1. Who is considered an individual income taxpayer?

A. Natural persons
B. Corporations
C. Estates
D. Trusts

**Answer:** A
**Explanation:** Individual income taxpayers are natural persons, which means individual human
beings.

2. When is a non-resident citizen treated as such for tax purposes?

A. When working abroad

B. When physically present in the Philippines
C. When leaving the Philippines permanently
D. When residing abroad temporarily

**Answer:** C
**Explanation:** A non-resident citizen is treated as such when they leave the Philippines
permanently, meaning they establish their residence abroad.

3. Are Filipino citizens working abroad as overseas contract workers (OCWs) taxable on their income
earned abroad?

A. Yes, they are always taxable.

B. Yes, but only on income earned within the Philippines.
C. No, they are exempt from all taxes.
D. Yes, but only on their income earned abroad.

**Answer:** B
**Explanation:** Filipino citizens working abroad as overseas contract workers are generally taxable
on their income earned within the Philippines, but their income earned abroad may be exempt from
tax depending on certain conditions.

**TAX ON NON-RESIDENT ALIEN (ETB)**

4. Who is considered a Non-Resident Alien Engaged in Trade or Business (NRA ETB), and how are
they taxed?

A. Any alien residing in the Philippines.

B. Alien individuals who occasionally do business in the Philippines.
C. Alien individuals engaged in trade or business in the Philippines.
D. Alien individuals temporarily visiting the Philippines.

**Answer:** C
**Explanation:** Non-Resident Aliens Engaged in Trade or Business (NRA ETB) are alien
individuals who are engaged in trade or business within the Philippines and are subject to specific tax
rules.
**TAX ON OCWs**

5. Who qualifies as Overseas Contract Workers (OCWs), and what are the requirements for seafarers
to be considered OCWs?

A. Filipino citizens working overseas.

B. Filipino citizens employed abroad and certified by POEA.
C. Any Filipino citizen working abroad.
D. Filipino citizens working at sea.

**Answer:** B
**Explanation:** Overseas Contract Workers (OCWs) are Filipino citizens employed abroad and
certified by the Philippine Overseas Employment Administration (POEA). This certification is
important for them to be considered OCWs for tax purposes.

**KINDS OF INCOME**

6. What is compensation income, and what are some examples of it?

A. Income from business activities.

B. Income from the practice of a profession.
C. Income from personal services in an employer-employee relationship.
D. Income from investments.

**Answer:** C
**Explanation:** Compensation income is income from personal services rendered by an individual
in an employer-employee relationship. Examples include salaries and wages.

7. What is self-employment or professional income, and who are classified as self-employed or

professional individuals?

A. Income from rental properties.

B. Income from investments.
C. Income from businesses.
D. Income earned from a sole proprietorship business or the practice of a profession.

**Answer:** D
**Explanation:** Self-employment or professional income is income earned from a sole
proprietorship business or the practice of a profession. It is typically associated with self-employed
individuals.

8. Define passive income and provide examples.

A. Income earned actively from employment.

B. Income earned without actively working for it.
C. Income from professional services.
D. Income from selling products.

**Answer:** B
**Explanation:** Passive income is income earned without actively working for it. Examples include
interest, dividends, and rental income.
**PASSIVE INCOME**

9. What is the tax rate for interest income from a Philippine peso bank deposit, and how is it affected
by the holding period?

A. 10% final tax; higher for shorter holding periods.

B. 20% final tax; lower for longer holding periods.
C. 10% final tax; fixed rate regardless of the holding period.
D. 5% final tax; higher for longer holding periods.

**Answer:** A
**Explanation:** Interest income from a Philippine peso bank deposit is subject to a 10% final tax.
The tax rate is the same regardless of the holding period.

10. Are nonresident citizens and nonresident aliens subject to tax on interest income under the
expanded foreign currency deposit (EFCD) system?

A. Yes, they are subject to regular tax rates.

B. No, they are exempt from all taxes.
C. Yes, but only on interest income exceeding a certain threshold.
D. No, they are exempt from tax on interest income.

