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51 questions
1. Partnerships, no matter how created or organized, are taxable as corporation for income tax purposes.
True
False
2. The term “domestic”, when applied to a corporation, means created or organized in the Philippines or under the laws of a foreign country as long as it maintains a Philippine branch.
True
False
3. A corporation which is not domestic may be a resident (engaged in business in the Philippines) or non-resident corporation (not engaged in business in the Philippines).
True
False
4. Resident foreign corporations are subject to income tax based on net income from sources within the Philippines.
True
False
5. Associations and mutual fund companies, for income tax purposes, are excluded in the definition of corporations.
True
False
6. A minimum corporate income tax (MCIT) of 2% of gross income as of the end of the taxable year is imposed upon any domestic corporation beginning the 4th taxable year immediately following the taxable year in which such corporation commenced its business operations.
True
False
7. MCIT shall be imposed whenever such corporation has zero or negative taxable income, or when the amount of MCIT is greater than normal income tax due from such corporation.
True
False
8. the amount of MCIT is greater than normal income tax due from such corporation. T The computation and the payment of MCIT, shall likewise apply at the time of filing the quarterly corporate income tax.
True
False
9. Minimum corporate income tax is not applicable to special corporations.
True
False
10. Temporary labor dispute is a valid ground for the suspension of MCIT.
True
False
11. Corporations exempt from income tax are not subject to income tax on incomes received which are incidental or necessarily connected with the purposes for which they were organized and operating.
True
False
12. Corporations exempt from income tax are subject to income tax on income of whatever kind and character from any of their properties (real or personal) or from any other activity conducted for profit regardless of the disposition of such income.
True
False
13. Joint ventures, regardless of the purpose by which they were created, are generally exempt from corporate income tax.
True
False
14. The share of a co-venturer corporation in the net income of a taxable joint venture or consortium is subject to corporate income tax.
True
False
15. The share of a co-venturer corporation in the net income of a taxable joint venture or consortium is subject to corporate income tax.
True
False
16. “Nonresident owners of vessels are treated as special corporations only from charters or leases of the vessels to Filipino citizens or corporations approved by the Maritime Industry Authority.
True
False
17.Private educational corporations are subject to income tax based on the net income from sources within the Philippines at the tax rate of 10%.
True
False
18. Regional Headquarters” are subject to 10% income tax on its net come derived from the Philippines.
True
False
19. International air carrier may be exempt from income tax.
True
False
20. Incomes of nonresident individuals and nonresident corporations from transactions with OBUs are tax exempt.
True
False
21. Optional corporate income tax is a tax imposed in the nature of a penalty to the corporation to prevent the scheme of accumulating income rather than distribute the same to the stockholders for the purpose of avoiding tax on dividends.
True
False
22. For gross income tax purposes, a manufacturing concern's cost of goods manufactured and sold shall include all costs of production of finished goods, such as raw materials, direct labor and manufacturing overhead, freight cost, insurance premiums, and other costs incurred to bring the new materials to the factory or warehouse.
True
False
23. Improperly accumulated earnings tax is applicable only to listed entities.
True
False
24. Interest expense, for 15% gross income tax purposes, shall form part of “cost of services” if the taxpayer is a seller of services.
True
False
25. The fact that any corporation is a mere holding company or investment company shall be prima facie evidence of a purpose to avoid that tax upon its shareholders or members.
True
False
26. The fact that the earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the tax upon its shareholders or members unless the corporation, by the clear preponderance of evidence, shall prove the contrary.
True
False
27. Improperly accumulated earnings tax shall not apply to banks and other non-bank financial intermediaries.
True
False
28. Immediacy test is a test used in determining the reasonable needs of a business to justify the accumulation of earnings which will exempt the corporation from paying improperly accumulated earnings tax.
True
False
29. Any profit remitted by a branch office to its head office is subject to 15% tax rate. The computation shall be based on profits applied or earmarked for remittance without the deduction for the tax component.
