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CPA Review School of the Philippines

Local Taxes, Preferential Taxation, DTA Llamado/ Dela Cruz / De Vera / Lopez

1. Where does the local tax authority emanate from?

a. Legislature c. Sanggunian
b. Executive d. Supreme Court

2. Which of the following is not a fundamental principle of local taxation?

a. It shall be uniform in each local sub-unit.
b. It shall evolve a progressive system of taxation.
c. The revenues collected under the Local Government Code shall inure solely to the
benefit of and subject to disposition by the LGU levying the tax or other imposition
(autonomy).
d. Collection of local taxes can be delegated to any private person.

3. When may a Local Government Unit adjust local taxes?

a. Every 5 years
b. Every 2 years
c. Every year
d. Anytime the sanggunian deems it fit.

4. Where the National government elects to tax a particular area, it impliedly withholds from
the local government the delegated power to tax the same field. This doctrine is known as?
a. Preemption
b. Separatedness of Departments of Government
c. Exclusive prerogative doctrine
d. Tax Jurisdiction

5. Zion Shoes’s head office is located in Ortigas, Pasig City. However, its manufacturing plant
is in Taytay, Rizal. As the company accountant you were asked by Zion where to pay the
2% Local Business Tax. Zion’s gross receipts is Php10 million.
a. Pay Php200,000 at Taytay, Rizal.
b. Pay Php200,000 at Ortigas, Pasig City.
c. Pay Php60,000 at Ortigas, Pasig City and Php140,000 at Taytay, Rizal.
d. Pay Php140,000 at Ortigas, Pasig City and Php60,000 at Taytay, Rizal.

6. The presentation of a community tax certificate is necessary in the following situations,

except:
A. To acknowledge execution of document before a notary public
B. To take oath of office in the government
C. To receive any license or permit or certificate from public authority
D. To receive private funds

7. Which is not a characteristic of the real property tax?

a. Direct tax
b. Ad Valorem
c. Progressive
d. Indivisible

8. Which real property is subject to the real property tax?

A. Real property of religious and charitable institution

B. Machineries actually, directly, and exclusively used by local water districts
C. Real property owned by cooperatives
D. Machineries for pollution control

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9. What is considered idle land?

(i) agricultural lands more than one hectare in area, half of which remains uncultivated
except agricultural land with perennial crops with at least 50 trees and those used
for grazing;
(ii) land in the city or municipality more than one thousand square meters in area, one
half of which remains unutilized or unimproved by the owner.
a. True, True c. False, True
b. True, False d. False, False

10. For the given year 2018 the following information from business:

Gross Receipts from business P 900,000.00

Rental Income 650,000.00
Operational Expenses 400,000.00
Real Properties 17, 000,000.00

Compute Individual Community tax.

a. P1,555.00 c. P5,200.00
b. P1,155.00 d. P5,005.00

11. Compute Corporate Community Tax.

a. P7,920.00 c. P 1,120.00
b. P7,560.00 d. P10,500.00

12. Who has the authority to collect Community Tax?

a. Bureau of Internal Revenue c. Bureau of Customs
b. Cities/Municipalities d. National Treasury

13. What is the characteristic of Community Tax?

a. Tax b. Fee c. Identification Card d. License

14. Elorde, a famous boxer intends to convert his boxing gymnasium into a cockpit arena. Elorde
summons you to give him advise to go over his tax exposure. As a certified public
accountant, you will recommend to Mr. Elorde which of following reference/documents?
a. National Internal Revenue Code
b. Revenue Regulations of the NIRC
c. Local Government Code
d. Tariff and Customs Code

15. Your client, Mr. Aegis, is an importer who inquired what laws will have most relevance in
his daily transactions. Having several laws to take into consideration, which laws do you
recommend for Mr. Aegis to read?
a. National Internal Revenue Code.
b. Implementing Rules and Regulation of NIRC.
c. Tariff and Customs Code, as amended by the CMTA
d. Local Government Code.

