CPA Review School of the Philippines

Manila

Taxation September 21, 2023

Pre-week Lecture Atty. Jack A. De Vera, CPA, JD

GENERAL PRINCIPLES

1. Statement 1: A person may refuse to pay a tax on the ground that he receives no personal
benefit from it.
Statement 2: A taxpayer has a right to question illegal expenditures of public funds.
a. If only the first statement is correct.
b. If only the second statement is correct.
c. If both statements are correct.
d. If both statements are incorrect.

2. All are similarities of taxation, police power, and power of eminent domain, EXCEPT
a. All are necessary attributes of the Constitution
b. All exist independently of the Constitution
c. All contemplate an equivalent benefit
d. All are superior to the non-impairment clause of the Constitution

3. Below are characteristics of a sound taxation system, EXCEPT:

a. Administrative feasibility and compliance
b. Fiscal adequacy
c. Theoretical justice
d. Uniformity of taxation

4. Tax as distinguished from license fee:

a. Non-payment does not necessary render the business illegal
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover cost of regulation

5. Aspects of taxation, except?

a. Levying of tax
b. Administration of tax
c. Collection of tax
d. Interpretation of tax

6. 1st Statement - The Commissioner of Internal Revenue shall have the power to inquire into
a taxpayer’s bank deposit in relation to all internal revenue taxes.
2nd Statement - The Commissioner of Internal Revenue shall have the power to prescribe
real property values:
a. True; False c. False; True
b. True; True d. False;False

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7. The following powers of the Commissioner may not be delegated, except:
a. The power to recommend the promulgation of rules and regulations by the secretary of
finance.
b. The power to issue ruling of first impression or to reverse, revoke or modify any
existing ruling of the bureau.
c. The power to compromise or abate internal revenue taxes save for a few.
d. The power of the commissioner to make assessments.

8. The following are agents and deputies for collection of National Internal Revenue taxes,
except:
a. The commissioner of Customs and his subordinates with respect to the collection of national
Internal Revenue Taxes on imported goods.
b. The head of the appropriate government office and his subordinates with respect to the
collection of energy tax.
c. Banks duly accredited by the commissioner with respect to receipts of payments of internal
revenue taxes authorized to be made thru banks.
d. City treasurer with regard to collection of real estate tax.

9. 1st Statement – The BIR Commissioner upon the recommendation of the Secretary of
Finance, shall promulgate all needful rules and regulations for the effective enforcement of
the provisions of NIRC.
2nd Statement – The rules and regulations of the BIR shall contain the conditions to be
observed by revenue officers respecting the institution and conduct of legal actions and
proceedings.
a. True; False c. False; True
b. True; True d. False; False

INCOME TAXATION
10. San Miguel Corporation a domestic corporation declared dividends in favor of a non-
resident foreign corporation, Mc Donald’s USA in the amount of 200M. How much is the
tax payable in the Philippines?
a. 30M
b. 50M
c. 60M
d. Exempt

11. Using the preceding number in case there is no tax sparring, how much is the tax
due/payable in Philippines?
a. 30M
b. 50M
c. 60M
d. Exempt

12. CRP is one of the Philippines registered top 20,000 private corporation. As the company’s
accountant you were tasked to account for all payments made local/resident suppliers. What
percentage of withholding tax rates of income payments made by top 20,000 private
corporations to their local/resident suppliers of goods?
a. 1% of the gross payments.
b. 2% of the gross payments
c. 3% of the gross payments
d. 4% of the gross payments

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13. Tan Torres a non-stock and non-profit charitable institution pays for its regular repairs and
maintenance of its facilities to Carmel Manpower Service Incorporated. As the accountant of
the exempt entity, how much withholding tax will you impose to its supplier (Carmel) for
the repairs and maintenance expense?
a. Exempt from withholding tax.
b. 1% withholding tax on its gross payment.
c. 2%withholding tax on its gross payment.
d. 5% withholding tax on its gross payment.

