CHAPTER 1: INTRODUCTION TO c.

Not pay consumption tax if the seller is a non-

CONSUMPTION TAXES resident
d. Not pay consumption tax regardless of the
Multiple Choice – Part 1 residency of the seller
1. Which type of consumption will pay
consumption tax? 9. The tax on domestic consumption is referred
a. Domestic consumption to as
b. Foreign consumption a. VAT on importation
c. Both domestic and foreign consumption b. Business tax
d. Neither domestic nor foreign consumption c. Either A or B
d. Neither A nor B
2. Which is a tax upon the usage of income?
a. Saving tax 10. The tax on domestic consumption from
b. Investment tax foreign suppliers is
c. Consumption tax a. VAT on importation
d. Business tax b. Business tax
c. Either A or B
3. Which is subject to the VAT on importation? d. Neither A nor B
a. Foreign consumption from resident sellers
b. Foreign consumption from foreign sellers 11. The tax on domestic consumption from
c. Domestic consumption from resident sellers resident suppliers is
d. Domestic consumption from foreign sellers a. VAT on importation
b. Business tax
4. Which is subject to business tax? c. Either A or B
a. Foreign consumption from resident sellers d. Neither A nor B
b. Foreign consumption from foreign sellers
c. Domestic consumption from resident sellers 12. Which is not a business tax?
d. Domestic consumption from foreign sellers a. VAT on importation
b. VAT on sales
5. Which is an incorrect statement regarding c. Percentage tax
consumption taxes? d. Excise tax
a. They are always indirect in nature
b. They effectively tax everyone in the state 13. The percentage tax is generally
c. They apply only when the goods or services a. 3% of sales or receipts
are destined for consumption within Philippines b. 3% of purchases
d. Consumption taxes may encourage savings c. 3% of mark-up
formation. d. 12% of mark-up

6. Which is correct regarding consumption tax? 14. The VAT as a business tax is
a. It may help in the redistribution of wealth to a. 12% of sales or receipts
society. b. 12% of purchases
b. It is entirely based upon the consumers’ c. 12% of mark-up
ability to pay. d. 3% of mark-up
c. It applies to both domestic and foreign
consumption. 15. The VAT on importation is
d. It applies only when the seller is non- a. 12% of sales
resident. b. 12% of purchases
c. 12% of mark-up
7. Domestic consumption is taxable when the d. 3% of mark-up
seller is
a. A non-resident 16. Which form of consumption is tax-free?
b. A resident a. Sales to a resident
c. Either a resident or non-resident b. Sales to a non-resident
d. Both a resident and non-resident c. Importation by an importer engaged in
business
8. Foreign consumption shall d. Importation by an importer not engaged in
a. Pay consumption tax if the seller is a resident business
b. Pay consumption tax if the seller is a non-
resident
17. As to incidence of tax, a VAT on importation a. Direct method
is a form of b. Indirect method
a. Direct tax c. Tax credit method
b. Indirect tax d. Withholding method
c. Ad valorem tax
d. Specific tax 5. Which statement is conceptually incorrect?
18. Which of these import consumptions is tax- a. The buyer pays the consumption tax on
free? his/her purchase to the seller
a. Importation from a seller not engaged in b. The buyer pays the consumption tax to the
trade or business government
b. Importation from a seller engaged in trade or c. The seller pays the consumption tax to the
business government
c. Both A or B d. The seller collects consumption tax for the
d. Neither A nor B government

19. Which importation is subject to the VAT on 6. Which is correct?

importation? a. The sale to foreigners must include a business
a. Importation by a person engaged in business tax
b. Importation by a person not engaged in b. The sale to residents must include a business
business tax
c. Both A or B c. The purchase from abroad must include a
d. Neither A nor B business tax
d. All of these
20. Who is the statutory taxpayer to the VAT on
importation? 7. The deduction from Output VAT is called’
a. Foreign seller a. Percentage tax
b. Domestic buyer b. Value Added Tax
c. Both A and B c. Input VAT
d. None of these d. VAT on importation

Multiple Choice – Part 2 8. Which is pure form of a sales tax?

