150. Which of the following is subject to fringe benefit tax?

A. B. C. D.
Compensation income of management employees Yes No No No
Taxable fringe benefits of managerial employees Yes Yes Yes Yes
De minimis benefits of managerial employees Yes No Yes Yes

 Answer: B
 Compensation income, regardless of the employee’s rank is subject to basic tax.
 De minimis benefit (on the assumption that the amount involved is within the
ceiling regardless of the employee’s rank is exempt from income tax.
 Taxable fringe benefits
 Subject to basic income tax if received by a rank and file employee
 Subject to fringe benefit tax if received by a supervisory or managerial
employee

151. Fringe benefit tax is computed based on:

a. Grossed-up monetary value
b. monetary value
c. Gross compensation
d. Net compensation

 Answer: A

152. Statement 1: The grossing-up fringe benefits was adopted in order to align the tax
treatment of fringe benefits with salaries and wages.
Statement 2: The grossed-up monetary value of the fringe benefits includes the net amount of
money received or the net monetary value of and the amount of the fringe benefit tax.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

 Answer: C

153. Which of the following statements regarding grossed-up monetary value is correct?
I. The grossed-up monetary value of the fringe benefit is simply a figure meant to represent the
entire income earned by the employee.
II. The grossed-up monetary value includes the net amount of money received, the net
monetary value of any property received by the employee from the employer.
III. The grossed-up monetary value of the fringe benefits by the grossed-up monetary value
factor.
IV. The grossed-up monetary value of the benefits is generally the total allowable deduction of
the employer from his gross income.
 a. I only
b. I and II only
c. I, II and III
d. All of the above

 Answer: D

154. Statement 1: Grossed-up monetary value is reflected in the books of accounts as fringe
benefit expenses and fringe benefit tax expense.
Statement 2: Any amount not withheld by the employer on employee’s salary is the liability of
the employee.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

 Answer A
 Failure to withhold the required tax on salary is collectible from the employer
 Taxable fringe benefit shall generally be recorded by the employer as follows:
Fringe benefit expense (monetary value) Pxx
Fringe benefit tax expense (FBT) xx
Cash* xx
*amount paid to the employee and the BIR
 It shall be noted, however, that the entry is simply to determine the components
of the benefit provided (the monetary value of the benefit – the tax component)
“Fringe benefit tax expense” as provided in the entry above is not a
“component” of the employer’s “tax expense”. FBT is an income tax. It is imposed
on the employee who derived the income, not the employer. Therefore. It is part
of the employee’s income tax expenses, not the other way around. The amount
of FBT shown above, however, is a part of deductible operating expense of the
employer. The total amount of the GUMV may be recorded as manpower
expenses by the employer.

155. How much is the allowable deduction from business income of a domestic corporation
which granted and paid P136,000 fringe benefits to its key officers during 2020 taxable year?
a. P0 c. P136,000
b. P64,000 d. P209,230

 Answer: D
 GUMV = P136,000/65%= P209,231
The transaction shall be recorded by the employer as follows:
 Fringe benefit expense (monetary value) P136,000
Fringe benefit tax expense (FBT) P3,231
Cash* 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) questions:
During 2020, Alpha Corporation gave the following fringe benefits to its employees
Salaries to rank and file employees P1,000,000
Salaries to managerial employees 1,800,000
De minimis benefits to rank and file employees 54,400
De minimis benefits to managerial employees 27,200
Fringe benefits to rank and file employees 102,000
Fringe benefits to managerial employees 170,000

156. How much is the fringe benefit 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 deduction from business income of Alpha Corporation?
a. P3,153,600 c. P3,245,138
b. P3,233,600 d. P3,271,600

 Answer: C
Salaries to rank and file employees P1,000,000
Salaries to managerial employees 1,800,000
De minimis benefits to rank and file employees 54,400
De minimis benefits to managerial employees 27,200
Fringe benefits to rank and file employees 102,000
Fringe benefits to managerial employees 170,000
Fringe benefit tax (as computed above) 91,538
Total allowable OPEX of Alpha Corporation P3,245,136

