CHAPTER 1 1.

The consumption tax for purchases of goods

Introduction to Consumption Taxes or services from foreign sources shall be
True or False 1 payable by the buyer. TRUE
1. Consumption taxes is a tax levied upon 2. Business tax is a form of consumption tax.
businesses. FALSE TRUE
2. A purchase is a form of consumption. TRUE 3. Consumption tax is a form of business tax.
3. A tax on consumption will effectively causes FALSE
all residents of the state to pay tax. TRUE 4. Business tax is imposed on the sales of
4. Consumption is the acquisition or utilization sellers which is the purchaseS made by
of goods and services. TRUE buyers. TRUE
5. Income tax is based on the taxpayer’s 5. The vat on importation is payable only by
capacity to sacrifice for the support of the those regularly engaged in trade or business.
government. TRUE FALSE
6. Consumption tax is more consistent with 6. Business taxes are paid by sellers while the
“ability to pay” theory rather than the vat on importation is paid by buyers. TRUE
“benefit received theory” FALSE 7. The statutory taxpayer and the economic
7. A tax on consumption would support taxpayer are the same with the vat on
savings initiative, TRUE importation. TRUE
8. Consumption taxes should not apply to basic 8. Business taxes are usually included in the
necessities. TRUE price of goods and services of the seller but
9. Both domestic consumption and foreign are rEmitted by the seller to the government.
consumption are subject to Philippine TRUE
consumption tax. FALSE 9. In business taxes, the statutory taxpayer is
10. Non-resident sellers are exempt from not the economic taxpayer. TRUE
consumption taxes on their domestics sales. 10. The sales of importation of goods is not
TRUE subjec to specific percentage tax. TRUE
11. Resident sellers shall pay consumption tax 11. When the impact and incidence of taxation
on foreign consumption. FALSE rests upon different persons, the tax is an
12. The sale by non-resident persons abroad is indirect tax. TRUE
subject to Phililppine consumption tax. 12. Domestic pay consumption tax to domestic
FALSE sellers. TRUE
13. The utilization or consumption of goods or 13. Importers pay consumption tax to
services shall be taxable in their country of non-resident sellers. FALSE
origin. FALSE 14. Domestic sellers pay consumption tax to the
14. The sale by non-resident persons in the government. TRUE
Philippines is exempt from consumption tax . 15. Exporters pay consumption tax to the
FALSE government . FALSE
15. The sale by resident in the philippines is
subject to consumption tax. TRUE Multiple Choice- Theory Part 1
1. Which type of consumption will pay consumption
True or False 2 tax?
 a. Domestic consumption 7. Domestic consumption is taxable when the seller
b. Foreign consumption is
c. Both domestic and foreign consumption a. A non-resident
d. Neither domestic nor foreign consumption b. A resident
2. Which is a tax upon the usage of income? c. Either resident or non-resident
a. Savings tax d. Neither resident nor non-resident
b. Investment tax 8. Foreign consumption shall
c. Consumption tax a. Pay consumption tax if the seller is a
d. Business tax resident.
3. Which is subject to the VAT on importation? b. Pay consumption tax if the seller is
a. Foreign consumption from resident sellers. non-resident.
b. Foreign consumption from foreign sellers. c. Not pay consumption tax if the seller is
c. Domestic consumption from resident non-resident.
sellers. d. Not pay consumption tax regardless of the
d. Domestic consumption from foreign residency of the seller.
sellers. 9. The tax on domestic consumption is referred to as
4. Which is subject to business tax? a. VAT on importation
a. Foreign consumption from resident sellers. b. Business tax
b. Foreign consumption from foreign sellers. c. Either A or B
c. Domestic consumption from resident d. Neither A or B
sellers. 10. The tax on domestic consumption from foreign
d. Domestic consumption from foreign suppliers is
sellers. a. VAT on importation
5. Which is an incorrect statement regarding b. Business tax
consumption taxes? c. Either A or B
a. They are always indirect in nature. d. Neither A or B
b. They effectively tax everyone in the state. 11. The tax on domestic consumption from resident
c. Apply only when the goods or services are suppliers is
destined for consumption within the a. VAT on importation
Philippines. b. Business tax
d. Consumption taxes may encourage c. Either A or B
savings formation. d. Neither A or B
6. Which is correct regarding consumption tax? 12. Which is not a business tax?
a. It may help in the redistribution of wealth a. VAT on importation
in the society. b. VAT on sales
b. It is entirely based upon the ability to pay c. Percentage tax
of consumers. d. Excise tax
c. It applies to both domestic and foreign 13. The percentage tax is generally
consumption. a. 3% of sales or receipts
d. It applies only when the seller is b. 3% of purchases
non-resident. c. 3% of mark-up
 d. 12% of mark-up a. Foreign seller
14. The VAT as a business tax is b. Domestic buyer
a. 12% of sales or receipts c. Both A and B
b. 12% of purchases d. None of these
c. 12% of mark-up
d. 3% of mark-up Multiple Choice- Theory Part 2
15. The VAT on importation is 1. Generally, the tax basis of business tax is
a. 12% of sales a. Sales or receipts
b. 12% of purchases b. Purchase cost
c. 12% of mark-up c. Either A or B
d. 3% of mark-up d. Both A and B
16. Which form of consumption is tax-free? 2. Who is the statutory taxpayer of business taxes?
a. Sales to a resident. a. The seller who must be engaged in trade
b. Sales to non-resident. or business.
c. Importation by an importer engaged in b. The seller, whether or not engaged in
business trade or business.
d. Importation by an importer not engaged in c. The buyer, who must be engaged in trade
business or business.
17. As to incidence of tax, the VAT on importation is d. The buyer, whether or not engaged in
a form of trade or business.
a. Direct tax 3. The economic taxpayers of consumption taxes are
b. Indirect tax a. Sellers who are engaged in trade or
c. Ad valorem tax business.
d. Specific tax b. Sellers, whether or not engaged in trade
18. Which of these import consumption is tax free? or business.
a. Importation from seller not engaged in c. Buyers who are engaged in trade or
trade or business business.
b. Importation from seller engaged in trade d. Buyers, whether or not engaged in trade
or business or business.
c. Both A and B 4. What is the method used to determine the VAT
d. Neither A nor B due and payable?
19. Which importation is subject to the VAT on a. Direct method
importation? b. Indirect method
a. Importation by a person engaged in c. Tax credit method
business d. Withholding method
b. Importation by a person not engaged in 5. Which statement is conceptually incorrect?
business a. The buyer pays the consumption tax with
c. Both A or B its purchase to the seller.
d. Neither A nor B b. The buyer pays the consumption tax to the
20. Who is the statutory taxpayer to the VAT on government.
importation?
 c. The seller pays the consumption tax to the d. Seller or buyer depending on who is
government. agreed to pay the excise tax.
d. The seller collects consumption tax for the 12. Export sale is (select the incorrect one)
government. a. Exempt to percentage tax
6. Which is correct? b. Exempt from VAT
a. The sales to foreigners must include a c. Exempt form excise tax
business tax. d. All of these.
b. The sales to residents must include a 13. Statement 1: Excise tax is always paid together
business tax. with VAT or percentage tax.
c. The purchases from abroad must include a Statement 2: Excise tax is paid at the point of
business tax. sale.
d. All of these. Which statement is false?
7. The deduction from output VAT is called a. Statement 1
a. Percentage tax b. Statement 2
b. VAT due and payable c. Both statements.
c. Input VAT d. Neither statement.
d. VAT on importation 14. Which is imposed with a tax of zero percent
8. Which is pure form of a sales of tax? (0%)?
a. Percentage of tax a. All export sales.
b. Value added tax b. Export sales of VAT-registered taxpayers.
c. Both A and B c. Import sales of VAT-registered taxpayers.
d. Neither A nor B d. Export sales of non-VAT registered
9. Statement 1: A business which pays VAT taxpayers only.
normally does not pay percentage tax. 15. Which is not subject to excise tax?
Statement 2: A business which pays percentage a. Sin products.
tax also pays VAT. b. Non-essential commodities.
Which statement is correct? c. Food products.
a. Statement 1 d. Mineral products.
b. Statement 2 16. The tax basis of consumption tax on foreign
c. Both statements. purchase is
d. Neither statement. a. Sales or receipts.
10. Which of the following business taxes applies b. Purchase costs
only for domestic consumption? c. Either A or B
a. VAT on sales d. Both A and B
b. Percentage tax 17. The consumption tax on domestic purchases is
c. Excise tax imposed upon the
d. All of these a. Sales or receipts
11. Excise tax is paid by b. Purchase costs
a. Sellers c. Either A or B
b. Buyers d. Both A and B
c. Importers or manufacturers.
18. Technically, the excise tax on the manufacture of 8. False - The VAT on importation is paid to the
certain articles is payable only when the articles is BIR.
intended for 9. True - The final withholding VAT on services
a. Domestic consumption is paid to the BIR.
b. Foreign consumption 10. False - The importation of any agricultural or
c. Both A and B marine products is VAT exempt.
d. Neither A nor B 11. True - The importation of professional
19. Which is correct with the VAT on importation? instruments and implements is exempt from
a. Payable only when the importer is VAT.
engaged in business 12. False - The importation of any product
b. Payable only when the foreign seller is intended for human consumption is VAT
engaged in business. exempt.
c. Payable regardless of the purpose of the 13. False - Importation is subject to either VAT
importation. or percentage tax.
d. Payable only when the resident seller is 14. False - The importation of professional
not engaged in business. instruments and implements in commercial
20. The VAT on domestic sales is an example of quantities is VAT-exempt.
a. A direct tax 15. True - The importation of equipment,
b. An indirect tax machinery and spare parts for marine
c. A regulatory tax vessels is VATexempt.
d. A specific tax TRUE/FALSE2
1. False - Resident foreigners are not subject to
the VAT on importation.
CHAPTER 2 2. True - All agricultural or aquaculture inputs
VALUE ADDED TAX ON IMPORTATION are VAT exempt.
TRUE/FALSE 1 3. True - The sale of processed agricultural
1. False - The Vat on importation is a business products is vatable.
tax. 4. True - The importation of books and
2. False - The final withholding VAT is a newspapers is VAT-exempt.
business tax. 5. True - The importation of life-saving
3. False - The VAT on importation is 12% of equipment is VAT-exempt.
the value added on importation. 6. True - The lease of aircrafts or vessels from
4. False - The VAT on importation is 12% of non-residents is exempt from final
the receipts from the sale of services abroad. withholding VAT.
5. False 5. Importation is subject to either VAT 7. True - The purchase of services from foreign
or percentage tax. consultants is exempt from final withholding
6. False - The final withholding VAT is 12% of VAT.
the contract price of purchased services from 8. True - The importation of fuel, goods, and
within the Philippines. supplies by international carriers is
7. False - The sale of services abroad is VAT-exempt.
subject to 12% final withholding VAT.
 9. False - The importation of agricultural c. Purchase of goods from Ecozone
machineries by farmers is VAT-exempt. entities
10. True - The importation of agricultural d. Purchase of goods from other
machineries by agricultural cooperatives is domestic sellers
VAT-exempt. 5. Which of the following is subject to the VAT
11. False - The VAT on importation is payable on importation where imported?
only by those engaged in business. a. Books
12. True - The final withholding VAT on b. Table sugar
importation of services is payable even by c. Mushroom
those not engaged in business. d. Ordinary salt
13. True - The VAT on importation and final 6. Which non-food agricultural product is
withholding VAT can be claimed as Input exempt from VAT on importation?
VAT creditable against Output VAT. a. Chicken manure
14. False - In economic reality, the VAT on b. Eggs
importation and final withholding VAT are c. Live hogs
taxes to be paid by non-resident sellers. d. Cattle
15. True - Qualified exempt importation is 7. Which of the following is not exempt from
exempt from VAT only if made by an exempt VAT?
person a. Grapes
b. Oranges
MULTIPLE CHOICE: THEORY 1 c. Orchids
1. Which is subject to value added tax? d. Kiwi fruits
a. Sheep 8. Which seedling is vatable?
b. Sheep wool a. Grafted mango seedlings
c. Cut sheep meat b. Pomelo seedlings
d. All of these c. Narra seedlings
2. Which agricultural product is VAT-exempt d. Guava seedlings
on importation? 9. Which agricultural produce is exempt from
a. Charcoal VAT?
b. Wood a. Rubber
c. Lumber b. Abaca hemp
d. Corn c. Copra
3. Which importation is subject to VAT? d. Firewood
a. Importation from abroad 10. Which is vatable?
b. Purchase of goods from economic a. Bamboo shoots
zone in the Philippines b. Banana hearts
c. Both A and B c. Banana fruits
d. Neither A nor B d. Bamboo poles
4. Which is not subject VAT on importation? 11. Which is VAT-exempt?
a. Importation of goods for personal use a. Coconut soft wood
b. Importation of goods for business use b. Cotton seeds
 c. Cotton wool a. Formulated horse feeds
d. None of these b. Corn grits
12. Which is VAT-exempt? c. Swine feeds
a. Coconut lumber d. Broiler feeds
b. Coconut broom sticks 20. Feeds of the following animals are
c. Coconut shells considered as specialty feeds, except for
d. Coconut meat a. Zoo animals
13. Which is subject to VAT on importation? b. Aquarium fish
a. Wheat c. Livestock
b. Coffee bean d. Fighting cocks
c. Barley
d. Cocoa Multiple Choice- Theory 2
14. Which agricultural product is subject to VAT? 1. Which is VAT-exempt?
a. Honey a. Peacock feathers
b. Rattan cane b. Eggs
c. Sugar cane c. Hamster
d. Sugar beets d. Leather
15. Which is subject to VAT on importation? 2. Which is vatable on importation?
a. Cocoon silk a. Tea leaves
b. Pineapple silk b. Tobacco leaves
c. Furniture c. Cayenne pepper
d. All of these d. Chinese cabbage
16. Seedling of this tree are exempt from VAT on 3. Which of these is VAT exempt on
importation. importation?
a. Rubber tree a. Almonds
b. Paper tree b. Blueberries
c. Palm oil tree c. Ginseng roots
d. Mahogany tree d. All of these
17. Which of the following when imported is 4. Which is not exempt on importation?
subject to VAT? a. Sunflower seeds
a. Rubber b. Beeswax
b. Corn c. Peanuts
c. Cacao d. None of these
d. Peanuts 5. Which is not generally considered as pet
18. Which of these seed is not VAT-exempt? under the regulation?
a. Corn seeds a. Rabbit
b. Mustard seeds b. Zoo animals
c. Flower seeds c. Race horse
d. Cabbage seeds d. Fighting cocks
19. Which of the following feed is subject to 6. Which of these is non-vatable?
VAT on importation? a. Lovebirds
 b. Parrots c. Squids
c. Goldfish d. Shrimps
d. Milkfish 14. Example of mollusk and shellfish:
7. Which is not a VAT-exempt poultry? a. Crabs
a. Ducks b. Oysters
b. Geese c. Lobster
c. Turkeys d. Clams
d. Game fowl roosters 15. Which of these agricultural products is not
8. Which of these animals is vatable when considered as being in its original state?
imported a. Kopra
a. Cows b. Muscovado sugar
b. Rabbits c. Refined sugar
c. Goats d. Ordinary salt
d. Race horses 16. By revenue regulation, which of the item
9. Which is vatable agricultural input? below is not considered in original state?
a. Fertilizer a. Marinated fish
b. Pesticides b. Dried fish
c. Seeds c. Frozen meat
d. Seedlings d. Smoked fish
10. The following are generally considered as 17. Which product is non-taxable with VAT on
pets which are vatable when imported importation?
excepts for a. Fresh cow’s milk
a. Janitor fish b. Olive oil
b. Goldfish c. Butter
c. Catfish d. Parmesan cheese
d. Koi fish 18. Which of the item below is taxable with
11. Which of these is taxable with VAT on VAT?
importation? a. Shrink-wrapped meat
a. Yellowfin tuna b. Vacuum-packed vegetable
b. Pink salmon c. Tetra-packed fresh fruit juice
c. Blue marlin d. Canned fruits
d. Butterfly fish 19. Which is not considered as simple
12. Which of the following seafood is considered processing?
as vegetable and therefore VAT-exempt? a. Freezing
a. Kelp b. Stripping
b. Sea lettuce( green nori) c. Broiling
c. Sea grapes d. Marinating
d. All of these 20. The following advanced technological means
13. Which of these is vatable? of packaging are deemed not to alter the
a. Sea shells nature of agriculture marine food products
b. Octopuses
 thereby retaining their original state. Which 5. The importation of which transport medium
is the exemption? is exempt from VAT?
a. Canning a. Sea
b. Vacuum-packaging b. Air
c. Plastic shrink wrapping c. Land
d. Tetra-packing d. A and B
6. Examples of Transport vehicles:
MULTIPLE CHOICE THEORY 3 a. Bus
1. Which is not exempt from VAT on b. Cars
importation? c. Vessels
a. Importation of books d. Aircraft
b. Importation of school supplies
c. Importation of magazines Which of these is not exempt from VAT
d. All of these when imported?
2. Which importation is not VAT-exempt? a. C and D
a. Importation of personal and b. A and B
household effects of residents coming c. All of these
to resettle in the Philippines d. None of these
b. Importation of personal and 7. Which importer is exempt from VAT in
household effects of foreigners importation of fuel, goods and supplies?
coming to settle permanently in the a. Domestic carriers
Philippines b. International carriers
c. Importation of personal and c. Domestic carriers on their
household effects which are subject international operations
to custom duties d. Either B and C
d. All of these 8. Which of the following items is subject to
3. The importation of professional instruments VAT on importation to an individual who is
and implements may be subject to VAT intending to settle in the Philippines?
when the a. Vehicles
a. Volume is not in commercial quantity. b. Professional instruments
b. Goods accompany the person or c. Household effects
arrive within 30 days before and after d. Personal effects
his arrival. 9. The importation of fuel, goods and supplies
c. Importation involves vehicles and is not exempt from VAT when used in
machineries. a. Domestic operation
d. All of these b. International shipping operations
4. Which importation is exempt from VAT? c. Household effects
a. Importation of books by a school d. Personal effects
b. Importation of books by a student 10. Which is vatable?
c. Importation of books by a bookstore a. Importation of life saving equipment
d. All of these
 b. Importation of safety or rescue a. Importation of fuels or supplies by a
equipment person engaged in domestic
c. International transport operations transport operations
d. Any of these b. Importation of fuels or supplies by an
11. The importation of vessel or aircraft for international carrier
domestic operations is c. Importation of cargo vessels and
a. Vatable. aircraft by those engaged in
b. Always VAT exempt. international transport operations
c. VAT exempt if the importer complies 17. Which of these is non-vatable?
with maximum service life set by law. a. Purchase of services from a foreign
d. Vatable if the importer complies with service provider who is not engaged
maximum sevice life set by law. in business
12. The importation of fuels, goods and supplies b. Purchase of goods from a foreign
for domestic shipping or air transport service provider who is engaged in
operation is business abroad
a. Vatable. c. Purchase of goods from economic
b. Always VAT exempt. zone enterprises
c. Vatable if the importer is a domestic d. None of these
carrier. 18. Who shall pay the VAT on importation when
d. Exempt if the importer is a domestic a VAT on importation when a VAT-exempt
carrier. entity subsequently sells an imported article
13. The importation of farm machineries and or goods to a non-exempt entity?
equipment is exempt when imported by a. The exempt buyer
a. A member of the cooperative b. The non-exempt buyer
b. A trader engaged in business. c. Both A and C
c. An agricultural cooperative. d. Neither A nor C
d. A or C 19. Importation is not subject to VAT when
14. Who has the burden of proving exemption a. Made by a VAT-registered business
from VAT on importation? b. Made by a non-VAT-registered
a. The government business
b. The importer-buyer c. It involves exempt goods
c. The seller d. Coursed through an exempt importer
d. Both A and C 20. Which is not included in landed cost?
15. Which is a qualified exempt importation? a. Dutiable value
a. Importation of a cooperative of farm b. Custom's duty
equipment c. Excise tax
b. Importation by a cooperative of rice d. VAT
c. Importation of books 21. Which is not included in the landed cost?
d. Importation of marine food products a. Purchase price
16. Which is not a qualified exempt importation? b. All incident cost of bringing the
goods to the customs warehouse
 c. Taxes other than VAT paid prior to 13. The absence of a profit motive may preclude
the withdrawal of the goods an activitiu from being considered as
d. Cost of transporting the goods from business. FALSE
customs warehouse the importer's 14. Government agencies and instrumentalities
warehouse or residence and non-profit organization associations are
generally considered as businesses. FALSE
CHAPTER 3 15. A company director is considered to be
Introduction to Business Taxation engaged in business. FALSE

True or false- Part 1

1. Once employed, one cannot be considered True or False - Part 2
engaged in business. FALSE
2. All sales by a businessman are considered 1. Marginal income earners are exempt from

made in the course of business. FALSE both business tax and income. False

3. A business involces habitual engagement in 2. An employed professional is engaged in

a commercial activity. TRUE business. False

4. Commercial activity means provision of 3. Self-employed professionals rendering

goods or services to the public for a profit. services to clients are engaged in

TRUE Business. True

5. To be construed as being engaged in 4. Agents and brokers are considered as

business, one must be employed. FALSE employees; hence, they are not considered

6. A self-employed individual is engaged in engaged in business. False

business. TRUE 5. Consultants and movie artists are considered

7. An employee is not engaged in business. engaged in business. True

TRUE 6. Businesses for mere subsistence are not

8. All casual sales of properties are considered considered business because they

not made in the course of business. FALSE are non-profit. False

9. The sale of ordinary assets by a business is 7. Businesses for mere subsistence have gross

considered made in the course of business. receipts not exceeding P100.000 per year.

TRUE True

10. The sale of capital assets by a business is 8. The owner of a business for mere

also considered made in the course of subsistence is called a marginal income

bysiness being incidental to business earner. True

operation. FALSE. 9. A professional, consultant, or artist can

11. A business which is not registered is exempt qualify as a marginal income earner as long

from business tax. FALSE as his receipts do not exceed P100,000 in

12. Government agencies and instrumentalities any 12-month period. False

and non-profit organizations or associations 10. A sale made by a non-resident is presumed

may be considered as businessess on their to be made in the course of business despite

unrelated operation; hence these are subject irregularity of sales transactions. True

to business tax. TRUE

 11. A non-profit organization is subject to copyright, design, secret formula, trademark
business tax on all of its receipts if it and other property or right.
engages in activities subject to business tax. 3. TRUE-Businesses are classified as sellers of
False goods or sellers of services for purposes of
12. Exemption from income tax means business taxes.
exemption from business tax. False 4. FALSE- Sellers of goods are taxable on
13. A non-profit organization will be exempt gross receipts while sellers of services are
from business tax if it uses the income taxable on gross selling price.
generated from activities subject to business 5. FALSE- The sale of radio, television, satellite
tax for non-profit purposes. False transmission and cable television time is a
14. An individual, trust, estate, partnership, sale of service not a sale of goods or
corporation, joint venture, cooperative or properties.
association will pay business tax. True 6. FALSE- Real estate brokerage is considered
15. Only sales outlets are required to pay the a sale of goods or properties rather than sale
annual registration fee. True of services.
16. The Certificate of Registration shall be 7. FALSE- A contractor is a seller of goods or
exhibited in a conspicuous place in the property not a seller of services.
principal place of business. True 8. TRUE- Leasing or distribution of
17. The husband and the wife are taxable as a cinematographic films is a sale of service.
single person; hence, they pay under a 9. FALSE- Dealers in securities and lending
consolidated business tax return. False investors are sellers of goods rather than
18. Businesses are required to register in the sellers of services.
revenue district office (RD0) which has 10. FALSE- The sale of electricity by generation,
jurisdiction over their principal place of transmission and distribution companies is
business. True considered sale of goods or properties.
19. Businesses pay an annual registration fees of 11. TRUE- The term gross selling price excludes
P1,000. False taxes on the sale.
20. Every distinct establishment with or without 12. TRUE-Excise tax is part of the gross selling
sales operation shall pay the annual price.
registration fee. False 13. TRUE- Sales returns and allowances are
deductible against gross selling price.
14. TRUE- Gross selling price includes cash,
True or False - Part 3 accounts and installment sales.
15. TRUE- Constructive receipts are part of
1. TRUE- The term "goods or properties"
gross receipts.
includes real properties held primarily for
16. TRUE- Constructive receipts are monies
sale, lease or use in the ordinary course of
which are placed in the control of the seller
business.
of services without restrictions.
2. TRUE-The term "goods or properties"
17. TRUE- Only discounts determinable at the
includes the right or privilege to use patent,
point of sale are deductible against gross
selling price.
 18. TRUE- The term "gross receipts" includes purposes shall be synchronized with its fiscal
client or customer advances for unperformed year.
jobs. 12. FALSE- Corporations pay quarterly VAT
19. TRUE- Gross receipts include only cash while individuals pay VAT annually.
received and excludes uncollected income. 13. FALSE- VAT taxpayers use BIR Form 2551
20. FALSE- Promissory notes and other while non-VAT taxpayers use BIR Form
evidences of indebtedness submitted by 2550.
clients or customers are part of gross 14. TRUE- A few percentage taxpayers are
receipts. required to pay their tax quarterly while
most pay their taxes monthly.
15. TRUE- Exempt sales will not be subject to
True or False Part 4 VAT or percentage tax.