14. Ayer domestic corporation hired Velayo, Gorres and Santos accounting firm to conduct its
annual audit for the year 2023. Ayer corporation paid VGS & Co., an engagement fees
equivalent to Php100 Million. Such payment to VGS & Co. Shall be:
a. Exempt from withholding tax.
b. Subject to 1% withholding tax on its gross payment.
c. Subject to 2%withholding tax on its gross payment.
d. Subject to 5% withholding tax on its gross payment.

John and Marcia inherited a commercial lot and building from their parents 2 years ago. In
2023 (current year), the inherited property realized rental income of P300,000 per month, in
which both shared the revenues equally. The co-ownership remained unregistered with the
Securities and Exchange Commission. In addition, Jose and Maria reported their following
personal income and expenses.

15. How much final withholding income tax should the co-ownership remit representing the
revenue distribution to the co-owners?
a. P360,000
b. P540,000
c. None
d. P180,000

16. How much is the taxable income of John in his annual income tax return, assuming optional
standard deduction is used in determining his expenses?
a. P2,290,00
b. P1,860,000
c. P3,010,000
d. Exempt

17. How much is the taxable income of Marcia in his annual income tax return, assuming
optional standard deduction is used in determining his expenses.
a. P2,000,000
b. P2,280,000
c. P2,600,000
d. Exempt

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18. When is the deadline for filling of the annual income tax return of the co-ownership for
taxable year 2023?
a. April 15, 2024
b. May 15, 2025
c. Not applicable
d. April 15, 2023

19. 1st Statement – The fact that an individual’s name is signed to a filed return shall be prima
facie evidence for all purposes that the return was actually signed by him.
2nd Statement – If a taxpayer is unable to make his return, the return may be made by his
guardian or representative, the latter assuming the responsibilities of making the return and
incurring penalties if the same was erroneous.
a. True; False c. False; True
b. True; True d. False; False

BUSINESS TAXES
20. Which of the following transactions is exempt from value- added-tax?
a. Medical services such as dental and veterinary services rendered by professionals.
b. Legal services.
c. Services arising from employee-employer relationship.
d. Services rendered by domestic air transport companies.

21. Which of the following transactions is exempt from value- added-tax?

a. Sale of non-food agricultural products in their original state.
b. Sale of non-food marine and forest products in their original state.
c. Sale of cotton and cotton seeds.
d. Sale of agricultural food products in their original state.
22. Which of the following transactions is subject to zero-rated value-added-tax?
a. Services by regional or area headquarters of multi-national corporations.
b. Sale to Philippine Economic Zone Authority.
c. Sales by non-agricultural, non-electric, non-credit cooperatives.
d. Importation of professional instruments and implements by settlers in the Philippines.

23. Which of the following businesses is allowed a presumptive input value-added-tax?

a. Manufacturer of canned goods.
b. Manufacturer of packed juices.
c. Manufacturer of packed noodles
d. Manufacturer of dried fish

24. Goldilocks sells cakes and pastry to well-known hotels in Metro Manila area. The hotels are
allowed credit based on the track record of the hotels. The sale by the store in April 2022
was P224,000, including the VAT. Seventy five 75% percent of the sales are normally on
account. How much is the output tax for the month of April 2022?
a. P22,000 c. P6,000
b. P20,000 d. P24,000

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25. DST corporation bought a land at P56,000,000 using its original shares of stock as payment
thereof. How much documentary stamp tax will DST corporation pay if it was agreed that
Documentary Stamp Tax will be shouldered by DST corporation?
a. P840,000
b. P560,000
c. P1,400,000
d. None of the above.