Use the following data for the next five (5) questions:
Juan Dela Cruz, accounting manager of ABC Corporation, provided the following data for
2020 taxable year:
Salaries @ P120,000 per month P1,440,000
Allowances subject to liquidation 50,000
 Allowances not subject to liquidation 60,000
Rica allowance at P3,000 per month 36,000
Christmas gift/bonus 30,000
13th month pay and mid-year bonus 240,000
Productivity incentive pay covered by a CBA 25,000
Monetized unused vacation leave for 12 days 66,000
Monetized unused sick leave for 5 days 27,500
Medical cash allowance to dependents 3,000
Actual medical benefits 10,000
Creditable withholding tax on compensation income 397,000

158. How much is the amount of exempt de minimis benefits?

a. P97,000 c. P118,000
b. P107,000 d. P124,500

 Answer: A
Solution:
Rice allowance @ P2,000 a month only P24,000
Christmas gift/bonus 5,000
Monetized unused vacation leave for 10 days 55,000
Medical cash allowance to dependents 3,000
Actual medical benefits 10,000
Total exempt de minimis P97,000

159. How much is the amount of de minimis and other benefits subject to basic tax?
a. P240,500 b. P251,500
b. P250,500 c. P280,000

 Answer: B
Solution:
Amount Exempt Excess
Rice allowance P36,000 P24,000 P12,000
Christmas gift/bonus 30,000 5,000 25,000
13th month pay and mid-year bonus 240,000 90,000 150,000
Productivity incentive pay 25,000 - 25,000
Monetized unused vacation leave 66,000 55,000 11,000
Monetize unused sick leave for 5 days 27,500 - 27,500
Medical cash allowance to dependents 3,000 3,000 -
Actual medical benefits 10,000 10,000 -
Total P250,500

 Productivity incentive pay under BIR RULING No. 293-2015

 If not more than P10,000 – considered as exempt de minimis
 If more than P10,000 – the entire amount shall be included in the “other
benefits” with P90,000 ceiling
 NOTE:
This ruling is not applicable to other types of de minimis benefits such as rice
allowance.
 Allowance subject to liquidation non-taxable income of Juan but part of ABC’s
operating expense
 Allowance not subject to liquidation taxable “fringe benefit” a final tax. Thus no
longer presented on the computation of income tax payable using the graduated
tax rate.
 Christmas gift or bonus in the amount of P5,000 is included in the list of
deminimis benefits.

160. How much is the fringe benefit tax?

a. P48,000 c. P32,308
b. P80,000 d. P166,400

 Answer: C
 FBT for the allowance not subject to liquidation
=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. P267,500 d. P0

 Answer D
Salaries @ P120,000 per moth P1,440,000
Taxable 13th month pay and other benefits 250,500
Tax net Income P1,690,500

Income Tax Due (TRAIN law graduated rate)

First P800,000 P130,000
 In access of P800,000 @ 30% = P800,500 x 30% 267,150
Total P397,150
Less: Creditable withholding tax on compensation (P397,150)
Income Tax Payable P0

162. How much is the total allowable deduction from business income of ABC Corporation in
relation to the information 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 liquidation 50,000
Allowances not subject to liquidation 60,000
Rica allowance at P3,000 per month 36,000
Christmas gift/bonus 30,000
13th month pay and mid-year bonus 240,000
Productivity incentive pay covered by a CBA 25,000
Monetized unused vacation leave for 12 days 66,000
Monetized unused sick leave for 5 days 27,500
Medical cash allowance to dependents 3,000
Actual medical benefits 10,000
Fringe benefit tax 32,208
Total OPEX of ABC P2,019,708

 The fringe benefit tax shall form part of the operating expenses of ABC
Corporation

Special Rule in Computing the Monetary Value of Fringe Benefits

(Applicable to Holding Benefits and Motor Vehicles – refer also to the Lecture Notes)

163. In 2020. Mapagpala Corporation paid for the monthly rental of the residential house of its
branch manager amounting P204,000.
How much is the fringe benefit expense for the month?
a. P0 c. P102,000
b. P48,000 d. P204,000
 Answer: D
 The FB Expense is equal to the rental expense of the employer. The 50% rule of the
rental used only for purposes of computing the applicable FB Tax.

