DISCUSSION QUESTIONS
a. Resident alien.
Choose the letter of the correct answer.
1. Which of the following is not considered a non-resident
citizen?
a. A citizen of the Philippines who establishes to the
satisfaction of the Commissioner the fact of his
physical presence abroad with a definite intention
to reside therein.
b. A citizen of the Philippines who leaves the
Philippines during the taxable year to reside abroad,
either as an immigrant or for employment on
permanent basis.
c. A citizen of the Philippines who works and derives
income from abroad and whose employment thereat
requires him to be physically present abroad most of
the time during the taxable year.
d. A citizen of the Philippines who went on a business
trip abroad and stayed therein most of the time
during the year.
2. Due to his expertise, Engr. Pedro D. Magiba (a
freelancer) was hired by a foreign petroleum contractor
in Thailand to provide technical assistance for two
months from February to March. He was hired again for
the months of June-July and October-December of the
same taxable year. Engr. Pedro D. Magiba is a:
a. Resident citizen
b. Nonresident citizen
c. Special Filipino employee
d. None of the above
3. Ronnie, worked in the United States as a Partner of a Big
Four Accounting Firm and has been residing therein for
the past 25 years. He arrived in the Philippines on July
1, 2018 to reside here permanently. Which of the
following statements is correct with respect to Ronnie’s
classification for income tax purposes?
a. He will be classified as nonresident citizen from January
1, 2018 until the date of his arrival in the Philippines.
b. He will be classified as nonresident citizen for the whole
year of 2018.
c. He will be classified as resident citizen for the whole
year of 2018.
d. He will be classified as neither resident nor nonresident
citizen for the year 2018.
4. Dr. J, an expert American Physicist was hired by a
Philippine corporation to assist in its organization and
operation for which he had to stay in the Philippines for
an indefinite period. His coming to the Philippines was
for a definite purpose which in its nature would require
an extended stay and to that end makes his home
temporarily in the Philippines. The American
management expert intends to leave the Philippines as
soon as his job is finished.
For income tax purposes, the American management
expert shall be classified as:
b. Nonresident alien engaged in trade or business.
c. Nonresident alien not engaged in trade or business.
d. Resident citizen.
5. Which of the following interest income derived within
the Philippines is subject to basic income tax?
a. Interest income from bank deposits
b. Interest income from loans
c. Interest income from deposit substitutes
d. Interest income from trust funds
6. Which of the following interest income by a resident
taxpayer is subject to 15% upon effectivity of the TRAIN
Law?
a. Interest income from peso bank deposits
b. Interest income from deposit substitutes
c. Interest income trust funds
d. Interest income from dollar deposits
7. A non-resident alien derived interest income from his
bank deposit here in the Philippines under the FCDU
system of a domestic bank. The interest amounted to
$500. How much is the income tax due of the said alien?
($1=Php50)
a. P0 c. P3,750
b. P1,875 d. P10,000
8. If an account in a depository bank under the foreign
currency deposit system is jointly in the name of a
nonresident citizen such as an overseas contract worker,
or a Filipino seaman, and his spouse or dependent who
is a resident of the Philippines, the interest on such
deposit for 2018 taxable year shall be:
a. Exempted in its entirety.
b. Subject to final withholding tax of 15% in its
entirety.
c. 50% exempt and 50% subject to final withholding
tax of 15%.
d. Subject to regular income tax rates for individuals.
9. Which of the following royalties earned within the
Philippines is not subject to 10% final withholding tax?
a. Royalties from computer software
b. Royalties from books
c. Royalties from literary works
d. Royalties from musical compositions
10. Statement 1: A nonresident alien not engaged in trade
or business shall be subject to a final tax rate of 25% on
all income derived from sources within the Philippines,
including gain on sale of shares of a domestic
corporation.
