Chapter 5 – Exercise 2

1. Cynthia found various ways to make use of her money to generate income. The following summarizes all the income
she was able to derive from her use of money:

 Interest income from loans granted to online sellers who did not have enough capital on their own – P25,000
 Interest income on a 90-day time deposit with BPI. The amount of deposit is P500,000 which pays 7% interest
per annum. The interest was already credited to her account
 Interest income on her savings account maintained in her cooperative – P5,000
 Interest income on promissory notes of clients – P7,000

How much interest income is subject to final tax?

a. P40,750
b. P15,750
c. P13,750
d. P8,750
Note
8,750 (500,000 x 7% x 90/360)

2. Carlos is a resident citizen. He maintains a savings account deposit with the BPI-Baguio City Branch. For the current
year, his savings earned a total of P6,000 interest.

How much is the final tax on said income?

a. P300
b. P720
c. P1,200
d. P1,500

3. Minda, an OFW Filipino, returned to the country after 3 years abroad. She immediately went to her bank and had
her savings account passbook updated. She computed a total of P1,280 interest credited to her account.

How much is the final tax on her interest income debited against her account?

a. P256
b. P320
c. P427
d. Zero

4. Jones, a foreigner, arrived in the Philippines under a Temporary Visitor’s Visa. He had been staying in the country for
more than 60 days and so he was able to open a savings account with a local bank. On one occasion, he withdrew
his money and found out that he received a total of P1,100 interest.

How much final tax must have been withheld by the local bank?

a. P220
b. P275
c. P330
d. P367

Note
367 [(1,100/.75) x25%] – Jones is a NRANETB subject to 25% final tax. The amount of 1,100 is the amount received net of tax
5. ABX Corporation, a domestic corporation, maintains a 6-year time deposit with BPI. The amount of deposit is
P2,000,000 and earns a 6% interest per annum which is credited to the account every end of each quarter. Exactly
three years and 3 quarters after opening the account, ABX pre-terminated it.

How much final tax on interest income must be withheld by the bank at pre-termination date?

a. P54,000
b. P18,000
c. P10,800
d. Zero
Note
Zero – There is no pre-termination rule on corporation because the interest on long-term deposit of a corporation is not exempt. Hence, the
interest income was already subjected to final tax every quarter that it was credited. Note that the pre-termination occurred exactly after the
quarter

6. On march 1, 2017 Amelia, a non-resident citizen, opened a 5-yr time deposit with her local bank. The amount of
deposit is P600,000 at 6% annual interest credited every calendar year’s end. Needing money, she pre-terminated
the account on June 1, 2021

How much final tax is withheld by the bank at pre-termination?

a. Zero
b. P750
c. P3,000
d. P7,650

7. Karen, an alien staying in the Philippines for 3 years now, maintains a foreign currency deposit account under the
EFCDS with DEF Bank. For the current period, she received the amount of $255 interest from the bank.

How much final tax was withheld by the bank?

a. Zero
b. $20.7
c. $38.3
d. $45

8. Karen, an alien staying in the Philippines for 3 years now, maintains a foreign currency deposit account under the
EFCDS with DEF Bank. For the current period, she received the amount of $255 interest from the bank.

Using the same data above except that Karen is an OFW Filipino, how much is the final tax on her interest income?

a. Zero
b. $20.7
c. $38.3
d. $45

9. Spouses Pedro and Margarita, both Filipinos, maintain a joint foreign currency deposit account under EFCDA with an
offshore bank in the country. Pedro has been working abroad for 4 years now while Margarita stay in the
Philippines. For the current period, the account earned $500 interest.
How much is the final tax on the interest?

a. Zero
b. $18.8
c. $37.5
 d. $75
10. Minda, resident citizen, invested in a 6-year bond issued by a local bank. The bond was issued by the bank t more
than 20 persons in the public and complied with legal requirements. Minda earned a total of P2,000 interest on the
instrument for the current period.
How much is the final tax on the interest?

a. Zero
b. P300
c. P400
d. P500

11. ZAX Corporation, a domestic corporation, declared a P1,000,000 dividend for the current period 2021. The following
are some stockholders of ZAX:
Stockholde Description Ownershi
r p
De Guzman Resident Citizen 10%
Cruz Non-resident alien engaged in 15%
business in the Philippines
ABC Domestic corporation 30%
Corporation
DEF Non-resident foreign corporation 10%
Corporation
How much is the final tax on the dividend earned by De Guzman?

a. P10,000
b. P11,111
c. P15,000
d. No final tax
Note
(1,000,000 x 10%) x 10%

12. ZAX Corporation, a domestic corporation, declared a P1,000,000 dividend for the current period 2021. The following
are some stockholders of ZAX:
Stockholde Description Ownershi
r p
De Guzman Resident Citizen 10%
Cruz Non-resident alien engaged in 15%
business in the Philippines
ABC Domestic corporation 30%
Corporation
DEF Non-resident foreign corporation 10%
Corporation
How much is the final tax on the dividend earned by Cruz?

a. P15,000
b. P30,000
c. P37,500
d. No final tax
Note
(1,000,000 x 15%) x 20%

13. ZAX Corporation, a domestic corporation, declared a P1,000,000 dividend for the current period 2021. The following
are some stockholders of ZAX:
Stockholder Description Ownershi
p
De Guzman Resident Citizen 10%
 Cruz Non-resident alien engaged in 15%
business in the Philippines
ABC Domestic corporation 30%
Corporation
DEF Non-resident foreign 10%
Corporation corporation
How much is the final tax on the dividend earned by ABC?

a. P30,000
b. P60,000
c. P75,000
d. No final tax

14. ZAX Corporation, a domestic corporation, declared a P1,000,000 dividend for the current period 2021. The following
are some stockholders of ZAX:
Stockholder Description Ownership
De Guzman Resident Citizen 10%
Cruz Non-resident alien engaged in 15%
business in the Philippines
ABC Domestic corporation 30%
Corporation
DEF Non-resident foreign corporation 10%
Corporation
How much is the final tax on the dividend earned by DEF?

a. P15,000
b. P20,000
c. P25,000
d. No final tax

15. Gentrix Corporation, a resident foreign corporation, owns 40% of Omega Corporation, a domestic corporation. The
rest of Omega is owned by several resident individuals. Omega declared a P1,500,000 dividend in 2021.

