Questions and Answers
Sales receipts and other income derived from ____________ project or activity shall be subject to appropriate taxes imposed under the Tax Code, as amended.
The SIPP shall contain Exports of at least __________ of products and services.
Which of the following statements is correct?
PEZA registered enterprises shall be exempt from the payment of income taxes reckoned from the scheduled start of commercial operations, as follows: I.New projects with a pioneer status for six (6) years; II.New projects with a non-pioneer status for four (4) years; and III.PD 66 or the law creating the Export Processing Zone Authority; and IV.Expanding firms for three (3) years. Which are correct?
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The Tax incentives shall apply to registered operations of ____________ during the period of registration with PEZA.
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PEZA registered enterprises are subject to what percent of Special Tax on Gross Income?
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Refers to gross sales/revenues derived from business activity within the ecozone, net of sales discounts, returns and allowances minus cost of sales or direct costs but before any deductions are made for administrative expenses. What is this definition?
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Which of the following statements about income tax exemption extensions is correct?
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The following are included in the declared policies of the state except?
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EO 226 provides incentives to the following except?
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The following incentives are in addition to those provided under PD 66 and RA 7916 except?
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Income tax exemption will be extended for another year in each following case except?
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Incentives to BOI registered enterprises exclude the following except?
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Which of the following statements is correct?
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Which of the following statements is incorrect?
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Upon the effectivity of the plan or portions thereof, the President shall?
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Subject to publication requirements and criteria for investment priority determination, the BOI may, at any time, except?
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The SIPP shall be submitted to the _________ for the Approval and shall be valid for three (3) years from its issuance.
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COMPOSITION OF FIRB (____________)
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Where the investment capital is equal to _____________________ or below, the FIRB shall delegate the power to grant tax incentives to the concerned IPA.
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CERTIFICATE OF ENTITLEMENT TO TAX INCENTIVES (CETI), RMC 28-2022 dated ______________ provides that all RBEs shall apply for a Certificate of Entitlement to Tax Incentives (CETI).
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POWER OF THE PRESIDENT TO GRANT INCENTIVES (______________)
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INVESTMENT PRIOR TO THE EFFECTIVITY OF CREATE LAW (_______________)
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The deductible compensation expense for Bubbles Corporation is:
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Using the above information, except that 20% of the regular employees are persons with disability, the deductible compensation expense of the corporation is:
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What is the discount rate that will be enjoyed by the senior citizen/PWD staying in a hotel offering a 30% promotional discount?
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Which statements about Persons with Disabilities (PWDs) are correct?
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PWDs/Senior Citizens may avail the 20% discount and VAT exemption from the purchases of certain goods/services upon submission of the following proofs of entitlement thereto:
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Agricultural lands more than one hectare in area, half of which remains cultivated except agricultural land with perennial crops with at least 50 trees and those used for grazing, are considered idle land.
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Installation of additional facilities and/or equipment that will result in the increase of production capacity may include modernization and rehabilitation.
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A registered enterprise is defined as:
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Include all registered producer enterprises other than pioneer enterprises.
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An area of activity shall be accorded non-pioneer status if it may be determined categorically as falling in such classification using the Investment Priorities Plan (IPP).
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As a general policy, the basis for determining whether an area of economic activity may be considered pioneer or non-pioneer shall be Investment Priorities Plan prepared yearly by the Board of Investments.
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May be extended to an ECOZONE Export or Free Trade Enterprise only after the evaluation of their application for such status.
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Any income from unregistered operations are subject to the provisions of the Tax Code, as amended, such as:
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Which of the following is/are incorrect about the exclusion in national taxes referring to internal revenue taxes?
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Which of the following statements are correct?
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Which is not correct in Refund/Credit of Erroneously Paid 5% GIT?
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This was derived from business activity within the ecozone, net of sales discounts, sales returns and allowances minus cost of sales during a given taxable period.
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Which of the following statements are the Exemptions of PEZA Registered Enterprises from LGU Permits and Local Taxes, Licenses and Fees?
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Where does local tax authority emanate from?
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Which of the following is not a fundamental principle of local taxation?
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When may a Local Government Unit adjust local taxes?
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Where the National government elects to tax a particular area, it impliedly withholds from the local government the delegated power to tax the same field. This doctrine is known as?
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Which is not a characteristic of the real property tax?
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The presentation of a community tax certificate is necessary in the following situation, except:
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Zion Shoe’s head office is located in Ortigas, Pasig City. However, its manufacturing plant is in Taytay, Rizal. Where should the company pay the 2% Local Business Tax?
