

33. Holy Hospital, Inc. (domestic corporation), a private non-profit hospital, has the following financial
information for CY 2021:
Hospital-related activities:
Gross receipts ₱10,000,000
Cost of services 4,000,000
Operating expenses 1,250,000

Unrelated business activities:

Gross receipts ₱10,000,000
Cost of services 3,000,000
Operating expenses 1,000,000
Compute the income tax due for CY 2021.
(a) ₱2,687,500
(b) ₱2,500,000
(c) ₱2,680,000
(d) ₱107,500

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34. CPA University, a proprietary educational institution organized in 2006, had the following data for
2021:
Tuition fees ₱850,000
Cost of services (tuition) 400,000
Rental income (net of 5% CWT) 142,500
Cost of services (rental) 10,000
School related expenses 420,000

The income tax still due for 2021 is

a. P 9,500
b. P 10,500
c. P 5,800
d. None of the above

35. CPA Airlines, a resident foreign international carrier has the following records of income for the
period. (The income represents gross billings.)
a. Continuous flight from Manila to Tokyo = 1,000 tickets at P2,000 per ticket
b. Flight from Manila to Taipei; transfer flight (on CPAR Airlines) from Taipei to Tokyo = 2,000
tickets at P2,000 per ticket
c. Continuous flight from Manila to Taipei = 3,000 tickets at P1,000 per ticket
The income tax due is
a. P 225,000
b. P 125,000
c. P 100,000
d. P 175,000

36-40. The Alliance Corporation provided the following data for the calendar year ending December 31,
2021 ($ 1 = P50)
Philippines U.S.A.
Gross Income ₱4,000,000 $40,000
Deductions ₱2,500,000 $15,000
Income Tax Paid $ 3,000

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36. If it is a resident international carrier, its income tax is s

a. P100,000 c. P 37,000
b. P 10,000 d. P125,000

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

a. P1,000,000 c. P300,000
b. P100,000 d. P128,000

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

a. P100,000 c. P300,000
b. P180,000 d. P128,000

39. If it is a non-resident lessor of aircrafts, machineries and equipment, its income tax is
a. P100,000 c. P300,000
b. P180,000 d. P128,000

40. If it is a resident foreign corporation but its expenses within and outside the Philippines is P3M,
unallocated (disregard original data on expense). Furthermore, its total assets amount to ₱90,000,000.
What is its total income tax liability if it remits 60% of its net profit to its head office abroad?
a. P635,000
b. P726,000
c. P480,000
d. None of the above.

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41. DBH Corporation, an RFC, is also a registered ROHQ since 2009. For taxable years 2020 to 2023,
its operations show the following financial results:
2020 2021 2022 2023
Gross sales/receipts 35,000,000 12,000,000 13,000,000 7,000,000
Cost of services 11,250,000 6,000,000 6,500,000 4,250,000
Allowable deductions 3,625,000 4,200,000 1,250,000 3,125,000
Compute income tax due for 2020?
a. ₱2,012,500
b. ₱4,025,000
c. ₱5,031,250
d. ₱6,037,500

42. Compute income tax due for 2021?

a. ₱180,000
b. ₱360,000
c. ₱450,000
d. ₱540,000

43. Compute income tax due for 2022?

a. ₱525,000
b. ₱1,050,000
c. ₱1,312,500
d. ₱1,575,000

44. Compute income tax due for 2023?

a. ₱0
b. ₱41,250
c. ₱55,000
d. ₱27,500

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45. “Corneo” Corporation with total assets of ₱40,000,000, excluding the land on which its business is
situated, has the following data for the year 2021:
Gross Income, Philippines P1,000,000
Gross income, USA 500,000
Gross income, Japan 500,000
Expenses, Philippines 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, sale of San Miguel shares directly to buyer 150,000
Royalties, Philippines 50,000
Royalties, USA 100,000
Interest income (other than from bank deposit) 60,000
Rent, land in USA 250,000
Other rental income (Phils.) 100,000
Prize, contest in Manila 200,000
Interest income ($ deposit in BDO) 50,000

The total tax liability as a domestic corporation, if is:

a. P486,000 c. P679,750
b. P692,750 d. None of the above

46. Based on the above problem, its total tax liability if it is a resident foreign corporation is
a. ₱318,000 c. ₱328,750
b. ₱305,000 d. None of the above.

47. And if it is a non-resident foreign corporation, its total tax liability is

a. ₱433,500 c. ₱338,500
b. ₱385,500 d. None of the above.

48. Any income from transactions with depository banks under the expanded foreign currency deposit
system shall be exempt from income tax if derived by a
a. Domestic corporation
b. Resident foreign corporation
c. Non-resident foreign corporation
d. Resident ali

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49. The records of a closely-held domestic corporation show the following data for fiscal year ending June
30, 2021:
Gross income P1,500,000
Business expenses 600,000
Gain on sale of business asset 60,000
Interest on deposits with Metrobank, net of tax 5,000
Sale of shares of stocks, not listed and traded:
Selling price 150,000
Cost 115,000
Dividends from Victory Corporation, domestic 35,000
Dividends paid during the year 120,000
Reserved for building acquisition 300,000

In the previous fiscal year, the corporation suffered an operating loss of P130,000. This amount was
carried forward and claimed as deduction from gross income in fiscal year ending June 30, 2021. Also
in FY ending June 30, 2021, total CWT withheld from its income amounted to P40,000. The income
tax still due or payable for FY ending June 30, 2021?
a. P126,000
b. P249,000
c. P273,937
d. None of the above

50. In number 49, the improperly accumulated earnings tax to be imposed for FY ending June 30, 2021 is
a. P36,075
b. P34,765
c. P35,640
d. None

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51. Good Vibes Corporation is a domestic corporation and has, since 2015, owned 50% of the outstanding
shares of FirstWorld Corporation, a non-resident foreign corporation. On May 10, 2021, Good Vibes
received a dividend from FirstWorld in the amount of ₱5.0 Million.
On November 8, 2022, Good Vibes paid ₱2.0 Million (out of the ₱5.0 Million) as dividends to its
shareholders. On February 14, 2023, Good Vibes utilized ₱500,000 (of the remaining ₱3.0 Million)
for capital expenditures. On October 8, 2024, it invested the remaining ₱2.5 Million in a domestic
subsidiary.
(a) Good Vibes will be subject to income tax on ₱2.0 Million for the taxable year 2021, plus
surcharge, interest, and penalties.
(b) Good Vibes will be subject to income tax on ₱2.5 Million for the taxable year 2021, plus
surcharge, interest, and penalties.
(c) Good Vibes will be subject to income tax on ₱3.0 Million for the taxable year 2021, plus
surcharge, interest, and penalties.
(d) None of the above.

END

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