**Answer:** D
**Explanation:** Nonresident citizens and nonresident aliens are exempt from tax on interest
income under the expanded foreign currency deposit (EFCD) system.

**CASH AND/OR PROPERTY DIVIDENDS**

11. Who is liable for the 10% dividend tax on cash and/or property dividends?

A. All individuals, including non-resident aliens.

B. Only corporations.
C. Resident citizens only.
D. Any person or entity receiving dividends from domestic corporations.

**Answer:** D
**Explanation:** Any person or entity receiving dividends from domestic corporations is liable for
the 10% dividend tax.

**THE 8% INCOME TAX OPTION**

12. Under what conditions can an individual taxpayer avail of the 8% income tax option, and how
does it work?

A. Any individual taxpayer can always choose this option.

B. Only those with annual gross sales exceeding P3 million.
C. Individuals below 21 years old.
D. Individuals with no other income sources.

**Answer:** B
**Explanation:** The 8% income tax option is available to individuals, but it's only applicable to
those with annual gross sales or receipts not exceeding P3 million.
**SCHEDULE OF INCOME TAX RATES**

13. What are the income tax rates for different income brackets for taxable year 2018 to 2022 and
taxable year 2023?

A. Taxable Year 2018-2022: 20% for all income levels.

Taxable Year 2023: Progressive rates based on income.

B. Taxable Year 2018-2022: Progressive rates based on income.

Taxable Year 2023: 15% for all income levels.

C. Taxable Year 2018-2022: 10% for all income levels.

Taxable Year 2023: 25% for all income levels.

D. Taxable Year 2018-2022: Progressive rates based on income.

Taxable Year 2023: Progressive rates based on income.

**Answer:** D
**Explanation:** For taxable years 2018 to 2022, income tax rates are progressive based on
income. However, for taxable year 2023, the tax rates become progressive

based on income.

**PERSONAL AND ADDITIONAL EXEMPTIONS**

14. What is the amount of personal and additional exemptions for individual taxpayers for taxable
year 2022?

A. Personal: P50,000; Additional: P25,000 for each dependent child.

B. Personal: P25,000; Additional: P50,000 for each dependent child.
C. Personal: P75,000; Additional: P50,000 for each dependent child.
D. Personal: P50,000; Additional: P50,000 for each dependent child.

**Answer:** C
**Explanation:** For taxable year 2022, personal exemption is P50,000, and additional exemption
for each dependent child is P25,000.

**TAX ON INDIVIDUALS EARNING PURELY COMPENSATION INCOME**

15. What is the tax rate for individuals earning purely compensation income, and is there any income
threshold for the application of this tax rate?

A. 5% fixed tax rate regardless of income level.

B. Progressive tax rates based on income, with thresholds.
C. 10% fixed tax rate regardless of income level.
D. 15% fixed tax rate regardless of income level.

**Answer:** B
**Explanation:** The tax rate for individuals earning purely compensation income is progressive,
with different rates based on income levels and thresholds.
**TAX ON CORPORATIONS**

16. What is the tax rate for domestic corporations and resident foreign corporations in the
Philippines?

A. Domestic corporations: 25%; Resident foreign corporations: 25%.

B. Domestic corporations: 20%; Resident foreign corporations: 30%.
C. Domestic corporations: 30%; Resident foreign corporations: 25%.
D. Domestic corporations: 35%; Resident foreign corporations: 30%.

**Answer:** A
**Explanation:** The tax rate for domestic corporations and resident foreign corporations in the
Philippines is 25%.

**Tax on social media influencers**

17. What is the tax rate for social media influencers earning income from endorsements, sponsored
content, and other online activities, and what is the tax base for their income?

A. Tax rate of 10% and tax base equal to their actual earnings.
B. Tax rate of 5% and tax base equal to the grossed-up monetary value of their earnings.
C. Tax rate of 15% and tax base equal to their actual earnings.
D. Tax rate of 20% and tax base equal to the actual value of their earnings.

