TAX05-04 Corporate Income Tax

No. 125 Brgy.
San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]
Income Taxation of Corporation TAX05-04
1. For purposes of income taxation, the following are considered “Corporation”, except:
a. One person corporation

b. Ordinary Partnership
c. General Professional Partnership
d. Joint Venture
e. Joint stock companies
f. Joint accounts (cuentas en participacion)
g. Associations
h. Insurance companies
2. The following are not “Corporation” under the National Internal Revenue Code, except:
a. General Professional Partnership

b. Joint venture or consortium formed for the purpose of undertaking construction projects
c. Joint venture or consortium formed for the purpose of engaging in petroleum, coal,
geothermal and other energy operations pursuant to an operating or consortium agreement
under a service contract with the Government
d. Joint venture formed between two transport corporations granted their respective franchise
to operate public utility of transportation
3. Technotronics Energy Corporation, a corporation registered in Belgium, has a 50 MW electric

power plant in Ibaan, Bataan. Aside from Technotronic’s income from its power plant, which
among the following is considered as part of its taxable income from sources within the
Philippines?
a. Gains from the sale to an Ilocos Norte power plant of generator delivered in the United
States
b. Interests earned on its dollar deposits in a Philippine bank under the Expanded Foreign
Currency Deposit system
c. Dividends from a three-year old Norwegian subsidiary with operations in the Philippines and
derives 60% of its gross income from the Philippines
d. Royalties from the use in Brazil of generator sets designed in the Philippines by its engineers
4. Villasis, Inc. bought a parcel of land in 2020 for P7 million as part of its inventory of real
properties. In 2021, it sold the land for P12 million which was its zonal valuation. In the same
year, it incurred a loss of P6 million for selling another parcel of land in its inventory. These were
the only transactions it had in its real estate business. Which of the following is the applicable
tax treatment?
a. Villasis shall be subject to a tax of 6% CGT of P12 million

b. Villasis could deduct its P6 million loss from its P5 million gain
c. Villasis’ gain of P5 million shall be subject to the holding period being held for less than a
year
d. Villasis’ P6 million loss could not be deducted from its P5 million gain
5. Samsang Tech Corporation is registered under the laws of the British Virgin Islands. It has
extensive operations in Asia. In the Philippines, its products are imported and sold at a mark-up
by its exclusive distributor, Somewell, Inc.’s products The BIR compiled a record of all the imports
of Somewell from Samsang and imposed a tax on Samsang’s net income derived from its exports
to Somewell. Is the BIR correct?
1|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

No. 125 Brgy. San Sebastian
Mobile : 0927 283 8234
Telephone : (043) 723 8412
a. Yes. Samsang is a resident foreign corporation engaged in trade or business in the

Philippines.
b. No. The tax should have been computed on the basis of gross income and not net income.
c. No. Samsang is a non-resident foreign corporation not engaged in trade or business in the
Philippines.
d. Yes. Samsang is doing business in the Philippines through its exclusive distributor Somewell.
6. The following government owned and controlled corporations are exempt from income tax,
except:
a. Social Security System

b. Philippine Health Insurance Corporation (Philhealth)
c. Government Service Insurance System
d. Local Water Districts
e. Philippine Amusement and Gaming Corporation
7. The following are classified as non-resident foreign corporation, except:
a. Non-resident owner of vessel chartered by Philippine nationals

b. Non-resident owner of aircraft leased and used in the Philippines
c. Non-resident owner of cinematographic Films
d. Non-resident airline, with no landing right in the Philippines, whereby tickets of its flight
originating abroad are regularly sold by Philippine travel agents in the Philippines
8. All of the following are taxable on income derived from sources within the Philippines only, except:
a. Non-resident foreign corporation

b. Resident foreign corporation
c. Domestic Corporation
d. Foreign corporation
9. First Statement - Non-Resident Foreign Corporations are not required to file any income tax
return.
Second Statement - Tax exempt corporations are also required to file an ITR for administrative
purposes only.
a. True, True
b. False, True
c. False, False
d. True, False
10. The following passive income, from sources within the Philippines, received by a domestic
corporation shall be subject to 20% final withholding tax, except:
a. Interest income from peso bank deposit

b. Yield from deposit substitutes
c. Interest income from foreign currency denominated deposit under the Foreign Currency
Deposit System
d. Royalties

