Solution manual transfer and business taxes by valencia CHAPTER 11 PERCENTAGE TAXES

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 11: PERCENTAGE TAXES

CHAPTER 11

PERCENTAGE TAXES
Problem 11–1
1. False – Non-VAT business is not allowed to have Input VAT.
2. False – expressly exempted from business tax.
3. True
4. True
5. False – 3% tax on gross receipts within. Gross receipts outside the Philippines is not subject
to business tax in the Philippines.
6. False – 2% percentage tax.
7. False – the VAT rate should be 12%.
8. False – expense of the service consumer
9. False – 10% on foreign insurance company
10. False – Gross receipts on cabaret and nightclubs are now included in 12% VAT taxable
transactions.
11. False – only gross receipts within.
12. True
Problem 11–2
1. False – minimum quarterly receipts or actual quarterly gross receipts whichever is higher.
2. True
3. False – grants from the government
4. False – Subject to VAT for being registered as VAT
5. False – exempt

6. True
7. False – amusement taxes ranging from 10% to 30%
8. True
9. False – Horse race’s cost of winning ticket is deductible
10. True
Problem 11 – 3
1. False – business tax.
2. True
3. False – 3% percentage tax.
4. True
5. False – the percentage tax forms part of seller’s expense
6. True
7. False – The ½ of 1% is applicable for sale of shares of stock in the stock exchange.
8. True
9. True
10. False – 7% percentage tax
11. False – within 20 days
Problem 11 – 4
1. B
8. A
2. C
9. D
3. B
10. D
4. C
11. D
5. B
12. C
6. D
13. B

7. C
14. C


BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 11: PERCENTAGE TAXES

Problem 11 – 5
C
Percentage tax (P40,000 x 3%) x 12
Problem 11 – 6
Exempt

P14,400

A

Problem 11 – 7
Business tax (P540,000 x 3%)

C
P16,200

Note: The actual sale has not yet reached the VAT threshold exceeding P1,500,000 in a year.
Problem 11 – 8
A

Percentage tax (P28,000/112%) x 3%
VAT (P28,000/9.3333)
Surcharge (P3,000 x 50%)
Business tax
Problem 11 – 9
C
Percentage tax payable (P500,000 x 3%)
Problem 11 – 10
C
Percentage tax due (P54,000 + P18,000 + P36,000) x 3%
Problem 11 – 11
D
Percentage tax (P65,700 x 3%) x 5

P

750
3,000
1,500
P 5,250
P 15,000
P 3,240

P9,855

Should be P9,855 instead of P9,859.
Problem 11 – 12
D
Taxi (P98,600 x 3%) x 10
Bus (P1,000,000 x 3%)

Common carrier tax due
Problem 11 – 13
D
Total gross receipts (P1,000,000 + P6,000,000)
Multiplied by applicable business tax rate
Total business tax

P29,580
30,000
P59,580
P7,000,000
12%
P 840,000

Note: Common carrier by sea is subject to VAT of 12%.
Problem 11 – 14
A
Percentage tax (P10,000,000 x 3%)
VAT (P6,000,000 + P1,000,000) x 12%
Average business tax in a year
Divided by number of quarter in a year
Estimated average business tax per quarter

P 300,000
840,000
P1,140,000
4
P 285,000

Problem 11 – 15

C
Percentage tax (P10,000,000 x 3%)

P 300,000

Problem 11 – 16
A
Outside for trip - Manila to USA (P1,000,000 x 3%)
In the Philippines for trip – Manila to USA (P1,100,000 x 3%)
Philippine business tax

P 30,000
33,000
P 63,000


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Chapter 11: PERCENTAGE TAXES

Problem 11 – 17
C
Percentage tax – water franchise (P1,000,000 x 2%)
Problem 11 – 18
B
Percentage tax – water franchise (P2,000,000 x 2%)
Percentage tax – radio franchise (P10,000,000 x 3%)

Total percentage tax
Problem 11 – 19
B
Percentage tax (P5,000 + P2,000) x 10%
Problem 11 – 20
Exempt

P 700

P 750,000
75,000
P 825,000

D

Problem 11 – 23
D
Percentage tax (P200,000 x 10%)
Problem 11 – 24
D
Amusement tax (P500,000 + P200,000 + P100,000) x 18%
Problem 11 – 25
1.
A
Percentage tax (P2,000,000 + P1,000,000) x 10%
2.