Statement 2: On OFW shall be subjected to the same tax
rules that applies to a resident citizen.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
 d. Both statements are incorrect
18. Share in the net distributable income of a general co-
11. In 2022, John Bo won P500,000 in a PCSO 6/42 lotto partnership by a resident citizen is subject to:
draw. Uncertain on which investment should he devote a. 10% final withholding tax
the money, he decided to temporarily deposit P300,000 b. 20% final withholding tax
of his lotto winnings in Bobadilla Bank, a local bank. His c. 6% capital gains tax
interest income from the said deposit will be: d. Basic income tax
a. Subject to 10% final tax
b. Subject to 20% final tax 19. Share in the net distributable income of a general
c. Subject to basic tax professional partnership by a resident citizen is subject
d. Exempt from income tax. to:
a. 10% final withholding tax
12. The PCSO 6/42 lotto winnings in the preceding number b. 20% final withholding tax
shall be: c. 6% capital gains tax
a. Subject to 10% final tax d. Basic income tax
b. Subject 20% final tax
c. Subject to basic income tax 20. If a non-resident citizen received his share in the income
d. Exempt from income tax of a taxable joint venture, what type of income tax that
will apply on the said income?
13. If the PCSO winnings in the preceding number was a. Final withholding tax on passive income
received by NRA ETB, what type of income tax will b. Capital gains tax
apply? c. Basic income tax
a. Subject to 10% final tax d. Fringe benefit tax
b. Subject 20% final tax
c. Subject to basic income tax 21. Based on the preceding number, except that the joint
d. Exempt from income tax venture is exempt from income tax, what type of income
tax will apply on the said income?
14. If the PCSO winnings in the preceding number was a. Final withholding tax on passive income
received by NRANETB, what type of income tax will b. Capital gains tax
apply? c. Basic income tax
a. 25% Final withholding tax d. Fringe benefit tax
b. Capital gains tax
c. Basic income tax 22. Assume that on September 30, 2021, Pedro sold 10,000
d. Exempt from tax shares for P150 per share of X Corporation, a closely held
domestic corporation. The applicable tax shall be:
15. If the amount of prize received in the Philippines did not a. Final withholding tax on passive income
exceed P10,000, what type of income tax will apply? b. Capital gains tax
a. Final withholding tax on passive income c. Basic income tax
b. Capital gains tax d. Exempt from income tax
c. Basic income tax
d. Fringe benefit tax 23. Assume the shares of stock sold in the preceding number
were acquired for P100 per share, how much is the
16. The following taxpayers who received a dividend capital gains tax?
income from a domestic corporation will received net of a. P25,000 c. P75,000
10% final withholding tax, except: b. P50,000 d. P100,000
a. Resident citizen
b. Non-resident citizen 24. Which of the following transactions is subject to 6%
c. Resident alien capital gains tax:
d. Non-resident alien engaged in trade or business a. Sale of condominium units by a real estate dealer
b. Sale of real property utilized for office use
17. Which of the following cash and/or property dividends c. Sale of apartment houses
actually or constructively received by an individual shall d. Sale of vacant lot by an employee
not be subject to final tax but to regular income tax for
individuals? 25. Statement 1: Proceeds of sale of real property classified
a. Cash and/or property dividends from a domestic as capital asset may be exempt from the 6% capital gains
corporation or from a joint stock company tax.
b. Cash and/or property dividends from insurance or
mutual fund companies Statement 2: Gain from sale of real property classified as
c. Cash and/or property dividends from regional capital asset to the Government may be taxed under
operating headquarters of multinational companies Section 24 (A) at the option of the individual taxpayer.
d. Cash and/or property dividends from a nonresident a. True, True c. False, False
foreign corporation b. True, False d. False, True
26. Which of the following is not a requisite for the sale or 31. An employer subject to fringe benefit tax may be a/an
disposal of principal residence to be exempt from CGT? a. An individual
a. The proceeds are fully utilized in acquiring or b. General professional partnership
constructing a new principal residence within 18 c. Corporation
calendar months from date of filing the CGT Return. d. All of the above
b. The historical cost or adjusted basis of the real
property sold or disposed shall be carried over to the 32. Which of the following is subject to fringe benefit tax?
new principal residence built or acquired. a. Basic salary of the rank and file employees.
c. The BIR is notified within 30 days from the date of b. Basic salary of the supervisory or managerial
sale or disposition. employees.
d. The tax exemption can only be availed of once every c. Fringe benefit of the rank and file employee.