1. FALSE- Non-VAT taxpayers pay their

quarterly tax in three monthly payments.
2. FALSE- Loans or agency monies received by True or False Part 5
the business are part of gross receipts.
3. TRUE- Receipts that do not redound to the 1. FALSE-Services specifically subject to

benefit of the taxpayer are not included in percentage tax are subject to VAT if not

gross receipts. subjected to percentage tax.

4. TRUE-There are three types of business 2. TRUE-Sales from goods or services, other

taxes: VAT, percentage tax and excise tax. than exempt sales and services subject to

5. TRUE- There are two types of business percentage tax, are vatable.

taxpayers: VAT and Non-VAT taxpayers. 3. FALSE- The term "vatable sales" means

6. TRUE- Normally, VAT and percentage tax sales automatically subject to VAT.

are mutually exclusive. 4. FALSE- All services specifically subject to

7. TRUE- excise tax is an addition to either VAT percentage tax are taxed at a rate of 3%.

or percentage tax for businesses 5. FALSE-All taxpayers with vatable sales or

manufacturing or importing excisable receipts in the past 12-months aggregating

articles. P1,919,500 from whatever type of sales are

8. FALSE- The accounting period for business subject to VAT.

tax is called the taxable year. 6. FALSE-A person who wishes to register as

9. TRUE- VAT taxpayers pay their quarterly tax a VAT taxpayer despite not meeting the

in two monthly and one quarterly VAT threshold is called a "registrable

payment. person."

10. TRUE- The taxable quarters of an individual 7. FALSE- The VAT payable is computed as

are patterned after that of the calendar output VAT less 3% percentage tax.

quarter. 8. FALSE- If the aggregate sales or receipts

11. TRUE-The taxable quarters of a corporation from all sources (exempt, specifically genie

adopting a fiscal year for income tax subject to percentage tax, and others)
 exceed P3,000,000, the person is d. Sale of properties considered as capital
subject to VAT. assets
9. FALSE- Franchise grantees of radio or 4. Which is not engaged in business?
television broadcasting companies which a. A corporate
exceeded P1,000,000 in annual sales must b. A broker
register as VAT taxpayer. c. An agent
10. FALSE- Persons who optionally register as d. A security dealer
VAT taxpayers can cancel their VAT b 5. Which of these is least likely to be subjected to
registration within three years. business tax?
11. TRUE- Franchise grantees of television or a. Sale of stocks held as inventory
radio broadcasting companies cannot cancel b. Sale of bonds held as inventory
their VAT registration. c. Sale of stocks held as investment
12. FALSE- Registrable persons shall be subject d. None of these
to VAT. They shall pay VAT with the benefit 6. Which is considered engaged in business even if
of an input VAT credit plus the percentage not regularly engaged in trade?
tax. a. A non resident seller who exports into the
Philippines
Multiple Choice- Theory: Part 1 b. An importer who imports goods into the
1. Which of the following entities below is not Philippines
considered as a business? c. A seller who makes a one time sale of real
a. A sari-sari store with P 500,000 annual property
sales d. Any seller which sells goods or services at
b. A new stand with sales exceeding a price above P 100,000 during the year
P100,000 7. Which of the following is considered to be
c. A cigarette vendor with sales not engaged in business?
exceeding P 100,000 a. Government agencies
d. An employed professional earning b. Non-profit organization
part-time self-employment income not c. Sales agent
exceeding P100,000 d. Consultant
2. Which of the following is not considered as a. A and B
engaged in business? b. C and D
a. A purely self-employed individual c. B and C
b. Self employed and employed individual d. None of these
c. A purely employed individual 8. Which is of these is always presumed to be made
d. A and B in the course of business, hence, subject to
3. Which of the following is not subject to business business tax under the regulations?
tax even if made by a registered business? a. Export sales
a. Sale of goods b. Importation
b. Sale of services c. Domestic sales
c. Sale of properties considered as ordinary d. All of these
assets 9. The business tax on exempt sales is
 a. VAT b. Neither statements
b. Percentage tax c. Statement 1 only
c. A or B d. Statement 2 only
d. None 16. Statement 1: An employed taxpayer will pay
10. The consumption tax on importation is annual registration fee.
a. VAT Statement 2: A self-employed taxpayer will pay
b. Percentage tax annual registration fee.
c. A or B Which statement is correct?
d. None a. Statement 1
11. The consumption tax on domestic sales is b. Statement 2
a. VAT c. Both statements
b. Percentage tax d. Neither statement
c. A or B 17. The term gross selling price excludes
d. None a. The contract price of the goods sold
12. The business tax on services specifically subject b. Discounts which are contingent upon
to percentage tax is future events
a. VAT c. Delivery charges
b. Percentage tax d. Sales returns and allowances
c. A or B 18. The term gross receipts excludes
d. None a. Reimbursements for customer expenses
13. Which is more likely to qualify as a marginal paid by the service provider
income earner? b. Reimbursements for out-of-pocket
a. Artist expenses incurred by the service provider
b. Consultant c. Advances made by the client for services
c. Sales agent yet to be rendered
d. Operators of a single unit tricycle d. Cash collections for services rendered
14. Statement 1: Sellers of goods are subject to 19. Which is not a constructive receipt?
percentage tax. a. Bank deposits made available to the
Statement 2: Sellers of services are subject to service provider without restriction
VAT. b. Transfer of amounts retained by the payor
Which statement is correct? to the account of the contractor-service
a. Statement 1 provider
b. Statement 2 c. Judicial consignation by the payor of the
c. Both statements contract price which the service provider
d. Neither statement wish to donate to the payor
15. Statement 1: Both the husband and the wife are d. Collection of revenue for past services
subject to either VAT or percentage tax. rendered
Statement 2: The husband may pay VAT while 20. Which is part of gross receipts?
the wife may pay percentage tax. a. Amounts received which will be remitted
Which statement is false? to others persons
a. Both statements
 b. Receipt of notice from a debtor to offset a. Those who are below the VAT threshold
the consideration of the service for the depth b. Those whose only sales are exempt sales
of the service provider c. Those who only derive receipts from
c. Receipt from bank loans services specifically subjects percentage tax
d. Receipt from insurance of stocks or d. Any of these
issuance of certificates of indebtedness 7. A non-VAT registered seller of goods shall pay
a. 3% percentage tax on its gross receipts
Multiple Choice- Theory: Part 2 b. 12%percentage tax on its value added
1. A non -VAT registered service provider shall pay c. 3% percentage tax on its sales
a. 3% percentage tax on its gross receipts d. 12% VAT on its gross receipts
b. 12% VAT on its value added 8. A VAT registered seller of goods shall be subject
c. 12% VAT on its export sales or receipts to
d. 3% percentage tax on its export sales a. 12% output VAT on sales
2. Which must be present to construe the existence b. 12% output VAT on gross receipt
of a business? c. 3% percentage tax on sales
a. Regularity of transaction d. 3% percentage tax on gross receipts
b. Offering of services or goods to the public 9. Who is entitled to claim (deduct) input VAT
for a profit against output VAT against output VAT?
c. Actual presence of profit during the period a. A VAT registered persons only
d. Both A or B b. VAT registrable persons only
3. A person who made a one-time or casual sale of c. Non-VAT registered persons
properties is d. All of these
a. Exempt from business tax 10. Who pays percentage tax?
b. Subject to percentage tax a. Those who exceed the VAT threshold and
c. Subject to value added tax opted to be register as non-VAT
d. Subject to either percentage tax or value b. Those who did not exceed the VAT
added tax threshold but are registered as VAT
4. A VAT registered person shall pay taxpayers
a. 3% percentage tax and VAT c. Only those service providers specifically
b. 12% VAT on its sales or receipt subject to percentage tax
c. 12% VAT on its value added d. Those providers of services specifically
d. 12% VAT on its export sales subject to percentage tax and those who
5. Who is subject to VAT? sales or receipt in any 12- month period are
a. Those who optionally register as VAT below the VAT threshold
taxpayer 11. When the receipts from services specifically
b. Those who are mandatorily required to subject to percentage tax exceeds the VAT
register as VAT taxpayer threshold, future receipts from these services are
c. Those who are registrable to VAT a. Exempt from percentage tax
d. Any of these b. Still subject to the same percentage tax
6. Who are not required to register to the VAT c. Subject to VAT
system? d. Subject to 3% percentage tax
12. A VAT registered person who did not exceed the 19. A non-VAT registered person who exceed the
VAT threshold will pay VAT threshold shall pay
a. VAT a. VAT
b. Percentage tax b. Percentage tax
c. Both A and B c. Both A and B
d. Either A or B at his discretion d. Either A or B at his discretion
13. Once the vatable sales or receipts exceeds the 20. A non-VAT registered person who did not
VAT threshold, future monthly sales from vatable exceed the VAT threshold shall pay
sales or receipts shall be subject to a. VAT
a. 3% percentage tax b. 3% percentage tax
b. Percentage taxes of various rates c. Percentage tax at various rates
c. 12% VAT d. Either A or B at his discretion
d. 0% VAT 21. What is the general VAT threshold?
14. A marginal income earner shall pay a. P 1,919,800
a. 3% percentage tax b. P 1,919,500
b. 12% VAT c. P 3,000,000
c. Either A or B d. P 10,000,000
d. Neither A nor B 22. Which is a special VAT threshold?
15. The export sales of VAT registered taxpayer is a. P 1,919,800
a. Subject to zero-rated VAT b. P 1,919,500
b. Exempt from business tax c. P 3,000.000
c. Subject to 12% VAT d. P 10,000,000
d. Subject to 3% percentage tax 23. The mandatory or voluntary registration as VAT
16. The export sales of non-VAT registered taxpayer taxpayers under the special threshold is
is a. Revocable anytime
a. subject to zero rated VAT b. Revocable after the lapse of three years
b. Exempt from business tax c. Revocable within a year
c. Subject to 12% VAT d. Perpetually irrevocable
d. Subject to 3% percentage tax 24. Mandatory or voluntary registration as VAT
17. A non-VAT person with exempt sales exceeding taxpayer under the general threshold is
the VAT threshold is still a. Revocable anytime
a. Exempt from business tax on exempt sales b. Revocable after the lapse of three years
b. Exempt from VAT on all its sales c. Revocable within a year
c. Exempt from percentage tax on all sales d. Perpetually irrevocable
d. A and B 25. The VAT registration upon commencement of
18. A VAT-registered person who exceeded the VAT operation based upon expectation of
threshold will pay exceeding the VAT threshold shall be
a. VAT a. Revocable anytime
b. Percentage tax b. Revocable after the lapse of three years
c. Both A and B c. Revocable within a year if sales do not
d. Either A or B at his discretion actually exceed the VAT threshold.
 d. Perpetually irrevocable. 5. Frozen meat is considered a processed
agricultural food product. False
CHAPTER 4 6. A fish pond operator is subject to 3%
Exercise Drills percentage tax. False
1. Vegetables - Exempt 7. A farmer is subject to business tax on
2. Cooked rice - Vatable farming occupation. False
3. Sundried banana - Exempt 8. All sales of agricultural or marine food
4. Canned fish - Vatable products are subject to business tax. False
5. Fruit shake - Vatable 9. The services provided by agricultural
6. Boiled eggs - Exempt contract growers are vatable. True
7. Fresh fruits - Exempt 10. The employment of chemical treatment to
8. Fresh sea foods - Exempt agricultural or marine food products is
9. Lumber - Vatable considered state altering. True
10. Orchids and bonsai - Vatable 11. The sale of bread is exempt from business
11. Chicken manure - Exempt tax. False
12. Bamboo - Vatable 12. The services of an agricultural contract
13. Bamboo shoots - Exempt grower are subject to VAT. False
14. Cotton seeds - Vatable 13. Restaurants are exempt from VAT. False
15. Cotton - Vatable 14. A fruit vendor is exempt from business
16. Wheat - Exempt tax.True
17. Cacao - Exempt 15. A manufacturer of canned sea foods is
18. Cocoa - Vatable exempt from VAT. False
19. Cheese - Vatable
20. Charcoal - Vatable True or False 2
21. Furniture - Vatable 1. The transport services of an international
22. Zoo animals - Vatable carrier is exempt from VAT. True
23. Tobacco - Vatable 2. Agricultural cooperatives are exempt from
24. Tea - Vatable VAT. True
25. Aquarium fish - Vatable 3. Electric cooperatives are subject to VAT. True
26. Smoked or dried fish - Exempt 4. The sale of commercial lots where the
27. Canned Fish - Exempt selling prices do not exceed P1,919,500 a
unit is exempt. True
True or False 1 5. Bookstores are totally exempt from VAT.
1. The sale of processed agricultural products False
is vatable. True 6. Schools are subject to VAT. False
2. The sale of fruits and vegetables is exempt 7. Hospitals are subject to VAT. False
from business tax. True 8. The export sales by VAT taxpayers are
3. The sale of fertilizers, seeds, and pesticides exempt from VAT. False
is exempt from VAT. False 9. The export sales of non-VAT taxpayers are
4. Exempt sales are exempt from both the VAT subject to zero-rated VAT. False
and percentage tax. True
 10. Consultants are exempt from VAT because b. Percentage tax
their services are akin to employment. False c. Both A and B
11. The leasing of residential units is exempt d. Neither A nor B
from VAT if the annual rentals do not exceed 6. All of the following are exempt agricultural
P15,000 per unit. False produce, except
12. Domestic airliners are exempt from VAT on a. Palay
their transport of passengers. False b. Corn
13. The sale of a residential dwelling by a c. Garlic
non-dealer is subject to VAT if the selling d. Tobacco
price per unit does not exceed P3,199,200. 7. Which of the following is considered as not
False in its original state?
14. The sale of an adjacent lot to the same buyer a. Frozen fish
shall be treated as one. True b. Dried fish
15. The sale of adjacent dwellings to different c. Marinated fish
buyers shall be aggregated as one. False d. None
8. Which is exempt from business tax?
Multiple Choice - Theory: Part 1 a. Sale of boiled peanuts
1. Which of the following sale is not subject to b. Sale of peanut brittle
business tax? c. Sale of coco lumber
a. Sale of a car by a dealer d. Sale of flowers
b. Casual sale of a car by a non-dealer 9. Which of the following sale is exempt from
c. Sale of real property by a dealer business tax?
d. Sale of office equipment by a a. Sale of palay
business b. Sale of furniture
2. Which of these pay business taxes? c. Sale of pottery
a. Vegetables dealer d. Sale of textile
b. Gold trader 10. The sale of this agricultural or marine
c. Fruit dealer product is exempt from business tax
d. Fisherman a. Mackerel
3. Which is taxable with VAT? b. Silk
a. Sale of cotton in original state c. Leather
b. Sale of milkfish in original state d. Pearl
c. Sale of muscovado sugar 11. Which of the following establishments may
d. Sale of mustard seeds qualify for exemption from business tax?
4. Which is exempt from business tax? a. Hotel
a. Bakery b. Inn
b. Manufacturer of canned fruits c. Boarding house
c. Manufacturer of noodles d. Resort
d. Meat vendor 12. Which of the following is least likely subject
5. Exempt sales are not subject to to VAT?
a. VAT a. Banana cake
 b. Chocolate d. Aquarium fish
c. Cassava chips 20. Which of the following sales is not exempt
d. Corn grits from business tax?
13. The sale of which of the following is exempt a. Sale of pets
from business tax? b. Sale of unprocessed agricultural food
a. Wine products
b. Fish sauce c. Sale of processed marine foods
c. Vinegar d. Sale of unprocessed non-food
d. Boiled eggs agricultural products
14. The sale of this agricultural supply is exempt
from business tax Multiple Choice - Theory: Part 2
a. Fertilizer 1. Which is subject to business tax?
b. Farm machineries a. A private hospital
c. Farm tools b. A non-profit hospital
d. All of these c. A government hospital
15. Which is subject to VAT when sold? d. None of these
a. Seeds 2. Which is not subject to business tax?
b. Fingerlings a. A purely employed professional
c. Feeds b. A professional practitioner
d. None of these c. A self-employed individual
16. Which is not exempt from business tax? d. All of these
a. Miller of palay into rice 3. All of these pay business tax, except
b. Miller of corn into corn grits a. Stock broker
c. Miller of sugar cane into refined sugar b. Insurance agent
d. Miller of sugar cane into raw sugar c. Consultant
17. Which is exempt from business tax? d. Employee
a. Agricultural contract growers 4. Which of the following pays business tax?
b. Food processor a. Regional operating headquarters
c. Paper manufacturer b. Regional administrative headquarters
d. All of these c. Both A and B
18. Which of the following transactions is not d. Neither A nor B
subject to business tax? 5. Which is exempt from business tax?
a. Sale of game fowl a. Receipts from rental of aircraft
b. Sale of specialty feeds b. Receipts from rental of vessels
c. Sale of genetic materials for poultry c. Sale of aircraft or vessels
d. Sale of aquarium fish d. None of these
19. Which of the following animals is not 6. Which is an exempt medical service?
considered as a pet? a. Services of surgical doctors
a. Domestic animal b. Services of dentists
b. Livestock c. Services of pediatricians
c. Race horse d. Hospital services
7. The gross receipts or sales of the hospital c. Technical Education and Skills
from which of the following sources is not Development Authority
exempt from business tax. d. Commission on Higher Education
a. Medicines 14. Which of the following activities related to
b. Medical services books is exempt from business tax?
c. Dental services a. Printing
d. Veterinary services b. Sale
8. Which of these is exempt from business tax? c. Publication
a. Sale of aircraft for domestic transport d. All of these
b. Sale of aircraft for international 15. Which of the following statements is
transport correct?
c. Both A and B a. The sale of real property by any
d. Neither A nor B person is subject to business tax.
9. Which of these is subject to business tax? b. The sale of real property is vatable
a. Sale or lease of sea vessels for only when the seller is a realty
domestic transport dealer.
b. Sale or lease of sea vessels for c. The sale of property held for sale,
international transport lease or use in the course of business
c. Both A and B is subject tax.
d. Neither A nor B d. The casual sale of real property used
10. Which is exempt from business tax? in business is subject to business tax.
a. Private school 16. The sale of real property by a person not
b. Non-profit school engaged in business is
c. Government school a. subject to business tax.
d. All of these b. exempt from business tax.
11. Which of these receipts by a school is more c. partially subject to business tax.
likely to be subject to business tax? d. automatically subject to VAT.
a. Tuition fee 17. Which of the following may not be subject to
b. Miscellaneous fee business tax when sold?
c. Computer fee a. Property held for sale
d. Rent income b. Property held for lease
12. Which of the following items is exempt from c. Property held for use
business tax? d. Property held as investment
a. Sale of books 18. What is the price limit for the exemption of
b. Sale of newspapers residential lot?
c. Sale of ballpen and notebooks a. P1.000.000
d. Sale of magazines b. P1,919,500
13. Which is not an accrediting agency for a c. P1,500,000
school to be exempt from business tax? d. P3,199,200
a. Department of Education 19. What is the price limit for the exemption of
b. Department of Health residential dwellings?
 a. P1.000,000 c. Both A and B
b. P1,919,500 d. Neither A nor B
c. P1.500.000 6. An international carrier is not involved in
d. P3,199,200 a. land transport.
20. The lease of residential units is exempt from b. sea transport
business tax provided that rent per month c. air transport.
per unit is d. Any of these
a. more than P12,800. 7. An international carrier is owned by a
b. less than P15.000. a. Domestic corporation.
c. not more than P12.800. b. Foreign corporation
d. not less than P15,000. c. Either A or B
d. Neither A nor B
Multiple Choice - Theory: Part 3 8. Which of the following activities by any
1. Realty dealers, developers or lessors are carrier is a foreign consumption exempt from
usually registered as Philippine business tax for being rendered
a. Excise taxpayers outside the Philippines?
b. Percentage taxpayers a. Inbound transport of passengers and
c. VAT taxpayers baggage to the Philippines
d. Any of these b. Outbound transport of passengers
2. Which of these is vatable? and baggage or cargoes for abroad
a. Properties classified as ordinary c. A and B
assets d. None of these
b. Properties classified as capital assets 9. The receipts from outgoing transport of
c. Both A and B domestic carriers is
d. Neither A nor B a. subject to zero percent tax.
3. Which is exempt under certain price b. subject to zero percent VAT.
conditions? c. exempt from business tax.
a. Residential lot d. subject to excise tax.
b. Residential dwellings 10. To an international carrier, the receipts from
c. Low-cost housing unit inbound flights is
d. All of these a. subject to percentage tax.
4. The rental limit on residential dwellings does b. subject to VAT.
not apply to c. subject to VAT for passenger and
a. an apartment. percentage tax for cargoes.
b. A house for rent d. exempt.
c. a dormitory. 11. Statement 1: Cooperatives are generally
d. motels. subject to VAT.
5. Which carrier has an exemption from Statement 2: Cooperatives are generally
business tax? subject to percentage tax.
a. Domestic carrier
b. International carrier Which is correct?
 a. Statement 1 1. Common carried by land – transport of
b. Statement 2 passengers - 3% percentage tax
c. Both statements 2. Common carrier by land – transport of
d. Neither statement cargoes- VAT or 3% percentage tax
12. The sale by non-VAT registered persons to 3. Common carried by sea -VAT
entities in the Philippines with indirect tax 4. Common carrier by air - VAT
exemption is considered 5. International carrier – passengers - Exempt
a. A domestic consumption subject to 6. International carrier – cargoes, baggage or
VAT. mails - 3% percentage tax
b. A domestic consumption subject to 7. Non-life insurance - VAT
percentage tax. 8. Life insurance - 2% percentage tax
c. A foreign consumption exempt from 9. Bank – short-term loans - 5% percentage
business tax. tax
d. A foreign consumption subject to 10. Bank – long-term loans - 1% percentage
zero-rated VAT. tax VAT
13. As a rule, all cooperatives are exempt from 11. Franchise grantees of electricity - VAT
business tax, except 12. Franchise grantees of water - 2%
a. agricultural cooperatives. percentage tax Franchise grantees of gas -
b. electric cooperatives. 2% percentage tax
c. credit cooperatives. 13. Franchise grantees of telephone - inbound
d. None of these calls - Exempt
14. Which of these entities do not have indirect 14. Franchise grantees of telephone - outbound
tax exemption? calls - 10% percentage tax
a. Philippine Amusement and Gaming 15. Operators of cinemas - VAT
Corporation (PAGCOR) 16. Operations of cockpits - 18% percentage
b. Development Bank of the Philippines tax
(DBP) 17. Operator of jai-alai - 30% percentage tax
c. International Rice Research Institute 18. Places of exhibitions of professional
(IRRI) basketballs - 15% percentage tax
d. Embassies 19. Places of exhibitions of professional boxing -
15. The export sales of non-VAT taxpayers are 10% percentage tax Bowling alleys - VAT
a. Exempt. or percentage tax
b. subject to percentage tax. 21. Night or day clubs and cabarets - 18%
c. subject to 12% VAT. percentage tax
d. subject to 0% VAT.
True or False 1
CHAPTER 5
1. To be subject to VAT, one has to be
Exercise Drills registered under the VAT system. F Note:
Even registrable taxpayers are vatable.
 2. VAT-exempt sales are subject to percentage 6. The sale of water by water utility franchise
tax. F grantees is subject to VAT. F
3. A seller is subject to percentage tax if he is 7. The sale of electricity by electric utility
non-VAT registered even if his sales or franchise grantees is subject to VAT. T
receipt exceed the VAT threshold. F 8. The sale of stocks directly to buyers is
4. The 3% general percentage tax applies to subject to percentage tax. T
non-VAT registered taxpayers. T 9. The sale of stocks by a dealer through the
5. A seller of service which is specifically PSE is subject to percentage tax. F
subject to percentage tax is subject to VAT if 10. The follow-through offering of listed
its 12-month sales or receipts exceeded the enterprises is exempt from percentage tax. T
VAT-threshold. F
6. A seller is subject to percentage tax even if Multiple Choice – Theory: Part 1

he registered as VAT taxpayer if his annual

1. The percentage tax rates on services
sales do not exceed the VAT threshold. F
specifically subject to percentage tax ranges
7. Common carriers are vatable on their
from:
transport of cargoes or baggage. T
a. 1⁄2 of 1% to 3%
8. Domestic sea or air carriers are vatable on
b. 1⁄2 of 1% to 30%
their transport of passengers or cargoes. T
c. 1% to 3%
9. International carriers are vatable on their
d. 1% to 30%
transport of cargoes or baggage. F
2. To be subject to the general percentage tax,
10. Franchise grantees of private franchises are
a taxable person must not be
vatable. T
a. VAT-registered.

