MELANIE S.

SAMSONA
BUSINESS TAX
CHAPTER 7 EXERCISES
1. A.
Only onerous transfers are subject to business tax. Gratuitous transfers are subject to
estate or donor tax.
2. D.
Income taxes are based on the taxpayer’s net taxable income while business taxes are
based on gross sales or gross receipts.
It’s also stated that the major business taxes in the Philippines are the vat, opt, and excise
tax.
3. D.
Those transactions considered principally for subsistence or livelihood and not in the
ordinary course of business or trade are not subject to business taxes such as MIEs.
Those vat exempt transactions may be subject to OPT except those transactions exempt
from business taxes such as those made for subsistence or livelihood.
4. D.
According to cross border doctrine, no VAT shall be imposed to form part of the cost of
goods destined for consumption outside the territorial border of the Philippines.
It is stated in Section 105 NIRCC; Section 4. 105-3, RR 16-2005 that “in the course of
trade or business” means the regular conduct or pursuit of a commercial or an economic
activity, including transactions incidental thereto, by any person, regardless of whether or
not the person engaged therein is a non-stock, non-profit private organization or
government entity.
RR 16-2005 provides that service rendered in the Philippines by a non-resident foreign
person shall be considered as being rendered in the course of trade or business even if
the performance is not regular.
5. D.
Isolated transactions are generally not considered in the ordinary course of trade or
business, hence, not subject to business tax.
Moreover, transactions of individuals whose gross sales or receipts that do not exceed
Php. 100,000 are considered principally for subsistence or livelihood, hence, not subject
to business taxes.
6. B.
Letter A statement cannot be considered “in the course of trade or business” because “in
the course of trade or business” means the regular conduct or pursuit of a commercial or
an economic activity.
Letter B statement is provided by RR 16-2005 where service rendered in the Philippines
by a non-resident foreign person shall be considered as being rendered in the course of
trade or business even if the performance is not regular.
7. C.
It is stated on page 212 that gross selling prices is the total amount of money or its
equivalent which the purchaser pays or is obligated to pay to pay to the seller in
consideration of the sale, barter or exchange of the goods or properties, excluding vat.
The excise tax, if any, on such goods or properties shall form part of the gross selling
price.
8. D.
RR 4-2007; Section 4. 106-4, RR16-2005 provides that in the case of sale, barter, or
exchange of real property subject to vat, gross selling price shall mean the consideration
stated in the sales document or the fair market value, whichever is higher. Moreover, it
provides that fair market value shall mean whichever is higher of the fair market value as
determined by the BIR Commissioner or the fair market value as shown in schedule of
values of the Provincial and City Assessors. And, gross selling price, in the absence of
zonal value or fair market value as determined by the BIR Commissioner, shall refer to
the market value shown in the latest property tax declaration or the consideration,
whichever is higher.
9. C.
Transactions subjected to vat should no longer be subjected to opt.
A transaction subjected to either vat or opt may still be subjected to excise tax.
Business taxes are in addition to income tax unless specifically exempted. Therefore, vat
and opt may be imposed together with income tax.
10. D.
Vat is a proportional tax because it applies the same tax rate to all regardless of gross
sales/receipts as long as such exceeds Php. 100,000 and the taxpayer is not vat-exempt.
11.C.
RA 9337 provides that the seller is the one statutorily liable to pay for the payment of the
vat but the amount of the tax may be shifted or passed on the buyer or transferee or
lessee of the goods, properties or services.
It is provided that the “burden of the tax” is borne by the final consumers although the
producers and suppliers of these goods and services are the ones who have to file their
vat returns to the BIR, hence, what is transferred or shifted to the consumers is not the
“liability to pay the tax” but the tax burden.
12. B.
Vat-exempt taxpayers with transactions made for subsistence or livelihood are not subject
to any business taxes.
Business taxes are in addition to income and other taxes paid, unless specifically
exempted. Thus, a taxpayer who is subject to opt on his gross receipts will also be subject
to income tax on his net income.
13. C.
The excise tax on goods or properties shall form part of the gross selling price in addition
to vat. Moreover, GJ supermini-cigarettes are classified as sin products.
14. A.
Importation is subject to vat and paid directly by the importer.
Cigarettes are sin products therefore subject to excise tax.
15. D.
It’s provided on page 218 that specific taxes are excise taxes based on the weight,
volume, capacity or any other physical unit of measurement of the goods and on the other
hand, ad valorem taxes are excise taxes based on the selling price or other specified
value of the goods.
Business taxes or transaction taxes are generally based on gross sales or gross receipts,
hence, irrespective of the results, taxpayers are still liable to pay for business tax.
16.C.
Cigarettes are sin products and therefore subject to excise tax.
17. D.
As long as the gross sales of a person exceeds Php 100,000 and is not vat-exempt, such
person is subject to vat.
Not vat-registered individuals shall still be liable to pay the tax as if they were vat-
registered.
18. D.
The individual is still subject to 12% vat but he cannot avail the benefits of input tax credit
for the period he was not properly registered.
19. A.
Persons stated in the first statement may elect to be vat-registered by registering with the
RDO that has jurisdiction over the head office of that person.
Regarding the second statement, a person may cancel his vat registration if he makes a
written application and can demonstrate to the commissioner’s satisfaction that his gross
sales or receipts for the following 12 months will not exceed Php. 3,000,000 but he cannot
be considered a vat-exempt just because his gross sales/receipts do not exceed Php
3,000,000 because a vat-exempt is a person whose gross sales/receipts do not exceed
Php 100,000.
20. D.
The transaction of person whose gross sales or receipts do not exceed Php. 100,000 is
considered principally for subsistence or livelihood, hence, not subject to any business
tax.