oi CS ne ne aera ghee tT (ee eee eee Fringe Benefit (Rank and vinge Benefit isvers00¥ & Up) Subject to Fringe Benefit Tax In“excess” of 890,000 limit when added with “other benefits? EXCESS is subject to basic & creditable withholding tox Conforming to the ceiling of De Minimis \ Benefits? In“excess” of 290,000 limit when added with “other benefits?=) rranstors ownerstip 0 employee = Employer purchases resi transfers ownership to emplo} amount = Annual Benefit = Monetary value 0 annual Benefit = Acquisiti Monetary value of the benefit = mover owns and maintains a fleet of motor vehicles for the use of the business and empioyees Employer leasesimaintains a fleet of motor vehicles for the use of the business and the _employees: Employer purchases vehicle in the name of —emoiyee,_ foe a employee with cash for purchase of the vehicle, and ownership is placed in the name of the employee. ° Empoyer chases thevehicleon and ownership is nae of he empoyee ip is placed in the Employer shoulder cite nichers 8 a portion of the amount omneppne of vehicle and Placed in the name of the manu monetary Value Rental Employer leas Value The high® potwoon FMV 10 the Fagg Ero re ome cpt vant Vee on vO 5% x 50%" Employer owns a resident property dod i exci Ot Ey oT arpa Monetary Va ‘Acquisition A ttn ayer purchases (08 net Empat use af he OMY? og 1 Value of ie Bonet The higher vetwie Ene purchases reside proparty and | Mr qusition cost or Zona! value a8 GOLErTTINEd ty dental property and yee ON B lesser FMV or Zonal, whichever is the benefit = FMV or Zonal ion cost exclusive of interest x 5% ‘Acquisition cost exclusive of interest x 7 ec Errol UL CMa aude ine OR: her between the F WV inthe ‘Monetary Value: The hi @ real property dectaration oF Zonal 88 GELETTTINE by loyee. CIR less cost to the emp higher x 5% |, whichever is higher x 5% * 50% 5% x 50% NETARY VALUE OF MOTOR Vitae ‘Monetary Value: Acquisition cost of vehicles not normally used for business divided by 5 years x 50% Monetary Value: Amount of rental payments not normally used for business purposes x 50% Monetary Value: Acquisition cost i Monetary Value: Cash received | Monetary Value: Acquisition _ divided by 5 years quisition cost exclusive of interes Monetary Value: Amount aFringe Ben ILLUSTRATION 6 “ | (SPECIAL RULES IN COMPUTING MONETARY VALUE) | the folowing illustrations are based on the ilustrations under Revenue | Reguiations 3-98 (as amended under RA10963-TRAIN Law) \ \ CASE A. | in 2021, a domestic Corporation paid for the monthly rental of a residential house | of its branch manager, Mr. Juan Dela Cruz, amounting to P156,000. (Assume there is NO transter of ownershi i Question 1: What is the monetary ” ' y value of the benefit? Question & What is the grossed-up monetary value of the benefit? oe a How much is the fringe benefit tax? Question 4 Total amount deductible by the employer from its gross income? Question 5: What is the appropriate j to record the provision of the above benefit? ippropriate journal entry to pl > Answers: Question 1: 78,000 ~~ Question 2:P120,000 Question 3: P42,000 Question 4: P198,000 Solution: Rental payment P156,000 x 50% Monetary value P78,000 Divide by 65% GUMV 120,000 ~~ x Fringe benefit tax rate 35% ~~ | Monthly Fringe benefit tax expense 00 % Add: Rentals paid 1561 | Total Deductible Expense 198,000 Question 5° To record the transaction, the following nes | should be made by the employer forthe mopth ee oeeeonee { Fringe benefit expense P156,000 Fringe benefit tax expense 42,000 Cash (Rental payment) L FB. TaxPayableSi woe » only of the rentay | [ TE ugh 1 tye bone is 50%, ‘\ ae te ney ae of the emBove ay = a te ye ise ek rl or | a 80 cial rules in como ee ‘monetary | # iy be taken into consideration © purposes | nsatic i value nefit sh | of computing the fringe | CASEB. a said corporation | | K domestic corporation Ow? ndominium unit In se a oe | granted the sail coperty for the residen' BIR \ | Vice President. The fait market value of the property Pet assessment | amounts to 10,000,000, wil ts fair market value 25 © own in its current Real | | property Declaration ‘amounts to 000,000. Determine the following: | | 1; Monthly Monetary value of the benefit? | 2 Monthly Gr up monetary value of the benefit? if 3: Monthly Fringe benefit expense? 3: Monthly Fringe benefit tax expense? deductible by the employer for the month? 'e above benefit? 4; Total amount 5; Journal entry to record the provision of th ; ¢ Answers: 1; P20,833 2: P32,051 3:P0 4,P11,218 | 5:P11,218 | Solution: ne per BIR assessment (Higher) 10,000,000 | Value of the benefit i | x 300,00 | Annual Monetary value 50% | Divide by 250,000 | Monthly monetary value 12 months_ | Divide by P20,833 by regea monetaly value 65% | x Fringe benefit tax rate 32,051 Fringe benefit tax wh Pat 218 P11 218 by the employer dior:fringe Benefit Tae | NOTE: | * Fringe benefit expense is PO | The "Finge bereft tax expense” in this case is already the amount deductible from the employer's gross income as fringe benefit expense. | The employer, shall not further claim ‘other deduction such as the | ‘monetary value of the benefit because the cost for the use of the | residential property has been or will be recovered as deduction from its | 9105s income under ‘Depreciation expense” (RR 3-98) | 9 {200rd the transaction, the folowing journal enries should be | made: | Fringe benefit tax expense P11,218 | Fringe benefit tax payable P11,218 | % | CASE C: | Using the same data in c; i isiti of the | z ase B and assuming that the acquisition cost | property is 5,000,000 with a remaining useful lfe of ten (10) years. How much [is the monthly fringe benefit expense? | Answers: P41,667 computed as follows: | FMV per BIR assessment (Higher) 10,000,000 Less: cost (6,000,000) | Excess of FMV over cost 5,000,000 | Divide by its remaining lite 10 years | Fringe benefit expense (for the year) 500,000 Divide by 12 months Monthly fringe benefit expense 41,667 NOTE: = _ Fringe benefit expense for the month is P41,667 If the zonal value or fair market value of the said property is greater than its cost subject to depreciation, the excess amount shall be used in computing additional depreciation expense allowed as a deduction from the employer's gross income as fringe benefit expense and shall be amortized throughout the remaining useful life (RR 3-98). The journal entry for the month in this case as provided in the foregoing revenueaye Benefit Tie ITS G BENEFITS, considered taxable fringe & LE HOUSIN NON-TAXAPT using benetl Trnests (Section 33 — tax code): 1g unit inside or adjacent (within 50 meters) from the perimeter of ent” to the premises d as a taxable fringe benefit housing ‘of the business if it is locateg rimeter of the business. A ince or advantage of 1) Housin the busin ‘A housing unit which is situ: be considere ess premises. ated “inside or adjac of a business shall no! idered adjacent unit is consi c win the maximum of ity (50) meters from he Pere housing unit shall be consider fo be for the “con sino is within fifty (50) meters from the perimeter of the be on-call due to the the employer” if the sé d business premises and the employees are required to DA-635-04, December 15, nature of the employer's operation (BIR Ruling No. a and BIR Ruling No. DA-241- 2004 issued to Foreign Holiday Philippines, Inc. an 04, May 7, 2004 issued to Sohbi Koghei (Phils.), Inc.) 2) Temporary housing for a stay in the housing unit for three (3) months or less. 3) Housing privilege of military officials of the Armed Forces of the Philippines. Other Fringe Benefits Under this category, the value of the benefit rey i C presenting the amount given or paid by the employer should also be the monetary” value of the benefit. 