True or False 2 b. Non-VAT-registered.

c. Operating below the VAT threshold.
1. Franchise grantees of transport operations d. All of these
are subject to percentage tax. T Note: 3% 3. Which domestic common carrier is
percentage tax specifically subject to percentage tax?
2. Winnings from cockpits are subject to a. Common carrier by land
percentage tax. F b. Common carrier by air
3. Franchise grantees of the government on c. Common carrier by sea
utilities are subject to percentage tax. F Note: d. All of these
electricity and telecommunication 4. From which of the following sources does
franchisees are subject to VAT. the 3% common carriers tax specifically
4. The percentage tax of banks is called apply?
“premiums tax.” F Note: The term “premiums a. Transport of passengers
tax” pertains to nsurance companies. b. Transport of goods
5. The overseas communication tax applies to c. Both A and B
both incoming and outgoing dispatch of d. Neither A nor B
messages or communication. F Note: only on 5. The percentage tax specifically imposed on
outgoing calls certain domestic transporters is called
 a. Common carrier’s tax a. Fares from passengers
b. Skipper’s tax b. Fares from baggage
c. Transporter’s tax c. Fares from cargoes and mails
d. Gross receipt tax d. All of these
6. Which is not specifically subject to a 12. To an international carrier, which is subject to
percentage tax? percentage tax?
a. International sea or air carrier a. Transport of passengers
b. Domestic common carrier by land b. Transport of cargoes, mails or
c. Domestic common carrier by sea baggage
d. A and B c. AandB
7. From which of the following sources is the d. Neither A nor B
gross receipt of an international carrier 13. Which is not specifically subject to common
subject to percentage tax? carrier’s tax?
a. Outgoing transport of passengers a. Bus
b. Outgoing transport of cargoes b. Taxi
c. Incoming transport of passengers or c. Jeepney
cargoes d. Truck
d. None of these 14. Which is more likely exempt from business
8. A domestic carrier which is also engaged in tax?
international transport operation is subject to a. Tricycle
a. VAT b. Jeepney
b. Percentage tax c. Car for hire without chauffeur
c. Excise Tax d. Pedicab
d. VAT and Percentage tax 15. To an operator of a domestic aircraft, which
9. On transport of excess baggage, cargoes or is vatable?
mails, an international carrier shall pay a. Fares from passengers
a. Percentage tax if it is below the VAT b. Fares from baggage
threshold. c. Fares from cargoes and mails
b. Percentage tax even if it is above the d. All of these
VAT threshold.
c. VAT regardless of whether it is below Multiple Choice – Theory: Part 2

or above the VAT threshold.

1. Which of these is vatable?
d. No business tax.
a. City taxis
10. Which is a VAT-exempt receipt to a bus
b. Sea vessels
operator?
c. Provincial buses
a. Receipts from passengers
d. City buses
b. Receipt from cargoes
2. Which is subject to 3% percentage tax?
c. Receipt from baggage
a. Kalesa
d. None of these
b. Bangka
11. To an operator of a domestic sea transport
c. Bulldozer
vessel, which of the following is vatable?
 d. Car for hire a. 2% of gross receipt.
3. A jeepney operator with gross receipts from b. 3% of revenue.
passenger fares exceeding P3,000,000 in c. 2% of revenue.
any 12-month period is subject to d. 3% of gross receipt.
a. 3% percentage tax. 10. A radio or television broadcasting company
b. 8% percentage tax. with annual gross receipt not exceeding
c. 12% VAT. P9,000,000 shall pay
d. 0% VAT. a. VAT
4. Franchise grantees of telephone, telegraph, b. 3% percentage tax
and other communication equipment are c. 2% percentage tax
subject to percentage tax on d. No business tax
a. Overseas dispatch of message 11. What is the business tax liability of gas and
b. Domestic dispatch of message water utilities with gross receipts not
c. BothAandB exceeding P10,000,000?
d. Neither A nor B a. VAT
5. Which is not exempt from the overseas b. 3% percentage tax
communication tax? c. 2% percentage tax
a. PEZA locators d. Exempt
b. Government 12. What is the business tax liability of gas and
c. Diplomatic services water utilities with gross receipt exceeding
d. News services P10,000,000?
6. The overseas communication tax is a. VAT
a. 10% of revenue. b. 3% percentage tax
b. 10% of gross receipts. c. 2% percentage tax
c. 3% of revenue. d. Exempt
d. 3% of gross receipts. 13. A radio or television broadcasting company
7. Which is a vatable receipt to a franchise with annual gross receipts of P12,000,000
telephone franchise grantee? shall pay
a. Receipt from domestic dispatch of a. VAT
message b. 3% percentage tax
b. Receipt from incoming calls c. 2% percentage tax
c. Receipt from outgoing calls d. No business tax
d. BothAandB 14. The gross receipt tax on long-term interest
8. Which of the following franchisees is subject income is
to the franchise tax? a. 7%
a. Electricity b. 5%
b. Transportation c. 3%
c. Water utility d. 1%
d. Telephone 15. Which is subject to the gross receipt tax?
9. The franchise tax on radio or television a. Banks
franchises is b. Quasi-banks
 c. Pawnshops d. Neither statement
d. All of these 7. Agents of foreign insurance are subject to
a. 2% premiums tax
Multiple Choice – Theory: Part 3 b. 5% premiums tax
c. 4% premiums tax
1. The gross receipts of banks pertain to
d. 10% premiums tax
a. Principal collection
8. Which is not subject to amusement tax?
b. Interest collection
a. Places of boxing exhibitions
c. Principal and interest collection
b. Places of professional basketball
d. None of these
games
2. Which is subject to percentage tax?
c. Cockpits
a. Life insurance
d. Golf course
b. Hull insurance
9. The premiums tax on insurance premium is
c. Fire insurance
a. 2%
d. All of these
b. 3%
3. The premiums tax on life insurance applies
c. 5%
to
d. 7%
a. Direct premium
10. The percentage tax for operators of race
b. Re-insurance premium
tracks is
c. Refunded premium
a. 10%
d. All of these
b. 15%
4. Which is part of gross receipts for purposes
c. 18%
of the premiums tax on life insurance?
d. 30%
a. Check
11. Operators of discos or cabarets are subject to
b. Bills and coins
an amusement tax of
c. Promissory notes
a. 10%
d. All of these
b. 15%
5. The gross receipt tax on banks from other
c. 18%
items of gross income added from interest
d. 30%
income is
12. The general percentage tax on winnings
a. 7%
from a horse race is
b. 5%
a. 3%
c. 3%
b. 4%
d. 1%
c. 5%
6. Statement 1: Reinsurance premium is
d. 10%
exempt from the percentage tax. Statement
13. Which winning is subject to percentage tax?
2: Reinsurance premium is exempt from VAT.
a. Winnings from lotto
Which statement is correct?
b. Winnings from derby
a. Statement 1
c. Winnings from horse race
b. Statement 2
d. Winnings from gambling
c. Both statements
 14. Which of the following events is not exempt 4. Statement 1: All initial public offerings are
from amusement tax? subject to IPO tax.
a. World championship
b. Oriental championship Statement 2: A follow-through offering is

c. National championship exempt from IPO tax. Which is correct?

d. None of these
a. Statement 1
15. Which is incorrect with respect to the
b. Statement 2
requisites of exemption of receipts from
c. Both statements
professional boxing?
d. Neither statement
a. Both contenders must be Filipinos
5. Statement 1: The percentage of block sale in
b. The promoter must be a Filipino or
primary offering is determined using the
corporation with at least 60% Filipino
outstanding shares after the IPO.
ownership
Statement 2: The percentage of stock sale in
c. The competition must be a world or
secondary offering is determined using the
oriental championship
outstanding shares before the IPO.
d. All of these
Which is correct?

Multiple Choice – Theory: Part 4 a. Statement 1

b. Statement 2
1. Which of the following sales is subject to c. Both statements
stock transaction tax? d. Neither statement
a. The sale by an investor of a listed 6. A public corporation is a corporation at least
stock directly to buyer 50% in the value of its outstanding capital
b. The sale by a listed corporation of stock is owned by
shares through the PSE a. less than 20 shareholders.
c. The sale by an investor of a listed b. more than 20 shareholders.
stock through the PSE c. 20 or more shareholders.
d. The sale by a listed corporation of d. at least 20 shareholders.
shares directly to buyer 7. If the block sale of primary shares exceeds
2. The IPO tax is payable by 1/3 of the outstanding shares after the IPO,
a. The buyers of IPO shares the IPO tax is
b. The issuing corporation a. 4%
c. Both the buyer and issuing b. 2%
corporation c. 1%
d. The Philippine Stock Exchange d. 1⁄2of1%
3. The stock transaction tax is withheld and 8. What is the tax rate on the sale of stocks
remitted by through the facilities of the PSE?
a. The Philippine Stock Exchange a. 4%
b. The stock broker b. 2%
c. The owner of stocks c. 1%
d. The buyer of the stocks d. 1⁄2of1%
9. The percentage tax on double forecast, CHAPTER 6
quinella, or trifecta bets on horse race is
a. 3% Drill Exercises

b. 4%
1. Seller of agricultural food product EXEMPT
c. 5%
d. 10% 2. Furniture shop VATABLE
10. Which is subject to premiums tax?
a. Health insurance premiums 3. Vegetable trader EXEMPT
b. Reinsurance premiums
4. A private high college EXEMPT
c. Property insurance premiums
d. Fire insurance premiums 5. A private hospital EXEMPT
11. All of the following pays monthly percentage
tax, except? 6. A dentist VATABLE
a. Franchise grantees of gas and water
7. Hospital drug store VATABLE
b. Domestic carriers and keepers of
garage 8. A non- profit elementary school EXEMPT
c. Proprietors of cockpits
d. Life insurance companies 9. A government college EXEMPT
12. Which is specifically subject to percentage
10. Restaurant VATABLE
tax?
a. Credit cooperatives
11. Bus operator % TAX
b. Property insurance companies
c. International carriers 12. Hotel VATABLE
d. Domestic shipping companies
13. Which is the correct percentage tax on the 13. Operator of domestic sea vessel VATABLE
following service providers?
14. Life insurance company % TAX
a. Operators of jai-alai – 30%
b. Keepers of garage – 5% 15. Mall VATABLE
c. Franchisees of water utility – 3%
d. Life insurance companies – 5% 16. Domestic airliner VATABLE
14. Interest income on loans is specifically
17. Lessor vessels or aircraft VATABLE
subject to percentage tax if earned by a
a. Lending investor 18. Banks % TAX
b. Dealer in security
c. Quasi-banking institution 19. Operator of taxi % TAX
d. All of these
20. International carriers % TAX
15. The gross receipt tax does not apply to
a. Bangko Sentral ng Pilipinas. 21. Keepers of garage % TAX
b. rural banks.
c. urban banks. 22. Book publishers EXEMPT
d. industrial banks.
23. Quasi-banks VATABLE 5. A person who commences business with an
expectation to exceed the VAT threshold must
24.Dealer of household appliances VATABLE register as a VAT taxpayer. TRUE

25. Dealer of commercial lot VATABLE 6. A registrable person is exempt from VAT. FALSE

26. Insurance agent VATABLE 7. A VAT-registered person is exempt from VAT on

VAT-exempt sales. TRUE
27. Employee EXEMPT

8. A non-VAT taxpayer shall not bill VAT on his sale.

28. Contractor VATABLE
TRUE
29. Processor of sardines VATABLE
9. A VAT-registered person is liable to VAT on
30. Auto parts dealer VATABLE exempt sales and services specifically subject to
percentage tax. FALSE
31. Manufacturer of hog feeds EXEMPT
10. The threshold for franchise grantees of
32. Seller of fertilizer and seeds EXEMPT electricity is P10,000,000. FALSE

33. Fisherman EXEMPT 11. The VAT threshold for sellers of goods or
services is P3,000,000. TRUE
34. Fish vendor EXEMPT
12. The VAT threshold for franchise grantees of gas
35. Textile manufacturer VATABLE
and water is P10,000,000. TRUE
True or False 1
13. The VAT threshold applicable to professional
1. A person who exceeded the VAT-threshold in any practitioners is P10,000,000. TRUE
12-month period must register as a VAT taxpayer.
14. Exempt sales shall not be billed with an output
TRUE
VAT. TRUE
2. The VAT applies on receipts or sales other than
15. A sale to the government shall not be billed
those exempted and those specifically subject to
with output VAT since it is exempt from VAT. FALSE
percentage tax. TRUE
True or False 2
3. A person with vatable sales or receipts not
exceeding the VAT-threshold may register as a 1. Export sales shall be billed with output VAT.
non-VAT taxpayers. TRUE FALSE

