SELF-TEST EXERCISES

TRUE OR FALSE 1

1. Generally, interest income from non-bank sources is subject to regular income tax.

2. Foreign income is subjected to final tax if the taxpayer is taxable on global income tax

3. Items of passive income from abroad are subject to final tax.

4. Interest income on government securities are subject to final tax.

5. All items of passive income are generally subject to final tax.

6. Final tax is collected at source; hence there is no need to file an income tax return.

7. Corporations are tax-exempt on inter-corporate dividends from any corporation.

8. Individuals and corporations are tax-exempt on interest income on long termdeposits.

9. Dividends from resident corporations are subject t to regular tax.

10. Dividends from Real Estate Investment Trusts are exempt from final tax.

11. Stock dividends are always exempt from final tax.

12. Corporations are subject to final tax on prizes.

13. The share in the next income of a business partnership is subject to a creditable withholding tax, not to final tax.

14. General professional partnerships are subject to final tax but not to regular tax.

15. All non-residents are exempt from final tax on foreign currency deposits.

16. Royalties, active or passive are subject to regular income tax.

17. The tax sparing rules is applicable to resident and non-resident foreigncorporations.

TRUE OR FALSE 2
1. A government employee may claim the tax informer’s reward.
2. The final tax on winnings applies to corporations.
3. Individual, except corporations, are subject to final tax on winnings abroad.
4. Winnings which are not more than 10,000 in amount are subject to the regular income tax.
5. PCSO or lotto winnings are exempt from all types of income tax.
6. Special aliens do not file a regular income tax return on their compensation income.
7. The final tax on interest on tax-free corporate covenant bonds applies only to resident individual or corporate taxpayers.
8. NRA-NETB and NRFC are subject to final tax only to passive income from sources in the Philippines.
9. NRA-NETB and nrfcs are not required to file the regular income tax return.
10. Residents shall withhold 10% final tax upon interest on foreign currency loans of FCDU banks under the expanded foreign
currency deposit system.
11. A qualified employee trust fund is not subject to final tax.
12. The income of FCDU banks from fellow depositary banks under the expanded foreign currency deposit system is subject to 10%
final tax.
13. Petroleum service subcontractors are subject to 8% final tax on their income from petroleum service contractors.
14. The final withholding tax return shall be filed by the withholding agent on or before the 15 th day of the month the final taxes
were withheld
15. Foreign governments and foreign government-owned and controlled corporations are exempt from final tax.
Multiple Choices - Theory 1
1. Which is correct with regard to the final income taxation?

a. Taxpayers need not file an income tax return.

b. It covers all items of passive income from whatever sources.
c. It applies to all items of gross income of any non-resident earnedfrom sources within the Philippines.
d. It applies to passive income earned abroad.

2. Which statement is correct regarding final income tax?

a. Items of income subjected to final tax can still be subjected to regular tax.
b. Final tax applies only on certain passive income earned within the Philippines
c. Items of income exempt under final tax are subject to regular tax.
d. Final income tax applies to all passive income from Philippines sources.

3. Interest income from which of the following sources is subject to final income tax?

a. Lending
b. Bond investment
c. Mortgage loans
d. Money market placements

4. The final tax does not apply to interest on (select the best answer)

a. Long-term deposit
b. Trust funds
c. Deposit substitute
d. Promissory notes

5. The exemption on final tax on interest from long-term deposit is not applicable to

a. Citizen’s individuals
b. Resident corporation or individuals
c. Corporations
d. All of these

Income Taxation Chapter 5-F

6. Which interest income is not subject to any income tax?

a. Interest income from discount notes

b. Interest income from bonds issued by a bank
c. Imputed interest
d. Interest income from deposit substitute

7. The final tax rates on pre- termination of long-term deposits is not relevant to?

a. any corporations.
b. resident aliens.
c. resident citizens.
d. non-resident citizens.

8. Which of the following is subject to 15 final tax an interest from foreign currency deposits made with Philippine banks?

a. Non-resident corporation
b. Nonresident alien engaged in trade or business
c. Non-resident alien not engaged in trade or business
d. Resident alien
 9. The following are subject to final tax on all income from sources within the Philippines. Which is the exception?

a. Non-resident foreign corporation

b. Non-resident alien not engaged in trade or business
c. Non-resident alien engaged in trade or business
d. None of these.

