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

BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 57 Chapter 11: PERCENTAGE TAXES CHAPTER 11 PERCENTAGE TAXES Problem 11–1 False – Non-VAT business is not allowed to have Input VAT False – expressly exempted from business tax True True False – 3% tax on gross receipts within Gross receipts outside the Philippines is not subject to business tax in the Philippines False – 2% percentage tax False – the VAT rate should be 12% False – expense of the service consumer 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 False – minimum quarterly receipts or actual quarterly gross receipts whichever is higher True False – grants from the government False – Subject to VAT for being registered as VAT False – exempt True False – amusement taxes ranging from 10% to 30% True False – Horse race’s cost of winning ticket is deductible 10 True Problem 11 – False – business tax True False – 3% percentage tax True False – the percentage tax forms part of seller’s expense True False – The ½ of 1% is applicable for sale of shares of stock in the stock exchange True True 10 False – 7% percentage tax 11 False – within 20 days Problem 11 – B A C D B 10 D C 11 D B 12 C D 13 B C 14 C BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 58 Chapter 11: PERCENTAGE TAXES Problem 11 – C Percentage tax (P40,000 x 3%) x 12 Problem 11 – Exempt P14,400 A Problem 11 – 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 – A Percentage tax (P28,000/112%) x 3% VAT (P28,000/9.3333) Surcharge (P3,000 x 50%) Business tax Problem 11 – 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 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 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 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 59 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 A Percentage tax (P2,000,000 + P1,000,000) x 10% 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 - - 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 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 60 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 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 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 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 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 61 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 12% P 1,440 ,000 Notes: 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 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 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 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 62 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 Percentage tax (P0.50 x 1,000,000) x 0.005 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 Year Remaining maturity 2005 2006 2007 2008 2009 Total gross receipt tax paid 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 P 200,000 2006 200,000 2007 200,000 2008 200,000 2009 Less than 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 - 1,800,000 P1,800,000 120,000 P1,680,000 Telephone services 10% P330,000 10% P168,000 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) SUGGESTED ANSWERS 63 Chapter 11: PERCENTAGE TAXES 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 Race track 30% P300,000 30% P120,000 Boxing exhibition 10% P100,000 10% P 40,000 Water utilities 2% P 20,000 P Life insurance 5% P 50,000 5% P 20,000 Agents of foreign insurance companies 10% P100,000 10% P 40,000 Overseas dispatch 10% P100,000 10% P 40,000 Computation of percentage taxes: Common carrier of passengers (assume land transport) 2% 8,000 .. .BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 58 Chapter 11: PERCENTAGE TAXES Problem 11 – C Percentage tax (P40,000 x 3%) x 12 Problem 11 – Exempt... minimum amount is subject to percentage tax BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 61 Chapter 11: PERCENTAGE TAXES Problem 11 – 39 Gross receipts (P2,500,000... business tax rate for cockpits Total business tax P1,650,000 18% P 297,000 Problem 11 – 46 BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 62 Chapter 11: PERCENTAGE