1) Expense account Expense account may be taxable as fri 3€ ac t ringe benefits compensation income depending on the nature of the eee provided to employees. a. Taxable as fringe benefits * Expense accounts paid for or rei eimbui Poona expenses like groceries) are wane ee Senet "1 rae if the expenses were receipted in the eos Sia a do os partake the nature of “personal coed employees, such txats ) expense accounts should Saari fringe benefits. It should neither be induded ir re lon of the individual : ; oo taxpayers’ taxable compensation i 166Lringe Bencfi Lae : not treated as taxable fringe benefits Represent a ot) oe mon ‘and transportation allowance given regularly ¢ able as compensen ty basis are not taxable fringe benefits but twa eit lon income subject to basic tax under Sec. 24(A) expenses for foreign travel expenses in connection with i ead convention (inland travel expenses) ‘such 3s food, beverages. a sensportation curing foreign travel (except lodging cost in a hotel) at an wage of Per day are considered reasonable expenses and shall not be subject to fringe benefit tax. “The cost of economy and business cass airplane ticket Shall not be subject to fringe benefit tax. However, 30% of the cost of first class airplane ticket shall be subject to fringe penefit tax. In the absence of documentary evidence showing that the employee's travel abroad was in connection with business meeting or convention, the entire cost of ticket, including cost of hotel accommodations and other expenses shouldered by employer shall be veated as taxable fringe benefits. Traveling expense of family members of employees paid for by employer shall be treated as taxable fringe benefit. }) Educational assistance to the employee or his dependents In general, cost of educational assistance is treated as taxable fringe benefit except: a When the study is directly connected with the employer's trade, business or profession and there is a written contract between the employee and employer that the former is under obligation to remain in the employ of the employer for a period of time 7 5. When given to employee's dependents through a competitive scheme under scholarship program of the company. Membership dues or fees of employees borne by employer in social and letic clubs or other similar organizations. Life oF health insurance and other norlife insurance premiums are 4% taxable benefits. 167ping’ Denoft Vig ———" 42 benefits: sowing anal 0% DH treated 68 vanaf onorie Yom INCOME tay rennge panient® eran are uthorien ay (Page 62) # indor the Tax Code of under any pect Hi of OF momssaty 10 the ving mingo bent IP ‘quiron by We a age 152) trado, business OF profession of the employ ce ae Tesvartage Of the when the fringe benefit 16 for the conven Sinployer (Page 152) Contributions of the employer for retroment, insurance and hospitalizal ¢. Bonefits given to rank and file employee : P Nontaxable housing benefits discussed in Pade 168. Other non-taxable benefits discussed in this Chapter. d Helicopters ft and helicopters own efit but treate the Use of Aircraft ani The Use of aircra' ed and maintained by the employer is not a taxable fringe ben J as business expense of the employer. FILING OF RETURNS x paid/remitted not later than The tax return shall be filed and the ta the last day of the month following the close of the quarter during which withholding was made (TRAIN Law; RR 11-2018). ILLUSTRATION 5: ‘Assume an employer furnished cash frin je benefit tax amounting p ge benefit to P975,000 during the first quarter of 2020 taxable pe ae = What should be the appropriate journal entry in the books of the employer? | rnge benef expen a om | (P975,000165%) x 35% a oo | —= a “parson pr ssom| ro oa ea 1a2Cringe Benoft Tae Quarterly Remittance Return acorn Reuanes et Patd to Employees Other Than Rank end File a Ts Remiied Rete Previously Fafa mnamenaeavauow Teal henanen in antanaaiy ne inl inp —— Lotibitpiy aes Heme Brea heats nee we STA ANG SEL DUE aSS yee Ne oes eee S22 S eS ‘SESS ttre ss Sone Si omemmeentctrtpnayate a 5 = Frere SE ee to ”~ : ss mel ape are sapere Seg - SSS SSeS Senne ae ten SSS EEE SSS SSE Siena SES = = - ieee, — SeeCH aus] iy PROBLEMS _ Determine if the fotiowi 73.4 ng incomes are subject to basic tax, fringe ee ee inl from tax by putting a check mark in the column ones ‘© value of the benefit is provided, indicate the correct eet ———_ eee Sa _ ‘Amount | Subject to | Subject to | Exempt cong FBT | Basle | not | P120,000 Housing unit fumished to an employee, where said unit was 45,000 | situated inside or adjacent to the premises of the business & Monetized unused vacation 15,000 . | ‘eave credits not exceeding 10 | days 10. Household personnel benefit 60,000 by an officer of a domestic Corporation. 171Lringe Benefit Tae ia p326,000 to Wilderness my ity Corporation eect cally COMPO TY Mike, 2" EXCESS 000 ~ GE Cle Leer 021, Garcia Re 3.2. ne tir vacation expe Foca 21S ere thy olOWiND ayn “Ye re Be eee "See Compary As taxable fring? POET ing fringe ae a ° few i rele. ba bel efit be included in the’ retumable ble fring’ c. should the taxat ? ° for the yea! oD income oF Ae tinge benefit tax calecod? 5 it tax rem te (anen isthe fringe ener rg fle employee, ts the fringe benefit ‘assuming Mike is 2 subject to fringe benefit tax? NO mployed by Chris Sports, Incorporated. is a resident citizen is employer during 2021: 'ed the following from bi Basic compensation income 4 900,000 13" month pay + 75,000 3,000 monthly transportation allowance % 36,000 Productivity incentive pay a4 10,000 Christmas bonus — 25,000 Uniform allowance = 16,000 Actual medical allowance = 10,000 Rice subsidy = 36,000 Required: Determine LJ’s taxable net income P3.4. Assume the same data in P3. ; -3 except that th ivit incentive pay amounted to P20;000. Sees Required: Determine LJ’s taxable net income P3.5. A rank and file employee received the followin ye . id following compensation.and Basic compensation i 13" month pay eee * 540,000 Mid-year bonus e 45.000 Christmas gift Z ees Mode medical allowance ey san lows f Rice subsidy /ance to dependents = 15,000 Monetized v; = .2:000 = 18,000 Ronnatt vacation leave for 12 4 Determine the employses en) ~ 24.000 le net incomeChapter Lee Lringe Benefit Tig p36. serie ee IN COMPUTING THE MONETARY VALUE OF FRiXyz Co. leased a residential house f 1. No rent per agreement was bi re Li ca of its branch manager. .. ste mien 's the monetary value of the benefit for the month? ° 's the fringe benefit tax for the month? yZ Company owns resident 1 Oe for use, The fe tial property which is assigned to its 2 i . Cost lowing data pertain to the residential property 5,000,000 Fai Market value per BIR 4'500,000 a me market value per Assessor's 3,000,000 a. How much is the hi nian Monetary value of the benefit for the b. How much is the fringe benefit tax for the quarter? 3, Using the oa data in no. 2, and assuming that XYZ Company transferred the ownership of the residential property in the name of the officer, answer the following: a.How much is monetary value of the benefit? b.How much is the fringe benefit tax? 4, Chen Company purchased a motor vehicle for the use of its manager. The vehicle was registered in manager's name. The cost of the vehicle was P1,200,000 used partly for personal Purposes and partly for the benefit of the company. Compute the following. a. Monetary value of the benefit b. Fringe benefit tax 5. Using the same data in no. 4 and assuming that Chen shouldered only @ portion of the cost of the car in the amount of P800,000 and the balance paid by the manager, determine the following: a. Monetary value of the benefit b. Fringe benefit tax Using the same data in no. 4 and assuming that Chen purchased the Car in the name of the manager on installment basis. Determine the following: ing: ; a. Monetary value of the benefit b. Fringe benefit taxyer e False therwise: write penefits furnished o, ect, ON ce of ONE ic salar tis COMER” servicd ny, including basi FES tg + Sor in KiNG: E FALSE amen TRUE bee ifthe soe is any, 9°°c ash ~— we Ae petn employer to the finde benefit ably re 208 180 fata mr ich subl ee root ext 2. Ainge Oe employe? subject !