26. Toyota Philippines Inc., sold the following vehicles in the first day of 2023:
Vios P998,000
Hilux P1,580,000
Land Cruiser P4,200,000
Compute the excise tax on the net manufacturer price?
a. P99,800
b. P316,000
c. P2,100,000
d. P2,199,800

27. A domestic corporation paid P40,000 stock transaction tax on Initial Public Offering (IPO)
of 500,000 shares in the year 2020. After the IPO, there were 800,000 shares outstanding.
The selling price of IPO per share was
a. P10 c. P4
b. P 8 d. P2

28. A won from a race horse bet amounting to P36,400 net of the tax. The ticket cost is 4,000.
How much is the percentage tax on the said winnings?
a. P4, 044 c. P3,600
b. P1, 516 d. Answer not given

29. A is a radio-tv broadcasting franchise grantee. During the preceding year, its gross receipts
did not exceed P10,000,000. During the first quarter of the current year, it has the following
data:
Gross receipts, sale of airtime P 2,000,000
Gross receipts, use of radio station’s
communication facilities for overseas comm. 500,000
Business expenses 700,000
Rental income from office spaces. 3,500,000

The franchise tax due for the first quarter is

a. P60,000 c. P75,000
b. P20,000 d. P50,000

30. How much was the overseas communication tax?

a. 250,000
b. 200,000
c. 75,000
d. 50,000

31. How much is the output VAT, if any?

a. 720,000
b. 660,000
c. 420,000
d. None

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32. Billy signed a 60 days debt instrument amounting to Php700,000. How much documentary
stamp tax will Billy pays?
a. 3,500
b. 5,250
c. 875
d. None

33. LouLou an importer of goods from China seeks your professional advice regarding which
value will be the basis of tax assessment for customs duties and value added tax?
a. Product price and gross selling price, respectively.
b. Landed cost and transactional value, respectively.
c. Dutiable value and landed cost, respectively.
d. Computed value and import value, respectively.

34. What is excise tax imposed on distilled spirit?

a. Ad valorem
b. Specific
c. Both Ad valorem and Specific
d. None

35. Philippine Tobacco Institute sold cigarettes per pack of 5’s; 10’s and 20’s. The Bureau of
Internal Revenue impose excise tax per net retail price. The Philippine Tobacco Institute
argued the basis of excise tax must be specific taxation per pack of 20 and not based on ad
valorem or net retail price. Should excise tax on cigarettes packed by hand or machine be
taxed at specific or ad valorem?
a. Ad valorem
b. Specific
c. Both Ad valorem and Specific
d. None

TRANSFER TAXES
36. Which of the following will not reduce the inheritance of heirs?
a. Unpaid medical expenses
b. Vanishing deduction
c. Transfer for public purpose
d. Casualty loss

37. Donor’s tax as distinguished from estate tax.

First distinction: The rates for donor’s tax are lower than those for estate tax, in all cases.
Second distinction: In donor’s tax, the exemption is P 250,000 while in estate tax there is
none.
a. Both distinctions are correct.
b. Both distinctions are wrong.
c. First distinction is correct, the second is wrong.
d. First distinction is wrong, the second is correct.

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38. Donor’s tax as distinguished from estate tax.
First distinction: For donor’s tax there maybe relatives or/and stranger donee’s unlike
Estate tax there’s no relative or stranger heirs.
Second distinction: In donor’s tax, transfer for public purpose is strictly construed against
the donor, unlike in Estate tax transfer for public purpose shall be liberally construed.
a. Both distinctions are correct.
b. Both distinctions are wrong.
c. First distinction is correct, the second is wrong.
d. First distinction is wrong, the second is correct.

39. Anthony Cabe, single, an American but resident of Friendship Road, Angeles, Pampanga,
died in year 2021 left the following properties:
Gross estate in Philippines
Family Home P7,000,000
Agricultural land inherited P8,000,000
Cash and investment P15,000,000
Gross estate Foreign country
Dodge Calibre P12,000,000
Tiny House P8,000,000
Funeral expenses P200,000
Administrative expenses P2,000,000
Claims against the estate P5,000,000
Unpaid mortgage P2,000,000

How much is the special deduction?

a. P12,000,000
b. P15,000,000
c. P7,500,000
d. P7,000,000

40. How much is the estate tax due?

a. P1,680,000
b. P1,860,000
c. P2,160,000
d. P2,610,000

REMEDIES OF THE STATE AND TAXPAYER

41. When Pre-assessment notice not required?
a. When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return;
b. When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent;
c. When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax liabilities for
the taxable quarter or quarters of the succeeding taxable year; or
d. When imported articles value added tax has not been paid and where release in the
customs warehouse;

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42. When collection proceedings may initiate without assessment notice?
a. When a discrepancy has been determined between the tax withheld and the amount
actually credited by the payee of income;
b. When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax liabilities for
the taxable quarter or quarters of the succeeding taxable year ;
c. When the excise tax due on excisable articles has not been paid;
d. When an article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold,
traded or transferred to non-exempt persons.