P 40,000
300,000
P 340,000

A

Problem 11 – 21
D
Service charge (P75,000/10%)
Percentage tax (P750,000 x 10%)
Total collection
Problem 11 – 22
P -0-

P 20,000

P 20,000
P 144,000

P300,000

D
Exempt

Problem 11 – 26
B
Percentage tax [P1,000,000 - (P200,000/100)] x 10%

P 99,800

Problem 11 – 27
A
Percentage tax (P100,000 – P1,000) x 10%

P 9,900

Problem 11 – 28
B
Percentage tax [P1,000,000 x .005)

P 5,000

Problem 11 – 29
D
P - 0 -. The sale is subject to capital gains tax because the shares of stock were sold directly
to the buyer.
Problem 11 – 30
C
Percentage tax [400,000 x P12) x 1%
400,000/1,150,000 = 34.5% more than 33 1/3% = 1% percentage tax.

P 48,000


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Chapter 11: PERCENTAGE TAXES

Problem 11 – 31
D

Percentage tax [P600,000 x 4%)

P 24,000

(600,000/20)/ (2,600,000/20) = 23% = 4% percentage tax.
Problem 11 – 32
B
Interest income with maturity more than 5 years (P400,000 x 1%)
Leasehold income (P300,000 x 7%)
Total gross receipt tax

P 4,000
21,000
P25,000

Note: The net trading loss is deductible only from trading gain of the same taxable year.
Problem 11 – 33
D
Interest income with maturity less than 5 years (P600,000 x 5%)
Royalty income (P300,000 x 7%)
Gain from sale of derivatives (P200,000 x 7%)
Total gross receipt tax

P 30,000
21,000
14,000
P 65,000

Note: The net trading loss for 2005 is not deductible from trading gain of 2006.
Problem 11 – 34

A
Percentage tax [P62,400/(100%-1%-3%) x 3%

P 1,950

Problem 11 – 35
C
Net payment (P200,000 x (100% - 1% - 2%)

P 194,000

Problem 11 – 36
Gross receipts (P480,000 + P190,000 + P100,000 + P2,000,000 + P2,500,000)
Multiplied by applicable business tax rate - VAT
Business tax liability

P5,270,000
12%
P 632,400

Note: Sale of service should be based on gross receipts (collections) while sale of foods and
beverages should be based on gross sales (revenues).
Problem 11 – 37
Minimum quarterly amount – City taxi (P98,600 x 2)
Multiplied by percentage tax rate
Percentage tax payable – 2nd quarter (answer)

P197,200
3%
P 5,916

The total actual gross receipts and related percentage taxes from April to June (2 nd quarter)
were lower than the minimum, hence not applicable.
Problem 11 – 38
Tax units
1
2
3
4
5
Total amount = higher amount
Multiplied by percentage tax
Percentage tax

Actual
100,000
80,000
95,000
90,000
105,000
470,000

Minimum
98,600
98,600
98,600
98,600
98,600
493,000
3%

14,790

Note: The higher of the aggregate/total amount of the actual gross receipts or minimum
amount is subject to percentage tax.


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Chapter 11: PERCENTAGE TAXES

Problem 11 – 39
Gross receipts (P2,500,000 + P5,000,000 + P3,000,000 + P1,500,000)
Multiplied by common carrier’s (by air /sea) VAT rate
Business tax

P12,000,00
0
12%
P
1,440
,000

Notes:
1. Common carriers by air and sea relative to the transport of passengers within the
Philippines is subject to 12% VAT. Transport of passengers by land however is subject
to 3% percentage tax.
2. International air carriers and international shipping carriers doing business in the

Philippines shall pay a tax of three percent (3%) of their quarterly gross receipts.
Problem 11 – 40
Gross receipts (P100,000 + P50,000 + P150,000 + P200,000)
Multiplied by applicable business tax rate
Business tax for the quarter

P 500,000
12%
P 60,000

Note: R.A. 9337 changed the business tax rate of day and night club from 18% to 12% VAT.
Problem 11 – 41
Gross receipts
Multiplied by applicable franchise tax rate – VAT
Franchise tax