° rn A ich is e benefit ; rene ae —T nefit tax cover only those fringg ject to fringe bene 2 perisory nose fog Fringe benefits SUPE, sl en ot ok rrr a toate AP oyer on quartedy fore more it nefit is 6. Employee ithneld and iO oe ne yer ge De 0 rn The grossed-up MO i 6 Tount received By he employ’ fringe benefit shall te of fringe benefit by the value of the ssed-up_ monetary ae 7 Tee rained by dividing the monetary grossed up monetary val benefit tax is the employer, whether he ig 19 c corporation regardless o i frin a, Jhe person table for fiNge DTT Or a an indi en “e pavable or not or the government and is whether the corpo! instrumentalities ne who is vested with A 9, A managerial employee is 0 th A erogatives to lay down and execute management policies andior to hire, transfer, suspend, lay-off, recall discharge, assign or discipline employees, or to effectively recommend such managerial actions. 10. The grant of fringe benefits to the employee is exempt from tax if such grant is required by the nature of, or necessary to the trade, business or profession of the employer. 11. The amount on which the fringe benefit tax rate is applied is te monetary value of the fringe benefit. 12. The amount on which the fringe benefit tax rate is applied is te amount deductible by the employer from its gross income. 13. Grossed-up moneta is ; fringe benefit aienae and tgs tan in the books of accounts # 14. Failure to withhold the required ta efit tax expense. X ON salary is collectible from P 45. Foam false into . Failure to withhold the pbesehlirs Correct amour ‘ y the employee shall be the tablet te employeeChapter Exercises ~ Fringe Bersft Tie tapter Ee pga Bes ¢ FIED) IDENTIFICATION monn eine whether or not the following is subject to fringe benefit tax. i A if the benefit is subject to fringe benefit tax, otherwise, write B. weme further that the employee is holding supervisory or managerial Ae ition unless Stated otherwise, fringe benefit required by the nature of or necessary to trade or + pusiness of the employer. Fringe benefit for the convenience or advantage of the employer: car plan for managerial employees. Daily meal allowance for Managerial employees. Monetized unused vacation leave credits of private employees not exceeding 10 days, Monetized unused vacation leave credits of government employees in * excess of 10 days, 1. Monetized value of sick leave credits not exceeding 10 days. : Monetized value of sick leave credits of private employees in excess of 10 days. g, Compensation income of supervisory and managerial employees. 40. Housing units situated inside or adjacent to business or factory (located within 50 meters from the perimeter of business). 11. House benefits to the Chief Finance Officer of the company 12. Allowances received by supervisory and managerial employees not subject to liquidation. 13. Used by employee of aircraft (including helicopters) owned/maintained by the employer. 14. Cost of 1* class/business class airplane ticket for business travel or convention abroad in excess of 70%. 15. De minimis benefits received by an executive of a company. 16. Educational assistance (Master of Science in Accountancy) granted to Fe, the Finance Manager of ABC Company. No written contract was executed by Fe and ABC. 17. Premiums borne by the employer for the group insurance of its employees 18. Contributions of the employer for the benefit of the employee to ‘etirement, insurance and hospitalization benefit plans. 19. Reimbursement of transportation expenses paid to a messenger of 20. Contribution, ployer to SSS, GSIS and similar butions made by an employer oi Contributions under coat laws in excess of what the law requires as Contributions.z rele che ICE newer muLtiPle ergot the correct @ noo? correct? n the ments '8 O° itnholding tax o' princes no rovowing Sts afl ge benofit granted. by thy 4. which fringe bene” of the holds @ managerial The vaue of Ne who o ip monetary IMG employer 10 ; diess of whether sition. ive regar' t wrt is effective egsional partnership or , supervisi a benefit jal, PI \ ng in individual other the Corporation IS taxa er saver is a a orrath n (regardless of ulations cover only tho or not). r ; The fringe benef eerie to. managerial OF SUPErviser, benefits den, Te quiations do not cover ore benefits which employees. Tmpensation income, BECAUSE these are subjeq are Reitable withholding tax on compensation in accordance i amended. c. I, land Ill with RR No.2-98, a& d. None of the above a a. lonly b. land tl only 2. Statement 1: Fringe benefits are forms of incentives to employees. Statement 2: Fringe benefits include salaries, services, or other benefit given by employer to an individual employee. a. Only statement 1 is correct b. Only statement 2 is correct c. Both statements are correct d. Both statements are not correct 3. Which i i i oar of the following statements regarding fringe benefit tax s a. Fringe benefit tax is imposed on the b. The employer i i bgsancws ie ployer is the one liable for the payment of fringe benefit ¢. Both “a” and “"b" 4. Neither “a” nor “b” 4. This income of are to basic tax sident alien holding Managerial position is sublet 5 Fringe benefit tax meot2st income trom Phil ; nk ippine currency deposit with SecuChapter Ferien Vringe Benefit Cie 50,000 winnings from PCSO and Philippine lotto 4 Prizes from S&fR (P10,000), Gateway (P10,000), and Glorieta (P10,000) or @ total of P30,000 which of the following is a fringe benefit not covered by the fringe 5 benefit tax a. De minimis benefit, ol b. Housing privileges granted to rank and file employees. c. Fringe benefits granted as a result of the nature of the business, trade, or profession of the employer. d. Allof these. The following earnings are subject to fringe benefit tax, except a. Salary of a rank-and-file employee b. Housing necessary for trade and for the convenience of the employer c. Food allowance for the convenience of the employer and necessary in the conduct of the business d. All of the above 6 7. The following are exempt fringe benefits, except for one a. Fringe benefits given to rank and file employee. b. Fringe benefit given for the convenience of the employee. c. When the fringe benefit is required by the nature of or necessary to the trade, business or profession of the employer. d. Rice benefit amounting to P1,500 a month. & Which of the following benefits is not subject to the fringe benefits tax? . a. Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans b. Housing c. Expense account d. Vehicle of any kind 9. Statement 1: Household of the employee borne by the employer such as salaries of hougehold help, personal driver and other similar personal expenses are taxable fringe benefits. Statement 2: A fringe benefit which is not subject to the fringe benefit tax is returnable income of the employee. a. Statements 1 and 2 are false 5. Statement 1 is true but statement 2 is false ¢. Statement 1 is false but statement 2 is true 4. Statements 1 and 2 are true 477inf Benefit Te, hye seers “VS € on the vit tax 18 comput age panel ° it ary ware 11908 benef ‘ne fringe benefit mona, valve ft he fring? nts regarding grossecup MONGtar, following state , value of the fringe bent i simply “athe entire income eamed by the P Grossed-uP & Fair value of 41. which of oe value is co" onetery rhe grossed-uP ft a gure ‘meant to represen| employee. onotary value includes the net amount of Fup mi 4 The osivad, ponelZrt monetary value of ANY Property ony and the amount of finde benefit tax. i, The grossed-up monetary Wise of the fringe benefit ig Jatornined by dividing the monetary value of the fringe benef ing January 1, 2018. by 65% starting "8 and ni >. tnd only d. None of the above b. 42. Which statement is wrong? The amount on which the fringe benefit tax rate is applied is: ; ‘a, The monetary value of the fringe benefit t b. The grossed-up monetary value of fringe benefit c. The amount deductible by the employer from his/its gross income d. Reflected in the books of accounts in the two accounts of fringe benefit expense” and “fringe benefit tax expense” 