1

CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

CORPORATIONS Dela Cruz / De Vera / Llamado

1. One of the following does not fall under the definition of a “corporation” for income tax purposes:
a. General partnership
b. One-person corporation
c. Insurance company
d. Sole proprietorship

2. For income taxation purposes, the term “corporation” excludes one of the following:
a. Ordinary partnership
b. An incorporated business organization
c. General professional partnership
d. One-person corporation

3. A corporation organized and created under the laws of a foreign country and is authorized to do
business/ trade in the Philippines is:
a. Domestic corporation
b. Resident foreign corporation
c. Government owned and controlled corporation
d. Non-profit hospital

4. One of the general principles of income taxation:

a. A foreign corporation engaged in business in the Philippines is taxable on all income derived from
sources within and without the Philippines.
b. A foreign corporation engaged in business in the Philippines is taxable on all income derived from
sources within the Philippines only
c. A domestic corporation is taxable on income derived from sources within the Philippines only.
d. A domestic corporation is taxable on income derived from sources without the Philippines only.

5. A domestic corporation or resident foreign corporation may employ, as a basis for filing its annual
corporate income tax return the:
a. Calendar year only c. Either calendar or fiscal year
b. Fiscal year only d. Neither calendar or fiscal year

6. A corporation files a quarterly return within

a. 30 days after the end of each of the first 3 quarters
b. 60 days after the end of each of the first 3 quarters
c. 30 days, after the end of each of the first 4 quarters
d. 60 days after the end of each of the first 4 quarters

7. A final or annual return is filed on or before the 15th day of the

a. Month following the close of the taxable year
b. 2nd month following the close of the taxable year.
c. 3rd month following the close of the taxable year
d. 4th month following the close of the taxable year

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8. DEF, a corporation registered in Germany, operates a 1,000 ton steel milling plant in Quezon province.
Which among the following shall be taxable under the Tax Code?
a) Its income from a steel-forging plant located in the Netherlands
b) Its gain from the sale of its non-operational smelting plant in Indonesia.
c) Royalties from the use in the Philippines of its proprietary software which was developed and
patented in Germany.
d) Interest income from a Euro deposit with a French bank in Paris.
e) None of the above.

9. Aplets Corporation is registered under the laws of the Virgin Islands. It has extensive operations in
Southeast Asia. In the Philippines, its products are imported and sold at a mark-up by its exclusive
distributor, Kim’s Trading, Inc. The BIR compiled a record of all the imports of Kim from Aplets and
imposed a tax on Aplets’s net income derived from its exports to Kim. Is the BIR correct?
a. Yes. Aplets is a non-resident foreign corporation engaged in trade or business in the Philippines.
b. No. The tax should have been computed on the basis of gross revenues and not net income.
c. No. Aplets is a non-resident foreign corporation not engaged in trade or business in the Philippines.
d. Yes, Aplets is doing business in the Philippines through its exclusive distributor Kim’s Trading Inc.

10. ABC Inc., a corporation registered and holding office in Australia, not operating in the Philippines, may
be subject to Philippine income taxation on
a. Gains it derived from sale in Australia of an ore crusher it bought from the Philippines with the
proceeds converted to pesos.
b. Gains it derived from sale in Australia of shares of stock of Philex Mining Corporation, a Philippine
corporation.
c. Dividends earned from investment in a foreign corporation that derived 40% of its gross income
from Philippine sources.
d. Interest derived from its dollar deposits in a Philippine bank under the Expanded Foreign Currency
Deposit System.

11. Which of the following is subject to the income tax?

a. A non-stock and non-profit educational institution
b. Public educational institution
c. Civic league or organization not organized for profit and operated exclusively for the promotion of
social welfare
d. Mutual savings bank and cooperative bank having a capital stock represented by shares organized
and operated for mutual purposes and profit.

12. The Philippine Health Insurance Corporation (Philhealth), and the Home Development Mutual Fund
(Pagibig) are government-owned corporations which are
a. Exempt from the corporate income tax.
b. Subject to the preferential corporate income tax for special corporations.
c. Subject to the basic corporate income tax
d. Subject to final tax

13. Public educational institutions, like the University of the Philippines, is deemed by law:
a. Subject to the preferential corporate income tax for special corporations.
b. Subject to the basic corporate income tax.
c. Subject to both the preferential income tax and the basic corporate income tax.
d. Exempt from the corporate income tax.

