Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

Since 1977

TAXATION NARANJO/GUDANI/SIAPIAN
FIRST PRE-BOARD EXAMINATION FEBRUARY 23, 2021

Multiple Choice. Select the letter that corresponds to b. exempt from income taxation.
the best answer. This examination consists of 40 items c. taxable only if earned by a citizen.
and the exam is good for three (3) hours. Good luck! d. included in the income tax return.

PART 1 - THEORIES 8. Chupapi, a Filipino citizen, migrated to Spain some

ten (10) years ago and got a permanent resident
1. The following are essential elements of a tax, status. For purposes of Income taxation, he should
except: pay his Philippine income taxes on
a. It must be levied by lawmaking body a. the gains derived from the sale in Puerto Real,
b. It must be levied for public purpose Spain of Rolex watch he purchased in the Mall
c. It must be payable in money of Asia, Philippines.
d. It must be proportionate in character b. the proceeds he received from “Buhay Mo,
Sagot ko” a Philippine insurance company as the
2. Professional tax collected by Treasurers of local sole beneficiary of life insurance taken by his
government units is an example of: father, Munyanyo who died recently.
a. Direct tax c. the gains derived from the sale in the Bolsa de
b. Income tax Madrid, a stock exchange in Spain of shares of
c. Privilege tax stock in Ayala, a Philippine corporation.
d. Specific tax d. dividends received from a Grovie, a foreign
corporation whose gross income was derived
3. With the intention of limiting contact by taxpayers solely from Philippine sources.
when dealing with the BIR and at the same time
save time and money, the Bureau allowed on-line 9. The management of JVC., Inc wants to change its
filing of returns and other reports. This is in keeping taxable period to calendar year from fiscal year in
with: filing its annual income tax return. It may do so,
a. Fiscal Adequacy provided:
b. Administrative Feasibility a. it seeks prior BIR approval of its proposed
c. Theoretical Justice change in accounting period.
d. Uniformity in Taxation b. it simultaneously seeks BIR approval of its new
accounting period.
4. Statement 1: There can only be a tax if there is a c. it should change its accounting period two years
law imposing the tax. prior to changing its taxable year.
Statement 2: The power to tax is inherent. d. its constitution and by-laws authorize the
a. Only statement 1 is true. change
b. Both statements are true.
c. Only statement 2 is true. 10. What is the rule on the taxability of income that a
d. Both statements are false. government educational institution derives from its
school operations? Such income is
5. Statement 1: Police power can be used to raise a. subject to 10% tax on its net taxable income as
revenue for the government. if it is a proprietary educational institution.
Statement 2: The primary purpose of taxation is to b. Exempt from income taxation if it is actually,
implement police power. directly, and exclusively used for educational
Statement 3: One example of the principle fiscal purposes.
adequacy is the Introduction of electronic Filing c. subject to the ordinary income tax rates with
(Electronic Filing and Payment System (EFPS) or e- respect to incomes derived from educational
BIR Forms Package activities.
a. Only statement 2 is false. d. Exempt from income taxation in the same
b. Only statement 1 is true. manner as government-owned and controlled
c. Only statement 2 is true. corporations.
d. Only statement 3 is false.
PHPMI is a manufacturer of tiles and is almost at the
6. Double taxation in its general sense means taxing point of insolvency. It only has Php 100,000 of cash in
the same subject twice during the same taxing bank and all it has are unsold tiles. It received an
period. In this sense, double taxation assessment from the BIR for deficiency in Income tax
a. violates substantive due process. and Value added tax in the amount of P 5,000,000.
b. does not violate substantive due process. PHPMI agrees with the assessment and is willing to pay
c. violates the right to equal protection. but due to lack of cash, it seeks permission from the BIR
d. does not violate the right to equal protection. to pay only Php 100,000 cash the remaining cash of
PHPMI and the balance, in kind with tiles.
7. Passive income includes income derived from an
activity in which the earner does not have any
substantial participation. This type of income is
a. usually subject to a final tax.

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EXCEL PROFESSIONAL SERVICES, INC.

