Chapter 7 - Business Taxes

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 37 SUGGESTED ANSWERS Chapter 7: BUSINESS TAXES

CHAPTER 7

BUSINESS TAXES Problem 7-1 1. False – this is a transfer not in the conduct of business 2. False – such rule is applicable only to nonresident foreign or alien persons 3. False – Merchandising business is engaged in buying and selling of goods, not manufacturing 4. False – Only one TIN is allowed. 5. True 6. False – On or before January 31 7. False – P500 for each establishment 8. False – exempt from P500 registration fee 9. True 10. True 11. True 12. True Problem 7-2 1. False – treated as tax credit 2. True 3. False – This is a description of receipt. 4. True 5. True 6. False – Required to become VAT if total gross sales/receipts exceed P1,500,000 a year. 7. True 8. False – Commercial activity is business. 9. False – Nonresident alien/foreign person is not subject to the rule of regularity, hence, considered business. 10. False – liable to VAT without the benefit of creditable input VAT. Problem 7-3 1. False – A business could be a servicing business. 2. False – This is compensation from employment. 3. False – Both are merchandising. 4. False – This is a servicing business. 5. True 6. False – Not in the case of VAT person. VAT paid on purchases can be claimed as creditable input VAT. 7. False – employees are also required to register to BIR 8. True 9. False – only one TIN per person 10. True 11. True 12. False – should issue official receipt for the amount received Problem 7-4 1. B 2. B 3. A 4. A 5. A 6. B 7. A 8. C

Problem 7-5 1. D 2. D 3. B 4. D 5. D 6. A

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 38 SUGGESTED ANSWERS Chapter 7: BUSINESS TAXES

9. D Problem 7-6 B Annual registration fee = P500 Problem 7-7 B Registration fee of: Au Chemical Supplies Gusto Eatery Total annual registration fee

P 500 500 P1,000

Problem 7-8 A Cooperatives are exempt from registration fee. Problem 7-9 A Gross sales or receipts not exceeding P100,000 per year. Problem 7-10 C Total amount in the invoice [P50,000 + (P12% of P50,000)]

P56,000

Problem 7-11 B Business tax (P1,600,000 x 12%)

P192,000

Problem 7-12 B Cost (P84,000/1.12) Add: Profit margin (P75,000 x 20%) Sales price (120% of cost) Add: VAT (P90,000 x 12%) Total VAT sales invoice amount

P 75,000 15,000 P 90,000 10,800 P100,800

Problem 7-13 C Output VAT (P300,000 x 12%) Input VAT (P268,800/9.3333) Net business tax payable or net VAT payable

P 36,000 28,800 P 7,200

Problem 7-14 Form of business operation = Manufacturing Form of business organization = Corporation Problem 7-15 The cooperative is required to register to the BIR. No registration fee or annual registration fee shall be collected from cooperatives. Problem 7-16 1. Annual registration fee for main store (P500) + (P500) for sales outlet 2.

No, because the total sales during the year do not exceed P1,500,000.

P 1,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 39 SUGGESTED ANSWERS Chapter 7: BUSINESS TAXES

Problem 7-17 Annual registration fee (1 + 50 + 10) x P500 Add: Interest (P30,500 x 20% x 8/12) Surcharge (P30,500 x 25%) Total amount to be paid to the BIR

P4,067 7,625

P 30,500 11,692 P 42,192

Note: Registration shall be made on or before the last day of January of the following year Problem 7-18 1. The business should be registered as VAT because the sales exceeded P1,500,000 in a year. 2.

Sales invoice because official receipts are issued only when there are collections.

3.

Official receipts.

Problem 7-19 Net VAT payable Add: Input VAT (P5,040,000 x 12%) Output VAT Divide by Sales

P 180,000 604,800 P 784,800 12% P6,540,000

(1 ) (2 )

Problem 7-20 1. Satur Nino is not subject to VAT because the sale is a casual sale of personal property. 2. Assuming that the FMV remains the same, the VAT of ROX Realty would be twelve percent (12%) of the FMV (higher value), hence, P4,200,000 or (P35,000,000 x 12%). Problem 7-21 1 Percentage tax (P1,344,000/1.12) x 3% . Add: VAT (P1,344,000/9.333 Surcharge (P144,000 x 50%) Total business tax and surcharges 2 .

P 36,000 P144,000 72,000

Percentage tax (P1,792,000/1.12) x 3% Add: VAT (P1,792,000/9.333 Surcharge (P192,000 x 50%) Total business tax and surcharges

216,000 P252,000 P 48,000

P192,000 96,000

Problem 7-22 1 As capital asset . Capital loss (P3,000,000 – P3,024,000) Multiplied by corporate tax rate No income tax – loss Add: Other taxes paid: Custom duties (P1,500,000 x P 750,000 50%) Excise tax (P2,250,000 x 20%) 450,000 Input VAT (P2,700,000 x 12%) 324,000 Total revenue contributed to government

288,000 P336,000

(P 24,000) 30% P 0

1,524,000 P1,524,000

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) 40 SUGGESTED ANSWERS Chapter 7: BUSINESS TAXES

Supporting Computation: Purchase value Add: Custom duties (P1,500,000 x 50%) Excise tax (P2,250,000 x 20%) Input VAT (P2,700,000 x 12%) Total landed cost – if capital asset

2 .

P1,500,000 P 750,000 450,000 324,000

1,524,000 P3,024,000

As ordinary asset Gross income (P3,000,000 – P2,700,000) Less: OSD (P300,000 x 40%) Net income Multiplied by corporate tax rate Normal tax Add: Other taxes paid Custom duties (P1,500,000 x P 750,000 50%) Excise tax (P2,250,000 x 20%) 450,000 Input VAT (P2,700,000 x 12%) 324,000 Total revenue contributed to government

Supporting Computation: Purchase value Add: Custom duties (P1,500,000 x 50%) Excise tax (P2,250,000 x 20%) Total landed cost – if ordinary asset

P 300,000 120,000 P 180,000 30% P 54,000

1,524,000 P1,578,000 P1,500,000

P 750,000 450,000

1,200,000 P2,700,000