**Answer:** D
**Explanation:** Social media influencers are taxed at a rate of 20%, and the tax base is equal to
the actual value of their earnings.

**FRINGE BENEFITS TAX (FBT)**

18. Are social media influencers liable for income tax, and are they exempt under any circumstances?

A. Social media influencers are exempt from income tax.

B. Social media influencers are not liable for income tax.
C. Social media influencers are liable for income tax unless exempted under the law.
D. Social media influencers are liable for a lower tax rate than other individuals.

**Answer:** C
**Explanation:** Social media influencers are liable for income tax, but they may be exempted
under certain circumstances as provided by the law.

**FRINGE BENEFITS TAX (FBT)**

19. What is a fringe benefit, and which types of benefits are exempt from FBT?

A. Fringe benefits are all benefits provided by an employer.

B. Fringe benefits are any goods, services, or benefits provided by an employer to an employee.
C. Fringe benefits are only financial benefits.
D. Fringe benefits include only those exempted from income tax under the law.

**Answer:** B
 **Explanation:** Fringe benefits are any goods, services, or benefits provided by an employer to an
employee. They are not limited to financial benefits.

20. What is the tax rate and tax base for fringe benefits subject to FBT?

A. Tax rate of 20% and tax base equal to the actual value of the benefits.
B. Tax rate of 35% and tax base equal to the grossed-up monetary value of the benefits.
C. Tax rate of 15% and tax base equal to the cost incurred by the employer.
D. Tax rate of 10% and tax base equal to the fair market value of the benefits.

**Answer:** B
**Explanation:** The tax rate for fringe benefits subject to FBT is 35%, and the tax base is equal to
the grossed-up monetary value of the benefits.

**HOUSING BENEFITS**

21. What types of housing benefits are exempt from FBT?

A. All housing benefits are exempt from FBT.

B. Housing benefits of military officials and housing units near business premises.
C. Housing benefits of employees staying for less than 3 months.
D. Only housing benefits located within the city.

**Answer:** B
**Explanation:** Housing benefits of military officials and housing units near business premises are
exempt from FBT.

**MOTOR VEHICLE OF ANY KIND**

22. Explain how the value of a motor vehicle fringe benefit is determined in different scenarios.

A. The value is always based on the acquisition cost.

B. The value is based on the employer's choice.
C. The value depends on the type of vehicle.
D. The value varies based on specific circumstances.

**Answer:** D
**Explanation:** The value of a motor vehicle fringe benefit can vary based on specific
circumstances, and it's not solely based on acquisition cost.

**EXPENSE ACCOUNT**

23. Which expenses of the employee are subject to FBT, and what personal expenses are not treated
as fringe benefits?

A. All employee expenses are subject to FBT.

B. Only expenses incurred for work-related purposes are subject to FBT.
C. Expenses paid or reimbursed by the employer, along with personal expenses, are subject to
FBT.
D. Personal expenses duly receipted in the name of the employer are not treated as fringe
benefits.
 **Answer:** C
**Explanation:** Expenses paid or reimbursed by the employer, along with certain personal
expenses, are subject to FBT.

**HOUSEHOLD EXPENSES**

24. What household expenses of the employee are borne by the employer and treated as taxable
fringe benefits?

A. Household expenses are not taxable fringe benefits.

B. Only personal driver expenses are considered taxable.
C. Household expenses include salaries of household help and personal expenses.
D. Household expenses are always borne by the employee.

**Answer:** C
**Explanation:** Household expenses that include salaries of household help and certain personal
expenses are considered taxable fringe benefits when borne by the employer.

**INTEREST ON LOAN AT LESS THAN MARKET RATE**

25. What is the tax treatment of loans given to employees by their employer at an interest rate lower
than the market rate?

A. The loan interest rate doesn't affect taxation.

B. The entire loan is subject to income tax.
C. The difference between the assumed interest rate and 12% is treated as a taxable fringe
benefit.
D. Only the interest on the loan is taxable.