4. A person with vatable sales or receipts not 2. The export sale of a VAT-taxpayer is an exempt
exceeding the VAT-threshold may register as a VAT sale. FALSE
taxpayer. TRUE
3. A non-VAT-registered person who invoiced VAT
on his sale shall be subject to 12% VAT without the
benefit of an input VAT 3% percentage tax, and 1. All of these are vatable, except
25% surcharge.FALSE a) Engineering contractors c.
b) Lawyers
4. Exempt sales which are billed as regular sales c) Employee
shall be considered as regular vatable sales.TRUE d) Brokers
2. Which is not VAT-exempt?
5. The VAT payable of a VAT-registrable person is
a) Importation of agricultural or marine food
the output VAT without benefit of Input VAT plus
products
3% percentage tax.FALSE
b) Gross receipts of professional practitioners
6. No input VAT traceable to exempt can be claimed c) Receipts from taxicabs
sales as tax credit.TRUE d) Gross receipts of hospitals
3. Which is vatable?
7. No input VAT traceable to government sales is a) Sale of fertilizers
claimable as tax credit. FALSE b) Sales of fruit
c) Sale of bamboo handicrafts
8. A VAT-registered person shall be subject to a
d) Sale of bamboo handicrafts
final withholding VAT of 12% on sales to the
4. All of these businesses are vatable, except
government.FALSE
a) Non-life insurance business
9. The VAT payable of any person is always 3% of b) Banks
the value-added on the sales of goods.FALSE c) Security dealers
d) Merchandisers
10. The claimable input VAT on government sales is 5. Which is vatable?
7% of the sales.TRUE a) Fruit dealer
b) Department stored.
11. The VAT payable on zero-rated sales is always
c) Cooperative
zero.TRUE
d) Meat vendor
12. There is no way VAT payable could be negative 6. Which of the following will pay VAT?
in a particular month or quarter.FALSE a) Farmer
b) Food processor
13. VAT is paid in three monthly installments similar c) Rice or corn miller
to the percentage tax.FALSE d) Fruit dealer
7. Which will not pay VAT?
14. Exempt sales must be indicated as such;
a) International carrier
otherwise, they will be regarded as regular
b) Domestic air carrier
sales.TRUE
c) Domestic sea carrier
d) All these
15. The standard input VAT is 5% of government
8. Which of the following is vatable?
sales.FALSE
a) An operator of cockpits
b) A disco
c) A bowling alley
Multiple Choice - Theory: Part 1 d) An operator of a race track
9. Which is vatable? c) revocable in 1 year,
a. Local water districts d) irrevocable perpetually,
b. Gasoline stations 16. Which is not vatable as a separate entity?
c. Internet service providers a) A branch
d. Schools b) A subsidiary company
10. Which is vatable? c) A spouse
a) Sale of buses and jeepneys d) A parent company
b) Sale of vessels 17. Statement 1: Sellers of services are subject to
c) Sale of aircraft VAT on gross receipts.
d) d. Lease of vessels or aircraft Statement 2: Sellers of goods are subject to VAT
11. Which will not pay VAT on its receipts? on gross selling price
a) Hospitals Which is correct?
b) Real Property dealers a) Both statements
c) Bookstores b) Neither statement
d) Taxicab Operators c) Statement 1
12. Which sales is vatable d) Statement 2
a) sales of agricultural or marine food 18. Statement 1: As a rule, percentage tax is paid
products monthly.
b) gross receipts of medical practitioners Statement 2: VAT is paid monthly and quarterly.
c) sales of book Which is false?
d) sale of fertilizer, seeds, and seedlings a) Both statements
13. Which statement is correct? b) Neither statement
a) Husband and wife are considered separate c) Statement 1
taxpayers for business tax d) Statement 2
b) For purposes of the VAT threshold, both 19. Statement 1: "Gross receipt" means collections
exempt sales and receipts from services and advances by clients.
subject to Statement 2: "Gross selling price" means gross
percentage tax must be included. sales including delivery charges and excise tax on
c) VAT-registered taxpayer must pay VAT on the sales if any.
services subject to percentage tax. Which is correct?
d) All of these a) Both statements
14. What is the general lock-in period (or those who b) Neither statement
voluntarily register as VAT c) Statement 1
a) 3 years d) Statement 2
b) 5 years 20. Statement 1: Discounts that are contingent to a
c) 1 year future event are deductible from gross selling price.
d) perpetual Statement 2: Expenses of the service provider that
15. To franchise grantees of radio or television, the are reimbursed by theclient forms part of the gross
VAT-registration shall be c receipt.
a) Revocable in 3 years Which is incorrect?
b) irrevocable in 3 years a) Both statements
 b) Neither statement c) Output VAT less Input VAT
c) Statement 1 d) Output VAT plus 3% percentage tax
d) Statement 2 6. The claimable input VAT is 12% of purchases
from
Multiple Choice Theory: Part 2 a) VAT-registered taxpayers.
1. Which is non-vatable? b) Non-VAT-registered taxpayers.
a) Exempt sales billed as regular sales by c) Aor B
VAT persons d) None of these
b) Export sales of VAT-registered persons 7. Which is a source of input VAT?
c) Regular sales of registrable persons a) Purchase of agricultural or marine food
d) Export sales of non-VAT-registered products from VAT-sellers
persons b) Purchase of agricultural or marine food
2. Statement 1: Input VAT is creditable only by products from non-VAT sellers
VAT-registered taxpayers. c) Purchase ofvatable goods or services from
Statement 2: Input VAT is deductible by non-VAT non-VAT suppliers
taxpayers against their gross income for purposes of d) Purchase of vatable goods or services
income tax. from VAT suppliers
Which statement is correct? 8. Which is not a sales category for VAT taxpayers?
a. Statement 1 c. Both statements a) Exempt sales
b. Statement 2 d. Neither statement b) Zero-rated sales
3. Statement 1: A VAT taxpayer who purchases c) Sales to the government
goods from non-VAT suppliers will effectively pay a d) Sales to non-profit institutions
VAT 9. What is the VAT due and payable on regular
equivalent to the output VAT. sales?
Statement 2: No output VAT shall be billed on a) Output VAT less Input VAT
export sales and exempt sales. b) Output VAT less Input VAT plus 3%
Which is incorrect? percentage tax
a. Statement 1 c. Both statements c) Output VAT + 3% percentage tax
b. Statement 2 d. Neither statement d) Output Vat + 3% percentage tax plus
4. What is the tax payable by a non-VAT taxpayer surcharge
who issues a VAT invoice Or VAT official receipt? 10. Which is subject to withholding VAT?
a) Output VAT plus 3% percentage tax a) Regular sales of real properties
b) Output VAT less input VAT, plus 3% b) Zero-rated sales
percentage tax and 50% surcharge c) Sales to the government
c) Output VAT plus 3% percentage tax and d) Exempt sales
50% surcharge 11. AVAT taxpayer cannot claim input VAT credit on
d) 3% percentage tax a. Regular sales c. Government sales
5. What is the business tax payable by a person b. Zero-rated sales d. Exempt sales
who js VAT-registrable? 12. Which is a possible source of input VAT?
a) The output VAT a) Importation
b) The input VAT b) Purchase from VAT-sellers
 c) Purchase from non-VAT sellers Which is incorrect?
d) A and B a. Statement 1 c. Both statements
13. AVAT taxpayer can claim the actual input VAT b. Statement 2 d. Neither statement
credit on 22. Which is a correct statement regarding the VAT?
a. Regular sales c. Government sales a) The taxable quarter of any taxpayer must
b. Zero-rated sales d. A and B be aligned to the calendar year.
14. A VAT taxpayer may claim only partial or full b) The taxable quarter of an individual
input VAT credit on taxpayer must be aligned to the calendar
a. Regular sales c. Government sales year.
b. Zero-rated sales d. A and B c) The taxable quarter of a corporate
15. The output VAT on government sales is taxpayer must be aligned to the calendar
a. 12% of sales c. None year.
b. 0% of sales d. 12% of value added d) All of these
16. The output VAT on export sales is 23. Statement 1: The VAT returns for the first two
a. 12% of sales c. None months of the quarter are prepared on a monthly
b. 0% of sales d. 12% of value added basis.
17. The output VAT on exempt sales is Statement 2: The VAT return on the third month of
a. 12% of sales c. None the quarter reflects a monthly balance.
b. 0% of sales d. 12% of value added Which is incorrect?
18. No input VAT is creditable on a) Statement 1
a. Government sales c. Export sales b) Statement 2
b. Regular sales d. Exempt sales c) Both statements
19. The claimable input VAT on government sales is d) Neither statement
a) 12 %of purchases from VAT suppliers 24. Statement 1: VAT paid in the first two months of
b) 12% of purchases from non-VAT suppliers the quarter is deductible against the Output VAT for
or VAT supplier the entire quarter.
c) 7% of purchases from VAT suppliers Statement 2: The VAT paid in a quarter is deductible
d) 7% of sales against the outputVAT of future quarters of the
20. Statement 1: The VAT due and payable on taxable year.
regular sales is always positive. Which is correct?
Statement 2: The VAT due and payable on export a) Statement 1
sales is always negative b) Statement 2
Which statement is generally correct? c) Both statements
a) Both statements d) Neither statement
b) Neither statement 25. The monthly VAT return is referred to as
c) Statement 1 a) BIR Form 2551M
d) Statement 2 b) BIR Form 2550M
21. Statement 1: Sellers always pay VAT on c) BIR Form 25510
government sales. d) BIR Form 25500
Statement2: Sellers will not pay VAT on export
sales.
 15. For purposes of the VAT, fair value of real
property means the higher of independent appraisal
CHAPTER 7 value and zonal value. FALSE (AV or ZV whichever
higher)
True or False 1
16. If the VAT is based on the fair value of the
1. Sellers of services are subject to VAT on their property, the same is presumed to be inclusive of
gross sales or receipts. FALSE (GR only) the VAT. FALSE(exclusive)
2. Sellers of goods are subject to VAT on gross 17. The VAT on the installment sale of goods may
receipts. FALSE (Gross Selling Price) be reported in installment. FALSE (only real
3. Sellers of properties are subject to VAT on the fair property)
market value of the property sold or disposed of. 18. The VAT on the sale of real property is always
FALSE (FMV or GSP) reported in installment. FALSE
4. Gross receipts include agency monies and bank 19. The installment reporting of output VAT on
loans received by the taxpayer. FALSE services is as allowed so long as the initial
5. When the discount exceeds 30% of the actual payments do not exceed 25% of the agreed contract
market value, the selling price is considered price. FALSE (not services, real property only)
unreasonably lower. TRUE 20. The installment reporting of VAT must be over
6. If the selling price exceeds the fair value, the the estimated life of the property in months or 60
basis of the output VAT is the fair value. FALSE months whichever is lower. FALSE (over the
7. If the selling price is below fair value, the basis of collection period)
the output VAT is the fair value. FALSE
True or False 2
8. If the selling price is unreasonably lower, the
basis of the output VAT is the selling price. FALSE 1. The sale of properties considered ordinary assets
(FMV) is subject to Output VAT. TRUE
9. "Gross receipt" means collections including 2. The sale of real property on the deferred payment
evidences of indebtedness such as promissory notes basis, not on the installment basis, shall be subject
given by the client. FALSE (except notes) to VAT similar to a cash sale. TRUE
10. Advances given by the client are included in 3. Interest and penalties are subject to VAT in the
gross receipts. TRUE months they are collected. TRUE
11. Client expenses reimbursed by the client to the 4. The sale of capital assets such as nvestments is
business taxpayer are part of gross receipt. FALSE not subject to Output VAT. TRUE
12. Out-of-pocket expenses of the service provider 5. The donation of business properties considered
reimbursed by the client are part of gross receipt. ordinary assets by the business owner is a
TRUE transaction "deemed sale". TRUE
13. Only dealers in real properties are subject to 6. The distribution of cash dividends is a deemed
VAT on the sale of real properties. FALSE (ordinary sale subject to Output VAT. FALSE
assets are also vatable) 7. The distribution of property dividend in the form
14. A person not engaged in business is not subject of stocks of another corporation is subject to output
to VAT on his sale of goods or properties. TRUE VAT. FALSE (unless taxpayer is dealer in securities)
8. The sales of all ordinary assets are exempt from b. Gross receipts
VAT. FALSE c. Fair value
9. The exchange of investments in payment of debt d. Fair value or gross selling price whichever
is a deemed sales transaction subject to VAT. FALSE is higher
10. The exchange of residence in payment of debt is 2. What is the tax basis of the output VAT on sales
subject to VAT as a deemed sale transaction. FALSE of goods?
11. Consignment is deemed sold if not returned by a. Gross selling price
the consignee in 30 days. FALSE (60 days) b. Gross receipts
12. The consignee is subject to VAT on the c. Fair value
commission income on sales of consigned goods. d. Fair value or gross selling price whichever
TRUE is higher
13. The consignor is subject to VAT on the sales of 3. What is the tax basis of the output VAT on
consigned goods by its consignees. TRUE exchange of properties?
14. The vatable inventories and properties of a VAT a. Gross selling price
taxpayer upon retirement or cessation of business b. Gross receipts
are subject to VAT as deemed sales.TRUE c. Fair value of properties received
15. The output VAT on deemed sales upon d. Fair value or gross selling price whichever
retirement or cessation of business shall be based is higher
on the market price or cost of goods whichever is 4. What is the tax basis of the output VAT on sales
lower. TRUE of real properties?
16. The commissioner shall determine the market a. Selling price
value in cases of transactions deemed sales and b. Gross receipts
sales with unreasonably lower gross selling prices. c. Fair value
TRUE d. Fair value or selling price whichever is
17. The change in corporate control over a higher
corporation is considered a deemed sale transaction. 5. What is the tax basis of the output VAT on sales
FALSE of goods with unreasonably lower selling price?
18. When a business changes its trade name, a. Gross selling price
vatable items or properties in its possession shall be b. Gross receipts
deemed sold at the date of change. FALSE c. Fair value
19. The consolidation of a corporation with another d. Fair value or gross selling price whichever
corporation is not considered a deemed sale is higher
transaction. TRUE 6. What is the tax basis of the output VAT on
20. The merger between two corporations shall installment sales?
result in a deemed sale transaction. FALSE a. Gross selling price
b. Installment received
c. Fair value of property sold
Multiple Choice - Theory: Part 1 d. Fair value or gross selling price whichever
1. What is the tax basis of the output VAT on sales is higher
of services? 7. What is the tax basis of the output VAT on
a. Gross selling price deemed sales?
 a. Gross selling price b. Gross receipts of international common
b. Gross receipts carriers
c. Fair value c. Gross receipts of banks
d. Fair value or gross selling price whichever d. Gross receipts of non-life insurance
is higher companies
8. Which of the following selling prices is 14. Which is subject to the 12% regular output tax?
considered unreasonably lower? a. Sale of residential dwelling with P
Fair value Selling price Discount 1,500,000 unit price
a. P 200,000 P 240,000 -None b. Gross receipts from residential dwelling
b. P 250,000 P 172,500 P 77,500 with P 15,000 monthly rental
c. P 400,000 P 300,000 P 100,000 c. Receipts from publishing of books
d. P 500,000 P 380,000 P 120,000 d. Gross receipts of hospital
9. Which of these is excluded in the gross selling 15. Which is not subject to the 12% output tax?
price? a. Gross receipts from restaurant
a. Excise tax b. Gross receipts from professional practice
b. Output tax c. Gross receipts from race track operations
c. Contract price d. Sale of medicines
d. Delivery charges
10. Which of the following is excluded in gross Multiple Choice - Theory: Part 2
receipts? 1. Which of the following is subject to output tax if
a. Cash collection sold by a person not engaged in business?
b. Check collection a. Sale of personal residence
c. Promissory note given by the buyer b. Sale of car
d. None of these c. Sale of investment in stocks
11. Which is not considered in the determination of d. None of these
the tax base of the VAT on sale of real properties? 2. Which of the following when sold will result in an
a. Selling price output VAT?
b. Zonal value a. Vegetables
c. Assessed value b. Furniture
d. Appraisal value c. Fruits
12. Which of the following is subject to the Output d. Rice
tax? 3. A real property is sold by a dealer for P
a. Sale of books 1,900,000. The property had a zonal value of P
b. Sale of agricultural or marine food 2,000,000, assessed value of P 1,800,000 and
products independent appraisal value of P2,400,000. What is
c. Sale of non-food agricultural or marine the "gross selling price" for VAT purposes?
products a. P 1,800,000
d. Sale of educational services by a school b. P 1,900,000
13. Which is subject to Output tax? c. P 2,000,000
a. Gross receipts of domestic common d. P 2,400,000
carriers by land
4. Which of the following is not subject to output 9. Which of the following properties is not subject
tax when sold by a realty dealer? to VAT in a foreclosure sale (i.e. dacion en pago)?
a. Sale of properties held for sale a. Cars held for sale
b. Sale of properties used in business b. Machineries
c. Sale of investment in stocks c. Corporate building
d. Exchange of properties held for sale in d. Vacant lot not used in business
settlement of debt 10. Which is a deemed sale transaction?
5. The output VAT on the installment sale of a. Change in corporate name
property may be reported in installment if b. Merger or consolidation of corporations
a. the ratio of initial payment exceeds 25% of c. Sale of the entire business
the selling price. d. Placement of an investment by a
b. the ratio of initial payment exceeds 25% of shareholder
the fair value. 11. Statement 1: If the output VAT is erroneously
c. the ratio of initial payment does not billed, the amount shown in the invoice is deemed
exceed 25% of the selling price. exclusive of VAT.
d. the ratio of initial payment does not Statement 2: If the output VAT is not separately
exceed 25% of the fair value. indicated in the invoice, it shall be computed as
6. Which is not a deemed sales transaction? 12/112 of the invoice prices.
a. Distribution of property dividend Which statement is false?
b. Dacion en pago a. Statement 1
c. Consignment of goods when actual sale is b. Statement 2
made within 60 days c. Both statements
d. Cessation of status as VAT taxpayer d. Neither statement
7. Which is a deemed sales transaction subject to 12. Statement 1: By revenue regulation, the VAT
VAT? shall be displayed separately from the selling price
a. Retirement of business by a non-VAT in the invoice.
taxpayer Statement 2: If the seller failed to indicate the VAT
b. Dacion en pago of properties by a person on the invoice, the sale shall be presumed exempt.
not engaged in business Which statement is correct?
c. Distribution of property dividend by a VAT a. Statement 1
taxpayer b. Statement 2
d. All of these c. Both statements
8. Which of the following dividend declaration is a d. Neither statement
deemed sale subject to VAT? 13. Statement I: Only VAT taxpayers are generally
a. Distribution of stock dividends subject to the output tax
b. Distribution of investments as property Statement 2: Non-VAT taxpayers never pay the 12%
dividends output tax.
c. Distribution of cash dividends Which statement is correct?
d. Distribution of properties held for sale as a. Statement 1
dividends b. Statement 2
c. Both statements
 d. Neither statement 8. The 60-day rule on deemed sales of consignment
14. Which is subject to the 12% regular output applies to export sales.FALSE
VAT? 9. The sale of gold to the BSP must be paid for in
a. Sale of silver to the Bangko Sentral ng acceptable foreign currencies to be subject to zero
Pilipinas rating. FALSE
b. Sale of services to a non-resident person 10. The sale to a local export oriented enterprise is
c. Sale of office supplies to the Asian subject to zero-rating only if paid for in acceptable
Development Bank foreign currencies. FALSE
d. Export sale by a non-VAT taxpayer 11. Legal title over exported goods must pass
15. Which of the following receipts from a domestic abroad to be subject to zero-rating. FALSE
common carrier are not subject to regular output 12. Export sales that are not paid for in acceptable
tax? foreign currencies are subject to the 12% VAT.
a. Receipts from transport of passengers by FALSE (treated as exempt)
land 13. The export sales by non-VAT registered person
b. Receipts from transport of cargoes by land are exempt from VAT but are subject to the 3%
c. Receipts from transport of passengers by percentage tax. FALSE (exempt from % tax)
sea 14. When the remittance of the foreign
d. Receipts from transport of cargoes by air currency-denominated sale is not accounted for
under BSP rules, the same shall be considered
CHAPTER 8 VAT-exempt. TRUE
15. An export-oriented enterprise is an entity that
True or False 1
exports at least 70% of its total annual
1. To be zero-rated, all forms of export sales must
Production. FALSE (more than 70%)
be paid for in acceptable foreign c urrencies. FALSE
(This only applies on exports, excluding effectively
True or False 2
zero-rated sales)
1. The direct export by an export trader shall be
2. VAT exemption results in total tax relief while
considered an export subject to 12% VAT.FALSE
zero-rating results in tax relief. FALSE
(0% VAT)
3. Input taxes on zero-rated sales are deductible as
2. The sale of an export trader to a fellow export
part of costs or expenses FALSE
trader is subject to zero-rated VAT. TRUE
4. Input taxes on zero-rated sales are claimable as
3. The commission income from export sales by
tax credit or tax refund. TRUE
export traders is exempt from VAT. FALSE (subject
5. As a rule, effectively zero-rated sales require prior
to 0% VAT)
application with the BIR for zero-rating. TRUE
4. The sale to a bonded manufacturing warehouse
6. Sales to tax-exempt persons will be subject to
of an export-oriented enterprise is subject to
12% VAT in default of an approved application for
effective zero-rating.TRUE
zero-rating. FALSE (zero-rated if with approved
5. The sales of goods or services to
application, exempt if otherwise)
export-processing zones are subject to an automatic
7. The foreign currencies must be inwardly remitted
zero-rating without the need for a BIR application
and accounted for under the rules of the BSP to be
for effective zero-rating. TRUE
zero-rated. TRUE
6. The sales to diplomatic missions are exempt from 2. Which is correct regarding the treatment of input
VAT. FALSE (0-rated) VAT?
7. The sales to a BOI-registered manufacturer are a. Input VAT on zero-rated sales is
subject to zero-rated VAT as long as 100% of its deductible from gross income.
annual production is actually exported. TRUE b. Input VAT on zero-rated sales is creditable
8. The sale of goods or services to a domestic carrier against output VAT or refundable
for its international operations is subject to c. Input VAT on zero-rated sales is both
zerorated VAT. TRUE deductible from gross income and creditable
9. The sale of goods or services to a domestic carrier against output VAT.
for its domestic operations is exempt from VAT. d. Input VAT on exempt sales is refundable
FALSE(12 % VAT) or creditable.
10. The transport of domestic carriers of 3. Which of the following requires prior BIR
passengers, baggage and mails from the Philippines application for effective zeros rating?
to a foreign country is subject to zero-rated VAT. a. Sales to PEZA locators
TRUE b. Direct export sales
11. The transport of passengers by an international c. Foreign currency denominated sales
carrier from the Philippines to a foreign country is d. Sales to export-oriented enterprises
exempt. TRUE (Exempt from % tax and VAT) 4. What sale is not subject to zero-rating?
12. The transport of cargoes, baggage or mails by a. Sale to a senior citizen
an international carrier from the Philippines to a b. Sale to a registered export trader
foreign country is subject to zero-rated VAT. FALSE c. Sale to a bonded manufacturing
(subject to % tax) warehouse of an export trader
13. The sale of locally manufactured goods to d. Sale to an export processing zone
overseas Filipinos is subject to an effective 5. Which is not a constructive export?
zero-rating if paid for in acceptable foreign a. Direct export to a foreign country
currencies. TRUE b. Sale to ecozones
14. Sales to the Asian Development Bank are c. Sales to diplomatic missions
subject to zero-rated VAT. TRUE d. Sales to export-oriented enterprises
15. The sale to embassies with VEC and embassy 6. Which is non-vatable?
personnel with VEIC is not subject to the zero-rated a. Sales to a domestic shipping company
VAT. FALSE b. Sales to an international carrier
c. Sale of goods to a BOI-registered
Multiple Choice - Theory: Part 1 manufacturer which exports 80% of its
1. Which statement is correct? annual production
a. Zero-rated sales are taxable, but will not d. Sales to senior citizens
result in an output VAT. 7. Statement 1: The export of VAT-exempt goods is
b. Zero-rated sales are non-taxable; hence, subject to zero-rated VAT.
these will not result in an output VAT. Statement 2: The domestic sale of VAT-exempt
c. VAT zero-rating and VAT exemption are goods is subject 12% VAT.
synonymous concepts. Which is incorrect?
d. All of these a. Statement 1
 b. Statement 2 c. Sale of goods to an international transport
c. Both statements operator
d. Neither statement d. Sale to the USAID
8. Which is subject to a zero-rated VAT? 13. Which is correct with constructive export?
a. Sale of fruits and vegetable to an embassy a. Must be paid for in acceptable foreign
personnel with VEIC currencies
b. Sale of fruits and vegetables to senior b. Must be actually exported
citizens c. Must be sold to a non-resident
c. Sale of fruits and vegetables to persons d. None of these
with disability 14. Which of the following is not subject to
d. Sales of any goods to the government zero-rated VAT?
9. What is the requirement for zero-rating of sales a. Sales to diplomatic missions
to BOI-registered enterprises? b. Sale of gold to the BSP
a. At least 70% of production must be c. Export sales paid for in the local currency
exported d. All of these
b. More than 70% of production must be 15. Prior BIR application for effective zero-rating is
exported not required for
c. 100% of production must be exported a. direct export to a foreign country
d. More than 100% of production must be b. sales to tax exempt persons
exported c. sales to international air transport
10. What is the requirement for zero-rating of sales operations
to a PEZA-registered enterprise? d. sales to an export-oriented enterprise
a. The goods must be actually imported 16. Which of the following may not qualify as
b. Export sales must exceed 70% of annual export sale?
production a. Export by an export producer
c. Production must be 100% exported b. Export by an export producer to another
d. None export producer
11. What is the requirement for zero-rating of sales c. Sale to an export trader
to an export-oriented enterprise? d. None of these
a. The goods must be actually imported 17. What is not a constructive export?
b. Export sales must exceed 70% of annual a. Sale to a bonded manufacturing
production warehouse of an export-oriented enterprise
c. At least 70% of production must be b. Sale to export processing zones
exported c. Sales to diplomatic missions
d. Production must be 100% exported d. Sale to a foreign customer abroad
12. Which is not subject to zero-rating? 18. A non-large taxpayer shall file the application
a. Sale under the internal export program of for effective zero-rating with the
the government a. Regional director where the taxpayer is
b. Export of automobiles to a local registered
export-oriented enterprise b. Revenue district officer having jurisdiction
over their principal place of business
 c. Audit Information, Tax Exemption and b. Service rendered to an ecozoneentity is
Incentive Division subject to 12% VAT
d. International Tax Affairs Division c. Service rendered abroad is subject to 0%
19. An approved application for effective zero-rating VAT.
is given d. Service rendered abroad is exempt from
a. a retrospective effect any business tax.
b. a prospective effect 4. Which is subject to zero-rating?
c. A and B Customer Place rendered Amount
d. no effect a. Resident alien Philippines € 150,000
20. An approved application for zero-rating is valid b. Non-resident foreign corp. Philippines $
for 10,000
a. one quarter only c. Non-resident alien Abroad P 1,000,000
b. 2 years d. Non-resident citizen Abroad ¥ 2,000,000
c. 3 years 5. Which is not required in the zero-rating of
d. 5 years services rendered to a non-resident?
a. The services must be performed in the
Multiple Choice - Theory: Part 2 Philippines
1. The sale of services to the following cannot b. The non-resident alien must be a resident
qualify for zero-rating in the Philippines at the time the services
a. Sale to a resident person doing business in were rendered
the Philippines c. The services must be paid in acceptable
b. Sale to a non-resident person engaged in foreign currencies
business abroad d. The payment must be accounted for under
c. Sale to a non-resident not engaged in the rules and regulations of the BSP
business abroad 6. Sale of services to this entity is subject to the
d. Sale to a resident export-oriented 12% VAT.
enterprise a. Development Bank of the Philippines
2. Statement 1: Services to non-residents are b. International Rice Research Institute
always subject to zero-rated VAT if rendered Philippine
abroad. c. National Red Cross
Statement 2: Services to residents may be subject to d. Philippine Amusement and Gaming
zero-rating if paid for in acceptable foreign Corporation
currencies. Which is incorrect? 7. Which is not subject to zero-rating?
a. Statement 1 a. Services to an export-oriented enterprise
b. Statement 2 b. Sale of services to a BOI-registered
c. Both statements enterprise
d. Neither statement c. Sale of services to PEZA locators
3. Which is correct? d. Sale of services to embassies with VEC
a. All service rendered in the custom's 8. To which of the following is a sale not subject to
territory is subject to the 12% VAT' zero-rated VAT?
 a. Philippine Amusement and Gaming d. Incoming transport of passengers,
Corporation cargoes, excess baggage or mails by a
b. Philippine National Red Cross domestic carrier
c. Ecozone entities 13. Which of these services is subject to
d. Government agencies zero-rating?
9. Which is not subject to zero-rating? a. Incoming transport by an international sea
a. Sale to a domestic air carrier on its carrier
international operations b. Incoming transport by a domestic sea
b. Sale to a domestic sea carrier on its carrier
domestic operations c. Incoming transport by a domestic air
c. Sale to an international air carrier carrier
d. Sale to an international sea carrier d. None of these
10. Which is incorrect with effectively zero-rated 14. Which of these entities is subject to zero-rating
sales? on the sale of renewable sources of energy?
a. The sale must be rendered in the a. Generation companies
Philippines b. Transmission companies
b. The sale must be rendered to a person c. Distribution companies
with indirect tax exemption d. All of these
c. The sale need not be paid for in acceptable 15. Which of the following power generation plants
foreign currencies is not qualified to a zero-rating treatment on the
d. The sale must be made by a VAT-exempt sale
person of electricity?
11. Which is incorrect with foreign a. Geothermal power plant
currency-denominated sales? b. Hydro power plant
a. The goods must be destined for c. Solar power plant
consumption abroad d. Coal power plant
b. Title to the goods must pass to the buyer
outside Philippine territory CHAPTER 9
c. The sale must be paid for in acceptable
foreign currency True or False 1
d. The remittance of the proceeds of the sale 1. Only VAT- registered taxpayers can claim
must be accounted for under Central bank input vat. TRUE
rules 2. There is no intput VAT from purchases to
12. Which is subject to zero-rating? VAT taxpayers from non-vat registered
a. Outgoing transport of passengers by an suppliers TRUE
international carrier 3. The total consideration paid by purchases to
b. Outgoing transport of mails, cargoes or VAT taxpayers includes the selling price and
baggage by an international carrier the vat.TRUE
c. Outgoing transport of passengers, 4. Registrable persons can claim input VAT.
cargoes, excess baggage or mails by a FALSE
domestic carrier
 5. Those who cannot claim input vat can deduct 4. The input VAT on purchases of services is
those input vAT as part of their cost or claimable in the month the services are
expenses. TRUE rendered not when paid. FALSE
6. Input VAT can be claimed as a tax credit or a 5. Persons transitioning to the VAT system
deduction at the option of the taxpayer. shall submit an inventory of goods. TRUE
FALSE (not all input vat is creditable and 6. The input VAT on the purchase of real
deductible, as such this only apply to properties may be paid in installment. TRUE
negative balances) 7. The input VAT on depreciable capital goods
7. The term creditable input vat means input or properties must be amortized over a
vat deductible from output vat- TRUE period of 60 months. FALSE
8. Exempt persons who issue vat invoices can 8. The input VAT on depreciable capital goods
claim input vat- FALSE or properties with aggregate acquisition
9. Input vat is computed as 12/112 of the costs exceeding P1M must be amortized
selling price of the seller- FALSE (multiplied over a period of 60 months. FALSE
by 12%) 9. The input VAT on non-depreciable vehicles is
10. Input vat may come from importation and disallowed as tax credit. TRUE
domestic purchase. TRUE 10. The presumptive input VAT is 4% of
11. The purchase if exempt goods and services agricultural and marine purchases. FALSE
has no input vat. TRUE 11. Traders of sardines, mackerel, milk, and
12. If the vat is not separately billed, it shal be cooking oil can claim presumptive input VAT.
computed as 12/112 of the selling price in FALSE
the sales document. TRUE 12. The standard input VAT is 5% of sales to the
13. Input taxes on purchases for personal government. FALSE
consumption are creditable against output 13. The standard input VAT is 7% of the
vat- FALSE purchases sold to the government. FALSE
14. Only input vat for purchase of goods or 14. There is a deductible expense when the
services in the course of business is actual input VAT exceeds the standard input
creditable- TRUE VAT on government sales. TRUE
15. Input vat needs to be evidenced by a vat 15. There is a reduction in costs or expenses or
invoice or official receipt to the creditable- an item of gross income when standard input
TRUE VAT exceeds the actual input VAT on
government sales. TRUE
True or False 2 16. The excess of the input VAT over the output
1. The transitional input VAT is 2% of the VAT is referred to as input VAT carry-over.
vatable beginning inventory. FALSE 17. Input VAT carry-over is included as part of
2. The input VAT on importation is creditable the creditable input VAT of the following
upon release of the goods from Customs month.TRUE
custody. TRUE 18. The input VAT carry-over in a quarter is
3. The input VAT on domestic purchase of deductible in the following quarter. TRUE
goods is deductible upon payment. FALSE 19. The input VAT carry-over cannot be credited
over a period of 3 years. FALSE
 20. The input VAT carry-over in a prior quarter c. Exempt Sales
can be carried over as input VAT in the first d. All of these
month of the following quarter. TRUE
21. The input VAT carry-over in the second 6. Which of the following input VAT can be claimed
month of a quarter is creditable on the third as tax refund?
month of that quarter. FALSE a. Input VAT traceable to exempt sales
b. Input VAT traceable to regular sales
c. Input VAT traceable to sales to the
Multiple Choice - Theory: Part 1 government
1. Which is creditable? d. Input VAT traceable to export sales
a. Input VAT incurred on by personal
purchases 7. The input VAT on purchases of
b. Input VAT evidenced by an ordinary non-VAT-registered taxpayers shall be claimable as
receipt a. Tax credit within two years
c. Input VAT on exempt sales b. Deduction against gross income for income
d. Input VAT traceable to vatable sales tax purposes
c. Deduction against output VAT
2. Which is a likely source of a creditable input VAT? d. Any of these at the option of the taxpayer
a. Purchase of goods from persons
not-engaged in business 8. Who can claim the VAT on importation as a tax
b. Purchase of goods from non-VAT registered credit?
persons engaged in business a. An importer of goods for personal
c. Purchase of goods from aliens who are not consumption
engaged in business abroad b. An importer of goods who is exempt from
d. None of these the VAT on importation
c. An importer of goods for business use
3. Partial credit for Input VAt is allowed on d. Any of these
a. Government Sales
b. Regular Sales 9. The transitional input VAT is whichever is the
c. Export Sales a. Lower of 2% of beginning vatable inventory
d. Exempt Sales or the actual input VAT thereon
b. Higher of 2% of beginning vatable inventory
4. Full Input VAT credit is allowed on or the actual input VAT thereon
a. Regular Sales c. Lower of 2% of total beginning inventory or
b. Export Sales the actual input VAT thereon
c. Exempt Sales d. Higher of 2% of total beginning inventory or
d. A and B the actual input VAT thereon