13. If both the fringe benefit expense and the fringe benefit tax expense are allowed as deductions from gross it rporati entry in the books of accounts is SS ete a. Fringe benefit expense Fringe benefit tax expense ; Cash b. Fringe benefit tax expense ea tel ~ Fringe benefit expenss Fringe benefit omen Income construct structive received ely OK XxX g BES Cash 4. Any of the above 3 178Chapter Exerises — Cringe Benofit Tae he monetary value of fringe benefit if given in money is a. Fair market value (BIR) or zonal value whichever is higher. b. Amount granted ¢. Depreciated value d, Acquisition cost plus other incidental costs statement 1° if the employer did not withhold the fringe benefit tax 16 snd subsequently discovered and assessed by the BIR, the related 1 fringe benefit tax is not allowed as a deduction from the employer's gross income, Statement 2: Fringe benefit tax includes additional benefit granted by the employer to the employees in addition to the basic salary. a. Statements 1 and 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true al 16. Statement 1: The exemption of any fringe benefit from the fringe benefit tax shall not be interpreted to mean exemption from any other income tax imposed under the Tax Code except if the same is likewise expressly exempt from any other income tax imposed under the Tax Code or under any other existing law. Statement 2: If the fringe benefit is exempted from the fringe benefit tax, the same may, however still form part of the employee’s gross compensation income which is subject to income tax, hence, likewise subject to withholding tax on compensation income payment. a. Statements 1 and 2 are false b. Statement 1 is true but statement 2 is false c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true 17. Cost of life or health insurance and other non-life insurance premiums borne by the employer for his employee shall be treated as taxable fringe benefit, except Contributions of the employer for the benefit of the employee a. pursuant to provision of existing SSS and GSIS laws. Cost of premiums borne by the employer for the group insurance of his employees. ind “b”.Tiiage Binifd Cin o ised Oye eure minge benont 8 tue? regarding Mii tyiioh are pald far ¢ jayee Di Vinge benefits, a eipted for and in rs Yaxabl U {tures do NOt partaks rei A pan CEPT when re croyer and te oxi table to the employ ihe amp so att oe, pense Miothor granted Under a 2, Mot are subject to fringe fits given 10 by Benetve bargaining fringe benefit ron’ the fringe benefit tax ringe Derr exemption from any other empt by law. Benefit t@X any The exemption of im, The rer be interpreted | TT owise OX acome tax untess tne & Mand 11 only & Nall of the above a. only b. and Ill only 49. Fringe benefits NOT SUBJECT to fringe benefit tax include which of the following? ; Fringe benefits authorized a “ade or under any special law. er for the benefit of the employee I under the Ci 1 Contributions of the employ to retirement, insurance, and hospitalization benefit plans, It. Benefits given to the rank and file, whether granted under a collective bargaining agreement or not. IV. De minimis benefits. a. land Il only c. Allof the above b. Hand Ill only d. None of the above 20. Which of the following shall be subject to fringe benefits tax? a. Housing privilege of Armed Forces of ilippi i iV the Phi b. Housing units situated inside or adjacent to iene or factory (located within 30 meters from thi i 0 @ perimet c. Temporary housing for an employee who wasn tre housing F nit for 3 months or less. |. Housing privilege of an ali hore banking inthe Price lien employee of an offs! nd exempted from income tax eee of FBT . much is the alloy Pall, ? allowable deductio' i income nae i y proleade ead granted and a Bef no’ i fs a. P150,000 “” aoe c. P99,000 5. P100,000 ¢ . 65,000Chapter Eeercses - br ninge Bensfit Toe ; 2021, ABC Corporation gave the following fringe benefits to its 2 smployees e To managerial employees 1,300,000 To rank and file employees 5,000,000 The allowable dedu for the fringe benefit a. P2,000,000 b. P2,148:000 In 2021, ABC Corporation provided a 3-day vacation in Tagaytay to all of its employees of which 80% are rank and file. Total expenses incurred by the company for the said vacation amounted to 1,200,000. The fringe benefit tax expense is ction from the gross income of the corporation its given to employees is c. P6,320,000 d. P7,000,000 28 a. P470,588 c. P84,000 b. P376,470 d. P129,231 24, Using the above data, the total deductible expense is a. P1,294,118 c. P1,284,000 b. P294,118 d. P1,329,231 Use the following data for the next two question: From a managerial employee for taxable year 2021: Salaries and wages- net of the following P681,200 - SSS and medicare contributions 12,000 - tax withheld 134,800 Total fixed monthly allowance (P5,000/mo.) 60,000 Allowance, not subject to liquidation 48,000 Gasoline allowance, subject to liquidation 30,000 13" month pay 68,000 Christmas bonus 15,000 25. The gross compensation income subject to graduated rate is a. P440,000 c. P816,000 b. P681,200 d. P876,000 2%. The fri fit tax due from the above benefit is re c. P24,941 b. P33,412 cocoa- Fritfe Benefit Cae the Monetary Value fo, Hyerekses Chapeer OE“ of ination utes 07, 0 Ore ue of ah special Rue Yenicle Ben tne monetary value Of 2 Nousin, fousing ge benef 12% ge where the housing un Fo emPlOYe yal place of residence ig es of the fringe 27. For PurPOsrted by empl e benefit gran by the employe ho housing unt provide’y the employer ciation for the fair market val owned By mount of JePTECS which 1s 5% of the fal ue b. 50% of the ene A is higher. ua gneve is a zon a tof deereciaun & Net book value ay corporation paid for We, Saas mounting & 2a.1n 2021, Mabuhay COPEON. ‘general manager amounting tg residential hous? ts Mabuhay Corporation is merge Gabe 88 2, P8aT: b. P318,750 ee tions: Ml data for the next five ques! | pete one compensation package of an xecutive was the free use of the company’s residential condominium unit in Makati City, Philippines, Data on the condominium unit for 2020 taxable year follows: Fair market value in the Real Property Declaration P1,000,000 Zonal value 2,000,000 Fair market value 2,500,000 29. How much is the monetary value of the fringe benefit and the fringe benefit tax, respectively? a. P4,167; P2,244 c. P2,000,000; P705,832 b, P50,000; P26,923 d. P6,127.45; P945,177 30. Assume the residential condominium unit the was purchased company in installment for the executive's free sees Naas on exclusive of interest was P3,000,01 company test was P3,000, 00. At what amount should the | jonthly mot ‘ a ee nee benefit tax, respectively? Va of the tinge beer - 4,166.67; P1961 —¢. P2,000,000: b. P1,500,000; 326,400. P6250, Pe cereChyler Lucca bay, Vang Mt lap Assume (he residential condoriniun unk wns tanchanet try Wa COMPANY I inatationend, Cran stiG A Wn Wilh tm Wnenbante ty Om exoautive, Acquisition Cost exchisive (A innerwet wae FLD) IL) WH zonal oe determined at 5,000,000 At whut weranne A ens we oom PON as the monetary v A the Wenge ta “te noge BONE tax, respectively? ee a P416.067, 106,076 «2,000,000, PTY BIZ » P8.000,000:P2,602,308 4. P1510), P5794 ” 32 Assume 1h® residential condominium unk was yxchaaes iy we company In installment, ownership of which will be warwterred Wo Wa executive. Acquisition cost exclusive f inten oot was P4L) IL) WA zonal value determined at P5,000,000. The empayes 16 remsees Yo pay P2,000,000 to the employer before the traneler A ownersrep @ made. At what amount should the company revort ae the monetary valve of the fringe benefit and the benefit tax, a. P3,000,000; 1,615,385 c, P250,000, P117 47 0S b. P1,500,000; P326,400 4. P6,250, P2.941.16 33. Assume the residential condominium unit is located in Cebu and tat the executive is allowed to use the same for a period of tree montne while he is completing an evaluation of the over-all performance of tie company's Cebu branch. At what amount should the company report as the monetary value of the fringe benefit and the fringe benefit tax. respectively? a. P4,1667.67; P1,961 ¢. 