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Section 3 of PEZA Act provides the following purpose, intent, and objectives of the law, except:
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The ______ shall administer itself on economic relations with other entities within the country, or with foreign entities or enterprises.
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It contains establishments that cater both local and foreign investors to the Ecozones, such as hotels and resorts.
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Tracts of land developed for the use of industries are known as:
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The PEZA Board shall be composed of thirteen members and the ______ as Chairman.
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The CREATE LAW introduced a new title in the Tax Code, TITLE XIII, entitled:
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_________________, projects or activities currently registered with IPAs and enjoying incentives prior to the effectiveness of the Act.
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The Fiscal Incentives Review Board (FIRB) of the IPA under a delegated authority from the FIRB, shall grant the appropriate tax incentives provided in this title to registered business enterprises.
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After the expiration of Income Tax Holiday, an Export Enterprise may avail a tax rate equivalent to ____ percent effective July 1, 2020, based on gross income earned.
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Registered business enterprises may be granted enhanced deductions under __________ of the Tax Code, as amended.
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In enhanced deductions, depreciation allowance of the assets acquired for the entity’s production of goods and services includes additional ______________ for buildings; and additional ______________ for machineries and equipment.
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For export enterprises governed by special laws which do not provide for allocation, what is the distribution percentage for the 5% SCIT?
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Sale of goods and services to the following are subject to a discount of at least 20% and entitled to VAT exemption:
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Which of the following statements is correct regarding a senior citizen couple checking in at Shangri-La The Fort?
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What is the consumption of basic utilities (water, electricity, and telephone) by a Senior Citizens Center entitled to?
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What rate of discount is granted to senior citizens on their purchase of basic necessities and prime commodities?
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What is the applicable discount rate if the buyer is a PWD?
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How much is the maximum amount of purchase per calendar week of basic and prime commodities entitled to discount?
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How much should the group pay to the restaurant if two of the five diners are senior citizens?
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How much should Medusa pay for her bus fare?
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How much should Cardo pay for his airplane fare?
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What is the output tax due for the CLEA Musa Corporation's sale to Amando and Amanda?
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What is the total amount to be paid by the spouses?
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The Board of Investment is otherwise known as:
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Objectives of BOI includes the following except:
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Who is responsible for the development of investments in the Philippines?
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Which of the following incentives are granted to registered enterprises except:
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Which of the following statements is correct regarding new registered firms under the Board of Investments?
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Regarding Income Tax Holiday (ITH) for BOI registered enterprises, which is correct?
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Which of the following tax incentives is/are granted to BOI registered enterprises?
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Which additional incentives are granted to BOI registered enterprises?
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Which of the following statements is correct regarding Pioneer enterprises under EO 226?
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____ refers to the most recent list of the thirty poorest provinces of the Philippines at the time of application, as determined by the National Economic Development Authority (NEDA):
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EO 226 provides incentives to:
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Investment Priorities Plan includes and contains:
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Income tax exemption will be extended for another year in each following case except:
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____ refers to any of the credits against taxes and/or duties equal to those actually paid or would have been paid:
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Which of the following statements is incorrect?
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Incentives to BOI Registered Enterprises include:
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The following incentives are in addition to those provided under Presidential Decree 66 and RA 7916 except:
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Tax exemptions provided to BOI registered enterprises include the following except:
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Prior to the amendment of the Tax Code under CREATE Act, tax incentives were granted to registered business enterprises by the different government agencies, except:
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The implementing Rules and Regulations of Title XIII of the Tax Code as amended provides that the IRR shall cover or apply to:
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_________, as amended provides that the IPAs shall maintain their functions and powers as provided under the special laws governing them except to the extent modified by the provisions of this Code.
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INVESTMENT PROMOTION AGENCIES (IPAs) _____________ of the Tax Code, as amended:
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IPAs refer to government entities created by ______, executive order, decree or other issuance, charge of promoting investments, granting and administering tax and non-tax incentives, and overseeing the operations of the different economic zones and Freeport in accordance with their respective special laws.
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Refers to any individual, partnership, corporation, Philippine branch of a foreign corporation, or other entity organized and existing under Philippine laws and registered with an investment promotion agency.
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SUMMARY OF TAX AND DUTY INCENTIVES AND PERIOD OF AVAILMENTS (Sec. 294 and 296, NIRC), subject to the conditions and period of availment __________, respectively.
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(ITH) stands for INCOME TAX HOLIDAY.
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It is one of the fiscal incentives given to Registered Business Enterprises (RBEs) that complies with the conditions required by law.
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After expiration of Income Tax Holiday, an Export Enterprise may avail a tax rate equivalent to ___________ effective July 1, 2020, based on the gross income earned, in lieu of all national and local taxes.