True
False
30. Remittance of a branch of a foreign corporation in the Philippines of passive income earned in the Philippines to its head office, is exempt from branch remittance tax.
True
False
1.The term “Corporation ” shall include:
I. Partnerships, no matter how created or organized
II. Joint stock companies
III. Joint accounts (ceuntas en participation)
IV. Associations
V. Insurance companies
VI. Mutual fund companies
VII. Regional headquarters of multinational corporations
a. I and II only
b. I, II, and III only
c. I, II, III, IV, and V only
d. all of the above
3. A “Joint Account” is constituted when one interests himself in the business of another by/and
I. Contributing capital thereto
II. Sharing in the profits or losses in the proportion agreed upon
III. They are not subject to any formality
IV. It may be privately contracted orally or in writing
uthority
a. I and II only
b. I, II, and III only
c. all of the above
d. none of the above
4. Hananiah Corporation, a corporation engaged in business in the Philippines and abroad has the following data for the current year:
Gross Income, Philippines — P975,00
Expenses, Philippines — P750,000
Gross Income, Malaysia — P770,000
Expenses, Malaysia — P630,000
Interest on bank deposit — P25,000
Determine the income tax due if the corporation is
Domestic — Res. Foreign — Non-resident Foreign
a. P116,800 — 72,000 — P320,000
b. P109,500 — 67,500 — 300,000
c. P312,000 — 515, 850 — 116,800
d. P109, 500 — 72,000 — 300,000
Use the following data for the next three questions:
A domestic corporation provided the following data for the current year:
Gross profit sales — P3, 000,000
Business expenses — 1,800,000
Dividend from domestic corp. — 100,000
Dividend income from a resident corp. — 50,000
Dividend income from a non-resident corp. — 40,000
Capital gain on sale of land in the Philippines (SP-P2M; FMV-2.8M; Cost-P1.5M)
500,000
Capital gain on sale of land in China (SP-P1.5M; FMV-1.8M; Cost-P1. 3M)
200,000
Capital gain on shares of domestic corp. (direct sale to buyer)
120,000
Gain on sale of shares of a domestic corporation thru a local stock exchange
(SP-P200, 000; Cost P150, 000). — 50,000
Interest income from:
Notes receivable — 20,000 Bank deposits (peso accounts) — 30,000 Bank deposits (foreign currencies) — 25,000 Treasury bills — 10,000
5. The income tax due for the year is
a. P366, 000
b. 423,000
c. 426,000
d. 453,000
6. The total capital gains taxes for the year is
a. P121,750
b. 37,000
c. 127,000
d. 138,000
7. The total final taxes on passive income for the year is
a. P13,000
b. 17,000
c. 11,750
d. 9,875
8. During the current year, a domestic corporation declared and paid dividends to its shareholder as follows:
To Louie, a resident citizen — P100,000
To Floyd, a nonresident citizen — 100,000
To Zeus, a resident alien — 100,000
To JJ, a nonresident alien engaged in trade in the Philippines — 100,000
To Francis, a nonresident alien not engaged in the Philippines — 100,000
To Chen, a domestic corp. — 100,000
To a resident foreign corp. — 100,000
To a nonresident foreign corp. (with tax sparing) — 100,000
How much final tax shall be withheld by the corporation?
a. P80,000
b. 90,000
c. 85,000
d. 95,000
9. Interest income received from a depository bank under expanded foreign currency deposit system shall be subject to
RFC — NRFC — NRA-NETB
a. 20% — 20% — 20%
b. 7½% — Exempt — Exempt
c. Exempt — 20% — 20%
d. 30% — 25% — 25%
10.A depository bank under Foreign Currency Deposit System has the following income from foreign currency transactions (Exchange Rate $1=P45).