10 years. d. Fringe benefit of the supervisory or managerial
employee.
27. Vincent sold his principal residence for P10,000,000 to
his friend. Its FMV when he inherited it from his father 33. How much is the allowable deduction from business
was P12,000,000 although its present FMV is income of a domestic corporation which granted and
P15,000,000. He used ½ of the proceeds to buy a new paid P97,500 fringe benefits to its key officers in 2021?
principal residence within eighteen (18) months after a. P150,000 c. P97,500
the sale. Assume further that Vincent properly informed b. P100,000 d. P65,000
the BIR about the sale within the required period. It
shall be: 34. In 2021, ABC Corporation gave the following fringe
a. Exempt from capital gains tax benefits to its employees:
b. Subject to P300,000 capital gains tax
c. Subject to P450,000 capital gains tax To managerial employees P1,300,000
d. Subject to P600,000 capital gains tax To rank and file employees 5,000,000

28. Because of dire necessity, Juan sold a parcel of land from The allowable deduction from the gross income of the
for P8,000,000 with a cost of P10,000,000. At the time of corporation for the fringe benefits given to employees is
sale, the fair market value of the land was P11,000,000. a. P2,000,000 c. P6,320,000
The proceeds of the sale were used to purchase principal b. P2,148,000 d. P7,000,000
residence at Manila. As such, within 30 days from the
sale, he informed the Commissioner of Internal Revenue 35. Data from a managerial employee for taxable year 2021
of his intention to avail of the exemption and set-up an revealed the following:
escrow deposit equivalent to the capital gain’s tax. The Salaries and wages (net of SSS and 785,000
sale of land resulted a tax consequence of: philhealth contributions amounting to
a. P480,000 capital gains tax on sale of real property. 25,000 and withholding tax of 150,000)
b. P600,000 capital gains tax on sale of real property. Allowance, not subject to liquidation 60,000
c. P660,000 capital gains tax on sale of real property. Gasoline allowance, subject to liquidation 19,500
d. None. 13th month pay 80,000

29. Fringe benefit tax is computed based on: Taxable compensation income subject to graduated rates
a. Grossed-up monetary value is -
b. Monetary value a. P785,000 c. P935,000
c. Gross compensation b. P810,000 d. P960,000
d. Net compensation
36. Based on the above problem, the fringe benefit tax due
30. The following statements are true, except is -
a. Fringe benefit tax shall be treated as a final income a. P19,500 c. P31,500
tax on the employee withheld and paid by the b. P30,000 d. P32,307
employer on a quarterly basis
b. The grossed-up monetary value of the fringe benefit 37. In 2021, Bank of Philippine Archipelago Inc. paid for the
is the actual amount received by the employee quarterly rental of a residential house of its branch
c. The grossed-up monetary value of the fringe benefit manager, Mr. Tolentino, amounting to P90,000.
shall be determined by dividing the monetary value
of the fringe benefit by the gross monetary value How much is the fringe benefit expense?
factor a. P15,750 c. P90,000
d. The person liable for fringe benefit tax is the b. P45,000 d. P105,750
employer, whether he is an individual, professional
partnership or a corporation regardless of whether 38. How much is the fringe benefit tax?