5. No input VAT credit is allowed on 10. Which is included in the VAT basis of the 2%
a. Export Sales transitional input VAT?
b. Government Sales
 a. Vatable goods and properties purchased b. Do not exceed P1M
from VAT suppliers c. Exceeds P1,919,500
b. Vatable goods and properties purchased d. Exceeds P10M
from non-VAT-suppliers
c. Vatable goods and properties purchased 15. The input VAT on purchases of real properties
from VAT or non-VAT suppliers may be claimed in installment if
d. A and B a. The VAT seller is subject to VAT on the
installment payments
11. Which is included in the VAT basis of the 2% b. The sale of the real property is qualified as a
transitional input VAT? deferred payment sale
a. Inventory of processed foods c. The seller is a realty dealer
b. Inventory of fruits and vegetables d. The seller is a non-realty dealer
c. Inventory of non-food goods
d. A and C Multiple Choice - Theory Part 2
1. The amortization period for depreciable
12. Which of the following properties may be capital goods or properties shall be
included in the basis of the 2% transitional input a. Whichever is longer between the
VAT? actual useful life in months or 60
a. Building subject to periodic provision for months
depreciation b. Whichever is shorter between the
b. Land and other properties not subject to actual useful life in months or 60
depreciation months
c. Land or building classified as inventory held c. 60 months if the useful life of the
for sale capital goods or properties does not
d. Land or building classified as property held exceed 5 years
for sale d. 60 months, without regard to the
actual useful life in months
13. Which of the following input VAT may be 2. Statement 1: The input VAT on
amortized? non-depreciable vehicles shall be claimed in
a. Input VAT on the sale of services the month purchased
b. Input VAT on the purchase of goods on Statement 2: The input VAT on construction
installment in progress shall be claimed in the month
c. Input VAT on the purchase of billing is paid.
non-depreciable property Which is correct?
d. Input VAT on the purchase of depreciable a. Statement 1
property b. Statement 2
c. Both statements
14. The amortization of input VAT on certain d. Neither
properties is allowed when the aggregate 3. The withheld final VAT is
acquisition costs a. 7% of the sales made to government
a. Exceeds P1M b. 5% of the sales made to government
 c. 7% of the input VAT traceable to the 9. Statement 1: VAT-registered persons do not
government pay VAT on zero-rated sales
d. 5% of the purchases on sales made Statement 1: VAT-registered persons always
to government pay VAT on government sales
4. Which of the following cannot claim Which statement is correct?
presumptive input VAT a. Statement 1
a. Processor of sardines b. Statement 2
b. Manufacturer of grease oil c. Both statements
c. Manufacturer of packed noodle based d. Neither
instant meals 10. Statement 1: The excess of the output VAT
d. Processor of milk over the creditable input VAT is paid to the
5. The presumptive input VAT is government
a. 2% of primary agricultural input Statement 2: The excess of creditable input
b. 2% of primary marine input VAT over the output VAT is claimed as a tax
c. 4% of primary agricultural or marine credit or tax refund
input Which statement is incorrect?
d. 4% of primary agricultural input a. Statement 1
6. The standard input VAT is equivalent to b. Statement 2
a. 7% of the sales made to government c. Both statements
b. 5% of the sales made to government d. Neither
c. 7% of the input VAT traceable to the 11. The excess of creditable input VAT over
government output VAT is
d. 5% of the purchases on sales made a. VAT payable
to government b. VAT refundable
7. The withheld final percentage tax is c. Input VAT carry-over
a. 7% of the sales made to government d. Standard input VAT
b. 3% of the sales made to government 12. Which of the following input VAT carry-over
c. 5% of the sales made to government is creditable against output VAT of the
d. 3% of the purchases on sales made quarterly VAT return?
to government a. Those arising from the first month of
8. If the input VAT exceeds the actual input the quarter
VAT traceable to government sales, the b. Those arising from the second month
excess is of the quarter
a. An item of gross income subject to c. Those arising from the prior quarter
income tax d. All of these
b. An item of deduction against gross 13. Which of the following is creditable against
income in income tax the input VAT of the quarterly VAT return?
c. Claimable as tax credit against other a. Those arising from the first month of
national taxes the quarter
d. Ignored since it has no further use b. Those arising from the second month
of the quarter
 c. Those arising from the third month of 15. The quarterly VAT due of the taxpayer is
the quarter paid within 20 days following the end of the
d. All of these quarter. FALSE

