CAVITE STATE UNIVERSITY – CARMONA CAMPUS

BMGT 28 T A X A T I O N
Bachelor of Science in Business Management

PROBLEM SET
Course Requirement and Review Material on Individual and Corporate Income Taxation

GENERAL INSTRUCTIONS. This assessment material contains set of problems and

each problem has a corresponding guideline and instruction to comply with. The student
has to provide his or her significant points and insights, and should answer the problems
with clear solution and computations. This assessment material will be part of the final
examination requirement.

For compliance, create a separate file for the answers and solutions. Indicate proper label
for ease of checking. Save the file with PDF format and upload it on the submission link
to be posted in the class group page. If problems occur, upload the file in Google Drive,
turn on link sharing, copy the link of the file, and comment the link on the published
submission post. For the file name, use the following format for uniformity:

SURNAME_Student Number_Major, Year, & Section

BAYSON_0000-00000_MM2A

The submission will be on June 11, 2020 – Friday. For questions and clarifications, the
class group page and class group chat are open.

This assessment material is created to review all the discussion points and learning about
the concepts and principles discussed in the course. To note, honesty is always the best
policy. That is, it is better to get a failing “0” than a stolen “100”.

Antonino Jose L. Bayson | BMGT 28 Instructor | antoninojose.bayson@cvsu.edu.ph

Tax Problem Set Page 1

TAX THEORY
MULTIPLE CHOICE. Read each statement carefully and complete the correct thought of each
statement by selecting the letter of the correct answer.

1. __________ refers to the inherent power of the state to exact an enforced contribution upon
persons, properties or rights to generate revenues for the use and support of the government.
A. Power of Taxation C. Police Power
B. Power of Eminent Domain D. Power of the State
2. __________ refers to the inherent power of the state to expropriate private property for public
purpose in return for a just or reasonable compensation.
A. Power of Taxation C. Police Power
B. Power of Eminent Domain D. Power of the State
3. __________ refers to the inherent power of the state to promote general welfare of the people
by limiting or regulating the rights or properties of any person.
A. Power of Taxation C. Police Power
B. Power of Eminent Domain D. Power of the State
4. Constitutional limitations are limitations specifically cited or written in the provisions of the
Philippine Constitution. All of the following are constitutional limitations, except:
A. Due Process Clause
B. Granting Tax Exemptions with Minority of the Congress
C. Uniformity, Equitability, and Progressivity
D. Answer Not Given
5. Inherent limitations are limitations which are not specifically cited or written in the provisions of
the Philippine Constitution. All of the following are inherent limitations, except:
A. Prohibition of Double Taxation
B. Exemptions from taxation of government entities
C. Tax laws must not be subject to international comity
D. Answer Not Given
6. _________ is one of the basic principles of a sound tax system. This means that tax laws must
be capable of reasonable and convenient enforcement, just and effective administration.
A. Fiscal Adequacy C. Administrative Feasibility
B. Internal Acceptability D. Equality or Theoretical Justice
7. __________ refers to the territorial jurisdiction of the government where it has the authority to
impose its taxation power which is to levy and collect taxes on persons, properties or rights.
A. Scope of Taxation C. Situs of Taxation
B. Nature of Taxation D. Basis of Taxation
8. One of the phases of taxation is __________ which refers to the imposition of tax.
A. Levying C. Assessment
B. Collection D. Management
9. The reciprocal duty of the state and the people is __________ and __________ that must be
exercised, respectively.
A. Support; Protection C. Protection; Support
B. Welfare; Complying D. Complying; Welfare
10. __________ means residence or domicile of the taxpayer; while __________ means location
of the property of the taxpayer.
A. Mobilia Sequuntur Personam; Lex Rei Sitae
B. Mobilia Sequuntur Sitae; Lex Rei Personam
C. Lex Rei Personam; Mobilia Sequuntur Sitae
D. Lex Rei Sitae; Mobilia Sequuntur Personam