Mobile : 0927 283 8234
Telephone : (043) 723 8412
11. A depository bank under Foreign Currency Deposit System has the following income from foreign
currency transactions (Exchange Rate $1=P50):
Other income From Nonresidents $50,000

Interest income from residents 30,000
Other income- BPI (FCDU) 2,000
How much is the final withholding tax applicable on the above income?
a. P225,500
b. P95,000
c. P150,000
d. P545,000
12. Interest income of a domestic commercial bank derived from a peso loan to a domestic
corporation in 2021 is:
a. Subject to the 25% income tax based on its net taxable income
b. Subject to the 20% final withholding tax.
c. Subject to the 15% final withholding tax.
d. Subject to 10% final withholding tax.
Numbers 13 to 15 are based on the following set of facts:
On April 15, 2021, Aishin Corporation sold shares of stocks of Abu Co., a domestic corporation. It
was sold at its fair market value of P5,000,000 when its cost to the seller was P2,000,000
13. Assuming Aishin Corporation is a domestic corporation, the capital gains tax on the transaction
is:
a. P450,000
b. P295,000
c. P750,000
d. P345,000
14. Assuming Aishin Corporation is a foreign corporation, the capital gains tax on the transaction is:
a. P450,000
b. P295,000
c. P750,000
d. P345,000
15. Assuming Aishin Corporation is a domestic corporation and the shares were sold at a price of
P4,000,000, when its fairmarket value at the time was P5,000,000. The cost of the shares
remain at P2,000,000. The total tax liability of the seller is:
a. P450,000
b. P295,000
c. P750,000
d. P345,000

Mobile : 0927 283 8234
Telephone : (043) 723 8412
Corporate income tax under CREATE
The higher between the “Regular” or “Minimum Corporate

Type of Corporation Income Tax (MCIT)” rates
Regular MCIT
Rate Effectivity Rate Effectivity
Domestic Corporation:
Domestic corporations, in general 25% July 1, 2020 1% July 1, 2020 to
June 30, 2023
2% July 1, 2023
For corporations with net taxable 20% July 1, 2020 1% July 1, 2020 to
income not exceeding Five Million June 30, 2023
Pesos (P5,000,000) AND total
assets not exceeding One Hundred
Million (P 100,000,000), excluding 2% July 1, 2023
the land on which the particular
business
entity’s office, plant and equipment
are situated
Proprietary Educational Institutions 1% July 1, 2020 Not Applicable
and Hospitals to June 30, 2023
10% July 1, 2023
Foreign Corporation [on taxable income(e.g., net or gross income,
as applicable) derived from all sources within the Philippines]:
Resident Foreign Corporation 25% July 1, 2020 1% July 1, 2020 to
June 30, 2023
2% July 1, 2023
The higher between the “Regular” or “Minimum Corporate
Type of Corporation Income Tax (MCIT)” rates
Regular MCIT
Rate Effectivity Rate Effectivity
Offshore Banking Unit (OBUs) (Note: 25% Upon the 1% Upon the
OBUs shall now be taxed as resident effectivity of the effectivity of
foreign corporation upon effectivity of CREATE the CREATE
the CREATE) until June 30,
2023
2% July 1, 2023
Regional Operating Headquarters 25% January 1, 2022 1% January 1, 2022

(ROHQ) to June 30,
2023
2% July 1, 2023
Non-Resident Foreign Corporation 25% January 1, 2021 Not applicable

