UNIVERSITY OF THE PHILIPPINES

COLLEGE OF LAW
BAR OPERATIONS COMMISSION
Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines
Telefax o! "20#$$1% loc# 31$ & Mo'ile o! 0"1(#")23"01
TAXATION (Answer Key)
1# *ne of these is t+ue!
a# ,ai-e+ of p+esc+ipti-e pe+io. to last until the completion of in-esti/ation is -ali.#
b. W!"er !s #$%yer&s '(n'ess!(n #( #)e s##e* #)+s* !# ,+s# be '(ns#r+e-
s#r!'#.y /!ns# #)e s##e
c# ,ai-e+ 'ein/ unilate+al, the state nee. not exp+ess its acceptance, an. 0hen
accepte., the taxpaye+ nee. not 'e notifie.#
.# ,ai-e+ 'ein/ unilate+al, acceptance 'y the state nee. not o'se+-e the le-el of
autho+ity of the officials empo0e+e. to accept#
2# *ne of these has no time limit 0ithin 0hich to assess!
a# 1ncome tax
'# T+ansfe+ taxes 2.ono+ o+ estate3
c# 4alue 5..e. Tax
-. Pr!"!.e/e #$
3# *ne of these is not a type of local tax an. othe+ impositions 6
a# Municipal taxes on 'usiness 7 occupations
'# Municipal fees 7 se+-ice cha+/es
c# Real p+ope+ty taxes
-. T$es (n /r(ss re'e!%#s (0 #rns%(r##!(n b+s!nesses
%# 8o+ casual sale of +eal p+ope+ty, you .o not pay 6
a# Capital /ains tax
'# Documenta+y stamp tax
c# 9ocal t+ansfe+ tax
-. In'(,e #$
$# :pecial classes of +eal p+ope+ty .o not inclu.e 6
a# 9ocal 0ate+ .ist+ict
b. P+b.!' %(wer 1 /ener#!n/ '(,%ny
c# Hospitals
.# :chools
;# ,hich is not a le-y on +eal p+ope+ty 6
a# :pecial e.ucation fun.
'# 5. -alo+em tax on i.le lan.
c# :pecial assessment
-. Trns0er #$ (n s.e (r #rns0er
(# The manufactu+e of casino +u''in/ alcohol is su'<ect to!
a# 45T
'# pe+centa/e tax
UNIVERSITY OF THE PHILIPPINES
COLLEGE OF LAW
BAR OPERATIONS COMMISSION
Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines
Telefax o! "20#$$1% loc# 31$ & Mo'ile o! 0"1(#")23"01
c# specific tax
-. -".(re, #$
)# 5 tax impose. at e-e+y sta/e of .ist+i'ution p+ocess on the sale, 'a+te+ o+ exchan/e
of /oo.s an. se+-ices an. t+ansactions .eeme. sale, as 0ell as impo+tation of /oo.s an.
se+-ices#
a# p+i-ile/e tax
'# pe+centa/e tax
'. VAT
.# excise tax
"# Ma+io .ispute. a .eficiency tax assessment an. upon +eceipt of an a.-e+se .ecision
'y the Commissione+ of 1nte+nal Re-enue, file. an appeal 0ith the Cou+t of Tax 5ppeals#
,hile the appeal is pen.in/, the =1R se+-e. a 0a++ant of le-y on the +eal p+ope+ties of
Ma+io to enfo+ce the collection of the .ispute. tax# >+antin/ a+/uen.o that the =1R can
le/ally le-y on the p+ope+ties, 0hat coul. Ma+io .o to stop the p+ocess?
a# 5ppeal the =1R@s action to the Cou+t of 5ppeals
'# Dispute =1R@s le-y on the p+ope+ties 'efo+e the Cou+t of Tax 5ppeals
c# 8ile a motion fo+ in<unction 0ith the Cou+t of Tax 5ppeals on the /+oun. that such
collection 0ill <eopa+.ize the inte+est of the taxpaye+ o+ the /o-e+nment#
-. Se'+re #e,%(rry res#r!n!n/ (r-er be0(re #)e S+%re,e C(+r#.
