GeneralPrinciples Incometax Tabag 51 224

 

150. Which of the following is subject to fringe benet tax? Compensaon income of management employees Taxable fringe benets of managerial employees De minimis benets of managerial employees  

 A.

 B.

C.

D.

Yes Yes Yes

No Yes No

No Yes Yes

No Yes Yes

Answer: B   Compensaon income, regardless of the employee’s rank is subject to basic tax.   De minimis benet (on the assumpon that the amount involved is within the ceiling regardless of the employee’s employee’s rank is exempt from income tax.   Taxable fringe benets  Subject to basic income tax if received by a rank and le employee  Subject to fringe benet tax if received by a supervisory or managerial employee

151. Fringe benet tax is computed based on: a. Grossed-up monetary value b. monetary value c. Gross compensaon d. Net compensaon  

Answer: A

152. Sta Stateme tement nt 1:  The grossin grossing-u g-up p fringe fringe benets benets was adopte adopted d in order order to ali align gn the tax treatment of fringe benets with salaries and an d wages. Statementt 2: The grossed-up monetary value of the fringe benets includes the net amount of Statemen money received or the net monetary value of and the amount of the fringe benet tax. a. Only Only sta state teme ment nt 1 is is corr correct ect b. Only Only sta statem tement ent 2 is is ccorr orrect ect c. Both Both sta state teme ment nt are are cor corre rect ct d. Both Both sta state temen mentt a are re incorr incorrect ect  

Answer: C

153. Which of the following statements regarding regarding grossed-up monetary value is correct? I. The grossed-up monetary value of the fringe benet is simply a gure meant to represent the enre income earned by the employee. II.  The gr gross ossed-u ed-up p monet monetary ary va value lue includes includes the net amount amount of money money receiv received, ed, the net monetary value of any property received by the employee from the employer employer.. III. The grossed-up monetary value of the fringe benets by the grossed-up monetary value factor. IV. IV. The grossed-up monetary value of the benets is generally the total allowable deducon of the employer from his gross income.

 

a. b. c. d.

I only Ia an nd IIII only I, IIII and IIIII All All o off the the ab abo ove

 

Answer: D

154. Statement 1: Grossed-up monetary value is reected in the books of accounts as fringe benet expenses and fringe benet tax expense. Statementt 2: Any amount not withheld by the employer on employee’s salary is the liability of Statemen the employee. a. Only Only sta state teme ment nt 1 is is corr correct ect b. Only Only sta statem tement ent 2 is is ccorr orrect ect c. Both Both sta state teme ment nt are are cor corre rect ct d. Both Both sta state temen mentt a are re incorr incorrect ect  

Answer A  Failure to withhold the required tax on salary is collecble from the employer  Taxable fringe benet shall generally be recorded by the employer as follows: Fringe benet expense (monetary value) Pxx Fringe benet tax expense (FBT) xx Cash* xx *amount paid to the employee and the BIR 

It shall be noted, however, however, that the entry is simply to determine d etermine the components of the benet provided (the monetary value of the benet – the tax component) “Fringe benet tax  expense”  expense” as provided in the entry above is not a “component” of the employer’s “tax expense”. expense”. FBT is an income tax. It is imposed on the employee who derived the income, not the employer. employer. Therefore. It is part of the employee’s income tax expenses, not the other way around. The amount of FBT shown above, however, however, is a part of deducble operang expense of the employer.. The total amount of the GUMV may be recorded as manpower employer expenses by the employer.

155. How much is the allowable deducon from business income of a domesc corporaon which granted and paid P136,000 fringe benets to its i ts key ocers during 2020 taxable year? a . P0 c. P136,000 b. P64,000  

d. P209,230

Answer: D 

GUMV = P136,000/65%= P209,231 The transacon shall be recorded by the employer as follows:

 

Fringe benet expense (monetary value) Fringe benet tax expense (FBT) Cash*

P136,000 P3,231 P209,231

*amount paid to the employee and the BIR 

FBT rate under TRAIN Law was increased to 35%

Use the following data for the next two (2) quesons: During 2020, Alpha Corporaon gave the following fringe benets to its employees Salaries to rank and le employees P1,000,000 Salaries to managerial employees 1,800,000 De minimis benets to rank and le employees 54,400 De minimis benets to managerial employees 27,200 Fringe benets to rank and le employees 102,000 Fringe benets to managerial employees 170,000 156. How much is the fringe benet tax? a. P48,000 c. P91,538 b. P80,000  

d. P166,400

Answer: C 

FBT = P170,000/65% x 35% = P91,538

157. How much is the total allowable deducon deduc on from business income of Alpha Corporaon? a. P3,153,600

c. P3,245,138

b. P3,233,600

d. P3,271,600

 

Answer: C Salaries to rank and le employees Salaries to managerial employees De minimis benets to rank and le employees De minimis benets to managerial employees Fringe benets to rank and le employees Fringe benets to managerial employees Fringe benet tax (as computed above) Total allowable OPEX of Alpha Corporaon

P1,000,000 1,800,000 54,400 27,200 102,000 170,000 91,538 P3,245,136

Use the following data for the next ve (5) quesons: Juan Dela Cruz, accounng manager of ABC Corporaon, provided the following data for 2020 taxable year: Salaries @ P120,000 per month Allowances subject to liquidaon

P1,440,000 50,000

 

Allowances not subject to liquidaon

60,000

Rica allowance at P3,000 per month

36,000

Christmas gi/bonus

30,000

13th month pay and mid-year bonus

240,000

Producvity incenve pay covered by a CBA

25,000

Monezed unused vacaon leave for 12 days

66,000

Monezed unused sick leave for 5 days

27,500

Medical cash allowance to dependents

3,000

Actual medical benets

10,000

Cred Credit itab able le wi witthhol hholdi ding ng tax on co com mpens pensa aon on in inco com me

397, 397,00 000 0

158. How much is the amount of exempt de minimis benets? a. P97,000

c. P118,000

b. P107,000

d. P124,500

 

