Summary of New Income Tax Rules

for Individual and Corporate Income Taxpayers

TAXPAYER

TAXBASE

1. Resident Citizens

TAXRATE/(S)

a. Taxable income, World

5% - 32%

b. Passive income

20%; 7.5% - 5% - 12%

20%; 10%; 6 - 8 - 10%

c. Special Income

6%; 5% & 10%

2. Non-Resident Citizens/
Resident Aliens

a. Taxable income, Phils.

b. Passive income
c. Special income

same 1-a
same 1-b
same 1-c

3. Non-Resident Alien engaged

in trade or business

a. Taxable income, Phils.

b. Passive income

same 1-a
same 1-b but without 6 8
10% & 7.5%
same 1-c

c. Special Income
4. Non-Resident Alien not engaged
in trade or business

a. Gross income, Phils

(including passive income)

25% final tax

b. Special income

same 1-c

a. Gross compensation
income, Phils.
b. Other gross income, Phils.
including passive income
c. Special income

15% final tax

5. Special Alien Employees:

a. Multinational Corporations
b. Offshore banking units
c. Petroleum Contractors/
subcontractors

25% final tax

same 1-c

Note:
1. The following are non-resident citizen:
a. One who establishes to the satisfaction of the commissioner the fact of his physical presence
abroad with a definite intention to reside therein;
b. One who leaves Philippines during the taxable year to reside abroad;
c.

One who works and derives income from abroad whose job there requires him to be
physically abroad most of the time (during the taxable year).

2. A non-resident alien individual who comes to the Philippines and stays therein of an aggregate
period of more than 180 days during any calendar year shall be deemed a non-resident alien doing
business in the Philippines.
Rates of Income Tax on Individual Citizen and Individual Resident Alien of the Philippines
Sec.24 (A) The tax shall be computed on taxable income in accordance with and at the rates
established in the following schedule:
Over
P10,000
30,000
70,000
140,000
250,000
500,000

But not over

P10,000
30,000
70,000
140,000
250,000
500,000
-

The tax shall be

5%
P500
2,500
8,500
22,500
50,000
125,000

Plus
10%
15%
20%
25%
30%
32%

Of excess over
P10,000
30,000
70,000
140,000
250,000
500,000

Today, I will greet the day with love in my heart- Og Mandino

PASSIVE INCOME

RC / RA / NRC

NRA ETB

NRA NOT ETB

1. Interest
Income from
Phil. bank
deposits
2. Yields from
deposit
substitutes
3. Royalty
Income
4. Awards /
Prizes ( over
P10T )
5. Winnings
( except
from PC80 )
6. Dividend
income from
domestic
corp
7. Distributive
share of a
partner
NIAT
Of a taxable
partnership

Format of computation of Taxable income:

a. Pure compensation income earner
Gross compensation income
Less: Basic personal exemption
Additional exemption
Health insurance premiums
Taxable compensation income
Income tax due [ Sec.24 (A) ]
Less: Tax withheld from compensation
Income tax payable
b. Pure business/professional income earner

Pxxx
Pxxx
xxx
xxx

xxx
Pxxx
Pxxx
xxx
Pxxx

Gross business income

Less: Deductions allowed (Sec.34)
Income before personal exemptions
Less: Basic personal exemption
Additional exemption
Taxable Net income

Pxxx
xxx
Pxxx
Pxxx
xxx

Income tax due [ Sec.24 (A) ]

Less: Creditable withholding tax at source
Income tax payable
c.

xxx
Pxxx
Pxxx
xxx
Pxxx

Mixed income earner ( compensation from employment and business/professional income ).

Gross business income
Gross compensation income
Total
Less: Deduction allowed [ Sec. 34 ]
Income before personal exemptions
Less: Basic personal exemption
Additional exemption
Taxable Net income
Income tax due [ Sec.24 (A) ]
Less: Tax withheld from compensation
Creditable withholding tax at source
Income tax payable

Pxxx
xxx
xxx
xxx
xxx
Pxxx
xxx

xxx
Pxxx
Pxxx

Pxxx
xxx

xxx
Pxxx

Simplified Summary Rules for Corporations

KINDS

TAX BASE

TAX RATE

1. Domestic Corporations

Taxable Net income, World

38%

2. Resident Foreign Corporations

Taxable Net income, Phils.

the same

3. Non-Resident Foreign Corporations

Gross Income, Phils.

the same

1. Private Educational Institutions

& Non-Stock/Non-Profit Hospitals

Taxable Net income, World

(unless Resident Corp.)

10%

2. Resident International Carriers

Gross Billings, Phils.

2%

3. Non-Resident Cinematographic
Film Owner/Lessor

Gross Income, Phils.

25%

4. Non-Resident Owner/Lessor of Vessels

Gross income from rentals,

leases, charter, fees, Phils.