16. AZEP Corporation secured an income tax holiday for 4 years as a pioneer enterprise. On the
third year of the tax holiday, AZEP Corporation declared and paid cash dividends to its
stockholders, all of whom are individuals. Are the dividends taxable?

a. The dividends are taxable; the tax exemption of AZEP does not extend to its
stockholders.
b. The dividends are tax exempt because of AZEP Corporation’s income tax holiday.
c. The dividends are taxable if they exceeded 50% of AZEP Corporation’s retained
earnings.
d. The dividends are exempt if paid before the end of AZEP Corporation’s fiscal year.

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17. The following are tax incentives given to micro business enterprises, except?
A. Income tax exemption on all types of income of the enterprise.
B. Exemption from the coverage of the Minimum Wage Law (but employees will still
receive the same social security and health care benefits as other employees);
C. Priority to a special credit window set up specifically for the financing requirements of
BMBEs; and
D. Technology transfer, production and management training, and marketing assistance
programs for BMBE beneficiaries.

18. Mr. Lim bought a piece of land in Manila in 2017 whereby he discovered that it has unpaid
real property tax for year 2016. Which of the following is correct?

A. Mr. Lim is liable to real property tax because he is the new owner.
B. Mr. Lim is liable to real property tax because he assumed responsibility carried from
previous owner.
C. Mr. Lim is not liable because realty taxes attach to the property, and are
chargeable against the person who had actual or beneficial use and possession of
it regardless of whether or not he is the owner.
D. Mr. Lim is not liable because but realty tax attaches upon the property. It is the
property itself which is liable.

19. Idle lands are exempt from real property tax under the following circumstances, except:
A. Civil disturbance
B. Natural Calamity
C. Any cause which physically or legally prevents the owner from utilizing his land
D. Declared by the president

20. 1st Statement: No regular court may intervene in assessment of real property taxes; it is the
primary jurisdiction of the Board of Assessors.
2nd Statement: No injunction by court will lie against real property tax collection by the
Local Government.

A. True, False C. False, True

B. True, true D. False, False

21. 1st Statement: Local tax relief or exemption is granted in cases of natural calamities, civil
disturbances, general failure of crops, or adverse economic conditions which
substantially decrease prices.
nd
2 Statement: Local tax incentives are granted only to new investments in the locality.

A. True, False
B. True, true
C. False, True
D. False, false

22. 1st statement: Local tax cases may be brought to the attention of the Secretary of Finance.
2nd statement: Customs tax cases may be brought to the attention of the Secretary of
Justice.
A. True, False
B. True, true
C. False, True
D. False, false

23. Which of the following has no power to impose taxes?

a. Provinces b. Cities c. Barangays d. Barrios

24. Talong Company is a domestic corporation whose principal classification is for well drilling
work. It has no branches nor sales outlets, but maintains project offices in different

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localities in the Philippines. It is also registered as a Specialty Contractor at the Philippine

Overseas Construction Board. As part of its business expansion plan, the company intends
to offer its well drilling and construction services to clients located overseas.

Are cities and municipalities authorized to impose and collect local business taxes on gross
receipts realized by a specialty contractor from its overseas construction projects?

(a) No. Gross receipts must be realized from services rendered within the jurisdiction
of the LGU imposing the tax. (BLGF Opinion, May 2017).
(b) Yes. The local business tax depends on the previous year’s sales receipts regardless of
source.
(c) It depends.
(d) None of the above.

25. Kamay Holding Company, a holding company, owns 51% of Hawak Corporation. In its
Statement of Comprehensive Income, the holding company reported its proportionate share
in the income of Hawak Corporation as “revenue from equity in the net earnings of an
associate.” Is the “revenue from equity in the net earnings of an associate” considered as gross
receipts subject to the LBT?
(a) Yes. Equity in net earnings is still considered revenue.
(b) No. The “revenue from equity in the net earnings of an associate” does not fall
under the category of gross receipts. It is a mere paper entry mandated by
accounting rules. (BLGF Opinion, July 2017).
(c) Call me maybe.
(d) None of the above.