Tax Problem Set Page 1

11. __________ is an act of taxing the same taxpayer twice by the same kind and character of
tax, by the same taxing authority within the same jurisdiction or taxing district for the same purpose
and during the same taxable period.
A. Indirect Income Taxation C. Indirect Double Taxation
B. Direct Income Taxation D. Direct Double Taxation
12. Statement 1 Tax laws are not political in nature (of relating to people) but deemed civil in
nature (of relating to the government).
Statement 2 One scope of taxation is comprehensive which means that taxation is considered
the strongest power of the state.
A. Only Statement 1 is correct. C. Both statements are correct.
B. Only Statement 2 is correct. D. Both statements are incorrect.
13. __________ refers to the fundamental rule of taxation that no law shall be passed to impose
taxation on the property owned by a foreign government or sovereignty
A. Foreign Country Conventions C. Territoriality Law
B. National Agreement D. International Comity
14. Statement 1 No public money or property shall be appropriated for a religious or private
purpose.
Statement 2 The Philippine President has the power to approve or veto (disapprove) a tax
bill approved or passed by the Philippine Congress.
A. Only Statement 1 is correct. C. Both statements are correct.
B. Only Statement 2 is correct. D. Both statements are incorrect.
15. __________ refers to the burden or enforced contribution imposed by the government based
on its power of taxation, upon persons, properties, or rights.
A. Tax
B. Taxation
C. Both A and B
16. __________ is an act of using legitimate or lawful means permitted or allowed by our tax laws
in order to minimize or totally avoids one’s tax liability.
A. Tax Evasion C. Tax Avoidance
B. Tax Exemption D. Tax Shifting
17. __________ is an act of legitimately passing on one’s tax liability or payment to another
person in accordance with the provisions of the tax laws.
A. Tax Evasion C. Tax Avoidance
B. Tax Exemption D. Tax Shifting
18. __________ is a fraudulent act of using pre-tenses or forbidden devices in order to lessen tax
liability or payment.
A. Tax Evasion C. Tax Avoidance
B. Tax Exemption D. Tax Shifting
19. All are essential characteristics of a tax, except:
A. It is an enforced contribution. C. It is payable in money or in kind.
B. It is imposed for public purpose. D. It is a proportionate burden.
20. __________ refer to those taxes imposed upon persons, properties, rights which amount of
tax increases as the bracket or layer increases.
A. Community Taxes C. Progressive Taxes
B. Property Taxes D. Regressive Taxes
21. __________ refer to those taxes imposed for special purposes and the proceeds of which go
to certain special funds.
A. General Taxes C. Specific Taxes
B. Special Taxes D. Ad Valorem Taxes

Tax Problem Set Page 2

22. Statement 1 Tax avoidance is a form of tax escape.
Statement 2 Tax evasion is not punishable.
A. Only Statement 1 is correct. C. Both statements are correct.
B. Only Statement 2 is correct. D. Both statements are incorrect.
23. Statement 1 There is no regressive tax in the Philippines at present.
Statement 2 Tax is considered the bread and butter or the lifeblood of the government.
A. Only Statement 1 is correct. C. Both statements are correct.
B. Only Statement 2 is correct. D. Both statements are incorrect.
24. In determining the applicable tax rate for the income of self-employed or professional
individuals, the threshold to be considered is __________.
A. Php 1,919,500.00 C. Php 3,500,000.00
B. Php 3,000,000.00 D. Php 250,000.00
25. When income is derived from being compensation income earner, the income will be taxed
using the __________.
A. Regular Personal Income Tax Rates
B. Fixed Income Tax Rates
C. 8 percent of the Gross Sales or Gross Receipts
D. Compensation Income Tax Rates
26. __________ income is derived from rendering professional expertise and services like
medical and legal services.
A. Compensation C. Business
B. Professional D. Passive
27. Considering the classification of the taxpayers as to residency, citizenship, and sources of
income, income tax is imposed on the __________ of resident citizens, resident aliens, non-
resident citizens, and non-resident aliens engaged in business in the Philippines. On the other
hand, it is imposed on the __________ of non-resident aliens not engaged in business in the
Philippines.
A. Income; Taxable Income C. Net Income; Gross Income
B. Gross Income; Net Income D. Taxable Income; Income
28. __________ pertain to individuals engaged in an employee-employer relationship.
A. Compensation Income Earner C. Professionals
B. Self-Employed D. Mixed Earners
29. Statement 1 Inclusive contributions are disregarded as these amounts are already deducted
to compensation income.
Statement 2 Exclusive contributions are deducted as these amounts are not yet deducted to
compensation income.
A. Only Statement 1 is correct. C. Both statements are correct.
B. Only Statement 2 is correct. D. Both statements are incorrect.
30. If a taxpayer received Php 125,750.00 13 th month pay and other benefits, the taxable benefit
will amount to __________ and will be __________ to the income subject to tax.
A. Php 35,570.00; added C. Php 35,750.00; added
B. Php 35,750.00; deducted D. Php 35,570.00; deducted
31. __________ are individuals engaged in doing business while __________ are those who
practice their profession or expertise.
A. Compensation Income Earners; Professionals
B. Self-Employed; Professionals
C. Professionals; Compensation Income Earners
D. Professionals; Self-Employed