11. Should the BIR grant the requested permission? 8% optional income tax rather than the graduated
a. It should grant permission to make payment tax Inday initially chose. Nicanor, wanting to
convenient to taxpayers in consistent with the impress Inday, filed the Annual ITR using 8% tax
principle of Administrable feasibility . rate. Statement: Nicanor is wrong.
b. It should not grant permission because a tax is Statement 2: Income of on-line sellers are taxable.
generally payable in money. a. Only statement 1 is true.
c. It should grant permission; otherwise, PHPMI b. Only statement 2 is true.
would not be able to pay and will be severed c. Both statements are true.
with penalties. d. Both statements are false.
d. It should not grant permission because the BIR
does not have the storage facilities for tiles. 18. Nusseir Yassin is a popular Palestinian-Israeli
blogger using the page “Daily Nas”. Under Philippine
12. Statement 1: Generally, tax laws operate only taxation, he is classified as?
within Philippine jurisdiction. a. Resident alien
Statement 2: Visa fees collected by the United b. Non-resident alien engaged in trade or business
States are not taxed by the Philippine government. c. Non-resident alien not engaged in trade or
a. Inherent limitation, Inherent limitation business
b. Inherent limitation, Constitutional limitation d. he has no classification
c. Constitutional limitation, Inherent limitation
d. Constitutional limitation, Constitutional 19. Basel Manadil (a.k.a. The Hungry Syrian Wanderer)
limitation is a Syrian vlogger based in the Philippines. For
taxation purposes, he is classified as?
13. Statement 1: If Nicanor are both engaged in trade a. Resident alien
or business, both must be taxed alike. b. Non-resident alien engaged in trade or business
Statement 2: Nicanor reported to the BIR that Inday c. Non-resident alien not engaged in trade or
is a tax evader. The BIR cannot forthwith collect the business
tax because it has to go through a process. d. he has no classification
a. Inherent limitation, Inherent limitation
b. Inherent limitation, Constitutional limitation 20. Statement 1: The payor in withholding tax system.
c. Constitutional limitation, Inherent limitation Statement 2: A kind of withholding tax which was
d. Constitutional limitation, Constitutional deducted on commission of agents not considered
limitation employees of the company.
a. Income earner, expanded withholding tax
14. Statement 1:The Commissioner can force a b. Income earner, final withholding ta
taxpayer to produce its accounting records if the c. Withholding agent, expanded withholding tax
taxpayer refuses to provide the same during audit. d. Withholding agent, final withholding tax
Statement 2: The BIR can issue an assessment even
without the benefit of a notice of audit.
a. Only statement 1 is true. PART 2 – COMPUTATION
b. Only statement 2 is true.
c. Both statements are true. Refer to the relevant tax tables at the end of the
d. Both statements are false. questionnaire if necessary.

15. Statement 1: The Commissioner can estimate the

income and expense of a taxpayer. A.
Statement 2: Regressive system of taxation is not
allowed in the Philippines due to Inherent 21. Nicanor is an employee receiving semi-monthly his
Limitation. salary (kinsenas/katapusan) of Php 40,000.
a. Only statement 1 is true. Compute the withholding tax on compensation.
b. Only statement 2 is true. a. Php 0
c. Both statements are true. b. Php 4,166.75
d. Both statements are false. c. Php 5,416.67
d. Php 7,416.77
16. Statement 1: If Nicanor failed to signify his choice
B.
of method of taxation in the 1st quarter ITR, he shall
use the graduated tax table in computing his annual Nicanor is a professional Architect and at the same time
tax due. an employee of ABC Corp. He made available the
Statement 2: Facts: During year-end, Nicanor, an following information:
independent accountant has determined that his Architecture
client Inday will save more money if she will opt for Gross receipts Php 2,000,000
graduated tax instead of the 8% optional income tax Cost of service Php 1,000,000
chosen during the 1st quarter ITR filing. Nicanor, Other valid expenses 200,000
wanting to impress Inday, filed the Annual ITR using Gross compensation Php 1,000,000
graduated tax. Statement: Nicanor is wrong. Non-taxable Php 200,000
a. Only statement 1 is true. compensation
b. Only statement 2 is true.
c. Both statements are true. 22. Compute the annual income tax due if Nicanor will
d. Both statements are false. opt for graduated tax rate.
a. Php 370,000
17. Statement 1: Facts: During year-end, Nicanor, an b. Php 430,000
independent accountant has determined that his c. Php 290,000
client Inday will save more money if she will opt for d. Php 350,000

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EXCEL PROFESSIONAL SERVICES, INC.

