Chapter 14 Percentage Taxes2013

BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 105
SUGGESTED ANSWERS
Chapter 14: OTHER PERCENTAGE TAXES
CHAPTER 14
PERCENTAGE TAXES
Problem 141
1. False 3% of gross sales or gross receipts.
2. False business tax.
3. False advalorem tax.
4. False if the business is VAT-registered or engaged in business tax-exempt tra
nsactions, it
shall not be subject to 3% OPT. Also not all OPT rate is 3%.
5. False Non-VAT business is not allowed to have Input VAT.
6. True
7. False expressly exempted from business tax by law. (R.A. 8424)
8. False the 3% is applicable only to transport by land. Transport by water and
air is subject
to 12% VAT.
9. True
10. False 2% percentage tax.
11. True
12. True
13. False Premium collections outside the Philippines from nonresident person is
exempt.
14. True
15. False only gross receipts within.
Problem 142
1. False Option to register not required under OPT. The business can also regist
er as VAT.
2. True
3. False minimum quarterly receipts or actual quarterly gross receipts, whicheve
r is higher.
4. True
5. False Subject to VAT for being registered as VAT
6. False CNN is exempt from OPT because the communication is for news services.
7. True
8. True
9. False amusement taxes ranging from 10% to 30%
10. True
11. False Horse races cost of winning ticket is deductible.
12. False not deductible.
13. False only interest is subject to GRT
14. False national tax
15. True
Problem 143
1.
B
2.
A
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
B
B
C
C
A
B
D should be NOT covered by
P1,919,500 threshold.
C
D
C
Problem 144
1.
A
2.
A should be is NOT exempt
from OPT.
3.
C
4.
A
5.
D
6.
B
7.
A
8.
B
9.
D
10.
11.
12.
B
A
C
ALL RIGHTS RESERVED BY VALENCIA EDUCATIONAL SUPPLY.
This solution manual is not for sale. Any person who sells it in photocopy, mech
anical or
electronically is unauthorized and shall be prosecuted in accordance with law.
SUGGESTED ANSWERS
Problem 14 5
D
Zero. Monthly rental income of P12,800 or less per unit of residential property
is exempt from
business tax regardless of the aggregate amount per year.
Problem 14 6
C
Beginning inventory
Add: Purchases
Total
Less: Ending inventory (P100,000 + P196,000)
Cost of sales
Add: Gross profit (P700,000 x 100%)
Sales
Multiplied by OPT rate
Business tax
P 100,000
896,000
P 996,000
296,000
P 700,000
700,000
P1,400,000
3%
P
42,000
Problem 14 7
D
Other percentage tax (P403,200/112%) x 3%
VAT (P403,200/9.333)
Surcharge (P43,200 x 50%)
Total amount due
P10,800
43,200
21,600
P75,600
Problem 14 8
C
Other percentage tax (P800,000 x 3%)
P24,000
Problem 14 9
A
Sales (P1,330,000/70%)
Business tax
P1,900,000
3%
P
57,000
Problem 14 10
B
Net taxable income (P180,000/30%)
Add: OSD (P600,000/60%) x 40%
Gross income
Add: Cost of sales
Gross sales
OPT
P 600,000
400,000
P1,000,000
800,000
P1,800,000
3%
P
54,000
Problem 14 11
1. Letter C
Sales (P35,000/25%) x 12
Annual business tax
P1,680,000
3%
P
50,400
2.
Letter D
Sales (P35,000/20%*) x 12
Multiplied by VAT rate
Annual business tax
*Computation of 20%:
Sales
125%
Cost
100%
Gross profit
25%
P2,100,000
12%
P 252,000
(25%/125%) = 20%
anical or
SUGGESTED ANSWERS
Problem 14 12
A
Cooperatives are exempt from income and business tax on their sales. Furthermore
all of the
sales reported are VAT and OPT exempt products.
Problem 14 13
1.
Letter D
Percentage tax
There is no percentage tax because nonprocessed agricultural
food products are business tax exempt.
2.
P - 0 -
Letter B
Total sales (P5M + P20M)
Less: Cost of sales (P3M + P12M)
Gross income
Less: OSD (P10,000,000 x 40%)
Net taxable income
Multiplied by corporate income tax rate
Income tax due and payable (OSD provides lesser income tax)
P25,000,000
15,000,000
P10,000,000
4,000,000
P 6,000,000
30%
P 1,800,000
Problem 14 14
C
OPT withheld (P90,000 x 3%)
Proof:
Sales (P86,400/96%)
Less: OPT withholding (P90,000 x 3%)
Creditable withholding tax (P90,000 x 1%)
Net sales proceeds
Problem 14 15
B
Service fee
Less: OPT (P30,000 x 3%)
Creditable withholding tax (P30,000 x 2%)
Net check payment
P 2,700
100%
(3%)
(1%)
P90,000
P2,700
900
3,600
P86,400
P30,000
P900
600
1,500
P28,500
Problem 14 16
D
Gross receipts
Less: Operating expenses
Net income before personal exemption
Less: Personal exemption
Net taxable income
P350,000
50,000
P300,000
50,000
P250,000
Income tax due of P250,000 (Sec. 24A,NIRC)
P 50,000
Note: Owners of bancas and owners of animal-drawn two-wheeled vehicles are busin
ess taxexempt; but subject to income taxes.