43. The Commissioner of Internal Revenue may compromise the payment of any internal
revenue tax when
I. A reasonable doubt as to the validity of the claim against the taxpayer exists
II. The tax or any portion thereof appears to be unjustly or excessively assessed.
III. The financial position of the taxpayer demonstrates a clear inability to pay the assessed
tax.
a. I and II c. II and III
b. I and III d. I, II and III

44. The Commissioner of Internal Revenue may abate or cancel the tax liability when
I. The administration and collection costs involved do not justify the collection of the
amount due
II. A reasonable doubt as to the validity of the claim against the taxpayer exists
III. The tax or any portion thereof appears to be unjustly or excessively assessed
IV. The financial position of the taxpayer demonstrates a clear inability to pay the assessed
tax.
a. Only I c. I and III
b. I and II d. I and IV

45. A’s income tax liability for 2019 was P75,000. She filed the return and paid the total amount
due on July 15, 2020 but not with the proper internal revenue district office. The amount
payable by A is
a. P 96,000 c. P 116,250
b. P 114,750 d. P 112,500

46. Gerry was being prosecuted by the BIR for failure to pay his income tax liability for
Calendar Year 2013 despite several demands by the BIR in 2015. The information was filed
with the RTC only last June 2016. What are the remedies of Gerry?
a. Gerry should file a motion to quash the Information on the ground of prescription.
b. Gerry should answer the Information.
c. Gerry should file a protest with the Commissioner of BIR.
d. Gerry should appeal to the CTA.

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47. For a finding of “filing a fraudulent return” by the BIR to prosper:
Statement 1: Fraud must be intentional, consisting of deception willfully and deliberately
done or resorted to in order to avoid payment of the tax.
Statement 2: Fraud cannot be presumed but must be proved. Fraudulent intent cannot be
deducted from mistakes however frequent they may be, especially if such mistakes emanate
from erroneous classification of items in accounting methods utilized for determination of
tax liabilities.
a. True; False c. False; True
b. True; True d. False; False

48. The following are the reasons which necessitates the filing of an administrative claim for
refund with the BIR, except:
a. To afford the Commissioner an opportunity to consider the claim.
b. To give the Commissioner a chance to correct the errors of subordinate officers.
c. To notify the Government that such taxes have been questioned and the notice should be
borne in mind in estimating the revenue available for expenditures.
d. To give ample time to the Commissioner in preparing the cash to be disbursed for the
taxpayer’s refund.

49. 1st Statement: A refund check or warrant, which shall remain unclaimed or uncashed after
five (5) years from the date the said warrant was mailed or delivered shall be forfeited in
favor of the Government.
2nd Statement: A tax credit certificate which shall remain unutilized after five (5) years from
the date of its issue, unless revalidated, be considered invalid and shall not be allowed as
payment for internal revenue taxes.
a. True; False c. False; True
b. True; True d. False; False

50. 1st Statement – The CIR may impose administrative penalty of 25% on the tax proper only.
2nd Statement – The CIR may impose interest double the legal rate as imposed by Banko
Sentral ng Pilipinas.
a. True; False c. False; True
b. True; True d. False; False

51. What are the requisites in order that distraint or levy may be exercised by the government,
EXCEPT?
a. The taxpayer must be delinquent in the payment of taxes (except in constructive
distraint);
b. There must be a subsequent demand for its payment;
c. The taxpayer failed to pay the delinquent tax within the period prescribed;
d. The period for assessment or collection has prescribed.

