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SAINT LOUIS UNIVERSITY. TAXATION LAW.

ACADEMIC YEAR 2019-2020

INSTRUCTIONS

1. Read each question very carefully and write your answers in the same
order the questions are posed. In your answers, use the numbering system
in the questionnaire.
2. Answer the Essay questions clearly, and concisely. Start each number
on a separate page. An answer to a sub-question under the same number
may be written continuously on the same page and the immediately
succeeding pages until completed.

I.

Spouses Jose San Pedro and Clara San Pedro, both American citizens (and
former Filipino citizens) residing in California, are the owners of a
residential house and lot in Quezon City. After the recent wedding of
their son, Mario, to Maria, the spouses donated said real property to
them. At the time of donation, the real property has a fair market value
of P2 million.

Are Jose and Clara subject to donor's tax? If so, how much is the NET
taxable gift of each spouse and what rate shall be applied to the gift?
Explain. (5%)

II.

The spouses Helena and Federico wanted to donate a parcel of land to


their son Dondon who is getting married in December, 2Motivated by love,
Mr. D donated a car to his brothers, Mr. E and Mr. F, naked title to Mr.
E and usufruct to Mr. F for one year. Is the transfer of the car, naked
title to mr. E and usufruct to Mr. F a valid donation. The parcel of
land has a zonal valuation of P420,000.00. What is the most efficient
mode of donating the property? (5%)

III.

A non-resident alien donated shares of stocks purchased from a non-


resident foreign corporation to his only son in consideration of his
marriage. The value of shares of stocks is Php 110,000. The country
where the non-resident resides grants exemption from transfer taxes in
favor of Filipino citizens not residing therein. Is the non-resident
alien liable for donor's tax? (5%)

IV.

Summarize the rules on the taxability of political contributions. (5%)

V.

Chevron Phils. Inc. (Chevron) sold and delivered petroleum products to


Clark Development Corporation (CDC) in the period from
August 2007 to December 2007. Chevron did not pass on to CDC the
Chevron's judicial claim for tax refund or tax credit through its
decision and later on also denied Chevron's Motion for Reconsideration.
In due course, Chevron appealed to the CTA En Banc, which affirmed the
ruling of the CTA First Division, stating that there was nothing in
Section 135(c) of the NIRC that explicitly exempted Chevron as the seller
of the imported petroleum products from the payment of the excise taxes;
and holding that because it did not fall under any of the categories
exemptedfrom paying excise tax, Chevron was not entitled to the tax re
fund or tax credit. Chevron sought reconsideration, but the CTA En Banc
denied its motion for that purpose in the resolution. Rule on the
case.(5%)

VI.

ABC Corporation is an entity exempt from VAT. During the taxable year,
it purchased materials from VAT-registered suppliers and paid the VAT
component. Can ABC Corporation avail of the tax credit mechanism?
Explain. (5%)

VII.

The Congregation of the Mary Immaculate donated a land and a dormitory


building located along Espana Street in favor of the Sisters of the Holy
Cross, a group do nuns operating a free clinic and high school teaching
basic spiritual values. Is the donation subject to donor’s tax? Reason
briefly. (5%)

VIII.

In the settlement of the estate of Mr. Barbera who died intestate, his
wife renounced her inheritance and her share of the conjugal property
in favor of their children. The BIR determined that there was a taxable
gift and thus assessed Mrs. Barbera as a donor. Was the BIR correct?
(5%)

IX.

Emiliano Paupahan is engaged in the business of leasing out several


residential apartment units he owns. The monthly rental for each unit
ranges from 10,000 to 13,000. His gross rental income for one year is
Php 3,500,000. He consults you on whether it is necessary fro him to
register as a VAT taxpayer. What advice will you give him, and why? (5%)

X.

Melissa inherited from her father a 300-square meter lot. At the time
of her father’s death on March 14, 2017, the property was valued at
Php1,720,000. On July 28, 2018, to defray the cost of the medical
expenses of her sick son, she sold the lot for Php1,500,000. The
prevailing market value of the property at the time of sale was
Php3,000,000 per square meter. Is Melissa liable to pay VAT on the sale
of property? If so, how much and why? If not, why not? (5%)

XI.

Foster Corporation (FC) is a Singapore-based foreign corporation engaged


Philippines, provided that the installation part of the project may be
sub-contracted to a local construction company. Pursuant to the contract,
the design and supply contracts were done in Singapore by FC, while the
installation works were sub-contracted by the FC with the Philippine
Construction Corporation (PCC), a domestic corporation. The project with
a total cost of P100 Million was completed in 2011 at the following cost
components: (design – P20Million; machinery and equipment – P50 Million;
and installation –P30 Million). Assume that the project was 40% complete
in 2010 and 100% complete in 2011, based on the certificates issued by
the certificates issued by the architects and engineers working on the
project. GOC paid FC as follows: P60 Million in 2010 and P40 Million in
2011, and FC paid PCC ion foreign currency through a Philippine bank as
follows: P10 Million in 2010 and P20 Million in 2011. Is PCC, which
adopted the percentage of completion method of reporting income and
expenses, liable to value added tax in 2010 and in 2011. Explain your
answer. (5%)

XI.

Lily's Fashion, Inc. is a garment manufacturer located and registered


as a Subic Bay Freeport Enterprise underRepublic Act No. 7227 and a non-
VAT taxpayer. As such, itis exempt from payment of all local and national
internalrevenue taxes. During its operations, it purchased
varioussupplies and materials necessary in the conduct of
itsmanufacturing business. The suppliers of these goodsshifted to Lily's
Fashion, Inc. the 10% VAT on thepurchased items amounting to P
500,000.00. Lily's Fashion,Inc. filed with the BIR a claim for refund
for the input taxshifted to it by the suppliers. If you were the
Commissionerof Internal Revenue, will you allow the refund? (5%)

XII.

Prepare a flowchart of refund of unutilized input VAT. (10%)

XIII.

Cathay Pacific, an international carrier, purchased petroleum products


from Petron, which will be used for its domestic and international
flights. It likewise imported goods and supplies necessary for its
domestic and international flights.

During the year, Cathay Pacific, an international carrier, earned income


from domestic and international flights.

a. Is the purchase of fuel, goods and supplies exempt from VAT? (5%)
b. What is the business tax implication of the gross receipts of
Cathay Pacific? (5%)- BONUS

-end of quiz-

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