10# 5..itional exemption fo+ each .epen.ent chil. pe+ R5 "$0%
a# P 10,000
'# P ",000
c# P ),000
-. P 23*444
11# 1ncome tax is not a
a# pe+sonal tax
'# national tax
'. e$'!se #$
.# .i+ect tax
12# An.e+ R5)%2%, the allo0a'le .e.uction fo+ me.ical expenses of a +esi.ent .ece.ent
shall not excee. !
a# P $0,000
'# P $$0,000
c# P $,000
-. P 344*444
13# Pe+ R5 "$0%, ho0 much is the total pe+sonal an. a..itional exemption of M+s# 5, 0ho
'ecame a 0i.o0 .u+in/ the taxa'le yea+ an. suppo+tin/ he+ mothe+ an. one mentally
+eta+.e. ille/itimate 2$ yea+Bol. chil.?
. P 53* 444
'# P %0, 000
c# P 100, 000
UNIVERSITY OF THE PHILIPPINES
COLLEGE OF LAW
BAR OPERATIONS COMMISSION
Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines
Telefax o! "20#$$1% loc# 31$ & Mo'ile o! 0"1(#")23"01
.# P %), 000
1%# The follo0in/ is not a taxa'le income of a +esi.ent 8ilipino citizen!
a# income f+om an ille/al 'usiness
'# income f+om a 'usiness a'+oa.
c# income f+om casino
-. w!nn!n/s 0r(, .(##(
1$# ,hich of the follo0in/ a+e exclu.e. f+om the /+oss estate?
. %r('ee-s (0 .!0e !ns+rn'e %(.!'y %yb.e #( n !rre"('b.e bene0!'!ry
'# +e-oca'le t+ansfe+s
c# t+ansfe+ in contemplation of .eath
.# claims a/ainst insol-ent pe+sons
1;# =asically, po0e+ of taxation is exe+cise. 'y
a# the P+esi.ent
b. #)e C(n/ress
c# Cu.icia+y
.# =1R
1(# The stan.a+. .e.uction of P 1,000,000 f+om the /+oss estate is!
a# optional
b. !n --!#!(n #( #)e !#e,!6e- -e-+'#!(ns
c# not a-aila'le to +esi.ent .ece.ents
.# in lieu of all itemize. .e.uctions
1)# The follo0in/ a+e the +eDuisites fo+ income to 'e taxa'le, except!
a# The+e must 'e /ain o+ p+ofit
'# The /ain must 'e +ecei-e. o+ +ealize.
c# The /ain must not 'e exclu.e. 'y la0 o+ t+eaty f+om taxation
-. T)e !n'(,e ,+s# e$'ee- #)e %ers(n. n- --!#!(n. e$e,%#!(ns (0 #)e
#$%yer
1"# ,ho amon/ the follo0in/ a+e *T +eDui+e. to file an income tax +etu+n?
a# 8ilipino citizen 0ith 'usiness income f+om the Philippines#
'# Resi.ent alien on income .e+i-e. 0ithin the Philippines#
c# onB+esi.ent alien en/a/e. in t+a.e o+ 'usiness
-. An !n-!"!-+. w)(se s(.e !n'(,e )s been s+b7e'#e- #( 0!n. w!#))(.-!n/
#$.
20# An.e+ R5 "33(, a p+esumpti-e input tax c+e.it is allo0e. to
p+ocesso+sEmanufactu+e+s of milF, sa+.ines, macFe+el, +efine. su/a+, cooFin/ oil, an.
pacFe. noo.leB'ase. instant meals at the +ate of!
a# 1#$G
UNIVERSITY OF THE PHILIPPINES
COLLEGE OF LAW
BAR OPERATIONS COMMISSION
Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines
Telefax o! "20#$$1% loc# 31$ & Mo'ile o! 0"1(#")23"01
b. 89
c# 2G
.# )G
21# The follo0in/ a+e Dualifie. .epen.ents of a hea. of the family, except!
a# Hithe+ o+ 'oth pa+ents
'# =+othe+E:iste+ of 0hole o+ halfB'loo.
c# :enio+ citizen
-. Grn-')!.-ren
22# ,hich of the follo0in/ is .e.ucti'le fo+ income tax pu+poses!
. E,%.(yer&s '(n#r!b+#!(n #( %ens!(n #r+s#
'# Pe+sonal, family, li-in/ expenses
c# ,a/e+in/ losses
.# IicF'acFs
23# 8o+ tax pu+poses, income is synonymous to!
a# Capital
b. Re'e!%#s
c# Realize. p+ofit
.# 5ccumulate. P+ofit
2%# The follo0in/ can a-ail of the 1nput Tax C+e.it, except!
a# 1mpo+te+ of /oo.sEa+ticles p+e-iously su'<ecte. to 45T
'# Pu+chase+ of .omestic /oo.s upon consummation of the sale
'. E$%(r#er (0 /((-s n- ser"!'es n(# re/!s#ere- +n-er #)e VAT sys#e,
.# Pu+chase+ of se+-ices, lessee o+ licensee upon payment of compensation, +ental,
+oyalty o+ fee
2$# H.ucational se+-ices +en.e+e. 'y p+i-ate e.ucational institutions a+e exempt f+om
45T if .uly acc+e.ite. 'y the follo0in/, except!
