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Brightest Buwis Masters

2023
(FINAL ROUND)
(EASY)
1. To record expired portion of Minimum Corporate Income
Tax (MCIT), what account is debited?

a) Retained earnings
b) Income tax payable
c) Deferred charges MCIT
d) Provision for income tax

Answer: a
2. The United Kalinga Unibank received a total of P8,000,000 interest income from
short-term deposits with other banks during the month. The interest was net of 20%
final income tax. How much is the gross receipts tax resulting from the transaction?

Answer: Gross Receipts (P8,000,000/80%) P10,000,000

Multiply by: 7%
Gross Receipts Tax P 700,000
3. Which of the following is being taxed on gross income?
a) Domestic corporation
b) Non-profit cemetery
c) Resident-foreign corporation
d) Non-resident foreign corporation

Answer d. Codal Reference: Section 28(B)(1) of the Tax Code

4. Fill in the blank. Corporations, companies, partnerships or persons whose gross
annual sales, earning, receipts or output exceed _______________, shall have their
books of accounts audited and examined yearly by independent Certified Public
Accountants.

Answer: P 3,000,000.00 under Section 3, RMC 29-2019

5. Linda has recently graduated from BIR University and applied for
work at ABC Corp. As a first-time registrant, the employer shall register
the employee:
a) At any time before employment
b) Within ten (10) days from date of employment
c) Within thirty (30) days before date of employment
d) Within thirty (30) days from date of employment

Answer b. Basis: Section 6.4 of RR 12-2007 in relation to Part II paragraph 1 of RMO 37-2019
6. A VAT- registered seller merely indicated an amount of P300,000 on a
bill without separately indicating the VAT thereon. How much is the
output VAT?
a) At any time before employment
b) Within ten (10) days from date of employment
c) Within thirty (30) days before date of employment
d) Within thirty (30) days from date of employment

Answer: P32,143 (P300,000 x12/112)

7. A VAT-registered supplier sold goods amounting to P 500,000 to a
government-controlled corporation during a particular quarter. Which of
the following statements is incorrect in relation to the sale of goods
a) The sale is subject to creditable withholding VAT.
b) The government-controlled corporation will withhold P15,000 withholding VAT
c) The government-controlled corporation shall remit the withholding VAT to the BIR within 10
days following the end of the month the withholding was made.
d) The VAT-registered supplier may refuse the withholding of VAT as long as it is willing to pay
the full 12% VAT.

Answer d. Reference: RMC 36-2021; Section 4-114-2, RR 13-2018

8. Identification. It is a tax wherein the payor withholds an amount from the payee’s
income and pays this amount to the government on behalf of the payee. The payee
then no longer needs to file an income tax return for this income.

Answer: Final Withholding Tax or Final Tax. Reference: Section 2.57 (A) of RR 2-98
9. Identification. An alien individual employed by Regional or Area headquarters &
Regional Operating headquarters of multinational companies shall be taxable of
_____ % on all income received by every individual within the Philippines.

Answer: 15%
10. The following persons are not covered by the issuance of
BIR Certificate of Registration (COR), except
a) Local employees deriving purely compensation income.
b) One – time transaction taxpayers (ONETT Taxpayers).
c) Persons who have secured Taxpayer Identification Number under EO 98, series of 1998.
d) Individual taxpayers engaged in business or practice of profession.

Answer d. Section 7, RR 7-2012

(AVERAGE)
11. Mr. X, elected the 8% income tax rate option on January 20, 2023 by filing BIR
Form 1905. Later, before the due date on filing of the 1st Quarterly Percentage Tax
Return or 1st Quarterly Income Tax Return, Mr. X had a change of heart to be taxed
at the graduated rates. Which of the following statements is correct?
a) Mr. X can signify the option to be taxed at the graduated rates in filing his 1st Quarterly
Percentage Tax Return or 1st Quarterly Income Tax Return for 2023.
b) Mr. X can re-file the BIR Form 1905 before filing his 1st Quarterly Percentage Tax Return.
c) Mr. X shall continue to file his income tax returns under the graduated rates for taxable year
2023.
d) The income tax rate option, once elected, shall be irrevocable, and no amendment of option
shall be made for the taxable year it has been made.

Answer d. RMO 23-2018

12. Gerry sold his real property located in Apalit, Pampanga. The details
of information were duly provided:
•Consideration in the Deed of Absolute Sale – Php 5,000,000
•Zonal value – Php 4,000,000
•Fair Market Value (FMV) of assessor – Php 3,000,000
•Mortgage value of land as annotated in the Certificate of Title – Php 7,000,000
•Prevailing selling price in the area – Php 6,000,000
•Appraiser’s valuation – Php 10,000,000
How much is the capital gains tax?

