EXERCISES 21-1 DISCUSSION QUESTIONS / PROBLEMS Franchise Tax Carrier’s tax Premium Tax Tax on Banks Non-VAT Amusement Tax Final Tax ANSWER SOURCE: O L O G A P O L B E D I O R B Y N O N P T U G I I A M U S E M E N T A C Y O N A E N L I M T E E V N G B R O A X T O U M V E U R F T A V N O N E E G I D I T O N T M H A A G G F E N B M A T E A X A T S R E I R R A C X E A I T O R N E A M N A O N I O S D N K I E D S Y H F R A N C H I S E A EXERCISES 21-2 DISCUSSION QUESTIONS / PROBLEMS a Bobby is subject to a percentage of 3% on Persons Exempt from VAT because he is not a VAT-registered taxpayer and at the same time his gross receipts during his first year of operation does not exceed P1,500,000 Therefore, the percentage tax due of Bobby is P15,600 (P520,000x3%) b If Bobby decides to voluntarily register under the VAT system, he shall be subject to value-added tax regardless of the amount of his annual gross receipts Patricia is subject to Other Percentage Tax or Non-VAT of 3% of gross receipts When the annual gross receipts of a business not exceed P1,500,000 in any 12month period, it shall be subject to 3% Non-VAT unless it voluntarily registers under the VAT system The business of Ato is subject to VAT Thus, the taxable amount is P72,000 (600,000 x 12%) This is based on the assumption that the gross receipts in any 12-month period exceeds P1,500,000 The computation of common carrier's tax is based on the actual collections of P24,000 during the quarter The salaries or wages of drivers, including the cost of oil and gasoline and the expenses for the purchase of spare parts and minor repairs of the trimobile are not deductible Hence, Beato should pay a common carrier's tax of P720 83 (24,000x 3%) If Beato is operating a calesa instead of a trimobile, he is not liable to this tax because he owns and operates an animal-drawn two-wheeled vehicle which is exempt from tax If there is a change in plane belonging to the same airline at a certain point which is not the final destination of the passenger, for any reason other than force majeure, the flight is still "continuous and uninterrupted"; the basis of the gross receipts reportable for percentage tax purposes will be the cost of the ticket corresponding from the point of origin (Manila) to the final destination of the passenger (BIR Ruling 88-164) Hence, for purposes of computing the percentage tax, the gross receipts shall be based on the cost of the ticker for the entire journey, i.e from Manila to United States a b c d e f g 12% VAT 3% percentage tax 0% VAT Not subject to businesstaxes due to lack of tax jurisdiction 12% on gross receipts from a domestic port to another domestic port 3% percentage tax 0% VAT provided that the same to limited to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port without docking or stopping at any other port in the Philippines to unload passengers and/or cargoes loaded in and from another domestic port a Operators of gas and water utilities are subject to a Franchise Tax of 2% on the gross receipts Thus, if the gross receipts during the month amount to P2,000,000, Too Big Company shall be liable to pay a tax of P40,000 (P2,000,000 x 2%) b Payments for services rendered, other than the business covered by the law granting the franchise, are not subject to the tax In other words, the franchisee is taxable on the receipts from the sale of water only Hence, Too Big Company's franchise tax payable is P40,000 c No, generally businesses which are subject to percentage taxes are disqualified to register under the VAT system even if they desire to be registered Hence, Too Big Company is strictly governed by the provision on Franchise Tax January Monthly telephone bill Percent of overseas call Receipts from overseas call Divide by Overseas communication tax P20,00 60 % 12,00 1 1,090.9 Februar y P14,50 60% March P 25,700 60% 8,700 15,420 11 11 790.90 1,401.8 Note: The bills on the overseas communications include already the 10% tax The basic monthly bills including the long distance call charges are subject to value- 84 added tax, to wit: Telephone bill during the quarter P 60,200 00 Less: Gross receipts from overseas communication January P 12,000 February 8,700 March 15,420 Amount subject to VAT Multiply by Input tax Year Remaining maturity 2006 2007 2008 2009 2010 Amount of interest, etc Tax rate 100,000 1% 100,000 1% 100,000 1% 100,000 1% 100,000 5% Total gross receipts tax 36,120 23,880 3/28 2,558.57 Tax 1,000 1,000 1,000 1,000 5,000 9,000 Upon pretermination, the loan agreement shall be reclassified and the correct gross receipt tax, including prior years, shall be recomputed on the basis of new category as shown hereunder: 2004 2005 2006 2007 2008 Less than yr 100,000 100,000 100,000 100,000 100,000 5% 5% 5% 5% 5% 5,000 5,000 5,000 5,000 5,000 25,000 Total gross receipts tax Less: Gross receipts tax previously paid Tax due 25,000 9,000 16,000 Total premiums collected Portion of life insurance (100%-55%) x 3,500,000 Gross receipts from life insurance Rate of tax Tax on life insurance premiums P 3,500,000 1,575,00 1,925,00 % 96,25 Non-life insurance premiums are subject to VAT Thus, the output tax is P168,750 (P1,575,000 x 3/28) 85 10 (a) Operation of cockpit Restaurant Gross receipts Rate of tax Amusement tax P 340,000 75,000 415,000 18% 74,700 (b) The defense of Mon is not tenable Both the Bureau of Internal Revenue and the municipal government are empowered to impose amusement tax on the operation of the cockpit The authority of the BIR is based on the provisions of the National Internal Revenue Code, while the authority of the municipal government is based on the municipal ordinance which is also authorized under the Local Government Code 11 Inasmuch as the establishment is serving food and drinks, furnish long playing records and/or tapes and allow the members of the family to dance, then the business is falling under the category of a night or day club Accordingly, it is subject to a tax of 18% of its gross receipts (BIR Ruling No 88-108) 12 Bowling alleys are neither subject to percentage tax nor to value-added tax Bowling is classified as a sport and therefore, bowling alleys are not classified as a business enterprise (BIR Ruling No 88-112) 13 Winnings in horse races (P20,000 x 10%) Winning race horse (P10,000 x 10%) Total amusement tax to be withheld 14 a Gross selling price Rate Stock transaction tax 2,000 1,000 3,000 100,000 005 500 b Sale of shares of stock which are not listed and traded in the Philippine Stock Exchange are not subject to percentage tax However, they are subject to income tax based on the net capital gain 86 ... agreement shall be reclassified and the correct gross receipt tax, including prior years, shall be recomputed on the basis of new category as shown hereunder: 200 4 200 5 200 6 200 7 200 8 Less than yr 100,000... Year Remaining maturity 200 6 200 7 200 8 200 9 201 0 Amount of interest, etc Tax rate 100,000 1% 100,000 1% 100,000 1% 100,000 1% 100,000 5% Total gross receipts tax 36, 120 23,880 3/28 2,558.57 Tax... generally businesses which are subject to percentage taxes are disqualified to register under the VAT system even if they desire to be registered Hence, Too Big Company is strictly governed by the