4%

5. Non-Resident Owner/Lessor of Aircrafts,

Machineries and Equipment

The same (#4)

7%

6. Offshore Banking Units

Interest income from Foreign

Currency transactions

10%

Ordinary Corporations:

Special Corporations:

IMPORTANT NOTES TO REMEMBER:

A. For Private Educational Institutions and Hospitals:

If their gross income from unrelated trade or business exceed 50% of their gross income from
all sources the rule on ordinary corporation (30% rates) shall apply.
B. For Resident Corporations:
Subject to additional tax of 15% for every profit remittance made to their head office abroad.
(exempt if registered with EPZA).
C. For Non-Resident Corporations:
Unless, otherwise, provided a foreign corporation not engaged in trade or business in the
Philippines shall pay a tax equal to 35% of the gross income received during the taxable year
from all sources within the Philippines such as interests, rents, salaries, premium (except
reinsurance premiums), annuities, emoluments, or other fixed or determinable annuities.
Periodical or casual gains, profits and income and capital gains, except income subject to Capital
gains tax.
Formula for computation:
Gross Income ( within the Philippines )
Multiplied by: Tax rate
Income tax due

Pxxx
30%
Pxxx

D. Minimum Corporate Income tax rule ( MCIT ) beginning January 1, 1998 corporations which are
already in their 4th year of operations, shall be subject to income tax of 30% on their taxable net
income or 2% of their gross income whichever is higher.
1. With tax credit benefits for the excess of the 2% MCIT over the normal/regular income tax
(Deductible vs. Normal income tax in the succeeding three years).
2. 2% MCIT is not applicable to the following corporations.
a.
b.
c.
d.
e.
3. But corporations subject to 2% MCIT may still ask for relief or exemption under the following:
a.
b.
c.
E. Improperly Accumulated Earnings Tax ( IAET )
1. Imposed on corporations starting January 1,1998 on their improperly accumulated earnings
(accumulated Retained Earnings which are not declared/distributed as dividends without
justifiable reasons).
2. Not applicable to the following:
a.
b.
c.
d.
e.
3. Certain circumstances indicating Improper accumulation of profits:
a. Substantial changes to corporate officers who are stockholders at the same
time/Personal loans.
b. Radical change in the nature of business after a considerable surplus has been
accumulated.
c. Investment is unrelated business or activity.
d. Substantial expenditures of corporations for the personal benefit of stockholders only.
4. In general, an accumulation of earnings or profits is unreasonable or improper if it is not
required for the purposes of the business.

a. If to be used as working capital needed by the business.

b. If needed for plant expansion of the business.
c. If, in accordance with contractual obligations, placed to the credit of a sinking fund for the
purpose of retiring bonds issued by the corporation.
5. Formula for IAET
Taxable Net income
Add:
Passive Income
Special Income
Tax-exempt income
Total
Less: All taxes paid (not claimed as deductions)
Dividends paid/declared
Appropriations of Retained Earnings
Improperly Accumulated Earnings
Multiplied by
Improperly Accumulated Earnings tax
F. Special and passive income for Corporations:

Domestic

Pxxx
Pxxx
xxx
xxx
xxx
xxx
xxx

Resident

xxx
Pxxx
xxx
Pxxx
10%
Pxxx
Non-resident

Special income
1. Sale of shares of stocks of a domestic
Corp. held as capital assets, not thru
Local stock exchange.

5% and 10% of the Net Capital Gains

2. Sale of Real Property in the Philippines

held as capital asset.

6% of the GSP or FMV

(higher)

SP-Cost x 30%
(included in
other income)

20%
20%

20%
20%

30%
30%

20%
Exempt

20%
Exempt

30%
15%

1.5%

1.5%

Exempt

Passive income
1. Interest income from Phil. Bank deposits
2. Yields, monetary benefits from deposits
substitutes
3. Royalty income
4. Intercorporate dividends
5. Interest income from expanded foreign
currency deposit

G. The following corporations are exempted from tax on corporations:

1. Labor, agricultural or horticultural organization not organized principally for profit;
2. Mutual savings bank not having a capital stock represented by share, and cooperative bank
without capital stock organized and operate for mutual purposes and without profit;
3. A beneficiary society, order or association operating for the exclusive benefit of the members
such as fraternal organization operating under the lodge system, or a mutual and association or a
nonstick corporation organized by employees providing for the payment of life, sickness,
accident, or other benefits exclusively to the members of such society, order, or association, or
nonstick corporation or their dependents;
4. Cemetery company owned and operated exclusively for the benefits of its members;
5. Non-stock corporation or association organized and operated exclusively for religious, charitable,
scientific, athletic or cultural purposes, or for the rehabilitation of veterans, no part of its net
income or asset shall belong to or inure to the benefit of any member organizer, officer or any
specific person;
6. Business league, chamber of commerce, or board of trade, not organized for profit and no part of
the net income of which inures to the benefit of any private stockholder or individual;
7. Civic league or organization not organize for profit but operated exclusively for the promotion of
social welfare;
8. A non-stock and non-profit educational institution;

