A good tax system should be efficient in that it should be able to waste as little money and resources as possible. 1. 1. Which of the following statements is not correct? 7. %) of gross rentals or fees. (B) Withholding income tax on passive income. (D) None of the above. 20. Statement 2. (B) January 1, 1999. 69. The term “domestic”, when applied to corporation, means created or organized in the Philippines or under the laws of a foreign country as long as it maintains a Philippine Branch. Thus, people who earn more should pay more than those people who make less than them. For optional corporate income tax purposes, which of the following shall be included in cost of goods sold for a trading or merchandising concern? âIn estimating a man's faculty or ability to pay we must not alone think of the burden imposed on him in parting with his property or income, but we must also consider the opportunities he has enjoyed in securing that property or income. What year would be the first MCIT be imposed on such corporation? Which of the following statements is most correct? Constitutional Limitations - (Naaayon sa ating saligang batas) Due process and equal protection clause As the major principles of taxation in any system, it is worth taking an in-depth look at âefficiencyâ and âequity (fairness)â. 7. (C) Interest expense between a corporation and the controlling individual. (D) Reappraised value of the property. Customer Code: Creating a Company Customers Love HubSpot. 17. In tax parlance, situs refers to the place of taxation. (A) Net capital loss. (C) Both statements. Constitution: Article VI, Section 28 of the Constitution states that "the rule of taxation shall be uniform and equitable" and that "Congress shall evolve a progressive system of taxation". (D) None of the above. None of the above. (D) Two and one-half (2? All joint ventures regardless of the purpose these are created are exempt from income taxation. An individualistic theory would lead, so to speak, to man having as little as possible to do with the State. It appears very reasonable and just that taxes should be levied on the basis of the taxable capacity of an individual. (D) None of the above. (B) Earnings reserved for definite corporate expansion projects or programs requiring considerable capital expenditures as approved by the Board of Directors or equivalent body. Stock dividends received by a domestic corporation or by a resident foreign corporation from a domestic corporation shall (A) Not subject to tax. (D) Joint ventures. Statement 2. It is intended to make the teaching and learning process a more inter-active and productive endeavor. Which of the following can not avail of the Net Operating Loss Carry-Over (NOLCO)? (B) Resident foreign corporation. 44. 2.3.1 The taxation of cross-border income under domestic corporate income tax laws It is commonly accepted that there are two aspects to a state’s sovereignty: the power over a territory (“enforcement jurisdiction”) and the power over a particular set of … Taxation has a key role in a modern economy. (C) Multinational corporation. (C) Nonresident foreign corporation. (D) None of the above. A nonresident owner or lessor of vessels chartered by chartered by Philippine nationals shall be subject to a tax of (A) Twenty-five percent (25%) of its gross income from all sources within the Philippine. It should be noticed that although income and inheritance taxes are the particular ones to which graduation is most easily applicable, yet progression can also be realized to a certain extent by levying heavy taxes on luxuries and the better kinds of a number of articles. (D) An asset held in business as investment is ordinary asset. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it (CIR v. (C) Contributions to media in its fund drive for the relief of calamity victims are deductible from gross income. Theories and Basis of Taxation 1. The other major principle of taxation is that the burden of tax should be distributed fairly.Accordingly, equity or fairness is further highlighted by two principles: the ability-to-pay principle and the benefits principle. The allowance for deduction of net operating loss carry over (NOLCO) shall be limited only to net operating losses accumulated beginning (A) January 1, 1998. (B) Capital gains only. (C) Improperly accumulated earnings tax. The Improperly Accumulated Earnings Tax (IAET) shall not apply to which of the following corporations? (C) General business partnership. 