2,000,000; P705,832 b. P1,500,000; P326,400 —d. PO; PO Use the following data for the next five questions: induded in the compensation package of the Chief Accountant s @ car glan worth P1,000,000. The ownership will be transferred in the name of the employee. % Assume the employer purchases the car in the name of the employee a P1,538,462; P538,462 ¢, P735,294, P235,.294 b. P1,000,000; P320,000 d. P500,000, P160.000 35. Assume the employer provides P800,000 to the employee to purchase vehicle of his interest, Ownership of the car is placed in the name ibe exciyes The employee purchased a brand new car worth 183 P1.200,000. At what amount should the employer report as the eae~ Fringe Berit Cage spor Eqceroises — it and the fringe beneri, Cape’ pene! jue of the fnge eR eg 1p1,230,769:P430,769 § 800,000: 256,000 ployer purchases the car in instar Taper ae ot 36, Assume the Say what SMU tho, employer fopOr 35 tin the re ssonetary value of the fringe benefit ge Denes, gross tively? a eer 70.588: p470,588 ¢ Ee 2 B1/000,000; P320,000 , EFITS > *, z IE sae De minimis benefits are Facilities or privileges furnisheg py an employer to his ‘employees that are of relatively smay ‘ed or furnished by the employer merely as a mean; tment, or efficiency of tig or offered value and are offered 0! ealth, goodwill, conten iven to rank and file g employees or of promoting the h mployees are not subject to final employees. Statement 2: De Minimis benefit supervisory @! fit and creditable withholding tax. to managerial or fringe bene 000; P45,500 100; 64,000 withholding tax for a. Statements 1 and 2 are false b. Statement 1 is true but statement 2 is false Statement 1 is false but statement 2 is true ©. d. Statements 1 and 2 are true 38. Alpha Company grants grocery allowance of P! 5,01 employee payable every June 30 and ese batl at fiaeod on re le existing Comprehensive Agreement with its employees. The benefit 5. nefit granted is: a. Exempt from basic incot i : Stine me tax but subject to 10% creditable ._ Exempt from basic income tax and to creditable withholdi ing tax c. Subj i ubject to fringe benefit tax if the recipient is a rank and fil le 4 crore . Subj it ject to fringe benefit tax if the recipient is a managerial employee 39. Fixed dail ily meal allowances granted employees are a oa ham income tax lo fringe benefit tax if the recipient i pient is a rank and file employeeChapter Exercises - Fringe Benefit Tie ¢. Subject to fringe benefit tax if the recipient is a managerial employee d. Subject to basic income tax regardless of employee's rank gratement 1: Uniforms and clothing allowance not exceeding six #2 Fousand Pesos (P6,000) per annum is an exempt de minimis benefit. tement 2: - Actual medical benefits not exceeding P10,000 per \ jnnum is an exempt de minimis benefit. \ a. Statements 1 and 2 are false \ b. Statement 1 is true but statement 2 is false Vi c. Statement 1 is false but statement 2 is true d. Statements 1 and 2 are true } er benefits received by employees from an employer which are not 41 the list of de minimis benefits under RR 8-2012, as amended, are: a. Treated as de minimis if the benefits are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees. b. Treated as de minimis, regardless of the value, if such benefits are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees. c. Not de minimis benefits because the list as provided in the regulations are all inclusive. d. None of the above 42. Reasonable business expenses which are paid for by the employer for the foreign travel of his employee to attend business meetings or conventions are not taxable as fringe benefits. Which is NOT true? |. _ Inland travel expenses (food, beverages, and local transportation) except lodging cost in a hotel or similar establishment amounting to an average of US$300 or less per day, shall not be subject to a fringe benefit tax. Il. The cost of economy and business class airplane ticket shall not be subject to a fringe benefit tax. However, 30% of the cost of first class airline ticket shall be subject to a fringe benefit tax. ; lll. The expenses should be supported by documents proving the actual occurrences of the meetings or conventions, otherwise, they shall be treated taxable fringe benefit. c. 1, and Il a. lonly b. |and Il only d. None of the abovepasos (P2,000) or 7 usand Perrot more than ry s fit. minimis BENET. 9.g., for length cg ta nieve be in the fOr, ofa tanaie ther than on or gift oat oe wianived by a othe poaing ten thousare far, which eta under an establis rite. Pa ana Se nig empimnate in favor of highly paid emp! fit. ar Statements 1 and 2 are false t2Is false b. Statement 1 is true but statement ae ; ‘statement 2 i c. Statement 1 is false but 4. Statements 1 and 2 are true i ceili 44, The amount of de minimis benefits conforming to the Ceiling of de minimis benefits shall be: 2 Exempt from income tax, regardles: employee cs b. Not be considered in determining the 90,000 ceiling of other benefits excluded from the gross income under the Code, as amended. c. Both “a” and “b” d. Neither “a” nor “b” ss of the rank of the 45. The excess of the de minimis benefits over their respective ceilings prescribed under the regulations shall be ‘a. Considered as part of other benefits subject to tax only on the excess over the 290,000 ceiling. b. Not be considered in determining the P82,000 ceiling of other benefits excluded from the gross income under the Code, as amended. . c. Both “a” and “b” d. Neither “a” nor “b” 46. Minimun Wage Earners (MWEs) receiving “ benefits” exceeding the P90,000 limit shall be ie ns e re on the excess benefits only axable on the excess benefits as well salaries, ) as wages hae allowances, just like an employee reat compensatio” A Palle beyond the statutory minimum w: - Exempt from income tax ~~ d. None of the aboveCaptor Exercises Triage Beagfit Tag the amount of P90,000 under “other benefits” which are excluded at Tom gross income shall |, _ Not be applicable to self-employed individuals. 1 Not be applicable to income generated from the conduct of trade or business, 1, Shall be applicable to alll types of income a. fonly c, 1, Hand il b. Land Il only d. None of the above -other Benefits” und go f Chiistmea icra regulations include Il. Productivity incentive bonus lil, Loyalty awards IV. Gifts in cash or in kind and other benefits of similar nature actually received by officials and employees of both government and private offices a. lonly c. 1, land Ill b. Land Ill only d. 1,1, Mand IV 49. Which of the following statements regarding thirteenth (13") month pay is correct? a. Thirteenth (13") month pay and other benefits received by officials and employees of public and private entities are exempt from income tax and creditable withholding- tax on compensation, provided that the total exclusion shall not exceed P90,000. b. The excess of de minimis benefits over the ceiling would form part of an individual's gross income only if the total excess benefits including bonuses exceeds P90,000 and would be subject to income tax and applicable final withholding taxes . c. Statements “a” and “b” are correct d. Neither statement “a” nor “b” is correct 50. Pedro, single, is a minimum wage earner of EDT Manufacturing Corporation. In addition to his basic minimum wage of P144,000 for 2020 taxable year, he also received the following benefits: "Holiday pay, P25,000 * Overtime pay, 12,000 * Night shift differential, 19,000 The income subject to tax should be: a. P56,000 c. P200,000 b. P31,000 d. nilsees - Erie Benofit ZZ es oper zeeercives OT ner of EDT Manufa ge eamem wage of P144.000 98 a minimum 4 jinimu! 