Answer: A

Soluon: Rice allowance @ P2,000 a month only

P24,000

Christmas gi/bonus

5,000

Monezed unused vacaon leave for 10 days

55,000

Medical cash allowance to dependents

3,000

Actual medical benets

10,000

Total exempt de minimis

P97,000

159. How much is the amount of de minimis and other benets subject to basi basicc tax? a. P240,500

b. P251,500

b. P250,500

c. P280,000

 

Answer: B

Soluon: Amount

Exempt

Excess

P36,000

P24,000

P12,000

Christmas gi/bonus

30,000

5,000

25,000

13th month pay and mid-year bonus

240,000

90,000

150,000

Producvity incenve pay

25,000

-

25,000

Monezed unused vacaon leave

66,000

55,000

11,000

Moneze unused sick leave for 5 days

27,500

-

27,500

Rice allowance

Medical cash allowance to dependents

3,000

3,000

-

 

Actual medical benets

10,000

10,000

Total

P250,500



Producvity incenve pay under BIR RULING No. 293-2015  

If not more than P10,000 – considered as exempt de minimis

 

If more than P10,000 – the enre amount shall be included in the “other benets” with P90,000 ceiling

 

NOTE NO TE:: This ruling is not applicable to other types of de minimis benets such as rice allowance.



Allowance subject to liquidaon non-taxable income of Juan but part of ABC’s operang expense



Allowance Allowa nce not subject to liquidaon liquidaon taxable taxable “fringe benet” a nal tax. Thus no longer presented on the computaon of income tax payable using the graduated tax rate.



Chris Chr istm tmas as gi gi or bo bonu nuss in th the e amou amount nt of P5 P5,0 ,000 00 is includ included ed in the the list list of deminimis benets.

160. How much is the fringe benet tax? a. P48,000

c. P32,308

b. P80,000

d. P166,400

 

Answer: C 

FBT for the allowance not subject to liquidaon =P60,000/65% x 35% = P32,308

161. How much is the income tax payable of Juan for the year? a. P130,000 c. P397,150 b. P2 P 267,500  

d . P0

Answer D Salaries @ P120,000 per moth Taxable 13th month pay and other benets Tax net Income

P1,440,000 250,500 P1,690,500

Income Tax Due (TRAIN law graduated rate) First P800,000

P130,000

 

In acce access ss of P800 P800,0 ,000 00 @ 30 30% % = P800 P800,5 ,500 00 x 30 30% %

267, 267,15 150 0

Total

P397,150

Less: Creditable withholding tax on compensaon

(P397,150)

Income Tax Payable

P0

162. How much is the total allowable deducon from business income of ABC Corporaon in relaon to the informaon provided? a. P1,900,000

c. P1,987,500

b. P1,500,000

d. P2,019,708

 

Answer D Salaries @ P120,000 per month

P1,440,000

Allowances subject to liquidaon

50,000

Allowances not subject to liquidaon

60,000

Rica allowance at P3,000 per month

36,000

Christmas gi/bonus 13th month pay and mid-year bonus

30,000 240,000

Producvity incenve pay covered by a CBA

25,000

Monezed unused vacaon leave for 12 days

66,000

Monezed unused sick leave for 5 days

27,500

Medical cash allowance to dependents

3,000

Actual medical benets

10,000

Fringe beneft tax

32,208

Total OPEX o ABC

P2,019,708



The fring fringe e be bene net t ta taxx shal shalll form form part part of the the oper opera ang ng ex expe pens nses es of ABC ABC Corporaon

Special Rule in Compung the Monetary Value o Fringe Benefts (Applicable to Holding Benefts and Motor Vehicles – reer also to the Lecture Notes) 163. In 2020. Mapagpala Corporaon paid for the monthly rental of the residenal house of its branch manager amounng P204,000. How much is the fringe benet expense for the month? a . P0 b. P48,000  

Answer: D

c. P102,000 d. P204,000

 

The FB Expense is equal to the rental expense of the employer. The 50% rule of the rental used only for purposes of compung the applicable appl icable FB Tax. 164. How much is the fringe benet tax for the month? a . P0

c. P102,000

b. P54,923  

d. P204,000

Answer: B Soluon:

 Monthly Rent x 50 %  = FBT rate GUMV Factor FBT = P204,000 x ½ / 65% =35% FBT = P54,923 FBT =

165. The total allowable deducon from business income of Magpala Magpal a Corporaon is a. P48,000 c. P258,923 b. P204,000  

d. P300,000

Answer: C 

Total OPEX – FB expense + FBT = P258,923

Journal Entry: Fringe benet expense (monetary value) Fringe benet tax expense (FBT) Cash*

P204,000 P54,923 P258,923

*amount paid to the employee and the BIR

166. Uste Company owns a condominium unit in “ The One Residence” which is n near ear thefactory and the plant’s p lant’s administrave building. To To make it convenient to its execuve. It allowed the laer to use the said property as his residence. The zonal value of the property is P32,000,000 while its fair market value as shown in its current Real Property Tax Tax Declaraon amounts to P25,000,000. How much is the fringe benet expense? a. P0 P0 c. P25,000,000 b. P800,000  

d. P32,000,000

Answer: A 

The property is assumed to be part of the employer’s PPE. Hence the cost of the property is assumed to have been or will be recovered as deducon from its gross income under “depreciaon expense” account (RR 3-98)

167. Based on the preceding number nu mber,, how much is the fringe frin ge benet tax expense?

 

a . P0

c. P367,470

b. P94,117

d. P430,769

 

Answer: D MV = Higher between FMW in the Real property declaraon and Zonal value x 5% x 50% MV = P32M x 5% x 50% = P8000,000 FBT = MV/GUMV Factor x 35% FBT = P800,000/65% x 35% = P430,769

168. Assuming that the acquision cost of the residenal property is P26,000,000 and the remaining useful life is 12 years. How much is the fringe benet expense? a. P0 P0

c. P2,666,667

b. P500,000

d. P2,083,000

 

