Tax on Corporations
1. Which of the following is not subject to tax as a corporation?
a. Business partnerships
b. Joint stock companies
c. Insurance companies
d. General professional partnership
2. A partnership formed by persons for the sole purpose of exercising
their common profession, no part of the income of which is derived from
engaging in any trade or business.
a. Joint venture
b. Trading partnership
c. General professional partnership
d. Joint accounts
3. First statement: All joint ventures regardless of the purpose these are
created are exempt from income taxation.
Second statement: The term “domestic”, when applied to corporation,
means created or organized in the Philippines or under the laws of a
foreign country as long as it maintains a Philippine branch.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
4. The term applies to a foreign corporation engaged in trade or business
within the Philippines.
a. Resident foreign corporation
b. Non-resident foreign corporation
c. Multinational corporation
d. Petroleum contractor
5. The term applies to a foreign corporation not engaged in trade or
business within the Philippines.
a. Resident foreign corporation
b. Non-resident foreign corporation
c. Multinational corporation
d. Petroleum contractor
6. Which of the following corporations shall be taxed upon its taxable
income derived during each taxable year from all sources within and
without the Philippines?
a. Domestic corporation
b. Resident foreign corporation
c. Non-resident foreign corporation
d. None of the choices
7. Effective January 1, 2009, the rate of corporate income tax shall be:
a. Thirty-five percent (35%)
b. Thirty-two percent (32&)
c. Thirty percent (30%)
Tax on Corporations
d. Twenty-five percent (25%)
8. They are constituted when a group of individuals, acting jointly,
establish and operate a business enterprise under an artificial name, with an
invested capital thereto, and sharing in the profits or losses in the
proportion agreed upon.
a. Joint stock companies
b. Joint accounts or cuentas en participacion
c. Associations
d. Joint ventures
9. They include all organizations with substantially all the salient features
of a corporation and are taxable as a "corporation."
a. Joint stock companies
b. Joint accounts or cuentas en participacion
c. Associations
d. Joint ventures
10. It is a commercial undertaking by two or more persons, but it is
different from a partnership in that it involves the disposition of a single
lot of goods or the completion of a single project.
a. Joint stock companies
b. Joint accounts or cuentas en participacion
c. Associations
d. Joint ventures
11. For optional corporate income tax purposes, which of the following shall
not be included in the 'cost of goods sold' for a trading or merchandising
concern?
a. Invoice cost of the goods sold
b. Import duties
c. Freight in transporting the goods to the place where the goods are
actually sold
d. All costs of production of finished goods
Tax on Corporations
12. Which of the following statements is incorrect?
a. The option to be taxed based on gross income shall be available only
to firms whose ratio of cost of sales to gross sales or receipts from
all sources does not exceed fifty-five percent (55%)
b. The election of the gross income tax option by the corporation shall
be irrevocable for three (3) consecutive taxable years during which the
corporation is qualified under the scheme.
c. The term 'gross income' derived from business shall be equivalent to
gross sales less sales returns, discounts and allowances and cost of
goods sold.
d. "Cost of goods sold" shall include all business expenses whether
directly or not directly incurred to produce the merchandise to bring
them to their present location and use.
13. Proprietary educational institutions and hospitals which are non-profit
shall pay a tax of how much on their taxable income at what percent?
a. Thirty percent (30%) c. Fifteen percent (15%)
b. Twenty-five percent (25%) d. Ten percent (10%)
14. If the gross income from unrelated trade, business or other activity
exceeds fifty percent (50%) of the total gross income derived by such
educational institutions or hospitals from all sources, what tax rate shall
be imposed on the entire taxable income starting January 1,2009?
a. Thirty percent (30%) c. Fifteen percent (15%)
b. Twenty-five percent (25%) d. Ten percent (10%)
15. Which of the following income is not from a related trade, business or
activity of a domestic propriertary educational institution?
a. Income from the hospital where medical graduates are trained for
residency
b. Income from the canteen situated within the school campus
c. Income from bookstore situated within the school campus
d. Income from rent of available office spaces in one of the school
buildings
16. Which of the following government-owned or controlled corporations,
agencies or instrumentalities shall pay such rate of tax upon their taxable
income as are imposed upon corporations or associations engaged in similar
business, industry, or activity?