10. The interest income from long-term peso deposits made with foreign banks is

a. subject to 20% final tax.

b. exempt from any tax.
c. subject to regular tax
d. None of these

11. What is the final tax on interest income on 6-year deposit pre-terminated less than2 years before maturity?

a. 20%
b. 12%
c. 5%
d. 0%

12. Which of the following recipients is exempt from final tax on dividends?

a. Resident citizen
b. Resident corporation
c. Non-resident alien
d. Resident alien

13. A dividend declaration in 2019 is subject to a final tax of

a. 6%
b. 8%
c. 10%
d. 20%

14. Dividends declared by a resident corporation is

a. exempt from any tax.

b. subject to 10% final tax,
c. subject to regular income tax
d. subject to 20% final tax.

15. Between the date of declaration and the date of record, BCD, Inc. sold a investment representing stock of ABC, Inc., a domestic
corporation. Which statement is correct?
a. ABC, Inc. shall withhold 10% dividend tax if the buyer of the sale is an individual.
b. ABC, Inc. shall withhold 10% dividend tax if the buyer of the sale is a Corporation.
c. ABC, Inc. shall withhold 10% dividend tax if the seller of the sale is an individual
d. ABC, Inc. shall withhold 10% dividend tax if the seller of the sale is a corporation.

Multiple Choices - Theory 2

1. Which is covered by final tax?

a. Interest income from foreign banks

b. Share in the net income of a joint venture
c. P10,000 taxable prizes from the Philippines
d. Share in the net income of a general professional partnership

2. Which is not subject to 20% final tax?

a. Interest income from trust funds

b. Royalties from musical compositions
c. P11,000 worth of prizes
d. Winnings

3. Which is not subject to 10% final tax?

a. Royalties from literary works

b. Dividends from a domestic corporation
c. Share in the net income of a business partnership
d. Royalties from a business trademark

4. Which of the following is taxable?

a. Prize on sports competitions sanctioned by the national sports organization

b. Prize from dance competition abroad
c. Nobel prize
d. Any prize received without effort

5. Which winning is taxable to a final tax

a. Winnings exceeding P10,000

b. Winnings not exceeding P10,000
c. Winnings from PCSO or lotto
d. All of these

6. Prizes from sources abroad is subject to final tax

a. If the amount of prices exceeds P10,000

b. If the amount of prizes does not exceed P10,000.
c. If it is given to the taxpayer without effort.
d. Under no circumstance.

7. The following winnings are exempt from tax, except one. Which is the exception?

a. Jueteng winnings
b. Lotto winnings exceeding P10K
c. PCSO winnings not exceeding P10k
d. All of these

8. Which of the following is exempt form final tax?

a. Interest income earned by a bank from deposits in another bank

b. Royalties from books
c. Interest income earned by a bank from lending activities
d. All of these

9. Dividend Income from domestic corporations is subject to final taxeffective

a. 2000
b. 1998
c. 1999
d. 1997

10. Prizes arising from sources within the Philippine may be

a. subject to final tax.

b. subject to regular tax.
c. exempt from tax
d. exempt or subject to final tax or regular tax

11. Any royalties earned abroad by a non-resident corporation is

a. not to subject to Philippine income tax.

b. always subject to final tax.
 c. subject to either final tax or regular tax
d. always subject to regular tax.

12. The winnings of a resident alien from abroad is

a. subject to regular tax

b. subject to final tax.
c. subject to either final or regular tax.
d. not subject to Philippine income tax.

13. Royalty income of a domestic corporation from abroad is

a. subject to regular tax

b. subject to final tax.
c. subject to either final or regular tax.
d. not subject to Philippine income tax.

14. Winnings of PCSO are generally

a. exempt from any tax.

b. subject to regular tax.
c. subject to 20% final tax
d. subject to both final and regular tax.

