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 Chapter 5 - Final Income Taxation

PCSO winnings areexempt from alltypes of income tax.

T6. return on their
aliens do not file a regular income tax
t7.
F8.
Special
income.
The final compenSat
tax on interest on tax-free corporate covenant bonds applies only
T9. resident
NRA-NETBindividual
and NRFC are subjecttaxpayers.
or corporate to final tax only to passive income from sourc
in the Philippines.
NRA-NETB and NRFCs are not required tofile the regular income tax retur
1 10. on foreign currency lon
upon interest
T 11. Residents shallwithhold 109% final tax currency deposit system.
FCDUbanks under the expanded foreign
T13. qualified
12. AThe of FCDUtrust
incomeemployee fund
banks
is not subject to final tax.
from fellow depositary banks under the expanda
to 10% final tax.
foreign currency deposit system is subject
subject to 8% final tax on their income&
F14. Petroleum service subcontractors are
petroleum service contractors.
government-owned and controlled corpors
‘15. Foreign governments and foreign
are exempt from final tax.
Multiple Choices - Theory 1
deposits are not relevant to
1. The final tax rates on pre-termination of long-term
C. resident aliens.
a any corporations.
resident citizens. d. non-resident citizens.
b.

2. Which is correct with regard to the final income

taxation?
a. Taxpayers need not file an income tax return.
b. It covers all items of passive income from whatever sources.
earned fron
C. It applies to all items of gross income of any non-resident
sources within the Philippines.
d. Itapplies to passive income earned abroad.
3. Which statement iscorrect regarding final income tax?
a. Items of income subjected to final tax can still be subjected to regular tax.
b. Final tax applies only on certain passive income earned within
Philippines.
C. Items of income exempt under final tax aresubject to regular tax.
a Final incometax applies to all passive income from Philippines sources.
etar
final income
4. Interest income from which of the following sources is subject to
a. Lending c. Investment in corporate bonds
b. Mortgage loans d. Money market placements
5. The final tax does not apply to interest on (select the best answer)
a. Long-term deposit c. Deposit substitute
b. Trust funds d. Promissory notes

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 Chapter5- Final Income Taxation

exemption on final tax on

TheCitizens individuals interest from long-term deposit is applicable to
e.
corporation or individualsnot
6.
a.
b. Corporations Resident
d. All of these
Whichinterest income is not subject to any income tax?
a. Interestincomefrom discount notes
b
Interest income from bonds issued by a bank
Imputed interest
Interest income from deposit substitute
8 Which of the following is subject to 15% final tax on interest from foreign
currency deposits made with Philippine banks?
a.
Non-resident corporation
b. Non-resident citizen
C. Non-resident alien not engaged in trade or business
d. Resident alien
o The following are subject to final tax on all income from sources within the
Philippines. Which is the exception?
Non-resident foreign corporation
b. Non-resident alien not engaged in trade or business
L Non-resident alien engaged in trade or business
d. None of these.
foreign banks is
10. The interest income from long-term peso deposits made with
a. subject to 20% final tax. e.subject to regular tax.
b. exempt from any tax. d. None of these.
deposit pre-terminated less
11. What is the final tax on interest income on 6-year
than 2years before maturity? 2re
a. 20% :5% Iyr 2,
b. 12% d. 0%

following recipients is exempt from final tax on dividends?

wcn of the e. Resident corporation
a. Resident citizen
d. Resident alien
b. Non-resident alien
of
13. Adividend declaration in 2019 is subject to afinal tax
a. 6%. 10%.
b. 8%. d. 20%.

14. corporation is
Dividends declared by a resident
a. exempt from any tax. e. subjectto regular income tax.
20% final tax.
D. subject to 10% final tax. d.subjectto

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 Chapter5 - Final Income Taxation
15. Between the date of declaration and the date of record, BCD, Inc. sold
corporation,
stock of ABC, Inc., a domestic
investment representing
statement is correct?
10% dividend tax if the buyer of the sale
Whieh
a. ABC, Inc, shall withhold
b. individual.
ABC, Inc. shall withhold 10% dividend tax if the buyer of the sale is a

.
corporation.
withhold 10% dividend tax if the seller of the Sala
C. ABC, Inc. shall
individual. seller of the sale
Inc. shall withhold 10% dividend tax if the
d. ABC,
corporation.
Multiple Choices - Theory 2
Prizes from sources abroad is subject to final tax
1. exXceeds P10,000.
if theamount of prizes
does not exceed P10,000.
a.

b. if the amount of prizes without effort.