164. How much is the fringe benefit tax for the month?
a. P0 c. P102,000
b. P54,923 d. P204,000

 Answer: B
Solution:
Monthly Rent x 50 %
FBT = = FBT rate
GUMV Factor
FBT = P204,000 x ½ / 65% =35%
FBT = P54,923

165. The total allowable deduction from business income of Magpala Corporation 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 benefit expense (monetary value) P204,000
Fringe benefit tax expense (FBT) P54,923
Cash* P258,923
*amount paid to the employee and the BIR

166. Uste Company owns a condominium unit in “The One Residence” which is near thefactory
and the plant’s administrative building. To make it convenient to its executive. It allowed the
latter 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 Declaration amounts to
P25,000,000. How much is the fringe benefit expense?
a. 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 deduction from its
gross income under “depreciation expense” account (RR 3-98)

167. Based on the preceding number, how much is the fringe benefit tax expense?
 a. P0 c. P367,470
b. P94,117 d. P430,769

 Answer: D
MV = Higher between FMW in the Real property declaration 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 acquisition cost of the residential property is P26,000,000 and the
remaining useful life is 12 years. How much is the fringe benefit expense?
a. P0 c. P2,666,667
b. P500,000 d. P2,083,000

 Answer: B
 Additional depreciation in the form of fringe benefit 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 depreciation, the excess amount shall be used in computing additional
depreciation expense and shall be amortized throughout the remaining useful
life (RR 3-98). The journal entry for the month in this case as provided in the
foregoing revenue regulation shall be
Fringe benefit expense (monetary value) Pxx
Fringe benefit tax expense (FBT) xx
Income constructively received Pxx
Fringe benefit tax payable xx

169. Kape Puno Manufacturing Corporation operates a manufacturing plant in Davao Economic
Zone (a PEZA registered economic zone). LJ was assigned to lead the conduct of audit and
performance evaluation of the plant which is estimated to last for a period of 2-3 months. He
was provided a free housing benefit for the duration of the audit in one of the prominent
subdivision in the City. The zonal value of the property is P32,000,000 while its fair market value
as shown in its current Real Property Tax Declaration amounts to P25,000,000. Determine the
fringe benefit expense and the fringe benefit tax expense, respectively.
a. P800,000; P376,470 c. P32,000,000; P15,058,824
b. P625,000; P294,118 d. P0; P0

 Answer: D
 Temporary housing for a period of not more than three (3) months is a
nontaxable benefit.
170. In 2020, Delta Corporation bought a condominium unit on installment for the use of its
executive. The acquisition cost inclusive of 12% interest is P6,720,000. The fair market value of
the property per Tax Declaration is P6,800,000 while the zonal value is P6,500,000

How much is the fringe benefit 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 residential property in installment for use employee,
the monetary value shall be the acquisition cost exclusive of interest x5% x 50%

171. Assume the ownership over the property will be transferred to the executive, how much is
the fringe benefit tax?
a. P0 c. P3,500,000
b. P3,058,524 d. P6,500,000

 Answer: C
 FBT = P6,500,000 /65% x 35% = P3,500,000
 If employer purchases residential property and transfers ownership to employee,
the monetary value shall be the higher between acquisition cost exclusive of
interest and the zonal value as determined by the CIR.

172. Delta Corporation bought a condominium unit for P6,000,000. The fair market value of the
property per Tax Declaration is P6,800,000 while the zonal value is P6,500,000. It was
transferred in the name of Pedro, one of its executive, for lower consideration amounting to
P5,800,000. How much is the fringe benefit 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 residential property and transfers ownership to employee on a lesser
amount, the monetary value shall be computed as the higher between FMW in
the real property declaration 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 benefit tax?
a. P0 c. P329,412
b. P94,118 d. P470,588

 Answer: A

174. In 2020, Omega Corporation purchased a motor vehicle for the use of its executive. It was
registered under the name of the execution although it was agreed that it shall be used partly
for the benefit of the company. The cost of the vehicle was P1,400,000. The amount of fringe
benefit 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 benefit
of the company, the entire amount shall be subject to FBT 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 Pacific 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 compensation 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 benefit 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 immediately preceding number, but assuming First Metro is an offshore
banking unit, how much is the fringe benefit 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 Benefits/Other Benefits