28. (C) Both statements are correct. (D) None of the above. (B) Insurance companies. Income payments to partners of a general professional partnership amounting to P720,000 or less are subject to (A) Creditable withholding tax of 15%. (B) Statement 2 only. (B) Cost of goods sold shall include all business expenses whether directly or not directly incurred to produce the merchandise to bring them to their present location and use. TAXATION IN THE PHILIPPINES. Which of the following statement is most correct? But another aspect of the matter can well be brought in here. (C) There is no deduction for bad debt when there is a surety for the debtor against whom collection may be enforced. In case of cash sale of shares of stocks not traded through the local stock exchange, the selling price shall be the (A) Total consideration per deed of sale. (D) All costs of production of finished goods. (B) Seven and one-half percent (7 ? Income is considered to be sourced in the Philippines if the income is derived from property or activities within the Philippines. Federal Supreme Court Cassation Decisions - Table of content Volume 1-24, Federal Supreme Court Cassation Decisions Volume 24, Federal Supreme Court Cassation Decisions - Table of content Volume 1-23, The Secutity of Movable Properties In Ethiopia, Freedom of Expression and The Media Landscape in Ethiopia - Contemporary Challenges, Search - Resources and Research Papers (Pdf). 80. Which of the following statements is most correct? (B) Nonresident foreign corporation. A gain from a sale of shares of a domestic corporation shall be considered derived from the Philippines regardless of where the shares are sold. (D) None of the above. %) of gross rentals, lease or charter fees from leases. 62. Interest on indebtedness is an allowable and itemized deduction provided that the following requisites are present, except: (A) The debt is related to the taxpayer’s trade or business. (D) None of the above. Which of the following is exempt from income tax? Is it possible to arrive at the golden mean? Academic Content. Which of the following expenses of the business would be allowed as deduction from its business income? (C) Both statements. (A) Resident citizen. But he/she is considering only the consumption aspect of income. 57. (B) Trading partnership. Statement 2. 55. 64. In the case of exchange, the selling price shall be the (A) Total consideration per deed of sale. (D) None of the above. (B) Statement 2 only. 47. (B) Statement 2 only. When dealing with taxation, it is unavoidable to have important and complicated questions popping up into our heads. (B) Statement 2 only. (B) Is required to file an income tax return although not required to pay the income tax. (A) Statement 1 only. (D) None of the above. For purposes of computing the distributive share of the partners, the net income of the partnership shall be computed in the same manner as a corporation. (B) Net operating loss. The Improperly Accumulated Earnings Tax (IAET) is imposed on improperly accumulated taxable income earned starting January 1, 1998 by domestic corporations as defined under the Tax Code and which are classified as closely-held corporations at the rate of (A) Twenty percent (20%). (A) When related to the acquisition and/or improvement of land and building, must be capitalized. (B) Resident foreign corporation. (D) None of the above. (B) A deduction for bad debt is available only when a write off is made. (A) A deduction for bad debt is not available when a provision for it is made. (D) None of the above. HAVEN’T FOUND ESSAY YOU WANT? 84. According to the theory, taxes should be based upon the amount of money people earn. (A) 2004. (C) 5%. (C) Creditable withholding tax of 10%. Statement 2. Determined by legislature, situs is one aspect of taxation, along with nature, purpose, rate, and coverage. (A) There must be an existing indebtedness to the taxpayer and this must be valid and legally demandable. (B) The deduction of a corporation for contributions subject to limitation should not exceed five percent (5%) of its taxable income from business or trade before deduction for contribution. The following are passive income, except: (A) Royalties, Prices and Winnings more than P10,000. 42. (C) Both statements are correct. Suppose that a quarter of a man's income was required by the State; then a man earning 10 Birr a week would pay 25 cents, and the one getting 2 Birr a week would pay l0 cents each week; the first man might now no longer be able to keep a motor cycle, while the latter would hardly be able to feed his wife and family. (D) None of the above. (C) Associations. (A) Resident foreign corporations are subject to income tax based on net income from sources within the Philippines. PRIMARY: Revenue or fiscal purpose. Taxation Basics: BIR Registration and Getting Your TIN Card. Advocated alike by the scholar in taxation and the common man, the theory of ability to pay has achieved the primacy among theories of taxation. (B) The corporate income tax shall be applied on the amount computed by multiplying the number of months covered by the new rate within the fiscal year by the taxable income of the corporation for the period, divided by twelve. (A) The deduction of an individual for contributions subject to limitation should not exceed ten percent (10%) of his taxable income from business, trade or practice of profession before deduction for contribution. (D) Private educational corporations are subject to income tax based on the net income from sources within the Philippines at the tax rate of 10%. Statement 2. 