. Se'+r!#!es n- E$')n/e C(,,!ss!(n
'# Commission on Hi/he+ H.ucation
c# Depa+tment of H.ucation, Cultu+e an. :po+ts
.# Technical H.ucation an. :Fills De-elopment 5utho+ity
2;# 8o+ 45T pu+poses in connection 0ith .efe++e. payment sale of +eal p+ope+ty, the te+m
Jinitial paymentsK shall inclu.e!
. Py,en#s ,-e !n #)e yer (0 s.e !n --!#!(n #( #)e -(wn %y,en#
'# Mo+t/a/e on the +eal p+ope+ty sol. not excee.in/ the cost the+eof
c# H-i.ence of in.e'te.ness issue. 'y the pu+chase+ to the selle+ at the time of sale
.# Do0n payment only ma.e at the time of sale#
2(# 1n ou+ <u+is.iction, 0hich of the follo0in/ statements may 'e e++oneous!
a# Taxes a+e pecunia+y in natu+e#
'# Taxes a+e enfo+ce. cha+/es an. cont+i'utions#
UNIVERSITY OF THE PHILIPPINES
COLLEGE OF LAW
BAR OPERATIONS COMMISSION
Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines
Telefax o! "20#$$1% loc# 31$ & Mo'ile o! 0"1(#")23"01
c# Taxes a+e impose. on pe+sons an. p+ope+ty 0ithin the te++ito+ial <u+is.iction of a
:tate#
-. T$es re .e"!e- by #)e e$e'+#!"e brn') (0 #)e /("ern,en#.
2)# Citin/ :ection 10, 5+ticle 4111 of the 1")( Constitution 0hich p+o-i.es that sala+ies of
<u./es shall 'e fixe. 'y la0 an. that .u+in/ thei+ continuance in office thei+ sala+y shall
not 'e .ec+ease., a <u./e of a Re/ional T+ial Cou+t Duestione. the .e.uction of
0ithhol.in/ taxes f+om his sala+y since it +esults into a net .e.uction of his pay#
1s the contention of the <u./e co++ect?
a# o# The contention is inco++ect 'ecause taxes a+e enfo+ce. cont+i'utions#
'# o# The contention is inco++ect 'ecause taxes must 'e collecte. in o+.e+ to suppo+t
the /o-e+nment#
'. N(. T)e '(n#en#!(n !s n(# '(rre'# be'+se -e-+'#!(n (0 w!#))(.-!n/ #$es !s
n(# -!,+n!#!(n '(n#e,%.#e- by #)e 0+n-,en#. .w.
.# o# The contention is inco++ect 'ecause .e.uction of 0ithhol.in/ taxes is +eDui+e.
'y la0#
2"# ,hat is the minimum comp+omise +ate in cases of .ou'tful -ali.ity of assessment?
. 849 (0 #)e bs!' ssesse- #$
'# 10G of the 'asic assesse. tax
c# o limitation
.# P1,000,000
30# ,hich of the follo0in/ 45T t+ansactions a+e not consi.e+e. ze+oB+ate.?
a# Hxpo+t sales of /oo.s
b. :(,es#!' s.e (0 /((-s !n #)e re/+.r '(+rse (0 #r-e (r b+s!ness
c# 8o+ei/n cu++ency .enominate. sale
.# :ale of /ol. to =an/Fo :ent+al n/ Pilipinas
31# =a+'a+an municipality has an o+.inance 0hich +eDui+es that all sto+es, +estau+ants,
an. othe+ esta'lishments sellin/ liDuo+ shoul. pay a fixe. annual fee of P20,000#
:u'seDuently, the municipal 'oa+. p+opose. an o+.inance imposin/ a sales tax
eDui-alent to $G of the amount pai. fo+ the pu+chase o+ consumption of liDuo+ in sto+es,
+estau+ants, an. othe+ esta'lishments# The municipal mayo+ +efuse. to si/n the
o+.inance on the /+oun. that it 0oul. constitute .ou'le taxation#
1s the +efusal of the mayo+ <ustifie.?
