PARTNERSHIP AND CORPORATIONS General 1. Professional Partnerships False 2. False 3. What does GPP stand for?

False

4.

Corporations can participate or be one of the partners in a GPP A GPP is a partnership created for the exercise of a common purpose, no part of income being derived from engaging in trade or business A general partner is one who is answerable for the liabilities of the partnership to the full extent of his personal properties

Common practice of profession Not limited to his contributions or investments but extends to their separate property GPP is not taxable on its collective income They are required to file returns of their income Only the partner can claim the expenses

False False False

5. 6. 7.

False

8.

True

9.

False False True False False

10. 11. 12. 13. 14.

A GPP being a partnership is subject to the 2% MCIT starting on its 4th taxable year of operation A GPP is a pass through entity, may or may not submit the computation of its net income A partner of a GPP can claim the expenses that he incurred in the practice of his profession as a partner in a GPP even after the GPP has utilized the same expenses in computing for his distributive share in the firms net profit A partner is bound by the choice of the GPP in using itemized deduction or the optional standard deduction in arriving at net income An agreement to contribute money, property, or industry to common fund and the intent to divide the profits among the contracting parties are the only essential elements of a partnership under the Civil Code The OSD is equivalent to 10% of gross income A corporation can compute its OSD based on its gross sales or receipts depending on its method of accounting A partnership is always treated as a corporation for tax purposes A corporation is subject to 30% tax on taxable income from global sources Non-stock, non-profit educational institutions fall under Section 30 of the Tax Code and are thus, subject to the 10% tax on its income

Article 1767

40%

Domestic sources Proprietary educational institutions (private schools registered under CHED/DepEd/ TESDA) They are exempted from tax

False True

15. The predominance test applies to non-stock, non-profit educational institutions 16. The predominance test states that if the gross income from unrelated trade, business or other activity exceeds

True False False

17. 18. 19.

False

20.

True False True False True

21. 22. 23. 24. 25.

False

26.

True True

27. 28.

False

29.

50% of the total gross income derived by any educational institution or non-profit hospital from all sources, the normal tax is imposed on such income arising from unrelated trade, business or other activity The entire MCIT paid during a taxable year is carried forward to the succeeding taxable year MCIT be carried forward for 4 executive taxable years In discarding or expiring MCIT balances carried forward, the taxpayer is bound to discard on a first-in last-out or last-in first-out basis All domestic corporations are subject to the 2% MCIT on the 4th taxable year from the commencement of its operations Only domestic corporations subject to the normal income tax or the 30% income tax are subject to MCIT Resident foreign corporations are not subject to the MCIT Resident foreign corporations subject to normal income tax are subject to MCIT Resident foreign corporations not subject to normal income tax but to other taxes are subject to the MCIT A partnership other than a GPP is taxable as a corporation and therefore, the partners share in the profits are treated or taxable as dividends Proprietary educational institutions are bound by the requirement that all its income to be subject to the appropriate tax ACTUALLY, DIRECTLY and EXCLUSIVELY used for its educational activities Exempt corporations under Section 30 of the tax code are exempt on their income Entities above (#27) are subject to normal income tax on any income that are derived from any of their properties or profits from activities conducted for profit, regardless of the disposition of such income Anyone can just claim relief from the MCIT using any of the 3 grounds or bases of such relief

3 First-in first-out FIFO

Also GOCCs, and resident foreign corporations

Non-profit non-stock educational institutions OR educational purposes not activities

Must be verified by the Commissioners verified representative 3 grounds: Prolonged labor dispute Force majeure (act of God/ fortuitous events) Legitimate business

False False

True

30. OSD is available at rates 10%, 30% and 40% of gross income, gross sales or gross receipts 31. OSD grants the option not just to avail or opt for OSD, but also as the percentage of OSD applicable and on what gross tax base is to be computed 32. An individual engaged in business or in the practice of profession waves his/her right to the basic personal and additional exemptions upon opting for OSD

reverses (fire, robbery, embezzlement) Only 40% Only one percentage for OSD

ESTATES AND TRUST False False 1. 2. Death taxes pertain to the income taxation of estates and trust The scheduler tax rate used for individual income tax is the same tax schedule used for estate tax The top rate for income taxation of estates is Php 1,215,000 for the first 10M of the taxable net estate and 20% in excess of Php10M Property, rights and obligations that are extinguished by the demise of a decedent or owner form part of the deceaseds estate Anything that accrue to any property, right or obligation that comprise an estate does not form part of the estate but is subject to income tax A trust is created by a will or by an agreement transferring ownership of a property in favour of a fiduciary agent An estate is created by operation of law Death creates an estate Pertains to the tax on the transfer of property Effective January 1, 1998 Php 200,000 below tax exempt

True

3.