From Nonresident — $5,000
From Residents — $3,000
From Philippine National Bank — $2,000
How much is the final withholding tax applicable on the above income?
a. P22,500
b. 13,500
c. 9,000
d. 45,000
11. Bank of Manila a domestic corporation has the following data for the taxable year:
Regular Banking Unit:
Interest Income from loans P10,000,000
Interest Income from peso deposit Bank of Phil. Islands P1,000,000
Dividend Income from various domestic corporations P1,500,000
Foreign Currency Deposit Unit: ($1 = P40)
Interest Income from loans to residents $50,000
Interest Income from loans to nonresidents $12,500
Additional Information: The bank has total operating expenses of P12,000,000. How much is the normal income tax for the year?
a. P600,000
b. P400,000
c. P500,000
d. P0
Additional Information: The bank has total operating expenses of P12,000,000. How much is the normal income tax for the year?
P600,000 b. P400,000 c. P500,000 d. P0
JOINT VENTURES
ABC Company and DEF Company formed a joint venture. They agreed to share profit or loss in the ratio of 70% and 30% respectively. The results of operations of the joint venture as well as the co-ventures are as follows:
Joint Venture ABC Co. DEF Co.
Gross Income P5,000,000 3,000,000 2,000,000
OPEX P3,000.000 2,000,000 1,500,000
12. The Income tax payable of the joint venture is
a. P0
b. P150,000
c. P300,000
d. P600,000
13. The total income tax expense of DEF Co. is:
a. P0
b. P150,000
c. P570,000
d. P750,000
14. Assume the joint venture is tax exempt, the total income tax expense of ABC Co. is:
a. P150,000
b. P330,000
c. P300,000
d. P720,000
15. An international air carrier doing business in the Philippines shall be subject to
a. 3% percentage tax on gross receipts from cargo operations originating in the Philippines only.
b. 2 ½% income tax on Gross Philippine billings only.
c. Both 3% percentage tax on gross receipts from cargo operations originating in the Philippines and 2 ½% income tax on Gross Philippine billings.
d. Neither the 3% percentage tax on gross receipts from cargo operations originating in the Philippines nor 2½ income tax on Gross Philippine billings.
16. Which of the following is included in the Gross Philippine Billings for income tax purposes of an international air carrier:
I. Tickets sold outside the Philippines for passengers originating from outside in the Philippines.
II. Tickets sold in the Philippines for passengers originating from the Philippines but are not actually flown.
III. Passage documents sold outside the Philippines for excess baggage originating from the Philippines.
IV. Passage documents sold in the Philippines for cargoes originating from outside the Philippines.
a. II only
b. III only
c. II and IV only
d. I, II, III and IV
17. Philippine air, a domestic corporation engaged in local and international operations has the following data for the current year: Gross income and expenses from international operations, P10,000,000 and P4,000,000, respectively. The income tax due of the corporation is
a. P150,000
b. P250,000
c. P1,800,000
d. P3,000,000
18. Assume the carrier is an international carrier ( a resident foreign corporation), the income tax due is
a. P150,000
b. P250,000
c. P1,800,000
d. P3,000,000
19. Statement 1: International air carriers and international shipping carriers shall not be subject 12% value added tax but 3% common carrier’s tax based on gross receipts derived from their transport of passengers and goods from the Philippines to other countries.
Statement 2: In cases when the Gross Philippines Billings Tax of 2.5% for international carriers is not applicable (i.e taz exempt based on reciprocity or treaty) the common carrier’s tax under section 118 of the NIRC , as amended shall still apply.
a. Statement 1- True
Statement 2- True
b. Statement 1- True
Statement 2- False
c. Statement 1- False
Statement 2- True
d. Statement 1- False
Statement 2- False
Pacific Airlines, an international aire carrier showed the following gross receipts for the current year:
Point of Origin Destination Gross Receipts
Philippines U.S.A P8,000,000
U.S.A U.K P4,000,000
U.S.A Philippines P3,750,000
U.K Philippines P2,100,000
Additional information:
Forty percent (40%) of the shipments from the Philippines to the United States were later shipped to the United Kingdom 25% of all its revenue were from transport of cargoes and goods.
20. The Income tax payable for the year is
a. P127,500
b. P150,000
c. P170,000
d. P200,000
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