the corporation is taxable or not or the government a. P24,230 c. P90,000
and its instrumentalities. b. P45,000 d. P105,750
 a. P789,000 c. P589,000
39. International Phone Inc. owns a condominium unit. b. P570,500 d. P434,000
During the year 2018, it allowed its CEO to use the said
property as his residence. The zonal value of the
property is P10,000,000 while its fair market value as 45. If he is a resident alien, his income tax payable is:
shown in its current Real Property Tax Declaration a. P360,580 c. P384,380
amounts to P8,000,000. b. P358,020 d. P295,000

How much is the fringe benefit expense? 46. If he is a non-resident citizen, his income tax due after
a. P500,000 c. P200,000 tax credit, if any is:
b. P250,000 d. nil a. P360,580 c. P384,380
b. P358,020 d. P295,000
40. Based on the preceding number, how much is the
quarterly fringe benefit tax expense? 47. If he is a non-resident alien engaged in trade or business
a. P50,000 c. P33,654 in the Philippines but without the benefit of Reciprocity
b. P23,529 d. nil Law, the income tax due after tax credit, if any is:
a. P295,000 c. P405,500
41. Using the same data in Number 39 and assuming that the b. P378,500 d. P338,500
acquisition cost of the residential property is P7,000,000
and the remaining useful life is 15 years. 48. If he is a non-resident alien not engaged in trade or
business, disregarding professional & business data, the
How much is the fringe benefit expense? total income tax that should be withheld from his
a. P500,000 c. P200,000 income is:
b. P250,000 d. nil a. P50,000 c. P31,500
b. P18,500 d. P338,500
42. Mikaela Flower Shop Inc. purchased a motor vehicle in
2021 for the use of its manager, Mike. It was registered 49. Mr. and Mrs. Tijam, both CPA’s and residents of the
under Mike’s name. The cost of the vehicle was Philippines, with 6 minor children, had the following
P400,000. The vehicle will be partly used for the benefit data for taxable year 2019:
of the Company.
Salaries, wife P600,000
How much is the fringe benefit tax? Bonus (13th month pay), wife 60,000
a. P188,235 c. P37,647 Professional Fees, (net of 10%
b. P215,385 d. nil withholding tax) 7,200,000
Expenses – Practice of profession 3,200,000
43. A leading manufacturing firm in the country provides Rental income (net of 5% withholding tax
educational assistance to all its employees’ dependents 712,500
provided the latter qualifies in the entrance examination Rental expenses 280,000
given by the school of their choice. The educational Other income, husband 840,000
assistance is/subject to:
a. Subject to basic income tax or fringe benefit tax The taxable income of Mr. Tijam is:
depending on the rank of the related employee. a. P3,475,000 c. P3,335,000
b. Subject to fringe benefit tax regardless of the rank of b. P3,235,000 d. P4,800,000
the related employee.
c. Subject to basic income tax regardless of the rank of 50. The taxable income of Mrs. Tijam is:
the related employee a. P3,475,000 c. P3,335,000
d. Tax exempt b. P3,235,000 d. P4,800,000

The next five (5) questions are based on the following: 51. Which of the following statements regarding minimum
Chris, married, had the following data for taxable year 2019: wage earner (MWE) is correct?
a. The MWE is exempt from income tax on his basic
Philippines Abroad statutory minimum wage (SMW).
Business income P1,000,000 $20,000 b. The MWE is exempt from income tax on his
Professional income 400,000 10,000 overtime pay, holiday pay, night shift differential,
Salaries 200,000 and hazard pay.
Business and professional c. The MWE is subject to income tax on income other
expenses 250,000 8,000 than those mentioned in “a” and “b”.
Income tax paid 4,000 d. All of the above

NOTE: $1 = P50 52. What is the correct treatment of overtime pay, holiday
pay, night shift differential, and hazard pay received by
44. If he is a resident citizen, his income tax payable is: those whose basic pay is more than the SMW?
 a. Exempt from income tax.
b. Subject to income tax, and consequently, to the
withholding tax on compensation income.
c. Considered as fringe benefit subject to fringe
benefit tax, provided the employee is holding
managerial or supervisory position.
d. None of the above.