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ENHANCED DEDUCTIONS (ED), Registered business enterprises may be granted enhanced deductions in addition to the allowable ordinary and necessary deduction under ________ of the Tax Code, as amended.
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In enhanced deductions, ______________ additional deduction on research and development expense incurred in the taxable year.
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For export enterprises governed by special laws which do not provide for allocation, the 5% SCIT based on the gross income shall be paid and remitted as follows: ___ to the National Government; and ___ which shall be directly remitted by a registered enterprise to the Treasurer’s office of the municipality or city where the enterprise is located.
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Study Notes
Preferential Taxation Overview
- Sale of goods and services to senior citizens and persons with disabilities receive a discount of at least 20% and are entitled to VAT exemption.
- Eligibility for discounts includes meeting identification requirements that verify senior citizen or PWD status.
Discounts for Seniors and PWDs
- Senior citizens and persons with disabilities can avail themselves of a 50% discount on basic necessities and prime commodities.
- Maximum purchase amount for discounts on these goods is P1,300 weekly; any unutilized amount cannot be carried over.
Transportation Discounts
- Discounts applicable for senior citizens on transportation fares:
- Public transport (like buses) often offers reduced fares.
- Example: A senior citizen might pay a reduced fare on a bus as compared to regular pricing.
Dining Discounts
- Senior citizens dining in restaurants entitled to discounts, calculated against the total bill, can save significantly—specific calculations based on total spend are crucial.
Taxation of Enterprises
- Registered enterprises under the Board of Investments (BOI) benefit from varied tax incentives, including:
- Income Tax Holiday (ITH) - periods: 6 years for pioneer projects, 4 years for non-pioneer projects.
- Incentives extended based on condition fulfillment, including capital equipment ratios and foreign exchange earnings.
Investment Priorities Plan (IPP)
- The IPP delineates specific activities and economic categories targeted for investment, crucial for guiding enterprises to comply with incentives.
- The IPP potentially includes utilities qualifying for incentives, supporting infrastructure based on economic needs.
Incentives and Exemptions
- BOI registered enterprises are generally exempt from certain taxes and granted additional deductions for labor and infrastructure investments.
- Pioneer enterprises represent those engaging in production activities not yet established in the Philippines.
Government Agencies and Functions
- The BOI and other investment promotion agencies (IPAs) oversee investment regulations and incentives.
- Regulations require consultation with government bodies, such as NEDA, to determine the eligibility for special incentives.
Certificate of Entitlement
- Enterprises need to apply for a Certificate of Entitlement to Tax Incentives before filing annual tax returns, consolidating their entitlement to incentives under the CREATE Law.
Tax Code Compliance
- Various incentives provided are detailed in the Tax Code, including both tax credits and deductions aimed at fostering economic growth and development.
- Compliance with sections of the Tax Code is mandatory for all registered entities to maintain their incentive status.
Fiscal Policies Implications
- Income tax exemptions can be extended based on meeting specific economic criteria.
- Persistent audits and evaluations by the FIRB ensure that businesses continue to adhere to the conditions of their granted incentives.
Calculation and Forms
- Precise calculations for sales receipts and tax obligations based on enterprise registration status form a crucial part of compliance.
- Knowledge of sections pertaining to incentives and tax filings facilitates better fiscal management for businesses.### Compensation and Deductions
- Total compensation for regular employees: P800,000
- Total compensation for senior citizen employees: P200,000 (additional P100,000 for those with salary above the poverty level)
- Deductible compensation expense total: P1,100,000, P1,115,000, P1,120,000, or P1,145,000 depending on classifications.
Persons with Disabilities (PWD) Compensation
- 20% of regular employees are PWD receiving compensation of P160,000.
- Possible deductible compensation with adjustments leads to options: P1,152,000, P1,155,000, P1,178,000, or P1,192,000.
Discounts for Senior Citizens and PWDs
- Senior citizens/PWDs entitled to a minimum 20% discount on purchases as specified under relevant laws.
- Senior citizens/PWDs entitled to VAT exemption similar to that of senior citizens.
Proofs for Discounts
- Acceptance of IDs issued by local government or relevant authorities necessary for discount claims.
- Passport and transport discount cards from the National Council for the Welfare of Disabled Persons also valid.
Idle Land Definition
- Agricultural lands over one hectare, half uncultivated, excluding specific perennial crop-dedicated lands and grazing areas.
- Urban land over 1,000 square meters, half unused, qualifies as idle land.