a. Percentage tax
1. Generally, the tax basis of business tax is b. Value Added Tax
a. Sales or receipts c. Either A or B
b. Purchase costs d. Neither A nor B
c. Either A or B
d. Neither A nor B 9. Statement 1: A business which pays VAT
normally does not pay percentage tax.
2. Who is the statutory taxpayer of business Statement 2: A business which pays percentage
tax? tax also pays VAT
a. The seller who must be engaged in trade or Which statement is correct?
business a. Statement 1
b. The seller, whether or not engaged in trade b. Statement 2
or business c. Both statements
c. The buyer who must be engaged in trade or d. Neither statements
business
d. The buyer, whether or not engaged in trade 10. Which of the following business taxes
or business applies only for domestic consumption?
a. VAT on sales
3. The economic taxpayers of consumption b. Percentage tax
taxes are c. Excise Tax
a. Sellers who are engaged in trade or business d. All of these
b. Sellers, whether or not engaged in trade or
business 11. Excise tax is paid by
c. Buyers who are engaged in trade or business a. Sellers
d. Buyers, whether engaged in trade or business b. Buyers
c. Importers or manufacturers
4. What is the method used to determine the d. Seller or buyer depending who agreed to pay
VAT due and payable? the excise tax
 c. Payable regardless of the purpose of the
12. Export sale is (select the incorrect one) importation
a. Exempt from percentage tax d. Payable only when the resident seller is not
b. Exempt from VAT engaged in business
c. Exempt from excise tax
d. All of these 20. The VAT on domestic sales is an example of
13. Statement 1: Excise tax is always paid a. A direct tax
together with VAT or percentage tax b. An indirect tax
Statement 2: Excise tax is paid at the point of c. A regulatory tax
sale d. A specific tax
Which statement is false?
a. Statement 1 Multiple Choice – Problem 1
b. Statement 2
c. Both statements 1. Free Company, a resident business, renders
d. Neither statements services to Mr. Erlwin, a resident person who is
not engaged in business.
14. Which is imposed with a tax of zero percent Identify the statutory taxpayer and the type of
(0%)? consumption tax.
a. All export sales a. Free Company – business tax
b. Export sales of VAT-registered taxpayers b. Mr. Erlwin – VAT on importation
c. Import sales of VAT-registered taxpayers c. Mr. Erlwin – business tax
d. Export sales of non-VAT registered taxpayers d. Free Company – VAT on importation
only
2. Baliwag Company, a non-resident business,
15. Which is not subject to excise tax? purchased P200,000 from Cauayan Company, a
a. Sin products resident business. Which will pay the
b. Non-essential commodities consumption tax on this transaction?
c. Food products a. Cauayan Company
d. Mineral products b. Baliwag Company
c. Both A and B
16. The tax basis of consumption tax on foreign d. Neither A nor B
purchase is
a. Sales or receipts 3. Heidenberg Corporation, a resident business,
b. Purchase costs purchased P100,000 goods from Kiwi Company,
c. Either A or B a non-resident business.
d. Neither A nor B Identify the statutory taxpayer and the type of
consumption tax.
17. The consumption tax on domestic purchases a. Heidenberg Corporation – business tax
is imposed upon the b. Kiwi Company – business tax
a. Sales or receipts c. Heidenberg Corporation – VAT on
b. Purchase costs importation
c. Either A or B d. Kiwi Company – VAT on importation
d. Neither A nor B
4. Mr. Cedric, an employee, sold his residential
18. Technically, the excise tax on the lot to Mrs. Corneto a real property dealer. Who
manufacture of certain articles is payable only is subject to consumption tax with respect to
when the article is intended for this transaction?
a. Domestic consumption a. Mr. Cedric
b. Foreign consumption b. Mrs. Corneto
c. Either A or B c. A and B
d. Neither A nor B d. Neither A nor B