C. if it is given to the taxpayer
d. under no circumstance.

2 Which is covered by finaltax?

a. Interest income from foreign banks
b. Share in the net income of a joint venture
P10,000 taxable prizes from the Philippines
C.

d. Share in the net income of a general professional partnership

3. Which is not subject to 20% final tax?
Interest income from trust funds
b. Royalties from musical compositions
C. P11,000 worth of prizes
d. Winnings
4. Which is not subject to 10% final tax?
a. Royalties from literary works
b. Dividends from a domestic corporation
C. Share in the net income of a business partnership
d. Royalties from a business trademark
5. Which of the following is taxable?
Prize on sports competitionssanctioned by the national sports organizauon
a.
b. Prize from dance competition abroad
C. Nobel prize
d. Any prize received without effort
6. Which winning is taxable to a final tax?
a. Winningsexceeding P10,000 c. Winnings from PCSO lotto
b. Winnings not exceeding P10,000 d. All of these
162
 Chapter5- Final Income Taxation

7.
subject to final tax, except one. Which is the
The following are
a. Jueteng winnings c. PCSOwinnings not exception?
b.
Lotto winnings exceeding P10K d. All of
these
exceeding P10K
Which of the following is exempt from final tax?
Interest income earned by a bank from
from books deposits in another bank
b. Royalties
C. Interest income earned by a bank from lending activities
d. Allof these
The share in the net income of a business partnership is
9. subject to which tax if
received by a domestic corporation?
a. 10% final tax C. regular income tax
b. 20% final tax d. 15% capital gains tax
10. Prizes arising from sources withinthe Philippines may be
subject to final tax.
b. subject to regular tax.
C. exempt from tax.
d. exempt or subject to final tax or regular tax.
11. Any royalties earned abroad by a non-resident corporation is
not subject to Philippine income tax.
b. always subject to final tax.
C. subject toeither final tax or regular tax.
d. always subject to regular tax.
12. The winnings of a resident alien from abroad is
a. subject to regular tax.
b. subject to final tax.
C. subject to either final or regular tax.
d. not subject to Philippine income tax.
13. Royalty income of a domestic corporation from abroad is
a. subject to regular tax.
b. subject to final tax.
C. subject to either final tax or regular tax.
a. not subject to Philippine income tax.

14. Winnings from PCSOare generally

d. exempt from any tax.
b. subject to regular tax.
C
subject to 20% final tax
d. subject to both final andregular tax.

163
 Chapter 5 - Final Income Taxation
are generally similar to the

folowing
15. The final tax rates on passive income
taxpayers,except one. Select the exception.
c. Non-resident citizen
a. Domestic corporation d. Non-resident corporation
b. Resident alien

16. The tax informer's reward may be granted to

a. Officials of the BIR
b. Public officials or employees
C. Close relatives of public government employees consanguinit.
d. Relatives of government employees beyond the 6th degree of
17. Which is not subject to final tax?
a. Compensation to non-resident aliens not-engaged in trade or business
b. Fringe benefits of supervisory and managerial employees
Income of non-resident foreign corporations
C.

d. Fringe benefits of rank and file employees

18. Which of the following is exempt from final tax?
a. Winnings incompetitions sponsored by a local trading company
b. Prizes in a body building competition
C. Dividends from aforeigncorporation
d. Winnings from a casino
Multiple Choice - Problems1
1. Certain debt instruments were issued at the following scenario:
Instrument Lenders at origination
I
Treasury notes 14
II. Investment certificate 20
|III. Certificate of deposit 30
|IV. Investment certificate 18
The interest income from which of the
a. I, II, III and IV foregoing is not subject to final tax?
c. II andIV
b. I, II and IV
d. IVonly
2. Winnie, a resident citizen, deposited P2,000,000 in the
Banco de Oro. The deposit pays 8% interest. 180-day time depositu
the deposit. Compute the final tax on maturity
a. P6,000
c. P20,000
b. P8,000 d. P16,000
3. Assume that Winnie is a
non-resident alien not engaged in trade
compute the final tax on maturity or business
of the deposit.
a. P6,000 c. P20,000
b. P8,000 d. P16,000

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 Chapter5- Final Income Taxation

4. Renz received P42,000 interest from short-term deposits. Compute the final tax
withheld onthe interest.
a.
P10,500 c. P5,000
b. P9,000 d. P4,500