Tax on Corporations
a. Government Service Insurance System (GSIS)
b. Social Security System (SSS)
c. Philippine Amusement and Gaming Corporation (PAGCOR)
d. Philippine Charity Sweepstakes Office (PCSO)
17. What is the minimum corporate income tax (MCIT) rate imposed upon any
domestic corporation on its gross income within and without the Philippines?
a. Fifteen percent (15%) c. Five percent (5%)
b. Ten percent (10%) d. Two percent (2%)
18. What is the minimum corporate income tax (MCIT) rate imposed upon
resident foreign corporation on its gross income from sources within the
Philippines?
a. Fifteen percent (15%) c. Five percent (5%)
b. Ten percent (10%) d. Two percent (2%)
19. The MCIT shall be imposed upon a domestic corporation or a resident
foreign corporation:
I - whenever such corporation has a zero or negative taxable income;
II - when the amount of minimum corporate income tax is greater than
the normal income tax due from such corporation.
a. Both I and II are correct c. Only I is correct
b. Neither I nor II is correct d. Only II is correct
20. A domestic corporation was registered with the BIR on January 1,2004.
What year would the first MCIT be imposed on such corporation?
a. 2004 c. 2008
b. 2007 d. 2010
21. Which of the following statements is incorrect?
a. The computation and the payment of MCIT, shall likewise apply at the
time of filing the quarterly corporate income tax as prescribed under
Section 75 and Section 77 of the Tax Code, as amended.
b. In the computation of the tax due for the taxable quarter, if the
computed quarterly MCIT is higher than the quarterly normal income tax,
the tax due to be paid for such taxable quarter at the time of filing
the quarterly corporate income tax return shall be the MCIT which is
two percent (2%) of the gross income as of the end of the taxable
quarter.
Tax on Corporations
c. In the payment of said quarterly MCIT, excess MCIT from the previous
taxable year/s shall not be allowed to be credited.
d. Expanded withholding tax, quarterly corporate income tax payments
under the normal income tax, quarterly corporate income tax payments
under the normal income tax, and the MCIT paid in the previous taxable
quarter/s are not allowed to be applied against the quarterly MCIT due.
22 to 25 are based on the following: Panday corporation's computed normal
income tax and MCIT, and creditable income taxes withheld from 1st to 4th
quarters including excess MCIT and excess withholding taxes from prior year/s
are as follows:
22. How much is the income tax payable for the first quarter?
a. P 100,000 c. P 60,000
b. P 80,000 d. P 40,000
23. How much is the income tax payable for the second quarter?
a. P 330,000 c. P 100,000
b. P 230,000 d. P 80,000
24. How much is the income tax payable for the third quarter?
a. P 470,000 c. P 80,000
b. P 400,000 d. P 70,000
25. How much is the annual income tax payable?
a. P 670,000 c. P 165,000
b. P 505,000 d. P 100,000
26. Which of the following corporations shall be subject to an income tax
equivalent to thirty percent (30%) of its taxable income derived in the
preceding taxable year from all sources within the Philippines?
a. Non-resident foreign corporation c. Domestic corporation
b. Resident foreign corporation d. None of the choices
27. A resident foreign corporation shall be granted the option to be taxed at
what percent on gross income under the same conditions, as provided in Tax
Code?
a. Thirty percent (30%) c. Fifteen percent (15%)
b. Twenty-five percent (25%) d. Ten percent (10%)
Tax on Corporations
28. An international carrier doing business in the Philippines shall pay a
tax of:
a. three percent (3%) on its gross receipts.
b. two and one-half percent (2 ½%) on its ‘Gross Philippine Billings.’
c. two percent (2%) on its ‘Gross Philippine Billings.’
d. one and one-half percent (1 ½%) on its gross receipts.