19. Which is correct with the VAT on 5. Mr. Porma made a causal sale involving a car
importation? to Ms. Totyal, a resident buyer. Mr. Porma is
a. Payable only when the importer is engaged in not a car dealer. Who Is sunject to consumption
business tax?
b. Payable only when the foreign seller is a. Mr. Porma
engaged in business b. Ms. Tutyal
c. Both A and B
d. Neither A nor B 11. A person who imports goods or properties
will more likely to pay
6. Mr. Llama, an employee, imported a pair of a. a 3% percentage tax on the importation
shoes in Hong Kong. Which consumption tax is b. a 12% VAT on the importation
he liable to pay? c. Either 3% or 12% tax on the importation
a. Business tax d. No consumption tax
b. VAT on importation
c. Both 12. A personal who is not regularly engaged in
d. None trade or business made a casual sale of a
property for P100,000. What will be the invoice
7. Kapederasyon, a charitable non-profit price of the sale?
corporations, imports various office supplies a. P100,000
from XG Manufacturing Industries in China. b. P103,000
Which is correct? c. P112,000
a. Kapederasyon is exempt from VAT on d. Either B or C
importation
b. Kapederasyon is subject to VAT on 13. Alison is regularly engaged in the sale of
importation goods. He will pay
c. XG Manufacturing is subject to business ax a. Value added tax only
d. XG Manufacturing shall pay the VAT on b. Percentage tax only
importation c. Either A or B
d. Neither A nor B
8. Mr. Cavite produces an excisable article for
sale in the Philippine market. Which is incorrect 14. Mr. Ventura is subject to 3% percentage tax.
with respect to Mr. Cavite’s business taxation? He made total collection of P206,000 during a
a. Mr. Cavite is subject to either VAT or month and paid P103,000 in his purchases.
percentage tax Compute his percentage tax.
b. Mr. Cavite pays excise tax in addition to VAT a. P0
or percentage tax b. P3,000
c. Mr. Cavite pays excise tax in addition to VAT c. P6,180
and percentage tax d. P12,000
d. Mr. Cavite will pay excise tax without regard Solution: 206,000 x 3% = 6,180
to whether he is a VAT or non-VAT taxpayer
15. A business taxpayer purchased goods worth
9. A person engaged in business is subject to 3% P120,000 from non-residents and sold worth
business tax. He has inventories of goods in his P140,000 for P180,000. What is the concept of
possession costing P77,600 which he intends to “value added” for VAT purposes?
sell to earn a mark-up of 25% of cost net of the a. P200,000
3% business tax. He shall invoice the sale of b. P140,000
P77,600 goods at c. P80,000
a. P100,000 d. P60,000
b. P103,000 Solution: 140,000 – 120,000 = 20,000 + 40,000
c. P97,000 (180,000-140,000) = 60,000
d. P110,000
Solution: 77,600 x 125% = 97,000/97% = 16. In the immediately preceding problem, what
100,000 is the basis of percentage tax?
a. P200,000
10. A business wants to make a P10,000 profit b. P140,000
from the sale of an inventory costing P30,000. c. P120,000
The business is subject to 3% percentage tax. At d. P180,000
what amount shall the business invoice the
sale? 17. Assuming the same data in the above
a. P41,237 problem, what is the basis of the VAT on
b. P41,200 importation?
c. P40,000 a. P200,000
d. P38,800 b. P140,000
Solution: 10,000 + 30,000 = 40,000/97% = c. P120,000
41,237 d. P80,000
18. Mr. Coroneti imported P300,000 equipment b. P24,000
for business use and a P1,200,000 car for c. P12,000
personal use. What is the amount subject to the d. P0
VAT on importation? Solution: 36,000-24,000=12,000
a. P0
b. P300,000 6. Assuming the taxpayer is a non-VAT taxpayer
c. P1,200,000 paying 3% percentage tax, the percentage tax
d. P1,500,000 will be
a. P12,000
b. 9,000
c. P6,000
d. P3,000
Solution: 300,000-200,000=100,000x3%=3,000
Multiple Choice – Problem 2
A business taxpayer recorded the following
1. A business taxpayer had the following transactions during the month:
purchases and receipts: Philippin Abroad Total
Imports of goods or services es
P190,000 Sales P350,000 P200,000 P550,000
Domestic purchase of goods or service 100,000 Purchases 150,000 100,000 250,000
Domestic sales of goods or services 150,000 Total P500,000 P300,000 P800,000
Export sales of good or services 50,000 Assuming the taxpayer is a VAT-registered
Compute the total amount subject to taxpayer
consumption tax to the business. 7. Compute the output VAT
a. P500,000 a. P0
b. P400,000 b. 24,000
c. P350,000 c. P36,000
d. P340,000 d. P42,000
Solution: 190,000+150,000=340,000 Solution: 350,000x12%=42,000

2. In the preceding problem, determine the 8. Compute the VAT on importation

amount subject to consumption tax if the a. P0
taxpayer is not engaged in business b. P12,000
a. P490,000 c. P18,000
b. P390,000 d. P32,000
c. P200,000 Solution: 100,000x12%=12,000
d. P190,000 Assuming the taxpayer is a non-VAT taxpayer
9. Compute the percentage tax
3. A VAT-registered taxpayer recorded the a. P0
following sales and purchases, exclusive of VAT, b. P6,000
during the month: c. P9, 000
Sales P300,000 d. P10,500
Purchases 200,000 Solution: 350,000x3%=10,500
What would be the output VAT?
a. P48,000 10. Compute the VAT on importation.
b. P36,000 a. P0
c. P24,000 b. P 3,000
d. P12,000 c. P12,000
Solution: 300,000x12%=36,000 d. P18,000
Solution: 100,00x12%=12,000
4. What is the input VAT?
a. P48,000 Sindangan Company, a VAT-registered taxpayer,
b. P36,000 purchased P400,000 worth of goods and sold
c. P24,000 the same for P800,000.
d. P12,000 11. Assuming that the business operation of
Solution: 200,000x12%=24,000 Sindangan Company is limited to Philippine
residents, what is the total business tax it will
5. What is the VAT payable? report on its sales?
a. P36,000 a. P 96,000
b. P 48,000
c. P 24,000
d. P0
Solution: 800,000x12%=96,000

12. Assuming that the purchases were imports

and the sales were exports, compute
respectively the business tax and total
consumption tax.
a. P 96,000; P144,000
b. P 24,000; P144,000
c. P 24,000; P72,000
d. P0; P48,000
Solution: P0 No business tax because of
destination principle; 400,000x12%= 48,000

CHAPTER 2: VALUE ADDED TAX ON

IMPORTATION

Multiple Choice - Part 1

1. Which is subject to value added tax?
a. Sheep
b. Sheep wool
c. Cut sheep meat
d. All of these

2. Which agricultural product is VAT exempt on

importation?
a. Charcoal
b. Wood
c. Lumber
d. Corn

3. Which importation is subject to VAT?

a. Importation from abroad
b. Purchase of goods from economic zones in
the Philippines
c. Both A and B
d. Either A or B

4. Which is not subject to VAT on importation?

a. Importation of goods for personal use
b. Importation of goods for business use
c. Purchase of goods from eco zone entities
d. Purchase of goods from other domestic
sellers

5. Which of the following is subject to the VAT

on importation when imported?