a# o# The +efusal of the mayo+ is un<ustifie. 'ecause .ou'le taxation is allo0e. in ou+
<u+is.iction#
b. N(. T)e re0+s. (0 #)e ,y(r !s n(# 7+s#!0!e- be'+se #)e !,%(s!#!(ns re (0
-!00eren# n#+re n- ')r'#er.
c# o# The +efusal of the mayo+ is un<ustifie. 'ecause it is not 0ithin his po0e+#
.# o# The +efusal of the mayo+ is not <ustifie. 'ecause .ou'le taxation 0ill /ene+ate
mo+e +e-enues#
UNIVERSITY OF THE PHILIPPINES
COLLEGE OF LAW
BAR OPERATIONS COMMISSION
Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines
Telefax o! "20#$$1% loc# 31$ & Mo'ile o! 0"1(#")23"01
32# This is a summa+y a.minist+ati-e +eme.y, seizu+e of +eal p+ope+ty to enfo+ce
payment of tax .ue!
. Le"y
'# Dist+aint
c# 8o+feitu+e
.# Tax lien
33# Tino is en/a/e. in 'uyin/ an. sellin/ of f+esh f+uits at the QBMa+t an. 5+anDue
Ma+Fets# He is also expo+tin/ canne. an. p+ese+-e. f+uits to Capan# 1n 200%, he ma.e a
/+oss sales of P2,000,000# He is lia'le fo+ 45T +e/ist+ation fee of !
. P344
'# P1,000
c# P1,$00
.# Hxempt
3%# :hi+ley 0as allo0e. to .e.uct P200,000 'a. .e'ts 0+itten off in 2003, 0he+e she ha.
a net income 'efo+e 'a. .e'ts of P1)0,000 an. a net loss of P20,000# 1 200%, she 0as
a'le to +eco-e+ the 'a. .e'ts 0+itten off in full# The 'a. .e'ts +eco-e+y is!
a# Taxa'le to the extent of P1)0,000
'# Taxa'le to the extent of P20,000
'. T$b.e #( #)e e$#en# (0 P244*444
.# ot taxa'le
3$# :epa+ation pay is taxa'le#
a# if sepa+ation is .ue to .eath, sicFness o+ in<u+y of employee
b. !0 e,%.(yee "(.+n#r!.y res!/ne-
c# if employee +esi/ne. at the a/e of ;0
.# if the employe+ close. shop
3;# The follo0in/ a+e taxe. liFe co+po+ation
a# /ene+al p+ofessional pa+tne+ship
b. (r-!nry b+s!ness %r#ners)!%
c# estates an. t+usts
.# all of the a'o-e
3(# 45T is
a# special tax
'# local tax
'. s%e'!0!' #$
.# +e/+essi-e tax
3)# 1f monthly +ental income of a +esi.ential unit excee.s P 10,000 pe+ unit, the same
shall 'e su'<ect to 12G 45T#
a# T+ue, 0ithout any fu+the+ con.ition#
UNIVERSITY OF THE PHILIPPINES
COLLEGE OF LAW
BAR OPERATIONS COMMISSION
Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines
Telefax o! "20#$$1% loc# 31$ & Mo'ile o! 0"1(#")23"01
b. Tr+e* (n.y !0 #)e #(#. /r(ss nn+. ren#.s re'e!"e- e$'ee- P ;.3<
c# 8alse, this is su'<ect to 0G 45T#
.# 8alse, this is exempt f+om 45T un.e+ R5 "33(
3"# The p+elimina+y in-esti/ation of a f+au.ulent tax e-asion case may 'e en<oine. in the
follo0in/ cases#
a# 0hen the+e is a p+e<u.icial Duestion
'# 0hen .ou'le <eopa+.y is clea+ly appa+ent
'. w)en ')r/es re ,n!0es#.y 0.se n- ,(#!"#e- by .+s# 0(r "en/en'e
.# 0hen the cou+t has no <u+is.iction o-e+ the offense
%0# :ale of +eal estate is su'<ect to 45T
. Tr+e* !0 ,-e !n #)e re/+.r '(+rse (0 #r-e (r b+s!ness
'# 8alse, it is exempt if the +eal estate is not classifie. as capital asset
c# 8alse, it is exempt if 0hat is sol. is a +esi.ential unit
.# T+ue, if 0hat is sol. is a +esi.ential unit
%1# ,hy is the 8+in/e =enefits Tax collecti'le f+om the employe+ an. not f+om the
employee?
