Exercise 2: Intro to Business Taxation

Instructions: Read and analyze each problem. Write your answer in a separate sheet and support it with
a solution in good form. Submit a photo of your answer via PM to your respective Class Secretary on
February 23,2021 (Tuesday) until 5:00 PM.

1. A person engaged in business sold the following properties:

Sales of goods held for sale P 250,000
Sale of personal residence 1,500,000
Sale of personal car 500,000

Compute the sales in the course of business subject to business tax ________________________

2. Mr. Cardinal, a security broker, effected the sakes of several securities of Mr. Heneral. The following
related to the sale:

Sales Commission
Sale of stocks 150,000 1,500
Sale of bonds 250,000 2,500
TOTAL 400,000 4,000

Compute the amount of receipts or sales of Mr. Cardinal subject to business tax.
_________________________

3. A non-stock charitable organization realized the following during the month:

Membership contributions P 240,000

Donation from various donors 260,000
Sale of souvenirs 150,000

Compute the amount subject to business tax ___________________

4. Roberto, a seller of goods, had the following transactions in January 2020:

Cash sales P 300,000

Credit sales (40% collected) 500,000
Sales returns and allowances 50,000
Freight charged to customers 30,000

How much is subject to business tax? ___________________

5. A service provider had the following income during the month:

Fees paid in cash and checks P 100,000

Fees paid in notes 130,000
Advances by clients for future services 30,000
Reimbursement for out-of-pocket expenses 45,000

Tax 2 – Transfer and Business Tax

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 Reimbursement for client expenses 25,000

Compute the amount subject to business tax. ________________

6. The following data pertain to a business taxpayer during a quarter:

January February March

Revenue/Sales P 200,000 P250,000 P280,000
Cash collections 150,000 180,000 200,000

a. If the taxpayer is registered as a non-VAT service provider, how much should be reported in
the BIR form to be filed on the reportorial month:
January : ________________________
February : ________________________
March : ________________________

b. If the taxpayer is registered as a non-VAT seller of goods, how much should be reported in
the BIR form to be filed on the reportorial month:
January : ________________________
February : ________________________
March : ________________________

c. If the taxpayer is registered as a VAT seller of goods, how much should be reported in the
BIR form to be filed on the reportorial month:
January : ________________________
February : ________________________
March : ________________________

d. If the taxpayer is registered as a VAT service provider, how much should be reported in the
BIR form to be filed on the reportorial month:
January : ________________________
February : ________________________
March : ________________________

7. Esmeralda Co., a non-VAT taxpayer paying 3% percentage tax exceeded the VAT threshold on
September 2020. Esmeralda generated P500,000 and P400,000 sales in October and November and
paid respectively P10,000 and P18,000 input VAT in these months. Esmeralda immediately
registered to the VATA system at the start of November 2020.

a. Compute the business tax payable in October, assuming no claim for tax credit was filed.
________________

b. Compute the business tax payable in October, assuming no Esmeralda claimed for tax credit
and was approved by the BIR. __________________

Tax 2 – Transfer and Business Tax

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 c. Compute the business tax payable in October, assuming no claim for tax refund.
_________________

d. Compute the business tax payable in November. __________________

8. A non-VAT taxpayer paying 3% percentage tax received P100,000 cash and P10,000 CWT from the
sale of service.

Computer the percentage tax. _______________________

9. A VAT taxpayer received a P60,000 on sale of goods plus P6,000 CWT certificate.

How much is the output VAT? ________________________

Invoice price in US dollars $ 15,000

Other costs to bring goods to the Philippines P 125,000
BOC charges 75,000
Customs duties is 10% of dutiable value
Peso-dollar exchange rate P 48.30: $1

Compute the VAT on importation. ___________________

10. Mrs. Alaya imported various merchandise form abroad. The importation was invoiced at $ 4,500.
She also incurred the following costs of importation:

Insurance P 3,500
Freight 12,000
Wharfage fee 3,500
Arrastre charge 5,000
Brokerage fee 6,000
Facilitation fee 7,000

Mrs. Alaya was also assessed P 25,000 and P15,000, respectively, for customs duties and excise tax.
The applicable exchange rate was P 47.50: $1.

Compute the VAT on importation. ___________________

Tax 2 – Transfer and Business Tax

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 Exercise 1: VAT on Importation
1. Shopify, Inc. purchased the following from abroad:
Sea shells and coral décor P 350,000
Tuna and Salmon 150,000
TOTAL P 500,000

What is the amount of taxable importation? ________________________

ANSWER:
Sea shells and coral décor P 350,000

Tuna and salmon are agricultural food products. These are VAT-exempt goods.