Answer: B 

Addional depreciaon in the form of fringe benet expense = P32M-P26M over



12years remaining life = P500,000 If the zonal value or fair market value of the said property is greater than its cost subject to depreciaon, the excess amount shall be used in compung addional depreciaon expense and shall be amorzed throughout the remaining useful life (RR 3-98). The journal entry for the month in this case as provided in the foregoing revenue regulaon shall be Fringe benet expense (monetary value) Fringe benet tax expense (FBT)   Income construcvely received   Fringe benet tax payable

Pxx xx Pxx xx

169. Kape Puno Manufacturing Corporaon operates a manufacturing plant in Davao Economic Zone (a PEZA registered economic zone). LJ was assigned to lead the conduct of audit and performance evaluaon of the plant which is esmated to last for a period of 2-3 months. He was provided a free housing benet for the duraon of the audit in one of the prominent subdivision in the City City.. The zonal value of the property is P32,000,000 while its fair market value as shown in its current Real Property Tax Tax Declaraon amounts to P25,000,000. Determine the fringe benet expense and the fringe benet tax expense, respecvely. respecvely. a. P800,000; P376,470 c. P32,000,000; P15,058,824 b. P625,000; P294,118  

d. P0; P0

Answer: D 

Tempo empora rary ry ho hous using ing for a perio period d of no nott more more than than thre three e (3 (3)) mont months hs is a nontaxable benet.

 

170. In 2020, Delta Corporaon bought a condominium unit on installment for the use of its execuve. The acquision cost inclusive of 12% interest is P6,720,000. The fair market value of the property per Tax Declaraon is P6,800,000 while the zonal value is P6,500,000 How much is the fringe benet tax? a . P0

c. P76,471

b. P70,588

d. P80,769

 

Answer D 

FBT = P6,720,000/1,12 x 5% x 50%/ 65% x 35% = P80,769



If the employer purchases residenal property in installment for use employee, the monetary value shall be the acquision cost exclusive of interest x5% x 50%

171. Assume the ownership over the property will be transferred to the execuve, how much is the fringe benet tax? a. P0 P0 b. P3,058,524  

c. P3,500,000 d. P6,500,000

Answer: C 

FBT = P6,500,000 /65% x 35% = P3,500,000



If employer purchases residenal property and transfers ownership to employee, the monetary value shall be the higher between acquision cost exclusive of interest and the zonal value as determined by the CIR.

172. Delta Corporaon bought a condominium unit for P6,000,000. The fair market value of the prop proper erty ty per Tax Decl Declar ara aon on is P6,8 P6,800 00,0 ,000 00 while while the the zonal zonal value value is P6 P6,5 ,500 00,0 ,000 00.. It was was transferred in the name of Pedro, one of its execuve, for lower consideraon amounng to P5,800,000. How much is the fringe benet tax? a . P0

c. P329,412

b. P538,462

d. P470,588

 

Answer: B 

FBT = (P6,800,000 – P5,800,000)/ 65% x 35% = 538, 462



If employer residenal property p roperty and transfers ownership to employee on a lesser amount, the monetary value shall be computed as the higher between FMW in the real property declaraon and Zonal as determined by the CIR less cost to the employee.

 

173. Assuming the selling price is P7,000,000, how much is the fringe benet tax? a . P0

c. P329,412

b. P94,118

d. P470,588

 

Answer: A

174. In 2020, Omega Corporaon purchased a motor vehicle for the use of its execuve. It was registered under the name of the execuon although it was agreed that it shall be used partly for the benet of the company company.. The cost of the vehicle was P1,400,000 P1,400,000.. The amount of fringe fringe benet tax is. a. P658,824

c. P329,411

b. P753,846

d. nil

 

Answer: B 

Although the problem provides that the vehicle will be partly used for the benet of the company company,, the enre enre amount amount shall be subject subject to FB FBT T because because it was registered under the name of the employee.



FBT = P1.4M/65% x 35% = P753,846

175. During 2020 taxable year, First Metro Pacic was able to persuade Francis to join the company as its Assistant Vice-President for Finance which included a car plan worth P3,000,000 in its compensaon package. First Metro purchased the vehicle and registered the same in favor of Francis. Assuming further that Francis is a non-resident alien not engage in trade or business, how much is the fringe benet tax? a. P529,412

c. P1,615,385

b. P1,411,765

d. P1,000,000

 

Answer: D 

FBT = P3M/75% x 25% = P1,000,000

176. Based on the immediatel immediately y preceding number, number, but assuming assuming First Metro Metro is an oshore oshore banking unit, how much is the fringe benet tax? a. P529,412

c. P1,615,385

b. P1,411,765

d. P1,000,000

 

Answer: C 

FBT = P3M/65% x 35% = P1,615,358

 



Prior to 2018 special employees are subject to 15% FBT. Under TRAIN Law, however, they are now subject to the same FBT rate of 35% beginning Jan. 1, 2028

De Minimis Benefts/Other Benefts 177. Statement 1: Monezed value of unused un used sick leave credits not exceeding 10 days to private employees is a tax exempt benet.

Stateme Sta tement nt 2:  Mone Monez zed ed va value lue of unuse unused d si sick ck le leav ave e cred credit itss no nott ex exce ceedi eding ng 10 da days ys to government employees is a tax exempt benet. a. b. c. d.

Only Only sta state teme ment nt 1 is is corr correct ect Only Only sta statem tement ent 2 is is ccorr orrect ect Both Both sta state teme ment nt are are cor corre rect ct Both Both sta state temen mentt a are re incorr incorrect ect

 

Answer: B  Only monezed  unused unused va vaca caon on lea leave ve credit credit not excee exceeding ding ten (10) (10) days days received by an employee from a private sector is tax exempt Monez Mone zed ed un unus used ed Vaca acaon on and Sick Sick leave leave credi creditt gr gran ante ted d to gove governm rnmen entt employees, regardless of the number of days, are tax exempt 

Used leave credits (vac (vaca aon on or si sick ck le leav ave) e) shal shalll be trea treate ted d as a re regu gula larr compensaon income subject to basic tax and consequently to the creditable withholding tax on compensaon income.

