BUSINESS TAXATION
October 27, 2020
TRUE OR FALSE - Write the correct True if the statement is correct and False if the statement is
wrong.
1. ______. To be zero-rated, all forms of export sales must be paid for in acceptable foreign
currencies.
2. ______ Input taxes on zero-rated sales are claimable as tax credit or tax refund.
3. ______ The sale of gold to the BPP must be paid for in acceptable foreign currencies to be
subject to zero-rating.
4. ______ Legal title over exported goods must pass abroad to be subject to zero-rating.
5. ______ An export-oriented enterprise is an entity that exports at least 70% of its total
annual production.
6. ______ The sale of an export trader to a fellow export trader is subject to zero-rated VAT.
7. The sale of goods or services to a domestic carrier for its international operations is subject
to zero-rated VAT.
8. ______ The sale of goods or services to a domestic carrier for its domestic operations is
exempt from VAT.
9. ______ The sale of locally manufactured goods to overseas Filipinos is subject to an
effective zero-rating if paid for in acceptable foreign currencies.
10. ______ Sales to the Asian Development Bank are subject to zero-rated VAT.
MULTIPLE CHOICE - In a separate sheet of paper, write the correct answer. Show
computation if necessary.
1. Which is correct regarding the treatment of input VAT?
a. Input VAT on zero-rated sale is deductible from gross income.
b. Input VAT on zero-rated sales is creditable against output VAT or refundable.
c. Input VAT on zero-rated sales is both deductible from gross income and creditable
against output VAT.
d. Input VAT on exempt sales is refundable or creditable.
2. Which of the following requires prior BIR application for effective zero-rating?
a. Sales to PEZA locators
b. Direct export sales
c. Foreign currency denominated sales
d. Sales to export-oriented enterprises
3. What sale is not subject to zero-rating?
a. Sale to a senior citizen
b. Sale to a registered export trader
c. Sale to a bonded manufacturing warehouse of an export trader
d. Sale to an export processing zone
4. Which is non-vatable?
a. Sales to a domestic shipping company
b. Sales to an international carrier
c. Sale of goods to a BOI-registered manufacturer which exports 80% of its annual
production
d. Sales to senior citizens
5. What is the requirement for zero-rating of sales to a PEZA-registered enterprise?
a. The goods must be actually imported
b. Export sales must exceed 70% of annual production
c. Production must be 100% exported
d. None
6. Prior BIR application for effective zero-rating is not required for
a. direct export to a foreign country
b. sales to tax exempt persons
c. sales to international air transport operations
d. sales to an export-oriented enterprise
7. Jose, a real estate dealer, transfer a parcel of land held for sale to Juan, his son as a
graduation gift on account of his graduation gift. For VAAT purposes, the transfer is :
a. Not subject to VAT because it is a gift
b. Subject to VAT because it is a deemed sale transaction
c. Not subject to VAT because it is subject to donor’s tax
d. Subject to VAT because it is considered an actual sale
8. Which of the following may not qualify as export sale?
a. Export by an export producer
b. Export by an export producer to another export producer
c. Sale to an export trader
d. None of these
9. An approved application for effective zero-rating is given
a. a retrospective effect.
b. a prospective effect.
c. A and B
d. no effect.
10. An approved application for zero-rating is valid for
a. 1 year only c. 3 years
b. 2 years d. 5 years
11. Which is correct?
a. All service rendered in the custom’s territory is subject to the 12% VAT.
b. Service rendered to an ecozone entity is subject to 12% VAT.
c. Service rendered abroad is subject to 0% VAT.
d. Service rendered abroad is exempt from any business tax.
12. Which is subject to zero-rating?
Customer Place rendered Amount
a. Resident alien Philippines € 150,000
b. Non-resident foreign corp. Philippines $ 10,000
c. Non-resident alien Abroad P 1,000,000
d. Non-resident citizen Abroad ¥ 2,000,000
13. Sale of services to this entity is subject to the 12% VAT.
a. Development Bank of the Philippines
b. International Rice Research Institute
c. Philippine National Red Cross
d. Philippine Amusement and Gaming Corporation
14. Which is not subject to zero-rating?
a. Services to an export-oriented enterprise
b. Sale of services to a BOI-registered enterprise
c. Sale of services to PEZA locators
d. Sale of services to embassies with VEC
15. To which of the following is a sale not subject to zero-rated VAT?
a. Philippine Amusement and Gaming Corporation
b. Philippine National Red Cross
c. Ecozone entities
d. Government agencies
16. Which is incorrect with effectively zero-rated sales?
a. The sale must be rendered in the Philippines
b. The sale must be rendered to a person with indirect tax exemption
c. The sale need not be paid for in acceptable foreign currencies
d. The sale must be made by a VAT-exempt person
17. Which of the following shall be exempt from VAT?
a. Services of banks
b. Services of money changers and pawnshops
c. Services of credit cooperatives
d. All of the above
18. A business payer reported the following sale during a period:
Domestic Sales P 200,000
Deemed sales 100,000
Export sales 300,000
Total P 600,000
Compute the zero-rated sales assuming the seller is respectively a VAT taxpayer and a non-
VAT taxpayer?
a. P 600,000; P 0 c. P 600,000; P 300,000
b. P 300,000; P 0 d. P 300,000; P 300,000
19. A Philippine company exported goods for $140,000 to a non-resident customer. The
payment; however, was not inwardly remitted. The same was remitted to its home office
abroad.