Tax Problem Set Page 3

32. A taxpayer has an annual gross sales of Php 350,000.00 with costs of goods sold and
operating expenses of Php 125,000.00 and Php 75,000.00, respectively. If the taxpayer opt to
elect Option 2, the taxable net income and tax due will amount to __________ and __________,
respectively.
A. Php 150,000.00; Php 0.00
B. Php 150,000.00; Php 8,000.00
C. Answer Not Given
33. __________ are individuals engaged in an employee-employer relationship and are involved
in doing business or in practicing profession or expertise.
A. Compensation Income Earners C. Professionals
B. Self-Employed D. Mixed Earners
34. If the gross sales or gross receipts received by a mixed earner under self-employed or
professional amounted to Php 3,000,000.00 or below, two options will be provided of which Option
2 entitles the taxpayer to be taxed using the __________.
A. Regular Personal Income Tax Rates
B. 8 percent of Gross Sales or Gross Receipts in excess over Php 250,000.00
C. Both A and B.
D. Answer Not Given
35. A taxpayer is a mixed income earner with taxable compensation income of Php 2,750,000.00
and taxable business income of Php 2,000,000.00. In relation to the business income, gross sales
amounted to Php 5,000,000.00. Is the taxpayer has the right to avail the options?
A. Yes, because taxable business income is Php 2,000,000.00
B. No, because taxable business income is Php 2,000,000.00
C. Yes, because gross sales amounted to Php 5,000,000.00
D. No, because gross sales amounted to Php 5,000,000.00
36. __________ is a business organization which is an artificial being created by operation of law,
having the right of succession and the powers and attributes expressly authorized by law or
incident to its existence.
A. Sole Proprietorship
B. Partnership
C. Corporation
37. __________ are corporations specifically identified and enumerated under the National
Internal Revenue Code which are subject to special or preferential corporate income tax rules
and tax rates.
A. Special Corporations
B. Ordinary Corporations
C. Exempted Corporations
38. _________ are corporations which are required to file corporate income tax returns as they
are subject to basic corporate income tax rules.
A. Special Corporations
B. Ordinary Corporations
C. Exempted Corporations
39. The following are classified as special corporations subject to preferential corporate income
tax rates, except __________.
A. Proprietary Educational Institution
B. Private Hospital
C. Resident Foreign Corporation
D. Resident International Carrier

Tax Problem Set Page 4

40. Sole proprietorship is a business owned by one individual only. As a business, the income
earned is subject to __________.
A. Corporate income tax because it is considered as a corporation
B. Personal income tax because it is considered as a self-employed individual
C. Both A and B
D. Answer Not Given
41. __________ is a corporation organized under the Philippine laws.
A. Domestic Corporation C. Ordinary Corporation
B. Foreign Corporation D. Special Corporation
42. __________ is a corporation organized outside the Philippines under the laws of a foreign
country.
A. Domestic Corporation C. Ordinary Corporation
B. Foreign Corporation D. Special Corporation
43. Statement 1 Foreign corporations are taxable on all income from sources within and without
the Philippines.
Statement 2 Domestic corporations are taxable on all income from sources within the
Philippines only.
A. Only Statement 1 is correct. C. Both statements are correct.
B. Only Statement 2 is incorrect. D. Both statements are incorrect.
44. In deciding the corporate income tax due payable, __________ between the basic corporate
income tax and minimum corporate income tax shall be considered.
A. Lower
B. Higher
C. Average
45. In computing the basic corporate income tax or BCIT of ordinary corporations, the two
conditions to be considered are:
A. Taxable gross income must be 5 million & below; Asset must be 100 million & below
B. Taxable gross income must be below 5 million; Asset must be below 100 million
C. Taxable net income must be 5 million & below; Asset must be 100 million & below
D. Taxable net income must be below 5 million; Asset must be below 100 million

