INCOME TAX ON

CORPORATIONS
Jasrah Bahira D. Ibrahim, CPA
 Kinds of Corporate Income Tax
1. Regular Corporate Income Tax/ Net Income Tax/ Basic Income Tax
2. Final Tax
3. Capital Gains Tax
4. MCIT
5. IAET

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 CORPORATION DEFN
• Includes the following but not limited to: Section 2, RA 11232 “Revised Corporation
1. One Person Corporation Code of the Philippines”
2. Partnership Corporation is an artificial being created by
operation of law, having the right of
3. Joint Stock Companies succession and the powers, attributes and
4. Joint Accounts properties expressly authorized by law or
incident to its existence.
5. Associations
6. Insurance Companies
• Excludes:
1. General Professional Partnership
2. Joint Venture for construction or energy with service contract with the
government
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 Definition of Certain Terms
EXCLUDED IN THE DEFINITION OF CORPORATION, for tax purposes:

General professional partnerships are partnerships formed by persons for sole

purpose of exercising their common profession, no part of the income of which is
derived from engaging in any trade or business

Joint venture/ Consortium for

• Undertaking construction projects pursuant to PD 929 to assist local contractors in
achieving competitiveness with foreign contractors by pooling their resources in
undertaking big construction projects; and
• For engaging in petroleum, coal, geothermal, and other energy operations pursuant
to an operating consortium agreement under a service contract with the government

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 Definition of Certain Terms
• A one-person corporation is a corporation with single stockholder; Provided,
that only a natural person, trust, or an estate may form a one person
corporation.

• Joint stock companies are constituted when a group of individuals, acting

jointly, establish and operate a business enterprise under an artificial name,
with an invested capital divided into transferable shares, an elected board
of directors, and other corporate characteristics, but operating without formal
governmental authority.

• Joint accounts are constituted when one interests himself in the business of
another by contributing capital thereto, and sharing in the profits or losses in
the proportion agreed upon. They are not subject to any formality and may
be privately contracted orally or in writing.
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 Definition of Certain Terms

• Associations includes all organizations which have substantially the salient

features of a corporation to be taxable as a “corporation”

• A "Proprietary educational institution" is any private school maintained and

administered by private individuals or groups with an issued permit to operate
from the Department of Education (DEPED), , or the Commission on Higher
Education (CHED), or the Technical Education and Skills Development Authority
(TESDA), as the case may be, in accordance with existing laws and regulations.

• A “Proprietary Hospitals” refer to any private hospitals, which are non-profit,

maintained and administered by private individuals or groups.
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 Kinds of Corporation
• Domestic Corporation
• Resident (Foreign) Corporation
• Non resident (Foreign) Corporation
• Special Corporation
• Exempt Corporation

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 SPECIAL CORPORATIONS
(DC) Private Educational Institution 10% TNI
7/1/20-6/30/23 : 1%
(DC) Non-stock and Non-Profit Hospitals 7/1/20-6/30/23
10% TNI : 1%
(RFC) Resident International Carrier 2.5% GPB
Non Resident owners of vessels 4.5% GPB
Non Resident Owners of Aircraft 7.5% GPB
Non Resident Cinematographic 25% GI (PH)
(RFC) Offshore Banking 25% RCIT
(RFC) Regional Operating Headquarters 25% RCIT

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EDUCATIONAL Ordinary Income Passive Income Capital Gains
INSTITUTIONS subject to FT subject to CGT

NON PROFIT GR: 10%oforRelated

Examples 1%; Income: FT CGT
Proprietary If• unrelated
Income fromincome is higher
tuition fees and misc. school fees
Educational Institutions • Income
than fromincome:
related hospital 25%
where or
medical graduates are trained for residency
• Income from canteen situated within the school campus
20%
• Income from bookstore situated within the school campus
Nonstock non profit Condition: Actually, directly, FT CGT
educational institutions and exclusively
=Tax exempt

Government Tax exempt FT CGT

educational Institutions

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HOSPITAL Ordinary Income Passive Income Capital Gains
subject to FT subject to CGT