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14. Which is not correct? The following are exempt from the corporate income tax:
a. Local water districts
b. Bureau of Internal Revenue
c. Government owned or controlled corporations
d. Social Security System

15. Which of the following may be subject to the corporate income tax?
a. A non-stock and non-profit educational institution
b. A public educational institution
c. A private educational institution
d. Government Service Insurance System

16. The improperly accumulated earnings tax (IAET) shall apply to:
a. Publicly held corporations for all taxable years prior to 2021
b. Banks and other non-bank financial intermediaries
c. Insurance companies for taxable years ending after July 20, 2020
d. Closely held domestic corporations for taxable years ending prior to April 11, 2021.

17. Which of the following statements is not correct?

a. MCIT is not applicable to resident foreign corporations.
b. The corporate quarterly return shall be filed within 60 days following the close of each of the first
three quarters of the taxable year.
c. Resident foreign corporations would be taxed on net income from within the Philippines only.
d. Non-resident foreign corporations are taxed on gross income from within the Philippines only.

18. The following income are subject to final tax, except

a. Royalty income received by a domestic corporation from a domestic corporation.
b. Cash dividends received by a non-resident foreign corporation from a domestic corporation
c. Cash dividends received by a domestic corporation from a domestic corporation
d. Interest income from a Peso deposit received by resident foreign corporation from a Philippine bank.
e. Branch profit remitted by a branch to the head office of a resident foreign corporation.

19. The MCIT shall not apply to the following resident foreign corporations, except
a. RFC engaged in business as international carrier subject to 2 1/2 % of their Gross Philippine Billings
b. RFC engaged in business as ROHQ before January 1, 2022
c. Offshore banking units beginning April 11, 2021
d. None of the above

20. Beginning July 1, 2020, the RCIT rate for domestic corporations shall be 25%. However, a lower
RCIT rate of 20% shall be imposed if the following conditions is/are present:
a. The domestic corporation’s net taxable income is not more than ₱5.0 Million
b. The domestic corporation’s net assets (excluding the land on which its office, plant, or equipment
are situated) are not more than ₱100 Million.
c. All of the above.
d. None of the above.

21. The MCIT is 2% of gross income. However, the MCIT rate to be imposed shall be 1%
a. From January 1, 2021 to June 30, 2023
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b. From October 8, 2021 to June 30, 2023

c. From July 1, 2020 to June 30, 2023.
d. None of the above.

22. CPG Corporation had the following data for calendar year 2021, its 5th year of operations:

Gross sales, Philippines ₱ 8,000,000

Gross sales, US 5,100,000
Cost of sales, Philippines 3,300,000
Cost of sales, US 2,300,000
Allowable deductions, Philippines 800,000
Allowable deductions, US 700,000
Non-operating income, Philippines 50,000

The corporation’s audited financial statements as of December 31, 2021 includes the following
accounts:

Land, Philippines ₱ 50,000,000

Building, Philippines 25,000,000
Total Assets 180,000,000

Compute the income tax due if the taxpayer is a domestic corporation:

(a) ₱1,512,500
(b) ₱ 975,000
(c) ₱1,175,000
(d) None of the above

Gross sales, Philippines ₱8,000,000

Gross sales, US 5,100,000 ₱ 13,100,000
Cost of sales, Philippines ₱3,300,000
Cost of sales, US 2,300,000 (5,600,000)
Gross income from ops. ₱ 7,500,000
Add: Other taxable income 50,000
Total Gross Income ₱ 7,550,000
Allowable deductions, Phils. ₱ 800,000
Allowable deductions, US 700,000 (1,500,000)
Net taxable income ₱ 6,050,000
RCIT (25%) ₱ 1,512,500
MCIT (1% of Total Gross Inc.) ₱ 75,500

Note: Even if the computed net taxable income of the corporation is not more than ₱5.0
Million, the applicable tax rate would still be 25% because its total assets excluding the land
amounts to ₱130 Million (₱180 Million - ₱50 Million) which is more than the ₱100 Million
threshold.