9. Government educational institution;

10. Farmers or other mutual typhoon or fire insurance company, mutual ditch or irrigation company,
mutual or cooperative telephone company, or like organization of a purely local character, the
income of which consists solely of assessments, dues, and fees collected from members for the
sole purposes of meeting its expenses; and
11. Farmers, fruit growers or like association organized and operated as a sales agent for the
purpose of marketing the products of its members and turning back to them the proceeds of
sales, less the necessary selling expenses on the basis of the quantity of products finished by
them;
Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and
character of the foregoing organizations from any of their properties, real or personal, or from any
of their activities conducted for profit regardless of the disposition made of such income, shall be
subject to tax imposed under the Tax Code.
QUARTERLY CORPORATE INCOME TAX RETURN
Corporation are required to file in duplicate a quarterly, summary declaration of its gross income
and deductions on a cumulative basis. The tax so computed shall be decreased by the amount with
tax previously paid or assessed during the preceding quarter.
Time of filing Quarterly returns shall be filed within 60 days following the close of each of the first
three quarters.
Final returns shall be filed on or before the 15th of the fourth month following the closed of the
taxable (fiscal or calendar year).
Income Taxation
Multiple Choice: Choose the best possible answer.
1. One of them is not considered non-resident citizen.
a. A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his
physical presence abroad with a definite intention to reside therein.
b. A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad,
either as an immigrant or for employment on permanent basis.
c.

A citizen of the Philippines who works and derives income from abroad and whose employment
thereat requires him to be physically present abroad most of the time during the taxable year.

d. A citizen of the Philippines who went on a business trip abroad and stayed therein most of the
time during the year.
2. DINA, nonresident citizen, arrived in the Philippines on July 1,2000 to reside here permanently after
working as nurse in the United States of America for many years.
Which of the following statements is correct with respect to her classification for income tax
purposes?
a. She shall be classified as nonresident citizen for the year 2000 with respect to her income
derived from sources abroad from January 1,2000 until the date of her arrival in the Philippines.
b. She shall be classified as nonresident citizen for the whole year of 2000.
c.

She shall be classified as resident citizen for the whole year 2000.

d. She shall be classified as neither resident nor nonresident citizen for the year 2000.
3. JESS, an expert American Physicist was hired by a Philippine corporation to assist in its organization
and operation for which he had to stay in the Philippines for an indefinite period. His coming to the
Philippines was for a definite purpose which in its nature would require an extended stay and to that
end makes his home temporarily in the Philippines for around 300 days during the calendar year. The
American management expert intends to leave the Philippines as soon as his job is finished.

For income tax purposes, the American management expert shall be classified as:
a.
b.
c.
d.

Resident alien.
Nonresident alien engaged in trade or business.
Nonresident alien not engaged in trade or business.
Resident citizen.

4. ASSUNTA, an American singer, was engaged to sing for one week at the Western Philippine Plaza
after which she returned to USA. For income tax purposes, she shall be classified as:
a.
b.
c.
d.

Resident alien.
Nonresident alien engaged in trade or business.
Nonresident alien not engaged in trade or business.
Resident citizen.

5. SITUS OF TAXATION IS WORLD/GLOBAL TAXATION?

a. Resident alien
b. Nonresident citizen

c. Nonresident alien
d. Resident citizen

6. It is important to know the source of income for income tax purposes (i.e. from within and without the
Philippines) because:
a. Some individuals and corporate taxpayers are taxed on their worldwide income while others are
taxable only upon income from sources within the Philippines.
b. The Philippine imposes income tax only on income from sources within.
c. Some individual taxpayers are citizens while others are aliens.
d. Export sales are not subject to income tax.
7. An exemption allowed to a taxpayer who has qualified legitimate, illegitimate or legally adopted
children.
a.
b.
c.
d.

Additional exemption.
Special additional personal exemption.
Optional standard deduction.
Basic personal exemption.

8. The following except one may claim personal exemption.

a.
b.
c.
d.

Nonresident alien not engaged in trade or business.

Nonresident alien engaged in trade or business.
Resident alien.
Citizens.

9. Which of the following taxpayers whose personal exemption is subject to the law on reciprocity under
the Tax Code?
a. Nonresident citizen with respect to his income derived from outside the Philippines.
b. Nonresident alien who shall come to the Philippines and stay herein for an aggregate period of
more than 180 days during any calendar year.
c. Resident alien deriving income from a foreign country.
d. Nonresident alien not engaged in trade or business in the Philippines whose country allows
personal exemption to Filipinos who are not residing but are deriving income from said country.
10. Under the Tax Code, who of the spouse is the proper claimant of the additional exemption with
respect to any of the dependent children?
a.
b.
c.
d.

The husband if his income is higher than the income of the wife.
The spouse who has the bigger income.
The husband.
The wife if her income is higher than the income of the husband.

11. Taxpayer, married, supports the following:

a.
b.
c.
d.

Vanessa, legitimate child, 21 years old.

Arli, recognized natural child, 18 years old.
Lorelie, stepchild, daughter of wife by a former marriage, 23 years old.
Widowed mother of her wife, 62 years old.

For income tax purposes, the taxpayer can claim:

a.
b.
c.
d.

Basic personal exemption

P50,000
P50,000
P50,000
P50,000

Additional exemption
P100,000
P75,000
P50,000
P0

12. One of the following is not a head of the family for income tax purposes:
a.
b.
c.
d.

Unmarried taxpayer supporting his mother, 50 years old.