5.
On lanuary 1, 2021, Mr. Albuera invested P2,000,000 in the six-year time deposit
of Sulu Unibank which pays 10% annual interest. Compute the final tax to be
withheld by Sulu Unibank on December 31, 2021.
a. P0 c. P200,000
b. P100,000 d. P250,000
Assume Mr. Albuera pre-terminated the time deposit on July 1, 2025; compute the
final tax to be withheld on pre-termination.
a. P5,000 c. P45,000
b. P12,000 d. P108,000

7. Boy,a resident citizen, received the following interest income:

P80,000 from short-term Peso timedeposit
P16,000 from a five-year bonds issued by acommercial bank
P24,000 from 5/6 lending to market vendors
How much final tax must have been withheld from Boy's interest income?
a. PO c. P20,000
b. P16,000 d. P24,000

8. Jack Corporation, a domestic corporation, deposited P1,000,000 in the five-year

time deposit of Banco Pilipino which pays 10% annual interest. Compute Jack
Corporation's net interest income in the first year of the deposit.
a. P100,000 c. P80,000
b. P90,000 d. P70,000
compute the final tax on
9. Assume Jack Corporation is a non-resident corporation;
interest income.
a. PO e. P25,000
b. P20,000 d. P30,000

P1,000,000 in the 5-year time deposit of

10. On January 2, 2021, Quezon, Inc. placed interest. Quezon, Inc. pre
Bank of Laguna. The placement earns 10% annual
Compute the finaltax tobe withheld on
terminated the deposit on June 30, 2024.
pre-termination.
a. PO c. P17,500
b. P10,000 d. P42,000

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 Chapter 5-Final Income Taxation

11. Francis, a resident citizen, invested P1,000,000 in a debt instruments

substitute) issued by UniBank. The debt instruments pay 10% annual
payable every quarter. How much final tax should UniBank withhold in
(dtheinepteorseis
quarter of the issue?
a. P0 c. P6,250
b. P5,000 d. P20,000

12. Charles, a resident citizen, deposited P5,000,000 in a non-resident

depositary bank which pays 12% annual interest. How much final tay
withheld inthe first year? shalforelig he
a. P0 c. P120,000
b. P45,000 d. P150,000

13. Rodrigo, a non-resident citizen, deposited his $2,000,000 savings in a

time deposit in Blue Bank, adepositary bank under the expandedforeign twCuro-reyncyear
deposit system. The deposit pays 8% annual interest. Compute the final tax to
withheld in dollars in the first year.
a. $0 c. $64,000
b. $24,000 d. $80,000
14. Gabriel is a non-resident citizen working abroad. He invested his $1,000.00
personal savings in a FCDU bank under a joint account with his resident wife. The
bank pays 8% annual interest. Compute the final tax to be withheld in oneyear.
a. $0 c.$12,000
b. $6,000 d. $ 16,000
15. Yvonne,a non-resident alien not engaged in trade or business, made a $5,000,000
deposit to an FCDU Bank. The deposit pays 89% annual interest. Compute Yvonne's
final tax in the first year.
a. $0 c. $ 160,000
b. $60,000 d. $ 200,000
16. David, a resident alien, deposited $1,000,000 in a depositary bank under the
expanded foreign currency deposit system. The five-year savings deposit pa
10% annual interest. Assuming a P45:$1 exchange rate, how much final tax o
interest would be withheld in the first year?
a. PO c. P40,000
b. P15,000 d. P 675,000

Multiple Choice - Problems 2

1. Mr. Siegmond, a resident citizen, received P100,000 dividend income from VouN
Inc., a domestic corporation. How much final tax must have been withheld
Vodka, Inc.?
a. PO c. P20,000
b. P11,111 d. P25,000
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 Chapter5- Final Income
Taxation

on its
Kenneth Inc., a domestic corporation, was credited $46,250 interest income
2. depositary account in an FCDU Bank. How much final tax was withheld?
$0 c.$ 6,937.50
a.
$7,500 d. $ 23,125.00
b.
Assuming Kenneth Inc. is a resident foreign Corporation, how much final tax was
3. withheld?
a. $ 23,125.00 c. $7,500
$6,937.50 d. $0
b.

4.
Tuazon Corporation declared P1,000,000 dividends in 2024. 40% of its
outstanding shares is held by its only corporate investor, Abdul, Inc. Compute the
amount of dividends tax to be withheld on declaration.
a. PO c. P60,000
b. P40,000 d. P100,000
Corporation, a resident
5 Mr. Nice,a resident alien, owns 40% of the shares of Coco tax
corporation. Coco declared P200,000 dividends in 2024. How much final
should be withheld from Mr. Nice's' dividend income?
a P40,000 c. P8,000
b. P20,000 d. P0

Corporation. Jericho and

6. Jericho, Inc. owns 20% of the stocks of Kidapawan declared P120,000
Kidapawan are both domestic corporations. Kidapawan
dividends in 2024.