Mobile : 0927 283 8234
Telephone : (043) 723 8412
16. A Domestic Corporation was registered with the Bureau of Internal Revenue. Its Certificate of
Registration (BIR Form 2303) indicates it was registered on December 27, 2020. It had a soft
opening and made its first sale on January 7, 2021. It can be liable to the Minimum Corporate
Income Tax on the year:
a. 2022
b. 2023
c. 2024
d. 2025
17. The following corporations are exempt from the MCIT, except
a. Non-resident owner of cinematographic Films

b. Off shore banking unit
c. Resident International Carrier
d. Ordinary partnership in the Philippines
18. One of the following is not a ground for exemption from MCIT:
a. Prolonged labor dispute

b. Force majeure problems
c. Legitimate business reverse
d. Law suits filed by the company
Corporation A, a retailer, has a gross sales of P1,400,000,000 with a cost of sales of

P560,000,000 and allowable deductions of 150,000,000 for the calendar year 2021. Its total
assets of P180,000,000 as of December 31, 2021 per Audited Financial Statements includes
the land costing P50,000,000 and the building of P25,000,000 in which the business entity is
situated, with an aggregate amount of P75,000,000 as Fixed Assets. Assuming CY 2021 is the
5th year of operation of Corporation A,
19. Corporation A’s regular corporate income tax for CY 2021 is:
a. P172,500,000
b. P8,400,000
c. P138,000,000
d. P0
20. Corporation A’s minimum corporate income tax for the CY 2021 is:
a. P172,500,000
b. P8,400,000
c. P138,000,000
d. P0
21. The amount of tax Corporation A is liable for the CY 2021 is:
a. P172,500,000
b. P8,400,000
c. P138,000,000
d. P0

Mobile : 0927 283 8234
Telephone : (043) 723 8412
22. Took Mall Corporation, a domestic corporation and in its 7th year of operation in 2018, provided
you with the following data:
2018 2019 2020

Gross sales P2,040,000 P2,800,000 P3,000,000
Sales returns 40,000 100,000 -
Cost of sales 1,000,000 700,000 1,500,000
Business expenses 950,000 2,100,000 1,200,000
Assuming that for the year ended 2020, Took Mall’s total asset is amounting to P250,000. The
income tax due after tax credit, if any for taxable year 2020 is:
a. P10,000
b. P60,000
c. P30,000
d. P90,000
Jiff Free Corporation has the following information for the taxable year ended December 31, 2020:
Creditable
Quarter RCIT MCIT
Withholding Tax
First 200,000 160,000 40,000
Second 240,000 500,000 60,000
Third 500,000 150,000 80,000
Fourth 300,000 200,000 70,000
Additional Information:
a) Excess MCIT for 2019, P60,000;
b) Excess tax credits from 2019 amounts to P20,000.
23. How much was the income tax payable for the first quarter?
a. P200,000
b. P120,000
c. P160,000
d. P80,000
24. How much was the income tax payable for the second quarter?
a. P660,000
b. P200,000
c. P460,00
d. P60,000
25. How much was the income tax payable for the third quarter?
a. P860,000
b. P600,000
c. P120,000
d. P140,000

Mobile : 0927 283 8234
Telephone : (043) 723 8412
26. How much was the annual income tax payable?
a. P1,260,000
b. P230,000
c. P390,000
d. P930,000
27. If the gross income from unrelated activity exceeds 50% of the total gross income derived by any
private educational institution, the rate shall be 25% based on the entire taxable income. This
principle is known as:
a. Constructive receipt
b. Tax benefit rule
c. End result doctrine
d. Predominance test
Umbrella Academy, a proprietary educational institution organized in 1972, had the following data
for 2020.
Tuition Fees P850,000

Rental Income (net of 5% cwt) 142,500
School related expenses 820,000
28. The income tax still due for 2020 is:
a. P2,400
b. (P5,700)
c. P10,500
d. P46,500
29. Assuming the year is 2021, the income tax due is:
a. P2,400
b. (P5,700)
c. P10,500
d. P46,500
a. P2,400
b. (P5,700)
c. P10,500
d. P46,500
a. P2,400
b. (P5,700)
c. P10,500
d. P46,500