**Answer:** C
**Explanation:** When an employer

**Section: GROSS INCOME (includes income derived from whatever source)**

1. What is the purpose of the tax informer's reward?

a. To provide additional income to informers.

b. To encourage individuals to report tax violations.
c. To fund government programs.
d. To compensate tax officials.

**Answer: b. To encourage individuals to report tax violations.**

Explanation: The tax informer's reward is designed to incentivize individuals to report violations of
the internal revenue law.

2. Who is not entitled to receive the tax informer's reward?

a. Anyone who reports a violation.

b. Internal revenue officials or employees.
c. Other public officials or employees.
 d. Relatives within the 6th degree of consanguinity.

**Answer: b. Internal revenue officials or employees, or c. Other public officials or employees, or d.

Relatives within the 6th degree of consanguinity.**

Explanation: The reward is not provided to internal revenue officials or employees, other public
officials or employees, or their relatives within the 6th degree of consanguinity.

3. What is the percentage of the tax informer's reward, and what is the maximum amount it can
reach?

a. 5%, with no maximum limit.

b. 10%, with no maximum limit.
c. 15%, with a maximum of P1 million.
d. 20%, with a maximum of P500,000.

**Answer: b. 10%, but not exceeding P1 million of the revenues, surcharges, or fees recovered
and/or fine or penalty imposed and collected.**

Explanation: The reward is 10% of the recovered amounts, but it cannot exceed P1 million.

4. Is the tax informer's reward subject to withholding tax?

a. Yes, subject to a 5% withholding tax.

b. Yes, subject to a 10% withholding tax.
c. No, it is not subject to withholding tax.
d. Yes, subject to a 15% withholding tax.

**Answer: b. Yes, subject to a final withholding tax at a rate of 10% on rewards collected.**

Explanation: The reward is subject to a final withholding tax at a rate of 10% on rewards collected.

**Section: Recovery of Bad Debts previously deducted (Tax Benefit Rule)**

5. When is a bad debt taxable?

a. It is always taxable.
b. It is not taxable.
c. It is taxable if the deduction in prior years resulted in a tax benefit.
d. It is taxable if the deduction did not result in a tax benefit.

**Answer: c. It is taxable if the deduction in prior years resulted in a tax benefit.**

Explanation: A bad debt is taxable if the deduction in prior years resulted in a tax benefit, such as a
reduction in tax liability.

**Section: Receipt of tax refund (Refund of taxes previously paid)**

6. When is the tax benefit rule applied?

a. When receiving a tax refund.

b. When applying for tax deductions.
 c. When paying taxes.
d. When filing for tax exemptions.

**Answer: a. When receiving a tax refund.**

Explanation: The tax benefit rule is applied when receiving a tax refund.

**Section: Receipt of Dividends**

7. What is the tax treatment of cash dividends received by a resident foreign individual?

a. Not taxable.
b. Subject to a 10% withholding tax.
c. Subject to a 25% withholding tax.
d. Exempt from tax if there is a tax sparing credit.

**Answer: b. Subject to a 10% withholding tax.**

Explanation: Cash dividends received by a resident foreign individual are subject to a 10%
withholding tax.

8. Under what circumstances are dividends received by a domestic corporation from a foreign source
exempt from tax?

a. Dividends must be reinvested in the Philippines within the same year.

b. Dividends must be used for capital expenditures only.
c. The domestic corporation must hold at least 10% of the outstanding shares of the foreign
corporation.
d. The domestic corporation must hold at least 20% of the outstanding shares of the foreign
corporation for at least two years.

**Answer: d. The domestic corporation must hold at least 20% of the outstanding shares of the
foreign corporation and has held the shareholdings uninterrupted for a minimum of two years at the
time of the dividends declaration.**

Explanation: To qualify for tax exemption, the domestic corporation must meet the criteria
mentioned, including holding at least 20% of the outstanding shares of the foreign corporation for at
least two years.