Married but legally separated taxpayer supporting a legitimate child, 6 years old.
Legally separated taxpayer supporting a brother, 27 years old, physically incapacitated.
Widower supporting his mother in law, 55 years old.

13. A taxpayer, single has the following dependents who live with him:
a.
b.
c.
d.

Tony, brother, 25 years old taking up Engineering course.

Inday, sister, 16 years old.
Lina, adopted child, gainfully employed.
Berto, not related to taxpayer, 65 years old, qualified senior citizen.

For income tax purposes, the taxpayer can claim:

a.
b.
c.
d.

Basic personal exemption

P50,000
P50,000
P50,000
P50,000

Additional exemption
Zero
P25,000
P50,000
P75,000

14. The taxpayer is a married nonresident alien engaged in business in the Philippines with two (2)
qualified dependent children. His country gives a nonresident Filipino with income therefrom a basic
personal exemption of P20,000 & P4,000 additional personal exemption for each qualified dependent
child. He is entitled to total personal exemptions of:
a. P50,000
b. P75,000

c. P28,000
d. P100,000

15. One of the following is not qualified as dependent for income tax purposes.
a. Illegitimate child, 16 years old, living in the United States due to his studies.
b. Legitimate child, 21 years old, with a monthly income of P2,000, living with the taxpayer in Manila.
c. Senior citizen, not related to the taxpayer, with a yearly income of P80,000, living with and taken
of by the taxpayer.
d. Brother, 24 years old, incapable of self support because of physical disability.
16. Life insurance premiums paid by an individual taxpayer is deductible from gross income for a
maximum amount of P2,400 provided the familys gross income for the year does not exceed
P250,000.
The premium on health and/or hospitalization insurance is deductible by the spouse who claimed the
additional exemption in case of married taxpayers.
a. True, True
b. True, False

c. False, False
d. False, True

17. Which of the following will change the status of the taxpayer?
a.
b.
c.
d.

Marriage of a dependent within the taxable year.

Dependent becoming 21 years old during the year.
Dependent gaining employment during the year.
Marriage of taxpayer himself during the year.

18. Filipino as well as alien employees of regional or area headquarters established in the Philippines by
multinational companies shall be subject to final tax of 15% on the gross business income in the
Philippines.

Generally, nonresident aliens not engaged in trade or business are subject to 25% creditable
withholding tax on their gross income in the Philippines.
a. True, True
c. True, False
b. False, False
d. False, True
19. Global system of income taxation means:
a.
b.
c.
d.

All types of income except those subject to final tax are aggregated to arrive at gross income.
Separate graduated rates are imposed on different types of income.
Capital gains are exclude in determining gross income.
Compensation income and business/professional income are taxed at different places in the
world.

20. Which of the following income of an individual taxpayer is subject to final tax?
a.
b.
c.
d.

P10,000 prize in Manila won by a resident citizen.

Dividend received by a resident citizen from a resident corporation.
Shares in the net income of a general professional partnership received by a resident alien.
Dividend received by a non-resident alien from a domestic corporation.

21. Interest received by nonresident individuals from a depository bank under the expanded foreign
currency deposit system is exempt from tax.
Passive income received by a resident citizen from sources outside the Philippines shall be generally
subject to Section 24 (A) and not to final tax.
a. True, True
c. False, False
b. True, False
d. False, True
22. A nonresident alien deriving income from Philippine sources claims that he is entitled to personal
exemptions. Which of the following is not a condition for the allowance of personal exemptions to said
taxpayer?
a. That he has stayed in the Philippines for an aggregate period of more than 180 days.
b. That his country has an income tax law that allows personal exemptions to Philippines not
residing therein.
c. That he has filed a true and accurate return of his total income from all sources within the
Philippines.
d. That he is married to a Filipina.
23. Which of the following statements is incorrect?
a. To be subject to final tax passive income must be from Philippine sources.
b. An income which is subject to final tax is excluded from the computation of income subject to
Section 24 (A).
c. Lotto winnings in foreign countries are exempt from income taxation in the Philippines.
d. An income which is subject to non creditable withholding tax is excluded in the computation of
income subject to Section 24 (A).
24. Proceeds of sale of real property classified as capital asset are exempt from the 6% capital gains tax
if used to build a new principal residence within 18 months from the date of sale or of disposition.
Gain from sale of real property classified as capital asset to the Government may be taxed under
Section 24 (A) at the option of the individual taxpayer.
a. True, True
c. False, False
b. True, False
d. False, True
25. One of the following is not a deposit substitute.
a.
b.
c.
d.

Bakers acceptance.
Promissory notes.
Repurchase agreements.
Debt instruments issued for interbank call loans with maturity of not more than 5 days to cover
deficiency in reserves against deposit liabilities.

26. Which of the following statements is not correct?

a. Interest income from long term deposit is exempt from income tax.
b. Winnings from Philippine Charity Sweepstakes are exempt from income tax.

c.

