CPA REVIEW CENTER
TAX007Q – Value Added Tax 1. When there is purchases from a VAT-registered supplier, the input VAT
allowed as tax credit against output VAT would be based on a) Sale b) Purchases c) Cost of sales d) Expenses 2. The following transactions are VAT taxable, except a) Importations b) Sale of goods from the Philippines to foreign country c) P 2,000,000 domestic sales for the year of a non-VAT business d) Sale of scrap materials by a VAT registered business 3. Coro Realty business sold a commercial lot amounting to P1, 900, 000.
This transaction is a. VAT-exempt b. Zero-rated c. Subject to VAT d. Subject to OPT 4. Statement 1: All transactions of a VAT person are VAT taxable
Statement 2: All transactions of a non-VAT person are VAT exempt a) Only statement 1 is correct b) Only statement 2 is correct c) Both statements are correct d) Both statements are incorrect 5. Which of the following business transactions is subject to VAT? a) Casual sale of capital asset real property with a selling price of P
2,000,000 b) Lease of commercial property with annual gross receipts of
P 2,000,000 c) Sale of livestock and poultry products amounting to P10,000,000 d) Importation of fertilizers and seedlings amounting to P5,000,000 6. Statement 1: Annual gross receipts of P 5,000,000 received by radio
and TV broadcast franchise holder, which is registered as VAT is subject to 12% VAT Statement 2: The gross receipts of P 20,000,000 for the year reported by non-VAT TV broadcast franchise are subject to VAT. a) Only statement 1 is correct b) Only statement 2 is correct c) Both statements are correct d) Both statement are incorrect 7. Which of the following business transactions is not subject to VAT? a) Sale of gold to Bangko Sentral ng Pilipinas b) Sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transporting operations c) Consignment of goods where actual sale is not made within 60 days from the date of consignment Page 1 of 8
d) Importation of personal; and household effects belonging to
balikbayans 8. Statement 1: All VAT taxable transactions are allowed with creditable
Input VAT Statement 2: As a rule, importations are subject to 12% VAT regardless of who is the importer and for what purpose the imported products will be used. a) Only statement 1 is correct b) Only statement 2 is correct c) Both statements are correct d) Both statement are incorrect 9. Statement 1: Both Zero-rated and VAT exempt transactions are not
subject to 12% Output VAT Statement 2: Zero-rated transactions are allowed with credit for Input VAT attributable such sales or receipts, while VAT-exempt transaction is not. a) Only statement 1 is correct b) Only statement 2 is correct c) Both statements are correct d) Both statements are incorrect 10. Which of the following sale is not an export sale? a) Sale of goods from foreign country to the Phjilippines b) Sale of gold to the Bangko Sentral ng Pilipinas c) Sale of goods to PEZA registered/Ecozone export enterprise d) Sale of locally manufactured goods to foreign country 11. Which of the following transaction are not allowed to deduct input VAT? a) Importation b) Zero-rated VAT c) Sales to the government d) Sale to a VAT registered person 12. Any person, in the course of business, who sells, barters, exchanges,
lease goods or properties, renders services and imports goods shall be subject to VAT, except a) Non-stock and nonprofit private organization b) Government owned and controlled corporations c) Farmers selling their farm food products in their original state d) Medical services rendered by professionals 13. What is the business tax rate imposed on sales of services to BOI-
registered export enterprise with 100% export sales and PEZAregistered enterprise? a) 12% b) 10% c) 5% d) 0% 14. Statement 1: Gross receipts of more than P 1,500,000 per year from
transport of passengers by land are VAT taxable transactions. Statement 2: Gross receipts of less than P 1,500,000 per year received by VAT person from transport of cargo by land are VAT taxable transactions. a) Only statement 1 is correct Page 2 of 8
b) Only statement 2 is correct c) Both statements are correct d) Both statements are incorrect 15. Which of the following transactions are subject to VAT? a) Export Sales b) Sales of house and lot with selling price of P 2,500,000 c) Sale of food agricultural product in their original state d) Casual sale of goods 16. Statement 1: VAT-exempt transactions of VAT-exempt person are
allowed with attributable input tax credit. Statement 2: Export sales of VAT registered person are allowed with attributable input tax credit. a) Only statement 1 is correct b) Only statement 2 is correct c) Both statements are correct d) Both statements are incorrect 17. Statement 1: Services rendered by an employee pursuant to
employee-employer relationship are VAT exempt and exempt from other business percentage tax. Statement 2: Professional services of medical doctors registered with PRC are VAT exempt transactions. a) Only statement 1 is correct b) Only statement 2 is correct c) Both statements are correct d) Both statements are incorrect 18. Statement 1: All transactions of cooperatives are VAT exempt.