**Section: Receipt of Dividends (continued)**

9. When is a stock dividend taxable?

a. Stock dividends are always taxable.

b. Stock dividends are not taxable for stockholders.
c. Stock dividends are taxable when there is a change in stockholder's equity.
d. Stock dividends are taxable if received by an individual.

**Answer: c. Stock dividends are taxable when there is a change in stockholder's equity. If taxable,
the measure of income is the FMV of the stock received.**
 Explanation: Stock dividends are taxable when there is a change in stockholder's equity. If taxable,
the measure of income is the fair market value (FMV) of the stock received.

**Section: Prizes and Awards**

10. Are all prizes and awards taxable?

a. Yes, all prizes and awards are taxable.

b. No, only cash prizes are taxable.
c. Prizes and awards are taxable unless given for charitable, educational, scientific, artistic,
religious, literary, or civic achievements.
d. Only international prizes are taxable.

**Answer: c. Prizes and awards are taxable unless given for charitable, educational, scientific,
artistic, religious, literary, or civic achievements if certain conditions are met.**

Explanation: Prizes and awards are generally taxable unless they are given primarily in recognition
of specific achievements and meet certain criteria, as listed in the explanation.

**Section: Income from Lease Agreements**

11. What should be reported as income by the lessor from lease agreements?

a. Only rent.
b. Rent and expenses.
c. Rent, obligations of the lessor to third persons, and advance rental.
d. Rent, taxes assumed and paid by the lessee, and depreciation.

**Answer: c. Rent, obligations of the lessor to third persons (such as taxes assumed and paid by
the lessee), and advance rental should be reported as income by the lessor.**

Explanation: The lessor should report not only rent but also obligations and advance rental as
income from lease agreements.

12. How should the lessor report income from leasehold improvements?

a. Report the full value of improvements in the year of completion.

b. Spread the income over the remaining term of the lease.
c. Deduct expenses for improvements in the year of completion.
d. Deduct expenses for improvements over the life of the leasehold improvement.

**Answer: b. The lessor may at his option report the

income from leasehold improvements either as the full value of improvements in the year of
completion or spread out the income over the remaining term of the lease.**

Explanation: The lessor has the option to report income from leasehold improvements as the full
value in the year of completion or spread it over the remaining term of the lease.

**Section: Minimum Corporate Income Tax (MCIT)**

13. When is the MCIT payable?

 a. It is payable on the 1st year of a corporation's operations.
b. It is payable when the corporation is profitable.
c. It is payable when the corporation has been in operation for at least 4 years.
d. It is payable when the MCIT is higher than the Normal Income Tax.

**Answer: d. The MCIT is payable when the MCIT is higher than the Normal Income Tax.**

Explanation: The MCIT is payable when it is higher than the Normal Income Tax, and this typically
occurs after the corporation has been in operation for at least four years.

Please note that this mock exam covers various topics related to taxation and income reporting. The
correct answers and explanations are provided for your reference.
Certainly! Here are 20 multiple-choice questions with answer choices and explanations based on the
provided information:

**Exclusions from Gross Income (Exempt from Income Tax):**

**Question 1:** Proceeds of life insurance policies paid to beneficiaries upon the death of the insured
are generally exempt from income tax. However, when the policy is sold or assigned, the proceeds
become taxable. How are the proceeds calculated in this case?

a. Proceeds are fully exempt.

b. Proceeds minus the capital invested by the assignee/claimant are taxable.
c. Proceeds minus 10% are taxable.
d. Proceeds minus 5% are taxable.

**Answer:** b. Proceeds minus the capital invested by the assignee/claimant are taxable.

**Explanation:** When a life insurance policy is sold or assigned, the taxable portion of the proceeds
is calculated by deducting the capital invested by the assignee or claimant from the total proceeds.

**Question 2:** Which of the following is NOT an exclusion from gross income?

a. Life insurance proceeds.

b. Amount received as return of premium.
c. Gifts, bequests, and devises.
d. Interest income from bank deposits.