Problem 14 17
B
Percentage taxes:
Taxi (P1,500,000 x 3%)
Bus (15 x P7,200 x 3%)
VAT (P50,000 x 12%)
Common carrier tax due
P45,000
3,240
6,000
P54,240
Note: The gross receipts from the transport of cargoes by domestic carriers by l
and shall still subject to 12%
VAT. (R.A. 9337)
anical or
SUGGESTED ANSWERS
Problem 14 18
D
Total gross receipts (P1,000,000 + P6,000,000)
Multiplied by applicable business tax rate
Total business tax
P7,000,000
12%
P 840,000
Note: Common carrier by sea is subject to VAT of 12%.
Problem 14 19
A
Percentage tax (P10,000,000 x 3%)
VAT (P6,000,000 + P1,000,000) x 12%
Average business tax in a year
Divided by number of quarter in a year
Estimated average business tax per quarter
Problem 14 20
C
Percentage tax (P10,000,000 x 3%)
Problem 14 21
1.
Letter D
Business tax
If Philippine registry, zero-rated on their transport of passengers and
cargo from the Philippine port to a foreign port (vice versa).
2.
Letter C
Manila to USA (P1,000,000 x 3%)
Manila to China (P1,400,000 x 3%)
Philippine business tax
Problem 14 22
C
Percentage tax water franchise (P1,000,000 x 2%)
Problem 14 23
B
Percentage tax water franchise (P2,000,000 x 2%)
Percentage tax radio franchise (P10,000,000 x 3%)
Total percentage tax
Problem 14 24
NOT IN THE CHOICES
OPT Overseas call (P5,000 x 10%)
VAT - Local calls (P2,000 x 12%)
Total percentage tax or business tax
Problem 14 25
Exempt
P 300,000
840,000
P1,140,000
4
P 285,000
P 300,000
P - 0 -
P30,000
42,000
P72,000
P 20,000
P 40,000
300,000
P 340,000
P500
240
P740
A
Problem 14 26
D
Service charge (P75,000/10%)
Add: Percentage tax (P750,000 x 10%)
Total collection
P 750,000
75,000
P 825,000
Problem 14 27
D
P - 0 -. Premium on life insurance from a nonresident alien is not covered of bu
siness tax in the
Philippines.
anical or
SUGGESTED ANSWERS
Problem 14 28
C
Life insurance (P10,000,000 x 80% x 5%)
Non-life insurance (P5,000,000 x 12%)
Total
Less: Life insurance refund within 6 months
(P2,000,000 x 30%) x 5%
P400,000
60,000
P460,000
30,000
P430,000
Problem 14 29
NOT IN THE CHOICES
Amusement tax (P3,500,000 x 18%)
P630,000
Problem 14 30
D
Amusement tax (P500,000 + P200,000 + P100,000) x 18%
P 144,000
Problem 14 31
1.
Letter A
Percentage tax (P2,000,000 + P1,000,000) x 10%
2.
P300,000
Letter D
Exempt
Problem 14 32
B
Percentage tax [P1,000,000 - (P200,000/100)] x 10%
Problem 14 33
A
Percentage tax (P100,000 P1,000) x 10%
Problem 14 34
A
Percentage tax [400,000 x P12) x 1%
P 99,800
P 9,900
P 48,000
IPO tax rate (400,000/1,150,000) = 34.5% more than 33 1/3% = 1% percentage tax.
Problem 14 35
D
Percentage tax [P600,000 x 4%)
P 24,000
IPO tax rate (600,000/20)/ (2,600,000/20) = 23% = 4% percentage tax.
Problem 14 36
A
Number of shares sold during the IPO (400,000 x 50%)
Total outstanding shares (500,000 x 120%) + 200,000
Percentage of IPO sales
Applicable IPO tax rate
Percentage tax (P1,000 x 200,000 x 4%)
Problem 14 37
B
Percentage tax [P1,000,000 x .005)
200,000
800,000
25%
4%
P8,000,000
P 5,000
Problem 14 38
D
P - 0 -. The sale is subject to capital gains tax because the shares of stock we
re sold directly to
the buyer.
anical or
SUGGESTED ANSWERS
Problem 14 39
B
Interest income with maturity more than 5 years (P400,000 x 1%)
Leasehold income (P300,000 x 7%)
Total gross receipt tax
P 4,000
21,000
P25,000
Note: The net trading loss is deductible only from trading gain of the same taxa
ble year.
