Passive Income:

1 Novo Inc, resident corporation has earned the following income during the year:
Dividend income from:
 Microsoft, a non – resident foreign corporation P 500,000
 Intel, a resident foreign corporation (ratio of Philippine income over world income for the past
three years is 40%) 400,000
 Panday, a domestic corporation 300,000
Interest income from:
 Current account, BDO 600,000
 Savings deposit, ABN – AMRO Bank, UK 700,000
 FCDU deposits 800,000
Royalty income from various domestic corporation 100,000
The total final tax on passive income assuming the taxable year is 2018.
a. P 200,000 b. P 260,000 c. P 328,000 d. P 1,088,000 # 33

2. Avono, Inc, a resident foreign corporation has earned the following income during the year 2018:
Dividend income from:
 Microsoft, a non – resident corporation P 500,000
 Intel, a resident foreign corporation 400,000
 Panday, a domestic corporation 300,000
Interest income from:
 Current account, BDO 600,000
 Savings deposit, ABN – AMRO Bank, UK 700,000
 FCDU deposits 800,000
Royalty income from various domestic corporation 100,000
Additional information:
 The ratio of Microsoft gross income in the Philippines over worldwide income for the past three years is
40%.
 The ratio of Intel’s gross income in the Philippines over worldwide income in the Philippines over
worldwide income for the past three years is 60%.
 The ratio of Panday’s gross income in the Philippines over worldwide income for the past three year is
80%.
How much is the income tax expense of Avono, Inc?
a. P 200,000 b. P 400,000 c. P 320,000 d. P 272,000 # 34
Assume that Avono, Inc, is a domestic corporation, how much is the income tax expense?
a. P 200,000 b. P 560,000 c. P 680,000 d. P 740,000

3. In 2018, a domestic corporation declared and paid dividends to its shareholders as follows:
To Apol, a resident citizen P 100,000
To Alex, a nonresident citizen 100,000
To George, a resident alien 100,000
To LJ, a non-resident alien engaged in trade in the Philippines 100,000
To Francis, a nonresident alien not engaged in trade in the Philippines 100,000
To Chen, a domestic corporation 100,000
To a resident foreign corporation 100,000
To a nonresident foreign corporation (with tax sparing) 100,000
How much is the final tax?
 a. P 80,000 b. P 90,000 c. P 85,000 d. P 95,000 # 36

4. ABC Company and DEF Company formed a joint venture. They agreed to share to profit or loss in the ratio of
70% and 30% respectively. The results of operations of the joint venture as well as the con-venture are as
follows:
Joint venture ABC Co. DEF Co.
Gross income P 5,000,000 P 3,000,000 P 2,000,000
OPEX 3,000,000 2,000,000 1,500,000

The income tax payable of the joint venture is

The total income tax payable of ABC Co. is

The total income tax expense od DEF Co. is

Assume that the joint venture is a tax-exempt JV, its income tax payable is
a. P 0 b. P 150,000 c. P 300,000 d. P 600,000 # 39

Capital Gains Tax

1. Chris, Inc. sold its vacant lot to Moca Corp. for P 10,000,000 which it acquired at a cost of P 5,000,000. The fair
market value of the said property per tax declaration is P 12,000,000, while its zonal value is P 15,000,000. How
much is the income tax applicable on the transaction?
a. P 600,000 b. P 720,000 c. P 900,000 d. P 1,500,000

2. IN 2018, East Star Inc. sold shares of stock for P 250,000. The shares, acquired in 2015 at a cost of P 100,000
were held as investment, and were sold directly to the buyer. How much was the capital gains tax due?
a. P 10,000 b. P 15,000 c. P 22,500 d. P 45,000

3. Using the same data in # 2, how much is the capital gains tax assuming the shares were sold by a foreign
corporation?
a. P 10,000 b. P 15,000 c. P 22,500 d. P 45,000

4. Assume the shares sold were not held for investment purposes and the seller is a dealer in securities, how
much is the capital gains tax?
a. P 10,000 b. P 15,000 c. P 22,500 d. nil

5. In 2018, East Star Inc. sold shares of stock of a domestic corporation for P 250,000. The shares acquired in
2015 at a cost of P 100,000 were held as investment, and were sold through the local stock exchange. How much
was the applicable tax due?
a. P 1,250 b. P 1,500 c. P 10,000 d. P 15,000

6. Assume the share sold were not held for investment purposes and the seller is a dealer in securities, how
much is the stock transaction tax (STT)?
a. P 1,250 b. P 1,500 c. P 10,000 d. nil
Regular Income Tax (RCIT), Minimum Corporate Income Tax (MCIT), Gross Income Tax (GIT)