Problem 11 – 42
Actual gross receipts from business operations
First quarter (P3,000,000 + P4,000,000)
Multiplied by applicable business tax rate
Franchise tax due – first quarter

P50,000,00
0
12%
P
6,000
,000

P7,000,000

12%
P 840,000

Note: During the taxable year, its gross receipts exceeded P10,000,000.
Problem 11 – 43
Gross receipts
Multiplied by percentage tax rate collected
Percentage tax to be remitted

P 500,000
10%
P 50,000

Problem 11 – 44
Total gross receipts (P600,000 + P400,000)
Multiplied by percentage tax for professional basketball organization
Percentage tax

P1,000,000
15%
P 150,000

Problem 11 – 45
Total gross receipts (P800,000 + P300,000 + P500,000 + P50,000)
Multiplied by applicable business tax rate for cockpits
Total business tax

P1,650,000
18%
P 297,000

Problem 11 – 46


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Chapter 11: PERCENTAGE TAXES

Income tax on cockfighting winnings (P500,000 x 20%)
Percentage tax on horseracing winnings (P800,000 x 10%)
Income tax on horseracing winnings (P800,000 x 20%)
Total tax on winnings

P 100,000
80,000
160,000
P 340,000

Problem 11 – 47
1.
Percentage tax (P0.50 x 1,000,000) x 0.005
2.

P 2,500

August 20, 2005 = last day of remittance without penalty.

Problem 11 – 48
Gross receipts tax on:
Rent income (P30,000 x 7%)
Royalty income (P20,000 x 7%)
Interest income (P50,000 + P20,000 + P10,000) x 5%
Total percentage tax
Problem 11 – 49
1.
Year
Remaining maturity
2005
9
2006
8
2007
7
2008
6
2009
5
Total gross receipt tax paid
2.

P 2,100
1,400
4,000
P 7,500

Amount
of interest, etc.

P 200,000
200,000
200,000
200,000
200,000

Applicable
tax rate
1%
1%
1%
1%
5%

Amount
Year
Remaining maturity
of interest, etc.
2005
4
P 200,000
2006
3
200,000
2007
2
200,000
2008
1
200,000

2009
Less than 1 year
200,000
Total gross receipt tax as recomputed
Less: Gross receipt tax previously paid
Gross receipt tax still due

Applicable
tax rate
5%
5%
5%
5%
5%

Gross receipt tax
P 2,000
2,000
2,000
2,000
10,000
P18,000
Gross receipt tax
P10,000
10,000
10,000
10,000
10,000
P50,000
18,000

P32,000

Problem 11 – 50
Franchise
P 400,000
3,000,000
P3,400,000
100,000
P3,300,000

Non-franchise
P
- 0 1,800,000
P1,800,000
120,000
P1,680,000

1. Telephone services

10%
P330,000

10%
P168,000

2. Water franchise

2%
P 66,000

3%
P 50,400

Beginning receivables
Add: Revenues
Total
Less: Ending receivables
Gross receipts


BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
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Chapter 11: PERCENTAGE TAXES

3. Fast food (P3,000,000 x 12%)
(P1,800,000 x 12%)

P360,000
P216,000

Note: The business tax on fast food is based on the revenue because the business is
a combination of sales of goods and service. Moreover, the fast food business is
subject to12% VAT because the total revenue exceeded the P1,500,000 threshold.
Problem 11 – 51
Comprehensive Problem
Collections:
Revenues

Accounts receivable
Advances
Gross receipts

Current
P 500,000
300,000
200,000
P1,000,000

Previous
P300,000
100,000
.
P400,000

3%
P 30,000

3%
P 12,000

2. Race track

30%
P300,000

30%
P120,000

3. Boxing exhibition

10%
P100,000

10%
P 40,000

4. Water utilities

2%
P 20,000

P

5. Life insurance

5%
P 50,000

5%
P 20,000

6. Agents of foreign insurance companies

10%
P100,000

10%
P 40,000

7. Overseas dispatch

10%
P100,000

10%
P 40,000

Computation of percentage taxes:
1. Common carrier of passengers (assume land transport)

2%
8,000