Problem 14 40
D
Interest income with maturity less than 5 years (P600,000 x 5%)
Royalty income (P300,000 x 7%)
Gain from sale of derivatives (P200,000 x 7%)
Total gross receipt tax
P 30,000
21,000
14,000
P 65,000
Note: The net trading loss for 200A is not deductible from trading gain of 200B.
Problem 14 41
D
1. Total gross receipts during the year (P360,000 x 3%)
2.
P10,800
Total gross receipts
Less: OSD (P360,000 x 40%)
Net income before personal exemption
Less: Personal exemption
Net taxable income
P360,000
144,000
P216,000
50,000
P166,000
Tax on P140,000
Tax on excess (P26,000 x 25%)
Income tax due
P22,500
6,500
P29,000
Problem 14 42
Gross receipts (P480,000 + P190,000 + P100,000 + P1,950,000 + P2,480,000)
Multiplied by applicable business tax rate - VAT
Output VAT
Add: OPT on overseas calls (P100,000 x 10%)
Total business tax
Problem 14 43
Actual gross receipts (higher) City taxi (P195,000) from April to June
Multiplied by percentage tax rate
Percentage tax payable 2nd quarter (answer)
Problem 14 44
Tax units
1
2
3
4
5
Total amount = higher amount
Multiplied by percentage tax
Percentage tax
Actual
15,000
9,000
12,000
8,000
20,000
P5,200,000
12%
P 624,000
10,000
P 634,000
P195,000
3%
P 5,850
Minimum
10,800
10,800
10,800
10,800
10,800
Higher
15,000
10,800
12,000
10,800
20,000
68,800
3%
2,058
Note: The higher of the aggregate/total amount of the actual gross receipts or m
inimum amount
is subject to other percentage tax.
anical or
SUGGESTED ANSWERS
Problem 14 45
Subject to VAT:
Transport of goods (P2.5M x 12%)
Transport of passengers (P5M x 12%)
Transport of cargoes (P3M x 12%)
Transport of animals (P1.5M x 12%)
Total business tax
P 300,000
600,000
360,000
180,000
P1,440,000
Notes:
1. Common carriers by air and water relative to the transport of passengers with
in the
Philippines is subject to 12% VAT. Transport of passengers by land however is su
bject to 3%
percentage tax.
2.
International air carriers and international shipping carriers with foreign regi
stry doing
business in the Philippines shall pay a tax of three percent (3%) of their quart
erly gross
receipts.
Problem 14 46
Gross receipts (P100,000 + P50,000 + P150,000 + P200,000)
Business tax for the quarter
Problem 14 47
Gross receipts
Multiplied by applicable franchise tax rate VAT
Franchise tax
Problem 14 48
Actual gross receipts from business operations
First quarter (P3,000,000 + P4,000,000)
Franchise tax due first quarter
P 500,000
18%
P 90,000
P50,000,000
12%
P 6,000,000
P7,000,000
12%
P 840,000
Note: During the taxable year, its business gross receipts must exceed P10,000,0
00; hence,
subject to VAT.
Problem 14 49
Gross receipts overseas calls (P500,000 x 10%)
Gross receipts local calls (P500,000 x 12%)
Total percentage taxes
P 50,000
60,000
P110,000
Problem 14 50
Total gross receipts (P600,000 + P400,000)
Multiplied by percentage tax for professional basketball organization
Percentage tax
P1,000,000
15%
P 150,000
Problem 14 51
Total gross receipts (P800,000 + P300,000 + P500,000 + P50,000)
Multiplied by applicable business tax rate for cockpits
Total business tax
P1,650,000
18%
P 297,000
Problem 14 52
Income tax on cockfighting winnings (P500,000 x 20%)
Percentage tax on horseracing winnings (P800,000 x 10%)
Income tax on horseracing winnings (P800,000 x 20%)
Total tax on winnings
P 100,000
80,000
160,000
P 340,000
anical or
SUGGESTED ANSWERS
Problem 14 53
Sales proceeds (P15 x 500,000)
Multiplied by applicable IPO rate
Percentage tax
P7,500,000
2%
P 150,000
The percentage tax rate is 2% because the initial public offering is 33%, comput
ed as follows:
Number of shares sold through IPO
Divided by outstanding shares (1,000,000 + 500,000)
Percent of IPO
Applicable IPO tax rate
500,000
1,500,000
33%
2%
Problem 14 54
1.
Sales proceeds (P50 x 2,000 shares)
Multiply by percentage tax rate
Percentage tax
P100,000
0.5%
P
500
2.
