INCOTAX THEORIES

1. Interest income on bank deposit or investment with maturity period of

more than five (5) years received by a corporation in 2023 taxable year is
subject to:
Domestic RFC NRFC
a. 20% 20% 25%
b. Exempt Exempt Exempt
c. 20% 20% Exempt
d. 20% Exempt Exempt

2. On January 1, 2020, the domestic corporation invested P1,000,000 to BDO’s

5-year, tax-free time deposit. The long-term deposit pays 10% annual interest
every January 1. In need of cash, the domestic corporation pre-terminated its
investment on July 1, 2023. How much is the final tax due in 2023?
a. P2,500 c. P10,000
b. P6,000 d. P12,000

3. Interest income received by corporations from their deposit under the

expanded foreign currency deposit system (FCDS) PRIOR to the effectivity of
CREATE law is subject to FWT rate of:
Domestic RFC NRFC
a. 20% 20% 20%
b. 7.5% 7.5% Exempt
c. 15% 15% Exempt
d. 15% 7.5% Exempt

4. Interest income received by corporations from their deposit under the

expanded foreign currency deposit system (FCDS) UPON the effectivity of
CREATE law is subject to FWT rate of:
Domestic RFC NRFC
a. 20% 20% 20%
b. 7.5% 7.5% Exempt
c. 15% 15% Exempt
d. 15% 7.5% Exempt

5. Royalty income received by corporation prior to the effectivity of CREATE is

subject to FWT of:
Domestic RFC NRFC
a. 20% 20% 30%
b. 7.5% 7.5% Exempt
c. 15% 15% Exempt
d. 15% 7.5% Exempt

6. Royalty income received by corporation UPON the effectivity of CREATE is

subject to FWT of:
Domestic RFC NRFC
a. 20% 20% 30%
b. 7.5% 7.5% Exempt
c. 20% 20% 25%
d. 15% 7.5% Exempt
7. Royalty income FROM BOOKS received by corporation PRIOR the effectivity
of CREATE is subject to FWT of:
Domestic RFC NRFC
a. 10% 10% 30%
b. 20% 20% 30%
C. 15% 15% Exempt
d. 15% 7.5% Exempt

8. Royalty income FROM BOOKS received by corporation UPON the effectivity

of CREATE is subject to FWT of:
Domestic RFC NRFC
a. 10% 10% 30%
b. 20% 20% 30%
C. 20% 20% 25%
d. 15% 7.5% Exempt

9. The following passive income 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 substitute
c. Dividend income from another domestic corporation
d. Royalties

10.Upon effectivity of CREATE law, which of the following dividends is subject

to RCIT rate of 25%?
A. Dividend income received by a domestic corporation from another
domestic corporation.
B. Dividend income received by a domestic corporation from resident foreign
corporation.
C. Dividend income received by a resident foreign corporation from another
resident foreign corporation.
D. All of the above

11.Upon effectivity of CREATE law, which of the following dividends may be

exempt from income tax?
A. Dividend income received by a resident foreign corporation from another
resident foreign corporation.
B. Dividend income received by a domestic corporation from nonresident
foreign corporation.
C. Dividend income received by a nonresident foreign corporation from
another resident foreign corporation.
D. All of the above

12. Which of the following sale transactions will be subject to capital gains tax?
a. Sale of shares of stock by a dealer in securities.
b. Sale of shares of stock during Initial Public Offerings (IPO)
c. Sale of shares of stock not through the local stock exchange by a person
who is not a dealer in securities.
d. Sale of shares of stock through the local stock exchange by a person who is
not a dealer in securities.
13.On March 2023, Josh sold the following shares of stock of domestic
corporations which he bought for investment purposes:
Listed and Traded Not Listed and Traded
Selling Price P250,000 P140,000
Cost 118,000 80,000
How much is the capital gains tax?
a. P3,000 c. P9,000
b. P6,000 d. P12,000

14.On March 2022, Josh sold the following shares of stock of domestic
corporations which he bought for investment purposes:
Listed and Traded Not Listed and Traded
Selling Price P250,000 P140,000
Cost 118,000 80,000
Assume that Johnson is a dealer in securities, the capital gains tax should be:
a. P0 c. P6,000
b. P3,000 d. P12,000

15.On March 2022, Josh sold the following shares of stock of domestic
corporations which he bought for investment purposes:
Listed and Traded Not Listed and Traded
Selling Price P250,000 P140,000
Cost 118,000 80,000
Assume the shares sold were issued by foreign corporations, the capital gains
tax should be:
a. P0 c. P6,000
b. P3,000 d. P12,000