177. Statement 1: Monetized value of unused sick leave credits not exceeding 10 days to private
employees is a tax exempt benefit.
Statement 2: Monetized value of unused sick leave credits not exceeding 10 days to
government employees is a tax exempt benefit.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

 Answer: B
 Only monetized unused vacation leave credit not exceeding ten (10) days
received by an employee from a private sector is tax exempt

Monetized unused Vacation and Sick leave credit granted to government

employees, regardless of the number of days, are tax exempt

 Used leave credits (vacation or sick leave) shall be treated as a regular

compensation income subject to basic tax and consequently to the creditable
withholding tax on compensation income.

178. Which of the following housing benefits is exempt from income tax?
a. Housing unit inside or adjacent (within 50 meters) from the perimeter of the business
premises.
b. Temporary housing for a stay in the housing unit for three (3) months or less
c. Housing privilege of military of the Armed Forces of the Phillipines
d. All of the above

 Answer: D

179. Which of the following conditions 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 attributable 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 attribute to employees should not be treated as taxable fringe
benefit.
Statement 2: The expenses describe above, if incurred by a managerial employee, should
neither be included in the computation of fringe benefit tax nor in the determination of the
individual taxpayers’ returnable compensation income
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

 Answer: C

181. Statement 1: Representation and transportation given regularly on a monthly basis are not
taxable fringe benefits but taxable as compensation income subject to basic tax under Sec.
24(A) of the Tax Code.
Statement 2: Expenses in connection with attending business meeting or convention in the
Philippines such as food beverages and transportation are nontaxable benefits of the employee.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

 Answer: C

182. A domestic corporation provides fixed daily meal allowance to all its regular employees.
The meal allowance is:
a. Exempt from basic income tax
b. Subject to fringe benefit tax if the recipient is a rank and file employee
c. Subject to fringe benefit tax if the recipient is a managerial employee
d. Subject to basic income tax

 Answer: D
 In general, fixed or variable allowances which are received by a public officer or
employer or officer or employee of a private entity, in addition to the regular
compensation, fixed for his position or office, is compensation subject to income
tax and consequently, creditable withholding tax on compensation income.
 Basis: Section 2.78 1(A) of RR-2-98 as amended by RR 10-2008. Examples or fixed
or variable allowances are transportation allowance, living away from home
allowance (LAFHA) and the like.

183. Accountancy University (AU) granted a scholarship grant abroad (Master of Science in
Accountancy) to Fermin, one of its regular faculty members. The management of AU believed
that the university will be able to improve its accountancy program through the scholarship
grant. Nonetheless, no written contract was executed between AU and fermin requiring the
latter to remain the employ of the employer for a certain period of time. The scholarship grant
is
a. Subject to basic income tax or fringe benefit tax depending on the rank of Fermin
b. De minimis benefit, hence, tax-exempt regardless of rank
c. The benefit was provided for the benefit of the employer, hence, non-taxable on the
part of the employee
d. None of the above

 Answer: A

184. The cost of educational assistance extended by an employer to the dependents of an

employee shall be treated as taxable fringe benefits, unless:
a. The education of study involved is directly connected with the parent’s employer’s
business or profession.
b. There is a written contract between the parents and the employer that the former is
under obligation to remain in the employ of the latter for period of time they have
mutually agreed upon.
c. The assistance was provided through a competitive scheme under the scholarship
program of the employer.
d. Any of the choices

 Answer: C

185. Reasonable business expense which are paid by the employer for the foreign travel of his
employee for the purpose of attending business meetings or convention shall not be treated as
taxable fringe benefits, except:
a. Inland travel expenses such as expense for food, beverage and local transportation
b. Lodging cost amounting to an average of US$300 or less per day
c. Cost of economy and business class airplane ticket
d. 30% of the cost of the first class airplane ticket

 Answer: D

Use the following date for the next four (4) questions
The following data were taken from Juan (single) holding managerial position for 2020 taxable
year:
 Gross salaries @ P50,000 per month P600,000
SSS contributions 12,000
Philhealth contributions 7,200
Pag-ibig contributions 4,800
Union dues 3,000
Withholding tax on compensation income 73,250
Allowances, not subject to liquidation 100,000
Gasoline allowances, subject to liquidation 17,000
13th month pay 50,000
De minimis benefits 12,000

186. The taxable compensation income subject to graduated rate under Section 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 contributions (12,000)
Philhealth contributions (7,200)
Pag-ibig contributions 94,800)
Union dues (3,000)
Compensation Income subject to basic tax P573,000

187. Based on above date the fringe benefits 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
Compensation 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 P127,096
 The FBT is the income tax expense of the employee not the employer.