The MCIT will already be imposed. It is imposed starting on the 4th year following the year
of commencement of its business, or the 5th year of operations.

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23. Compute the income tax due in number 22 if the taxpayer is a foreign corporation with a branch in the
Philippines (RFC).

(a) ₱1,500,000
(b) ₱ 987,500
(c) ₱1,175,000
(d) None of the above

Gross sales, Philippines ₱ 8,000,000

Cost of sales, Philippines (3,300,000)
Gross income ₱ 4,700,000
Add: Other taxable income 50,000
Total Gross Income ₱ 4,750,000
Allowable deductions, Phils. (800,000)
Taxable net income ₱ 3,950,000
RCIT (25%) ₱ 987,500
MCIT (1% of Total Gross Income) ₱ 47,500

Note: The lower 20% RCIT is available only for Domestic Corporations.

24. Compute the income tax due in number 22 if the taxpayer is a foreign corporation with no branch or
office in the Philippines (NRFC).

(a) ₱1,500,000
(b) ₱ 975,000
(c) ₱1,187,500 Gross income, Phils. ₱4,700,000
(d) None of the above Non-operating income, Phils. 50,000
Total ₱4,750,000
Income tax rate x 25%
Final Withholding Tax ₱1,187,500
.

25. MVP Corporation, domestic corporation, had the following financial data for taxable year ending April
30, 2021:

Gross sales ₱15,000,000

Cost of sales 8,500,000
Allowable deductions 2,500,000
Non-operating income 30,000

Compute the corporation’s income tax due for taxable year ending April 30, 2021, if it is taxable at the
new RCIT rate of 20% effective July 1, 2020.

(a) ₱873,301
(b) ₱1,000,000
(c) ₱75,833
(d) None of the above.

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RCIT MCIT
May 1, 2020 to June 30, 2020 (2 months) 30% 2%
July 1, 2020 to April 30, 2021 (10 months) 20% 1%
Blended Rates 21.67% 1.17%

Gross sales
Cost of sales
Gross income from ops.
Add: Other taxable income
Total Gross Income
Allowable deductions
Net taxable income

RCIT (21.67%)
MCIT (1.17%)

26. The records of Acme Corporation, domestic, organized in 2014, engaged in retail, show the following
in calendar years 2019, 2020, 2021:

2019 2020 2021

Sales, gross of CWT 1,800,000 1,740,000 2,100,200
Cost of Sales 430,000 110,000 510,100
Operating Expenses 1,740,200 1,600,000 1,300,400
Non-operating income 400,000 70,000 230,000
CWT on sales per BIR Form 2307 18,000 17,400 21,002
Taxes paid in previous 3 quarters 5,500 15,250 31,900

The corporation chooses to credit in future years any excess tax credits it may have in a taxable year.

Compute the tax due and tax payable in its 2019 AITR.

a. ₱35,400, ₱11,900
b. ₱35,400, ₱17,400
c. ₱8,940; ₱0
d. None of the above

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2019
Sales
Cost of Sales
Gross income from operations
Add: Other taxable income not subject to FTs
Total Gross Income
Less: Itemized Deductions (or OSD)
Taxable income
RCIT (30%)
MCIT (2%)

Tax due: 2019 (MCIT)

Less: Tax Credits:
(1) Excess tax credits from prior year
(2) Tax paid in previous quarters
(3) CWTs per BIR Form 2307
(4) Excess MCIT from prior years
(5) Foreign tax credits
(6) Tax paid in previous return if filing amended return
Tax payable/(refundable)

Excess MCIT (2019-2022)

27. In number 26, what would be the tax payable/(refundable) of Acme Corporation for taxable years
2020 and 2021 if the
taxpayer qualifies for 2020
the 20% tax rate Sales
effective July 1, 2020? Cost of Sales
Gross income from operations
a) ₱(7,150); ₱16,928
Add: Other taxable income not subject to FTs
b) ₱6,440; ₱134,908
Total Gross Income
c) ₱30,500; ₱131,908
Less: Itemized Deductions (or OSD)
d) None of the above.
Taxable income
RCIT (25% blended rate)
MCIT (1.5% blended rate)