29. One of the following is included in the “Gross Philippine Billing” for
income tax purposes of an international air carrier.
a. Tickets sold outside the Philippines for passengers originating from
outside the Philippines
b. Passage documents sold outside the Philippines for excess baggage
originating from the Philippines
c. Tickets sold in the Philippines for passengers originating from the
Philippines but are not actually flown
d. Passage documents sold in the Philippines for cargoes originating
from outside the Philippines
30. A branch, subsidiary of affiliate of a foreign banking corporation which
is duly authorized by the Bangko Sentral ng Pilipinas (BSP) to transact
offshore banking business in the Philippines in accordance with the
provisions of P.D. No. 1034 as implemented by CB (now BSP) Circular No. 1389,
as amended.
a. Offshore banking unit
b. Multinational company
c. Petroleum Service Contractor and Subcontractor
d. None of the choices
31. Which of the following shall be subject to 10% final tax?
a. Income derived by offshore banking units authorized by the Bangko
Sentral ng Pilipinas (BSP), from foreign currency transactions with
nonresidents, other offshore banking units, local commercial banks,
including local branches of foreign banks that may be authorized by the
Bangko Sentral ng Pilipinas (BSP) to transact business with offshore
banking units
b. Any interest income derived from foreign currency loans granted to
residents other than offshore banking units or local commercial banks,
including local branches of foreign banks that may be authorized by the
BSP to transact business with offshore banking units.
Tax on Corporations
c. Any income of nonresidents, whether individuals or corporations,
from transactions with said offshore banking units
d. None of the choices
32. In resident foreign corporations any profit remitted by a branch to its
head office shall be subject to what percent of tax which shall be based on
the total profits applied or earmarked for remittance without any deduction
for the tax component thereof (except those activities which are registered
with the Philippine Economic Zone Authority)?
a. Thirty percent (30%) c. Fifteen percent (15%)
b. Twenty-five percent (25%) d. Ten percent (10%)
33. Which of the following shall pay a tax of ten percent (10%) of their
taxable income?
I – Regional or area headquarters
II – Regional operating headquarters
a. Both I and II c. I only
b. Neither I nor II d. II only
34. Which of the following corporations shall pay a tax equal to thirty
percent (30%) of the gross income received during each taxable year from all
sources within the Philippines?
a. Domestic corporation
b. Resident foreign corporation
c. Nonresident foreign corporation
d. None of the choices
35. A cinematographic film owner, lessor, or distributor shall pay a tax of:
a. twenty-five percent (25%) of its gross income from all sources
within the Philippines.
b. seven and one-half percent (7 ½%) of gross rentals, lease or charter
fees from leases.
c. four and one-half percent (4 ½%) of gross rentals, lease or charter
fees from leases.
d. two and one-half percent (2 ½%) of gross income from all sources
within the Philippines.
Tax on Corporations
36. A nonresident owner or lessor of vessels chartered by the Philippine
nationals shall be subject to a tax of:
a. twenty-five percent (25%) of its gross income from all sources
within the Philippines.
b. seven and one-half percent (7 ½%) of gross rentals, lease or charter
fees from leases.
c. four and one-half percent (4 ½%) of gross rentals, lease or charter
fees from leases.
d. two and one-half percent (2 ½%) of gross income from all sources
within the Philippines.
37. Rentals, charters and other fees derived by a nonresident lessor of
aircraft, machineries and other equipment shall be subject to a tax of:
a. twenty-five percent (25%) of its gross income from all sources
within the Philippines.
b. seven and one-half percent (7 ½%) of gross rentals or fees.
c. four and one-half percent (4 ½%) of gross rentals or fees.
d. two and one-half percent (2 ½%) of gross income from all sources
within the Philippines.