178. Which of the following housing benets is exempt from income tax? a. Housing Housing unit unit inside or adjacent adjacent (within (within 50 meters meters)) from the perimet perimeter er of the busine business ss premises. b. Temporary emporary housing housing for a stay stay in the housing housing unit for for three (3) (3) months or or less c. Housing privilege privilege of of military military of the Armed Forces Forces of the Phillipine Phillipiness d. All All o off the the ab abo ove  

Answer: D

179. Which of the following condions is required in order that expenses incurred or paid by an employee but which are paid or reimbursed by his employer will be exempt from income tax?

I. The expenditures are duly receipted for and in the name of the employer II. The expenditures are not of a nature of a personal expense aributable to the employee. a. I only

c. Any of I and II

 

b. II only  

d. Both I and II are required

Answer: D

180.  Statement 1:  Expenses receipt in the name of the employer which do not partake the nature of personal expense aribute to employees should not be treated as taxable fringe benet.

Statement 2:  The expenses describe above, if incurred by a managerial employee, should neither be included in the computaon of fringe benet tax nor in the determinaon of the individual taxpayers’ returnable compensaon income a. b. c. d.

Only Only sta state teme ment nt 1 is is corr correct ect Only Only sta statem tement ent 2 is is ccorr orrect ect Both Both sta state teme ment nt are are cor corre rect ct Both Both sta state temen mentt a are re incorr incorrect ect

 

Answer: C

181. Statement 1: Representaon and transportaon given regularly on a monthly basis are not taxable fringe benets but taxable as compensaon income subject to basic tax under Sec. 24(A) of the Tax Code.

Statement 2:  Expenses in connecon with aending business meeng or convenon in the Philippines such as food beverages and transportaon are nontaxable benets of the employee. a. b. c. d.

Only Only sta state teme ment nt 1 is is corr correct ect Only Only sta statem tement ent 2 is is ccorr orrect ect Both Both sta state teme ment nt are are cor corre rect ct Both Both sta state temen mentt a are re incorr incorrect ect

 

Answer: C

182. A domesc corporaon provides xed daily meal allowance to all its regular employees. The meal allowance is: a. Exem Exempt pt from from bas basic ic inco income me tax tax b. Subject to to fringe fringe benet tax if the the recipient recipient is a rank rank and le employ employee ee c. Subject to fringe fringe benet benet tax if the recipient recipient is a manageri managerial al employee employee d. Subje Subject ct to to basic basic inco income me tax tax  

Answer: D  In general, xed or variable allowances allowances which are received received by a public ocer or employer or ocer or employee of a private enty, in addion to the regular compensaon, xed for his posion or oce, is compensaon subject to income tax and consequently, creditable withholding tax on compensaon income.

 

Basis: Secon 2.78 1(A) of RR-2-98 as amended by RR 10-2008. Examples or xed or variable variable allowances allowances are transporta transportaon on allowance, allowance, living away from home allowance (LAFHA) and the like. 183. Accountancy University (AU) granted a scholarship grant abroad (Master of Science in Accountancy) Accoun tancy) to Fermin, one of its regular regular faculty members. members. The management management of AU believed that the university will able contract to improve accountancy program through the scholarship grant. Nonetheless, no be wrien wasitsexecuted between AU and fermin requiring the laer to remain the employ of the employer for a certain period of me. The scholarship grant is a. Subject to to basic income income tax or or fringe fringe benet tax tax depending depending on the rank rank of Fermin Fermin b. De minimis minimis benet, benet, hence, hence, tax-e tax-exem xempt pt regar regardless dless of of rank c. The benet benet was provid provided ed for the benet benet of the employe employerr, hence, non-ta non-taxab xable le on the part of the employee d. None None of the the abo above ve  

Answer: A

184. The cost assistance an employer to the dependents of an employee shallof beeducaonal treated as taxable fringeextended benets, by unless: a. The educaon educaon of study involve involved d is directly directly connect connected ed with the parent’ parent’ss employ employer’ er’ss business or profession. b. There There is a wrien wrien contr contract act between between the parents parents and the employ employer er that the for former mer is under obligaon to remain in the employ of the laer for period of me they have mutually agreed upon. c. The The assi assist stan ance ce was was prov provide ided d th thro roug ugh h a comp compe ev ve e schem scheme e under under the the scho scholar larsh ship ip program of the employer. d. Any Any o off tthe he ch choi oice cess  

Answer: C

185. Reasonable business expense which are paid by the employer for the foreign travel of his employee for the purpose of aending business meengs or convenon shall not be treated as taxable fringe benets, except: a. Inland trave travell expenses expenses such as expense expense for food, food, beverag beverage e and local transpor transportao taon n b. Lodging cost cost amounng amounng to an averag average e of US$300 US$300 or or less per day day c. Cost Cost of econo economy my and and busines businesss class class airplane airplane ck cket et d. 30% of of the cost of the the rst rst class class airplane airplane cket cket  

Answer: D

Use the following date for the next four (4) quesons The following data were taken from Juan (single) holding managerial posion for 2020 taxable year:

 

Gross salaries @ P50,000 per month

P600,000

SSS contribuons

12,000

Philhealth contribuons

7,200

Pag-ibig contribuons

4,800

Union dues

3,000

Withholding tax on compensaon income Allowances, not subject to liquidaon

73,250 100,000

Gasoline allowances, subject to liquidaon

17,000

13th month pay

50,000

De mini minimi miss bene benet tss

12,0 12,000 00

186. The taxable compensaon income subject to graduated rate under Secon 24(A) of the tax code is: a. P465,000

c. P573,000

b. P576,000

d. P600,000

 

Answer: C Gross salaries @ P50,000 per month

P600,000

SSS contribuons

(12,000)

Philhealth contribuons

(7,200)

Pag-ibig contribuons

94,800)

Union dues

(3,000)

Compensaon Income subject to basic tax

P573,000

187. Based on above date the fringe benets tax due is: a . P0

c. P53,846

b. P8,000

d. P47,059

 

Answer: C 

FBT = P100,000/65% x 35% = P53,846

188. The total income tax expense of Juan is: a. P127,000

c. P170,760

b. P141,000

d. P179,400

 

Answer: A Compensaon income subject to basic tax

P573,000

 

Basic Tax (30,000 = (173,000 x 25%)

P73,250

FBT as computed above

53,846

Total income tax expense of Juan 

The FBT is the income tax expense of the employee not the employer. employer.