38. 10. 19. Which of the following statement is most correct? In return for his contribution, the tax payer receives the general advantages and protection which the government affords the taxpayer and his property. It is a commercial undertaking by two or more persons, but it is different from a partnership in that it involves the disposition of a single lot of goods or the completion of a single project. (B) Optional corporate income tax. (C) Associations. (B) Joint accounts or cuentas en participacion. (D) Accumulated profits of any year distributed to a shareholder of a corporation shall be considered dividend subject to final tax on the distributee in the year received. (D) Joint ventures. (C) Some of these items are just return of capital. (B) Resident corporation. Which of the following statements is most correct? Expenditures of private educational institutions for expansion of school facilities may be outright deductions, or capitalized. A net operating loss is the excess of allowable deductions over the gross income from business or practice of profession for a taxable year. Lifeblood Theory (Importance of Taxation). (C) Multinational corporation. (A) 15%. (C) The interest is on indebtedness incurred between related parties. Which of the following statements is not correct? (A) The tax imposed by law on corporations is not imposed only upon such corporations as are organized and operated for profit. Statement 1. Which of the following statement is most correct? Statement 2. 13. Computation of income tax Marvin Morales. Statement 2. (C) General professional partnership. It means apportioning the contribution of each person towards the expenses of government, so that he/she shall feel neither more nor less inconvenience from his/her share of the payment than every other person experiences. (C) Both statements. (D) None of the above. Which of the following statements is most correct? (D) Capital gains tax. (D) The debt must actually be ascertained worthless and uncollectible as of the end of the taxable year. Chapter 3 examines the costs of taxation according to welfare and optimal taxation theory and discuss how this analysis can be applied to Ukraine. If this be the case, we reach the faculty or ability theory of taxation. Theories and Basis of Taxation A. Lifeblood Theory The lifeblood theory constitutes the theory of taxation, which provides that the existence of government is a necessity; that government cannot continue without means to pay its expenses; and that for these means it has a right to compel its citizens and property within its limits to contribute. Which of the following is not allowed to avail of the Optional Standard Deduction? (D) None of the above. (D) General professional partnership. Deductible business expenses must be ordinary and necessary. (C) Ten percent (10%). %) of gross rentals, lease or charter fees from leases. (D) None of the above. Statement 2. (C) Withholding income tax at source. (B) Joint accounts or cuentas en participacion. (B) Sum of money and the fair market value of the property received. Which of the following statements is not correct? (B) Statement 2 only. Taxation 1 I. 27. Before you can become a taxpayer in the Philippines, you need to register with the Bureau of Internal Revenue (BIR) which will then assign you a permanent, system-generated Taxpayer Identification Number or TIN. A further extension of the same idea would be for the State to attempt to level the existing large inequalities in the incomes of its individual members by a heavily graduated tax. One source of much confusion of ideas was the inextricable intermingling of church funds with state and public funds. (D) 2010. (D) None of the above. Statement 1. (A) Statement 1 only. (D) General professional partnership. the process … Security, Unique (B) Statement 2 only. The law excludes some items of income from taxation because (A) The transformation of these incomes into economic gain is not essentially the result of labor or efforts of taxpayer. Lifeblood Theory Cases: Pilmico-Mauri Foods Corp. v. CIR, 802 SCRA 618 CIR v. Next Mobile, Inc., 776 SCRA 343 CIR v. Dash Engineering Philippines, Inc., 712 SCRA 347 Camp John Hay Development Corporation v. CBAA, 706 SCRA 547 Each example has to be judged on its own merits statistics can help us here, but it is difficult