Royalties on books, literary works and musical composition are subject to 10% non-creditable
withholding tax.
d. A prize of P10,000 is subject to 20% final tax.
27. Cash and/or property dividends received from domestic corporation by a nonresident alien not
engaged in trade or business are subject to 25% final tax.
Share of an individual in the distributed net income after tax of a general professional partnership is
subject to final tax.
a. True, True
b. True, False

c. False, False
d. False, True

28. 1st Statement Nonresident individual taxpayer are also subject to 7.5% final tax on their income from
expanded foreign currency deposit.
2nd Statement- There can be a 6% capital gains tax on sale of a real property in USA.
a. True, True
b. True, False

c. False, False
d. False, True

29. Which is covered by gross income taxation?

a.
b.
c.
d.

Resident alien
Nonresident alien engaged in trade or business without reciprocity law.
Nonresident alien not engaged in trade or business.
Nonresident citizen

30. Which is governed by modified gross income taxation?

a.
b.
c.
d.

A resident Filipino with compensation income only.

NRA-engaged in trade or business with the benefit of reciprocity law.
A non-resident citizen with business income only.
A resident citizen who is considered a mixed income earner.

31. JECK, resident Filipino taxpayer single supporting three minor (illegitimate) children one of them living
abroad showed the following data for taxable year 200A.
Salary from ABC Co. (net of P40,000 withholding tax)
Professional fee from various schools (net of 10% withholding tax)
Expenses incurred-practice of profession
(Living expenses including tuition fees of children 25% thereof)
Health and/or hospitalization insurance premium paid

P350,000
135,000
80,000
5,000

The income tax due after tax credit if any is:

a. P51,700
b. P49,300

c. P43,300
d. P35,000

32. Based on the above problem, his taxable income assuming his salary from ABC Co. is P80,000
(gross):
a. P126,600
c. P121,000
b. P129,000
d. P67,600
33. Benjie sold his residential house to Ms. Papaya for P5,000,000. Its FMV when he inherited it was
P6,000,000 although its presents FMV is P8,000,000. The tax on the above transaction is:
a. P360,000 capital gains tax
b. P480,000 capital gains tax

c. 30% donors tax

d. Value added tax

34. But assuming that Benjie used of the proceeds of the said house to buy a new principal residence
10 days after the above sale and he properly informed BIR about it, the tax shall only be:
a. P120,000 capital gains tax
b. P240,000 capital gains tax

c. P360,000 capital gains tax

d. P480,000 capital gains tax

35. Continuing no. 35, but assuming the residential house is located abroad, the capital gains tax is:

a. P360,000
b. P480,000

c. P120,000
d. P0

36 to 41 are based on the following data:

Mr. Pogi, married supporting 10 minor children 7 of which are gainfully employed had the following
data for taxable year 2010: ($1-P50).

Business income
Professional income
Salaries (net of P18,500 withholding
Tax)
Business and professional expenses
Income tax paid abroad:

Philippines

Abroad

P1,000,000
400,000

$20,000
10,000

181,500
250,000

8,000
4,000
2,575,000
354,245

36. If Mr. Pogi is a resident citizen, his income tax due after tax credit is:
a. P789,000
b. P570,500

c. P589,000
d. P434,500

37. If he is a resident alien, his income tax due after tax credit, if any is:
a. P360,580
b. P358,020

c. P384,380
d. P 338,500

38. If he is a non-resident citizen, his income tax due after tax credit, if any is:
a. P360,580
b. P358,020

c. P384,380
d. P338,500

39. If he is a non-resident alien engaged in trade or business in the Philippines but without the benefit of
Reciprocity Law, the income tax due after tax credit, if any is:
a. P397,000
b. P378,500

c. P405,500
d. P338,500

40. If he is a Non-resident alien not engaged in trade or business, disregarding professional & business
data, the income tax still due is:
a. P50,000
b. P18,500

c. P31,500
d. P338,500

41. And if he is a Special Alien Employee, disregarding professional and business data the income tax
that should be withheld from his income is:
a. P18,500
b. P30,000

c. P11,500
d. None

42. Mr. and Mrs. Robino, both CPAs and residents of the Philippines had the following data for taxable
year 2000:
Salaries, Mrs.
Bonus (13th month pay), Mrs.
Income from practice of Profession, Mr. and Mrs.
(net of 10% withholding tax)
Expenses professional practice
Rental income (net of 5% withholding tax
Rental expenses
Other income, Mr.

P150,000
42,000
450,000
120,000
190,000
80,000
80,000

20% of the other income is non-taxable while 15% of the professional expenses is non-deductible.
They have 12 minor children.

The taxable income of Mr. is:

a. P173,000
b. P275,000

c. P266,000
d. P234,000

43. The taxable income of Mrs. is:

a. P321,000
b. P357,000

c. P419,000
d. P410,000

44. Mr. Dimple de Leon Baby had the following data for taxable year 2009:
(Exchange rate $1-P40)
Philippines
Salaries
Income from merchandise
Business expenses
Interest income:
Personal receivable
From expanded FCDS
On bank deposits (20% long-term)
Royalty income (20% from books)
Prize won in contest
Dividend income:
From domestic corporation
From resident corporation
From non-resient
Winnings from Charity sweepstakes
Shares of stocks of domestic corp. sold to a buyer
(cost P10,000)

P165,000
450,000
120,000

Abroad
$2,000
6,000
1,500

10,000
25,000
22,000
10,000

$2,500
3,000
1,000

7,000
5,000
8,000
80,000
30,000

Mr. Dimple is married with the following children as dependents:

Haze, born March 15,1987, Diane, born April 5,1988, Christine and Pat, born May 6,1990, and
Batman, born February 27,1992.
He also sold a condominium unit in Manila (residential) for P2,000,000 although its FMV is
P3,000,000 but with a zonal value of P4,000,000.
The taxable income of Mr. Dimple is:
a. P798,000
b. P892,000

c. P724,000
d. P716,000

45. Mr. Dimples total final taxes on his passive income is:
a. P16,160
b. P16,020

c. P15,460
d. P8,520

46. His total capital gains taxes is:

a. P241,000
b. P251,720

c. P240,000
d. P257,000

47. If he is a Non-resident citizen his total final tax on passive income is:
a. P16,020
b. P15,460

c. P16,160
d. P8,520

48. If he is a Non-resident alien engaged in trade or business his total combined taxes on all income from
Philippines is: (excluding business income)
a. P83,000
c. P324,000
b. P241,000
d. P340,000
49. A Malaysian who is an employee in the regional area headquarter of a multinational corporation had
the following data for taxable year 2009.
Salaries received
P120,000
Other emoluments
50,000

Interest income from Philippine Bank Deposit

Winnings from Lotto
Winnings from Tournament
Gain from sale of shares of stock sold directly to a buyer
(stocks of a domestic corporation)

20,000
50,000
100,000
175,000

The capital gains tax is:

a. P12,000
b. P12,500

c. P7,500
d. P17,500

50. The total combined taxes on all other income from Philippines is:
a. P23,500
b. P42,500

c. P68,000
d. P80,500

51. Mr. de Vega, married, left Philippines in the middle of the year on July 1,2009 to go abroad and work
there as a contract worker for two years, the following data were provided as of December 31,2009:
(Assume all data from abroad only)

January 1 to June 30
July 1 to December 31

Gross income

Deductions

P300,000
P1,000,000

P100,000
P125,000

His taxable income is: ($1-P50)

a. P150,000
b. P1,403,000

c. P843,000
d. P0

52. If , assuming he arrived from abroad on July 1,2009 to permanently resettle in the Philippines, after
working abroad for 2 years, his taxable income as of December 31,2009 is:
a. P168,000
b. P1,043,000

c. P843,000
d. None

53. If he did not leave Philippines at all, his taxable income is:
a. P168,000
b. P1,043,000

c. P843,000
d. None

The Rainbow Corporation provided the following data for calendar year ending December 31,2010:
( $1-50)
Philippines
Abroad
Gross Income
Deductions
Income tax paid

P4,000,000
P2,500,000

$40,000
$15,000
3,000

54. If it is a domestic corporation, its income tax after tax credit is:
a. P675,000
b. P832,000

c. P880,000
d. P480,000

55. If is a resident corporation, its income tax is:

a. P450,000
b. P1,280,000

c. P880,000
d. P480,000

56. If it is a non-resident corporation, its income tax is:

a. P1,200,000
c. P880,000
b. P1,280,000
d. P480,000
57. Under # 54 but it opts to claim the tax paid abroad as deductions from gross income,its income tax is:
a. P780,000
b. P832,000

c. P880,000
d. P480,000

58. If it is a private educational institution like FEU, its income tax after tax credit:
a. P730,000
b. P832,000

c. P275,000
d. P150,000

59. If it is now profit hospital, its income tax after tax credit is:
a. P730,000
b. P832,000

c. P275,000
d. P150,000

60. If it is a resident international carrier, its income tax is:

a. P100,000
b. P10,000

c. P37,000
d. P125,000

61. If it is a non-resident cinematographic film owner/lessor, its income tax is:

a. P1,000,000
b. P100,000

c. P300,000
d. P128,000

62. If it is non-resident lessor of vessel, its income is:

a. P100,000
b. P180,000

c. P300,000
d. P128,000

63. If it is a non-resident lessor of aircrafts, machineries and equipment, its income tax is:
a. P100,000
b. P180,000

c. P300,000
d. P128,000

64. If it is a resident corporation but its expenses within and without is P3,000,000, unallocated (disregard
original data on expenses), its income tax is:
a. P600,000
b. P320,000

c. P480,000
d. P128,000

65. If it is a resident corporation and it remitted 60% of its net profit to its head office abroad, it total tax
liability is: (ORIGINAL DATA)
a. P544,500
b. P571,800

c. P196,000
d. P676,000

66. If it is a private educational institution but P3,500,000 of its total gross income is from lease &
restaurant business, its income tax is:
a. P730,000
b. P675,000

c. P150,000
d. P832,000

67. If it is a domestic corporation but its total expenses is P5,800,000 (disregard original data on
expenses), its income tax is:
a. P730,000
b. P64,000

c. P120,000
d. P85,000

68. If under # 67, but the domestic corporation is a non-profit hospital, (disregard tax paid abroad) its
income tax is:
a. P20,000
b. P64,000

c. P10,909
d. P120,000

69. If the corporation is a non-stock educational institution which uses all its revenues or income for
educational & charitable purpose, its income tax is:
a. P0
b. P730,000