Multiple Choice - Theory

CHAPTER 10
1. Which is not subject to payment of advanced
True or False input VAT?
1. Traders who import wheat shall pay a. Milk
advanced VAT. FALSE b. Refined sugar
2. The importation of sugar cane is subject to c. Flour
advanced input VAT. FALSE d. Timber
3. A manufacturer of refined sugar shall pay
advanced VAT before pulling out the refined 2. Which is a correct statement regarding the
sugar at the point of production. TRUE advanced input VAT?The advanced input
4. Millers who imports wheat shall pay VAT is synonymous to the VAT on
advanced VAT. TRUE importation
5. The owner of naturally grown timber shall a. The advanced input VAT is the final
pay advanced VAT prior to its transport to VAT due from the seller.
buyers. TRUE b. The advanced input VAT is a down
6. Traders of refined sugar and flour shall pay payment of the VAT on the ultimate
advanced VAT. FALSE sale of refined sugar, flour or timber.
7. Millers of refined sugar and flour shall pay c. The advanced input VAT is in lieu of
advanced VAT. TRUE the actual input VAT traceable to the
8. A non-VAT-registered person who transport sales of refined sugar, flour, or timber.
naturally grown timber for sale shall pay
advanced percentage tax in lieu of the VAT. 3. Which of the following tax credit can be
TRUE claimed through a tax credit certificate?
9. Unclaimed advanced VAT may be claimed as a. Input VAT on export sales
tax credit.TRUE b. Advanced input VAT
10. Unutilized advanced VAT may be claimed as c. Input VAT on sales to the government
tax refund. FALSE d. A and B
11. Unutilized advanced VAT may only be
claimed as tax credit certificate. FALSE 4. Which of the following is not subject to the
12. Unutilized input VAT can be refunded upon requirement to pay advanced VAT?
termination of the business of the taxpayer. a. Wheat traders
TRUE b. Millers of flour
13. A VAT overpayment may be carried over in c. Sugar refineries which process sugar
the succeeding periods. TRUE for their own accounts
14. Advanced VAT is an input VAT. FALSE d. Owners of harvested timber
5. Which of the following can be claimed as d. On the quarter following the quarter
VAT refund? when the cancellation was approved
a. Input VAT on export sales
b. Advanced input VAT CHAPTER 11
c. Input VAT on sales to the government True or False 1
d. A and B 1. Excise tax is payable at the point of sale. -
FALSE
6. Which is not a tax credit against net VAT 2. Imported excisable goods are taxable to
payable? excise tax at the point of sale. - FALSE
a. Advanced VAT 3. Excise tax is imposed after consumption. -
b. Monthly VAT payments FALSE
c. Standard input VAT 4. Excise tax is a direct tax rather than an
d. Final withheld VAT indirect tax. - FALSE
5. The introduction of excisable goods to the
7. Which industry is not subject to VAT? customs' territoy is subject to excise tax. -
a. Mining TRUE
b. Construction 6. The transshipment of excisable goods to
c. Banking duty-free shops, Freeport zones and
d. Air Transport ecozones are generally subject to excise tax.
- FALSE
8. Which is not a VAT compliance requirement? 7. The transshipment of sin products inside
a. VAT invoicing ecozones are subject to excise tax. - TRUE
b. Transactional Recording 8. An exemption from excise tax mean
c. Filing of monthly summary list exemption from other business tax. - FALSE
d. None of these 9. Since it is merely an additional tax, excise tax
is normally lower in tax rates. - FALSE
9. The summary list is required for 10. Just like other taxes, ad valorem taxes are
a. Large taxpayers not indexed to inflation. - TRUE
b. Non-large taxpayers 11. The timing of taxation of excise tax is the
c. Non-VAT taxpayers same with business taxes. - FALSE
d. All VAT taxpayers 12. The excise tax return may be filed in any
authorized agent banks, revenue collection
10. What is the effectivity of the request for officer or duly authorized city or municipal
cancellation of VAT registration? treasurers. - TRUE
a. On the day of the request is approved 13. All excise taxes are levied at the point of
b. On the day following the date the production or importation. - FALSE
request was approved 14. All exports of excisable goods are exempt
c. On the month following the month from excise tax. - FALSE
15. All specific taxes are subject to a 4% annual
the cancellation was approved
rate adjustments. - FALSE
True or False 2 15. The net retail price shall be determined by a
1. Specific excise taxes are normally indexed to price survey. - TRUE
inflation at 4% per year. - TRUE 16. The excise tax on imported car shall be
2. Locally produced goods are always subject based on the retail price of the car. - FALSE
to ad valorem tax. - FALSE 17. The excise tax on imported gold shall be
3. Imported excisable goods are subject to tax based on the net retail price of the gold. -
on landed cost. - FALSE FALSE
4. Excise tax is normally imposed upon sellers 18. The excise tax imposed on mineral products
of excisable goods. - TRUE is purely ad valorem tax. - TRUE
5. Goods with unpaid excise taxes shall expose 19. All excise taxes on cigars and cigarettees are
the owner of the same to the excise taxes. - specific taxes. - TRUE
TRUE 20. All taxes on petroleum products are specific
6. The excise tax on the sale of imported goods taxes. - TRUE
is collectible from the first buyer of the 21. There is only one type of service subject to
goods. - TRUE excise tax. - TRUE
7. When exempt persons import excisable
goods, the same shall not be subject to Multiple Choice 1
excise tax but when the same resells the 1. Excise tax shall apply to certain goods
goods to non-exempt person, the buyer shall intended for:
be subject to excise tax. - TRUE Domestic Foreign
8. To be exempt from excise tax, wines and Consumption Consumption
distilled spirits must first be denatured to be a. Yes Yes
unfit for human consumption when intended b. Yes No
to be used for processing of cigars and c. No Yes
cigarettes. - TRUE d. No No
9. Excise tax is payable at the point of sale. -
FALSE 2. Excise tax shall apply to certain goods that
10. The excise tax and VAT on importation are are
the same in the timing of imposition on Locally produced Imported
imported goods. - TRUE a. Yes Yes
11. Imported excisable goods taxable to excise b. Yes No
tax at the point of sale. - FALSE c. No Yes
12. Excise tax and VAT on importation are levied d. No No
upon landed costs. - FALSE
13. Imported articles are subject to specific taxes 3. Excise tax that are imposed based on weight
while domestically produced articles are or volume capacity or other physical unit of
subject to ad valorem taxes. - FALSE measurement
14. The excise tax on excisable goods shall be a. Specific tax
refunded or creditable only when the goods b. Ad valorem tax
are exported as integrated part of processed c. Quantitative tax
goods. - TRUE d. Metrical tax
 b. Cigars
4. The excise tax on certain excisable goods is c. Cosmetic Surgery
a tax on d. Sweetended beverages
a. Person - the owner or producer of
certain goods 10. The excise tax on certain goods or services is
b. Property - the goods produced on not a
manufactured importing certain a. direct tax
articles b. national tax.
c. Privilege - the right to enter into the c. Indirect tax
business of producing or d. tax on domestic consumption.
d. Privilege - the right to transport
certain goods 11. Which of the following does not properly
describe excise tax on certain goods or
5. Taxes imposed on substance known to harm services?
health a. Sin tax
a. Sin tax b. Vanity tax
b. Sumptuary tax c. Environmental tax
c. Green tax d. Thum tax
d. Vanity tax
12. Excise tax on locally produced excisable
6. Taxes imposed to restrain luxury goods shall be paid
a. Sin tax a. Within 15 days from the removal of
b. Sumptuary tax the goods
c. Green tax b. Upon removal of the goods
d. Vanity tax c. Before the removal of the goods
d. Upon sale of the goods
7. Which could not be considered a green tax?
a. Tax imposed upon mineral products 13. The tax due on non-metallic mineral or
b. Tax imposed upon petroleum mineral product, or quarry resources, shall be
products due and payable
c. Tax imposed upon jewelry a. Within 15 days from the removal of
d. Tax imposed upon quarry materials the goods b.
b. Upon removal of the goods
8. Which could not be considered a vanity tax c. Before the removal of the goods
a. Tax imposed upon jewelry d. Upon sale of the goods
b. Tax imposed upon champagne
c. Tax imposed upon automobiles 14. The excise tax on locally produced or
d. Tax imposed upon cosmetic surgery extracted metallic mineral or mineral
products,
9. Sin taxes is not be imposed on a. Within 15 days from the removal of
a. Wines the goods
 b. Upon removal of the goods 19. Who is required to pay the excise tax on
c. Before the removal of the goods excisable goods?
d. Upon sale of the goods a. Producer
b. Possessor of excisable goods with
15. Whether metallic or non-metallic mineral or unpaid excise tax
mineral product, the excise tax on imported c. Importer
goods shall be paid a. d. Any of these
a. Within 15 days from importation 20. What is the tax basis on goods subject to ad
b. Within 10 days after removal of the valorem tax?
goods from Customs. a. Gross selling price at the place of
c. Before the removal of the goods from production
Customs. b. Gross selling price of the resellers of
d. Upon sale of the goods to the the goods
Customs territory. c. Production cost plus a minimum 10%
margin
16. Filing of an excise tax bond is required on d. Gross selling price at the place of
a. Excise tax on non-metallic minerals production or in other places if sold
and mineral products by the owner in other places
b. Excise tax on metallic mineral and
mineral products Multiple Choice 2
c. Excise tax on mineral products 1. Who is the taxpayer on locally produced
d. Excise tax on indigenous petroleum excisable goods?
or natural gas a. Importer
b. Producer
17. In the case of indigenous petroleum, natural c. Wholesaler
gas or liquefied natural gas, the excise tax d. Consumer
thereon shall be paid by the 2. Which statement is correct?
a. Seller of the goods a. Excise tax normally don't have a
b. First buyer of the goods deadline of payment.
c. Producer of the goods b. Excise tax is payable on top of value
d. The person who is in possession of added tax but not of percentage tax.
the same c. Business for subsistence are exempt
18. When domestic products that tax, the ved from excise tax.
from their place of production without d. Excise tax are imposed at the point of
payment of the excise tax, the tax shall be consumption.
paid by the 3. Which is not subject to excise tax?
a. last seller. a. Quarry resources
b. owner having possession thereof. b. Precious metals
c. buyer and seller equally. c. Prostitution
d. producer of the goods. d. Sweetened beverages
4. Which of the following is not considered a c. Both statement
taxable sin product? d. Neither statement
a. Liquors
b. Marijuana 8. Which is subject to purely specific tax?
c. Tobacco leaves a. Cigar
d. Sweetened beverages b. Distilled spirits
c. Cigarettes
5. Statement 1: Excise tax rates are relatively d. Yacht
more burdensome compared to other
business taxes. 9. Which statement is false?
Statement 2: Excise tax rates covers a small a. Cigarettes are subject to specific
range products or services. taxes.
b. All excisable petroleum products are
Which is true? subject to specific taxes.
a. Both statements are true. c. All excisable jewelries are subject to
b. Both statements are false ad valorem tax.
c. Only statement 1 d. All excisable automobiles are subject
d. Only statement 2 to specific tax.
10. Which of the following mineral products is
6. Statement 1: Excise tax, customs duties and subject to specific tax?
the VAT on importation is similarly a. Coal and coke
collectible at the point of importation. b. Copper and gold
Statement 2: Excise tax and the VAT on c. Indigenous petroleum
importation are similarly imposed upon d. Granite
landed costs.
11. HKG, Inc. produced and withdrawn
Which is false? 1,000,000 units of excisable goods X which
a. Neither statement is subject to P1/ unit excise tax. HKG, Inc.
b. Both statement uses goods X to manufacture Product Y
c. Statement 1 which is sold domestically and abroad.
d. Statement 2 50,000 units of Product Y was produced out
7. Statement 1: The regulatory aspect of of which 30,000 units were exported.
specific taxes on certain sin products will Which is incorrect?
best be preserved when their tax rates a. Excise tax is payable only on the
adjust for inflation. 400,000 units of goods *.
Statement 2: There is no need to adjust ad b. HKG, Inc. shall pay P1,000,000 in
valorem taxes since they ride with inflation. excise tax.
c. HIRG, inc. shall claim tax credit or
Which is true? refund for P600,000.
a. Statement 1 d. None of these.
b. Statement 2
12. No excise tax credit or refund is allowed to 17. Who will pay excise tax?
the export of which of the following a. Manufacturer of denatured alcohol
commodities? b. Manufacturer of vinegar
a. Mineral products c. Manufacturer of plastic
b. Coal d. Hospitals performing cosmetic
c. Coke surgery
d. Petroleum products
18. What is the threshold alcohol content that
13. Which of the following requires a payment when exceeded shall reclassify wines into
of bond? distilled spirits?
a. Removal of wines and distilled spirits a. 10%
for tobacco leaf treatment b. 14%
b. Removal of spirits for rectification C. c. 25%
c. Removal of fermented liquor to d. 30%
bonded warehouses
d. All of these 19. The excise tax on locally produced or
manufactured products that are exported
14. The excise tax on excisable goods exported shall be claimed by the producer as
is claimable by refund or tax credit. Which is a. tax refund
an exception to this rule? b. tax credit
a. Sin products c. expense
b. Non-essential goods d. A or B
c. Mineral products
d. Petroleum products 20. The tax refund or tax credit on exported
products shall not be allowed on
15. Who is ultimately liable for the rectification a. All metallic products
of spirits? b. All mineral products
a. Distiller c. Coal and coke
b. Rectifier d. B and C
c. both distiller and rectifier 21. A manufactured cigarette and sold the same
d. Transporter to B. B exported the goods abroad fact tore
en retailer, C. Who is entitled to claim refund
16. Which is subject to payment of excise taxes? for the excise tax?
a. Removal of damaged liquor a. A
b. Removal of tobacco products entirely b. B
unfit for chewing or smoking c. C
c. Removal of petroleum coke to be d. None of them
used as fuels of power plants
d. Removal of bunker fuel for the 22. Which is not a sin product?
production of excisable products a. Chewing tobacco
b. Distilled spirits
 c. Cigarettes process or manufacturing by the lessee,
d. Jewelry concessionaire or owner
a. Minerals
23. Which of the following product is subject to b. Mineral products
both ad valorem and specific c. Quarry resources
a. Distilled spirits d. Metallic minerals
b. Cigars and cigarettes
c. Automobiles 29. Which statement is false?
d. A and B a. Manufacturer's and importers are
subject to ad valorem tax on their net
24. Which of the following agricultural products selling price, net of excise tax and ad
is subject to excise tax? valorem tax
a. Tobacco rolls b. To be considered hybrid vehicles, the
b. Ground coffee vehicle must be able to run using
c. Refined sugar solely electric motor.
d. All of these c. Automobiles used exclusively within
Freeport zone shall be exempt from
25. The excise tax on minerals does not apply excise tax.
to? d. Buses, trucks, cargo vans and
a. Diamond and sapphire jeepneys shall be considered as
b. Gold, chromite, copper, silver or iron automobiles for purposes of the
c. Natural gas excise tax.
d. Indigenous petroleum
30. Which is false?
26. Indigenous petroleum does not include a. The tax on non-essential goods is
a. Mineral oil or gas 20% of wholesale value for
b. Hydrocarbon gas manufacturers.
c. Bitumen or crude asphalt b. The tax on non-essential goods is
d. Coal, peat and bituminous shale or 20% of landed cost on importers.
stratified deposits c. The 20% tax on jewelry applies to
27. The term "quarry resources" does not include genuine precious metals jewelry bor
a. Marble and volcanic cinders including imitations such as platings
b. Granite and basalt and alloys of such metals.
c. Rock phosphate d. Only vessels intended for pleasure
d. Metallic rocks or mineralized rocks such as yatch are subject to the tax to
the exclusion of cargo or passenger
28. These refers to things produced and vessels.
prepared in marketable state by simple
treatment processes of washing or drying 31. Which is subject to the 20% jewelry tax?
without undergoing any chemical change or a. Dental gold alloys or gold tooth
filling
 b. Silver plated wares 2. Unilateral transfers are subject to transfer
c. Gold plated frames or mountings for tax. TRUE
eyeglasses 3. Bilateral transfers are subject to income tax.
d. Pearls TRUE
4. Unilateral transfers include sales and
32. Which of the following services is subject to barters. FALSE
excise tax? 5. Bilateral transfers include inheritance and
a. Dermal fillers donations. FALSE
b. Invasive cosmetic procedures and 6. Donations inter-vivos are subject to estate
surgeries tax. FALSE
c. Acupuncture rejuvenation therapy 7. A donation mortis causa is subject to donor's
d. Collagen induction therapy tax. FALSE
8. The transferee in a donation is referred to as
33. Petroleum products sold to the following a donee. TRUE
shall be subject to excise tax. 9. The transferee in a succession is referred to
a. Government agencies and GOCCs as an heir. TRUE
b. Economic zones 10. The transferor in a donation inter-vivos is a
c. International carriers donor. TRUE
d. Asian Development Bank 11. The transferee in a donation mortis causa is
a decedent. FALSE
34. Mosquada Company has three cigar 12. Complex transfers are subject to both
processing plants located in Bauang, La income tax and transfer tax. TRUE
Union, Baguio City and Dagupan City, 13. What constitutes an "adequate
Pangasinan. Mosquada's head office is in consideration" is a question of fact. TRUE
Baguio City. Which is true with respect to 14. Both the transfer and exchange element of a
filing of excise tax? complex transfer are subject to transfer tax.
a. Only one consolidated return needs FALSE
to be filed in Baguio City. 15. Transfer tax supports income taxation. TRUE
b. One return shall be filed for each
factory or place of production. True or False 2
c. Mosquada can choose to file the 1. Transfer tax is intended to recoup future
return at any of the RDOs having reduction in business taxes. FALSE
location of the plants 2. Transfer tax can be viewed as a mode of
d. Mosquada shali file the return where redistribution of wealth to society. TRUE
it warehouses its production. 3. The dominant view of transfer tax is the
ability to pay theory. FALSE
CHAPTER 12 4. Transfer tax is a tax on the privilege to
True or False 1 transfer property gratuitously. TRUE
1. A transfer is either bilateral or unilateral. 5. Transfer taxes are national taxes. TRUE
TRUE 6. Transfer tax is a form of specific tax. FALSE
7. Transfer tax is an indirect tax. FALSE
 8. Transfer tax is a revenue tax. TRUE 9. Donations inter-vivos are subject to transfer
9. Transfer taxpayers are classified into two tax at the point of death of the donor. FALSE
groups: residents and non-residents. FALSE 10. Donations mortis causa are subject to
10. Non-resident aliens are subject to tax only transfer tax at the death of the decedent.
on transfers of Philippine properties. TRUE FALSE
11. Citizens are subject to tax on transfers of 11. Donations inter-vivos are inspired by the
properties regardless of location. TRUE generosity of the donor. TRUE
12. Aliens are subject to tax only on transfers of 12. A donation mortis causa is effected by the
properties situated in the philippines. FALSE death of the decedent. TRUE
13. Residents are subject to tax on transfers of 13. As a rule, all properties of the donor existing
properties regardless of location. TRUE at the point of death constitute his donation
14. Non-residents are taxed only on transfers of mortis causa. TRUE
property located in the Philippines. FALSE 14. All forms of gratuitous transmission of
15. The reciprocity rule on intangible personal property while the donor is living is
property applies only to nonresident aliens. considered donation inter-vivos. FALSE
TRUE 15. Transfers in contemplation of death are
donations made inter-vivos but are actually
True or False 3 donation mortis causa. TRUE
1. The reciprocity rule may apply to movable 16. The transfers of property which conveys title
personal property located in the Philippines. to the property only upon death of the donor
FALSE are donations mortis causa. TRUE
2. The reciprocity rule applies to intangible 17. Estate tax rates are higher than donor's tax
properties of any alien located in the rates. TRUE
Philippines. FALSE 18. Incomplete transfers are not subject to tax
3. Franchises are subject to transfer tax in the upon physical transfer of the property. TRUE
place where they are exercised. TRUE 19. Incomplete transfers which are
4. The shares and bonds of domestic pre-terminated by the death of the transferor
corporations are presumed situated in the are subject to estate tax. TRUE
Philippines for purposes of transfer taxation. 20. When incomplete transfers are completed
TRUE during the lifetime of the transferor, the
5. Shares and bonds of foreign corporations are transfer is subject to donor's tax. TRUE
always presumed situated abroad for
transfer tax purposes. TRUE Multiple Choice - Theory: Part 1
6. For purposes of transfer tax, the interest in a 1. Which is subject to transfer tax?
business partnership organized abroad is a. Gratuitous transfers
presumed situated abroad. TRUE b. Onerous Transfers
7. Cash is considered an intangible property. c. Complex transfers
TRUE d. A and C
8. Shares of stocks and bonds are tangible. 2. Which is subject to transfer tax?
FALSE a. Sale
b. Barter
 c. Donation d. Beneficiary
d. Loan 10. Who is the taxpayer in estate taxation?
3. A property is transferred for less than full a. Decedent
consideration when it is sold b. Administrator
a. above the fair value of the property. c. Estate
b. below the fair value of the property. d. Executor
c. at the fair value of the property. 11. Which is not a rationalization of transfer
d. at any price which is deemed taxation?
unacceptable to the seller. a. Tax evasion
4. Gratuity is not characterized by b. Tax recoupment
a. Absence of consideration c. State partnership
b. Presence of adequate consideration d. All of these (actually none of the
c. Presence of inadequate consideration above)
d. A and C 12. Transfer tax is imposed to partially recover
5. Transfers for full or adequate consideration is future reduction in income tax which will
subject to arise from the split of income producing
a. Income tax property to few or several taxpayers.
b. Transfer tax
c. Both A and B What theory statement does the statement
d. Neither A nor B describe?
6. Transfer for inadequate consideration is a. Tax evasion theory
subject to b. Tax recoupment theory
a. Income tax c. Benefit received theory
b. Transfer tax d. Wealth redistribution theory
c. Both A and B 13. The government enforces the transfer of
d. Neither A nor B property by donation and succession. By
7. The transfer for adequate consideration is exercising these privileges, the transferor
a. Exempt from transfer tax must have to be taxed. What theory does
b. Exempt from income tax the statement describe?
c. Subject to transfer tax a. Tax evasion theory
d. Band C b. Tax recoupment theory
8. The gratuitous component of a transfer for c. Benefit received theory
inadequate consideration is d. Ability to pay theory
a. Subject to income tax 14. The transfer of wealth should be taxed so
b. Exempt from income tax that it will benefit the entire society. Which
c. Exempt from transfer tax theory does the statement describe?
d. A and B a. State partnership theory
9. Who is the taxpayer in donor's tax? b. Ability to pay theory
a. Donor c. Wealth redistribution theory
b. Trustee d. Tax recoupment theory
c. Donee
15. Wealth accumulation could not be possible d. None of these
without the government's indirect 21. Statement 1: All Philippine transfers are
participation. The transfer of wealth should subject to transfer taxes.
be subject to tax because it is just fair for the Statement 2: All foreign transfers are subject
government to take its just share of the to transfer taxes.
wealth.
Which statement is generally correct?
The statement describes a. Statement 1
a. State partnership theory b. Statement 2
b. Ability to pay theory c. Both statements
c. Wealth redistribution theory d. Neither statement
d. Tax minimization theory 22. Statement 1: The amount of transfer tax is
16. Transfers can be structured in such a way to dependent upon the value of the thing
avoid payment of income tax. Thus, the transferred.
gratuitous component of transfers must be Statement 2: Donor's tax is imposed upon
taxed. the properties of a decedent while estate tax
is imposed on a donor.
The statement describes
a. Tax evasion theory Which is incorrect?
b. Tax recoupment theory a. Statement 1
c. Benefit received theory b. Statement 2
d. Ability to pay theory c. Both statements
17. Which is not a characteristic of transfer tax? d. Neither statement
a. Privilege tax
b. National tax Multiple Choice - Theory: Part 2
c. Local tax 1. Transfer tax on donation mortis causa
d. Direct tax applies to a
18. Transfer taxes are not a. Natural person
a. Fiscal taxes b. Juridical person
b. Progressive taxes c. Both A and B
c. Ad valorem taxes d. Neither A nor B
d. Transaction taxes 2. Transfer tax on donation inter-vivos applies
19. Transfer taxes are to a
a. Regressive taxes a. Natural person
b. Indirect taxes b. Juridical person
c. Specific taxes c. Both A and B
d. Revenue taxes d. Neither A nor B
20. Who is subject to transfer tax? 3. Which is taxable on all transfers regardless
a. Transferor of location?
b. Transferee a. Resident citizen
c. Both transferor and transferee b. Resident alien
 c. Non-resident citizen c. Bonds
d. All of these d. All of these
4. Which is not subject to estate tax? 10. Which of these is subject to tax only on
a. Resident alien transfers of properties situated in the
b. Non-resident alien Philippines?
c. Domestic corporation a. A citizen of Japan residing in the
d. Non-resident citizen Philippines
5. Which is not subject to transfer tax on b. A citizen of the Philippines residing in
transfer of properties located abroad Hong Kong
a. Resident citizen c. A citizen of America residing in Korea
b. Resident alien d. A citizen of the Philippines residing in
c. Non-resident alien the Philippines
d. Non-resident citizen 11. Which of these is taxable on global transfers
6. A non-resident alien is of properties?
a. Exempt from transfer taxes. A. An American residing in the
b. Subject to transfer tax on Philippine Philippines
properties. B. A Filipino residing in Malaysia
c. Subject to transfer tax on global C. A Sudanese residing in Bahrain
properties. D. A Chinese residing in the Philippines
d. Subject to transfer tax only on
transfers of tangible properties. a. Aand B
7. Which of the following may be exempt on b. B and D
transfers on the basis of reciprocity? c. C only
a. Resident alien d. A, B and D
b. Non-resident citizen 12. Which is subject to donor's tax?
c. Non-resident alien a. Donation mortis causa
d. B and C b. Donation inter-vivos
8. Which properties does the reciprocity c. Sale for an adequate consideration
exemption cover? d. Both B and C
a. Intangible personal property located 13. Which is not a characteristic of a donation
abroad inter-vivos?
b. Intangible personal property located a. inspired by the generosity of the
in the Philippines transferor
c. Tangible and intangible properties b. inspired by the thought of death of
located abroad the transferor
d. Tangible and intangible properties c. zero consideration
located in the Philippines d. insufficiency of consideration
9. Which of the following is an intangible 14. Which of these is a donation mortis causa?
personal property? a. Donation in contemplation of death
a. Franchise b. Donation to take effect upon death
b. Stocks
 c. Revocable donation pre-terminated 20. Which is incorrect regarding the taxation of
by death incomplete transfers which are eventually
d. All of these completed?
15. Which of the following donations made a. They are subject to estate tax.
during the lifetime of the donor is subject to b. They are subject to donor's tax.
donor's tax? c. They are subject to both donor's tax
a. Donation inspired by motives and estate tax.
associated with life d. They are subject to either donor's tax
b. Donation made during the lifetime of or estate tax.
the decedent inspired by the thought 21. Which is a complete transfer?
of the decedent's death a. Conditional transfer
c. Donation made in contemplation of b. Transfer in contemplation of death
death c. Irrevocable transfers
d. All of these d. Transfer with reservation of certain
16. Which of the following is not a motive rights until death
associated with life? 22. A conditional donation may be completed by
a. To settle family dispute a. Fulfillment of the condition specified
b. To save on transfer tax by the transferee
c. To see children financially b. Waiver of the condition by the
independent transferor
d. To relieve the donor of the burden of c. Lapse of the right to revoke
management of the property d. A and B
17. Donation made on the decedent's last will 23. Conditional transfers and revocable transfers
and testament is which are still pending completion at the
a. a donation mortis causa. point of the transferor's death are
b. a donation inter vivos. a. donation inter-vivos.
c. subject to income tax. b. subject to estate tax.
d. subject to donor's tax. c. subject to donor's tax.
18. Which of the following forms of non-taxable d. subject to income tax.
transfers will not be subject to transfer tax?
a. Void transfer Multiple-Choice - Problems: Part 1
b. Quasi-transfer 1. Mr. Bonifacio purchased a piece of land in
c. Incomplete transfer 2011 for P500,000 when it was worth
d. A and B P450,000. He transferred the property when
19. Which of the following forms of non-taxable it was worth P1,000,000. Subsequently, Mr.
transfers may be subject to transfer tax in Bonifacio died when the property was worth
the future? P1,200,000.
a. Void transfer
b. Quasi-transfer Assuming that the donation is a donation
c. Incomplete transfer inter-vivos, what is the value to be subjected
d. All of these to donor's tax?
 a. P450,000
b. P500,000
c. P 1,000,000
d. P 1,200,000
Compute the amount of the donation mortis
2. Assuming that the donation is a donation
causa.
mortis causa, what is the value to be
a. P 0
subjected to estate tax?
b. P 3,700,000
a. P450,000
a. P 6,900,000
b. P500,000
b. P 7,300,000
c. P 1,000,000
6. A donor transferred the following properties
d. P 1,200,000
on a certain day:
3. Mang Juan transferred a property with a fair
value of P1,000,000. Title to the property
was stipulated to be transferred
immediately. Subsequently, Mang Juan died.
Assuming the donor is a resident citizen,
The property was worth P800,000 at the
what is the amount of the donation
date of his death. Which is correct?
inter-vivos?
a. The property is subject to donor's tax
a. P1,000,000
at P1,000,000.
b. P 1,400,000
b. The property is subject to donor's tax
c. P 4,000,000
at P800,000.
d. P 4,400,000
c. The property is subject to estate tax
7. Assuming the donor is a resident alien, what
at P800,000.
is the amount of the donation inter-vivos?
d. The property is subject to estate tax
a. P1,000,000
at P1,000,000.
b. P1,400,000
4. Assume instead that legal title to the
c. P 4,000,000
property was reserved by Mang Juan until
d. P 4,400,000
death, which is correct?
8. Assuming the donor is a non-resident citizen,
a. The property is subject to donor's tax
what is the amount of the donation
at P1,000,000.
inter-vivos?
b. The property is subject to donor's tax
a. P1,000,000
at P800,000.
b. P 1,400,000
c. The property is subject to estate tax
c. P 4,000,000
at P800,000.
d. P 4,400,000
d. The property is subject to estate tax
9. Assuming the donor is a non-resident alien,
at P1,000,000.
what is the amount of the donation
5. A resident citizen died leaving the following
inter-vivos?
property at the point of his death:
a. P1,000,000
b. P1,400,000
c. P 4,000,000
 d. P 4,400,000
10. Asumine aim dunt of the non resident alien What is the amount subject to income tax?
with a reciprocity exemption, what is the a. P0
amount of the donation inter-vivos? b. 1,500,000
a. P 1,000,000 c. P1,000,000
b. P1,400,000 d. 2,000,000
c. P 4,000,000 5. In the immediately preceding problem, what
d. P 4,400,000 is the amount subject to transfer tax?
a. P0
Multiple-Choice - Problems: Part 2 b. P1,000,000
1. Mr. Chucho decedent died leaving the c. P 1,500,000
following properties: d. P 2,000,000
6. Avalon sold a car. Data relating to the sale
and the car are as follows:
Fair Market Value 4,000,000
Assuming Mr. Chucho is a non-resident Selling Price 5,000,000
citizen or a resident alien, what is the amount Cost 2,500,000
of donation mortis causa?
a. P0 What is the amount subject to income tax
b. P3,000,000 and to transfer tax, respectively?
c. P 3,500,000 a. P0: P0
d. P 7,500,000 b. P1,500,000; P0
2. Assuming Mr. Chucho is a non-resident alien, c. P1,500,000; P1,000,000
what is the amount of the donation mortis d. P 0; P2,500,000
causa? 7. Mr. Peter made a revocable transfer of his
a. P0 stock investments on July 4, 2020 in favor of
b. P3,000,000 his brother, Merto. Peter died on December
c. P 3,500,000 15, 2020. The stocks had the following fair
d. P 7,500,000 values:
3. Assuming Mr. Chucho is a non-resident alien
and the reciprocity rule applies, what is the July 4, 2020 P 1,200,000
amount of the donation mortis causa? August 20, 2020 1, 100,000
a. P0 December 15, 2020 1,600,000
b. P3,000,000
c. P 3,500,000 Assuming Peter waived the right to revoke
d. P 7,500,000 on August 20, 2020, what is the amount
4. A seller of goods made the following sales: subject to transfer tax and the type of
Fair market value P5,500,000 transfer tax to apply?
Selling price 4,500,000 a. P1,200,000; donor's tax
Cost 2,500,000 b. P 1,100,000; donor's tax
c. P1,600,000; donor's tax
 d. P 1,600,000; estate tax 1. A resident alien conveyed the following
8. Assuming Mr. Peter did not revoke the properties on the following terms:
property until the date of his death, what is
the amount subject to transfer tax and the
type of transfer tax to apply?
a. P1,200,000; donor's tax
b. P1,100,000; estate tax Compute the total amount subject to transfer
c. P1,600,000; donor's tax tax.
d. P1,600,000; estate tax a. P880,000
9. In October 2020, Mrs. Blender transferred a b. P 560,000
property to her younger sister, Careen, c. P 500,000
subject to the condition that Careen must d. P 60,000
graduate in March 2021. 2. The following relates to a transfer made by a
seller:
The property was worth P 800,000 in
October 2020 and P 900,000 in March 2021. Selling price P1,500,000
Mrs. Blender died on July 15, 2021 when the Fair value of property at date of sale 4M
property was worth P 1,200,000. Fair value at death of the seller 5M