**Answer:** d. Interest income from bank deposits.

**Explanation:** Interest income from bank deposits is generally not excluded from gross income and
is subject to taxation.

**Question 3:** What is the taxation status of gifts, bequests, and devises in the Philippines?

a. Exempt from income tax.

b. Partially taxed.
c. Taxed at a flat rate.
d. Taxed at the donor's rate.

**Answer:** a. Exempt from income tax.

**Explanation:** Gifts, bequests, and devises are generally exempt from income tax, meaning they
are not subject to taxation.

**Question 4:** What happens to the income from property acquired as a gift or bequest?

a. The income is included in gross income and is taxable.

b. The income is fully exempt.
c. The income is partially taxed.
d. The income is subject to a flat tax rate.

**Answer:** a. The income is included in gross income and is taxable.

**Explanation:** While the property itself received as a gift or bequest may be exempt from tax, the
income generated from such property is included in gross income and is taxable.

**Question 5:** Under what conditions is compensation for personal injuries or sickness exempt from
income tax?

a. All compensation is taxable.

b. If damages compensate for damage to property, they are not taxable.
c. If damages represent compensation for loss of profits or income, they are not taxable.
d. All compensation for personal injuries or sickness is exempt.

**Answer:** b. If damages compensate for damage to property, they are not taxable.

**Explanation:** Compensation for personal injuries or sickness is generally exempt from income tax.
However, damages that compensate for damage to property are not taxable.

**Income Tax on Corporations:**

**Question 6:** Which of the following organizations is NOT exempt from income tax?

a. Nonstock and nonprofit educational institution.

b. Civic league.
c. Social Security System.
d. Business league.

**Answer:** d. Business league.

**Explanation:** Business leagues are generally not organized for profit, but they are not
automatically exempt from income tax.

**Question 7:** How is the income tax rate determined for a domestic corporation in the Philippines?

a. 20% of taxable income.

b. 10% of taxable income.
c. 25% of taxable income for 2020 and onwards.
d. 30% of taxable income.

**Answer:** c. 25% of taxable income for 2020 and onwards.

**Explanation:** The tax rate for a domestic corporation is 25% of its taxable income for the years
starting in 2020.

**Question 8:** What is the tax rate for a resident foreign corporation in the Philippines?

a. 20% of taxable income.

b. 10% of taxable income.
c. 25% of taxable income for 2020 and onwards.
d. 30% of taxable income.

**Answer:** c. 25% of taxable income for 2020 and onwards.

**Explanation:** The tax rate for a resident foreign corporation is 25% of its taxable income for the
years starting in 2020.

**Question 9:** Nonresident foreign corporations not engaged in trade or business in the Philippines
are taxed on what basis?

a. 20% of gross income.

b. 25% of taxable income.
c. 30% of taxable income.
d. 25% of gross income.

**Answer:** d. 20% of gross income.

**Explanation:** Nonresident foreign corporations not engaged in trade or business in the Philippines
are taxed at a rate of 20% of their gross income.

**Question 10:** What is the tax rate for international carriers in the Philippines?

a. 5% of gross income.
b. 2.5% of gross Philippine billings.
c. 20% of gross revenue.
d. 10% of gross income.

**Answer:** b. 2.5% of gross Philippine billings.

**Explanation:** International carriers are subject to a tax rate of 2.5% on their gross Philippine
billings.

**Question 11:** Which type of corporation is subject to a 15% final withholding tax on the capital gain
from the sale of shares of stock not traded on the stock exchange?

a. Domestic corporation.
b. Resident foreign corporation.
c. Nonresident foreign corporation.
d. Special corporation.

**Answer:** a. Domestic corporation.

**Explanation:** Domestic corporations are subject to a 15% final withholding tax on capital gains
from the sale of shares of stock not traded on the stock exchange.