a# 4aluation of 'enefits is easie+ at the le-el of the employe+
b. C(..e'#!(n (0 F=T !s ens+re- be'+se !# !s w!#))e.- # s(+r'e
c# The employee .oes not ha-e the means to pay
.# a an. ' a+e co++ect
%2# 5 taxpaye+ 0ith /+oss annual sales not excee.in/ P100, 000 is exempt f+om payment
of 'usiness tax an. +e/ist+ation +eDui+ements#
a# T+ue
b. F.se* re>+!re- #( re/!s#er w!#) #)e =IR b+# e$e,%# 0r(, #)e %y,en# (0
re/!s#r#!(n 0ee
c# 8alse, +eDui+e. to pay +e/ist+ation fee
.# ' an. c a+e co++ect
%3# ,hich of the follo0in/ statements is 0+on/?
a# The MC1T is eDual to 2G of the /+oss income of the co+po+ation
b. T)e <CIT !s n(# '(,%+#e- >+r#er.y b+# (n n nn+. bs!s
c# The MC1T payments can 'e ca++ie. o-e+ fo+ the next 3 yea+s imme.iately follo0in/
such payment
.# The taxpaye+ shoul. pay the MC1T o+ the +e/ula+ income tax 0hiche-e+ is hi/he+#
%%# The follo0in/ a+e su'<ect to 3G common ca++ie+@s tax, except!
a# taxica' ope+ato+s
b. '(,,(n 'rr!ers #rns%(r#!n/ 'r/(es
c# tou+ist 'uses
.# moto+ t+icycles

%$# #5ssessment is necessa+y in the follo0in/ cases, except!
UNIVERSITY OF THE PHILIPPINES
COLLEGE OF LAW
BAR OPERATIONS COMMISSION
Room 321 Malcolm Hall, Diliman, Quezon City 1101 Philippines
Telefax o! "20#$$1% loc# 31$ & Mo'ile o! 0"1(#")23"01
. be0(re #)e %re.!,!nry !n"es#!/#!(n (0 0r+-+.en# #$ e"s!(n 'se '(+.-
%r(s%er
'# to fix the tax lia'ility of a taxpaye+
c# esta'lish a case fo+ <u.icial action
.# fo+ issuance of 0a++ant of .ist+aint o+ le-y
%;# The manufactu+e an. impo+tation of the follo0in/ fo+ local consumption a+e su'<ect
to excise tax, except!
a# alcohol p+o.ucts
'# to'acco p+o.ucts
'. '!ne,#(/r%)!' 0!.,s
.# mine+al p+o.ucts
%(# The =1R commissione+ mayLLLLLLLLL payment of inte+nal +e-enue tax 0hen it appea+s
to 'e un<ustly o+ excessi-ely assesse., o+ that the a.minist+ati-e an. collection costs
in-ol-e. .o not <ustify the collection the+eof#
a# comp+omise
b. b#e
c# c+e.it
.# +efun.
%)# o c+e.itE+efun. of taxes shall 'e allo0e. unless the taxpaye+!
. F!.es wr!##en '.!, 0(r 're-!#?re0+n- w!#) #)e =IR w!#)!n 2 yers 0r(,
%y,en#
'# Pays the tax un.e+ p+otest
c# 5ppeals to the CT5
.# 5men.s his tax +etu+n
%"# The p+elimina+y in-esti/ation of a f+au.ulent tax e-asion case may 'e en<oine. in the
follo0in/ cases#
a# 0hen the+e is a p+e<u.icial Duestion
'# 0hen .ou'le <eopa+.y is clea+ly appa+ent
'. w)en ')r/es re ,n!0es#.y 0.se n- ,(#!"#e- by .+s# 0(r "en/en'e
.# 0hen the cou+t has no <u+is.iction o-e+ the offense
$0# ,hich of the follo0in/ statements is 0+on/?
a# The MC1T is eDual to 2G of the /+oss income of the co+po+ation
b. T)e <CIT !s n(# '(,%+#e- >+r#er.y b+# (n n nn+. bs!s
c# The MC1T payments can 'e ca++ie. o-e+ fo+ the next 3 yea+s imme.iately follo0in/
such payment
.# The taxpaye+ shoul. pay the MC1T o+ the +e/ula+ income tax 0hiche-e+ is hi/he+#