189. The income tax payable of Juan is:

a. P0 c. P43,250
b. P30,000 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”.
Statement 2: Tax exempt meal allowance should be furnished within the premises of the
employer.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

 Answer: C

191. The amount of de minimis benefits conforming to the ceiling of de minimis benefits 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 benefits 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 benefits over their respective ceilings prescribes under the
regulations shall be
a. Considered as part of other benefits subject to tax only on the excess over the P90,000
ceiling.
b. Not be considered in determining the P90,000 ceiling of other benefits excluded from
the gross income under the Code as amended.
 c. Both “a” and “b”
d. Neither “a” and “b”

 Answer: A

193. The amount of P90,000 under “other benefits” 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 Benefits” under revenue regulation include

I. Christmas bonus
II. Productivity incentive bonus
III. Loyalty awards
IV. Gifts in cash or in kind and other benefits of similar nature actually received by officials and
employees of both government and private offices
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
Salaries P165,000 $2,000
Business Income 450,000 6,000
Business expense 120,000 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 domestic corp.
Directly to a buyer (cost P10,000) 30,000
Additional Information:
 Pedro received the following dividend income during the taxable year:
 P70,000 from a domestic corporation. P30% of its income is attributed to its
operation abroad.
 P60,000 from a resident foreign corporation. The ratio of its gross income in the
Philippines over worldwide income for the past three years is only 40%.
 P80,000 from nonresident foreign corporation. The ratio of its gross income in
the Philippines over worldwide income for the past three 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 also sold a condominium unit in Manila (residential) for 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
Solution:
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 10,000

FCDU -

On bank deposits abroad (3k x P40) 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 domestic corp.
Directly to a buyer (cost P10,000) CGT
Dividend Income – RFC and NRFC (100%) 140,000
Basic personal exemption (repealed under TRAIN Law) NA
Additional personal exemption (repealed under TRAIN Law) NA
TAXABLE INCOME P1,075,000
 Dividend income from a foreign corporation (RFC and NRFC), is subject to basic
tax. The ratio of operation in the Philippines is immaterial if the taxpayer is a
resident citizen “RC” because such taxpayer(s) is taxable on income derived from
sources within and without the Philippines.

196. Pedro’s total final taxes on his passive income is:

a. P15,460 c. P38,460
b. P22,460 d. P45,960

 Answer: D
Solution:
Interest Income FDCU ($2,500 x P40 x 15%) P245,000
On bank deposits Phils. ($2,500 x 80% x 20%) 4,000
On bank deposits Phils. – long term exempt
Royalty income Phils. books (22k x 20% x 10%) 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 final taxes on passive income P45,960

 PCSO lotto 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 citizen his total final tax on passive income is:

c. P30,460 c. P23,460
d. P22,460 d. P23,900

 Answer: A
Solution:
Interest Income FDCU exempt
On bank deposits Phils. ($2,500 x 80% x 20%) P4,000
Royalty income Phils. books (22k x 20% x 10%) 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 final 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 properties
CGT on shares =SP30,000 – cost P10,000 = P20,000 x 15% = P3,000
CGT real properties = 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
Solution:
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 80,000
Sales of shares of stocks of a domestic corp.
Directly to a buyer (cost P10,000) -
DI-DC 70,000
DI – RFC and NRFC (considered income without) -
TAXABLE INCOME P336,500
INCOME TAX:
 P382,000 X 25% 16,000

 Total CGT 241,000



Total final taxes on passive income P336,500

 The dividend income from foreign corporation (RFC and NRFC) in this particular
case is considered income derived purely from abroad.