Assuming that Careen failed to graduate in Assuming that title to the property is
March 2021, what is the amount of donation transferred on the date of sale, what is the
and the transfer tax to apply? amount of donation and the type of transfer
a. P800,000; donor's tax tax to apply?
b. P900,000; donor's tax a. P0; none
c. P 1,200,000; estate tax b. P1,000,000; estate tax
d. None; none c. P2,500,000; donor's tax
10. During his birthday, Mr. Fu Chen donated the d. P 3,500,000; donor's tax
following properties 3. Assuming that title to the property was
agreed upon to take effect on the date of
Cash donation to his wife P 500,000 death, what is the amount of donation and
Oral donation of house and lot 3,000,000 the type of transfer tax to apply?
a. P0; none
Compute the taxable amount of donation b. P1,000,000; estate tax
inter-vivos. c. P2,500,000; donor's tax
a. P0 d. P3,500,000; estate tax
b. P500,000 4. The following relate to the disposition of
c. P3,000,000 property made by a seller:
d. P3,500,000
Selling price P 4,200,000
Multiple-Choice - Problems: Part 3 Fair value of property on date of sale 4M
 Fair value at death of the seller 5M d. The donation is void and is not
subject to transfer tax.
What is the amount subject to donor's tax? 9. Which of these is not considered within the
a. P0 Philippines?
b. P 200,000 a. Franchise of a foreign franchisor
c. P 800,000 which is exercised in the Philippines
d. P 4,000,000 b. Stocks of a domestic corporation with
5. Assuming that the transfer is revocable until 60% of business in the Philippines.
the death of the decedent. seller, what is the c. Foreign shares which are traded in
amount subject to estate tax? the Philippine stock market
a. P0 d. Stocks of a foreign corporation with
b. P 200,000 75% of business in the Philippines
c. P 800,000 10. Mr. Ku Loth, transferred a stock portfolio
d. P4,000,000 with a fair value of P2,000,000 for 81 1
6. A donor transferred properties to save on P1,990,000. Ownership shall not transfer
income taxes. The donation is until full payment is made by the transferee
a. income tax. within 10 days. On the 10th day, the buyer
b. Donor’s tax paid the price in full when the portfolio was
c. estate tax. worth P 2,100,000. Subsequently, the
d. both income tax and donor's tax. transferor died when the stocks were worth
7. Mr. B made a revocable donation of a P3,400,00.
property valued at P1,000,000. Which is a
correct statement regarding the taxation of What is the amount subject to transfer tax
the donation? and the transfer tax that would apply?
a. The donation shall be subject to a. P0; None
donor's tax. b. P50,000; Donor's tax
b. The donation shall be subject to c. P 100,000; Donor's tax
estate tax. d. P 1,400,000; Estate tax
c. The donation is subject to income tax. 11. Anton donated stock securities to his
d. The donation shall neither be subject daughter, Mary, as reward to the latter for
to donor's tax nor estate tax. services rendered to Anton. The proper Mary,
8. Kumar made an irrevocable donation of real as reward to the latter for services rendered
property during his lifetime in favor of his to Anton. The property was worth 1,100,000
wife. Which is true? when Anton wrote the deed of donation. The
a. The donation shall be subject to same had a value of $1,050.000 when the
donor's tax. donation was accepted by Mary.
b. The donation shall be subject to
estate tax. What is the amount of gratuity and the
c. The donation is subject to either applicable transfer tax?
donor's tax or estate tax. a. P1,050,000; donor's tax
b. P1,050,000; estate tax
 c. P1,100,000; donor's tax 5. The succession over properties of a decedent who
d. P1,100,000; estate tax prepared a will but covers only a portion of his
12. Mr. Erick received a property worth estate is called mixed succession. True
P1,400.000. Erick was entrusted to be the 6. A person who prepared a will is referred to as the
fiduciary heir to the property left by his executor. False
mother, Marciana. While still living, Erick 7. A person who died with a will is said to be
transferred the same property to his younger testate. True
brother, Erwin, in accordance with the will of 8. The succession by operation of law is called
their mother, Marciana. The property was intestate succession. True
worth P1,500,000 at the date of transfer. 9. The will may be prepared by the heirs of the
decedent. False
The property is 10. The will may be prepared after the death of the
a. subject to donor's tax at P1,500,000. decedent. False
b. subject to estate tax at P1,500,000. 11. A testator can designate any heirs even if in
c. subject to donor's tax at P1,400,000. violation of his legitime. False
d. exempt from transfer tax. 12. In intestate succession, the surviving spouse is
13. Raymund was indebted to Zeus with a P treated as a legitimate child qualified for a share
50,000 interest-bearing loan. Raymund while illegitimate children are allowed half-share
rendered services worth P51,500 to Zeus. each. True
Zeus canceled Raymund's indebtedness 13. The computation of the estate requires
when it was worth P51,500 including understanding of the legitime. False
interest.
True or False 2
The cancellation of indebtedness is 1. A debt can be inherited by heirs. False
a. subject to donor's tax. 2. Only testamentary dispositions are subject to
b. subject to estate tax. estate tax. False
c. exempt from transfer tax. 3. Successions whether testamentary, intestate, or
d. subject to both donor's tax and estate mixed are subject to estate tax. True
tax. 4. The decedent's successors in interest are referred
to as the heirs. True
5. With a last will and testament, the decedent can
CHAPTER 13 name any person which he wants as heir. False
True or False 1 6. In testamentary disposition, the heirs must always
1. Succession is a mode of acquisition of property be relatives of the decedent. False
similar to donation. True 7. The secondary compulsory heirs shall inherit only
2. Inheritance refers to the property which will be in default of concurring heirs. False
transmitted to the heirs. True 8. The concurring heirs shall inherit together with
3. The right to succession is transmitted from the the primary heirs, or in their default, the secondary
moment of death of the decedent. True heirs. True
4. A decedent with a last will and testament is said
to be intestate. False
9. In default of concurring heirs, relatives in the a. Will
collateral line up to the 5th degree shall inherit. b. Testamentary disposition
False c. Intestate disposition
10. In default of compulsory heirs, the government d. Mixed
shall inherit the estate of the decedent. False 8. Which is not an element of succession?
a. Decedent
Multiple Choice - Theory 1 b. Estate tax
1. IT is a mode of gratuitous acquisition of property c. Estate
out of the generosity of a person d. Heirs
a. Succession 9. It is the property, rights and obligations of the
b. Donation decedent not exinguished by his death.
c. Loan a. Estate
d. None of these b. Estate tax
2. It is a mode of gratuitous acquisition of property c. Codicil
by the death of a decedent d. Legitime
a. Donation 10. They are the successors in interest of the
b. Succession decedent.
c. Inheritance a. Heirs
d. Testate b. Estate
3. The donor in a donation mortis causa is c. Devisees
a. dead. d. Legatees
b. living 11. It is a donee of a real property in a last will and
c. either living or dead. testament.
d. in a coma a. Heir
4. Which is not a form of succession? b. Devisee
a. Testamentary c. Legatee
b. Compulsory d. Successor
c. Intestate 12. IT is a done of personal property in a last will
d. Mixed and testament.
5. It is succession in the absence of a will. a. Heir
a.Testamentary b. Devisee
b. Intestate c. Legatee
c. Mixed d. Successor
d. None of these 13. Who is not a compulsory heir?
6. It is succession by will and operation of law a. An adopted child
a. Testamentary b. Children of a deceased child
b. Intestate c. The surviving spouse
c. Mixed d. A brother
d. None of these 14. Who will inherit among the following?
7. It is written document which sets forth how the а. A legitimate child
decedent's property will be distributed after death. b. Parents
 c. Grandchildren c. Guardian
d. First cousin d. Trustee
15. Which of the following heirs will not inherit? 7. This is a person handpicked by the decedent to
a. Illegitimate child implement his will.
b. Surviving spouse a. Administrator
c. Nephew b. Executor
d. Legitimate child c. Guardian
d. Trustee
Multiple Choice - Theory 2 8. There are several estate tax laws in the history of
1. Which will not inherit from the following group? estate taxation in the Philippines. Which applies to a
a. Grandchild from a deceased son of the particular decedent?
decedent b. A daughter of the decedent a. The estate tax law in effect when the
c. Grandson from a living daughter of the properties of the decedent are being
decedent accumulated
d. An illegitimate child of the decedent b. The estate tax law in effect at the date of
2. Who may not inherit under an intestate the decedent's death
succession? c. The estate tax law in effect at the date the
a. Grandparents last will and testament was prepared
b. Grandchildren d. The estate tax law in effect upon
c. First cousin determination of the legal heirs
d. Best friends 9. Which is correct regarding estate tax?
3. Who will be disinherited from the following? a. A privilege tax
a. Widow b. A national tax
b. Legitimate children c. A final tax
c. Illegitimate children d. A fiscal tax
d. Parents 10. Statement 1: Succession will not effect until and
4. Who shall inherit from the following group? unless the estate tax is paid.
a. Legitimate child Statement 2: Estate tax is payable even in the
b. Parents absence of relatives who may inherit the estate.
c. Grandparents Which is correct?
d. Brothers and sisters a. Statement 1
5. Who shall inherit from the following potential b. Statement 2
heirs? c. Both statements
a. 1st cousins d. Neither statement
b. Brothers and sisters 11. Statement 1: No estate tax is due if the net
c. Nieces and nephews taxable estate is negative.
d. Second cousins Statement 2: Once there is death, the estate tax is
6. This is a person appointed by the court to manage always payable.
the distribution of the estate. Which is incorrect?
a. Administrator a. Statement 1
b. Executor b. Statement 2
 c. Both statements c. P200,000; P100,000
d. Neither statement d. P166,667; P166,667
12. Statement 1: A resident citizen is taxable on his 17. A married decedent died intestate leaving
estate wherever situated. behind P1,500,000 of his separate property and
Statement 2: A non-resident citizen is taxable only P6,000,000 common properties with his surviving
on his estate situated in the Philippines. spouse. If he has three children and one illegitimate
Which is correct? child. How much shall each legitimate child receive?
a. Statement 1 a. P1,666,667
b. Statement 2 b. P1,000,000
c. Both statements c. P666,667
d. Neither statement d. P333,333
13. Statement 1: A resident alien is taxable only on 18. In the immediately preceding problem, compute
his estate situated in the Philippines. the total properties of the surviving spouse after
Statement 2: A non-resident alien is taxable only on partition of the properties.
his estate situated in the Philippines. a. P3,000,000
Which is correct? b. P4,000,000
a. Statement 1 c. P4,666,667
b. Statement 2 d. P3,666,667
c. Both statements
d. Neither statement CHAPTER 13-A
14. The reciprocity exemption on intangible True or False 1
personal properties situated in the Philippines is 1. The list of properties of the decedent
applicable only to a existing at the point of death must be
a. Non-resident citizen established in determining gross estate. True
b. Non-resident alien 2. Gross estate consists of all real properties
c. Resident alien and tangible personal properties wherever
d. All of these situated, at the point of death. False
15. Which is correct? 3. The gross estate of a non-resident citizen
а. Estate tax is determined per piece of includes tangible properties wherever
property transferred to the heir. situated.False
b. Estate tax is collected by the local 4. The gross estate of a non-resident alien
government. includes only tangible properties situated in
c. Estate tax is a property tax. the Philippines. False
d. Estate tax is an excise tax. 5. The gross estate of a resident alien includes
16. A decedent died intestate with P1,000,000 net only real properties wherever situated may
estate. If he has four legitimate children and two be established False
illegitimate children, how much shall each 6. The list of properties of the decedent must
legitimate and each illegitimate child respectively be counted at the date of death. False
receive? 7. Properties owned by the decedent which are
a. P0; P0 exempted by law are initially included in
b. P100, P50,000
 gross estate, but are removed by way of 8. The proceeds of an irrevocable life insurance
deduction from gross estate. False is included in gross estate.False
8. Properties not owned by the decedent may 9. Properties held by the decedent as a
be included in gross estate. False fiduciary heir are included in gross
9. Taxable transfers consist of properties estate.False
passed to other persons before death but are 10. The proceeds of life insurance which is
still owned by the decedent at the point of revocably designated must be included in
death. True gross estate. True
10. The motives of the donation shall be the 11. The proceeds of life insurance is included in
basis of its taxation. True gross estate if the beneficiary is the estate,
11. Properties are valued at the higher of the fair the executor or administrator. True
value and acquisition cost. False 12. The separate properties of the surviving
12. Newly -acquired properties are valued at spouse are excluded from gross estate. True
acquisition cost. True 13. Transfers made for adequate considerations
13. Where the law or regulations do not are excluded from gross estate. True
prescribe for fair value rules, fair value rules 14. The merger of the usufruct in the owner of
of generally accepted accounting principles the naked title is a transfer excluded from
may be sought. True gross estate. True
14. Listed stocks are valued at their par value. 15. The gross estate includes only the separate
False properties of the decedent.False
15. Non-listed common stocks are valued at 16. The proceeds of group insurance is included
their book value. True in gross estate.False
17. The proceeds of GSIS policy and SSs
True or False 2 benefits are included in gross estate. True
1. Transfers inter-vivos made before death are 18. Benefits from the USVA are exempt from
included in gross estate.False estate tax. True
2. Income earned after death is included in 19. Donations mortis causa to accredited
gross estate.False non-profit institutions are exclusions in gross
3. Income earned before death is included in estate. True
gross estate.True 20. Transfers in contemplation of death are
4. The payment for obligations and expenses included in gross estate. True
after death is added back to the amount of 21. If the fair value of the property transferred
gross estate.True mortis causa for an inadequate consideration
5. Taxable transfers are included in gross deadlines below the amount of the
estate. True consideration at the date of death, no
6. Properties held by the decedent as a trustee amount is included in gross estate. True
must be included in gross.False 22. Revocable transfers and conditional transfers
7. Properties held by the decedent which must are included in gross estate atl the fair value
be transmitted to an heir in accordance with of the property at the date of their transfer to
the desire of a predecessor are excluded the transferees. True
from gross estate. True
 23. Properties passing under special power of d. Tangible personal properties located
appointment are included in gross estate. abroad
True 5. Which has reciprocity exemption?
24. The gross estate is valued at the point of a. Resident alien
death. True b. Non-resident alien
25. If a consideration is paid by the transferee in c. Non-resident citizen
a taxable transfer, the amount to include in d. All of these
gross estate shall be the excess of the fair 6. Which property is covered by the reciprocity
value of the property at the date of death exemption?
over the consideration given. True a. Intangible personal property abroad
b. Intangible personal property in the
Multiple Choice - Theory: Part 1 Philippines
1. The gross estate of resident or citizen c. Tangible personal property abroad
decedents does not include d. Tangible personal property in the
a. Properties located abroad Philippines
b. Properties located in the Philippines 7. Which of these properties may be excluded
c. Intangible personal property located from gross estate by reason of reciprocity?
abroad a. Cash
d. Properties not owned b. Car
2. Gross estate means c. Paintings
a. Properties, whether or not owned by d. Land
the decedent, existing at the point of 8. Which is not deducted from the inventory list
death of properties in arriving at the gross estate?
b. Properties owned by the decedent at a. Properties held as a trustee
the point of death b. Properties held as a fiduciary heir
c. Present properties in the possession c. Properties held under a general
of the decedent at the point of death power of appointment
d. Any of these d. Properties held under a special
3. As a rule, all decedents are taxable on world power of appointment
estate, except 9. If inventory-taking of properties is conducted
a. non-resident alien after the death of the decedent, which is
b. non-resident citizen deducted from the inventory list?
c. resident alien a. Income accruing after death
d. non-residents. b. Expenses paid after death
4. As a rule, the gross estate of non-resident c. Income accruing before death
alien decedents includes a. d. Expenses paid before death
a. Intangible personal properties 10. Which is not added to the inventory list of
located abroad properties in computing gross estate?
b. Real properties located abroad a. Transfer in contemplation of death
c. Intangible personal properties b. Revocable transfers
located in the Philippines
 c. Transfers under general power of c. Properties transferred under
appointment conditional donations wherein the
d. Merger of the usufruct in the owner donee has not yet fulfilled the terms
of the naked title of donation at the date of death of
11. Which is a correct statement? the decedent
a. The merger of the usufruct in the d. All of these
owner of the naked title is a 14. The proceeds of life insurance designated by
transmission subject to estate tax. the decedent to his /her child is included in
b. The transfer from the first heir to the gross estate
second heir in accordance with the a. if the designation is revocable.
wishes of a predecessor is a taxable b. if the designation is irrevocable.
transfer subject to estate tax. c. without regard to the designation as
c. The proceeds of life insurance taken revocable or irrevocable.
by the decedent for himself/herself is d. in all circumstances.
always included in gross estate if the 15. The proceeds of life insurance designated by
beneficiary is the estate, executor or the decedent to his/her estate is included in
administrator. gross estate
d. The trustor need not include a a. if the designation is revocable.
property transferred in a revocable b. if the designation is irrevocable.
trust in his gross estate. c. without regard to the designation as
12. Which of these transfers is subject to estate revocable or irrevocable
tax? d. in all circumstances.
a. Transfer of properties for a full 16. The proceeds of life insurance designated by
consideration b. the decedent to his wife is excluded in gross
b. Transfer of the inheritance from the estate
fiduciary heir to the fideicommissary a. if the designation is revocable
c. Transfer of the property held in trust b. if the designation is irrevocable
by a trustee to the beneficiary c. without regard to the designation as
d. Transfer mortis causa for less than revocable or irrevocable
full and adequate consideration d. under no circumstances
13. Which of these properties is subject to 17. The proceeds of life insurance designated by
estate tax? a. the decedent to his/her executor is excluded
a. Properties which were initially in gross estate
transferred in revocable trusts but a. if the designation is revocable.
were revoked by the decedent before b. if the designation is irrevocable.
his /her death c. without regard to the designation as
b. Properties transferred under revocable or irrevocable.
revocable trust which the decedent d. under no circumstances.
failed to revoke at the time of his/her 18. Which is an inclusion in gross estate?
death a. Separate properties of the surviving
spouse
 b. Common properties of the spouses a. The proceeds is exempt if he did not
c. Separate properties of the heirs changed the beneficiary during his
d. Properties acquired from group lifetime.
insurance b. The proceeds is taxable whether or
19. Which is not included in gross estate? not he changed the beneficiary during
a. Revocable transfers his lifetime.
b. Transfers in contemplation of death. c. The proceeds is exempt because it is
c. Transfer under special power of considered a revocable designation.
appointment d. The proceeds is taxable because it is
d. All of these considered a revocable designation.
20. Which is not included in the gross estate of 25. Which is not an exclusion in gross estate?
the husband? a. Accruals from SSS.
a. Capital properties b. GSIS benefits
b. Common properties c. War damage payments
c. Paraphernal properties d. Private retirement benefits
d. All of these 26. Which of the following bequests to a social
21. Which is not included in the gross estate of welfare or charitable institution is subject to
the wife? estate tax?.
a. Capital properties a. Bequests to be used for
b. Common properties administrative purposes
c. Paraphernal properties b. Bequests restricted by the decedent
d. None of these for program expenses of the
22. Which of the following donations in the last institution
will and testament is excluded in gross c. Bequests to accredited non-profit
estate of the decedent? institutions
a. Donation to a favorite child d. All of these
b. Donation to an ex-girlfriend 27. Statement 1: For taxable transfers, the value
c. Donation to a charitable institution to include in gross estate shall be the fair
d. Donation to the government value of the property at the point of death.
23. Which proceeds of insurance is included in Statement 2: For taxable transfers made for
gross estate of the decedent? an insufficient consideration, the total fair
a. Proceeds of life insurance irrevocably value of the property at the point of death
designated to the decedent's child shall be included in gross estate.
b. Proceeds of group insurance
c. Proceeds of property insurance Which is correct?
d. All of these a. Statement 1
24. If the decedent failed to specify the b. Statement 2
designation of the beneficiary of his life c. Both statements
insurance policy d. Neither statement
 CHAPTER 13-B 14. Personal or movable properties are separate
properties under absolute community of
True or False 1 properties. FALSE
1. The spouses can stipulate the conjugal 15. Properties received by way of gifts are
partnership of gains as their property exclusive properties. FALSE
regimes even in the current time. TRUE
2. The property regime of the spouses may be True or False 2
agreed upon during the marriage. FALSE 1. Properties received by way of inheritance are
3. In default of agreement as to the property exclusive properties. FALSE
relation between the spouses, the absolute 2. All properties brought into the marriage are
separation of property is presumed. FALSE separate under the conjugal partnership of
4. Fruits accruing during the marriage are gains. TRUE
conclusively presumed common while fruits 3. Generally, all properties brought into the
accruing before the marriage are conclusively marriage are community Properties. FALSE
presumed exclusive. FALSE 4. The properties of a spouse with a
5. The absolute community of property applies descendant from a prior marriage are
on fruits prospectively from the date of exclusive properties. FALSE
marriage. FALSE 5. The fruit of inherited properties are exclusive
6. The conjugal partnership of gains operates under absolute community of properties.
retrospectively and prospectively. TRUE TRUE
7. Properties for exclusive personal use of 6. The fruit of donated properties are exclusive
either spouses are exclusive properties properties under conjugal partnership of
under absolute community of properties. gains. FALSE
TRUE 7. The fruits of labor of either spouse are
8. All fruits, accruing before or after the exclusive under the absolute community of
marriage, are conjugal properties. FALSE property. FALSE
9. Fruits accruing from common properties are 8. The gross estate of a decedent includes his
common properties under conjugal separate properties and their common
partnership of gains. TRUE properties with his surviving spouse. TRUE
10. Fruits accruing from separate properties are 9. Marriages celebrated after August 3, 1988
common properties under conjugal are conclusively presumed under the
partnership of gains. TRUE absolute community of property. . FALSE
11. All fruits before the marriage are conjugal 10. In default of an agreement between the
properties. FALSE spouses, marriages celebrated before August
12. All fruits during the marriage are communal 3, 1988 are presumed under the conjugal
properties. FALSE partnership of gains. TRUE
13. Real properties are common properties 11. Issues of property regime are irrelevant to a
under absolute community of properties. single decedent. TRUE
FALSE 12. In taking inventory, properties are generally
presumed common unless proven as
exclusive of either spouse. TRUE
 13. The proceeds of separate property sold 5. Which of these is an exclusive property?
during the marriage can become a conjugal B. Fruits of properties acquired before
property. FALSE marriage
14. The proceeds of separate property sold 6. Which is a community property?
during the marriage is always a separate B. Properties representing fruits of
property under absolute community of community properties
property. TRUE 7. Which is a common property under absolute
15. Jewelry is generally considered community separation of property?
property. TRUE D. Business interest jointly financed by both
16. Jewelry inherited during the marriage is spouses
exclusive property. TRUE 8. Which of these donations or inheritance is a
17. The sale of a separate property may common property?
produce a separate property and a conjugal C. A donation designated by the donor for
property. TRUE the husband and the wife
18. The sale of a conjugal property may produce 9. Which is not a common property?
a separate property and a conjugal property. A. Revocable donation to both spouses
FALSE 10. Which is not a separate property under
19. The properties of a spouse with a conjugal partnership?
descendant from a prior marriage are D. All of these
communal properties. FALSE 11. Which is incorrect regarding fruits of
20. The properties of a spouse without any separate properties during the marriage?
descendant from a prior marriage are A. Exclusive under conjugal partnership
communal properties. FALSE of gains
12. Fruits accruing before the marriage are
Multiple Choice - Theory: Part 1 B. Common under absolute community of
1. Statement 1; Under absolute community of properties
property, properties are presumed 13. The income of donated properties before
community unl;ess proven otherwise. marriage are
Statement 2: Under conjugal partnership of A. Exclusive properties under conjugal
gains, properties are presumed conjugal partnership
unless proven otherwise 14. Property inheritance during the marriage is
Which is correct? D. A and B
C. Both statements 15. The property inheritance before the marriage
2. In determining the property regime of the is
spouses, which is given primacy? D. A andC
A. Agreement
3. Which is not a property regime?
D. Pooling of interest Multiple Choice Theory: Part 2
4. Which is a conjugal property? 1. Which is incorrect under the absolute
C. Property received from exercise of community of property?
profession during marriage D. None of these
 D. Property brought into the marriage by the
2. The income of properties acquired from the husband
personal hard work of other spouse is 14. Which will not be included in gross estate
D. A and B regardless of the property regime of the
3. The husband has numerous pricey personal spouses?
apparels. These are A. Accrual from SSS
D. None of these 15. Which is excluded in the gross estate of the
4. The gain on sale of a separate property husband under the conjugal partnership of
during the marriage is gains?
C. Common property under conjugal A. Properties inherited by the wife
partnership of gains
5. The gain on sale of common properties is
C. Common under absolute community of CHAPTER 14
property
6. Which is not considered a separate property True or False 1
of the recipient spouse? 1. Items of deduction must be supported by
D. All of these documents. True
7. Which is a paraphernal property under 2. As a rule, deductions are allowed if they are
absolute community of property? taken from gross estate or are chargeable to
B. Property inherited by the wife gross estate.True
8. Which is a paraphernal property under the 3. Double deduction is not allowed in estate
conjugal partnership of gains? taxation. True
A. Property brought into the marriage by 4. For married decedents, deductions are
the wife presumed common unless proven to be
9. Which of these is a capital property under exclusive. True
conjugal partnership of gains? 5. Vanishing deduction is a special deduction.
B. Properties inherited by the husband False
10. Which is a capital property under the 6. The share of the surviving spouse is 1/2 of
absolute community of property? the husband's exclusive property. False
C. Properties for exclusive personal use of 7. Ordinary deductions normally result in
the husband reduction in the hereditary estate. True
11. Which is excluded in gross estate? 8. Special deductions do not reduce the
C. Separate property of the surviving house hereditary estate of the heirs. True
12. Which is excluded in the gross estate of a 9. Special deductions are allowed only to
deceased husband under the absolute resident or citizen decedents. True
community of property? 10. Non-resident decedents cannot claim the full
A. Fruits of common properties during amount of ordinary deductions. False
the marriage 11. Obligations of the surviving spouse are
13. Which is excluded in the gross estate of a deductions against gross estate. False
deceased wife under the conjugal 12. The deduction for share of surviving spouse
partnership of gains? does not apply to unmarried decedents.True
 13. The estate tax liability of the decedent is 14. Resident alien decedents can claim deduction
deductible in the computation of the net for family home. True
taxable estate. False 15. Vanishing deductions is applicable only on
14. The vanishing deduction is applicable only if properties situated in the Philippines. False
the previous estate paid estate tax. False
15. The vanishing deduction is applicable only to Multiple Choice - Theory: Part 1
properties inherited by the decedent within 1. Which is correct regarding deductible
five years before his death.True obligations of the estate?
a. It must always be notarized.
True or False 2 b. It must be incurred before filing of the estate
1. An unpaid funeral expense may be deducted tax return.
through claim against the estate. False c. It must be paid before the filing of the estate
2. Non-resident decedents cannot claim standard tax return.
deductions. False d. It must be incurred before the death of the
3. Non-resident alien decedents cannot claim decedent.-
deductions for the share of the surviving spouse. 2. Which of the following losses is not deductible?
False a. Losses of properties compensated for by
4. Only taxes and obligations accruing after death insurance
are deductible from gross estate. False b.Losses arising from fires
5. The loss of separate properties of the decedent is C. Losses arising from theft or embezzlement
not deductible against common properties of the d. Losses arising from storms or shipwreck
spouses. True
6. The loss of separate properties of the surviving 3.Which of these do not diminish the hereditary
spouse is not deductible against gross estate. True estate of the decedent?
7. The standard deduction is claimable by a resident a. Judicial expense
or citizen decedent without the need to prove c.Medical expense paid before death
entitlement to the deduction. True b. Transfer for public use d.Funeral expense
8. A family home is a claimable deduction up to
P500,000. False 4. Which of the following decedents cannot claim
9. Standard deduction up to P10,000,000 can be special deductions for family home?
claimed as special deduction.False a.Resident citizen
10. Non-resident alien decedents cannot claim c.Non-resident alien
deduction for transfer for public purpose for b. Resident alien
properties located abroad. True d.Non-resident citizen
11. Losses of property before the death of the
decedent are deductible. False 5. Which is not considered in computing the share of
12. Non-resident aliens cannot deduct special surviving spouse?
deductions except standard deductions. True a.Claim against the estate c.Standard deduction
13. Non-resident alien decedents can claim only a b. Transfer for public use d.Vanishing deduction
proportion of losses, indebtedness, taxes, and
transfers for public purpose. False
6. In computing the actual share in common d.Neither A nor B
properties,funeral expenses are deductible against
a.Separate property of the surviving spouse 2. Which of the following losses is claimable as
b.Separate property of the decedent deduction against gross estate?
C.Common property of the spouses a.Losses claimed in the income tax return of the
d.Share of the surviving spouse estate
b. Losses occurring before the death of the decedent
7. Which of the following is an incentive deduction? C. Losses occurring after six months of the
a. Family home decedent's death
c. Vanishing deduction d. Losses of separate properties of the decedent
b.Standard deduction
d.All of these 3. Which is deductible by a non-resident alien
decedent?
8. In computing taxable net estate, claims against a.Transfer for public use
the estate are deductible against c. Medical expenses
A. exclusive property of the decedent b.Family home
B. common property of the spouses d.Funeral expenses
Which best completes the statement?
a.A only 4.The maximum allowable amount of standard
c.Either A or B deduction is
b.B only a.P 200,000
d.Neither A nor B c.P 5,000,000
b. P 500,000
9. Which is not an ordinary deduction? d.P 10,000,000
a.Family home
b. Vanishing deduction 5. Losses may be deducted if (void daw)
C.Share of surviving spouse a.paid.
d.Casualty losses of estate properties c.incurred within 6 months before death.
10.Which ordinary deduction is least likely deducted b.unpaid.
against commonproperties? d. incurred within one year before death.
a. Losses of conjugal property
b. Claim against the estate 6.What is the maximum amount of deductible
C.Communal properties previously taxed casualty losses?
d.Transfer for public use a.None
c.P1,000,000
Multiple Choice-Theory:Part 2 b. P500,000
1. Losses of separate properties of the surviving d.10% of gross estate
spouse are deductible against
a.Separate property of the decedent 7. The allowable deductible amount of family home
b.Common property of the spouses is
C.Both A and B a.5% of gross estate
c.P 5,000,000 d.Real property tax accruing before death
b.P 2,000,000
d.P 10,000,000 13. Non-resident alien decedents can claim prorated
amounts for the following deductions,except
8. If the family home is a conjugator community a.Taxes
property,what is the maximum allowable deduction? c. Indebtedness
a.5% of gross estate b.Losses
C.P 5,000,000 d.Vanishing deductions
b.P 2,500,000
d.P10,000,000 14. Which is not a requisite of vanishing deductions?
a.If the property is acquired by inheritance, the prior
9. The allowable amount of standard deduction is estate must have paid the estate tax.
a.5% of gross estate b.If the property is acquired by inheritance, the prior
c.P 500,000 estate must have not claimed vanishing deduction.
b. P 200,000 C.The decedent must have acquired the property by
d.P 5,000,000 way of inheritance ordonation.
d.The decedent must have acquired the property by
10. Which statement is incorrect? purchase.
a.Claims against insolvent persons are presented in
gross estate and deductions against gross estate. 15. Vanishing deduction is allowed if the property
b.Claims against insolvent persons are presented subject to vanishing
separately from losses. deduction is acquired
C.Non-resident alien decedents can claim a. one year before death.
deductions for losses,indebtedness,and taxes. B. more than one year before death.
d.Properties subject to mortgage are presented in C. within five year before death.
gross estate at anamount net of the mortgage. D. more than five year before death.