16.On March 2022, Josh sold the following shares of stock of domestic
corporations which he bought for investment purposes:
Listed and Traded Not Listed and Traded
Selling Price P250,000 P140,000
Cost 118,000 80,000
Assume the shares not listed and traded in the local stock exchange were only
sold for P60,000, the capital gains tax should:
a. P0 c. P6,000
b. P3,000 d. P12,000

17.Drei sold 10,000 shares in Alpha Corporation, a closely held domestic

corporation, for P1,250,000. The shares were acquired by Drei a year ago for
P1,000,000. How much is the capital gains tax?
a. P0 c. P30,000
b. P20,000 d. P37,500
18.Statement 1: The determination of 6% capital gains tax on sale of real
property is based on net capital gains realized by the seller of real property.
Statement 2: Except for certain passive income, a nonresident alien not
engaged in trade or business shall be taxed at 25% of his gross income derived
from sources within the Philippines.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

19.Mike, a resident citizen taxpayer owns a property converted into apartment

units with a monthly rental of P10,000 per unit. He subsequently sold the
property to Leomar, a resident alien taxpayer. The sale shall be subject to:
a. 6% capital gains tax
b. Basic income tax
c. 6% capital gains tax or basic income tax at the option of Mike
d. 6% capital gains tax or basic income tax at the option of Leomar

20.Statement 1: Proceeds of sale of real property classified as capital asset may

be exempt from the 6% capital gains tax.
Statement 2: Gain from sale of real property classified as capital asset to the
Government may be taxed under Section 24(A) at the option of the individual
taxpayer.
1. Only statement 1 is correct
2. Only statement 2 is correct
3. Both statements are correct
4. Both statements are incorrect

21.As a rule, there is no income tax if there is no income. Which of the

following is the exception?
A. Capital Gains Tax on sale of land and/or building
B. Capital Gains Tax on sale of share of stock outside the local stock exchange
C. Tax on passive income
D. Regular Corporate Income Tax

22.If the property is located abroad, what type of income tax will apply on the
transaction?
A. Basic income tax
B. Capital gains tax
C. Either “a” or “b” at the option of the seller
D. Either “a” or “b” at the option of the buyer
23.A foreign corporation sold a condominium unit to Pedro for P10,000,000
which it acquired at a cost of P5,000,000. The fair market value of the said
property per tax declaration was P12,000,000 while its zonal value was
P15,000,000. How much is the capital gains tax?
A. P600,000 C. P900,000
B. P720,000 D. nil

24.In 2023, Mabuhay Corporation, a domestic corporation, sold shares of stock

of another domestic corporation for P250,000 through the local stock
exchange (LSE). The shares were acquired in 2018 at a cost of P100,000 and
were held for investment purposes. How much was the applicable tax due?
A. P1,250 C. P10,000
B. P1,500 D. P15,000

25.East Star, a domestic corporation, sold shares of stock of a domestic

corporation for P250,000 in 2023. The shares were acquired in 2015 for
investment purposes at a cost of P100,000 and were sold directly to a
buyer.
How much was the capital gains tax due?
A. P10,000 C. P22,500
B. P15,000 D. P45,000

26.East Star, a domestic corporation, sold shares of stock of a domestic

corporation for P250,000 in 2023. The shares were acquired in 2015 for
investment purposes at a cost of P100,000 and were sold directly to a
buyer. How much is the capital gains tax assuming the shares sold were
shares of a foreign corporation and the sale was made during the effectivity
of CREATE law?
A. P10,000 C. P22,500
B. P15,000 D. NIL

27.East Star, a domestic corporation, sold shares of stock of a domestic

corporation for P250,000 in 2023. The shares were acquired in 2015 for
investment purposes at a cost of P100,000 and were sold directly to a
buyer. Assume the shares sold were from a domestic corporation but were
not held for investment purposes. Assume further that the seller is a dealer
in securities. How much is the capital gains tax?
A. P10,000 C. P22,500
B. P15,000 D. NIL
28.Southwest corporation, a resident foreign corporation, sold shares of stock
of a domestic corporation for P500,000 in 2023. The shares were acquired
three (3) years ago for investment purposes at a cost of P300,000. The shares
were sold outside of the local stock exchange. How much is the capital gains
tax?
A. P10,000 C. P22,500
B. P15,000 D. P30,000

ANSWER KEYS:
1. A
2. C
2. D
3. D
4. C
5. A
6. C
7. B
8. C
9. C
10. C
11. B
12. C
13. C
14. A
15. A
16. A
17. D
18. B
19. B
20. C
21. A
22. A
23. D
24. B
25. C
26. D
27. D
28. D