189. The income tax payable of Juan is: a . P0 b. P3 P30,000  

P127,096

c. P43,250 d. P73,250

Answer: A 

Income Tax Payable = Basic Tax – CWTx = P73,250 – 73,250 = P0

190. Statement 1: Meal allowances and lodging furnished by the employer to the employees are exempt from tax if furnished for the “advantage or convenience of the employer”. employer”.

Statement 2:  Tax exempt meal allowance should be furnished within the premises of the employer. a. b. c. d.

Only Only sta state teme ment nt 1 is is corr correct ect Only Only sta statem tement ent 2 is is ccorr orrect ect Both Both sta state teme ment nt are are cor corre rect ct Both Both sta state temen mentt a are re incorr incorrect ect

 

Answer: C

191. The amount of de minimis benets conforming to the ceiling of de minimis benets shall be:

I. Exempt from income tax, regardless of the rank of the employee II. Not be considered in determining the P82,000 ceiling of other benets excluded from gross income under the Code, as amended. a. I only

c. Any of I and II

b. II only

d. Both I and II are required

 

Answer: C

192. The excess of the de minimis benets over their respecve ceilings prescribes under the regulaons shall be a. Considered Considered as part part of other other benets benets subject subject to tax tax only on on the excess excess over over the P90,00 P90,000 0 ceiling. b. Not be consider consid ered ed in determ det erminin ining gasthe P90,00 P90,000 0 ceiling ceiling of other benets benets exclud excluded ed from the gross income under the Code amended.

 

c. Both Both “a” an and d “b “b”” d. Neit Neithe herr ““a” a” and and ““b” b”  

Answer: A

193. The amount of P90,000 under “other benets” which are excluded from gross income shall

I.  Not be applicable to self-employed individuals II. Not be applicable to income generated from the conduct of trade or business III. Shall be applicable to all types of income a. I only

c. I, II and III

b. I and II only

d. None of the above

 

Answer: B

194. “Other Benets” under revenue regulaon include

I.  Christmas bonus II. Producvity incenve bonus III. Loyalty awards IV. IV. Gis in cash or in kind and other benets of similar nature actually received by ocials and employees of both government and private oces a. I only

c. I, II and III

b. I and III only

d. I, II, III AND IV

 

Answer: D

OTHER COMPREHENSIVE PROBLEMS 195. Pedro, a resident if Isabela Province had the following data for taxable year 2020: (Exchange rate $1-P40) Philippines

Abroad

P165,000

$2,000

Business Income

450,000

6,000

Business expense

120,000

Salaries

1,500

Interest Income: Personal Receivable

10,000

FCDU

$2,500

On bank deposits (20% long-term

25,000

3,000

Royalty income (20% from books)

22,000

1,000

Prize won in contest

10,000

 

Winning from Phil. Charity Sweeptakes

80,000

Sales of shares of stocks of a domesc corp. Directly to a buyer (cost P10,000)

30,000

Addional Informaon: 

Pedro received the following dividend income during the taxable year:  

P70,000 from a domesc corporaon. P30% of its income is aributed to its operaon abroad.

 

P60,000 from a resident foreign corporaon. The rao of its gross income in the Philippines over worldwide income for the past three years is only 40%.

 

P80,000 from nonresident foreign corporaon. The rao of its gross income in the Philippines over worldwide worldwide income for the past past three years years is 10%.

Pedro is married with the following dependents:  

Ana, 23 year old, disabled

 

Lorna, who turned 21 years old on January 1, 2020

 

Fe, 28 years old. She was recently retrenched by her employer

 

Juan, a college student, living in Manila Pedro Pedr o also sold a condominium condominium unit in Manila (residenal) (residenal) for P2,000,000 P2,000,000 although its FMY is P3,000,000 but with a zonal value of P4,000,000. The taxable income of Pedro is: a. P825,000

c. P858,000

b. P950,000

d. P1,075,000

 

Answer: D Soluon:

Salaries (165k+(2k x P40)

P245,000

Business Income (450k+(6k x P40)

690,000

Business expense (120k+(1..5k x P40)

(180,000)

Interest Income: Personal Receivable FCDU On bank deposits abroad (3k x P40)

10,000 120,000

Royalty income abroad (1k x P40)

40,000

Prize won in contest (not exceeding P10k)

10,000

 

Sales of shares of stocks of a domesc corp. Directly to a buyer (cost P10,000)

CGT

Dividend Income – RFC and NRFC (100%) 140,000 Basic personal exempon ( repealed under TRAIN Law)

NA

Addional personal exempon (repealed under TRAIN Law)

NA

TAXABLE INCOME P1,075,000  Dividend income from a foreign foreign corporaon (RFC (RFC and NRFC), is subject to basic tax. The rao of operaon in the Philippines is immaterial if the taxpayer is a resident cizen “RC” because such taxpayer(s) is taxable on income derived from sources within and without the Philippines. 196. Pedro’s Pedro’s total nal taxes on his passive income is: a. P1 P 15,460 c. P38,460 b. P2 P22,460  

d. P45,960

Answer: D

Soluon: Interest Income FDCU ($2,500 x P40 x 15%)

P245,000

On bank deposits Phils. ($2,500 x 80% x 20%) On bank deposits Phils. – long term

4,000 exempt

Royalt alty inco income me Phils hils.. book bookss (22 22k k x 20 20% % x 10 10%) %)

440 440

Royalty income Phils. others (22k x 80% x 20%)