False

4.

The obligation is not extinguished upon death It forms the income of the estate In favour of the beneficiary

False

5.

False

6.

True False False True

7. 8.

False

9. A last will and testament creates an estate 10. A last will and testament does not create an estate but gives the testator a means to impose his will upon the manner of distribution of his estate after his death 11. Income Taxation of estates and trusts is a tax on the property constituting the estate or the trust 12. Death or estate tax is a tax on the right to transmit properties 13. The transfer of property to a trust where reversion of property is in full or in part creates a taxable trust 14. The complete transfer of title of property to a trust for which the instrument of trust allows the grantor to

It only triggers it, particularly a trust Creates a trust

On the income generated from the property

True False False

It should be irreversible/irrevocable This is a revocable trust

True False

15. 16.

False

17.

True True False True False

18. 19. 20. 21. 22.

False False True

23. 24. 25.

benefit from the income if the trust in the event that all of the beneficiaries pre-decease or refuse any income from the trust creates is a taxable trust A taxable trust is an irrevocable trust Income that is accumulated in a trust for future distribution to the beneficiaries pursuant to a provision of a will is not subject to income tax Income generated by a trust or an estate that the fiduciary distributes currently is taxable to the estate or trust All distributions of the income of a trust or estate to the beneficiaries or heirs constitute the deductions The fees of the fiduciary are deductible expenses to the trust and estate Income of a revocable trust is taxable to the fiduciary Income for the benefit of the grantor is taxable to the grantor Income of the trust which to the discretion of the fiduciary can either be distributed or accumulated are taxable only in the year of distribution the beneficiaries Income received outside the period of settlement or administration of an estate is taxable to the estate Income received outside the period of settlement or administration of an estate is taxable to the fiduciary All trusts where the parties are identical except for the fiduciaries can be consolidated for income tax purposes

It is subject

It is taxable to the beneficiaries

To the grantor

This is a deductible expense To the beneficiary To the beneficiary

VAT ETC False 1. VAT is a multi-stage tax that is also a privilege tax, that is also a capitation tax, that is also an indirect tax, that is also a uniform tax Death taxes pertain to the income taxation of estates and trusts VAT is a uniform tax because it applies on all sales The schedular rate used for individual income tax is the same tax schedule used for estate tax VAT is a consumers tax because the consumers carry the burden of the tax Capital not capitation

False False False False

2. 3. 4. 5.

Taxation on the transfer Sales (goods) and receipts (some services)

Tax burden could be shifted & because it should be consumption tax

True

6.

False False

7. 8.

The top rate for income taxation of estates is Php 1,215,000 for the first Php10M of the taxable net estate and 20% in excess of Php10M Importation of aquarium fishes is exempt from VAT Property, rights, and obligations that are extinguished

It is not exempted

False False

9. 10.

False False

11. 12.

False True False False True False True True

13. 14. 15. 16. 17. 18.

by the demise of a decedent or owner form part of the deceaseds estate Importation must be in the course of trade or business in order for it to be subject to VAT Anything that accrue to any property, right or obligation that comprise an estate does not form part of the estate but is subject to income tax Importation of seeds and seedlings is subject to VAT A trust is created by a will or by an agreement transferring ownership of a property in favour of a fiduciary agent Sale of professional services by doctors are exempt from VAT An estate is created by operation of law Medical, dental, hospital services are subject ot VAT Death creates an estate Export sales of persons not registered for VAT purposes are exempt from VAT A last will and testament creates an estate

In favour of the beneficiary

They are exempted Triggers it

It facilitates the distribution

False False False True False False False False

False True

19. Lease of a residential unit for an amount not exceeding 10,000 per month is exempt from VAT 20. A last will and testament does not create an estate but gives the testator a means to impose his will upon the manner of distribution of his estate after his death 21. Importation of fuel by persons engaged in international shipping or air transport is subject to VAT 22. Income taxation of estates and trusts is a tax on the property constituting the estate or trust 23. Services rendered pursuant to an employer-employee relationship is subject to VAT 24. Death or estate tax is a tax on the right to transmit properties 25. Dividing your receipt or invoice price by 112% or 1.12 will result in your selling price inclusive of VAT 26. The transfer of property to a trust where reversion of property in full or in part creates a taxable trust 27. Consumers can recover the VAT paid on their purchases because the VAT is a passed-on tax 28. The complete transfer of title of property to a trust for which the instrument of trust allows the grantor to benefit from the income of the trust in the event that all of the beneficiaries pre-decease or refuse any income from the trust is a taxable trust 29. The VAT is a fixed rate equivalent to 12% exempt on importations which are subject to 10% 30. A taxable trust is an irrevocable trust