15. The final tax rates on passive income are generally star tothe taxpayers, except one. Select the exception

a. Domestic corporation
b. Resident alien
c. Non-resident citizen
d. Non-resident corporation

16. The tax informer's reward may be granted to

a. Officials of the BIR

b. Public officials or employees
c. Close relatives of public government employees
d. Relatives of government employees beyond the 6 th degree of consanguinity

17. Which is not subject to final tax?

a. Compensation to non-resident aliens not engaged in trade or business

b. Fringe benefits of supervisory and managerial employees
c. Income of non-resident foreign corporations
d. Fringe benefits of rank and file employees

18. which of the following is exempt from final tax?

a. Winnings to competitions sponsored by a local trading company

b. Prizes in a body building competition
c. Dividends from a foreign corporation
d. Winnings from a casino

Multiple Choice - Problems 1

1. Winnie, a resident citizen deposited P2,000,000 in the 180-day time deposit of Bancode Oro. The deposit pays 8% interest.
Compute the final tax on maturity of thedeposit

a. P6,000 c. P20,000

b. P8,000 d. P16,000

2. Assume that Winnie is a non-resident alien not engaged in trade or business computethe final tax on maturity of the deposit.

a. P6,000 c. P20,000
 b. P8,000 d. P16,000

3. Renz received P42,000 interest from short-term deposits. Compute the final taxwithheld on the interest.

a. P10,500 c. P5,000

b. P9,000 d. P4,500

4. On January 1, 2014, Mr. Albuera invested P2,000,000 in the six-veartime of Sulu Unibank which pays 10% annual interest.
Compute the final tax tobe withheld by Sulu Unibank on December 31, 2014.

a. PO c. P200,000

b. P100,000 d. P250,000

5. Assume Mr. Albuera pre-terminated the time deposit on July 1, 2018: compute thefinal tax to be withheld on pre-termination.

a P5,000 c. P45,000

b. P12,000 d. P108,000

6. Boy, a resident citizen, received the following interest income:

P80,000 from short-term Peso time deposit

P16,000 from a five-year bond issued by a commercial bank

P24,000 from 5/6 lending to market vendors

How much final tax must have been withheld from Boy's interest income?

a. PO c. P20,000
b. P16,000 d. P24,000

7. Jake Corporation, a domestic corporation, deposited P1,000,000 in the five-year time deposit of Banco Pilipino which pays 10%
annual interest. Compute Jake Corporation's net interest income in the first year of the deposit.

a. P100,000 c. P80,000

b. P90,000 d. P70,000

8. Assume Jake Corporation is a non-resident corporation; compute the final taxon interest income.

a. PO c. P20,000

b. P10,000 d. P30,000

9. On January 2, 2011, Quezon, Inc. placed P1,000,000 in the 5-year time deposit ofBank of Laguna. The placement earns 10%
annual interest. Quezon, Inc. pre-terminated the deposit on June 30, 2014. Compute the final tax to be withheld onpre-
termination.

a. PO c. P17,500

b. P10,000 d. P42,000

10. Francis, a resident citizen, invested P1,000,000 in a debt instrument (deposit substitute) issued by UniBank. The debt
instruments pay 10% annual interest payableevery quarter. How much final tax should UniBank withhold in the first quarter of
theissue?

a. PO c. P6,250

b. P5,000 d. P20,000

11. Cyndrell, a resident citizen, deposited P5,000,000 in a non-resident foreign depositary bank which pays 12% annual interest.
 How much final tax shall be withheldin the first year?

a. PO c. P120,000

b. P45,000 d. P150,000

12. Petrodrill Ventures is a joint venture which operates under a service contractwith the government. Petrodrill is 30% owned by
individual investors. The owned bycorporate oil exploration companies. Petrodrill reported profit which was to be distributed.

a. P200,000 c. P140,000

b. P60,000 d.PO

13. Mr. Bayugan published his book abroad for the international market. During first quarter, he earned a gross royalty of
P1,000,000. How much final tax will be withheldby the foreign publisher?

a. P250,000 c. P100,000

b. P200,000 d.PO

14. Sison Inc. is the only corporate shareholder of Surigao Inc. owning 60% of its outstanding voting shares. During the year,
Surigao Inc, declared a P1,000,000dividend. Compute the final income tax to be withheld by Surigao.