38. Which of the following statement is incorrect?
a. Resident foreign corporations are subject to income tax based on net
income from sources within the Philippines.
b. Domestic corporations are subject to income tax based on net income
from all sources.
c. Nonresident foreign corporations are subject to income tax based on
gross income from sources within the Philippines.
d. Private educational corporations are subject to income tax based on
the net income from sources within the Philippines at the tax rate of
10%.
39. A tax imposed in the nature of a penalty to the corporation to deter tax
avoidance of shareholders who avoid paying the dividends tax on the earnings
distributed to them by the corporation.
a. Minimum corporate income tax
b. Optional corporate income tax
c. Improperly accumulated earnings tax
d. Capital gains tax
Tax on Corporations
40. First statement: An accumulation of earnings or profits (including
undistributed earnings or profits of prior years) is unreasonable if it is
not necessary for the purpose of the business, considering all the
circumstances of the case.
Second statement: The term “reasonable needs of the business” are hereby
construed to mean the immediate needs of the business, including reasonably
anticipated needs.
a. Only the first statement is correct
b. Only the second statement is correct
c. Bothe statements are correct
d. Both statements are incorrect
41. For purposes of implementing the provisions on improperly accumulated
earnings tax, the following constitute accumulation of earnings for the
reasonable needs of the business except:
a. allowance for the increase in the accumulation of earnings up to
100% of the paid-up capital of the corporation as of Balance Sheet date
, inclusive of accumulations taken from other years.
b. earnings reserved for definite corporate expansion projects or
programs requiring considerable capital expenditure as approved by the
Board of Directors or equivalent body.
c. earnings reserved for building, plants or equipment acquisition as
approved by the Board of Directors o0r equivalent body.
d. none of the choices.
42.The Improperly Accumulated Earnings Tax (IAET) is imposed on improperly
accumulated taxable income earned starting January 1,1998 by domestic
corporations as defined under the Tax Code and which are classified as
closely-held corporations at the rate of:
a. twenty percent (20%) c. ten percent (10%)
b. fifteen percent (15%) d. five percent (5%)
43. The Improperly Accumulated Earnings Tax shall not apply to which of the
following corporations?
a. Banks and other non-bank financial intermediaries
b. Insurance companies
c. Publicly-held corporation
d. All of the choices
Tax on Corporations
44. The Improperly Accumulated Earnings Tax shall not apply to which of the
following corporations?
a. Taxable partnerships
b. Enterprises duly registered with the Philippine Economic Zone
Authority (PEZA)
c. A branch of foreign corporation
d. All of the choices
45. In determining the improperly accumulated earnings, which of the
following is not deducted from the taxable net income?
a. Dividends actually or constructively paid
b. Income tax paid for the whole year
c. Amount reserved for the reasonable needs of the business
d. Income subject to final tax
46. In determining the improperly accumulated earnings, which of the
following is not added to the taxable net income?
a. Income exempt from tax
b. Income excluded from gross income
c. Amount of net operating loss carry-over deducted
d. Amount reserved for the reasonable needs of the business
47. First statement: Once the profits have been subjected to improperly
accumulated earnings tax. The same shall no longer be subject to the same tax
in later years even if not declared as dividends.
Second statement: Profits which have been subjected to improperly accumulated
earnings tax when finally declared as dividends shall be subject to tax on
dividends.
a. Both statements are true
b. Both statements are false
c. Only the first statement is true
d. Only the second statement is true
48. To avoid payment of IAET, when must the dividends be declared and paid or
issued?
a. Not later than one year following the close of the taxable year
Tax on Corporations
b. Not later than the 15th day following the close of the taxable year
c. Not later than 60th day following the close of the taxable quarter
d. None of the choices
49. If the closely-held corporation fails to declare and pay or issue
dividends within the period required, when shall the IAET be paid?
a. Within thirty (30) days following the end of the fiscal year
b. Within twenty-five (25) days following the end of the calendar year
c. Within fifteen (15) days after one year following the close the
taxable year
d. None of the choices
50. First statement: The fact that any corporation is a mere holding company
or investment company shall be prima facie evidence of a purpose to avoid the
tax upon its shareholders or members.
