Income and Business Taxation

1. What is the "life-blood theory" in the inherent power of taxation? Explain.

2. Diane is a self-employed taxpayer who owns a salon business. She earned Php 1,000,000 gross receipts for the year 2022. She needs your advice on the payment of her taxes. What options are available to Diane? Compute and compare the taxes she will pay in both options.

3. Brex Corporation is a London-based and registered company. It is engaged in the business of making sportswear and sports materials. It has a branch in the Philippines and for the year 2021, it earned Php 3,000,000.00 gross income. The BIR collects 25% corporate income tax on the said gross earnings. Brex Corporation argues that they should be allowed to make allowable deductions first before BIR computes the 25% corporate income tax. Is Brex Corp correct? Explain.

4. Corp. ABA has just started its business operations in 2019 and it is only their second year since registering with the BIR. In 2021, Corp. ABA declared to the BIR that its Normal Corporate Income Tax is negative or zero after experiencing losses. The BIR computed their Minimum Corporate Income Tax at 2 % and the result was that Corp. ABA is liable for Php 100,000 MCIT. Can the BIR collect MCIT on Corp. ABA? Explain.

5. In 2020, Corp. CBA declared to the BIR that it is only liable for Php 10,000 as Normal Corporate Income Tax. Upon computation by the BIR based on Gross income, Corp. CBA was liable for Php 220,000 as Minimum Corporate Income Tax. As such, Corp CBA pays the tax. Since Corp CBA was required to pay an excess of Php 210,000 because of the MCIT, what can Corp CBA do in the next years to recover it? Explain.

6. Differentiate Input VAT versus Output VAT.

7. Corp X buys leather materials from Corp Y [VAT Registered] and pays Php 4,000,000 with Php 480,000 representing VAT. Corp X made bags from the leather and sold it to another business in the amount of Php 5,000,000 with Php 600,000 representing VAT. How much Value Added Tax should Corp X pay to the BIR? Explain

8. A Private School was creating and selling their own textbooks to their students. The sales for 2020 reached Php 3,000,000. Can the BIR collect Value Added Tax on such sales? Explain.

9. Corp LOL buys cloth materials from Corp W and paid the amount of Php 5,000,000 with Php 600,000 representing input VAT. Corp LOL made dresses and was able to sell it for Php 3,000,000 with Php 360,000 representing output VAT for the first quarter of 2020.

A. Is Corp LOL liable to pay any VAT to the BIR for the first quarter of 2020? Explain.

B. Let's say, Corp LOL was able to sell another group of dresses for Php 3,000,000 with Php 360,000 still representing output VAT for the second quarter of 2020. How much VAT should Corp LOL pay to the BIR for such quarter? Explain.

Reference:

https://docs.google.com/presentation/d/1d0LLjzRgUpBqIwfqw1gPxBAgCLSQJ7rb/edit?usp=sharing&ouid=110658428973880671743&rtpof=true&sd=true