to see the use of applying any hard and fast rule. Administrative costs are the costs to the government (and ultimately to the taxpayer) of collecting tax revenue. A general co-partnership is a partnership wherein part or all of its income is derived from the conduct of trade or business and is subject to corporate income tax. (D) Any foreign national tax. So, in view of the growing tax burden and the increasing use of taxes as a tool for social and fiscal control, let us further review the new theories and modern problems of taxation. (C) Nonresident foreign corporation. (A) Thirty percent (30%). Statement 1. (B) 25%. Which of the following statements is most correct? The most suitable taxes from this standpoint are personal levies (income, net worth, consumption, and inheritance taxes). (B) Fair market value of the property. (B) Fifteen percent (15%). (B) Statement 2 only. (C) Both ordinary and capital gains. (C) Both statements are correct. (B) An asset used in business which is subject to amortization is an ordinary asset. (B) Final withholding tax of 10%. Regional operating headquarters. An individual on the cash basis of accounting shall deduct interest paid in advance in the year that the principal is paid. 34. Which of the following statement is most correct? (D) Five percent (5%). When the government levies taxes on goods, it distorts consumer behavior as people are bound to buy less of taxed goods and more of other goods. Statement 1. For purposes of the Optional Standard Deduction, gross income means: (A) If a trading concern, gross profit from sales. Which of the following statements is most correct? (B) Final withholding tax of 10%. (D) 10%. The Concept & Theories of Governance Introduction “Knowledge is knowledge only when the students do at their best on what they learn. (A) Statement 1 only. (D) None of the above. (A) Thirty percent (30%). (D) The interest is paid or accrued during the taxable year. Interest paid or incurred in the acquisition of fixed assets may be capitalized to the asset account. Provided that the sole aim in imposing taxation is to obtain revenue, then a reasonable distribution of taxation could surely be based upon the citizens' âabilities to payâ. (B) Income from a taxable partnership is constructively received by a partner in the same taxable year that the partnership determined its net income after tax. The strongest argument against this graduated form of taxation seems to be that it checks saving. (B) Statement 2 only. The MCIT shall be imposed upon a domestic corporation or a resident corporation when the amount of minimum corporation income tax is greater that the normal income tax due from such corporation. Research and development costs may be outright deduction or deferred expense. Which of the following is not subject to tax as a corporation? (B) Statement 2 only. Statement 1. Which of the following statements is not correct? General Principles A. 39. (D) None of the above. (D) None of the above. (C) Foreign excess-profit tax. The basis of computing depreciation of an asset is the (A) Acquisition cost of the property. 59. (A) A capital asset may be an asset connected or not connected with the trade or business of the taxpayer. (A) Statement 1 only. %) of gross rentals or fees. %) of gross rentals, lease or charter fees from leases. The term “reasonable needs of the business” are hereby construed to mean the immediate needs of the business, including reasonably anticipated needs. The MCIT shall be imposed upon a domestic corporation or a resident foreign corporation when the amount of minimum corporation income tax is greater that the normal income tax due from such corporation. Which of the following corporations shall pay a tax equal to thirty-five percent (35%), now thirty percent (30%), of the gross income received during the each taxable year from all sources within the Philippines? A net operating loss which had not previously been deducted from gross income shall be carried over as deduction only the next year immediately following the year of such loss. (A) Foreign income tax. 9. (C) Four and one-half percent (4 ? (A) Statement 1 only. (D) 2%. 