It is subject Income from the property It is exempted

Exclusive of VAT This is revocable, therefore not taxable It can never be recovered This is revocable, therefore not taxable

Flat rate of 12%

False False

False True

True False True False

False False True

31. Importations by persons not engaged in trade or business are not subject to VAT 32. Income that is accumulated in a trust for future distribution to the beneficiaries pursuant to the provision of a will is not subject to income tax 33. Income generated by a trust or an estate the fiduciary distributes currently is taxable to the estate or trust 34. All distributions of the income of a trust or estate to the beneficiaries or heirs constitute the deductions available to the trust and estate for income tax purposes 35. The fees of the fiduciary are deductible expenses to the trust and estate 36. Income of a revocable trust is taxable to the fiduciary 37. Income for the benefit of the grantor is taxable to the grantor 38. Income of a trust which to the discretion of the fiduciary can either be distributed or accumulated are taxable only in the year of distribution to the beneficiaries 39. Income received outside the period of settlement or administration of an estate is taxable to the estate 40. Income received outside the period of settlement or administration of an estate is taxable to the fiduciary 41. All trusts where parties are identical except for the fiduciaries can be consolidated for income tax

It is taxable to the fiduciary

It is taxable to the beneficiary It is taxable to the beneficiary

Value Added Tax A uniform tax imposed on each sale, barter, exchange or lease of goods, properties or services in the course of trade or business A privilege tax A Percentage tax Indirect tax and the amount may be shifted or passed on to the buyer Taxable transactions (12% EVAT) On sale of goods or properties (on gross sales) On importation of goods (on the total value used in determining customs duties) On sale of services and use or lease of properties (on gross receipts) Exemptions 1. Sale or importation of agricultural and marine food products in their original state 2. Sale or importation of fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and poultry feeds including materials used in the manufacture of finished feeds a. Except feeds for race horses, fighting cocks, aquarium fish, zoo animals or those generally considered as pets 3. Importation of personal and household effects belonging to the residents of the Philippines returning from abroad provided they are exempt from customs duties 4. Importation of professional instruments, wearing apparel, domestic animals, and personal household effects a. Except vehicle, vessel, aircraft, machinery, other goods used for manufacture and merchandise of any kind in commercial quantity 5. Services subject to percentage tax under Title V 6. Services by agricultural contract growers and milling for others or palay 7. Medical, dental, hospital and veterinary services a. Except by professionals 8. Educational services rendered by proprietary educational institutions and those rendered by government educational institutions 9. Services rendered by individuals pursuant to an employer-employee relationship 10. Services rendered by regional or area headquarters established in the Philippines by multinational corporations that do not derive income from the Philippines 11. Transactions which are exempt under international agreements to which the Philippines is a signatory under special laws 12. Sales by agricultural cooperatives duly registered with the Cooperative Development Authority as well as the sale of their produce, whether original or processed form, to non-members; their importation of direct farm inputs, machineries and equipment, including spare parts thereof 13. Gross receipts from lending activities by credit or multi-purpose cooperatives registered with the CDA 14. Sales by non-agricultural, non-electric and non-credit cooperatives provided that the share capital contribution of each member does not exceed Php15,000 15. Export sales by persons not VAT-registered 16. Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing (Urban Development and Housing Act) a. Php1.5 M and below Residential Lot

b. Php2.5 M and below house and lot, and other residential dwellings 17. Lease of residential unit with monthly rental not exceeding Php10,000 18. Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and is not devoted principally to the publication of paid advertisements 19. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare parts for domestic or international transport operations 20. Importation of fuel, goods and supplies by persons engaged in international shipping or air transport operations 21. Services of banks, non-bank financial intermediaries performing quasi-banking functions and other non-bank financial intermediaries Output Tax The value-added tax due on the sale or lease of taxable goods, properties or services by a VATregistered person Estate (inheritance) Decedent Heir Devisee Trustor or grantor Trust All property, rights and obligations which are not extinguished by death and also those which have accrued thereto since the opening of the succession General term applied to the person whose property is transmitted through succession A person called to the succession either by will or by operation of law A person to whom a gift of real property is given by virtue of a will Person who establishes a trust An arrangement created by will or an agreement under which title to property is passed to another for conservation or investment with the income therefrom and ultimately the corpus (principal) to be distributed in accordance with the directions of the creator The one in whom confidence is reposed as regards property for the benefit of another person The person whose benefit the trust has been created Guardian, executor, administrator, receiver

Trustee Beneficiary Fiduciary