3,520

PCSO winnings (P80,000 x 20%)

16,000

Dividend Income from DC (P70,000 x 10%)

7,000

Total nal taxes on passive income



P45,960

PCSO loo winnings exceeding P10,000 is subject to 20% FWT unless: o Received by NRA-NETB = 25% FWT, regardless of amount o Received by NRA-ETB (regardless of amount) = exempt

197. If he is non-resident cizen his total nal tax on passive income i ncome is: c. P30,460

c. P23,460

d. P2 P22,460

d. P23,900

 

Answer: A Soluon:

Interest Income FDCU

exempt

 

On bank deposits Phils. ($2,500 x 80% x 20%)

P4,000

Royalt alty inco income me Phils hils.. book bookss (22 22k k x 20 20% % x 10 10%) %)

440 440

Royalty income Phils. others (22k x 80% x 20%)

3,520

PCSO winnings (P80,000 x 20%)

16,000

Dividend Income from DC (P70,000 x 10%)

7,000

Total nal taxes on passive income

P30,960

198. The total amount if capital gains tax is: a. P241,000

c. P243,000

b. P251,720

d. P257,000

 

Answer: C  Total CGT = CGT on shares and real properes CGT on shares =SP30,000 – cost P10,000 = P20,000 x 15% = P3,000 CGT real properes = P4M x 6% = P240,000 Total CGT = P243,000

199. If he is a non-resident alien not engaged in trade or business his total combined taxes on all income from Philippines is (excluding business income): a. P83,000 c. P336,500 b. P2410  

d. P340,000

Answer: C Soluon:

Salaries Phils.

P165,000

Interest Income: Personal Receivable

10,000

FCDU On bank deposits Phils. Incl.long-term deposit

25,000

Royalty income Phils.

22,000

Prize won in contest

10,000

Winning from Phil. Charity Sweepstakes Sweepstakes

80,000

Sales of shares of stocks of a domesc corp. Directly to a buyer (cost P10,000) DI-DC DI – RFC and NRFC (considere (considered d income without) TAXABLE INCOME

70,000 P336,500

 

INCOME TAX:  

P382,000 X 25%

16,000

 

Total CGT

241,000

Total nal taxes on passive income

P336,500

 



The dividend income from foreign corporaon (RFC and NRFC) in this parcular case is considered income derived purely from abroad.

Use the following data for the next n ext ve (5) quesons: Ana has the following data on his passive income i ncome earned during 2020:

Philippines

Abroad

45,000

25,000

450, 450,00 000 0

60,0 60,000 00

Royales books

20,000

30,000

Royales from computer program

20,000

40,000

Interest income from long term peso bank deposits Int Inter eres estt inco income me from from long long ter erm m FDCU FDCU depo deposi sits ts

Winning from an electronic rae during SMART Communicaon’ss 50th anniversary (chosen randomly by the Communicaon’ network using SMART subscribers’ sim card numbers)

10,000

-

Dividend income from a domesc corporaon

27,000

13,000

Dividend income from a foreign corporaon

33,000

22,000

200. How much is the nal withholding tax if the taxpayer is a resident cizen? a. P1 P 13,450 c. P14,450 b. P1 P12,450

d. P18,200

Answer: D Soluon(from Philippine source only): Long-t Lon g-term erm peso peso bank deposit deposit,, P45k P45k x 20%  

FDCU deposit, P50,000 x 15%

exemp exemptt  

P7,500

Royalty - books P20,000 x 10%

2,000

Royalty – computer programs, P20,000 x 20%

4,000

Winnings, P10,000 x 20%

2,000

Dividend Income from DC P27,000 x 10%

2,700

Total nal taxes on passive income

18,200



Other winnings (unlike (unl ike prizes), regardless regardless of amount is subject to 20% FWT

 

201. How much is the nal withholding tax if the taxpayer is a resident alien? a. P1 P 13,450 c. P12,450 b. P9 P9,7 ,700 00  

d. P14, P14,45 450 0

Answer: D 

Same computaon with “RC”

202. How much is the nal withholding tax if the taxpayer is a non-resident cizen? a. P1 P13,450 c. P9,700 b. P8 P8,7 ,700 00

d. P10, P10,70 700 0

Answer: D Long-term peso bank deposit

exempt

FDCU deposit

exempt

 

Royalty - books P20,000 x 10%

2,000

Royalty – computer programs, P20,000 x 20%

4,000

Winnings, P10,000 x 20% Dividend Income from DC P27,000 x 10%

2,000 2,700

Total nal taxes on passive income

10,700



Non-resident taxpayers are not subject to income tax on their interest income derived from FCDU deposit.

203. How much is the nal withholding tax if the taxpayer is a non-resident alien engaged  in trade or business? a. P1 P13,450 c. P9,700 b. P1 P13, 3,40 400 0

d. P13, P13,75 750 0

Answer: B Long-term peso bank deposit

exempt

FDCU deposit

exempt

 

Royalty - books P20,000 x 10%

2,000

Royalty – computer programs, P20,000 x 20%

4,000

Winnings, P10,000 x 20%

2,000

Dividend Income from DC P27,000 x 20%

5,400

Total nal taxes on passive income

13,400

205. How much is the nal withholding tax if the taxpayer is a non-resident alien not engaged in trade or business?

 

c. P19,250

c. P43,000

d. P3 P30,500

d. P29,000

Answer: B Soluon: Long-term peso bank deposit

11,250

FDCU deposit

exempt

 

Royalty - books P20,000 x 25%

5,000

Royalty – computer programs, P20,000 x 25%

5,000

Winnings, P10,000 x 25%

2,500

Dividend Income from DC P27,000 x 25%

5,750

Total nal taxes on passive income

30,500



The exempon from tax interested income derived from long term peso ban deposit is not applicable to NRA-NETB.

