2013 (Taxation) Bar Exam Questions: Essay Question 7

[Discuss/answer the question below. Or see Taxation Instructions; Taxation Essay Questions: 12, 3, 4, 5, 68, 9, 10, 11 and 12; Taxation Multiple Choice Questions: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19 and 20; See also 2013 Bar Exam: Information, Discussions, Tips, Questions and Results]


XYZ Law Offices, a law partnership in the Philippines and a VAT-registered taxpayer, received a query by e-mail from Gainsburg Corporation, a corporation organized under the laws of Delaware, but the e-mail came from California where Gainsburg has an office. Gainsburg has no office in the Philippines and does no business in the Philippines.

XYZ Law Offices rendered its opinion on the query and billed Gainsburg US$1,000 for the opinion. Gainsburg  remitted its payment through Citibank which converted the remitted US$1,000 to pesos and deposited the converted amount in the XYZ Law Offices account.

What are the tax implications of the payment to XYZ Law Offices in terms of VAT and income taxes? (7%)


  1. I answered that the amount is subject to income tax kasi ang service is performed in the philippines. Vatable kasi di dumaan sa bsp requirements for foreign earnings. Hahaha may maisagot lang. Swerte ako pag maka 60. Hahaha

  2. As to income tax subject to individual income tax because GPP ito sila which is not a taxable entity although the income is included sa GPP for purposes of determining the individual distributive share. As to VAT i answered zero rated kasi services performed to person or business conducted outside the phil, paid in acceptable foreign currency, accounted for accrding to rules of BSP. In the problem obviously the services were for an entity outside the phil, was paid in us dollars, and the conversion and remittance is just one way of accounting for the amount received which is in accordance with BSP regulation. My opinion lang po ito, this is not my exact answer but the tenor is just similar as far as I can remember.

    1. Yung bsp requirwmwnts ang sabi ko di na-comply. naalala ko kasi nasabi ng prof ko you need to declare it daw sa bsp para ma-qualify siya. although yung akin eh di ako ganon ka-confident kas mejo sketchy memory ko.

      1. Yup i know what you mean, thats how i understand it also, but i just presumed na the mere fact na remitted, converted and deposited sya sa bank that the same was declared na with BSP considering that BSP is the central banking authority of the phil who has general supervision of all other banks operating in this country. I find it absurd kasi na kailangan pa i declare individually or everytime na may payment of foreign currency for those kind of services before sya maging zero rated, very tedious and not practical at all. Anyway my answer is based on my presumption lang naman kaya Im also not confident at all

      2. Actually anon, yun din talaga tingin ko eh. Absurd yung requirement na kailangan may declaration every transaction. You have a point, pero for now speculation talaga answer natin. Basta sa akin bmay points for the question ok na. Mahirap kasi talaga exam. Hopefully makakuha tayo 75 over all average. Ngayong lumalapit na lalo ako kinakabahan.

  3. Hehe wag ka kabahan, ako on my part Its just mind conditioning kaya di ako nakakaramdam ng kaba, i just hope for the best and prepare for the worst. Wala naman kasi ako mababago whatever the result is kaya ok lang kung ano man. Party2 kung pumasa, study ulit kung hindi, hehe

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