5 Oper single ddition to basi ri 2020, he also In ed the follOWiNE CT over in ii) ° , P60, , 2 Fe 8 vonth PaY and other benefits, P g tax due should be: pee 70,000 052,000 b. P32,000 a. PO . Pedro, senior citizen, is a minimum wage earner of ED 52. Fanufacturing Corporation. Pedro is also engaged in trading variou, consumer products every weekend. He derived profit therefrom amounting to P500,000 for 2020 taxable year. In addition to his bag; rinimum wage of P144,000 for 2020 taxable year, he likewi jie raseived the following additional benefits from his employer: Se 2 De minimis, P40,000 (all within the ceiling) «13 month pay and other benefits, P35,000 Pedro's taxable income should be: a. P644,000 c. P500,000 b. P594,000 d. P350,000~~ UNatler SF income Tax on Corporations CORPORATION DEFINED ‘ ’ ’ ‘Sector 2 Of RA 11232 - the Revised Corporation Code of the Philippines , * Section 2 ‘WIRATHHEA or S_ that by PRE WR CREATE) Act The term tions shall include: 1) One Pe Corporations (OPCs) \ 2) Partnerships, no matter how created or organized 3) Joint stock companies \ 4) Joint accounts (cuentas en participacion) { 5) Associations 6) Insurance companies A is a corporation with a single stockholder, Provided. trust, or an estate may form a one person corporation. The term Corporation does not include: ’ : ). A partnership 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. 227jucome eu J i und 929 (dated 4 May 1 or0e CeO Msmpetitiveness with fore; pegenievine trees in undertaking bjs oir engaging in petroleum, Coal, for fons pursuant 10 2M Operating of | service contract with the JOINT Joint venture iS from a partnership the com urpose of undertaking construction inder Section 22 of the Tax Code a) joint venture was formed for the purpose of 4 4 undertaking a construction roject; and ° b) Should involve f resources by wes licensed local contracts; that is, licensed as 5 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 Philippine Contractors Accreditation Board (PCAB) “" Department of Trade and Industry (DT). Absent any one Consortium faeel the afo resaid requirements, iol o shall be consider . the joint venture upose of undertaking construction projectsSucome Tage on Corporations foreign Contractors Joint ventures involving foreign contractors may also be treated as a non- jaxable corporation provided: a The construction project the appropri 1@ project is JOINT STOCK COMPANIES and JOINT ACCOUNTS Joint stock companies are constituted when a group of individuals, acting jointly, establish and operate 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 government authority. Joint accounts (cuentas en participacion) is 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. The term “associations” includes all organizations which have substantially the salient features of a corporation to be taxable as a “corporation.” X EXEMPT CORPORATION. Under Section 30 of the Tax Code, the following organizations shall not be taxed in respect to income received by them as such: 4) Labor, agricultural or horticultural organizations not organized principally for profits. >) Mutual savings bank not having a capital stock represented by shares, and cooperative bank without capital stock, organized and operated for mutual Purposes and without profit.“ , “6 Vr 3 operating for the ex jatio” yanization operating un’ 9 ‘or a NON-StOCK Corp 1 as socloty. Ose OF fratorntion such aid 45807" the payment of life, embers of Such Ociety penoficiary: ? Gent er mutual Tying fe 1od82 YS rioyees Pre ively tne Mineir depend organized PY rer benefits ere ation OF pendents, accident on oon stick ‘ order. oF clusively for the nd operated Le a Denefit of ig company owned &! and operated exclusives, f anized association orga! Non-stock CO ation Othietic, oF cultural Purpose ee religious, charitable, ae ic, aot income or asset shall belong of veterans, 5 Me officer oF any specific pera i rt of its Ne! rehabilitation inure to the benefit of any ‘member, Org e, or board of trade, not or: f which inures to the hott cemetery d) ) member ration OF Business league, chamber of commerc for profit and no part of the net income O' private stockholder or individual. nization not organized for profit but op, Civic league or orgal .otion of social welfare. 9) exclusively for the prom: h) Anon-stock nonprofit educational institution. i) Government educational institution. j) Farmers or other mutual typhoon or fire i mers insurance com| ba niga company, mutual or cooperative telephone o ae nee ee iz ions of a purely local character, the income of which oe ly of assessments, dues, and fees collected from members resend sole purpose of meeting its expenses; and k) Farmers, fruit i 5, growers, or like a iati sales issociation organi: tuming | Pook fron Purpose of marketing the hater Sr Sie the proceeds of sales, less the a ts ‘ SSary selling on the y basis of the quantity of produced fini ished by them. Notwithstandin aehioen 19 the provisions in the preceding paragr none Powis on so character of the foregoing a ai regardees of ha Personal or from any of thei sates congue to a i. fom en t activities conducted for prof ae Such income, shall be subject '0 ‘atfrcome Cage on C rogporations TAXATION OF ORGANIZATIONS AND CORPORATIONS UNDER SEC. 3001 NIRC OF 1997 (The Tax Code), as amended; RMO 38-2019 The requirements for the grant of tax exemption are specified by the aw granting itand such grant is strictly construed sonieat the tapeyor pecause an exemption restricts the collection of taxes necessary for the existence of the overmment. Thus, a corporation claiming tax exemption must be able to show clearly ee it ls organized and operated for the purposes under Section 30 of tne NIRC, and that its income is derived pursuant thereto. (1) Income Tax Exemption, Not Absolute income tax exemption covers only the income derived by the corporation in furtherance of the purposes for which it was organized under Section 30 of the NIRC. Sect. 30 corporations are still subject {o the corresponding internal revenue taxes imposed under the NIRC on income derived from any of their properties, real or personal, or any activity conducted for profit regardless of the disposition thereof (i.e. interest income from bank deposits, gains from investments, rental income from real or personal properties), which income should be reported for taxation purposes. (2) Obligations as withholding agent for the Government The tax exemption granted does not cover withholding taxes on compensation income of the employees of the corporation, or the withholding tax on income payments to persons subject to tax pursuant to Section 57 of the NIRC. The corporation or association is therefore constituted as a withholding agent for the government if it acts as an employer and any of its employees receives compensation income subject to withholding tax, or if it makes income payments to individuals. or corporations subject to the withholding tax. (3) Liability for VAT Purchase of goods or properties or services and importation of goods by a corporation organized and operated as a Section 30 corporation shall be subject to the 12% VAT. If the corporation is engaged in the sale of goods or services in the course of a business pursuit, including transactions incidental thereto, its revenues derived therefrom shall be subject to the 12% VAT, in case the gross receipts from such sales exceed 3,000,000, or to Percentage Tax under Section 116 of the Tax Code, as amended, if gross receipts do not exceed 3,000,000.Tie 0 OP Oration, Jncone 61S IN DETERM Tonal. TESPNIRC (RMO 38..1NG jor SO" 019) os rest tion or association's cong, yires that the corpora Gf incorporation and Byte nes raion, AMICC incorporation fal! under Wa) P seipized of operated for the beng ize viduals, iNCOTPOTAtOTS jot or persons controlled qi his (SE! documents (er its primary’ m anization must serve } interes! gan ; Bai, sharers, otal "Sterests. The Ors ectly by © se. ote rather Pan a private PUPS onal Test: operational fhe tivities of the corporat, vg requires that the regular 2° > corporation ee be “exclusively devoted to the accomplishment of or asiposes specified in Section 30 of the NIRC. A corporation = Fesociation fails to meet this