Tax due 2020 (MCIT)

Less: Tax Credits:
(1) Excess tax credits from prior year
(2) Tax paid in previous quarters
(3) CWTs
(4) Excess MCIT from prior years
(5) Foreign tax credits
(6) Tax paid in previous return if filing amended return
Tax payable/(refundable)

Excess MCIT (2020-2023)

Excess MCIT (2019-2022)

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2021
Sales
Cost of Sales
Gross income from operations
Add: Other taxable income not subject to FTs
Total Gross Income
Less: Itemized Deductions (or OSD)
Taxable income
RCIT (20%)
MCIT (1.0%)

Tax due 2021(RCIT)

Less: Tax Credits:
(1) Excess tax credits from prior year
(2) Tax paid in previous quarters
(3) CWTs
(4) Excess MCIT from prior years
(5) Foreign tax credits
(6) Tax paid in previous return if filing amended return
Tax payable/(refundable)

28. The records of CAMEL Corporation, domestic, show the following for calendar year 2023.

1st Q 2nd Q 3rd Q 4th Q

Sales, gross of CWT 4,000,000 12,400,000 5,500,000 5,200,000
Cost of Sales 50,000 50,000 245,000 45,000
Operating Expenses 3,700,000 12,100,000 4,000,000 4,500,000
Non-operating income 30,000 120,000 70,000 45,000
Excess tax credit (previous year) 10,000
CWT 50,000 30,000 40,000 35,000
Excess MCIT (previous year) 30,000

The income tax payable/(overpayment) for the first 3 quarters and in the annual return are:
a. ₱84,000; ₱329,000; ₱592,500; ₱802,500
b. ₱84,000; ₱195,000; ₱435,500; ₱802,500
c. ₱54,000; ₱245,000; ₱193,500; ₱175,000
d. ₱(20,000); ₱74,500; ₱259,250; ₱140,000
e. None of the above

Note: We use the 25% corporate income tax rate because there is no information that
the taxpayer qualifies for the lower 20% income tax rate.

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1st Q 2nd Q 3rd Q Annual

Sales 4,000,000 16,400,000
Cost of Sales (50,000) (100,000)
Gross income from operations 3,950,000 16,300,000
Add: Other taxable income not subject to FTs 30,000 150,000
Total Gross Income 3,980,000 16,450,000
Less: Itemized Deductions (or OSD) (3,700,000) (15,800,000)
Taxable income 280,000 650,000
Rate of tax 25% 25% 25% 25%
RCIT (25%) 70,000 162,500
MCIT (1%,1%,1.33%,1.5%) 39,800 164,500

Tax Due 70,000 164,500

Less: Tax Credits:
(1) Excess tax credits from prior year (10,000) (10,000)
(2) Tax paid in previous quarters 0
(3) CWTs (50,000) (80,000)
(4) Excess MCIT from prior year (30,000)
(5) Foreign tax credits
(6) Tax paid in previous return if filing
amended return
Tax payable (20,000) 74,500

Note: For the MCIT, a rate of 1% was applied in the first 2 quarters. Blended rates of 1.33% and 1.5% were applied in the
3rd quarter and in the Annual ITR, respectively. Both rates are weighted by the number of months to which the 1% and 2%
rates apply.

The revenue regulations do not provide guidance on the specific quarterly MCIT rates to apply in a year where the MCIT
rate reverts back to 2%. However, we believe that this calculation is consistent the past revenue regulations dealing with
the calculation of blended rates.

29. If the gross income from unrelated activity exceeds 50% of the total gross income derived by any
proprietary educational institution, the tax rate shall be the RCIT rate (25%/20%) based on the entire
taxable income. This is known as the
a. Constructive receipt
b. Tax benefit rule
c. End trust doctrine
d. Predominance test

30. Holy Hospital, Inc. (domestic corporation), a private non-profit hospital, has the following financial
information for CY 2023:

Hospital-related activities:
Gross receipts ₱10,000,000
Cost of services 4,000,000
Operating expenses 1,250,000
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Unrelated business activities:

Gross receipts ₱10,000,000
Cost of services 3,000,000
Operating expenses 1,000,000

Compute the income tax due for CY 2023.