23. Compute the annual income tax due if Nicanor will 29. Compute the ordinary / active / regular income
opt for 8% preferential tax rate. subject to normal/regular income tax.
a. Php 290,000 a. Php 100,000
b. Php 194,000 b. Php 200,000
c. Php 350,000 c. Php 210,000
d. Php 210,000 d. Php 220,000

C.
E.
Nicanor is a professional Architect and at the same time
an employee of ABC Corp. He made available the Nicanor earned the following incomes (gross amounts)
following information: in 2020: (Assume source is Philippines unless stated)

Architecture From Business:

Gross receipts Php 4,000,000
Cost of service Php 2,000,000 Gross sales – Php 1,000,000
Other valid expenses Php 1,000,000 Cost of sales – Php 200,000
Gross compensation Php 1,000,000 Allowable deduction – Php 300,000
Non-taxable Php 200,000 Other income:
compensation Rental – Php 100,000
Interest income – Php 100,000
24. Compute the annual income tax due if Nicanor will
opt for graduated tax rate. Compensation:
a. Php 490,000
b. Php 510,000 Gross compensation income – Php 120,000
c. Php 430,000 Non-taxable compensation income – Php 20,000
d. Php 450,000
Passive Income:
25. Compute the annual income tax due if Nicanor will
opt for 8% preferential tax rate. Dividends from ABC Corp. – Php 100,000
a. Php 490,000 Cash Prizes – Php 10,000
b. Php 510,000
c. Php 430,000 Capital gains:
d. Php 450,000
Sale of real property classified as capital asset:
D. − Selling price – Php 5 Million
− Zonal value – Php 10 Million
Nicanor earned the following incomes (gross amounts) − Assessed value – Php 4 Million
in 2020: (Assume source is Phils unless stated) − Appraiser’s value – Php 20 Million

• Dividends from ABC Corp. a domestic corp – Php Sale of shares of stocks not listed in stock exchange:
100,000 − Selling price – Php 2,000,000
• Dividends from XYZ Corp. a foreign corp (dominant − Acquisition Cost – Php 1,000,000
income is abroad) – Php 100,000 − Fair market value of stocks – Php 3,000,000
• Royalty from books – Php 100,000
• Royalty from other brands – Php 100,000 30. Compute the total gross income.
• Royalty received from abroad – Php 100,000 a. Php 800,000
• Prizes from raffle – Php 10,000 b. Php 810,000
• Prize from a TV show – Php 1,000,000 c. Php 1,100,000
• Lotto winnings – Php 10,000 d. Php 1,110,000
• Lotto winnings – Php 10,000,000
31. Compute the total capital gains tax.
26. Compute the total passive income in the a. Php 900,000
Philippines subject to final tax. b. Php 750,000
a. Php 11,320,000 c. Php 1,350,000
b. Php 11,310,000 d. Php 1,500,000
c. Php 11,300,000
d. Php 11,520,000 32. Compute the total final tax required to be withheld
by a withholding agent.
27. Compute the total passive income exempt from a. Php 0
taxation b. Php 10,000
a. Php 0 c. Php 12,000
b. Php 10,000 d. Php 32,000
c. Php 20,000
d. Php F.

28. Compute the total final tax. Use the following information for the next six (6)
a. Php 2,150,000 questions:
b. Php 2,270,000
c. Php 2,250,000 Ms. Bea a licensed real estate broker comes to you with
d. Php 2,252,000 the following records and transactions:

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EXCEL PROFESSIONAL SERVICES, INC.

b. P 260,000 d. P 200,000
Transaction #1. Land with TCT NO. 1900238 was sold
to Mr. Bean for P 5,000,000 by Mr. Budotz on 40. Nicanor, a private employee, received the following
September 08, 2019 in Manila evidenced by a deed of benefits:
sale executed in Bulacan. The cost of the land is P • Monetized vacation leave credits (20 days at
2,000,000 which is equal to its market value stated in Php 1,000 per day) – Php 20,000
the tax declaration and the property is located in Makati. • Uniform allowance – Php 10,000
• Christmas cash gift – Php 5,000
Transactions #2. Land with TCT No. 1877234 was sold • Cash received due to renewal of collective
to Mr Gerarld for P 10,000,000 by Mr. Joshua on bargaining agreement – Php 10,000
November 04, 2019 in Cavite evidenced by a deed of • 13th month pay – Php 50,000
sale executed in Caloocan. The cost of the land is P • Other Benefits exempted – Php 10,000
6,000,000 which is equal to its market value stated in
the tax declaration and the property is located in Manila How much is the taxable amount subject to
withholding tax on compensation?
Additional Information a. Php 0
• Bea called the respective RDO’s of each transaction b. Php 14,000
to determine how much is the zonal value of each land c. Php 30,000
sold. RDO’s reply is P 6,000,000 and P 9,800,000, d. Php 40,000
respectively.