test if the corporation has no activities conducted in furtherance of the purpose for which it was organized, gp f.2 substantial part of its operations constitutes “activities conducteg for profit”. Corporations falling under Section 30 of the NIRC, as amended, must be non-profit. Nonprofit means that "no net income fa asset accrues to or benefits any member or specific person, with all the net income or asset devoted to the institution's purposes and all its Thus, in order for an entity to qualify activities conducted not for profit”. as a non-profit corporation exempt from income tax, it must demonstrate that its earnings or assets do not inure t t io the any of its trustees, organizers, officers, members or he oa person. ABC Company is a non-stock non-profit cor ic i ; a bees poration 0 i ending and promoting Filipino Psychology (Giisherg teen ks fone ches Usually involved the conduct of seminars, Sriaeant aie aro vpn sa es eon poole 8 are from grants and donations, conferences s ip, mem telated 2 ‘materials like books and be hati wens Question: Is ABC's j income exempt under Section 30(E) of the Tax Cote? Answer: NoSrcome Cage on Conporations Non-stock non-profit corporations: organized and operated ly for religious, charitable, scientific, athletic, or cultural purposes, tation of veterans are exempt from income tax under Section SO(E) of the Tax Code. However, being a non-stock non-profit Corporation does not, by this sole reason alone, exempt an institution from tax. The entity should prove by actual operation that it is really a Cotporation contemplated under Section 30(E) of the Tax Code, as amended, In the case of ABC Co,, its purposes are_not_among those la 30 (E). As such, ABC Co. failed to prove that itis organized and operated exclusively for religious, charitable, scientific, athletic or cultural purposes, or for rehabilitation of veterans. Consequently, ABC Co. shall bo treated as an ordinary corporation which is subject to ‘egular corporate income tax as well as other applicable internal revenue taxes, Association of Non-Profit Clubs (ANPC) vs. CIR G.R. No. 228539. June }, 2019 . exclusively OF for rehabilt The BIR issued RMC No. 35-2012 which (a) subjects non-profit recreational clubs to income tax; and (b) imposes VAT on gross receipts Of recreational clubs including but not limited to membership fees and assessment dues, The association assailed the circular alleging that the CIR acted beyond its tule-making authority in interpreting that payments of membership fees, assessment dues, and service fees are considered as income subject to income tax, as well as a sale of service that is subject to VAT. The Court held that the membership fees, assessment dues, and other fees of similar nature only constitute contributions to and/or Teplenishment of the funds for the maintenance and operations of the facilities offered by recreational clubs to their exclusive members. They represent funds “held in trust’ by these clubs to defray their operating and general costs and hence, only constitute infusion of capital which are not subject to income tax. When the dues are paid, the members are not buying services from the club; hence, there is no economic or commercial activity to speak of as these dues are devoted for the operations/maintenance of the facilities of the organization. Thus, there is no “sale, barter or exchange of goods or properties, or sale of service” to speak of.tax under the Tax ¢ income “enown as basic Code, , cn neenelity 2 tomes, and (cas c esto meporale CO on comet, port 8 a Chapter te the 12 aoting (2% acorn tax0® , discuss in Chapter 2 2 nal whet cae HT gxpayere classitoane” of the corporate’ ° gai tos 1) ycapie (0iNIM Ng po income tn goveral factors depen ome subject 10% TPES OF CORPORATIONS a clas* corporations, for taxation purposes, 7° compere yomestic (DC): (RFC ond 2. Resident foreign corporations (FFA RFC). 3. Nonresident foreig” corporal sify corporate taxpayers because It is important to properly classi cOrPOr arom Sources c ple on their incot , eet jons (resident oF nonr con tic corporations are J ti Sno without the Philippines while foreign OOF ieippine SOUFES. af taxable only on their income derived from Fe tions are tmable hae: domestic corporations and resident foreign taxable eee He) fet income while nonresident foreign corpo! “gross income”. Domestic Corporations are corporations created Or incorporated in the Philippines or under its laws. A foreign corporation isa corporation organizes cor incorporated by a foreign law. A foreign corporation may be a residen, (engaged in business in the Philippines) oF nonresident (not engaged mh business in the Philippines). A resident foreign corporation is not created « res from the Securities ang incorporated under Philippine laws. It only secul Exchange Commission (SEC) a license to operate in the Philippines. Domestic and foreign corporations may be further classified as ordinary & special corporations (refer to page 263). rations are TYPES OF INCOME Under the Tax Code, the three (3) INCOME SUbjECt tO INCA 7 types tax feo Gocussed in Chapter 2) are as Tollows " * a : poae or regular income sive income derived from Philippine sources: . : Capital gains subject to Capital gains doce inteFucome Lag en Corpenitions J Ordinary or regular income refers to income derived from the regular juct of trade or business income, including incidental income Other than Some subject to final taxes and capital gains tax. The concept of ordinary me discussed in Chapter 2 (individual taxpayers) also applies to corporate ixpayers. Regular or ordinary income are generally subject to the Regular corporate Income Tax (RCIT) under the Tax Code, as amended by RA 11534 othe CREATE Act as follows, NRE Gross Income Pro Alowable Deductions A axable Income Sam fon Income Tax rate Ke income Tax Due EE NOTE: Refer also to Table 5-1 Passive incomes are certain types of income derived from sources wenn the Philippines that are subject to Final Withholding Taxes (FWT). Specifically, for corporate taxpayers, these incomes pertain only to interest come, royalties and dividends described in Table 5-2. Moreover, these comes are excluded in the determination of taxable income and in the preparation of income tax return (ITR). The types of passive incomes subject ‘0 FWT that were discussed in Chapter 2 (individual taxpayers) are the same win passive incomes subject to FWT for corporate taxpayers, except for prizes and winnings. However, if a corporation receives income classified as prize(s) andior winnings, it is generally subject to RCIT since these incomes are not included in passive incomes subject to FWT. Capital gains are incomes derived from sale of capital assets. The Giference between capital assets and ordinary assets are discussed in Chapters 2 and 9. Basically, the types of capital gains that are subject to capital gains tax for individual taxpayers (Chapter 2) are also the same with the capital gains subject to capital gains tax (CGT) for corporate taxpayers as ‘olows: 1 Capital gains from sale of shares of stocks of a domestic corporation not traded in the local stock exchange [Sec. 27(D\{2)); [Sec. 2B(A\(7)\c), [Sec. 28(B)(5)(c); and 2 Capital gains from sale of real property in the Philippines (Sec. 27(D\S) Ci not subject to capital gains tax are generally subject to basic tax (COT sates are summarized in Table 5-3)Tie. on rhoraty, Tage @ Oration, Jucone ppl GABLE INGOME Tax Table 5 Tax(FWT) Tables ROM olin noone Se Fina no ‘tax (CGT)___Table 53 come, Pris: OOP FIT (Pass incomes ang | Re | passive int ject © | ot subi toRCIT ff | Capital gai 29 nl are subect the corpo GUIDE: 55 EXEMPT wet I inary a * able 5-1 below. kon an ily classi NRF Gatsare generally Se gorved BY ep cor RFC and rman s Ri Ics Stats orice Cerss rey = ead Oe ene eos Be ReIT yo Netincome — 25%of Gos » TaxRate 25% Lapadeee) eatin only =o « Basis Income withit come without oom sue re 2 trot Grose In - 2020t0 1% ‘of Gross Incom monly no 2023 