53. Lorna, a minimum wage earner, works for E di Wow,
Incorporated. She earned compensation income of
P135,000 in 2018. Aside from her basic pay, she also
earned P140,000 consisting of P80,000 overtime pay,
P30,000 night shift differential, P15,000 hazard pay, and
P15,000 holiday pay. She also contributed to the SSS,
Philhealth, and HDMF amounting to P5,000 and has
received a 13th month pay of P11,000. Lorna’s income
tax due for the taxable year should be:
a. P1,800 c. P7,200
b. P3,600 d. P0
54. Ana, not a minimum wage earner, works for Maharlika
Corporation. She earned compensation income of
P240,000 in 2018. Aside from her basic pay, she also
earned P140,000 consisting of P80,000 overtime pay,
P30,000 night shift differential, P15,000 hazard pay, and
P15,000 holiday pay. She also contributed to the SSS,
Philhealth, and HDMF amounting to P5,000 and has
received a 13th month pay of P11,000. Ana’s income tax
due for the taxable year should be:
a. Exempt c. P76,000
b. P26,000 d. P80,000
55. Statement 1: Generally, qualified Senior Citizens
deriving returnable income during the taxable year,
whether from compensation or otherwise, are required
to file their income tax returns and pay the tax as they
file the return.
Statement 2: A Senior Citizen who is a compensation
income earner deriving from only one employer but
whose income had been subjected to the withholding tax
on compensation, shall, although not exempt from
income tax, be entitled to the substituted filing of
income tax return.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
56. Which of the following statements on the 8% income tax
rate is incorrect?
a. The Financial Statements (FS) is not required to be
attached in filing the final income tax return.
b. Existing rules and regulations on bookkeeping and
invoicing/receipts shall still apply.
c. The income tax is in lieu of the graduated rates of income
tax and percentage tax under Section 116 of the Tax
Code.
d. None of the above
57. Pedro is an individual taxpayer under a “contract of
service” or “job order arrangement” with DPWH, a
government agency.
Statement 1: Pedro is considered self-employed.
Statement 2: Pedro is liable both to income tax and business tax.
a. Only statement 1 is correct.
b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are incorrect.
58. Ms. EBQ operates a convenience store while she offers
bookkeeping services to her clients. In 2018, her gross
sales amounted to P800,000, in addition to her receipts
from bookkeeping services of P300,000. She incurred
cost of sales and operating expenses amounting to
P600,000 and P200,000, respectively. She already
signified her intention to be taxed at 8% income tax rate
in her 1st quarter return.
How much is the income tax liability for the year?
a. P68,000 c. P88,000
b. P10,000 d. P60,000
59. Based on the preceding number, if Ms. EBQ failed to
signify her intention to be taxed at 8% income tax rate
on gross sales on her initial Quarterly Income Tax
Return, her income tax liability is:
a. P68,000 c. P88,000
b. P10,000 d. P60,000
60. Mr. MAG, a financial Comptroller of JAB Company,
earned annual compensation income in 2018 of
1,500,000, inclusive of 13th month and other benefits in
the amount of P120,000 but net of mandatory
contributions to SSS and Philhealth. Aside from
employment income, he owns a convenience store, with
gross sales of P2,400,000. His Cost of Sales and operating
expenses are P1,000,000 and P600,000, respectively, and
with non-operating income of P100,000. Assume he
signified his intention to be taxed at 8% income tax rate
in his 1st quarter return, the total income tax due is:
a. P513,000 c. P313,000
b. P589,200 d. P493,000
61. Based on the preceding number, if he did not opt for the
8% income tax, his income tax due is:
a. P513,000 c. P313,000
b. P589,200 d. P493,000
62. On February 2019, Mr. MAG tendered his resignation to
concentrate on his business. His total compensation
income amounted to P150,000, inclusive of benefits of
P20,000. His business operations for 2019 remains the
same. He opted for the 8% income tax rate. His income
tax liability is:
a. P200,000 c. P190,400
b. P589,200 d. P493,000