Second statement: The fact that the earnings or profits of a corporation are
permitted to accumulate beyond the reasonable needs of the business shall be
determinative of the purpose to avoid the tax up on its shareholders or
members unless the corporation, by the clear preponderance of evidence, shall
prove to the contrary.
a. Both statements are correct
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
51. A corporation having practically no activities except holding property,
and collecting income there from or investing therein, shall be considered:
a. a holding company
b an investment company
c. a closely-held corporation
d. none of the choices
52. If the activities further include, or consist substantially of, buying
and selling stocks, securities, real estate, or other investment property
(whether upon a outright or a marginal basis) so that the income is derived
not only from the investment yield but also from profits upon market
fluctuations, the corporation shall be considered:
a. a holding company
Tax on Corporations
b. an investment company
c. a publicly held corporation
d. none of the choices
53. The following are prima facie instances of accumulation of profits beyond
the reasonable needs of a business and indicative of purpose to avoid income
tax upon shareholders except:
a. investment of substantial earnings and profits of the corporation in
unrelated business or in stock or securities of unrelated business.
b. investment in bonds and other long-term securities.
c. accumulation of earnings in excess of 100% of paid-up capital, not
otherwise intended for the reasonable needs of the business.
d. none of the choices.
54. Who shall initially determine whether there is an improper accumulation
of profit?
a. The taxpayer c. The Court of Tax Appeals
b. The BIR d. The Department of Justice
55. One of the following statements is incorrect.
a. The improperly accumulated earnings tax is calculated to force a
closely-held corporation to declare dividend.
b. The improperly accumulated earnings tax is computed on improperly
accumulated earnings for several years.
c. The improperly accumulated earnings tax is on the net income per
books after income tax.
d. The improperly accumulated earnings tax is based on a statutory
formula for improperly accumulated income.
56. First statement: The mere fact that the corporation distributed a large
part of its earnings for the year in question does not necessarily prove that
earnings were not permitted to accumulate beyond the reasonable needs of the
business.
Second statement: If the Commissioner of the Internal Revenue determined that
the corporation was formed or availed of for the purpose of avoiding the tax
on individuals through the medium of permitting earnings or profits to
accumulate, and the taxpayer contests such determination wrong by
preponderance of evidence, is on the taxpayer.
a. Both statements are correct
Tax on Corporations
b. Both statements are incorrect
c. Only the first statement is correct
d. Only the second statement is correct
57. In order to establish the exemption, and thus be relieved of the duty of
filing returns of income and paying the tax, it is necessary for every
organization claiming exemption to file an affidavit with the Commissioner of
Internal Revenue, showing which of the following?
a. The character of the organization
b. The purpose for which it was organized and its actual activities
c. The sources of its income and its distribution
d. All of the choices
58. Which of the following organizations shall be exempt from income tax?
a. Organizations such as provincial fairs and like associations of a
quasi-public character, which are designed to encourage the development
of better agricultural and horticultural products through a system of
awards, prizes, or premiums, and whose income derived from gate
receipts, entry fees, donations is used exclusively to meet the
necessary expenses of upkeep and operation
b. Association which have for their purpose, the holding of periodical
race meets, the profits from which may inure to the benefit of their
shareholders
c. Corporations engaged in growing agricultural or norticultural
products or raising livestock or similar products for profits
d. None of the choices
59. Which of the following income shall not be exempt from income tax?
a. In case of a religious corporation, income from the conduct of
strictly religious activities, such as fees received for administering
baptismal, solemnizing marriages attending burials, holding masses, and
other like income.
b. In the case of educational corporation, income from the holding of
an educational fair or exhibit.
c. Income of the above mentined corporations (letters a and b) from
investment, such as interests from the capital where the capital has
been loaned.
d. Donations and other similar contributions received by the above
mentioned corporations from other persons.
Tax on Corporations