Answer: Php 300,000; GSP 5,000,000 x 6%

13. Which of the following statements is false regarding withholding tax
system?
a) Some types of income, collectively referred as passive income, like interest income,
dividends, royalty income, etc. are subject to final withholding taxes.
b) The payee of the income is constituted as the government’s withholding agent with the
obligation to withhold the tax and remit the same to the BIR.
c) The income subject to final withholding tax must be derived from sources within the
Philippines.
d) Under the final withholding tax system, the amount of income tax that is withheld by a
withholding agent is constituted as a full and final payment of the income tax due from the
payee on said income.

Answer b. Reference: RR 2-98 as amended by RR 11 2018

14. BBM Corporation commenced its operations in 2019. Calendar year
2020 of BBM Corporation shows the following data:
•Gross Sales = 500M
•Cost of Sales = 450M
•Allowable Deduction = 47M
•Total Assets (excluding land) = 105M
How much is the income tax due?

Answer: P 825,000 computed as 500M-450M = 50M - 47M = 3M * 27.5% = 825K

15. Beer Hub is a manufacturer of beer. During a particular
quarter, it had the following transactions (net of VAT):
•January 4, 2022: Consigned beer to a retailer in Quezon City amounting to P200,000.
•February 14, 2022: Exported P1,000,000 worth of beer to Japan.
•February 27, 2022: President of Beer Hub celebrated his birthday, consuming P50,000 worth of
beer given to him by the company as a birthday gift.
•March 20, 2022: Declared property dividend of one case of beer for every 10 shares, amounting
to P150,000.
•Additional information: From January to March, domestic sales to wholesalers amounted to
P600,000. No beer was returned by the consignee until the end of the quarter.
How much is the output tax for the quarter?
Answer: P 120,000, computed as:
Cont..
Regular Sales
Domestic Sales for the quarter 600,000.00

Transactions Deemed Sales

Consignment Sales 200,000.00
Consumption of Goods (Birthday) 50,000.00
Distribution or transfer as property dividends 150,000.00 400,000.00

Total VATable Sales 1,000,000.00

Multiply by the VAT Rate 12%
Output VAT for the Quarter 120,000.00

Codal Reference: Section 106(A)(2) and (B) of the Tax Code

16. Judge Dadap, a French citizen permanently residing in the Philippines, received
several items during the taxable year. Which among the following is NOT subject to
Philippine income taxation?
a) Gains derived from the sale of his condominium unit located in The Fort, Taguig City to
another resident alien.
b) Dividends received from an American corporation which derived 60% of its annual gross
receipts from Philippine sources for the past 7 years.
c) Interests from his deposits in a local bank of foreign currency earned abroad converted to
Philippine pesos.
d) Consultancy fees received from designing a computer program and installing the same in the
Shanghai facility of a Chinese firm.
Answer: d
17. Mr. Bae Curry supplies special cupcakes on a regular basis to MS Supermarket, a top
withholding agent pursuant to applicable revenue regulations. Prior to 2022, his annual sales to
MS Supermarket never exceeded ₱250,000. He only bakes cupcakes upon order. MS Supermarket
is his lone payor of income; thus, he executed the sworn declaration of gross receipts stating that
his gross expected receipts shall not exceed ₱250,000 for the year from MS Supermarket.
However, in the latter part of 2022, MS Supermarket noted that its purchase of cupcakes shall
exceed ₱250,000. As expected, in 2022, the total purchase of cupcakes by MS Supermarket from
Mr. Bae Curry amounted to ₱300,000. In this case, MS Supermarket shall withhold how much
from income payments to Mr. Bae Curry?

Answer: P 500.00, computed as:

Cont…
Gross Receipts 300,000.00
Less: Amount not subject to withholding tax - 250,000.00
Income subject to withholding tax 50,000.00
Multiply by: EWT Rate 1%
Amount of withholding tax 500.00

Reference: Section 3, RR 11-2018

18. The following persons shall be exempt from the
imposition of the Annual Registration Fee (ARF), except:
a) Cooperatives duly registered with the Cooperative Development Authority.
b) Facilities with sales transactions occurring during the taxable year.
c) Tax exempt corporations such as those enumerated under Section 30 of the Tax Code, as
amended, in pursuance of tax-exempt activities.
d) Non-stock / non-profit organizations not engaged in business.