Which is correct?
a. The sale is a zero-rated sale.
b. The sale is an exempt sale.
c. The sale is subject to 12% VAT.
d. The sale is subject to 3% percentage tax.
20. A VAT-registered taxpayer made the following sales:
Sales destination Terms Payment
China FOB destination $ 10,000
Malaysia FOB destination P 450,000
Hong Kong FOB shipping point ¥ 800,000
Philippines FOB shipping point P 300,000
The applicable exchange rate to the Peso was $1:P42 and ¥1:P0.50.
Compute the total zero-rated sales.
a. P 420,000 c. P 1,270,000
b. P 820,000 d. P 1,570,000
21. Compute the output VAT.
a. P 0 c. P 54,000
b. P 36,000 d. P 90,000
22. An exporter entered into the following transactions during the month:
Unsold
Type of transaction Amount portion
Export sales P 1,000,000 -
Export sales $ 100,000 -
60-day consignment abroad $ 50,000 40%
Forex rate = $1 : P42.50
Compute the zero-rated sales.
a. P 0 c. P 6,100,000
b. P 4,250,000 d. P 5,525,000
23. Export Co. made the following export and foreign consignments:
Type of transaction Amount
Export sales 1 P 1,000,000
Export sales 2 $ 80,000
Consignment 1 $ 50,000
Consignment 2 $ 10,000
Export sales 2 pertains to goods owned by another entity where Export Co. was granted 10%
export commission. Consignment 1 was sold by foreign consignees during the month.
Consignment 2 remained unsold 75 days as of the end of the current month. The applicable
exchange rates is P43: $1.
Compute the total zero-rated sales or receipts.
a. P 2,494,000 c. P 3,494,000
b. P 2,924,000 d. P 5,590,000
24. Which is an export-oriented enterprise in 2018?
2017 2018
Production Export cost Production Export cost
Exporter cost of sale cost of sale
a. ABC Co. P 200M P 120M P 400M P 300M
b. BCD Co. P 400M P 280M P 500M P 350M
c. CDE Co. P 150M P 108M P 180M P 126M
d. DEF Co. P 250M P 125M P 300M P 300M
25. A BSP assay report on a sale of gold nuggets discloses the following:
Gold constent (850 x
P1,800/gram) P 1,530,000
Silver content (250 x P38/gram) 9,500
Total P 1,539,500
What is the total vatable sales and the output VAT?
a. P 1,539,500; P 184,740
b. P 1,539,500; P 1,140
c. P 9,500; P 1,140
d. P 1,530,000; P183,600
26. Carefree, a security service provider, had the following receipts during the month:
Sale to BOI-registered entity with domestic sales P 2,000,000
Sale to BOI-registered entity with no domestic sales 2,500,000
Sale to export-oriented enterprise (with 60% export last year) 1,000,000
Sale to export-oriented enterprise (with 90% export last year) 1,500,000
Total P 7,000,000
Receipts from clients inside PEZA P 3,000,000
Receipts from clients in the customs territory:
- From the government agencies and GOCCs 1,000,000
- From the Asian Development Bank 1,200,000
- From non-profit clients 1,500,000
- From private clients 2,000,000
What is the total amount of zero-rated sales?
a. P 3,000,000 c. P 4,200,000
b. P 4,000,000 d. P 5,200,000
27. Legazpi Corporation had the following sales in March 2020:
Sale to an export – oriented enterprise P 2,000,000
Sale to a BOI-registered enterprise 3,000,000
Assuming that the new VAT refund system is already in place, compute the total effectively
zero-rated sales.
a. P 0 c. P 3,800,000
b. P 3,000,000 d. P 5,000,00
28. A domestic enterprise made the following sales:
Sale to diplomatic missions P 2,000,000
Sale to an ecozone-registered enterprise $ 50,000
Conversion rate – P42.00: $1
Compute the zero-rated sales.
a. P 0 c. P 2,100,000
b. P 2,000,000 d. P 4,100,000
29. DrimPhil Enterprises, a VAT taxpayer, sold the following to various exporters in July 2018:
Assuming that the BIR and DOF has not yet fully implemented the new VAT refund system,
compute the zero-rated sales.
a. P 1,500,000 c. P 4,000,000
b. P 2,500,000 d. P 5,000,000
30. An electric cooperative sold the following during the month:
Sale of electricity from renewable sources of energy P 2,000,000
Sale of electricity generated from coal and natural gas 1,000,000
What is the zero-rated sale of the electric cooperative?
a. P 0 c. P 2,000,000
b. P 1,000,000 d. P 3,000,000