PROFIT hospitals RCIT FT CGT

NONPROFIT hospitals GR: 10% OR 1% FT CGT

NONSTOCK Conditions: non stock corp, FT CGT

NONPROFIT private exclusively for charity, no
hospital for income/asset shall belong to
charitable and Social any member
welfare purpose = Tax exempt
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 EXEMPT CORPORATION
A) Labor, agricultural, or horticultural organizations not organized principally for profit;
B) Mutual savings bank not having a capital stock represented by shares; and cooperative banks without capital
stock organized and operated for mutual purposes and without profit;
(C) A beneficiary society, order, or association, operating for the exclusive benefit of the members such as a
fraternal organization operating under the lodge system, or a mutual aid association or a non-stock corporation
organized by employees providing for the payment of life, sickness, accident, or other benefits exclusively to the
members of such society, order, or association, or non-stock corporation or their dependents;
(D) Cemetery company owned and operated exclusively for the benefit of its members;
(E) Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific,
athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong
to or inure to the benefit of any member, organizer, officer, or any specific person;

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 EXEMPT CORPORATION
(F) Business league, chamber of commerce, or board of trade, not organized for profit and no part of the net
income of which inures to the benefit of any private stockholder or individual;
(G) Civic league or organization not organized for profit but operated exclusively for the promotion of social
welfare;
(H) A non-stock and non-profit educational institution;
(I) Government educational institutions;
(J) Farmers’ or other mutual typhoon or fire insurance company, mutual ditch or irrigation company, mutual or
cooperative telephone company, or like organization of a purely local character, the income of which consists
solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses; and
(K) Farmers’, fruit growers’, or like association organized and operated as a sales agent for the purpose of
marketing the products of its members and turning back to them the proceeds of sales, less the necessary selling
expenses on the basis of the quantity of produce finished by them.

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 EXEMPT CORPORATION

• Income from their real OR personal

properties
• Income from activities conducted for
profit
 subject to TAX

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 TAX CONSEQUENCES

• Ordinary Income • RCIT

• Passive Income • Final Tax
• Capital Gains • Capital Gains Tax

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REGULAR CORPORATE INCOME TAX

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 REGULAR CORPORATE INCOME TAX

Gross Income xx
Less: Allowable Deductions (xx)
Net Taxable Income xx
Apply Tax Rates 25% or 20%
Net Income Tax Due xx

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 25%

FINAL 25%
25%
TAX
25%

15%

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 FINAL TAX
Dividend Income Recipient

DC RFC NRFC

Received from a DC Exempt Exempt 15% / 25%

Received from RFC

Derived from PH Sources Exempt 25% RCIT 25% FWT

Derived from Foreign Sources Exempt Exempt Exempt

Received from NFRC (Foreign Sourced Exempt Exempt Exempt

Dividends)
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 CAPITAL GAINS TAX
Capital Gains subject to CGT Recipient

DC RFC NRFC

On sale of shares of stock of a DC not listed and traded thru a

local stock exchange, held as capital asset.
Tax Base: On the Net Capital Gain 15% 15% 15%

On sale of real property in the Philippines held as a capital

asset
Tax Base: On the HIGHER between GSP or FMV at time 6% N/A N/A
of sale

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 MINIMUM CORPORATE INCOME TAX
Tax Rate 2% July 1, 2023
1% July 1, 2020 to June 30,2023
Tax Base Gross Income
Imposed upon DC and RFC
Imposition begins on 4th taxable year immediately following the taxable year in which such corporation
commenced its business operations,
Scenario a) Loss
b) MCIT > RCIT
Exempt a. Relief from MCIT: Force majeure; Losses on Prolonged labor dispute; Legitimate
business reverse
b. Corporations exempt from MCIT:
• NRFC
• Proprietary Educational Institutions and Hospitals
• RFC International Carriers
• RFC ROHQ
• Corp registered under PEZA and BCDA
Excess MCIT over NIT is Deferred/Prepaid Tax /jbdi /MSU main 20
CORPORATION: BIR FORM 1702
Quarterly Filing of ITR
• On or Before the 60th day following the close of the taxable year
Annual Filing of ITR:
• April 15 Next taxable year

Taxable year of corporation

• A corporation may employ either calendar year or fiscal year as a
basis for filing its annual income tax return.
• The corporation shall not change the accounting period employed
without prior approval from the Commissioner in accordance with the
provisions of Section 47 of this Code.
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PLACE OF FILING
The quarterly income tax declaration and the final adjustment shall be
filed with:
1) Authorized agent banks, or
2) Revenue District Office, or
3) Collection Agent, or Duly authorized Treasurer of the city or
municipality having jurisdiction over the location of the principal office of
the corporation filing the return or place where the main books of
accounts and other data from which the return is prepared are kept.

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Who shall file the corporate return?
• The income tax return shall, be filed by the president, vice-president or
other principal officer and shall be sworn to by such officer and by the
treasurer or assistant treasurer.

Payment of Income Tax

• The income tax due shall be paid at the time the declaration or return
is filed.

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