26. Uniwide Sales Warehouse Club, Inc. (“Uniwide”) conducts and operates its business in
buildings constructed on parcels of land covered by 3 Transfer Certificates of Title (“TCTs”)
issued by the Register of Deeds of Pasig City. The TCTs indicate Pasig City as the location
of the parcels of land. However, Cainta is claiming that the same are within its territorial
jurisdiction. To which LGU must Uniwide pay local business taxes?

(a) Pasig City. To identify the LGU entitled to collect taxes, the location stated in the
certificate of title should be followed until amended thru proper judicial proceedings
(Supreme Court Second Division, G.R. Nos. 176703 & 176721, June 28, 2017).
(b) Cainta.
(c) Baguio
(d) Colombia

27. The Municipal Assessor of San Francisco, Agusan del Sur assessed the National Grid
Corporation of the Philippines (“NGCP”) for deficiency real property tax (“RPT”) for the
years 2011 and 2012. In its petition with the LBAA, NGCP assailed the RPT assessment on
the ground that it is exempt from payment of the same under Section 9 of R.A. No. 9511 and
Section 234(c) of the Local Government Code. The Municipal Assessor filed a Motion to
Dismiss citing lack of jurisdiction on the part of the LBAA to rule on the petition due to
NGCP’s failure to first pay the tax under protest.

Did the LBAA acquire jurisdiction over NGCP’s petition against the RPT assessment?
(a) Yes. Since the taxpayer is questioning the very authority of the assessor to impose the
assessment, the petition is under the jurisdiction of the LBAA even without first paying the
tax under protest.
(b) No. Under Section 252 of the LGC, payment under protest is mandatory if the
taxpayer questions the reasonableness or correctness of the RPT assessment. (NGCP
vs. CBAA, CTA En Banc Case No. 1392, September 5, 2017).
(c) It depends on the amount of RPT assessed.
(d) None of the above.

28. A power generation company with principal office in Cebu City acquired and operated a power
plant in Navotas City. Due to the difficulty in hiring competent administrative personnel willing
to work in flood-prone Navotas City, the company established an administrative office in

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Malabon City. This administrative office does not generate sales orders nor does it receive
collections from sales.
Which of the 3 offices shall be liable for the local business tax (LBT”)?

(a) All 3 offices.

(b) Offices in Cebu City and in Malabon City.
(c) Offices in Cebu City and in Navotas City. Pursuant to Section 150(b) of the LGC,
70% of all sales recorded in the principal office shall be subject to the LBT in Navotas
City. The remaining 30% shall be subject to the LBT in Cebu City.
(d) Note of the above

Note: The Malabon office, on the other hand, shall not be subject to LBT, and no gross
receipts should be allocated to it. A mere administrative office is not a branch
which generates and records sales, and receives collections from customers. Nor
is it a project office or factory which is indispensable to the main purpose of the
business.
However, Malabon City may collect the Mayor’s permit and other regulatory
fees or service charges pursuant to Section 147 of the LGC (BLGF Opinion,
October 27, 2017).

29. In general, in order to avail of relief from double taxation on income earned within the
Philippines in the form of decreased tax rates thereon or exemption therefrom, what must be
submitted by a non-resident alien to the International Tax Affairs Division (ITAD) of the
BIR?
a. Memorandum of agreement between the taxpayer and host country
b. Tax treaty law of the host country
c. Tax treaty relief application (“TTRA”)
d. None of the above.

30. In order to avail of relief from double taxation on dividends, interest, and royalty income
earned within the Philippines in the form of decreased tax rates thereon or exemption
therefrom, what must be submitted by a non-resident alien to the payor of the income?
a. Memorandum of agreement between the taxpayer and host country
b. Tax treaty law of the host country
c. Certificate of Residence for Tax Treaty Relief (“CORTT”)
d. None of the above.

END

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