4. (D) Two and one-half (2? (C) Fair market value of the property received. (C) Property primarily for sale to customers in the ordinary course of his trade or business. Situs or territoriality - As a rule, the taxing power cannot go beyond the territorial limit of the taxing authority. Effective January 1, 2009, the rate of corporate income tax shall be (A) 35%. (B) Foreign war-profit tax. 78. (D) One and one-half percent (1? (B) Optional corporate income tax. 43. (C) Adjusted basis for computing the loss on the sale of property. (C) A corporation is not exempt simply and only because it is primarily not organized and operated for profit. Which of the following corporations shall be subject to an income tax equivalent to thirty percent (30%) of its taxable income derived in the preceding taxable year from all sources within the Philippines? Here, once again taking income as the standard, "equality of sacrifice" can be obtained (it is said) by exempting a certain amount of income and levying a uniform or possibly a slightly graduated rate of tax on any income above that limit. Situs of taxation is the State or country which has jurisdiction to tax a person, property or interest. (D) None of the above. PRINCIPLES AND THEORIES OF TAXATION The Equal Distribution Principle. As such, the development of general taxation was inevitable. (A) Minimum corporate income tax. What interest expense can be deducted from gross income? Which of the following statements is not correct? These compliance costs include not only the money that people spend on accountants, tax preparers and/or tax lawyers, but also the time spent in filing tax returns and keeping records. An accumulation of earnings or profits (including undistributed earnings or profits of prior years) is unreasonable if it is not necessary of for the purpose of the business, considering all the circumstances of the case. The answers to questions like these will be governed by the view we take of the function of the State. 73. 54. (B) Import duties. To provide funds or property with which to promote general welfare and protection of its citizens. Such considerations as these have led men to think of a progressive or graduated form of distribution, in which the rate of taxation levied increases with the size of the income. 36. 52. (B) Statement 2 only. Listed below are the ways in which governments can use taxation in a modern economy:- Revenue generation: – Taxation is used by the government to raise revenues for its operations, infrastructure, … Statement 2. (C) 2008. Statement 1. (B) Interest expense on money borrowed to finance petroleum operations. In the case of corporations adopting the fiscal-year accounting period, the taxable income shall be computed without regard of the specific date when specific sales, purchases and other transactions occur. Which of the following statements is most correct? Statement 1. Toll: amount charged for the cost and maintenance of the property used 2. Taxation, imposition of compulsory levies on individuals or entities by governments. (A) Statement 1 only. 1. If this is so, we have a plain case that equity requires a graduated rate of taxation; many higher incomes (and the so-called âunearnedâ incomes) are obtained as the result of particular privileges particularly that of inheritance and this legal or social privilege enjoyed in the production of an individual's income increases its " ability to pay." (B) Any corporation, firm or association, no matter how created or organized, or what the purpose of its organization may be, is subject to tax. Statement 1. (C) Earnings reserved for building, plants or equipments acquisition as approved by the Board of Directors or equivalent body. (B) Declining-balance method. (D) Domestic corporation. We may consider it entirely from the point of view of equity or from that of the consumption, or of the production of wealth. It is also defined as the act of levying a tax, i.e. (A) 30%. (D) Fifteen percent (15%). (C) The election of the gross income tax option by the corporation shall be irrevocable for three (3) consecutive taxable years during which the corporation is qualified under the scheme. (A) Interest expense on money borrowed to buy government bonds. 25. This is, of course, the way in which our present income tax works, which allows "a personal allowance " of 135, or 225 " in the case of an individual whose wife is living with him/her to be free of income tax. 12. (A) The option to be taxed based on gross income shall be available only to firms whose ratio of cost of sales to gross sales or receipts from all sources does not exceed fifty-five percent. Statement 1. Taxes are levied in almost every country of the world, primarily to raise revenue for government expenditures, although they serve other purposes as well. (A) Statement 1 only. (C) Sum-of-the-years-digit method. SAMPLE. (B) The corporations’ income and expenses for the fiscal shall be deemed to have been earned and spent equally for each month of the period. (D) Regular repairs of business property. Rodrigo Duterte on December 19, 2017 and its implementation began on January 1, 2018.. How will the TRAIN law affect income taxes of individuals and corporations? A domestic corporation is taxable on its worldwide income. Thirdly, we come to a form of distribution which may be called a qualified proportional one. (B) 2007. (C) Both statements. 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