**Question 12:** Which of the following is a special tax rate for domestic corporations with taxable
income not exceeding P5 million?

a. 15%.
b. 30%.
c. 1% (for 2020-2023).
d. 10%.

**Answer:** c. 1% (for 2020-2023).

**Explanation:** Domestic corporations with taxable income not exceeding P5 million have a special
tax rate of 1% for the years 2020 to 2023.

**Question 13:** For tax purposes, what condition must be met for a proprietary educational institution
or hospital to qualify for the 1% tax rate (for 2020-2023)?

a. Predominance of gross income from unrelated trade or business.

b. Predominance of tax-exempt income.
c. Predominance of foreign income.
d. Predominance of investment income.

**Answer:** a. Predominance of gross income from unrelated trade or business.

**Explanation:** To qualify for the 1% tax rate for the years 2020 to 2023, proprietary educational
institutions or hospitals must have a predominance of gross income from unrelated trade or business.

**Question 14:** What tax rate applies to branch profit remittances for Philippine branches not
registered with specific economic zones?

a. 5%.
b. 10%.
c. 15%.
d. 20%.

**Answer:** b. 10%.

**Explanation:** Branch profit remittances for Philippine branches not registered with specific
economic zones are taxed at a rate of 10%.

**Question 15:** Excluding general professional partnerships, what is

the classification of a joint venture or consortium formed for the purpose of undertaking construction
projects or engaging in energy operations under a service contract with the government?

a. Domestic corporation.
b. Resident foreign corporation.
c. Special corporation.
d. Nonresident foreign corporation.

**Answer:** c. Special corporation.

**Explanation:** Joint ventures or consortia formed for construction projects or energy operations are
classified as special corporations.

**Question 16:** What type of income from various sources is subject to a 20% final withholding tax
for passive income received by domestic and resident foreign corporations?

a. Interest on Philippine currency bank deposit.

b. Rental income.
c. Dividend income.
d. Salary income.
**Answer:** a. Interest on Philippine currency bank deposit.

**Explanation:** Interest on Philippine currency bank deposits is subject to a 20% final withholding tax
for domestic and resident foreign corporations.

**Question 17:** Which organization's income is exempt from tax on corporations if it is organized
primarily for religious, charitable, scientific, athletic, or cultural purposes?

a. Nonstock and nonprofit educational institution.

b. Mutual savings bank.
c. Government-owned or Controlled Corp.
d. Civic league.

**Answer:** a. Nonstock and nonprofit educational institution.

**Explanation:** Educational institutions organized for religious, charitable, scientific, athletic, or

cultural purposes may be exempt from tax on their income.

**Question 18:** What is the taxation status of the income of labor, agricultural, or horticultural
organizations not organized principally for profit?

a. Exempt from income tax.

b. Taxed at a flat rate.
c. Partially taxed.
d. Taxed at a reduced rate.

**Answer:** a. Exempt from income tax.

**Explanation:** Income of labor, agricultural, or horticultural organizations not organized principally

for profit is generally exempt from income tax.

**Question 19:** Under what conditions can a nonprofit educational institution in the Philippines be
subject to taxation?

a. If it has any income from any source.

b. If its gross income exceeds the statutory limit.
c. If its gross income from unrelated activities exceeds 50%.
d. If it receives any foreign income.

**Answer:** c. If its gross income from unrelated activities exceeds 50%.

**Explanation:** A nonprofit educational institution in the Philippines may be subject to taxation if

more than 50% of its gross income comes from unrelated activities.

**Question 20:** What tax rate applies to nonresident foreign cinematographic film owners, lessors, or
distributors in the Philippines?

a. 5%.
b. 25%.
c. 15%.
d. 30%.
**Answer:** b. 25%.

**Explanation:** Nonresident foreign cinematographic film owners, lessors, or distributors are subject
to a tax rate of 25% on their gross income from all sources within the Philippines.

These questions and explanations, along with the answer choices, should help clarify the concepts
related to exclusions from gross income and income tax on corporations. If you have further
questions or need additional information, please feel free to ask!