G.

Corporate Income Taxation

1. Definition – Corporation includes partnerships, no matter how

created or organized, joint stock companies, join accounts,
associations or insurance companies except:
a. Joint construction ventures;
b. Joint venture for engaging in petroleum, coal, geothermal
and other energy operations pursuant to a consortium
agreement with the government;
c. General Professional Partnership.

2. Partnership Taxed as Corporation

a. Joint Ventures Engaged in Construction Projects.

- A joint venture or consortium formed for the purpose of
undertaking construction projects, which is not
considered as corporation under Section 22 of the National
Internal Revenue Code (NIRC), of 1997 as amended, should
be:

a. for the undertaking of a construction project;

b. should involve joining or pooling of resources by
licensed local contracts; that is, licensed as general
contractor by the Philippine Contractors Accreditation
Board (PCAB) of the Department of Trade and Industry
(DTI);
c. the local contractors are engaged in construction
business; and
d. the Joint Venture itself must likewise be duly licensed
as such by the PCAB of the DTI. (RR No. 10-2012)

b. Income of Partners in Regular Partnership

- Taxable in their individual capacity (Section 73(D) of the
NIRC)

3. Kinds of Corporations
a. Domestic Corporation - means created or organized in
the Philippines or under its laws. Domestic Corporations
 are taxed on income within and outside the Philippines.
The tax base is the corporation’s taxable income.
- Source: Within and Without
- Tax base: Taxable income

b. Resident Foreign Corporation - foreign Corporations

engaged in trade or business within the Philippines or
having an office or place of business therein. Resident
foreign corporations are taxed on income within the
Philippines only. The tax base is the corporation’s
taxable income.
- Source: Within
- Tax base: Taxable income

c. Non- Resident foreign corporations – those foreign

corporations not engaged in trade or business within the
Philippines. Non-resident foreign corporations taxed on
incomes from the Philippines only. The tax base is the
corporation’s gross income
- Source: Within
- Tax base: Gross income

Marubeni Corporation v. CIR

- Petitioner is a Japanese corporation licensed to engage in
business in the Philippines with its branch office at Manila.
When the profits on Marubeni’s investments in Atlantic Gulf
and Pacific Co. of Manila were declared, a 10% final
dividend tax was withheld from it, and another 15% profit
remittance tax based on the remittable amount after the
final 10% withholding tax were paid to the Bureau of
Internal Revenue. Petitioner now claims for a refund or tax
credit for the amount which it has allegedly overpaid the
BIR. The claim was, however, denied by the CIR averring
that being a non-resident stockholder, said dividend income
is subject to the 25% tax pursuant to Tax Treaty between
Philippines and Japan. On the contrary, petitioner
contends that because it is engaged in business in the
Philippines through its Philippine branch, it must be
considered as a resident foreign corporation. A single
 corporate entity cannot be both a resident and a non-
resident corporation depending on the nature of the
particular transaction involved.
- The Supreme Court held that Marubeni Corporation is a
non-resident foreign corporation, with respect to the
transaction. Marubeni Corporation’s head office in Japan is
a separate and distinct income taxpayer from the branch in
the Philippines. The investment on Atlantic Gulf and Pacific
Co. was made for purposes peculiarly germane to the
conduct of the corporate affairs of Marubeni Corporation in
Japan, but certainly not of the branch in the Philippines.

d. Others
i. Private Educational Institutions
- Section 27 (B) Proprietary Educational Institutions and
Hospitals. - Proprietary educational institutions and
hospitals which are nonprofit shall pay a tax of ten
percent (10%) on their taxable income except those covered
by Subsection (D) (passive incomes) hereof: Provided, That
beginning July 1, 2020 until June 30, 2023, the tax rate
herein imposed shall be one percent
(1%): Provided, further, That if the gross income from
'unrelated trade, business or other activity' exceeds fifty
percent (50%) of the total gross income derived by such
educational or hospitals from all sources, the tax
prescribed in Subsection (A) (corporate tax 25% - GR and
20% - XPN) hereof shall be imposed on the ended taxable
income. For purposes of this Subsection, the term
'unrelated trade, business or other activity' means any
trade, business or other activity, the conduct of which
is not substantially related to the exercise or
performance by such educational institution or hospital
of its primary purpose or function. 'Proprietary' means a
private hospital, or 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.

Corporate Tax
GR: 25% of the taxable income
XPN: If the net taxable income does exceed P5Million AND
with total assets not exceeding P100M EXCLUDING LAND on
which the particular business entity’s office, plant and
equipment are situated shall be taxed at 20%.

Total assets shall be net of depreciation and allowance for bad debts
(RMC 62-2021).

ii. International carrier – International carrier doing

business in the Philippines shall pay a tax of two
and one-half percent on its Gross Philippine
Billings.

Foreign airline companies with out flights starting from

or passing through any point in the Philippines – An
offline airline having a branch office or a sales agent in
the Philippines which sells passage documents for
compensation or commission to cover offline flights of its
principal or head office, or for other airlines covering
flights originating from Philippine ports or offline flights,
is not considered engaged in business as an
international air carrier in the Philippines and is,
therefore not subject to GPB Tax provided for in
Section 28(A)(3)(a) of the Code nor to the three
percent (3%) common carrier’s tax under Section
118(A) of the same Code. This provision is without
prejudice to classifying such taxpayer under a different
category pursuant to a separate provision of the same
Code. (RR No. 15-02)

Gross Philippine Billings’ refers to the amount of

gross revenue derived from carriage of persons,
excess baggage, cargo, and mail originating from the
Philippines in a continuous and uninterrupted flight,
irrespective of the place of sale or issue and the place
of payment of the ticket or passage
document: Provided, That tickets revalidated,
exchanged and/or indorsed to another international
airline form part of the Gross Philippine Billings if the
passenger boards a plane in a port or point in the
Philippines: Provided, further, That for a flight which
originates from the Philippines, but transshipment of
passenger takes place at any part outside the Philippines
on another airline, only the aliquot portion of the cost of
the ticket corresponding to the leg flown from the
Philippines to the point of transshipment shall form part
of Gross Philippine Billings. (Section 1 of RA 10378)