Facility Installation and Economic Classification
- Installation of new facilities increases production capacity, classified under modernization, rehabilitation, extension, or expansion.
Registered Enterprises Classification
- Registered enterprises can be categorized as pioneer or non-pioneer based on the Investment Priorities Plan (IPP).
- Non-pioneer status accorded based on specified parameters under IPP.
Local Tax Authority
- Authority for local taxation derives from legislative bodies but requires local government approval for implementation.
- Local tax adjustments can occur based on local government discretion, typically every two years.
Real Property Tax
- Real property tax characterized as direct, ad valorem but generally non-progressive.
- Presentation of community tax certificates necessary for various transactions except receiving private funds.
Income Tax Provisions
- PEZA registered enterprises are eligible for specific income tax holidays based on project status.
- Loss or evasion of tax incentives for PEZA registered enterprises can lead to prosecution or penalties.
Exemption Regulations
- PEZA-registered enterprises exempt from most local taxes while still responsible for real estate-related taxes.
- Registered entities may receive enhanced deductions and specific taxation percentages for transactions within ecozones.
Tax Incentives and Compliance
- Incentives granted are project-specific and subject to approval from the Fiscal Incentives Review Board (FIRB).
- Registered enterprises must comply with tax code provisions to maintain incentives and benefits.
Special Tax Considerations
- PEZA operates under specific taxation guidelines, varying by the type of registered enterprise (export, local).
- A 5% special tax on gross income applies to PEZA registered enterprises post-income tax holiday expiration.
Investments and Regulatory Framework
- STRATEGIC investment initiatives must both fulfill domestic needs and ensure robust economic growth.
- Failure to provide accurate information regarding investment status may result in regulatory penalties.
Enterprise Classification and Duties
- Registered versus non-registered enterprise classification crucial for determining tax liabilities and compliance requirements.
- Maintaining compliance with PEZA and other governmental tax regulations critical for operational viability.### Fiscal Incentives and Their Duration
- Fiscal incentives aim to stimulate enterprise establishment and aid initial operations.
- Incentives last for a maximum of 15 years from registration or start-up unless indicated otherwise.
Eligibility for EO 226 Incentives
- Incentives are available for enterprises registered with the Board of Investments (BOI).
- Not available for enterprises not located in Less Developed Areas (LDAs).
- Multinational companies (MNCs) can receive incentives for regional headquarters (RHQs) in the Philippines.
- Incentives extend to MNCs with regional warehouses supplying the Asia-Pacific region.
Additional Incentives Beyond Existing Laws
- Certain incentives are supplementary to those under Presidential Decree 66 and RA 7916.
- Goods brought into export processing zones are exempt from customs, internal revenue laws, and local taxes.
- Additional deductions are available for major infrastructure works.
- BOI registered enterprises can enjoy exemptions from local taxes and licenses, excluding real estate tax.
Income Tax Exemption Conditions
- Income tax exemptions can be extended annually based on specific criteria.
- Key conditions include meeting capital equipment to worker ratios and native raw materials usage.
- Minimum net foreign exchange earnings of $500,000 per year is required during the first three operational years.
Exclusions from BOI Incentives
- BOI registered enterprises enjoy various incentives but certain exclusions apply.
- Possible incentives include additional deductions from taxable income and local tax exemptions.
- Six years of income tax holiday (ITH) is guaranteed for projects in LDAs.
Specific Statements Regarding Registered Firms
- New firms under BOI may receive an income tax holiday for 8 years for pioneer firms and 6 years for non-pioneer firms.
- Income tax holiday extension can reach a maximum of 8 additional years upon meeting set conditions.
- PEZA registered enterprises have differing ITH rules compared to BOI registered entities.
Accuracy of Statements on BOI Registered Companies
- Correct assertion: BOI firms are subject to a 5% gross income tax in lieu of national and local taxes.
- After the ITH period, BOI firms are treated as ordinary corporations.
- BOI registered companies are subject to zero-rated VAT.
Implementation of Investment Plans by the President
- Upon plan effectiveness, the President can proclaim full or partial plans as effective.
- The President may return plans to the BOI for revisions and issue necessary operational directives.
- The President cannot adopt policies contrary to the approved plan.
BOI’s Authority on Investment Plans
- The BOI can make adjustments to the investment plan while respecting existing rights of qualified enterprises.
- Adjustments may include adding areas, altering investment area declarations, and even terminating preference statuses.
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Test your knowledge on preferential taxation with this multiple-choice quiz. Designed for BS Accountancy students at the Polytechnic University of the Philippines, this quiz covers key concepts and scenarios related to taxation. Perfect for exam preparation and understanding tax regulations.
