Chapter 5 - Corporate Income Tax

A. Corporations subject to Income Tax

I. Corporations: Include partnerships, no matter how created or organized, joint-

stock companies, joint accounts (cuentas en participacion), association, or
insurance companies, but does not include general professional partnerships and
a joint venture or consortium formed for the purpose of undertaking construction
projects or engaging in petroleum, coal, geothermal and other energy operations
pursuant to an operating consortium agreement under a service contract with the
Government. 'General professional partnerships' are partnerships formed by
persons for the sole purpose of exercising their common profession, no part of
the income of which is derived from engaging in any trade or business.

II. Domestic Corporations: When applied to a corporation, means created or

organized in the Philippines or under its laws. It is taxed on its income from
sources WITHIN and WITHOUT the PH.

III. Foreign Corporation: When applied to a corporation, means a corporation

which is not domestic further classified into two.

a. Resident Foreign Corporation: Applies to a foreign corporation engaged

in trade or business within the Philippines.

- Taxed on income from sources solely within the PH.

- But is permitted to deductions from gross income, but only to the extent
that such is connected with the income earned in the PH.

b. Non-Resident Foreign Corporation: Applies to a foreign corporation not

engaged in trade or business within the Philippines.

- Taxable on income from all sources within the PH.

B. Determination of Taxable Income

C. Exclusions
I. Optional Standard Deduction

REQUISITES FOR CORPORATIONS:

(1) The corporation is a domestic or a resident foreign corporation;

(2) The corporation signifies in its return filed for the first quarter its intention to
elect OSD as deduction, otherwise, it is considered as having availed of the
itemized deductions;

(3) The election to avail OSD is irrevocable for the year in which it was made;
however, he can change to itemized deductions in succeeding years if he opts to;

(4) The OSD allowed shall be a maximum of 40% of gross income during the
taxable year.

Exempt GOCCs:

- GSIS

- SSS

- PHIC

- PCSO

D. Summary of Tax Source of Corporate Taxpayers