2. Mr. Zayn imported various personal and household effects with a value aggregating P400,000.
P240,000 of these was subjected to an 8% customs duty by the BOC. How much is the VAT on
importation? _________________________

ANSWER:

Dutiable value P240,000

Custom duty (240,000 x .08) 19,200
Landed Cost 259,200
VAT rate x .12
VAT on importation P 31,104

This quasi-importation is subject to VAT on importation even if the items are personal and
household effects because the goods are subject to customs duties.

3. A bookstore imported the following items:

Landed Cost
Books P 550,000
Professional instruments 200,000
School supplies 350,000
TOTAL P 1,100,000

How much is the total VAT on importation? ___________________

ANSWER:

Professional instruments P200,000

School supplies 350,000
Taxable Importation 550,000
VAT rate x .12
VAT on importation P 66,000

Tax 2 – Transfer and Business Tax

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 Books are VAT-exempt goods.

4. Oberlo Agri Cooperative imported the following:

Landed Cost
Seeds P 300,000
Fertilizers 650,000
Farming equipment 350,000
Herbicides and pesticides 150,000
TOTAL P 1,450,000

Compute the VAT on importation. ___________________

ANSWER:

Seeds Exempt
Fertilizers Exempt
Farming equipment Exempt
Herbicides and pesticides Exempt

VAT on importation P 0

Agri cooperatives are VAT-exempt on their importation of direct farm inputs, machineries and
equipment, including their spare parts.

5. Mr. Zalora imported rice from Thailand. Details of his importation show the following:

Total invoice value P 1,300,000

Freight and insurance in transit 150,000
BOC and other charges 30,000

Compute the VAT on importation. ________________

ANSWER:

Rice is an agricultural food product which is exempt from consumption tax. All related expenses are
also not subject to VAT.

6. Mrs. Juanico arrived in the Philippines with an immigration visa. She had the following:

Clothing, shoes, and apparel P 100,000

Professional instruments and implements 200,000
Personal car 600,000
TOTAL P 900,000

Tax 2 – Transfer and Business Tax

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 Compute the total amount subject to VAT on importation. ________________

ANSWER:

Personal car 600,000

VAT rate x .12
VAT on importation P72,000

Wearing apparel, personal household effects, and professional instruments and implements
belonging to persons coming to settle in the Philippines, for their won sale and not for sale, barter or
exchange is not subject to VAT on importation. Car is not a personal effect and therefore subject to
VAT.

7. Getsocio Shipping Co. imported P2,000,000 worth of vessel fuels and supplies for domestic use. The
company earmarked 65% of this for domestic use while 35% was reserved for its international
operations.

How much is the VAT on importation? ________________

ANSWER:

P2,000,000 x 65% x 12% = P156,000

Only the importation which will be consumed domestically is subject to VAT on importation. The
portion that will be used internationally is VAT tax-exempt.

8. Ms. Ruther, a VAT-registered trader, imported equipment with a dutiable value of $30,000 from
abroad. The importation was subject to P100,000 BOC charges before 10% customs duties on
dutiable value. The exchange rate to the Peso was P48: $1.

How much is the VAT on importation? ________________

ANSWER:

P2,000,000 x 65% x 12% = P156,000

Only the importation which will be consumed domestically is subject to VAT on importation. The
portion that will be used internationally is VAT tax-exempt.

9. Brand Root Company had the following data regarding its importation:

Invoice price in US dollars $ 15,000

Other costs to bring goods to the Philippines P 125,000
BOC charges 75,000
Customs duties is 10% of dutiable value

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 Peso-dollar exchange rate P 48.30: $1

Compute the VAT on importation. ___________________

ANSWER:

Purchase cost ($15,000 x P48.30) P 724,500

Other costs to bring goods to the Philippines 125,000

Dutiable value P 849,500

Customs duties (P849,500 x 10%) 84,950

BOC charges 75,000

Total landed cost P 1,009,450

VAT rate x .12

VAT on importation P 121,134

10. Mrs. Alaya imported various merchandise from abroad. The importation was invoiced at $ 4,500.
She also incurred the following costs of importation:

Insurance P 3,500
Freight 12,000
Wharfage fee 3,500
Arrastre charge 5,000
Brokerage fee 6,000
Facilitation fee 7,000

Mrs. Alaya was also assessed P 25,000 and P15,000, respectively, for customs duties and excise tax.
The applicable exchange rate was P 47.50: $1.

Compute the VAT on importation. ___________________

ANSWER:

Purchase cost ($4,500 x P47.50) P213,750

Insurance 3,500

Freight 12,000

Wharfage fee 3,500

Arrastre charges 5,000

Brokerage fee 6,000

Tax 2 – Transfer and Business Tax

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Customs’ duties 25,000

Excise tax 15,000

Total landed cost P 283,750

Vat Rate x .12

VAT on importation P 34,050

Facilitation fee which are unofficial or illegal are not included as landed cost.

Tax 2 – Transfer and Business Tax

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