Mobile : 0927 283 8234
Telephone : (043) 723 8412
32. Xavier School for Gifted Youngsters, a proprietary educational institution organized in 2004, had
the following data for 2020.
Tuition Fees P480,000

Rental Income (net of 5% cwt) 494,000
School related expenses 945,000
The income tax still due for 2020, assuming XSGY’s total assets is P500,000,000 is:
a. P16,500
b. (P9,500)
c. (P10,875)
d. P20,000
The Legacy Corporation provided the following data for the calendar year ending December 31, 2021
($1=P50).
Philippines USA
Gross Income P4,000,000 $40,000
Deductions 2,500,00 15,000
Income Tax Paid 3,000
33. If it is a domestic corporation, its income tax after tax credit is:
a. P812,500
b. P537,500
c. P962,500
d. P400,000
34. If it is a domestic corporation and its total assets amount to P95,000,000, its income tax after
tax credit is:
a. P812,500
b. P537,500
c. P962,500
d. P400,000
35. If it is a resident foreign corporation and its total assets amount to P95,000,000, its income tax
is:
a. P40,000
b. P450,000
c. P375,000
d. P525,000
36. If it is a non-resident foreign corporation, its income tax is:
a. P730,000
b. P1,280,000
c. P1,000,000
d. P1,400,000

Mobile : 0927 283 8234
Telephone : (043) 723 8412
37. If it is a domestic corporation, but it opts to claim the tax paid abroad as deduction from gross
income, its income tax is:
a. P910,000
b. P832,000
c. P237,000
d. P650,000
38. If it is a resident international carrier, assuming the gross income from the Philippines is the gross
Philippine billing, its income tax is:
a. P100,000
b. P 10,000
c. P 37,000
d. P125,000
39. If it is a non-resident cinematographic film owner/lessor, its income tax is:
a. P1,000,000
b. P 100,000
c. P 300,000
d. P 128,000
40. If it is a non-resident lessor of vessels, its income tax is:
a. P100,000
b. P180,000
c. P300,000
d. P128,000
41. If it is a non-resident lessor of aircrafts, machineries, and equipment, its income tax is:
a. P100,000
b. P180,000
c. P300,000
d. P128,000
42. If it is a resident foreign corporation but its expenses within and outside the Philippines is P3M,
unallocated (disregard original data on expense) its income tax is:
a. P640,000
b. P700,000
c. P480,000
d. P500,000
43. If it is a resident foreign corporation and it remitted 60% of its net profit to its head office abroad,
its total tax liability is (Original data)
a. P480,000
b. P571,800
c. 476.250
d. P612,750

Mobile : 0927 283 8234
Telephone : (043) 723 8412
44. Banco De Adamantium, a domestic corporation had the following data for the taxable year ended
December 31, 2020:
Regular Banking Unit:

Interest Income from loans P10,000,000
Interest Income from peso deposit with Bank of Gapan, a domestic corp. 1,000,000
Dividend Income from various domestic corporations 1,500,000
Foreign Currency Deposit Unit:

Interest Income from loans to residents 2,000,000
Interest Income from loans to nonresidents 500,000
Additional Information: Banco De Adamantium had total operating expenses of P12,000,000.

How much was the normal income tax for the year?
a. P600,000
b. P550,000
c. P400,000
d. P0
45. Generally, dividend income received by a domestic corporation from a foreign corporation is
includible as gross income of the recipient domestic corporation and subject to corporate income
tax. However, said foreign corporation dividend is exempt from income tax provided the following
requisites are met, except:
a. The dividends actually received or remitted into the Philippines are reinvested in the
business operations of the domestic corporation within the next taxable year from the
time the foreign-source dividends were received or remitted.
b. The dividends received shall only be used to fund the working capital requirements, capital
expenditures, dividend payments, investment in domestic subsidiaries, and infrastructure
project.
c. The domestic corporation holds directly or indirectly at least twenty percent (20%) in value
of the outstanding shares of the foreign corporation.
d. The domestic corporation has held the shareholdings uninterruptedly for a minimum of two
(2) years at the time of the dividends distribution. In case the foreign corporation has been
in existence for less than two(2) years at the time of dividends distribution, then the
domestic corporation must have continuously held directly at least twenty percent (20%) in
value of the foreign corporation's outstanding shares during the entire existence of the
corporation.
46. The following are exempt from the Improperly Accumulated Earnings Tax, except?
a. Banks and other non-bank financial intermediaries