Sales proceeds (4,000* shares x P55 per share)
Multiply by percentage tax rate
Percentage tax
P220,000
0.5%
P 1,100
Supporting computation:
Original holding
Add: Stock dividend (5,000 x 20%)
Total shares available
Less: First sale
*Remaining shares for this sale
Shares
5,000
1,000
6,000
2,000
4,000
Unit Cost
P50.00
P41.67
P41.67
Amount
P250,000
.
P250,000
83,320
P166,680
Problem 14 55
1.
Percentage tax (P0.50 x 1,000,000) x 0.005
2.
P 2,500
August 20, 200A = last day of remittance without penalty.
Problem 14 56
Gross receipts tax on:
Rent income (P30,000 x 7%)
Royalty income (P20,000 x 7%)
Interest income (P50,000 + P20,000 + P10,000) x 5%
Problem 14 57
1.
Year
Remaining maturity
2013
9
2014
8
2015
7
2016
6
2017
5
Total gross receipt tax paid
2.
Year
2013
Remaining maturity
4
P 2,100
1,400
4,000
P 7,500
Amount
of interest, etc.
P 200,000
200,000
200,000
200,000
200,000
Applicable
tax rate
1%
1%
1%
1%
5%
Amount
of interest, etc.
P 200,000
Applicable
tax rate
5%
Gross receipt tax
P 2,000
2,000
2,000
2,000
10,000
P18,000
Gross receipt tax
P10,000
anical or
SUGGESTED ANSWERS
2014
3
2015
2
2016
1
2017
Less than 1 year
Total gross receipt tax as recomputed
Less: Gross receipt tax previously paid
Gross receipt tax still due
200,000
200,000
200,000
200,000
Problem 14 58
5%
5%
5%
5%
10,000
10,000
10,000
10,000
P50,000
18,000
P32,000
Franchise
P 400,000
3,000,000
P3,400,000
100,000
P3,300,000
Non-franchise
P
- 0 1,800,000
P1,800,000
120,000
P1,680,000
1. Local telephone services
12%
P396,000
12%
P201,600
2. Water franchise
2%
P 66,000
3%
P 50,400
3. Fast food (P3,000,000 x 12%)
(P1,800,000 x 12%)
P360,000
Beginning receivables
Add: Revenues
Total
Less: Ending receivables
Gross receipts
P216,000
Note: The business tax on fast food is based on the revenue because the business
is a
combination of sales of goods and service. Moreover, the fast food business is s
ubject to12% VAT
because the total revenue exceeded the P1,919,500 threshold amount.
Problem 14 59
Collections:
Revenues
Accounts receivable
Advances
Gross receipts
Current
P 500,000
300,000
200,000
P1,000,000
Previous
P300,000
100,000
.
P400,000
3%
P 30,000
3%
P 12,000
2. Race track
30%
P300,000
30%
P120,000
3. Boxing exhibition
10%
P100,000
10%
P 40,000
4. Water utilities
2%
P 20,000
P
5. Life insurance
5%
P 50,000
5%
P 20,000
6. Agents of foreign insurance companies
10%
P100,000
10%
P 40,000
7. Overseas dispatch
10%
P100,000
10%
P 40,000
Computation of percentage taxes:
1. Common carrier of passengers (assume land transport)
2%
8,000
anical or
SUGGESTED ANSWERS
Extra problems
Write True if the statement is correct, or False if it is incorrect.
1.
Buyers from non-VAT business are required to withhold the percentage tax on thei
r
purchases from such business.
2.
Generally, the withholding tax on the payments by the government to persons who
are
exempt from payment of VAT and who are not a VAT-registered person is 3%.
3.
The sale to the government is not subject to withholding tax if the seller is a
non-VAT
person.
4.
The percentage tax on sale of shares of stocks outside stock exchange is of 1%.
5.
The tax on winning is required to be remitted to BIR within 20 days from the dat
e
withhold.
6.
Boxing exhibitions for World and Oriental Championships are exempted from amusem
ent
tax if one of the contenders is a Filipino and a Filipino Citizen promotes such
exhibitions.
7.
Net trading gains obtained by banks and non-bank financial intermediaries are su
bject to
5% percentage tax.
8.
The gross receipt tax of financial institutions is to be paid to the BIR within
10 days
following the end of the taxable month.
9.
The pre-terminated loan agreement within 5 years shall be subject to a gross rec
eipts tax
of 1%.
10. The payment of % of 1% tax on sale of securities will exempt the gain from su
ch
transaction from capital gain tax.
Answer to Extra problems
1. False the percentage tax forms part of sellers expense
2. True
3. False subject to 3% OPT withholding and CWT withholding.
4. False The of 1% is applicable for sale of shares of stock in the stock exchan
ge.
5. True
6. True
7. False 7% percentage tax
8. False within 20 days
9. False 5%.
10. True
anical or

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BUSINESS AND TRANSFER TAXATION 6th Edition (BY: VALENCIA & ROXAS) 105

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