(a) ₱2,687,500
(b) ₱2,500,000
(c) ₱2,680,000
(d) None of the above.

Related Unrelated
Total
Activities Activites
Gross sales/receipts 10,000,000 10,000,000 20,000,000
Cost of sales/sevices (4,000,000) (3,000,000) (7,000,000)
Gross income 6,000,000 7,000,000 13,000,000
Deductible expenses (2,250,000)
Net taxable income 10,750,000
Tax rate 25%
RCIT 2,687,500
MCIT (blended rate 1.5%) 195,000
Income tax due 2,687,500

Notes:

(a) The private non-profit hospital is subject to the regular income tax rate because it did not
pass the predominance test. Its gross income from unrelated activities (₱7.0 Million)
exceeds its gross income from hospital-related activities (₱6.0 Million). The gross income
from unrelated activities thus exceeds 50% of its total gross income derived from all
sources.

(b) The regular income tax rate to be imposed is 25% since the net taxable income exceeds
₱5.0 Million. The taxpayer is also subject to the blended rate of 1.5% MCIT.

31. CPA University, a proprietary educational institution organized in 2006, had the following data for
2023:
Tuition fees ₱850,000
Cost of services (tuition) 400,000
Rental income (net of 5% CWT) 142,500
Cost of services (rental) 10,000
School related expenses 420,000

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The income tax still due/(refundable) for 2023 is

a. P 9,500
b. P 10,500
c. P 1,850
d. None of the above.

Related Unrelated
Total
Activities Activites
Gross sales/receipts
Cost of sales/sevices
Gross income
Deductible expenses
Net taxable income
Tax rate (5.5%) 5.5%
Tax due
Less: Credit (CWT)
Income tax still due/(refundable)

32. CPA Airlines, a resident foreign international carrier has the following records of income for the
period. ( The income represents gross billings.)
a. Continuous flight from Manila to Tokyo = 1,000 tickets at P2,000 per ticket
b. Flight from Manila to Taipei; transfer flight (on CPAR Airlines) from Taipei to Tokyo = 2,000
tickets at P2,000 per ticket
c. Continuous flight from Manila to Taipei = 3,000 tickets at P1,000 per ticket
The income tax due is
a. P 225,000
b. P 125,000
c. P 100,000
d. P 175,000

Gross Philippine Billings

a) From Manila to Tokyo 1,000 tickets at 2,000 per ticket =
c) From Manila to Taipei 3,000 tickets at 1,000 per ticket =
b) From Manila to Taipei 2,000 tickets at 1,000 per ticket =

2.5%

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33 -37. The Alliance Corporation provided the following data for the calendar year ending December 31,
2023 ($ 1 = P50)
Philippines U.S.A.
Gross Income ₱4,000,000 $40,000
Deductions ₱2,500,000 $15,000
Income Tax Paid $ 3,000

33. If it is a resident international carrier, its income tax is s

a. P100,000 c. P 37,000
b. P 10,000 d. P125,000
₱4,000,000 x 2.5% = ₱100,000

34. If it is a non-resident cinematographic film owner/lessor, its income tax is

a. P1,000,000 c. P300,000
b. P 100,000 d. P128,000

₱4,000,000 x 25% = ₱1,000,000

35. If it is a non-resident lessor of vessels, its income tax is

a. P100,000 c. P300,000
b. P180,000 d. P128,000
₱4,000,000 x 4.5% = ₱180,000
₱4,000,000 x 4.5% = ₱180,000

36. If it is a non-resident lessor of aircrafts, machineries and equipment, its income tax is
a. P100,000 c. P300,000
b. P180,000 d. P128,000

₱4,000,000 x 7.5% = ₱300,000

₱4,000,000 x 4.5% = ₱180,000

37. If it is a resident foreign corporation but its expenses within and outside the Philippines is P3m,
unallocated (disregard original data on expense). Furthermore, its total assets amount to ₱90,000,000.
What is its total income tax liability if it remits 60% of its net profit to its head office abroad?

a. P635,000
b. P726,000
c. P480,000
d. None of the above.