c. P120,000
d. P64,000

70. For purposes of computing the MCIT, which will not form part of cost of goods sold for traders:

a. Invoice cost
b. Import duties

c. Freight
d. Wharfage

71. Under # 70, but the taxpayer is a manufacturer:

a. Raw materials used
b. Direct labor and overhead

c. Freight and insurance

d. Import duties

72. Under # 70, but the taxpayer is a seller of services:

a. Salaries and supplies
b. Employee benefits

c. Depreciation and rental expenses

d. Interest expense

73. The MCIT is only effective in the 5th year following the year in which the corporation commenced its
business.
Non-resident corporation are also covered by MCIT.
a. True, True
b. False, False

c. False, True
d. True, False

74. Non-resident corporations need not file any income tax returns.
Tax-exempt corporations are also required to file an ITR for administrative purposes only.
a. True, True
b. False, False

c. False, True
d. True, False

75. To record MCIT, the account deferred charges MCIT is:

a. Debited
b. Credited

c. Memo entry only

d. No entry required

76. To record application of excess MCIT vs. NORMAL income tax, what account is credited?
a. Income tax payable
b. Cash in bank

c. Retained earnings
d. Deferred charges MCIT

77. To record expired portion of MCIT, what account is debited:

a. Retained earnings
b. Income tax payable

c. Deferred charges MCIT

d. Provision for income tax

78. One of the following is not accepted basic relief from the MCIT:
a. Prolonged labor dispute
b. Force majeure problems

c. Legitimate business reverse

d. Law suits filed by the company

79. Which is not a characteristics of corporate income tax:

a. Progressive tax
b. Direct tax

c. General tax
d. National tax

80. 1st Statement: Non-stock/non-profit corporations are tax-exempt from their income from all operations.
2nd Statement: Intercorporate dividends are tax-exempt if the recipient is a foreign corporation.
a. True, True
b. False, False

c. False, True
d. True, False

81. Which is governed by gross income taxation.

a. Domestic corporation
c. Non-resident corporation
b. Resident corporation
d. Educational institutions
82. One of the following corporations cannot claim tax credit for foreign taxes paid abroad.
a. Private educational institutions
b. Resident International Carriers

c. Investment companies
d. Domestic Hospitals

83. 1st Statement: Foreign income tax may be treated by a taxpayer as tax credit but not as deduction
from gross income under the new law.
2nd Statement: Being a holding company is conclusive evidence of improper accumulation of profit.
a. True, True
b. False, False

c. True, False
d. False, True

84. The improperly accumulated earnings tax shall not apply to the following, except:
a.
b.
c.
d.

Insurance companies
Corporations formerly registered with PEZA
Publicly held corporations
Bank and Non-bank Financial Intermediaries

85. 1st Statement: Domestic corporation not falling under the definition of closely held corporations are
considered publicly held corporations.
2nd Statement: A closely held corporation under the Tax Code and a close corporation under the
Corporation Code are the same.
a. True, True
b. False, False

c. True, False
d. False, True

86. It is a test used in determining the reasonable needs of a business to justify the accumulation of
earnings which will exempt the corporation from paying Improperly accumulated earnings tax:
a. Urgency test
b. Reasonable needs test

c. Immediacy test
d. Control test

87. The improperly accumulated earnings tax is essentially a:

a. General tax
b. Property tax

c. Regulatory or Penalty tax

d. Excise tax

88. A domestic corporation provided the following data:

1998
1999
Gross Sales
Sales returns
Cost of goods sold
Business expenses

P2,040,000
40,000
1,000,000
950,000

2000

P2,800,000
100,000
700,000
2,100,000

2001

P3,000,000

P4,000,000

1,500,000
1,200,000

1,500,000
1,200,000

The income tax due after tax credit, if any for taxable year 2000 is:
a. P21,000
b. P40,000

c. P64,000
d. P30,000

89. Zaidia Corporation, a domestic corporation had the following data for taxable year 2010:
Sales
Cost of goods sold
General selling and administrative expenses
Interest income from Philippine bank deposit
Rental income (net of 5% withholding tax)
Dividend Income:
From domestic corporation
From foreign corporation
Winnings from charity sweepstakes
Capital gains from sale of domestic shares of stocks sold
Directly to buyer
Dividend declared and paid during the year
Retained earnings, beginning of the year (subjected to
Improperly accumulated earnings tax last year)
Note:

P5,000,000
2,000,000
500,000
100,000
190,000
60,000
50,000
1,000,000
75,000
500,000
1,000,000

The board of directors approved a resolution reserving P1,500,000 of its net profit for the
year for plant expansion.