Use the following data for the next five (5) questions:
Ana has the following data on his passive income earned during 2020:
Philippines Abroad

Interest income from long term peso bank deposits 45,000 25,000
Interest income from long term FDCU deposits 450,000 60,000
Royalties books 20,000 30,000
Royalties from computer program 20,000 40,000

Winning from an electronic raffle during SMART

Communication’s 50th anniversary (chosen randomly by the
network using SMART subscribers’ sim card numbers) 10,000 -
Dividend income from a domestic corporation 27,000 13,000
Dividend income from a foreign corporation 33,000 22,000

200. How much is the final withholding tax if the taxpayer is a resident citizen?
a. P13,450 c. P14,450
b. P12,450 d. P18,200

 Answer: D
Solution(from Philippine source only):
Long-term peso bank deposit, P45k x 20% exempt
FDCU deposit, P50,000 x 15% 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 final taxes on passive income 18,200
 Other winnings (unlike prizes), regardless of amount is subject to 20% FWT
201. How much is the final withholding tax if the taxpayer is a resident alien?
a. P13,450 c. P12,450
b. P9,700 d. P14,450

 Answer: D
 Same computation with “RC”

202. How much is the final withholding tax if the taxpayer is a non-resident citizen?
a. P13,450 c. P9,700
b. P8,700 d. P10,700

 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% 2,000
Dividend Income from DC P27,000 x 10% 2,700
Total final 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 final withholding tax if the taxpayer is a non-resident alien engaged in
trade or business?
a. P13,450 c. P9,700
b. P13,400 d. P13,750

 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 final taxes on passive income 13,400

205. How much is the final withholding tax if the taxpayer is a non-resident alien not engaged in
trade or business?
 c. P19,250 c. P43,000
d. P30,500 d. P29,000

 Answer: B
Solution:
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 final taxes on passive income 30,500
 The exemption from tax interested income derived from long term peso ban
deposit is not applicable to NRA-NETB.

Creditable Withholding Tax Rate

205. Professional fees, promotional, and talent fees, or any other form of remuneration for the
services rendered by an individual payee shall be subject to creditable withholding tax rate of:
a. 5% if the individual payee’s gross income for the current year did not exceed P3,000,000.
b. 5% if the individual payee’s gross income for the current year is more than P3,000,000.
c. 5% if the individual payee’s gross income for the current year did not exceed P720,000.
d. 10% if the individual payee’s gross income for the current year did not exceed P720,000.

 Answer: A

206. Professional fees, promotional, and talent fees, or any other form of remuneration for the
services rendered by non-individual payee shall be subject to creditable withholding tax rate of:
a. 5% if the individual payee’s gross income for the current year did not exceed P3,000,000.
b. 5% if the individual payee’s gross income for the current year is more than P3,000,000.
c. 5% if the individual payee’s gross income for the current year did not exceed P720,000.
d. 10% if the individual payee’s gross income for the current year did not exceed 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 the following cases:
I. The payee failed to provide the income payor/withholding agent with a notarized sworn
statement/declaration that the company or corporation’s gross income is estimated not to
exceed P720,000
II. The income payment exceeds P720, despite receiving the sworn declaration from the income
payee
a. I only c. I or II
b. II only d. Neither I nor II

 Answer: C

208. The notarized sworn declaration that the company or corporation’s gross income is
estimated not to be exceed P720,000 during the taxable year shall be executed by the:
a. Treasurer
b. Chief Finance Officer
c. General Accountant
d. President/managing partner of the corporation/company/general professional
partnerships.

 Answer: D

209. Statement 1: Under RR 11-2018 the withholding tax rate of individual payees for
“Professional fees” shall be either 5% or 10%
Statement 2: If the individual’s service is not covered by the definition of a “Professional”
under RR 8-2018 and does not fall under Section 2.57 (A) of RR 2-98 as amended by RR 11-2018,
the same shall be subjected to 2% creditable withholding tax rate.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

 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 the 8% preferential income tax rate.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statement are correct
d. Both statement are incorrect

 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% final withholding tax if the gross income for the current year do not exceed
P720,000
b. 15% final withholding tax if the gross income for the current year do not exceed
P720,000
c. 10% creditable withholding tax if the gross income for the current year do not exceed
P720,000
d. 15% creditable withholding tax if the gross income for the current year do not exceed
P720,000