b. Publicly-held corporations
c. Insurance companies
d. Closely-held corporation
47. It is a test used in determining the reasonable needs of a business to justify the accumulation of
earnings which will exempt the corporation from paying Improperly Accumulated Earnings Tax:
a. Urgency test
b. Immediacy test
c. Reasonable needs test
d. Control test
10 | P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

Mobile : 0927 283 8234
Telephone : (043) 723 8412
48. JCU Corporation, a domestic corporation had the following data for taxable year 2020:
Sales P5,000,000
Cost of goods sold 2,000,000
General selling and administrative expenses 500,000
Interest income from Philippine bank deposit 100,000
Rental income (net of 5% withholding tax) 190,000
Dividend Income:
From domestic corporation 60,000
From foreign corporation 50,000
Capital gains from sale of domestic shares of stocks sold Directly to buyer 75,000
Dividend declared and paid during the year 500,000
Retained earnings, 12/31/2019 1,000,000
Par Value of outstanding shares 500,000
The income tax payable was:
a. P825,000
b. P899,200
c. P746,250
d. P819,200
49. Based on the foregoing problem, the Improperly accumulated earnings tax was:
a. P208,125
b. P219,750
c. P108,125
d. P105,125
50. MNC Corporation, a domestic corporation, has unappropriated retained earnings in excess of its paid-up
capital stock amounting to P20,000,000 and P50,000,000 as of thefiscal years ending June 30, 2020
and June 30, 2021, respectively. MNC Corporation shall be subject to the 10% improperly accumulated
earnings tax on the following fiscal years ending, except:
a. June 30, 2018

b. June 30, 2019
c. June 30, 2020
d. June 30, 2021
Asian Spirit, an international air carrier showed the following gross receipts for 2019:
Point of Origin Destination Gross receipts

Philippines United States of America 8,000,000
Korea Malaysia 4,000,000
Thailand Philippines 3,750,000
Philippines Philippines 2,100,000
Additional information:
▪ Thirty Five percent (35%) of the shipments from the Philippines to the United States were
later shipped to the Soviet Union.
▪ 25% of all its revenues were from transport of cargoes and goods.

Mobile : 0927 283 8234
Telephone : (043) 723 8412
51. The income tax payable for 2019 is:
a. P127,500
b. P200,000
c. P170,000
d. P150,000
52. How much is the income tax payable for 2019 assuming the Philippines and U.S. entered into a
tax treaty subjecting international carriers to 1% income tax rate?
a. P68,000
b. P60,000
c. P80,000
d. P150,000
53. How much is the income tax payable for 2019 assuming that Philippine carriers are exempt from
payment of income tax in the United States?
e. P125,000
f. P60,000
g. P0
h. P80,000
A corporation has the following data for 2016:
Gross income, Phil. P1,000,000

Gross income, USA 500,000
Gross income, Japan 500,000
Expenses, Phil. 300,000
Expenses, USA 200,000
Expenses, Japan 100,000
Other income:
Dividend from San Miguel Corp. 70,000
Dividend from Ford Motors, USA 120,000
Gain on sale of San Miguel shares directly
to buyers 150,000
Royalties, Phils. 50,000
Royalties, USA 100,000
Interest from receivables in the Philippines 60,000
Rent Income, land in USA 250,000
Rent income, Building in the Philippines 100,000
The Company also sold a land classified as capital asset for P2,000,000. The cost of the land is
P1,000,000 while its Zonal Value is P3,000,000.
54. Its income tax on all income as a domestic corporation is:
a. P578,000
b. P963,600
c. P683,500
d. P821,500

