STUDY GUIDE:

INCOME TAXATION for CORPORATIONS

A. Taxable Corporations
i. Domestic Corporations

a. Domestic corporations with net taxable income not exceeding P5,000,000 and
with total assets not exceeding P100,000,000 (introduced by the CREATE Law)
ii. Resident Foreign Corporations
iii. Non-resident foreign Corporations
iv. Filing of ITR

B. PARTNERSHIPS AND CO-OWNERSHIPS

Co-ownership – Obillos vs. CIR
Partnership (2 types)
- Liabilities of partners

C. INCOME TAX EXEMPT ENTITIES (RMO 38-2019)

D. TYPES/CLASSIFICATIONS OF INCOME
i. Inclusions to Gross Income (Sec. 32, NIRC)
ii. Exclusions
iii. Deductions (Activity 1)
a. Itemized
b. Optional Standard Deduction

E. TAX RATES

Classification Rate and Base

DC
DC with net taxable income not
exceeding P5,000,000 and with total assets
not exceeding P100,000,000
RFC
25% on net income from all sources
20% on net income from all sources
2.5% on income on gross Ph billings
(international carriers)

10% on interest income from foreign

currency loans granted to residents other
than offshore business units or other
foreign currency deposit units of
depository banks
 25% on regional operating headquarters
earning income from the Philippines
NRFC 25% on income in general

20% on interest on foreign loans

15% on dividends from domestic

corporations if the country in which the
foreign corporation is domiciled does not
impose income tax on such dividends, or
allows a tax deemed paid credit of 15% or
the difference between the CIT and 15%
on the dividends

4.5% on rentals and charter fees payable

to non-residen owners of vessels
chartered by Philippine nationals

7.5% on rentals, charters, and other fees

derived by non-resident lessors of
aircraft, machinery, or other equipment

Briefly explain the following:

1. 15% Optional Corporate Tax – Requirements

2. 2% Minimum Corporate Income Tax

An MCIT of 2% of the gross income as of the end of taxable year (whether

calendar or fiscal year, depending on the accounting period employed) is imposed
on a corporation taxable under Title II of the Tax Code, as amended, beginning on
the 4th taxable year immediately following the taxable year in which such
corporation commenced its business operations when the MCIT is greater than the
regular income tax. The MCIT is compared with the regular income tax, which is
due from a corporation. If the regular income is higher than the MCIT, then the
corporation does not pay the MCIT but the amount of the regular income tax.

Carry Forward of Excess Minimum Tax

Any excess of the MCIT over the normal income tax may be carried forward and
credited against the normal income tax for the three (3) immediately succeeding
taxable years.
 Relief from the MCIT under certain conditions

Newly established corporations or firms which are on their first 3 years of

operations are not covered by the MCIT.

Read the following issuances:

1. CREATE Law implementing rules and regulations
a) Revenue Regulations (RR) No. 5-2021 [Income Tax]
b) Revenue Regulations (RR) No. 14-2021 [Suspension of certain provisions under RR
5-2021]
c) Revenue Regulations (RR) No. 3-2022 [Proprietary educational institutions and
proprietary hospitals which are non-profit]
d) Revenue Regulations (RR) No. 2-2021 [Withholding Tax]
2. Revenue Memorandum Order (RMO) No. 38-2019 [Tax exemption of non-stock non-profit
corporations]
3. Revenue Memorandum Circular (RMC) No. 64-2016 [Tax-exempt corporations]
4. Revenue Memorandum Circular (RMC) No. 51-2014 [Inurement Prohibition under NIRC]
5. Revenue Regulations (RR) No. 10-2002 [Representation and entertainment expenses]
6. Revenue Regulations (RR) No. 13-2000 [Interest]
7. Revenue Regulations (RR) No. 14-2001 [Losses]
8. Revenue Regulations (RR) No. 25-2020 [5-year entitlement to deduct Net Operating Loss
Carry-Over or NOLCO]
9. Revenue Regulations (RR) No. 5-99, as amended by RR No. 25-2002 [Bad debts]
10. Revenue Regulations (RR) No. 13-98 [Charitable contributions]
11. Republic Act No. 11635, as implemented by Revenue Regulations (RR) No. 3-2022 [Taxation
of proprietary educational institutions and proprietary non-profit hospitals]
12. Revenue Regulations (RR) No. 12-2007 [MCIT]
13. Revenue Memorandum Circular (RMC) No. 19-2022 [Tax-free exchange of property]

14. Republic Act No. 10026 [Income Tax exemption of Local Water Districts]