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Allocation of expenses
4,000,000
3,000,000 x = 2,000,000
6,000,000

ITR
Total Gross Income
Less: Itemized Deductions
Taxable income
Rate of tax
RCIT
MCIT (1.5%)
Tax in ITR

BPRT
Taxable income
Less income tax in ITR
After-tax net income
% Remitted
Branch profits remitted
BPRT rate

Total tax liability

Note: RFCs do not qualify for the 20% income tax rate.

38. DBH Corporation, an RFC, is also a registered ROHQ since 2009. For taxable years 2020 to 2023,
its operations show the following financial results:

2020 2021 2022 2023

Gross sales/receipts 35,000,000 12,000,000 13,000,000 7,000,000
Cost of services 11,250,000 6,000,000 6,500,000 4,250,000
Allowable deductions 3,625,000 4,200,000 1,250,000 3,125,000
Non-operating income 250,000 150,000 400,000 525,000

Compute income tax due for each of the years.

a. ₱2,037,500; ₱195,000; ₱1,412.500; ₱49,125

b. ₱20,012,500; ₱1,800,000; ₱5,250,000; ₱0
c. ₱2,012,500; ₱180,000; ₱1,312,000; ₱0
d. None of the above.
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2020 2021 2022 2023

Gross sales/receipts 35,000,000 12,000,000 13,000,000 7,000,000
Cost of services (11,250,000) (6,000,000) (6,500,000) (4,250,000)
Gross income 23,750,000 6,000,000 6,500,000 2,750,000
Non-op. income 250,000 150,000 400,000 525,000
Total gross income 24,000,000 6,150,000 6,900,000 3,275,000
Allowable deductions (3,625,000) (4,200,000) (1,250,000) (3,125,000)
Net taxable income 20,375,000 1,950,000 5,650,000 150,000
Tax rate 10% 10% 25% 25%
RCIT 2,037,500 195,000 1,412,500 37,500

MCIT rate N/A N/A 1.0% 1.5%

MCIT 69,000 49,125

Income Tax Due 2,037,500 195,000 1,412,500 49,125

Notes:

(a) The regular rate of 25% shall be effective on January 1, 2022 for an ROHQ. It will
also be subject to MCIT beginning on January 1, 2022.
(b) The MCIT rate of 1.5% was used for CY 2023. The MCIT rate from January 1 to
June 30, 2023 is 1%, while the MCIT rate for July 1 to December 31, 2023 is 2%.
The weighted average rate is 1.5%.
(c) For 2023, excess MCIT = 11,625 (2023-2026)

39. Any income from transactions with depository banks under the expanded foreign currency deposit
system shall be exempt from income tax if derived by a
a. Domestic corporation
b. Resident foreign corporation
c. Non-resident foreign corporation
d. Resident alien

40. Good Vibes Corporation is a domestic corporation and has, since 2015, owned 50% of the outstanding
shares of FirstWorld Corporation, a non-resident foreign corporation. On May 10, 2021, Good Vibes
received a dividend from FirstWorld in the amount of ₱5.0 Million.

On November 8, 2022, Good Vibes paid ₱2.0 Million (out of the ₱5.0 Million) as dividends to its
shareholders. On February 14, 2023, Good Vibes utilized ₱500,000 (of the remaining ₱3.0 Million)
for capital expenditures. On October 8, 2024, it invested the remaining ₱2.5 Million in a domestic
subsidiary.

(a) Good Vibes will be subject to income tax on ₱2.0 Million for the taxable year 2021, plus
surcharge, interest, and penalties.
(b) Good Vibes will be subject to income tax on ₱2.5 Million for the taxable year 2021, plus
surcharge, interest, and penalties.

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(c) Good Vibes will be subject to income tax on ₱3.0 Million for the taxable year 2021, plus
surcharge, interest, and penalties.
(d) None of the above.