52. What are the means employed in the assessment of taxes, EXCEPT?
a. Examination of tax returns (tax-audit);
b. Inventory taking surveillance and use of presumptions gross sales or receipts;
c. Prescription of real property values;
d. Examination of bank deposits;
e. Requiring of additional documentary evidences.

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53. When is the last day to appeal a denial of the protest with Court of Tax Appeals?
a. 30 days from its denial by BIR Commissioner.
b. After 30 days from the lapse 180 days decision period.
c. Taxpayers option either from 30 days from denial by the BIR commissioner or 30 days
after lapse of 180 days decision period.
d. Taxpayers option either from 30 days from denial by the BIR commissioner or 30 days
after lapse of 180 days decision period whichever comes later.

54. Jane filed his annual income tax return on May 22, 2026 for income earned during 2025.
The BIR examiner assessed Jane for tax delinquency on October 15, 2027. Jane filed a
protest plus all documentary evidence on November 8, 2027 with the Commissioner of the
Internal Revenue. The Commissioner rendered its unfavorable judgment on May 10, 2028.
When is the earliest day to appeal the case to the Court of Tax of Appeals?
a. June 8, 2028 c. May 25, 2028
b. June 10, 2028 d. May 22, 2028

55. On July 31, 2025, Esperanza received a preliminary assessment notice from the BIR
demanding that she pays P180,000.00 deficiency income taxes on her 2023 income. How
many days from July 31, 2025 should Esperanza respond to the notice?
a. 180 days c. 60 days
b. 30 days d. 15 days

56. On March 30, 2020 Miguel Foods, Inc. received a notice of assessment and a letter of
demand on its April 15, 2017 final adjustment return from the BIR. Miguel Foods then filed
a request for reinvestigation together with the requisite supporting documents on April 25,
2020. On June 2, 2020, the BIR issued a final assessment reducing the amount of the tax
demanded. Since Miguel Foods satisfied with the reduction, it did not do anything anymore.
On April 15, 2025 the BIR garnished the corporation’s bank deposit to answer for the tax
liability. Was the BIR action proper?
A. Yes. The BIR has 5 years from the filing of the protest within which to collect.
b. Yes. The BIR has 5 years from the issuance of the final assessment within which to
collect.
c. No. The taxpayer did not apply for a compromise.
d. No. The BIR right to collect already prescribed.

57. When a BIR decision affirming an assessment is appealed to the CTA, the BIR’s power to
garnish the taxpayer’s bank deposits.
a. Is suspended to await the finality of such decision.
b. Is suspended given that the CTA can reverse BIR decisions when prejudicial to the
taxpayer.
c. Is not suspended because only final decisions of the BIR are subject to appeal.
d. Is not suspended since the continued existence of government depends on tax revenues.

58. Jeopardy assessment is a valid ground to compromise a tax liability.

a. Involving deficiency income taxes only, but not for other taxes.
b. Because of doubt as to the validity of the assessment.
c. If the compromise amount does not exceed 10% of the basic tax.
d. Only when there is an approval of the National Evaluation Board.

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59. As a general rule, within what period must a taxpayer elevate to the Court of Tax Appeals a
denial of his application for refund of income tax overpayment?
a. Within 30 days from receipt of the Commissioner’s denial of his application for refund.
b. Within 30 days from receipt of the denial which must not exceed 2 years from payment
of income tax.
c. Within 2 years from payment of income taxes sought to be refunded.
d. Within 30 days from receipt of the denial or within two years from payment whichever
comes first.

60. What is the effect on the tax liability of a taxpayer who does not protest an assessment for
deficiency taxes?
a. The taxpayer may appeal his liability to the CTA since the assessment is a final decision
of the Commissioner on the matter.
b. The BIR could already enforce the collection of the taxpayer’s liability if it could secure
authority from the CTA.
c. The taxpayer’s liability becomes fixed and subject to collection as the assessment
becomes final and collectible.
d. The taxpayer’s liability remains suspended for 180 days from the expiration of the
period to protest.