How much dividend income after any applicable

tax will Jericho receive?
a. P24,000 c. P19,000
b. P20,000 d. P18,000

Suzuki owns 40% of the capital and profits of Cebu Ventures, a business
7. Ms.
engaged in the trade of tourist souvenirs. Cebu Ventures reported
partnershíp total final tax to be withheld by the
P200,000 net income in 2024. Compute the
partnership on Suzuki's profit sharing.
a. PO c. P10,000
b. P8,000 d. P20,000

20% of the capital and profits of a general professional

O Jose Mari owns reported P500,000 profits in 2024. How much final
partnership. The partnership
tax will be withheldfrom Jose Mari?
a. P 100,000 c. P10,000
b. P50,000 d. P0

9, Aris is a venturer sharing 50% in the profits of Wise Ventures, an unincorporated

trading of home appliances. Ventures reported
joint venture,
Cure, engaged in the
P200,000 profits for 2024.
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 Chapter5- Final Income Taxation

How much final tax willbe withheld by Wise Ventures?

a. PO c. P20,000
b. P10,000 d. P40,000
venturer in
10. Zamboanga Corporation, a resident corporation, is a
Philippine Ventures (SPV), an incorporated joint venture formed under Southern
laws. Zamboanga owns 30% interest in SPV. During 2021, SPV
P3,000,000 profit and declared P1,000,000 in dividends. How much final tax
be withheld from the dividend distribution to Zamboanga Corporation?
Phireipporpinteewidl
a. P100,000 c. P90,000
b. P30,000 d. P0

11. Peter Wow Ventures is a joint venture which operates under a service
Contrrea
with the government. Peter Wow is 30% owned by individual investors. The
is owned by corporate oilexploration companies. Peter Wow reported P2,000,00h
profit which was to be distributed.
How much final tax willPeter Wow withhold?
a. P200,000 C. P140,000
b. P60,000 d. P0

12. Mr. Badugan published his book abroad for the international market. During the
first quarter, he earned a gross royalty of P1,000,000. How much final tax will be
withheld by the foreign publisher?
P250,000 c. P100,000
b. P200,000 d. P0

13. Midsayap Inc. is the only corporate shareholder of Midsayap Inc. owning 60% of
its outstanding voting shares. During the year, Midsayap Inc. declared a
P1,000,000 dividend. Compute the final income tax to be withheld by Surigao.
a. P100,000 c. P40,000
b. P60,000 d. PO

14. Mr. Taiwan won an P800,000 prize in a national dancing competition. I

organizer of the event declared that the P800,000 grand prize was "tax free." How
much final tax must be remitted by the organizer to the BIR?
P 200,000 c. P88,889
b. P160,000 d. P0

15. Mr. Crocodile Park owns a mining property in Prosperidad. He allowed a mintis
onthe
company to operate under a condition that he will be paid 10% royalty
gold production. The mining company produced P8,000,000 worth of gold dur
the year. How much net royalties will be paid to Mr. Crocodile?
a. P800,000 c. P720,000
b. P640,000 d. P160,000
168
 Chapter5- Final Income Taxation

3
Multiple Choice - Problems
Tiong Go Department Store conducted a sales promotion where customer
1. purchasesexceeding P1,000 in one transaction shall be entitled to a ticket for a
chance to win P500,000 raffle prize. Mr. Shing won the prize.
How much shall Tiong Go withhold fromthe grand prize?
P200,000 c.P50,000
a.
P100,000 d. P0
b.

2.
Mr Sheriff Aguak earned the following prizes from two different competitions:
Date Event Gross Prize
January 4, 2023 Singing competition P12,000
February 14, 2023 Painting competition 10,100
Compute the total final tax that should have been withheld from the above prizes.
a. PS,500 c. P3,000
b. P4,420 d. P2,400

3. Mr. Remington Orayt participated in two different events on January 4, 2023:

Date Organizer Competition Gross Prize
January 4, 2023 Ang Mahiwagang Boses Singing P10,000
January 4, 2023 Sexy Body Foundation Dancing 11,000
prizes.
Compute the total final tax that should have been withheld from the above
a. PO c. P3,000
b. P4,420 d. P2,200