How much final tax on dividend must have been withheld by Omega?

a. P60,000
b. P90,000
c. P150,000
d. P300,000

16. Bandana Corporation, a resident foreign corporation consistently doing 40% of its business in the Philippines and the
rest abroad, declared P2,000,000 dividends for the current period 2021. Gomez, a resident Filipino, owns 15% of
Bandana.
How much dividend income is earned by Gomez?

a. IN – P300,000 ; OUT – Zero

b. IN – Zero ; OUT – P300,000
c. IN – P180,000 ; OUT – P120,000
d. In – P120,000 ; OUT – P180,000
17. Bandana Corporation, a resident foreign corporation consistently doing 40% of its business in the Philippines and the
rest abroad, declared P2,000,000 dividends for the current period 2021. Gomez, a resident Filipino, owns 15% of
Bandana.
How much is taxable in the Philippines?

a. Zero
 b. P120,000
c. P180,000
d. P300,000

18. Bandana Corporation, a resident foreign corporation consistently doing 40% of its business in the Philippines and the
rest abroad, declared P2,000,000 dividends for the current period 2021. Gomez, a resident Filipino, owns 15% of
Bandana.
How much is the final tax?

a. Zero
b. P12,000
c. P18,000
d. P30,000

19. Gamma corporation is a foreign corporation which is 40% owned by Beta Corporation, a corporation duly organized
under existing Philippine laws and whose net taxable income does not go below P5M in any taxable period. Gamma
declared P2,000,000 dividends earned by Beta is not reinvested in its business operations but invested in unrelated
activities.

How much of the dividend income earned by Beta is taxable in the Philippines?

a. P480,000
b. P800,000
c. P320,000
d. Zero

20. Gamma corporation is a foreign corporation which is 40% owned by Beta Corporation, a corporation duly organized
under existing Philippine laws and whose net taxable income does not go below P5M in any taxable period. Gamma
declared P2,000,000 dividends earned by Beta is not reinvested in its business operations but invested in unrelated
activities.

How much is the tax on the dividend income?

a. 25% final income tax

b. 25% regular income tax
c. 20% final income tax
d. 20% regular income tax
Note
25% regular income tax rate in general considering the net taxable income. Also, conditions for exemption rom tax is not met by the Corporation

21. Garcia, resident citizen, earned the following during the taxable year:
Description Within Without
Online selling of own books (delivery of P500,000 P600,000
books is under an arrangement with courier
partner)
Royalties paid to him for the sale of some of 265,000
his artistic works (canvass oil painting
Royalty on franchise 900,000 1,200,000
Total P1,665,000 P1,800,000

How much final tax must have been withheld from the above items of income?

a. P556,500
b. P333,000
c. P256,500
 d. P166,500
Note
[(500,000 + 265,000) x (900,000 x 20%) = 256,500

22. How much of the following prizes and awards is subject to income tax?
Description Amount
Prize won by a resident citizen from a local TV P9,000
station contest
Philippine online beauty pageant contest prize 50,000
won by a non-resident citizen
Nobel prize award given to Mr. Santos for his 600,000
intellectual achievement
US Lotto winnings of Sanchez, a resident citizen 1,500,000

a. P2,159,000
b. P1,559,000
c. P1,550,000
d. P59,000

23. How much of the following prizes and awards is subject to final tax?
Description Amount
Prize won by a resident citizen from a local TV P9,000
station contest
Philippine online beauty pageant contest prize 50,000
won by a non-resident citizen
Nobel prize award given to Mr. Santos for his 600,000
intellectual achievement
US Lotto winnings of Sanchez, a resident citizen 1,500,000
PCSO winnings of a resident citizen 200,000

a. P50,000
b. P200,000
c. P250,000
d. P1,750,000

24. How much of following is subject to final withholding tax in the Philippines?
 P10,000,000 prize of Ms. Hidilyn Diaz for bagging the gold in the Olympics
 P15,000,000 cash received from generous individuals and entities in the Philippines
 P990,000,000 earned by Manny Pacquiao from boxing abroad
 P80,000,000 earned by Manny Pacquiao from boxing in the Philippines

a. P1,085,000,000
b. P1,070,000,000
c. P95,000,000
d. P15,000,000
e. Zero
Note
 The P10,000,000 is exempt
 The P15,000,000 is subject to donor’s tax; exempt from income tax
 The 990,000,000 is income from profession (OUT) – taxable with regular income tax
 The P80,000,000 is income from profession (IN) – taxable with regular income tax

25. How much of following is subject to regular income tax in the Philippines?
 P10,000,000 prize of Ms. Hidilyn Diaz for bagging the gold in the Olympics
 P15,000,000 cash received from generous individuals and entities in the Philippines
 P990,000,000 earned by Manny Pacquiao from boxing abroad
  P80,000,000 earned by Manny Pacquiao from boxing in the Philippines

a. P1,085,000,000
b. P1,070,000,000
c. P95,000,000
d. P15,000,000
e. Zero
Note
1,070,000,000 – See previous number for solution