Creditable Withholding Tax Rate 205. Professional fees, promoonal, and talent fees, or any other form of remuneraon for the services rendered by an individual individu al payee shall be subject to creditable withholding tax rate of: a. 5% if the individual individual payee’ payee’ss gross gross income income for the current current year year did not exceed exceed P3,000,00 P3,000,000. 0. b. 5% if the individual individual payee’ payee’ss gross gross income income for the current current year year is more more than P3,000,000 P3,000,000.. c. 5% if the individual individual payee’ payee’ss gross gross income income for the current current year year did not exceed exceed P720,000. P720,000. d. 10% if the individual individual payee’ payee’ss gross gross income for for the current current year did did not exceed exceed P720,000. P720,000.  

Answer: A

206. Professional fees, promoonal, and talent fees, or any other form of remuneraon for the services rendered by non-individual payee p ayee shall be subject to creditable withholding tax rate of: a. 5% if the individual individual payee’ payee’ss gross gross income income for the current current year year did not exceed exceed P3,000,00 P3,000,000. 0. b. 5% if the individual individual payee’ payee’ss gross gross income income for the current current year year is more more than P3,000,000 P3,000,000.. c. 5% if the individual individual payee’ payee’ss gross gross income income for the current current year year did not exceed exceed P720,000. P720,000. d. 10% if the individual individual payee’ payee’ss gross gross income for for the current current year did did not exceed exceed P720,000. P720,000.  

Answer: D

207. The 15% creditable withholding tax rate of professional fees in the case of non-individual payee shall be applied in i n the following cases:

I.  The payee failed to provide the income payor/withholding agent with a notarized sworn statement/declaraon that the company or corporaon’s gross income is esmated not to exceed P720,000

 

II. The income payment exceeds P720, despite receiving the sworn declaraon from the income payee a. I only

c. I or II

b. II only

d. Neither I nor II

 

Answer: C

208.. The notari 208 notarized zed sworn sworn declar declarao aon n that that the compan company y or corpor corporao aon’ n’ss gr gross oss income income is esmated not to be exceed P720,000 during the taxable year shall be executed by the: a. Treasurer b. Chie Chieff Fina Financ nce e Oce Ocerr c. Gene Generral Ac Acco coun unttant ant d. Pr Pres esid iden ent/ t/man manag aging ing

partn partner er

of

th the e

corp corpor ora aon on/c /com ompa pany ny/g /gene enera rall

prof profes essi sion onal al

partnerships.  

Answer: D

209.  Stateme Statement nt 1:   Under Under RR 11 11-2 -201 018 8 th the e withho withhold lding ing tax tax rate rate of in indiv dividu idual al pa paye yees es fo forr “Professional “Profess ional fees” shall be either 5% or 10%

Statement 2: If the individual’s service is not covered by the denion of a “Professional” “Professional” under RR 8-2018 and does d oes not fall under Secon 2.57 (A) of RR 2-98 as amended by RR 11-2018, the same shall be subjected to 2% creditable c reditable withholding tax rate. a. b. c. d.

Only Only sta state teme ment nt 1 is is corr correct ect Only Only sta statem tement ent 2 is is ccorr orrect ect Both Both sta state teme ment nt are are cor corre rect ct Both Both sta state temen mentt a are re incorr incorrect ect

 

Answer: C (basis: RMC 50-2018)

210. Statement 1: Partners of GPPs are required to register as Professionals.

Statement 2: Partners of GPPs can opt to choose ch oose the 8% preferenal income tax rate. a. b. c. d.

Only Only sta state teme ment nt 1 is is corr correct ect Only Only sta statem tement ent 2 is is ccorr orrect ect Both Both sta state teme ment nt are are cor corre rect ct Both Both sta state temen mentt a are re incorr incorrect ect

Answer: A (basis: RMC 50-2018) 211. Income payment made periodically or at the end of the taxable year by a general professional partnership to the partners, such as drawings, advances, sharings, allowances etc., shall subject to:

 

 

a. 10 10% % n nal al wi with thho holdi lding ng tax if th the e gros grosss in inco come me for the curren currentt ye year ar do no nott ex exce ceed ed P720,000 b. 15 15% % n nal al wi with thho holdi lding ng tax if th the e gros grosss in inco come me for the curren currentt ye year ar do no nott ex exce ceed ed P720,000 c. 10% credit creditable able withho withholdin lding g tax if the gross gross income income for for the curren currentt year do not exceed exceed P720,000 d. 15% credit creditable able withho withholdin lding g tax if the gross gross income income for for the curren currentt year do not exceed exceed P720,000  

Answer: D (basis: RMC 50-2018)

212. What is creditable withholding tax rate for doctors/consultants who submied Sworn Declaraon under RR 11-2018 (gross receipts and other non-operang income is not more than (P3,000,000)? a . 2% c. 10% b . 5%  

d. nil

Answer: B o o o

Basis: RMC 50-2018 Regardless of whether they are availing the 8% preferenal tax rate or not. However, if the gross receipts and other non-operang income exceeds the P3M vat threshold, the applicable CWT shall be 10%

213. Income payment to certain contractors, whether individual or corporate, such as general engine eng ineerin ering g contr contract actor ors, s, genera generall buildin building g contr contract actor ors, s, special specialty ty contr contract actor orss and other other contractorss are subject to creditable contractor c reditable withholding tax rate of: a . 2% c. 10% b . 5% 

d. nil

Answer: A; (Basis: RMC 50-2018)

214. Income 214. Income paymen paymentt made made my top top withhol withholding ding agents agents,, eit either her priva private te corpor corporao aons ns or individuals, to their local/residents supplier of goods and local/resident supplier of services other than those covered by other rates of withholding tax? Suppli plier of of g go oods Suppl pliier of of se serv rviice a . 1% 1% b . 2% 2% c . 1% 2% d . 2% 1% 

Answer: A; (Basis: RMC 50-2018)

 

215. What is the creditable withholding tax rate on income distributed to the beneciaries of estates and trust as determined under Secon 60 of the tax code, except such as income subject to nal withholding tax and tax-exempt income? a . 2% c. 10% b . 5% 

d. nil

Answer: D; (Basis: RMC 50-2018)

216. Stateme Statement nt 1: An individual taxpayer under a contract of service or job order arrangement is considered self-employed.