61. There is prima facie evidence of a false or fraudulent return where the
a. Tax return was amended after a notice of assessment was issued.
b. Tax return was filed beyond the 11eglementary period.
c. Taxpayer changed his address without notifying the BIR.
d. Deductions claimed exceed by 30% the actual deduction.

62. Statement one: The Commissioner of Internal Revenue may issue subpoena duces tecum
and failure to obey subpoena may result into criminally liability.
Statement two: The Revenue Officer concerned must be present on the date indicated on
the subpoena to determine the completeness of submission of documents.
a. True, false
b. True, true
c. False, false
d. False, true

63. In filing a protest with the Bureau of Internal Revenue, what remedies may be availed by the
taxpayer simultaneously?
a. Reinvestigation or abatement;
b. Reinvestigation or compromise;
c. Reinvestigation or reconsideration;
d. Reinvestigation or review.

64. What is the prescriptive period for an assessment fraud?

a. 5 years from discovery;
b. 10 years from discovery;
c. 5 years from date of the return or deadline prescribe by law whichever is later;
d. 10 years from date of the return or deadline prescribe by law whichever is later;

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65. The prescriptive period for tax warrant or check for refund or tax credit shall be within:
a. 4 years from date of issue;
b. 5 years from date of issue;
c. 10 years from date of issue;
d. 12 years from date of issue;

66. Which of the following is not a proper way to deliver a final assessment notice?
a. Registered Mail; c. Substituted Service;
b. Electronic messaging; d. Personal Service.

67. Mr. Eugenio challenge the assessment of the BIR stating that he never received a copy of the
Letter of Authority from the BIR. The BIR proved that the security guard of Mr. Eugenio
received and acknowledged the receipt of the Letter of Authority by the BIR. Is the
assessment of the BIR valid?
a. No. The Letter of Authority must be served to Mr. Eugenio’s known business address
and in his absence to his clerk.
b. No. The Letter of Authority must be personally served to Mr. Eugenio.
c. Yes. The Letter of Authority is constructively served to Mr. Eugenio.
d. Yes. The Letter of Authority is properly served to Mr. Eugenio through his security
guard.

LOCAL AND PREFERENTIAL TAXATION

68. Luka Doncic, a professional basketball player from Slovenia came to the Philippines to
participate in the World Cup from August 25 to September 10, 2023. Luka’s income from
the Philippines may be?
a. Taxable in the Philippines
b. Taxable in Slovenia
c. Taxable both in the Philippines and Slovenia
d. Exempt from any tax since he is an athlete sanctioned by Slovenian Government.

69. Using the preceding number, may Luka claim tax exemption under double taxation
agreement?
a. No, tax treaty relief application is granted to non-resident who stay more than 183 days.
b. No, tax treaty relief are given to teachers, researchers, artist, students, trainees and
directors only.
c. Yes, provided Luka applies for tax relief with the BIR.
d. Yes, provided Luka is sanctioned by Slovenia Sports Commission.

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 70. Philippine Mining Corporation, operates in Benquet province was assessed by the Local
government for year 2023:
Owner’s Declaration showed the following valuation:
Land - P 9,000,000
Building - P 4,000,000

Assessor’s Value per assessment rolls:

Land – P7,000,000
Building – P6,000,000

Land use Assessment Levels

Residential 20%
Agricultural 40%
Commercial, Industrial and Mineral 50%
Timberland 20%
Special classes: cultural, scientific 15%
Hospital, and water districts 10%

Commercial/Industrial Building
FMV Over But Not Over Assessment Level

300,000.00 30%

300,000.00 500,000.00 35%

500,000.00 750,000.00 40%

750,000.00 1,000,000.00 50%

1,000,000.00 2,000,000.00 60%

2,000,000.00 5,000,000.00 70%

5,000,000.00 10,000,000.00 75%

10,000,000.00 80%

How much is the basic real property tax?

a. P180,000
b. P65,000
c. P90,000
d. P130,000

The End

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