a. P100,000 c. P40,000

b. P60,000 d.PO

15. Mr. Tuao won an P800,000 prize in a national dancing competition. The organizer of the event declared that the P800,000 grand
prize was "tax free." How much final tax must be remitted by the organizer to the BIR?

a. P200,000 c. P88,889

b. P 160,000 d. PO

16. Mr. Crocodile owns a mining property in Prosperidad. He allowed amining company to operate under a condition that he will be
paid 10% royalty onthe gold production. The mining company produced P8,000,000 worth of gold during the year. How much
net royalties will be paid to Mr. Crocodile?

a. P800,000 c. P720,000

b. P640,000 d. P160,000

Multiple Choice - Problems 3

1. Mr. Aguak earned the following prizes from two different competitions:

Date Event Gross Prize

January 4, 2017 Singing competition P12,000

February 14, 2017 Painting competition P10,100

Compute the total final tax that should have been withheld from the above prizes.

a. P5,500 c. P3,000
b. P4,420 d. P2.400

2. Mr. Rems Orayt participated in two different events on January 4, 2020:

Date Organizer Competition Gross Prize

January 4, 2020 Ang Mahiwagang Boses Singing P 10,000

January 4, 2020 Sexy Body Foundation Dancing P 11,000
Compute the total final tax that should have been withheld from the above prizes.

a. P0 c. P3,000

b. P4,420 d. P2,00

3. Mr. Conrado won the P50,000,000 6/49 Superlotto Jackpot of the Philippine Charity Sweepstakes Office. How much final tax
will be withheld?

a. P 500,000 c. P100,000
b. P200,000 d. PO

4. Ms. Matti won a gold medal and P50,000 cash prize for chess competition in the Palarong Pambansa. How much final tax should
be withheld from the prize?

a. P20,000 c. P5,000
b. P10,000 d. PO

5. Tiong Sang Department Store conducted a sales promotion where customer purchases exceeding P1,000 in one transaction shall
be entitled to a ticket for achance to win P500,000 raffle prize. Mr. Shing won the prize.
How much shall Tiong Sang withhold from the grand prize?

a. P200,000 c. P 50,000
b. P100,000 d. Po

6. Tacurong, a resident citizen, won $1,000,000 from the US lottery. The lottery winning is

a. exempt from tax c. subject to 10% final tax

b. subject to 20% final tax d. subject to regular tax

7. Mr. Curandang submitted a sworn statement regarding the alleged tax evasion practices of Chitie Corporation. This led the BIR
to recover P20,000,000 unpaid taxes. How muchnet tax informer's reward shall be paid to Mr. Curandang?

a. P1,800,000 c. P1,000,000

b. P1,600,000 d. P900,000

8. A concerned government employee furnished the BIR a statement detailing the improper tax practices of a corporate taxpayer.
The information was instrumental to thecollection of P500,000 tax. How much informer's tax reward after tax shall be released
to the informant?

a. PO c. P45,000

b. P40,000 d. P50,000

9. Roy invested P1.000.000 in the tax free" corporate bonds of RBC Corp The bond pays 8.75% interest annually net of any taxes.
How much final tax RBC Corporation withhold from the annual interest payment to Roy?

a P36,000 c. P37,500

b. P16,800 d. PO

10. A taxpayer wants to manually file his Monthly Remittance Return of Final Income Tax Withheld for the month of February
2017. What is the deadline for the return?

a. February 14, 2017 c. March 10, 2017

b. February 28, 2017 d. April 15, 2017

11. In reviewing its tax compliance, Rang-ay Banco noted that it failed to remit the P90,000 final taxes it withheld for the month of
February 2017. Compute the total amount of taxes due including the penalties if Rang-ay Banco settles the obligation on March
 20, 2017.

a. P 90,000 c. P 113,000

b. P 112,500 d. P 128,000

12. Bangko Illustrado failed to withhold the final tax on the P1,200,000 interestexpense which was credited to various accounts of
individual depositors in the month of April 2016. It wants to settle the unpaid final withholding tax on June 10,2017. Compute
the surcharge and interest penalty due.

a. P 450,000 c. P 64,000

b. P 320, 000 d. P 58,000