Statement 2: If the individual taxpayer n Statementb1 was hired by Public or Government sector,, the income payor shall withheld both sector b oth the income tax and applicab applicable le business tax.

Statement 3:  If the individual taxpayer n Statementb1 was hired by Private sector, the income payor shall withheld the income tax only a. Only Only sta state teme ment nt 1 is is corr correct ect b. Only Only stat stateme ement nt 1 and and 2 are are corr correct ect c. Only Only sta statem tement ent 2 and and 3 are correc correctt d. All stat stateme ement nt are are corr correct ect  

Answer: D (basis: RMC 50-2018) o Basis: RMC 50-2018 o Statement 2: if the payee’s annual gross receipt will not exceed P250,000 from a “lone” payor, the income payments maybe exempt from withholding of both income tax and percentage tax, if the payee signied the opon to be taxed at 8% preferenal income tax rate. o Statement 3: if the payee’s annual gross receipt will not exceed P250,00 fom a “lone” payor, the income payments maybe exempt from withholding of income tax. o Statement 3 is correct since the applicable business tax shall be paid by the payee himself/herself. himself/herself.

217. What is the applicable withholding withhold ing tax rate for director’s fees? fees? a. If the director director receiv receiving ing the directo director’ r’ss fee is also an employ employee ee of the same enty enty, the fe fees es shal shalll from from pa part rt of th the e comp compens ensa aon on incom income e subje subject ct to wit withho hholdi lding ng tax tax in compensaon income. b. If the the direc directo torr no nott an emplo employe yee e of the incom incomee-pa payo yorr the the subj subjec ectt is conside considere red d a profes pro fessio sional nal subject subject to the credit creditable able expande expanded d withhol withholding ding tax tax prescr prescribed ibed fo forr a professional and subject also to applicable business tax. c. In the case of of a government government employee employee who seats seats a board board member of of other Governm Government ent Owned and Controlled Corporaons (GOCCs), and is receiving director’s fees, honoraria

 

and/or other benets shall be subject to creditable withholding tax at the higher rate for professional of 10% d. All All o off the the ab abo ove 

Answer: D; (Basis: RMC 50-2018)

218.. What 218 What is the applicable applicable withhol withholding ding tax applica applicable ble to diploma diplomat’ t’ss wife wife who is locall locally y employed? a. 2% credi creditab table le with withhold holding ing tax tax rat rate e b. 5% credi creditab table le withho withholdin lding g tax tax rate rate c. 10% credit creditable able withho withholdin lding g ttax ax rat rate e d. Withholding Withholding tax tax using the the withholding withholding tax tax table for for compensa compensaon on income income 

Answer: D; (Basis: RMC 50-2018)

Filing o Income Tax Returns 219. Statement 1: Where an income tax return is required (e.g. in loan applicaons) and the individual did not le an income tax return because of the rules on “substute ling of income tax return” the cercate of withholding income tax signed by the employer and the employee will be the document use

Statementt 2: The rules on substuted ling of income tax return cannot apply if one of the Statemen spouse has business or mixed income a. The rst rst statem statement ent is true true while the the second second stateme statement nt is false false b. The rst rst statem statement ent is false false while while the second second statem statement ent is true true c. Both Both sta state teme ment ntss are are tr true ue d. Both Both sta state temen ments ts are false false  

Answer: C

220. The following are the requirements for substuted ling of income tax return except a. He had had one one empl emplo oyer yer b. His incom income e was pure purely ly compens compensao aon n income income c. Income Income tax tax withhe withheld ld by the the employ employer er is corr correct ect d. He had consecuve consecuvely ly led his income income tax tax return return for for the past past ve years years  

Answer: D

221. Statement 1:  if an employee had mulple employers within a year, an income tax return must be led at the end of the year

 

Statement 2: if an employee had a three employers, on succession, for each of the past three years, substuted ling of tax return is not allowed a. Stat Statem emen entt 1 & 2 are are ffals alse e b. Statement Statement 1 is true but but statem statement ent 2 is false false c. Stat Stateme ement nt 1 is fal false se but but stat stateme ement nt 2 is true true d. Stat Statem emen entt 1 & 2 are are true true  

Answer: B

222. 1st statement: Taxable income from self-employment (business and profession) is reported on a quarterly and annual basis.

2nd statement: The quarterly income tax return shall be led and the tax paid as follows: 1st Q – not later than April 15, 2nd Q – not later than August 15, 3 rd Q – not later than September 15. a. Stat Statem emen entt 1 & 2 are are ffals alse e b. Statement Statement 1 is true but but statem statement ent 2 is false false c. Stat Stateme ement nt 1 is fal false se but but stat stateme ement nt 2 is true true d. Stat Statem emen entt 1 & 2 are are true true  

Answer: B

223. Pedro’s Pedro’s income tax due d ue for the year amounted to P80,000. He may elect to pay the tax due du e on installment as follows: a. In two two eq equal ual inst instal allm lmen ents ts b. 1st installment is payable upon ling the annual income tax return. c. 2nd installment is payable on or before October 15 following the close of the calendar year d. All All o off the the ab abo ove  

Answer: D

224. 1st statement: If any installment payment of income tax is not paid on or before the date xed for its payment, the whole amount of the unpaid tax becomes due and payable, together with the delinquency penales to be reckoned from on the original date when the tax is required to be paid. 2nd  stat stateme ement: nt: Insta Installm llment ent paymen paymentt of income income is not allowed allowed to sel selff-emp employ loyed ed and/or and/or professional who are availing he 8% income tax rate. a. Stat Statem emen entt 1 & 2 are are ffals alse e

 

b. Statement Statement 1 is true but but statem statement ent 2 is false false c. Stat Stateme ement nt 1 is fal false se but but stat stateme ement nt 2 is true true d. Stat Statem emen entt 1 & 2 are are true true  

Answer: B