11.Which obligation is deductible against gross 16. A decedent died in a wild fire which totally
estate? gutted his home. Which is correct?
a.Bank loans acquired for the medication of the a. If the property is insured, the insurance
decedent reimbursement is included in gross estate
b.Income tax of the decedent before death and the loss is reported as a deduction.
C.Sole obligation of the surviving spouse b. If the property is not insured, the insurance
d.Real property tax of the separate property of the reimbursement is included in gross estate
surviving spouse and a deduction for loss is claimed.
c. No deduction is allowed with or without
12. Which of these taxes is deductible against gross insurance reimbursement.
estate? d. With or without reimbursement, a loss is
a.Income tax paid before death claimable.
b.Income tax of the estate
C.Real property tax accruing after death
 CHAPTER 15 b. Losses of properties occuring within
12 months after dead
c. Losses of properties occurring before
1. The taxable estate of the following includes death
all properties wherever situated, except a d. Claims against the estate
a. Resident citizen 7. Statement 1: No estate tax is due on an
b. Non-resident alien estate with P 5,000,000 worth of properties
c. Resident alien Statement 2: An estate with only a family
d. Non-resident alien home worth P 15,000,000 as its property
2. Which of the following is normally will not pay estate tax.
deductible against common properties? Which is correct?
a. Medical expenses a. Statement 1
b. Standard deductions b. Statement 2
c. Funeral expenses c. Both statements
d. Vanishing deductions d. Neither statements
3. Which is not considered in the computation 8. Statement 1: An estate with several
of the share of the surviving spouse properties but with a negative taxable estate
a. Medical expenses is not required to file an estate tax return.
b. Family home Statement 2: The BIR shall be notified of the
c. Obligations death of the decedent if he has properties
d. Standard deductions exceeding P 1,000,000
a. Statement 1
4. Which is included in the net taxable estate? b. Statement 2
a. Family home in excess of c. Both statements
P10,000,000 d. Neither statements
b. Separate property of the surviving
spouse 9. Which of these is require to file an estate tax
c. Amount paid for medical expenses of return?
the decedent a. An estate consisting solely of
d. Share of the surviving spouse P100,000 shares of stocks
5. Which is excluded in the computation of the b. An estate which includes a motor
net taxable estate and in the computation of vehicle worth P200,000
the net distributable estate? c. An estate with a real property worth
a. Share of the surviving spouse P1,000,000
b. Vanishing deductions d. All of these
c. Estate tax 10. Which decedent cannot claim deduction for
d. Family home tax credit?
6. Which is included in net taxable estate a. Resident citizen
a. Excess of family home fair value b. Non-resident alien
above P10m c. Resident alien
d. Non-resident alien
11. Which is correct regarding the deduction for c. 2 months
the share of the surviving spouse? d. 30 days
a. One-half of the gross estate after 17. What is the maximum period of extension in
ordinary deductions paying the estate tax?
b. Ane-half of the common properties a. 5 years
plus the separate properties of the b. 2 years
surviving spouse c. 2 months
c. one -half of the net common d. 30 days
properties 18. The estate tax return of a non-resident alien
d. It is the actual share which the decedent is filed with
surviving spouse gets of the common a. An accredited agent bank
properties b. Revenue district office
12. Who is directly liable to pay the estate tax? c. Collection agent
a. The decedent d. Office of the commisioner
b. The heirs
c. The estate administrator or executor
d. The surviving spouse
13. A CPA certification is required if the gross
estate
a. Exceeds P1,000,000
b. Exceeds P2,000,000
c. Exceeds P5,000,000
d. Contains registrable properties
without regard to the value of the
estate
14. A decedent died with a gross estate of
P4,000,000. Which of the following is
required?
a. Notice of death
b. Estate tax return
c. CPA certification
d. All of these
15. The estate tax return shall be filed within
a. 30 days from the date of death
b. 45 days from the date of death
c. 6 months from the date of death
d. 1 year from the date of death
16. What is the maximum extension allowable
in filing of the estate tax returns?
a. 5 years
b. 2 years
 CHAPTER 16 FALSE 19. Non-resident aliens are subject to
True of False 1 donor's tax only on donations of tangible properties
TRUE 1, Donor’s tax is a tax on the gratuitous located in the Philippines.
disposition of property by a living donor. FALSE 20. The donation to a non-resident alien is
FALSE 2. Donor’s tax is a property tax. exempt from donor's tax.
FALSE 3. Donees and benefactor of donees have the
primary obligation to pay the donor’s tax. True or False 2 NO ANSWERS
FALSE 4. The amount of donor’s tax is paid depends 1. Donations to any person is exempt if the amount
on the value of the property donated. of donation does not exceed P250,000
FALSE 5. Donor’s tax is applicable to donation 2. Donations by non-resident alien donors may be
mortis causa made inter-vivos. exempt from Philippine donor's tax for intangible
TRUE 6. Donor's tax is intended to minimize personal properties.
loopholes in both income tax and estate tax. 3 Intangible personal properties of non-resident
FALSE 7. Donor's tax is also imposed to counter alien donors, regardless of their location, are subject
evasion from business tax. to the rule on reciprocity exemption.
TRUE 8. A donor must be at least 18 years of age to 4. Aliens, residents or non-residents, are subject to
make a valid donation. donor's tax on tangible personal properties located
FALSE 9. Donation may be implied when the in the Philippines.
transferor is not claiming the return of his property. 5. Aliens, residents or non-residents, are subject to
FALSE 10. Donations, void or valid, are subject to donor's tax on intangible personal properties
tax. located in the Philippines. En
FALSE 11. The donee's acceptance is required for Resident or citizen donors are taxable on donation
the completion of the donation. of any property regardless of the location of the
FALSE 12. The delivery of the donor of the property property. The googlan
to be donated perfects the contract of donation. 7. Donations to relatives are exempt from donor's
FALSE 13. Acceptance is required even in transfers tax.
for inadequate considerations. 8. Donor's tax is a local tax intended to raise money
FALSE 14. The donation of intangible personal for the government.
property must be in writing 9. The renunciation by the surviving spouse of his
TRUE 15. The donation of tangible personal share in the hereditary
property may be made orally if the value exceeds estate is always taxable to donor's tax.
P5,000 10. The general renunciation of inheritance is
TRUE 16. The donation of real property must be in a generally exempt from donor's
public instrument. tax.
FALSE 17. The donation of intangible personal
property must be made in writing if the value does Multiple Choice Theory - Part 1
not exceed P5,000. 1. Which is an incorrect statement?
TRUE 18. Donors are classified into residents or a. Donor's tax is imposed on donation inter-vivos
citizens and non-resident aliens. b. Estate tax is imposed on donation mortis
causa
c. Income tax is imposed on onerous transactions
 d. None of these c. Delivery
2. Donor's tax is not intended to d. Intention to donate
a. raise money for the government. 8. Which is not required in taxation of transfers for
b. recoup government loss on future tax revenue. less than adequate and full consideration?
c. control tax evasion of income tax. a. Intention of the donor
d. provide a system of business regulation b. Acceptance of the donee
3. Who is the one directly liable to the payment of c. Delivery
donor's tax? d. A and B
a. Tax classification of the donor 9. What is the required form in the donation of real
b. Location of the property property?
c. Relationship of the donee to the donor a. Written agreement
d. A and B b. Public instrument
4. Which of these donations is subject to donor's c. Oral agreement
tax? d. A or B
a. located abroad. 10. The donation of shares of stocks must be in
b. a real property located abroad. a. writing
c. an intangible property located in the b. writing If the value exceeds P5,000,
Philippines. c. a public instrument
d. located in the Philippines at the date of d. any form
donation 11. Which is a correct statement?
5. Which of the following donation is not subject to a. Donation of tangible personal property not
donor's tax? exceeding P5,000 can be made orally.
a. Donation intended the donor to see his b. Donation of intangible personal property
children enjoy the property while he still lives exceeding P5,000 may be made in writing
b. Donation intended by the donor to reward c. The donation of tangible personal property
services rendered by the donee worth P5,000 or more must be in writing
c. Donation intended by the donor to settle d. The donation of real property must be in
family disputes writing
d. Donation intended to take effect upon the 12. Which donor is subject to tax on global
death of the decedent donation?
6. Which is subject to donor's tax? a. Mexican donor, residing in Africa
a. Merger of the usufruct in the owner of the b. American donor, residing in America
naked title c. Japanese donor, residing in the Philippines
b. Delivery of the property by the trustee to the d. Chinese donor, residing in Japan
beneficiary 13. Which is taxable only on Philippine donations?
c. Support payment to children a. Filipino residing in Jolo, Sulu, Philippines
d. Cancellation of indebtedness of a debtor out b. A Filipino citizen, residing in Canada
of gratuity c. An Australian citizen, residing in the
7. Which is not required in a contract of donation? Philippines
a. Legal capacity of the donee d. An Italian citizen, residing in the United Arab
b. Acceptance by the donee Emirates
14. Which of the following donated properties of a 5. Which of the following donation to is not
non-resident alien donor may be exempt from exempt from donor's tax?
donor's tax? a. Donation to the International Rice
a. Investment in domestic stocks Research Institute
b. Condominium unit b. Donation to a government-owned and
c. Cars controlled corporation
d. None of these c. Donation to the Integrated Bar of the
Philippines
Multiple Choice Theory - Part 2 d. Donation to the Philippine Inventors'
1. Statement 1: Donations to residents or Commission
citizens are subject to donor's tax. 6. Which of the following donation is not
Statement 2: Donations to non-resident exempt?
aliens are exempt from donor's tax. a. Philippine Institute of Certified Public
Which is correct? Accountant
a. Statement 1 b. Intramuros Administration
b. Statement 2 c Development Academy of the Philippines
c. Both statements robots
d. Neither statement d. Ramon Magsaysay Award Foundation
2. Statement 1: Donations of non-resident 7. Which is not excluded in net gift?
aliens to resident citizens are exempt. a. Donations to politicians or political parties
Statement 2: Donations of non-resident b. Donations between spouses
aliens to non-resident aliens are exempt. c. Donations with reserved powers
Which statement is correct? d. Foreign donations of resident aliens
a. Statement 1 8. The donation by a corporate donor is
b. Statement 2 a. Always subject to donor's tax regardless
c. Both statements of amount.
d. Neither statement b. Presumed made to a stranger hence
3. In donor's taxation, which is not considered always taxable.
in determining taxability of donations? c. Presumed always made to a relative;
a. Tax classification of the donor hence exempt.
b. Location of the property d. Subject to the same tax rules on donation
c. Relationship of the donee to the donor of individuals.
d. A and B 9. Statement 1: Any person, natural or juridical,
4. The donation of a non-resident alien donor is resident or non-resident who transfers or
exempt from donor's tax if the property is causes to transfer property by gift shall file
a. located abroad. an estate tax return.
b. a real property located abroad. Statement 2: A donation is taxable, whether
c. an intangible property located in the made in trust or otherwise, whether the gift
Philippines. is direct or indirect, and whether the property
d. located in the Philippines at the date of is real or personal.
donation. Which is correct?
 a. Statement 1 c. Gifts are reckoned on an annual basis. The
b. Statement 2 donor's tax is determined for the whole gift
c. Both statements throughout the year.
d. Neither statement d. Donation by a non-resident citizen to a
10. Which of these is taxable in the Philippines? non-resident alien is exempt from donor's
a. Donations made abroad tax.
b. Donations made in the Philippines 15. Which of the following donations may be
c. Donations of property situated in the exempt?
Philippines a. Donation of a resident alien of its
d. All Of These properties located abroad to a non-resident
11. Donation of foreign properties is exempt alien.
from tax if the donor is a b. Donation of a non-resident alien of
a. resident citizen. intangible properties located in the
b. resident alien. Philippines to a non-resident alien.
c. non-resident citizen. c. Donation of a non-resident alien of real
d. non-resident alien. properties located in the Philippines to a
12. Which is subject to a reciprocity exemption resident alien.
on donor's tax? d. Donation of intangible properties located
a. Donation of intangible personal property in the Philippines by resident aliens.
situated in the Philippines by a non-resident 16. Statement 1: Corporate donors are not
citizen. entitled to the P250,000 annual gift
b. Donation of intangible personal property exemption.
situated in the Philippines by a resident alien. Statement 2: Encumbrance on the property
c. Donation of intangible personal property donated, if assumed by the donor, is
situated in the Philippines by a non-resident deductible for donor's tax purposes.
alien. a. True, True
d. All of these b. True, False
13. When the reciprocity rule applies, which of c. False, True
these is subject to donor's tax to a d. False, False
non-resident alien donor? 17. Statement 1: A donation between husband
Property Location and wife during the marriage is generally
a. Cash Philippines void.
b. Land Japan Statement 2: A donation can be made to
c. Car Philippines conceived or unborn children.
d. Franchise Japan a. True, True
14. Which is incorrect? b. True, False
a. Donations of non-resident aliens involving c. False, True
properties located abroad to residents of the d. False, False
Philippines are exempt from donor's tax. 18. Which is incorrect?
b. Renunciation of inheritance by an heir to a. Donor's tax shall not apply until and
another is not subject to donor's tax. unless there is a completed gift.
 b. Donation is perfected from the moment 16. TRUE - Husband and wife are considered
the donee accepts delivery. separate taxpayers
c. Donation is completed at the moment the
donor makes delivery. True or False 2
d. Donor's tax is a tax on the transfer of 1. TRUE- The donation of communal or
property at death. conjugal properties is presumed made
one-half by the husband and one-half by the
CHAPTER 17 wife
2. TRUE- Under the train law, the donation of a
True or False 1 donee has no difference with a donation to
1. FALSE -The donor’s tax rate to relatives is a several donees
progressive tax 3. FALSE- Transfers mortis, whether inter vivos
2. FALSE- The donor’s tax rate to strangers or mortis causa, for an insufficient
increases as the net gift increases consideration are subject to donor’s tax
3. FALSE - Donation between juridical person 4. TRUE- Gifts of preferred shares are
is not qualified to 250,000 gift exemption measured at the par value of shares
4. FALSE- The gift of real property may be 5. FALSE- Net gift must be valued at the point
measured at independent/appraisal value of death of the donor
5. FALSE- The gft of listed shares is the closing 6. TRUE- Net gift must be valued at the
price of the shares at the date of donation completion of a conditional donation
6. FALSE- Corporate donors are subject to 6% 7. FALSE- The value of gift on revicabel
flat donor’s tax. Individual donors are subject transfers is determined when the contingent
to a tabular donor’s tax donee accepts the property
7. FALSE- Donation to corporate donees is not 8. TRUE- If either of the spouses did not
qualified to 250,000 gift exemption consent to the donation of a conjugal or
8. FALSE- The gift to non-residents is exempt communal propert, there is only oe donor for
from donor’s tax the purposes of the donor’s tax
9. TRUE- The gifts made to residents are 9. FALSE- Obligations assumed by the donor
generally are generally subject to donor’s tax are deductibe in computuing net gift
10. FALSE- Donations to donees abroad are 10. FALSE - The assumption of the donee’s
exempt from donor’s tax obligation by the donor is a form of donation
11. TRUE- The donation to a future heir is not sunject to donor’s tax
subject to donor’s tax 11. TRUE- the obligations of the donor on the
12. TRUE- Donation in trust which is irrevocably property donated, if assumed by the donee,
designated is subject to donor’s tax is deducted in computing net gift
13. TRUE- The registration of a property in the 12. TRUE- Donations to the government
name of another person is a taxable donation involving properties are exempt from donor’s
14. FALSE- The cancellation of the indebtedness tax
of another for a consideration is a donation 13. FALSE- Donations to accredited non-profit
15. TRUE- Donation in revocable trusts is institutions for administrative purposes are
excluded in net gift exempt from donor’s tax
 Multiple Choice -Theory Part 1 7. The donation of common property shall be
considered
1. A gift is valued at the date of a. One-half made by the husband and one-half
a. Death of the donor made by the wife
b. Notarization of the donation b. Totally made by the spouse signing the
c. Completion or acceptance of the deeed of donation
donation c. Void unless with the consent of both
d. Payment of the donor’s tax spouses
2. A donation of real property is valued at d. Donation made by the head of the family
a. Zonal value of the property 8. Donations of properties to joint donees are
b. Value pertax declaration treated as
c. Independent appraisabl value a. Separate donations to be reported under a
d. The higher of the zonal value or value per separate donors tax return
tax declaration b. Donations to each donee which will be
3. Which type of donation is exempt? classified according to the relation
a. Renunciation of the right to collect an c. A donation to a partnership; hence, these are
indebtness of a debtor subject to 30% donor’s ta
b. General renunciation of inheritance by an d. A single donation which will be reported in a
heir single donors tax return
c. Transfer for an insufficient consideration
d. Irrevocable donation in trust 9.Which of the following donations is taxable?
4. The donation of preferred stocks are valued at a. Donation to an accredited charitable institution
a. Book Value b. Donation to an association
b. Par Value c. Donation to an additional institution accredited by
c. Second Hand Value ChEd
d. Independent Appraisal Value d. All of these
5. For purposes of donor’s taxation, the fair value of
common stocks is determined as its book value 10. Which of the following obligations, even if
using the assumed by the Donee is not deductible in
a. Assset appraisal method computing
b. Independent appraisal method net gift?
c. Adjusted net asset method a. Mortgage payable
d. Market price averaging method b. Real property tax
6. Which is correct regarsing donation of common c. Donors tax
properties d. All of these
a. both spouses shall filed separate donor’s tax
returns 11. Which of these donations to a nonprofit
b. Either spouse shall file donor;s tax return institution are exempt from donor tax?
c. The spouses shall file a consolidated donor’s a. Donations restricted by the donor for salaries of
tax return staff of the nonprofit institution
d. Any of these at the discretion of the spouses
b. Donations restricted by the donor for utilities
expense of the nonprofit institution
c. Donations restricted by the donor to be used only 2. Which is correct regarding the exemption of the
for programs expenses of nonprofit nation to non stock and nonprofit institution
institution to carry out its organizational mission a. It must be made to accredited institutions
d. All of these only
b. It must be made to bona-fide non-profit
12. Obligations, if assumed by donor are instituions, whether accredited or not
a. Deductible by residents or citizens c. The donor must be a resident or a citizen of
b. Deductible by nonresident aliens the Philippiines
c. Deductible by Any donor d. The property donated must be situated in
d. Never deductible the Philippines at the date of donation

13. Statement 1: We’re property is transferred 3. The nation in the tax return is presented on a
during a person’s lifetime for less than adequate and cumulative year to date basis .This is true too
full consideration in money or money’s worth, then a. Donations to individuals only
the amount by which the value of the b. Donation to juridical persona only
property exceed the value of the consideration shall c. Both donations to individuals and donations
for the purposes of the donors tax be to corporations
deemed A gift. d. Donations made in the philippines only
Statement 2: Encumbrance on that property
donated if assumed by the donor is deductible for 4. Statement 1: Donors tax rates vary depending on
donors tax purposes the applicable tax law at the time of gift.
Which is true? Statement 2: The law in force at the time of
a. Statement 1 completion or perfection of the gift shall govern the
b. Statement 2 contract of donation.
c. Both statements Which is correct
d. Neither statement a. Statement 1
b. Statement 2
Multiple Theory:Part 2 c. Both statements
d. Neither Statements
1. Statement 1: Donation abroad are exempt from
donor tax to an alien donor 5. Which of these donation to the government are
Statement 2: Donation in the Philippines are subject to donor tax?
exempt to a non resident donor Which is false? a. Donations of tanks and ammunitions to the
Philippines military
a. Statement 1 b. Donations of computers to the department of
b. Statement 2 education
c. Both Statements c. Donations to government-owned and
d. Neither Statements controlled corporations
d. None of these
 c. Quadruplicate
6. Counted from the date of donation, the donors d. quintuplicate
tax is paid within?
a. 10 days 12. Which is not entitled to claim tax credit for
b. 15 days foreign donor’s tax paid?
c. 30 days a. Resident aliens
d. 60 days b. Resident citizens
c. Non-resident citizens
7. Which is not a required disclosure in the donors d. Non-resident aliens
tax return?
a. Current and past gifts during the year 13. The donor’s tax may be paid to the following
b. Donations made last year except
c. Name of the donee a. An authorized agent bank
d. Deductions claimed b. Revenue district officer
c. Revenue collection officer
8. Which is not included in net gift? d. Barangay treasurer
a. Transfers to the government
b. Transfers to non-profit and non-stock 14. If there is no BIR office in the place of the
charitable institutions donors residence, the donor’s tax return shall be
c. Portion of the fair value of the property filed with the
adequately paid for a. Officer of the commissioner
d. All of these b. Revenue district officer
c. Revenue collection officer
9. Which of the following is included in net gift? d. Authorized municipal treasurer
a. Transfers to the government
b. Transfers to non-profit and non-stock 15. Where the donors has no residence in the
charitable institutions Philippines, the donors tax return shall be filed with
c. Portion of the donation representing dowry a. The officer of president
d. Excess of the fair value of the property over b. The office of commissioner
the consideration paid by the donee c. An authorized government depositary bank
near the residence of the donee
10. Which of these is not included in net gift? d. The revenue district office having jurisdiction
a. Dowry gift to step child over the place where the donee is located
b. Gift to spouse
c. Gift to relatives 16. Which of these donations to the Philippines
d. Gift to a stranger government is subject to donors tax if the donor is
resident?
11. Under the law, the donors tax return shall be a. Donation of properties located abroad
filed in b. Donation of properties located in the
a. Duplicate philippines
b. Triplicate c. Both a and b
 d. Neither a nor b

17. Which of theses donations to the Philippines

government is subject to donors tax if the donor is
non resident alien
a. Donation of properties located abroad
b. Donation of properties located in the
philippines
c. Both a and b
d. Neither a nor b

18. Which of the following properties, when

donated, are not subjects to donors tax to the wife?
a. Capital properties
b. Paraphernal properties
c. Common properties
d. B and c