Statement 2: Electric cooperatives transactions are subject to VAT. a) Only statement 1 is correct b) Only statement 2 is correct c) Both statements are correct d) Both statements are incorrect 19. In sales to the government, if the actual input VAT is greater than the
standard input VAT, the excess amount shall be a) Deducted from the output VAT b) Deducted from the cost of sale or expenses c) Added as part of cost of sale or expenses d) Treated as other income 20. The amount of sales to a VAT registered person which requires that the sales invoice should contain the customer’s name, address and TIN. a) P5,000 or more b) P3,000 or more c) P2,000 or more d) P1,000 or more 21. VAT is imposed only in the country where the goods or services are consumed. This principle would refer to a) Destination principle b) Jurisdiction principle c) Business tax principle d) Consumer principle 22. This kind of tax imposed due to opportunity given to engage on sale, exchange, or barter of goods and services. Page 3 of 8
a) b) c) d)
Ad-valorem tax Privilege tax Consumption tax Indirect tax
23. Statement 1: the taxable base of 12% for the sales of goods is the gross selling price. Statement 2: Gross selling price includes excise tax, if any. a) Only statement 1 is correct. b) Only statement 2 is correct. c) Both statements are correct. d) Both statements are not correct. 24. Statement 1: Importation of goods is subject to VAT, but export sales are exempt from 12% VAT. Statement 2: VAT is an additional tax imposed on goods or services for the consumption privilege. a) Only statement 1 is correct. b) Only statement 2 is correct. c) Both statements are correct. d) Both statements are not correct. 25. Which of the following VAT rates can be used as rate for output and input VAT? a) 12% b) 7% c) 5% d) 2% 26. Statement 1: VAT is designed to be borne by the consumers. Statement 2: VAT system establishes audit trail. a) Only statement 1 is correct. b) Only statement 2 is correct. c) Both statements are correct. d) Both statements are not correct. 27. Statement 1: The gross margin is included in the determination of VAT. Statement 2: The standard input VAT allowed to sale of goods or services to the government is 12%. a) Only statement 1 is correct. b) Only statement 2 is correct. c) Both statements are correct. d) Both statements are not correct. 28. Statement 1: If the VAT invoice amount does not indicate separately the VAT, the sale is not covered by VAT. Statement 2: The amount of VAT is determined by dividing the VAT sales invoice by9.333. a) Only statement 1 is correct. b) Only statement 2 is correct. c) Both statements are correct. d) Both statements are incorrect. 29. Statement 1: The creditable input VAT can only be sourced from purchases of goods and services from VAT-registered supplier. Statement 2: Sales discounts due to prompt payments deductible from gross sales to determine VAT taxable base. Page 4 of 8
a) b) c) d)
Only statement 1 is correct. Only statement 2 is correct. Both statements are correct. Both statements are incorrect.
30. Statement 1: A VAT-exempt person should register under VAT system within 30 days from the end of the last month when his sales exceeds P1,919,500 Statement 2: In general, a VAT registered person is subject to VAT regardless of the amount of his gross annual sales or gross receipts. a) Only statement 1 is correct. b) Only statement 2 is correct. c) Both statements are correct. d) Both statements are incorrect. 31. Which of the following is not a characteristic of VAT? a) Tax on gross sales b) Tax on consumption c) Tax on sellers d) Tax on buyers 32. Statement 1: A zero-Vat business is the same with VAT- exempt business Statement 2: Senior citizens are exempted from VAT and subject to 20% discount. a) Only statement 1 is correct. b) Only statement 2 is correct. c) Both statements are correct. d) Both statements are incorrect. 33. The following item is not part of the taxable base for VAT purposes, except: a) Discounts that are expressly indicated in the invoice. b) Sales return with proper credit or refund was made during the month. c) Sales allowance with proper credit or refund was made during the month. d) Cost of sales of the taxable goods sold. 34. Which of the following is not considered a deemed sales? a) Installment sale of real property. b) Merchandise inventory left upon retirement. c) Distribution of inventory to creditors. d) Consignment of goods if not sold within 30 days. 35. Which of the sale of real property inventory is subject to VAT? a) Low-cost housing with sale price of P375, 000 per unit. b) Socialized housing with sales price of P150, 000 per unit. c) Residential lot valued at P2, 000, 000. d) Residential house and lot value at P2, 500, 000. 36. Upon full collection of installment sale of real property, there is an additional VAT if the a) Zone value is higher than market value. b) Market value is higher than zone value. c) Total collection is higher than zone value or market value.
