This document provides the suggested answers to problems in Chapter 11 on percentage taxes from the textbook "Business and Transfer Taxation 5th Edition" by Valencia & Roxas. It addresses 51 problems testing understanding of percentage tax concepts and calculations. The problems cover various percentage tax rates applied to different types of businesses, income, and transactions. The answers follow tax regulations and explain reasoning for right and wrong answers.

1. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11–1
1. False – Non-VAT business is not allowed to have Input VAT.
2. False – expressly exempted from business tax.
3. True
4. True
5. False – 3% tax on gross receipts within. Gross receipts outside the Philippines is not subject to business tax
in the Philippines.
6. False – 2% percentage tax.
7. False – the VAT rate should be 12%.
8. False – expense of the service consumer
9. 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
1. False – minimum quarterly receipts or actual quarterly gross receipts whichever is higher.
2. True
3. False – grants from the government
4. False – Subject to VAT for being registered as VAT
5. False – exempt
6. True
7. False – amusement taxes ranging from 10% to 30%
8. True
9. False – Horse race’s cost of winning ticket is deductible
10. True
Problem 11 – 3
1. False – business tax.
2. True
3. False – 3% percentage tax.
4. True
5. False – the percentage tax forms part of seller’s expense
6. True
7. False – The ½ of 1% is applicable for sale of shares of stock in the stock exchange.
8. True
9. True
10. False – 7% percentage tax
11. False – within 20 days
Problem 11 – 4
1. B 8. A
2. C 9. D
3. B 10. D
4. C 11. D
5. B 12. C
6. D 13. B
7. C 14. C
Problem 11 – 5 C
Percentage tax (P40,000 x 3%) x 12 P14,400
Problem 11 – 6 A
Exempt
Problem 11 – 7 C
Business tax (P540,000 x 3%) P16,200
Note: The actual sale has not yet reached the VAT threshold exceeding P1,500,000 in a year.

2. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 8 A
Percentage tax (P28,000/112%) x 3% P 750
VAT (P28,000/9.3333) 3,000
Surcharge (P3,000 x 50%) 1,500
Business tax P 5,250
Problem 11 – 9 C
Percentage tax payable (P500,000 x 3%) P 15,000
Problem 11 – 10 C
Percentage tax due (P54,000 + P18,000 + P36,000) x 3% P 3,240
Problem 11 – 11 D
Percentage tax (P65,700 x 3%) x 5 P9,855
Should be P9,855 instead of P9,859.
Problem 11 – 12 D
Taxi (P98,600 x 3%) x 10 P29,580
Bus (P1,000,000 x 3%) 30,000
Common carrier tax due P59,580
Problem 11 – 13 D
Total gross receipts (P1,000,000 + P6,000,000) P7,000,000
Multiplied by applicable business tax rate 12%
Total business tax 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%) P 300,000
VAT (P6,000,000 + P1,000,000) x 12% 840,000
Average business tax in a year P1,140,000
Divided by number of quarter in a year 4
Estimated average business tax per quarter 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%) P 30,000
In the Philippines for trip – Manila to USA (P1,100,000 x 3%) 33,000
Philippine business tax P 63,000
Problem 11 – 17 C
Percentage tax – water franchise (P1,000,000 x 2%) P 20,000
Problem 11 – 18 B
Percentage tax – water franchise (P2,000,000 x 2%) P 40,000
Percentage tax – radio franchise (P10,000,000 x 3%) 300,000
Total percentage tax P 340,000
Problem 11 – 19 B
Percentage tax (P5,000 + P2,000) x 10% P 700
Problem 11 – 20 A
Exempt

3. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 21 D
Service charge (P75,000/10%) P 750,000
Percentage tax (P750,000 x 10%) 75,000
Total collection P 825,000
Problem 11 – 22 D
P - 0 -
Problem 11 – 23 D
Percentage tax (P200,000 x 10%) P 20,000
Problem 11 – 24 D
Amusement tax (P500,000 + P200,000 + P100,000) x 18% P 144,000
Problem 11 – 25
1. A
Percentage tax (P2,000,000 + P1,000,000) x 10% P300,000
2. 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 - 0 -. 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% P 48,000
400,000/1,150,000 = 34.5% more than 33 1/3% = 1% percentage tax.
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 5 years (P400,000 x 1%) P 4,000
Leasehold income (P300,000 x 7%) 21,000
Total gross receipt tax 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 5 years (P600,000 x 5%) P 30,000
Royalty income (P300,000 x 7%) 21,000
Gain from sale of derivatives (P200,000 x 7%) 14,000
Total gross receipt tax P 65,000
Note: The net trading loss for 2005 is not deductible from trading gain of 2006.

4. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
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) P5,270,000
Multiplied by applicable business tax rate - VAT 12%
Business tax liability 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) P197,200
Multiplied by percentage tax rate 3%
Percentage tax payable – 2nd
quarter (answer) P 5,916
The total actual gross receipts and related percentage taxes from April to June (2nd
quarter) were lower than the
minimum, hence not applicable.
Problem 11 – 38
Tax units Actual Minimum
1 100,000 98,600
2 80,000 98,600
3 95,000 98,600
4 90,000 98,600
5 105,000 98,600
Total amount = higher amount 470,000 493,000
Multiplied by percentage tax 3%
Percentage tax 14,790
Note: The higher of the aggregate/total amount of the actual gross receipts or minimum amount is subject to
percentage tax.
Problem 11 – 39
Gross receipts (P2,500,000 + P5,000,000 + P3,000,000 + P1,500,000) P12,000,000
Multiplied by common carrier’s (by air /sea) VAT rate 12%
Business tax P 1,440,000
Notes:
1. 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.
2. 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) P 500,000
Multiplied by applicable business tax rate 12%
Business tax for the quarter 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 P50,000,000
Multiplied by applicable franchise tax rate – VAT 12%
Franchise tax P 6,000,000

5. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 42
Actual gross receipts from business operations
First quarter (P3,000,000 + P4,000,000) P7,000,000
Multiplied by applicable business tax rate 12%
Franchise tax due – first quarter P 840,000
Note: During the taxable year, its gross receipts exceeded P10,000,000.
Problem 11 – 43
Gross receipts P 500,000
Multiplied by percentage tax rate collected 10%
Percentage tax to be remitted P 50,000
Problem 11 – 44
Total gross receipts (P600,000 + P400,000) P1,000,000
Multiplied by percentage tax for professional basketball organization 15%
Percentage tax P 150,000
Problem 11 – 45
Total gross receipts (P800,000 + P300,000 + P500,000 + P50,000) P1,650,000
Multiplied by applicable business tax rate for cockpits 18%
Total business tax P 297,000
Problem 11 – 46
Income tax on cockfighting winnings (P500,000 x 20%) P 100,000
Percentage tax on horseracing winnings (P800,000 x 10%) 80,000
Income tax on horseracing winnings (P800,000 x 20%) 160,000
Total tax on winnings P 340,000
Problem 11 – 47
1. Percentage tax (P0.50 x 1,000,000) x 0.005 P 2,500
2. August 20, 2005 = last day of remittance without penalty.
Problem 11 – 48
Gross receipts tax on:
Rent income (P30,000 x 7%) P 2,100
Royalty income (P20,000 x 7%) 1,400
Interest income (P50,000 + P20,000 + P10,000) x 5% 4,000
Total percentage tax P 7,500
Problem 11 – 49
1.
Year Remaining maturity
Amount
of interest, etc.
Applicable
tax rate Gross receipt tax
2005 9 P 200,000 1% P 2,000
2006 8 200,000 1% 2,000
2007 7 200,000 1% 2,000
2008 6 200,000 1% 2,000
2009 5 200,000 5% 10,000
Total gross receipt tax paid P18,000
2.
Year Remaining maturity
Amount
of interest, etc.
Applicable
tax rate Gross receipt tax
2005 4 P 200,000 5% P10,000
2006 3 200,000 5% 10,000
2007 2 200,000 5% 10,000
2008 1 200,000 5% 10,000
2009 Less than 1 year 200,000 5% 10,000
Total gross receipt tax as recomputed P50,000
Less: Gross receipt tax previously paid 18,000
Gross receipt tax still due P32,000

6. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 50
Franchise Non-franchise
Beginning receivables P 400,000 P - 0 -
Add: Revenues 3,000,000 1,800,000
Total P3,400,000 P1,800,000
Less: Ending receivables 100,000 120,000
Gross receipts P3,300,000 P1,680,000
1. Telephone services 10%
P330,000
10%
P168,000
2. Water franchise 2%
P 66,000
3%
P 50,400
3. 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: Current Previous
Revenues
Accounts receivable
Advances
Gross receipts
P 500,000
300,000
200,000
P1,000,000
P300,000
100,000
.
P400,000
Computation of percentage taxes:
1. Common carrier of passengers (assume land transport) 3%
P 30,000
3%
P 12,000
2. Race track 30%
P300,000
30%
P120,000
3. Boxing exhibition 10%
P100,000
10%
P 40,000
4. Water utilities 2%
P 20,000
2%
P 8,000
5. Life insurance 5%
P 50,000
5%
P 20,000
6. Agents of foreign insurance companies 10%
P100,000
10%
P 40,000
7. Overseas dispatch 10%
P100,000
10%
P 40,000

7. BUSINESS AND TRANSFER TAXATION 5th Edition (BY: VALENCIA & ROXAS)
SUGGESTED ANSWERS
Chapter 11: PERCENTAGE TAXES
Problem 11 – 50
Franchise Non-franchise
Beginning receivables P 400,000 P - 0 -
Add: Revenues 3,000,000 1,800,000
Total P3,400,000 P1,800,000
Less: Ending receivables 100,000 120,000
Gross receipts P3,300,000 P1,680,000
1. Telephone services 10%
P330,000
10%
P168,000
2. Water franchise 2%
P 66,000
3%
P 50,400
3. 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: Current Previous
Revenues
Accounts receivable
Advances
Gross receipts
P 500,000
300,000
200,000
P1,000,000
P300,000
100,000
.
P400,000
Computation of percentage taxes:
1. Common carrier of passengers (assume land transport) 3%
P 30,000
3%
P 12,000
2. Race track 30%
P300,000
30%
P120,000
3. Boxing exhibition 10%
P100,000
10%
P 40,000
4. Water utilities 2%
P 20,000
2%
P 8,000
5. Life insurance 5%
P 50,000
5%
P 20,000
6. Agents of foreign insurance companies 10%
P100,000
10%
P 40,000
7. Overseas dispatch 10%
P100,000
10%
P 40,000