Taxation 2

1. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11–1
1. False – Non-VAT business is not allowed to have Input VAT.
2. False – expressly exempted from business tax.
3. True
4. True
5. False – 3% tax on gross receipts within. Gross receipts outside the Philippines is not subject to business tax
in the Philippines.
6. False – 2% percentage tax.
7. False – the VAT rate should be 12%.
8. False – expense of the service consumer
9. False – 10% on foreign insurance company
10. False – Gross receipts on cabaret and nightclubs are now included in 12% VAT taxable transactions.
11. False – only gross receipts within.
12. True
Problem 11–2
1. False – minimum quarterly receipts or actual quarterly gross receipts whichever is higher.
2. True
3. False – grants from the government
4. False – Subject to VAT for being registered as VAT
5. False – exempt
6. True
7. False – amusement taxes ranging from 10% to 30%
8. True
9. False – Horse race’s cost of winning ticket is deductible
10. True
Problem 11 – 3
1. False – business tax.
2. True
3. False – 3% percentage tax.
4. True
5. False – the percentage tax forms part of seller’s expense
6. True
7. False – The ½ of 1% is applicable for sale of shares of stock in the stock exchange.
8. True
9. True
10. False – 7% percentage tax
11. False – within 20 days
Problem 11 – 4
1. B 8. A
2. C 9. D
3. B 10. D
4. C 11. D
5. B 12. C
6. D 13. B
7. C 14. C
Problem 11 – 5 C
Percentage tax (P40,000 x 3%) x 12 P14,400
Problem 11 – 6 A
Exempt
Problem 11 – 7 C
Business tax (P540,000 x 3%) P16,200
Note: The actual sale has not yet reached the VAT threshold exceeding P1,500,000 in a year.

2. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 8 A
Percentage tax (P28,000/112%) x 3% P 750
VAT (P28,000/9.3333) 3,000
Surcharge (P3,000 x 50%) 1,500
Business tax P 5,250
Problem 11 – 9 C
Percentage tax payable (P500,000 x 3%) P 15,000
Problem 11 – 10 C
Percentage tax due (P54,000 + P18,000 + P36,000) x 3% P 3,240
Problem 11 – 11 D
Percentage tax (P65,700 x 3%) x 5 P9,855
Should be P9,855 instead of P9,859.
Problem 11 – 12 D
Taxi (P98,600 x 3%) x 10 P29,580
Bus (P1,000,000 x 3%) 30,000
Common carrier tax due P59,580
Problem 11 – 13 D
Total gross receipts (P1,000,000 + P6,000,000) P7,000,000
Multiplied by applicable business tax rate 12%
Total business tax P 840,000
Note: Common carrier by sea is subject to VAT of 12%.
Problem 11 – 14 A
Percentage tax (P10,000,000 x 3%) P 300,000
VAT (P6,000,000 + P1,000,000) x 12% 840,000
Average business tax in a year P1,140,000
Divided by number of quarter in a year 4
Estimated average business tax per quarter P 285,000
Problem 11 – 15 C
Percentage tax (P10,000,000 x 3%) P 300,000
Problem 11 – 16 A
Outside for trip - Manila to USA (P1,000,000 x 3%) P 30,000
In the Philippines for trip – Manila to USA (P1,100,000 x 3%) 33,000
Philippine business tax P 63,000
Problem 11 – 17 C
Percentage tax – water franchise (P1,000,000 x 2%) P 20,000
Problem 11 – 18 B
Percentage tax – water franchise (P2,000,000 x 2%) P 40,000
Percentage tax – radio franchise (P10,000,000 x 3%) 300,000
Total percentage tax P 340,000
Problem 11 – 19 B
Percentage tax (P5,000 + P2,000) x 10% P 700
Problem 11 – 20 A
Exempt

3. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 21 D
Service charge (P75,000/10%) P 750,000
Percentage tax (P750,000 x 10%) 75,000
Total collection P 825,000
Problem 11 – 22 D
P - 0 -
Problem 11 – 23 D
Percentage tax (P200,000 x 10%) P 20,000
Problem 11 – 24 D
Amusement tax (P500,000 + P200,000 + P100,000) x 18% P 144,000
Problem 11 – 25
1. A
Percentage tax (P2,000,000 + P1,000,000) x 10% P300,000
2. D
Exempt
Problem 11 – 26 B
Percentage tax [P1,000,000 - (P200,000/100)] x 10% P 99,800
Problem 11 – 27 A
Percentage tax (P100,000 – P1,000) x 10% P 9,900
Problem 11 – 28 B
Percentage tax [P1,000,000 x .005) P 5,000
Problem 11 – 29 D
P - 0 -. The sale is subject to capital gains tax because the shares of stock were sold directly to the buyer.
Problem 11 – 30 C
Percentage tax [400,000 x P12) x 1% P 48,000
400,000/1,150,000 = 34.5% more than 33 1/3% = 1% percentage tax.
Problem 11 – 31 D
Percentage tax [P600,000 x 4%) P 24,000
(600,000/20)/ (2,600,000/20) = 23% = 4% percentage tax.
Problem 11 – 32 B
Interest income with maturity more than 5 years (P400,000 x 1%) P 4,000
Leasehold income (P300,000 x 7%) 21,000
Total gross receipt tax P25,000
Note: The net trading loss is deductible only from trading gain of the same taxable year.
Problem 11 – 33 D
Interest income with maturity less than 5 years (P600,000 x 5%) P 30,000
Royalty income (P300,000 x 7%) 21,000
Gain from sale of derivatives (P200,000 x 7%) 14,000
Total gross receipt tax P 65,000
Note: The net trading loss for 2005 is not deductible from trading gain of 2006.

4. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 34 A
Percentage tax [P62,400/(100%-1%-3%) x 3% P 1,950
Problem 11 – 35 C
Net payment (P200,000 x (100% - 1% - 2%) P 194,000
Problem 11 – 36
Gross receipts (P480,000 + P190,000 + P100,000 + P2,000,000 + P2,500,000) P5,270,000
Multiplied by applicable business tax rate - VAT 12%
Business tax liability P 632,400
Note: Sale of service should be based on gross receipts (collections) while sale of foods and beverages should be
based on gross sales (revenues).
Problem 11 – 37
Minimum quarterly amount – City taxi (P98,600 x 2) P197,200
Multiplied by percentage tax rate 3%
Percentage tax payable – 2nd
quarter (answer) P 5,916
The total actual gross receipts and related percentage taxes from April to June (2nd
quarter) were lower than the
minimum, hence not applicable.
Problem 11 – 38
Tax units Actual Minimum
1 100,000 98,600
2 80,000 98,600
3 95,000 98,600
4 90,000 98,600
5 105,000 98,600
Total amount = higher amount 470,000 493,000
Multiplied by percentage tax 3%
Percentage tax 14,790
Note: The higher of the aggregate/total amount of the actual gross receipts or minimum amount is subject to
percentage tax.
Problem 11 – 39
Gross receipts (P2,500,000 + P5,000,000 + P3,000,000 + P1,500,000) P12,000,000
Multiplied by common carrier’s (by air /sea) VAT rate 12%
Business tax P 1,440,000
Notes:
1. Common carriers by air and sea relative to the transport of passengers within the Philippines is subject to
12% VAT. Transport of passengers by land however is subject to 3% percentage tax.
2. International air carriers and international shipping carriers doing business in the Philippines shall pay a
tax of three percent (3%) of their quarterly gross receipts.
Problem 11 – 40
Gross receipts (P100,000 + P50,000 + P150,000 + P200,000) P 500,000
Multiplied by applicable business tax rate 12%
Business tax for the quarter P 60,000
Note: R.A. 9337 changed the business tax rate of day and night club from 18% to 12% VAT.
Problem 11 – 41
Gross receipts P50,000,000
Multiplied by applicable franchise tax rate – VAT 12%
Franchise tax P 6,000,000

5. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 42
Actual gross receipts from business operations
First quarter (P3,000,000 + P4,000,000) P7,000,000
Multiplied by applicable business tax rate 12%
Franchise tax due – first quarter P 840,000
Note: During the taxable year, its gross receipts exceeded P10,000,000.
Problem 11 – 43
Gross receipts P 500,000
Multiplied by percentage tax rate collected 10%
Percentage tax to be remitted P 50,000
Problem 11 – 44
Total gross receipts (P600,000 + P400,000) P1,000,000
Multiplied by percentage tax for professional basketball organization 15%
Percentage tax P 150,000
Problem 11 – 45
Total gross receipts (P800,000 + P300,000 + P500,000 + P50,000) P1,650,000
Multiplied by applicable business tax rate for cockpits 18%
Total business tax P 297,000
Problem 11 – 46
Income tax on cockfighting winnings (P500,000 x 20%) P 100,000
Percentage tax on horseracing winnings (P800,000 x 10%) 80,000
Income tax on horseracing winnings (P800,000 x 20%) 160,000
Total tax on winnings P 340,000
Problem 11 – 47
1. Percentage tax (P0.50 x 1,000,000) x 0.005 P 2,500
2. August 20, 2005 = last day of remittance without penalty.
Problem 11 – 48
Gross receipts tax on:
Rent income (P30,000 x 7%) P 2,100
Royalty income (P20,000 x 7%) 1,400
Interest income (P50,000 + P20,000 + P10,000) x 5% 4,000
Total percentage tax P 7,500
Problem 11 – 49
1.
Year Remaining maturity
Amount
of interest, etc.
Applicable
tax rate Gross receipt tax
2005 9 P 200,000 1% P 2,000
2006 8 200,000 1% 2,000
2007 7 200,000 1% 2,000
2008 6 200,000 1% 2,000
2009 5 200,000 5% 10,000
Total gross receipt tax paid P18,000
2.
Year Remaining maturity
Amount
of interest, etc.
Applicable
tax rate Gross receipt tax
2005 4 P 200,000 5% P10,000
2006 3 200,000 5% 10,000
2007 2 200,000 5% 10,000
2008 1 200,000 5% 10,000
2009 Less than 1 year 200,000 5% 10,000
Total gross receipt tax as recomputed P50,000
Less: Gross receipt tax previously paid 18,000
Gross receipt tax still due P32,000

6. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 50
Franchise Non-franchise
Beginning receivables P 400,000 P - 0 -
Add: Revenues 3,000,000 1,800,000
Total P3,400,000 P1,800,000
Less: Ending receivables 100,000 120,000
Gross receipts P3,300,000 P1,680,000
1. Telephone services 10%
P330,000
10%
P168,000
2. Water franchise 2%
P 66,000
3%
P 50,400
3. Fast food (P3,000,000 x 12%)
(P1,800,000 x 12%)
P360,000
P216,000
Note: The business tax on fast food is based on the revenue because the business is a combination of
sales of goods and service. Moreover, the fast food business is subject to12% VAT because the total
revenue exceeded the P1,500,000 threshold.
Problem 11 – 51 Comprehensive Problem
Collections: Current Previous
Revenues
Accounts receivable
Advances
Gross receipts
P 500,000
300,000
200,000
P1,000,000
P300,000
100,000
.
P400,000
Computation of percentage taxes:
1. Common carrier of passengers (assume land transport) 3%
P 30,000
3%
P 12,000
2. Race track 30%
P300,000
30%
P120,000
3. Boxing exhibition 10%
P100,000
10%
P 40,000
4. Water utilities 2%
P 20,000
2%
P 8,000
5. Life insurance 5%
P 50,000
5%
P 20,000
6. Agents of foreign insurance companies 10%
P100,000
10%
P 40,000
7. Overseas dispatch 10%
P100,000
10%
P 40,000

7. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 50
Franchise Non-franchise
Beginning receivables P 400,000 P - 0 -
Add: Revenues 3,000,000 1,800,000
Total P3,400,000 P1,800,000
Less: Ending receivables 100,000 120,000
Gross receipts P3,300,000 P1,680,000
1. Telephone services 10%
P330,000
10%
P168,000
2. Water franchise 2%
P 66,000
3%
P 50,400
3. Fast food (P3,000,000 x 12%)
(P1,800,000 x 12%)
P360,000
P216,000
Note: The business tax on fast food is based on the revenue because the business is a combination of
sales of goods and service. Moreover, the fast food business is subject to12% VAT because the total
revenue exceeded the P1,500,000 threshold.
Problem 11 – 51 Comprehensive Problem
Collections: Current Previous
Revenues
Accounts receivable
Advances
Gross receipts
P 500,000
300,000
200,000
P1,000,000
P300,000
100,000
.
P400,000
Computation of percentage taxes:
1. Common carrier of passengers (assume land transport) 3%
P 30,000
3%
P 12,000
2. Race track 30%
P300,000
30%
P120,000
3. Boxing exhibition 10%
P100,000
10%
P 40,000
4. Water utilities 2%
P 20,000
2%
P 8,000
5. Life insurance 5%
P 50,000
5%
P 20,000
6. Agents of foreign insurance companies 10%
P100,000
10%
P 40,000
7. Overseas dispatch 10%
P100,000
10%
P 40,000