Mobile : 0927 283 8234
Telephone : (043) 723 8412
55. Based on the above problem, its income tax on all income if it is a resident foreign corporation,
ignoring sale of land:
a. P278,000
b. P663,600
c. P383,500
d. P509,000
56. And if it is a non-resident foreign corporation and there is tax sparing, its income tax on all income
is (ignore sale of land):
a. P378,000
b. P663,600
c. P383,500
d. P509,000
57. A domestic corporation may employ, as a basis for filing its annual corporate income tax return
the:
a. Calendar year only

c. Either calendar or fiscal year .
b. Fiscal year only
d. Neither calendar nor fiscal year
58. A corporation files a, quarterly return within:
a. 30 days following the close of each of the first 3 quarters

b. 60 days after the end of each of the first 3 quarters
c. 30 days, after the end of each of the first 4 quarters
d. 60 days following the end of each of the first 4 quarters.
59. Which of the following is subject to the income tax?
a. A non-stock and non-profit educational institution

b. Public educational institution
c. Civic league or organization not organized for profit and operated exclusively for the promotion
of social welfare
d. Mutual savings bank and cooperative bank having a capital stock represented by shares
organized and operated for mutual purposes and profit
That in all things, God will be glorified.

TAX05-04 Corporate Income Tax

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No. 125 Brgy.

Income Taxation of Corporation TAX05-04

a. One person corporation

a. General Professional Partnership

3. Technotronics Energy Corporation, a corporation registered in Belgium, has a 50 MW electric

a. Villasis shall be subject to a tax of 6% CGT of P12 million

1|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

a. Yes. Samsang is a resident foreign corporation engaged in trade or business in the

a. Social Security System

7. The following are classified as non-resident foreign corporation, except:

a. Non-resident owner of vessel chartered by Philippine nationals

a. Non-resident foreign corporation

a. Interest income from peso bank deposit

2|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

Other income From Nonresidents $50,000

Numbers 13 to 15 are based on the following set of facts:

3|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

Corporate income tax under CREATE

The higher between the “Regular” or “Minimum Corporate

Regional Operating Headquarters 25% January 1, 2022 1% January 1, 2022

Non-Resident Foreign Corporation 25% January 1, 2021 Not applicable

4|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

a. Non-resident owner of cinematographic Films

a. Prolonged labor dispute

Numbers 19 to 21 are based on the following set of facts:

Corporation A, a retailer, has a gross sales of P1,400,000,000 with a cost of sales of

5|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

2018 2019 2020

Numbers 23 to 26 are based on the following set of facts:

6|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

26. How much was the annual income tax payable?

Numbers 28 to 31 are based on the following set of facts:

Tuition Fees P850,000

28. The income tax still due for 2020 is:

7|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

Tuition Fees P480,000

Numbers 33 to 43 are based on the following set of facts:

36. If it is a non-resident foreign corporation, its income tax is:

8|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

39. If it is a non-resident cinematographic film owner/lessor, its income tax is:

40. If it is a non-resident lessor of vessels, its income tax is:

9|P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

Regular Banking Unit:

Foreign Currency Deposit Unit:

Additional Information: Banco De Adamantium had total operating expenses of P12,000,000.

a. Banks and other non-bank financial intermediaries

10 | P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

The income tax payable was:

a. June 30, 2018

Numbers 51 to 53 are based on the following set of facts:

Point of Origin Destination Gross receipts

11 | P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

51. The income tax payable for 2019 is:

Numbers 54 to 56 are based on the following set of facts:

A corporation has the following data for 2016:

Gross income, Phil. P1,000,000

54. Its income tax on all income as a domestic corporation is:

12 | P a g e AESCARTIN/TLOPEZ/JPAP A/DS ALES

a. Calendar year only

58. A corporation files a, quarterly return within:

a. 30 days following the close of each of the first 3 quarters

59. Which of the following is subject to the income tax?

a. A non-stock and non-profit educational institution