Tax Problem Set Page 5

TAX APPLICATION
TAX PROBLEM ONE. Given the taxable net income, complete the table below by identifying the
level or bracket of income and by computing the tax due. Show supporting computation.

TAXABLE LEVEL OR
TAX DUE
NET INCOME BRACKET OF INCOME
Php 00,125,000.00
Php 00,375,000.00
Php 01,750,000.00
Php 04,670,000.00
Php 10,200,000.00

TAX PROBLEM TWO. Given the following cases, compute for the taxable net income and the
tax due using applicable formats or computational patterns.

CASE 1 (Compensation Income Earner)

Annual Salary Php 1,340,000.00

Annual Contribution Php 55,500.00 (inclusive)
13th Month Pay and Other Benefits Php 290,000.00

Required. Compute for the taxable net income and the tax due of the taxpayer.

CASE 2 (Self-Employed Individual)

Gross Sales Php 990,000.00

Costs of Goods Sold Php 135,500.00
Operating Expenses Php 79,800.00

Required. Compute for the taxable net income and the tax due of the taxpayer. If the
gross sales amounted to Php 3,000,000.00 or below, compute the tax due for both options.
[Question] If the taxpayer elected to use Option 2, is it a good election or decision? Why
or why not?

CASE 3 (Mixed Earner)

Annual Compensation Php 1,340,000.00

Annual Contribution Php 55,500.00 (inclusive)
13th Month Pay and Other Benefits Php 290,000.00

Gross Receipts Php 6,900,000.00

Costs of Service Php 2,345,000.00
Operating Expenses Php 1,750,000.00

Required. Compute for the taxable net income and the tax due of the taxpayer.

Tax Problem Set Page 6

TAX PROBLEM THREE. Given the information, compute for the corporate income tax due under
the following cases using applicable formats or computational patterns.

ITEM PHILIPPINES ABROAD

Gross Sales Php 895,000.00 Php 950,000.00
Cost of Sales Php 410,000.00 Php 540,000.00
Other Income Php 120,000.00 Php 085,000.00
Operating Expenses Php 350,000.00 Php 380,000.00

CASE 1 Corporation is considered as a domestic corporation.

CASE 2 Corporation is considered as a resident foreign corporation.

TAX PROBLEM FOUR. For the taxable year, a corporation had a gross income within the
Philippines as well as without the Philippines of Php 12,750,000.00 and Php 9,550,000.00,
respectively. Its business expenses within the Philippines amounted to Php 9,980,000.00
whereas those outside the Philippines amounted to Php 7,575,000.00.

Required. Compute for the taxable net income (TNI) and corporate income tax due (TD) using
applicable formats or computational patterns assuming that the corporation is:
A. a private university with 75 percent unrelated activity (total asset is 120 million)
B. a private hospital with 45 percent unrelated activity (total asset is 80 million)
C. a non-resident foreign corporation, in general
D. a resident international carrier, in general
E. a non-resident cinematographic film owner, in general
F. a non-resident owner of aircraft, machinery, and equipment, in general

A B C D E F
GI, PH
GI, AB
Less: AD, PH
Less: AD, AB
TNI
SCIT/FIT
MCIT
BCIT
TD

WORDS FOR IMPROVEMENT. “End is not about saying goodbye but it is about saying hello to
the next chapter of our journey!” This quote is indeed a reminder that learning continues and
journey always opens door for advancement. With the discussion and all the experiences, leave
comments and suggestions for the teacher’s growth and improvement.
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Tax Problem Set Page 7