• On December 14, 2019, Ms. Bea P 1,500,000

received her commission income from the above stated
sellers. She incurred P 120,000 expenses in connection
with her work and P 20,000 for her cosmetics and
make-ups for her appealing appearance. Ms. Bea is
currently residing in Cubao.

She asked you the following questions:

33. In case of sale of real properties classified as capital

asset, who is liable to pay the capital gains tax?
a. Bureau of Internal Revenue c. Real Estate
Broker
b. Buyer d. Seller

34. In relation to transaction #1, How much is the

capital gains tax due, if any?
a. P 0 c. P 300,000
b. P 360,000. d. P 450,000

35. In transaction #2, how much is the capital gains tax

due?
a. P 588,000 c. P 750,000
b. P 360,000. d. P 600,000

36. How much is my taxable Income to reported in my

Income tax return, if any?
a. P 0 c. P 1,380,000
b. P 1,360,000 d. P 1,500,000

Mr. Harry is employed in DTE Corporation. He received

the SMW for 2018 in the total amount of ₱175,000,
inclusive of the 13th month pay. In the same year, he
also received overtime pay of ₱40,000 and night-shift
differential of ₱25,000. He also received commission
income from the same employer of ₱20,000, thus, total
income received amounted to ₱260,000.

37. Based on the given information, how much is Mr.

Harry’s taxable income?
a. P 0 c. P 20,000
b. P 260,000 d. P 60,000

38. In relation to the above, how, much is Mr. Harry’s

tax due?
a. P 0 c. P 1,000
b. P 2,000 d. some other answer

39. In relation to the above, how much is the income

exempt from tax?
a. P 0 c. P 240,000

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Appendix 1 – Tax Tables

REVISED WITHHOLDING TAX TABLE FOR COMPENSATION

DAILY 1 2 3 4 5 6
Compensation 685 and below 685-1,095 1,096-2,191 2,192-5,478 5,479-21,917 21,918 and
Range above
Prescribed 0 0 82.19 356.16 1,342.47 6,602.74
Withholding Tax + 20% over + 25% over + 30% over + 32% over + 35% over
685 1,096 2,192 5,479 21,918
WEEKLY 1 2 3 4 5 6
Compensation 4,808 and 4,808-7691 7,692-15,384 15,385-38,461 38-462-153,845 153,846 and
Range below above
Prescribed 0 0 576.92 2,500 9,423.08 46,346.15
Withholding Tax + 20% over + 25% over +30% over + 32% over + 35% over
4,808 7,692 15,385 38,462 153,846
SEMI-MONTHLY 1 2 3 4 5 6
Compensation 10,417 and 10,417-16,666 16,667-33,332 33,333-83,332 83,333-333,332 333,333 and
Range below above
Prescribed 0 0 1,250 5,416.67 20,416.67 100,416.67
Withholding Tax + 20% over + 25% over + 30% over + 32% over + 35% over
10,417 16,667 33,333 83,333 333,333
MONTHLY 1 2 3 4 5 6
Compensation 20,833 and 20,833-33,332 33,333-66,666 66,667-166,666 166,667- 666,667 and
Range below 666,666 above
Prescribed 0 0 2,500 10,833.33 40,833.33 200,833.33
Withholding Tax + 20% over + 25% over + 30% over + 32% over + 35% over
20,833 33,333 66,667 166,667 666,667

GRADUATED TAX TABLE UNDER TRAIN LAW (January 1, 2018 to December 31, 2022)

Over But not over The tax shall be Plus Of excess over
250,000 0 0 -
P 250,000 400,000 0 20% P 250,000
400,000 800,000 30,000 25% 400,000
800,000 2,000,000 130,000 30% 800,000
2,000,000 8,000,000 490,000 32% 2,000,000
8,000,000 2,410,000 35% 8,000,000

End of Examination

Thank you for participating in Team PRTC Nationwide Online First Pre-Board Examination.

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