Chapter 7: BUSINESS TAXESCHAPTER 7 BUSINESS TAXES Problem 7-1 1.. False – such rule is applicable only to nonresident foreign or alien persons 3.. False – Merchandising business is engag
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CHAPTER 7
BUSINESS TAXES
Problem 7-1
1 False – this is a transfer not in the conduct of business
2 False – such rule is applicable only to nonresident foreign or alien persons
3 False – Merchandising business is engaged in buying and selling of goods, not manufacturing
4 False – Only one TIN is allowed
5 True
6 False – On or before January 31
7 False – P500 for each establishment
8 False – exempt from P500 registration fee
9 True
10 True
11 True
12 True
Problem 7-2
1 False – treated as tax credit
2 True
3 False – This is a description of receipt
4 True
5 True
6 False – Required to become VAT if total gross sales/receipts exceed P1,500,000 a year
7 True
8 False – Commercial activity is business
9 False – Nonresident alien/foreign person is not subject to the rule of regularity, hence, considered business
10 False – liable to VAT without the benefit of creditable input VAT
Problem 7-3
1 False – A business could be a servicing business
2 False – This is compensation from employment
3 False – Both are merchandising
4 False – This is a servicing business
5 True
6 False – Not in the case of VAT person VAT paid on purchases can be claimed as creditable input VAT
7 False – employees are also required to register to BIR
8 True
9 False – only one TIN per person
10 True
11 True
12 False – should issue official receipt for the amount received
Problem 7-4 Problem 7-5
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7 A
8 C
9 D
Problem 7-6 B
Annual registration fee = P500
Problem 7-7 B
Registration fee of:
Problem 7-8 A
Cooperatives are exempt from registration fee
Problem 7-9 A
Gross sales or receipts not exceeding P100,000 per year
Problem 7-10 C
Total amount in the invoice [P50,000 + (P12% of P50,000)] P56,000
Problem 7-11 B
Problem 7-12 B
Problem 7-13 C
Problem 7-14
Form of business operation = Manufacturing
Form of business organization = Corporation
Problem 7-15
The cooperative is required to register to the BIR No registration fee or annual registration fee shall be collected from cooperatives
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Problem 7-16
1 Annual registration fee for main store (P500) + (P500) for sales outlet P 1,000
2 No, because the total sales during the year do not exceed P1,500,000
Problem 7-17
Annual registration fee (1 + 50 + 10) x P500
Add: Interest (P30,500 x 20% x 8/12)
Surcharge (P30,500 x 25%)
Total amount to be paid to the BIR
P4,067 7,625
P 30,500 11,692
P 42,192 Note: Registration shall be made on or before the last day of January of the following year
Problem 7-18
1 The business should be registered as VAT because the sales exceeded P1,500,000 in a year
2 Sales invoice because official receipts are issued only when there are collections
3 Official receipts
Problem 7-19
Net VAT payable
Add: Input VAT (P5,040,000 x 12%)
Output VAT
Divide by
Sales
P 180,000
604,800
P 784,800 12% P6,540,000
(1) (2)
Problem 7-20
1 Satur Nino is not subject to VAT because the sale is a casual sale of personal property
2 Assuming that the FMV remains the same, the VAT of ROX Realty would be twelve percent (12%) of the FMV (higher value), hence, P4,200,000 or (P35,000,000 x 12%)
Problem 7-21
1 Percentage tax (P1,344,000/1.12) x 3% P 36,000
Surcharge (P144,000 x 50%) 72,000 216,000
2 Percentage tax (P1,792,000/1.12) x 3% P 48,000
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Surcharge (P192,000 x 50%) 96,000 288,000
Problem 7-22
1 As capital asset
Capital loss (P3,000,000 – P3,024,000) (P 24,000)
Multiplied by corporate tax rate 30%
Add: Other taxes paid:
Custom duties (P1,500,000 x 50%) P 750,000
Excise tax (P2,250,000 x 20%) 450,000
Input VAT (P2,700,000 x 12%) 324,000 1,524,000
Total revenue contributed to government P1,524,000
Supporting Computation:
Add: Custom duties (P1,500,000 x 50%) P 750,000
Excise tax (P2,250,000 x 20%) 450,000
Input VAT (P2,700,000 x 12%) 324,000 1,524,000
2 As ordinary asset
Gross income (P3,000,000 – P2,700,000) P 300,000
Multiplied by corporate tax rate 30%
Add: Other taxes paid
Custom duties (P1,500,000 x 50%) P 750,000
Excise tax (P2,250,000 x 20%) 450,000
Input VAT (P2,700,000 x 12%) 324,000 1,524,000
Total revenue contributed to government P1,578,000
Supporting Computation:
Add: Custom duties (P1,500,000 x 50%) P 750,000
Excise tax (P2,250,000 x 20%) 450,000 1,200,000
Total landed cost – if ordinary asset P2,700,000