BAR EXAM 2012 -TAXATION

2012 BAR EXAM 2012- TAXATION

1.
Bank A deposited money with Bank B which earns interest that is
subjected to the 20°/o fina! withholding tax. At the same tirne, Bank A
is subjected to the 5°/o gross receipts tax on its interest income on
loan transactions to customers. Which statement below
INCORRECTLY describes the transaction?
a)
There is double taxation because two taxes income
tax and gross receipts tax are imposed on the
interest incomes described above, and double taxation is
prohibited under the 1987 Constitution

b)
There is no double taxation because the first tax is
income tax, while the second tax is business tax;

c)
There is no double taxation because the income tax is on
the interest income of Bank A on its deposits with Bank B
(passive income), while the gross receipts tax is on the
interest 'income received by Bank A from loans to its
debtor-customers (active income);

d)
Income tax on interest income of deposits of Bank A is a
direct tax, while GRT on interest income on loan
transaction is an indirect tax.

the 1st question in the 2012 bar exam for taxation was actually taken from the Supreme Court decided case of " Commissioner of Internal Revenue Vs. CITYTRUST INVESTMENT PHILS., INC., (and Asiabank vs. CIR) WITH G.R. Nos. 139786 AND G.R. No. 140857 , September 27, 2006

the 1st question was "Which statement below
INCORRECTLY describes the transaction? ". there were four statements and in answering the question, it is imperative that we must synthesize all the statements and determine if they are correct or not.

1st statement-
There is double taxation because two taxes income
tax and gross receipts tax are imposed on the
interest incomes described above, and double taxation is
prohibited under the 1987 Constitution

This statement is incorrect because there is no double taxation. in the case of CIR vs. Citytrust (2006), the supreme court held that :

"Corollarily, the Commissioner contends that the imposition of the 20% FWT and 5% GRT does not constitute double taxation.

We (SC ) agree.
Double taxation means taxing:
1. for the same tax
2. same period
3. the same thing or activity
twice,
when it should be taxed but once,
4. for the same purpose
5. and with the same kind of character of tax.[26]

This is not the situation in the case at bar.

**The GRT is a percentage tax under Title V of the Tax Code ([Section 121], Other Percentage Taxes),

while the FWT is an income tax under Title II of the Code (Tax on Income).


**The two concepts are different from each other.

In Solidbank Corporation,[27] this Court defined that a percentage tax is a national tax measured by a certain percentage of the gross selling price or gross value in money of goods sold, bartered or imported; or of the gross receipts or earnings derived by any person engaged in the sale of services. It is not subject to withholding.

An income tax, on the other hand, is a national tax imposed on the net or the gross income realized in a taxable year. It is subject to withholding.

Thus, there can be no double taxation here as the Tax Code imposes two different kinds of taxes.

b, c and d statements are correct. Kaya ang 1st statement ang mali. see the actual and full text of the abovementioned case. basically, andoon iyong 4 statements na iyan at nasagot na iyan ng Supreme Court doon.

if me tanong or violent reaction sa sagot ko, pakipost lang po. ako po ay tao po lamang. nagkakamali din.

nakita ko lang kasi ang hirap ng exam sa taxation s mga nagtake this year. sana mafilter natin ang sagot na ito. baka pala mali ako.

xx

c)
There is no double taxation because the income tax is on
the interest income of Bank A on its deposits with Bank B
(passive income), while the gross receipts tax is on the
interest 'income received by Bank A from loans to its
debtor-customers (active income);

1st transaction Bank A

1. DEPOSITED its own MONEY (or money ng customers na me deposit sa bank A) TO BANK B (as depositary bank of Bank A)
2. EARNS INTEREST

THIS INTEREST INCOME IS SUBJECT TO INCOME TAX .
pero kasi PASSIVE INCOME , 20% ang rate nito at me withholding ito. ang bank b ang magwithhold nito at magremit sa government. pero ang point nito is ang interest income ni bank a is subject to income tax.


2nd transaction
IBA NAMAN ITONG GRT NA ITO.business tax ito. ang rule is all income , me business tax bayaran aside s income tax. unless exempt sila sa percentage or sa VAT.


sI BANK A, NAGPAHIRAM NG MONEY KAY CUSTOMER A. nagcharge si bank a ng interest as cost of money (plus service fees)kay customer kaya iyong binayad ni customer A is interest income on the part of Bank A (and interest expense on the part of customer A).

** makikita niyo sa example na hindi pareho ang transaction nila

Double taxation means taxing:
1. for the same tax (hindi ito same tax kasi nga income tax iyong isa, ang isa GRT)
2. same period (same period nga pero dapat ang lahat na requisites na ito magconcur to constitute double taxation.)
3. the same thing or activity (ito ang hindi same thing or activity. hindi same ang transaction (see illustration above). kaya walang double taxation
twice,
when it should be taxed but once,
4. for the same purpose (not for the same purpose. iba ang purpose ng income tax at iba ang GRT)
5. and with the same kind of character of tax.[26] (different ang income at GRT)


KAYA WLANG DOUBLE TAXATION DITO kasi hindi nagconcur lahat ng requisites ng double taxation.

TAMA ITONG STATEMENT C NA ITO.

ANG 1ST STATEMENT (a) ANG INCORRECT