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d) Zonal value or market value is higher than the total collection. 37. Which of the following is not a requisite for the VAT taxability of a service transaction in the Philippines? a) Services are performed in any part of the world as long as the business is registered in the Philippines. b) Services are performed in the Philippines only. c) Services are not VAT-exempt under the Law, or international agreement. d) Services are rendered for valuable consideration actually or constructively received. 38. Transfer of amounts retained by the contractee to the account of the contractor is an example of: a) Actual receipts. b) Installment collection. c) Advanced collection. d) Constructive collection. 39. Which of the following item is not included as part of the taxable base of imported goods? a) Value used by the Bureau of Customers (BOC) in determining tariff and custom duties. b) Custom duties and community tax of the importer. c) Custom duties and excise taxes. d) Tax to be paid by the importer prior to the release of the goods from the BOC. 40. Which of the following non-VAT business is required to register under VAT system within 30 days upon reaching the threshold amount? a) Trading business b) Common carrier business c) Franchise grantees of radio/television broadcasting d) Agricultural food products in original state Items 41 - 45 One cold rainy evening, Lady Osang saw a handsome man, chilling in a corner of a street, bathe in the rain. Seeing an opportunity that very moment, Lady Osang rushed to offer her last remaining piece of “rain coat” to the young man, Mr. Moan Moan, for a big sum worth 1,000 pesos. 41. Suppose Mr. Moan got the big money inside his very wet jeans, how much VAT will result in the sale transaction? a) 120 Php b) 107 Php c) 134 Php d) None
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42. Suppose Mr. Moan, instead, offered Lady Osang the necessary service of carrying on her behalf the banana inventories of the lady for the “rain coat” in exchange, how much will be the related VAT on the transaction? a) 120 Php b) 107 Php c) 134 Php d) None 43. Suppose Mr. Moan got some 600 pesos in his pocket. If Lady Osang however accepts the money, hence, incurring a net loss of 400 pesos, how much will be the related VAT? a) 107 Php b) 72 Php c) 64 Php d) None 44. One year later, Mr. Moan and Lady Osang met again. This time, the handsome man, in gratitude for the kindness of the lady way back, decided to buy all the banana cue’s in her stall worth 5,000 pesos. How much is the related VAT therefrom? a) 600 Php b) 536 Php c) 672 Php d) None 45. Suppose, however, Lady Osang, hesitant to accept the offer, instead sold her inventories worth 5,000 pesos for a loss of 20%. How much will be the resulting VAT, if any? a) b) c) d)
480 Php 429 Php 600 Php None, its on a loss
46. Sony International acquired 80% of Sony Philippines. During the year, Sony Phil’s incurred advertising expenses worth P20 million. Sony International decided to subsidize the subsidiary for the amount incurred. How much output VAT can Sony International claim from the pertinent transaction? a) b) c) d)
2,400,000 2,142,857 2,688,000 Output VAT not allowed
47. Nokia Corporation acquired 60% of Alcatel Lucent on a condition that the latter will provide the exclusive services to the former in its mobile division. The service contract, worth P20 million, however provides that the subsidiary will receive payment from the parent on a reimbursement-on-cost basis only, without realizing profit. How much will be the related VAT therefrom? a) b) c) d)
2,400,000 2,142,857 2,688,000 The entity is not profit-oriented, hence, VAT not applicable.
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48. Ayala Land Incorporated, a real state conglomerate, acquired a fleet of vehicles for the exclusive use of its employees in line of its business. The management, however, decided to sell the vehicles to its employees. Was the transaction entered under a normal course of business? a) No, it was violative of the “Rule of Regularity”. b) No, it was not undertaken in business activity. c) No, there was an employer-employee relationship. Hence, not a business. d) Yes, it is an incidental transaction. 49. Any person shall be held liable, under sec. 105, who in the course or trade of business renders the following, but a) b) c) d)
Sells, barters, or exchanges Leases goods or properties Renders services Imports goods
50. Which of the following is not considered a business activity? a) b) c) d)
Selling of goods Production of goods for a consideration Employment Rendering services for a fee
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