Answer b. Section 8, RR 7-2012

19. Optional Corporate Income tax of 15% can be availed by conforming to the
following requirements, except:
a) Tax Effort Ratio of 20% (GNP)
b) VAT Effort of 4% (GNP)
c) Income Tax Collection of 30%
d) VAT to Income Tax Collection Effort Ratio of 40%

Answer c
20. Calendar Year 2020 of ABC Corporation shows the following data:
Interest Expense = P200,000
Interest Income (net of 20% final tax) = P100,000
How much interest expense is allowable deduction for income tax purposes?

ANSWER: P166,875 computed as:

*P100,000 divided by 20% = P125,000 gross interest income
P125,000/2 = P62,500*33% = P20,625
P125,000/2 = P62,500*20% = P12,500
*P200,000 - P20,625 - P12,500 = P166,875
(DIFFICULT)
21. The following cash benefits were given to Inday, a government employee during
December 2022:
•Monetized vacation leave credits (20 days at Php 1,000 per day) – Php 20,000
•Monetized sick leave credits (20 days at Php 1,000 per day) – Php 20,000
•Uniform allowance – Php 10,000
•Christmas cash gift – Php 10,000
•Employee achievement award (loyalty award) – Php 10,000
•Annual medical assistance – Php 10,000
You were preparing the alpha list of employees. How much will be the total de minimis benefits
from the above given?
Cont…
Answer: Php 61,000 computed as:
Solution:
•Monetized vacation leave credits (20 days at Php 1,000 per day) – Php 20,000
•Monetized sick leave credits (20 days at Php 1,000 per day) – Php 20,000
•Uniform allowance – Php 6,000
•Christmas cash gift – Php 5,000
•Annual medical assistance – Php 10,000
 22. An individual taxpayer who is using the accrual basis in his manufacturing
business reported the following results of operations in 2021:
• Sales, net of returns and discounts, P 5,000,000.00
• Cost of Sales, P 2,300,000.00
• Dividend income, net of final tax, P 45,000.00
• Business Expenses, including interest expense, P 1,800,000.00
• Gain on sale of equipment, P 120,000.00
• Sale of Scrap Metals, P 150,000.00
• Interest Income on employee advances, P 40,000.00
• Gain on sale of domestic stocks directly to a buyer, P 15,000.00
• Interest Income, net of final tax, P 40,000.00
How much taxable income is subject to regular income tax rate?
Cont…
Answer:
23. A local bank approved a loan of P300,000 in favor of its vice president, with
interest thereon at a special rate of 8% per annum. The term of the loan is 4 months.
How much is the fringe benefit tax?
Answer: P 2,153.85 computed as:

Reference: Section 7(D)(1-2), RR 11-2018

If an employer lends money to his employees free of interest or at a rate lower that 12%, such interest income
foregone by the employer (the difference of the interest assumed by the employee and the rate of 12%) shall be
treated as taxable fringe benefit.
The benchmark rate of 12% shall remain in effect unless revised by a subsequent regulation.
24. Sweets Refining Company manufactures refined sugar. It had the following data
during the first quarter of 2022:
Sale of refined sugar, net of VAT P 2,000,000
Purchase of sugar cane from farmers used
in the manufacture of refined sugar 500,000
Purchase of packaging materials, gross of VAT 784,000
Purchase of labels, gross of VAT 112,000
How much is the VAT payable?
Cont…
Answer: P 124,000 computed as:

Codal Reference: Section 111(B) of the Tax Code

Persons or firms engaged in the processing of sardines, mackerel and milk, and in
manufacturing refined sugar, cooking oil and packed noodle-based instant meals shall be
allowed a presumptive input tax of 4% of the gross value in money of their purchases of
primary agricultural products which are used as inputs to their production.
25. Magnifico, an office employee, recently resigned from his full time job, and decided to
concentrate in his bakery business. His compensation income in 2022 amounted to P120,000
inclusive of other benefits of P20,000.
In 2022, the bakery business had gross sales of P1,100,000, cost of sales of 300,000, and
operating expenses of P400,000. It also had non-operating income of P500,000.

What is his income tax due for 2022 if he avails of the 8% income tax rate option on his gross
sales plus non-operating income arising from his business?
Answers: P 128,000, computed as:
Cont…
His income tax due for 2022 is computed as follows:

Income tax on compensation:

Total compensation income 120,000.00
Less: 13th Month pay and other benefits - 20,000.00
Taxable compensation income 100,000.00

Tax on P100,000 (not over P250,000) P 0

Income tax on business income:

Gross Sales 1,100,000.00
Add: Non - operating income 500,000.00
Taxable business income 1,600,000.00
Tax rate 8% 128,000.00

Total Income Tax Due 128,000.00

Reference: Section 2(3), RMO 23-2018