BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 37 Chapter 7: BUSINESS TAXES CHAPTER BUSINESS TAXES Problem 7-1 False – this is a transfer not in the conduct of business False – such rule is applicable only to nonresident foreign or alien persons False – Merchandising business is engaged in buying and selling of goods, not manufacturing False – Only one TIN is allowed True False – On or before January 31 False – P500 for each establishment False – exempt from P500 registration fee True 10 True 11 True 12 True Problem 7-2 False – treated as tax credit True False – This is a description of receipt True True False – Required to become VAT if total gross sales/receipts exceed P1,500,000 a year True False – Commercial activity is business 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 False – A business could be a servicing business False – This is compensation from employment False – Both are merchandising False – This is a servicing business True False – Not in the case of VAT person VAT paid on purchases can be claimed as creditable input VAT False – employees are also required to register to BIR True False – only one TIN per person 10 True 11 True 12 False – should issue official receipt for the amount received Problem 7-4 B B A A A B A C Problem 7-5 D D B D D A BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 38 Chapter 7: BUSINESS TAXES D Problem 7-6 B Annual registration fee = P500 Problem 7-7 B Registration fee of: Au Chemical Supplies Gusto Eatery Total annual registration fee P 500 500 P1,000 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 Business tax (P1,600,000 x 12%) P192,000 Problem 7-12 B Cost (P84,000/1.12) Add: Profit margin (P75,000 x 20%) Sales price (120% of cost) Add: VAT (P90,000 x 12%) Total VAT sales invoice amount P 75,000 15,000 P 90,000 10,800 P100,800 Problem 7-13 C Output VAT (P300,000 x 12%) Input VAT (P268,800/9.3333) Net business tax payable or net VAT payable P 36,000 28,800 P 7,200 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 Problem 7-16 Annual registration fee for main store (P500) + (P500) for sales outlet No, because the total sales during the year not exceed P1,500,000 P 1,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 39 Chapter 7: BUSINESS TAXES 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 The business should be registered as VAT because the sales exceeded P1,500,000 in a year Sales invoice because official receipts are issued only when there are collections 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 Satur Nino is not subject to VAT because the sale is a casual sale of personal property 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 Percentage tax (P1,344,000/1.12) x 3% Add: VAT (P1,344,000/9.333 Surcharge (P144,000 x 50%) Total business tax and surcharges P 36,000 P144,000 72,000 Percentage tax (P1,792,000/1.12) x 3% Add: VAT (P1,792,000/9.333 Surcharge (P192,000 x 50%) Total business tax and surcharges 216,000 P252,000 P 48,000 P192,000 96,000 Problem 7-22 As capital asset Capital loss (P3,000,000 – P3,024,000) Multiplied by corporate tax rate No income tax – loss Add: Other taxes paid: Custom duties (P1,500,000 x P 750,000 50%) Excise tax (P2,250,000 x 20%) 450,000 Input VAT (P2,700,000 x 12%) 324,000 Total revenue contributed to government 288,000 P336,000 (P 24,000) 30% P 1,524,000 P1,524,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 40 Chapter 7: BUSINESS TAXES Supporting Computation: Purchase value Add: Custom duties (P1,500,000 x 50%) Excise tax (P2,250,000 x 20%) Input VAT (P2,700,000 x 12%) Total landed cost – if capital asset P1,500,000 P 750,000 450,000 324,000 1,524,000 P3,024,000 As ordinary asset Gross income (P3,000,000 – P2,700,000) Less: OSD (P300,000 x 40%) Net income Multiplied by corporate tax rate Normal tax Add: Other taxes paid Custom duties (P1,500,000 x P 750,000 50%) Excise tax (P2,250,000 x 20%) 450,000 Input VAT (P2,700,000 x 12%) 324,000 Total revenue contributed to government Supporting Computation: Purchase value Add: Custom duties (P1,500,000 x 50%) Excise tax (P2,250,000 x 20%) Total landed cost – if ordinary asset P 300,000 120,000 P 180,000 30% P 54,000 1,524,000 P1,578,000 P1,500,000 P 750,000 450,000 1,200,000 P2,700,000 .. .BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 38 Chapter 7: BUSINESS TAXES D Problem 7- 6 B Annual registration fee = P500 Problem 7- 7 B Registration... P336,000 (P 24,000) 30% P 1,524,000 P1,524,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 40 Chapter 7: BUSINESS TAXES Supporting Computation: Purchase value... P1,500,000 P 1,000 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 39 Chapter 7: BUSINESS TAXES Problem 7- 17 Annual registration fee (1 + 50 + 10) x P500 Add: Interest