 Answer: D (basis: RMC 50-2018)

212. What is creditable withholding tax rate for doctors/consultants who submitted Sworn
Declaration under RR 11-2018 (gross receipts and other non-operating income is not more than
(P3,000,000)?
a. 2% c. 10%
b. 5% d. nil

 Answer: B
o Basis: RMC 50-2018
o Regardless of whether they are availing the 8% preferential tax rate or not.
o However, if the gross receipts and other non-operating 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
engineering contractors, general building contractors, specialty contractors and other
contractors are subject to creditable withholding tax rate of:
a. 2% c. 10%
b. 5% d. nil

 Answer: A; (Basis: RMC 50-2018)

214. Income payment made my top withholding agents, either private corporations 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?
Supplier of goods Supplier of service
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 beneficiaries of
estates and trust as determined under Section 60 of the tax code, except such as income subject
to final withholding tax and tax-exempt income?
a. 2% c. 10%
b. 5% d. nil

 Answer: D; (Basis: RMC 50-2018)

216. Statement 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 the income tax and applicable 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 statement 1 is correct
b. Only statement 1 and 2 are correct
c. Only statement 2 and 3 are correct
d. All statement are correct

 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 signified the option to be taxed at
8% preferential 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.

217. What is the applicable withholding tax rate for director’s fees?
a. If the director receiving the director’s fee is also an employee of the same entity, the
fees shall from part of the compensation income subject to withholding tax in
compensation income.
b. If the director not an employee of the income-payor the subject is considered a
professional subject to the creditable expanded withholding tax prescribed for a
professional and subject also to applicable business tax.
c. In the case of a government employee who seats a board member of other Government
Owned and Controlled Corporations (GOCCs), and is receiving director’s fees, honoraria
 and/or other benefits shall be subject to creditable withholding tax at the higher rate for
professional of 10%
d. All of the above

 Answer: D; (Basis: RMC 50-2018)

218. What is the applicable withholding tax applicable to diplomat’s wife who is locally
employed?
a. 2% creditable withholding tax rate
b. 5% creditable withholding tax rate
c. 10% creditable withholding tax rate
d. Withholding tax using the withholding tax table for compensation income

 Answer: D; (Basis: RMC 50-2018)

Filing of Income Tax Returns

219. Statement 1: Where an income tax return is required (e.g. in loan applications) and the
individual did not file an income tax return because of the rules on “substitute filing of income
tax return” the certificate of withholding income tax signed by the employer and the employee
will be the document use
Statement 2: The rules on substituted filing of income tax return cannot apply if one of the
spouse has business or mixed income
a. The first statement is true while the second statement is false
b. The first statement is false while the second statement is true
c. Both statements are true
d. Both statements are false

 Answer: C

220. The following are the requirements for substituted filing of income tax return except
a. He had one employer
b. His income was purely compensation income
c. Income tax withheld by the employer is correct
d. He had consecutively filed his income tax return for the past five years

 Answer: D
221. Statement 1: if an employee had multiple employers within a year, an income tax return
must be filed at the end of the year
 Statement 2: if an employee had a three employers, on succession, for each of the past
three years, substituted filing of tax return is not allowed
a. Statement 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statement 1 & 2 are 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 filed and the tax paid as follows:
1st Q – not later than April 15, 2nd Q – not later than August 15, 3rd Q – not later than September
15.
a. Statement 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statement 1 & 2 are true

 Answer: B

223. Pedro’s income tax due for the year amounted to P80,000. He may elect to pay the tax due
on installment as follows:
a. In two equal installments
b. 1st installment is payable upon filing the annual income tax return.
c. 2nd installment is payable on or before October 15 following the close of the calendar
year
d. All of the above

 Answer: D

224. 1st statement: If any installment payment of income tax is not paid on or before the date
fixed for its payment, the whole amount of the unpaid tax becomes due and payable, together
with the delinquency penalties to be reckoned from on the original date when the tax is
required to be paid.
2nd statement: Installment payment of income is not allowed to self-employed and/or
professional who are availing he 8% income tax rate.
a. Statement 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statement 1 & 2 are true

 Answer: B