4. Mr. Conrad won the P50,000,000 6/49 Superlotto Jackpot of the Philippine
withheld?
Charity SweepstakesOffice. How much final tax will be
a. P 500,000 c. P100,000
b. P 200,000 d. P10,000,00

for chess competition in the

3. Ms. Matti won agold mnedal and P50,000 cash prize
withheld from the prize?
Palarong Pambansa. How much final tax should be
P 20,000 c. P5,000
b. P10,000 d.PO
the US lottery. The lottery
1abong, a resident citizen, won $1,000,000 from
winning is tax
a. exempt from tax C. subject to 10% final
Subject to 20% final tax d. subject to regular tax

169
 Chapter 5 - Final Income Taxation
alleged tax
sworn statemnent regarding the P20,000,
7. Mr. Carandang submitted a
practices of Cutie Corporation. This
led the BIR to recover
shall be paid to Mr.
evasion
,000 unpaid
Carandang?
taxes. How much net tax informer's reward
a. P1,800,000 c. P1,000,000
b. P1,600,000 d. P900,000
8. Aconcerned government employee furnished the BIR a statement detailing the
improper tax practices ofa corporate taxpayer. The information was instrumenta
collection of P500,000 tax. How much informer's tax rewardafter tax e
tothe
be released to the informant?
c. P45,000
a. PO
b. P40,000 d. P50,000
in the "tax-free" corporate bonds .
9. An individual taxpayer invested P1,000,000 annually net of any taxes, How
RBC Corporation. The bond pays 8.75% interest paymen
much final tax must RBC Corporation withhold from the annual interest
to Roy?
a. P36,000 c. P37,500
b. P16,800 d. P0

Final Income
10. A taxpayer wants tomanually file his Monthly Remittance Returnof the returm!
Tax Withheld for the month of February 2023. What is the deadline for
a. February 14, 2023 c. March 10, 2023
b. February 28, 2023 d. April15, 2023
11. In reviewing its tax compliance, Rang-ay Banco noted that it failed to remit the
P90,000 final taxes it withheld for the month of February 2023. Compute the total
amount of taxes due including the penalties if Rang-ay Banco settles the obligation
on March 20,2023.
a. P 102,827 c. P 127,796
b. P112,796 d. P 128,000

2. Bangko Illustrado failed to withhold the final tax on the P1,200,000 interes
expense which was credited to various accounts of individual depositors in td
month of April 2024. It wants tosettle the unpaid final withholding tax on June 10
2024. Compute the surcharge and interest penalty due.
a. P450,000 c. P64,000
b. P 320,000 d. P 62,400

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Chapter 5 - Final lncome Taxation

7. Mr. Carandang submitted a sworn statement regarding the alleged tax

practices of Cutie Corporation. This led the BIR to recover P20,000,000
taxes. How much net tax informer's reward shall be paid to Mr. Carandang?
evaunpadsion
a. P1,800,000 c. P1,000,000
b. P1,600,000 d. P900,000

8.
Aconcerned government employee furnished the BIR a statement detalling the
improper tax practices of a corporate taxpayer. The information was
to the collection of P500,000 tax. How much informer's taX instrumenta
reward after tay
be released to the informant?
a. PO c. P45,000
b. P40,000 d. P50,000

9 An individual taxpayer invested P1,000,000 in the "tax-free" corporate bonds o

RBC Corporation. The bond pays 8.75% interest annually net of any taxes, Hoi
much final tax must RBC Corporation withhold from the annual interest payment
toRoy?
P36,000 c. P37,500
b. P16,800 d. P0

10. Ataxpayer wants to manuallyfile his Monthly Remittance Return of Final Income
Tax Withheld for the month of February 2023. What is the deadline for the return!
a. February 14, 2023 c. March 10, 2023
b. February 28, 2023 d. April 15, 2023

11. In reviewing its tax compliance, Rang-ay Banco noted that it failed to remit the
P90,000 final taxes it withheld for the month of February 2023. Compute the total
amount of taxes due including the penalties if Rang-ay Banco settles the obligation
on March 20, 2023.
a. P102,827 c. P 127,796
b. P 112,796 d. P 128,000

12. Bangko llustrado failed to withhold the final tax on the P1,200,000 interest
expense which was credited to various accounts of individual depositors in the
month of April 2024. It wants to settle the unpaid final withholding taxon June 10
2024. Compute the surcharge and interest penalty due.
a. P450,000 c. P 64,000
b. P320,000 d. P 62,400

170