Foreign-sourced dividends received by a domestic corporation may be exempt from income

tax when the following requirements under Section 27(D)(4) of the Tax Code are met:

(1) Such dividends are reinvested in the business operations of the DC in the Philippines
within the next taxable year from receipt thereof;

(2) The use thereof shall be limited to funding the working capital requirements, capital
expenditures, dividend payments, investment in domestic subsidiaries, and
infrastructure projects, of the DC recipient; and

(3) The DC directly holds at least 20% in value of the outstanding shares of the foreign
corporation, and has held the same uninterruptedly for a minimum of 2 years at the
time of the dividend distribution. In case the foreign corporation has been in existence
for less than 2 years at time of the dividend distribution, the DC must have continuously
directly held at least 20% in value of the foreign corporation’s outstanding shares
during the entire existence of the foreign corporation.

41-45)

GILI Inc., a domestic corporation, had the following financial information for CY 2022:

Gross income, Philippines 3,895,000

Gross income, abroad 1,300,000
Business expenses, Philippines 878,000
Business expenses, abroad 340,000
Dividend income from a domestic corporation 40,000
Dividend income from a foreign corporation* 30,000
Interest income, BPI Manila 50,000
Interest income, Citibank New York 25,000
Interest income, BPI FCDU 34,000
Royalty income (Phils.), copyright (book) 450,000
Royalty income (Phils.), patent 1,350,000
Raffle draw winnings 60,000
CWT per Form 2307s 194,750

*Note: 2/3 of the foreign corporation’s income in the last 3 years was earned in the Philippines.

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41. What is the total amount of final taxes to be withheld from GILI’s income in 2022?
A. ₱375,100
B. ₱346,100
C. ₱379,600
D. None of the above

IF GILI is a DC: Amount Characterization Rate Final Tax

Dividend income from a DC 40,000
Dividend income from a FC 30,000
Interest income, BPI Manila 50,000
Interest income, Citibank New York 25,000
Interest income, BPI FCDU 34,000
Royalty (Phils.), copyright (book) 450,000
Royalty (Phils.), patent 1,350,000
Raffle draw winnings 60,000
Total FTs

42. Compute GILI’s income tax payable in its AITR for CY 2022.
A. ₱828,250
B. ₱623,650
C. ₱813,250
D. None of the above

Gross income from operations

Add Other taxable income not subject to FTs:
Dividend income from a FC
Interest income, Citibank New York
Raffle draw winnings
Total Gross Income
Less: Itemized Deductions
Taxable net income
RCIT (25%)
MCIT (1%)
Tax due
Less: Tax Credits:
CWT per Form 2307s
Tax payable

Note: RCIT of 25% was used because the facts in the problem do not indicate
if the taxpayer DC qualifies for the lower 20% RCIT.

Tax 94-03
 17

43. If GILI, Inc. is an RFC, what is the total amount of final taxes to be withheld from its income in CY
2022?
A. ₱375,100
B. ₱346,100
C. ₱379,600
D. None of the above

IF GILI is an RFC: Amount Characterization Rate FT

Dividend income from a DC 40,000
Dividend income from a FC 30,000

Interest income, BPI Manila 50,000

Interest income, Citibank New York 25,000
Interest income, BPI FCDU 34,000
Royalty (Phils.), copyright (book) 450,000
Royalty (Phils.), patent 1,350,000
Raffle draw winnings 60,000
Total FTs

44. If GILI is an RFC, compute its income tax payable in its 2022 AITR if it avails of the 40% OSD.
A. ₱401,500
B. ₱596,500
C. ₱714,000
D. None of the above

Gross income from operations

Add Other taxable income not subject to FTs:
Foreign dividend - part within
Raffle draw winnings
Total Gross Income
Less: 40% OSD
Taxable net income
RCIT (25%)
MCIT (1%)

Tax due
Less: Tax Credits:
CWT per Form 2307s
Tax payable

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 18

45. If GILI Inc. is an NRFC, what are the total final taxes to be withheld from its income in 2022?
A. ₱1,462,250
B. ₱1,464,750
C. ₱1,466,250
D. None of the above

IF GILI is an NRFC Amount Characterization Rate FT

Gross income, Philippines 3,895,000

Dividend income from a DC 40,000
Dividend income from a FC 30,000
Interest income, BPI Manila 50,000
Interest income, Citibank New York 25,000
Interest income, BPI FCDU 34,000
Royalty (Phils.), copyright (book) 450,000
Royalty (Phils.), patent 1,350,000
Raffle draw winnings 60,000
Total FTs

END

Tax 94-03