The income tax due after tax credit if any is:

a. P825,000
b. P815,000

c. P899,200
d. P819,200

90. Based on the foregoing problem, the Improperly accumulated earnings tax is:
a. P208,125
b. P108,125

c. P113,625
d. P105,125

91. Haidia corporation, an educational institution provided the following data for taxable year 2010:
Income from tuition fees
School miscellaneous fees
Dividend income:
Domestic corporation
Foreign corporation
Rent income (net of 5% withholding tax)
Operating expenses

P3,500,000
1,500,000
2,000,000
2,000,000
1,900,000
4,000,000

The income tax due of the school is:

a. P1,600,000
b. P1,500,000

c. P1,500,000
d. P1,400,000

92. A domestic bank authorized by the Bangko Sentral ng Pilipinas to operate a foreign currency
transaction provided the following data: ($1-P40) for year 2010:
Interest from Philippine bank deposits on a loan granted to borrowers
Interest from Philippine peso bank deposit with another bank
Interest from US dollar loans to resident borrowers
Interest from US dollar loans to non-residents
Interest income, abroad
Interest from US dollar deposit Philippine bank
Operating expenses

P10,000,000
P1,000,000
$50,000
P10,000
P20,000
P30,000
P2,500,000

The basic income tax of the bank is:

a. P2,409,600
b. P2,400,000

c. P2,729,000
d. P2,800,000

93. MEDINA corporation, a resident corporation provided the following data for taxable year 2010:
Philippines
Gross income
Dividends from:
Domestic corporation
Foreign corporation
Business expenses

USA

P40,000,000

P20,000,000

5,000,000
4,000,000
12,000,000

8,000,000

The corporation remitted to its head office the P5,000,000 dividend income and 40% of its net
profit to its head office in USA.
The corporations total tax liability including the tax on the profit remitted is:
a. P10,944,000
b. P11,545,600

c. P15,960,000
d. P12,475,000

94. In the foregoing problem, if it is registered with EPZA, its total tax liability is:
a. P10,240,000
b. P9,600,000

c. P11,545,600
d. P15,960,000

95. The following data were taken from the financial statement of Topnotcher Kah corporation for taxable
year 2009:
Philippines

Abroad

Gross sales
Sales returns
Cost of goods sold
Interest income from trade receivable
Interest income from bank deposits, Phil.
Dividend income from domestic corporation
Dividend income from foreign corporation
Royalty income
Sale of shares of stocks of domestic corp.
held as capital asset thru local stock exchange
Operating expenses
Income from money market placement
Sale of real property in the Phil. not used in
business, cost P4,000,000
30% of the operating expenses is non-deductible

P950,000
25,000
425,000
10,000
20,000
15,000
25,000
20,000
70,000
250,000
35,000

P2,000,000
300,000
50,000

300,000
100,000

5,000,000

The FMV of the real property sold was P8,000,000 at the time of the sale.
Its income tax on ordinary taxable income is:
a. P640,000
b. P600,000

c. P680,000
d. P580,000

96. Its total tax on passive income is:

a. P15,000
b. P8,000

c. P4,000
d. P11,000

97. Its capital gains tax is:

a. P480,000
b. P495,000

c. P300,000
d. P60,000

98. Based on the above problem, its total combined tax liability if it is a resident corporation:
a. P435,200
b. P450,000

c. P403,000
d. NONE

99. And if it is a non-resident corporation, its total combined taxes is:

a. P485,450
b. P515,200

c. P517,450
d. NONE

100. A corporation has the following data for the current year:
Gross income, Phil.
Gross income, USA
Gross income, Japan
Expenses, Phil.
Expenses, USA
Expenses, Japan
Other income:
Dividend from San Miguel Corp.
Dividend from Ford Motors, USA
Gain on sale of San Miguel shares directly to buyers
Royalties, Phils.
Royalties, USA
Interest (other than from banks)
Rent, land in USA
Other rent income
Prize, contest in Manila
Land sold in Philippines

P1,000,000
500,000
500,000
300,000
200,000
100,000
70,000
120,000
150,000
50,000
100,000
60,000
250,000
100,000
200,000
2,000,000

The cost of the land not used in business is P1,000,000, its FMV is P3,000,000.
Its total tax liability as a domestic corporation is:

a. P733,600
b. P913,600

c. P963,600
d. NONE

101. Based on # 100, its total tax liability if it is a resident corporation:

a. P539,200
b. P679,200

c. P659,200
d. NONE

102. And if it is a non-resident corporation, its total tax liability is:

a. P471,700
c. P791,200
b. P791,700
d. NONE
103. A domestic corporation has the following data for the year 2000 ( fourth year of operation ):
Sales
Cost of sales
Business expenses
Dividend from domestic corporation
Selling price of land classified as capital asset
(cost, P3,500,000)
Interest on Philippine currency bank deposit
Dividend declared and paid
Tax paid for the first three quarters

P5,000,000
1,500,000
800,000
50,000
4,000,000
40,000
500,000
150,000

The BIR, upon investigation, found out that there is improper accumulation of earnings.
The Improperly accumulated earnings tax is:
a. P167,800
b. P187,000

c. P517,800
d. NONE

104. CHUBA Corporation, a domestic corporation had the following data:

YEAR
1998
1999
2000
2001
2002

GROSS INCOME
P1,000,000
2,000,000
3,000,000
1,000,000
980,000

DEDUCTIONS
P1,200,000
1,900,000
2,950,000
1,100,000
500,000

The taxable income in 2002 is:

a. P380,000
b. P0

c. P100,000
d. P50,000

I will persist until I succeed, the slaughter house of failure is not my destiny.