within and without withit licable amof Gross Income Not applicable within only MCIT** beg. daly 1, 2023 2% of Gross Income within and without ives for Enterprises (CREATE, ‘own as the Corporate Recovery and Tax Incent he ich was publshed on Merch 27, 2021, took effect on vil 11, 2021. However, there are core dates which are earier than April 11, 2021, such asthe revises provision RCIT rates for DCs and RFCs as well as the revise RCIT - Regular Corporate Income Tax. RCIT is al CIT rates under the CREATE Act shall be as follows: income tax. The effectivity of the revised + Domestic Corporations and RFCs ~ July 1, 2020 + NRFCs—January 1, 2024 + PRIORTO JULY 1, 2020, the income tax rate of Corporations was at 30% and the MCIT ree wes 2%. A separate RCIT rate for MSME is not applicable prior to the effectivity of CREATE Act. Generally, RCIT rate for domestic corporations (DC) under CREATE Act shall be 25%. However, ithe DC is classified as MSME (Micro Small and Medium Enterprises), the RCTT rate to be applied shall be 20% of net income. MSMEs are domestic corporations wit 8) Natale nce of NOT mor than PS 000,000, AND ) sas of NOT mare than 100.0000, excudng the land on whch te pars , = nen ae fice, plant, and equipment are situated during the taxable year or? ° 1@ 20% income tax rate es for MSME is NOT applicable to foreign corporations (residentIucome Tage on C Comporations ‘MIT (Minimum Corporate Income Tax). 4. [raha be computed BEGINNING on the 4® year of operations immediately following the axsoie oy eich such corporation commenced its business (RR 2-98 as amended by RR 12-2007, RF 6 2020) ‘he amount of MCIT shail be compared with the RCIT. The tax ‘due shall be the HIGHER between the ot and MCIT. MCIT Rate: * TRAIN Law (beginning Jan. 1, 2018) 2% = CREATE Law © From July 1, 2020 to June 30,2023 = 1% © Beginning July 1, 2023 2% NONRESIDENT FOREIGN CORPORATIONS Under the CREATE Act, Nonresident foreign corporation not engaged jntrade or business in the Philippines shall pay a tax equal to 25% (previously 50%) of “gross” income beginning January 1, 2021 from all sources in the philippines such as interests, rents, premiums (except reinsurance premiums), annuities, emoluments, or other fixed or determinable annuities, periodic or casual gains, profits and income and capital gains, except income subject to capital gains tax. GOVERNMENT OWNED AND CONTROLLED CORPORATIONS (GOccs) Government Owned and Controlled Corporations (GOCCs) refer to all corporations, agencies, or instrumentalities owned or controlled by the Government. Under Section 27(C) of the Tax Code, as amended, GOCCs shall pay such tax rate of tax upon their taxable income as are imposed upon corporations or associations engaged in similar business, industry or activity, except the following tax exempt GOCCs as provided by law: + Goverment Service Insurance System (GSIS) Social Security System (SSS) Philippine Health Insurance Corporation (PHIC) Local Water Districts under RA10026 Home Development Mutual Fund (HDMF), also known as Pag- Ibig Fund (exempt upon effectivity of the CREATE Law) by special laws or charters shall be taxed based on the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of the Tax Code, insofar as they are applicable, such as the Bangko Sentral ng Pilipinas (BSP). Corporations createdTae Cop erating pate cot Jeet gan erovsee Wa 1 Bgy ary *Piaxes prencome derives, SSP from in the exercise shail be exert ar gunction®: 9nsaction® and its regulators aha vernmental ts actos Cone of. pencial institutions pee: ang tom, #8 to opeetcpank epyace businesses, ring supervisi over RO ney Stem operators; and it ns S Sees eto Mata pe ay oy erga emcees Gronetary ne tea say oe : the above enumeration gh, in monensin all applicable nation? SIMPLE GUIDE: rent gent} 7 from governmental functions -e . e Inne 3 oe age) from arising ‘arising from proprietary functions ~ taxatje = Income ofa _ [ILLUSTRATION 1: : i | ois following data for Hananiah Corporation during 2021 taxable ear: ie Gross Income, Philippines P9,750,000 i} _ Expenses, Philippines 5,500,000 | Gross Income, Malaysia 7,100,000 Expenses, Malaysia 3,300,000 Interest on bank deposit 250,000 Determine the income tax due assuming: Case A: The corporation is a domestic corporation Answer: P2,162,500 Gross Income, Philippines 9,750,000 Gross Income, Malaysia 7,700,000 Expenses, Philippines (5,500,000) Expenses, Malaysia (3,300,000) Taxable income 8,650,000 Tax Rate 25% Income Tax Due “Sa P2,162 500 % Under the CREATE Act, d generally , domestic corporations (DC) are saet e 25% regular corporate income tax (CIT - te regular net Rea far somes win and without the Philppines. However, fhe 0°° ME (page 236), the RCIT rate shall be 20%.Jucone Tig on C Hopporations The RCIT rate applied in the problem was 25% even n the absence of Information pertaining the amount of the domestic 's assets because its het taxable income was more than PSM, Thus, the OC wt ck quality as MSME . © Theinterest income on bank deposit snot a regular income. I's @ pessie income’ subject to fina tax of 20% (refer to Table 5-2 for the list of cert passive incomes subject to final taxes) Case B: The corporation is a resident corporation Answer: P1,062,500 j Gross income, Philippines ‘P9,750,000 Expenses, Philppines (5,500, Taxable income P4,250,000 Tax Rate pe Es J Income Tax Due 7,062,500 > The 20% rate for MSMEs under the CREATE Act is @ NOT applicable to foreign corporations. Consequenty, the RCIT rate applied in the problem ‘was 25% regardless of the amount of company assets and net income. ‘Case C: The corporation is nonresident corporation Answer: P2,500,000 Gross Income, Philippines 9,750,000 Interest on bank deposit 250,000 Total gross income 10,000,000 Tax Rate 25% Income Tax Due P2,500,000 + Nonresident foreign corporations (NRFC) are subject to 25% income tax on their “GROSS” income from Philippine sources (except income subject to CGT and tax-exempt income). Case D: The corporation is a domestic corporation. Assume further that the taxable year was 2020. Answer: P2,378,750 Gross Income, Philippines P9,750,000 Gross Income, Malaysia 7,700,000 Expenses, Philppines (8,500,000) Expenses, Malaysia — 8,300,000) Taxable income PB, 650,000 Tax Rate 7% Income Tax Due 2,378,730 _ | ° vputng th taration pared (rom TRAN eu fo CREATE Ace | fotlowing average tax rats (assume the Company 1 vang calender year | basis) shall be used: | ‘0 2020,0Cs other than MSME: 27.5%" | 0 2020 MSME: 25% \Tae 00 Corpor, % Or bioy poet sean oo GER; cones) Seyio Docent a | va 2008 10 SET | af eat anh Se u Jas np rom Jy 1 Deco se neues = Jo net snout BO NO FORRES 0 he tg a gta, mere res rt Yost ea sc nt xt ° rations and Sect; ion 28; tic COMPO! CREAT ‘ged, under E Law provig?) c ar(ent) ofthe Ta ne secson 7M tan coertons oS rate income TAX mort of one Wo percent (yy it taxable year is imposed upon dor corporations beginning ont, A Minimum COmPOE ng o the gross income as of the etdent foreig" '@ taxable year in which domestic corporations an ; 4g” taxable year enediately folowing erable. year in nt its ‘pusiness Operations en the IT is gre ich eommenced its BUSIPEN F920 until June 30, 2028, homens corporation RCIT, Provided: That effective Ju be one percent (1%). THE MCIT SHALL BE IMPOSED WHENEVER: =. The corporation has zero taxable income; or » The corporation has negative taxable income; or Whenever the amount ‘of MCIT is greater than the r . regular from such corporation. Hence, MCIT is oe ys income tax (RCIT) due computed and compared to RCIT starting on the fourth year oe operations. RULES FOR DETERMINING TH IE CORPORATION BECOMES SUBJECT TO MG Hie amended under RR 9-98) et es Meaning of “.... in the 4" ing of .... taxable i i ‘ year i u a eee ning fees near is Lasnoes ere d ie 4" ta; Cora r m registered shall be deere sees ar Under RR 12.2 R 12-2007, MC t also » MCIT shall in the computation of aired not only on a year bss x due.ecome Lage on Comporations 7 MCIT RATES: Period MeTT Rate (On or before dune 30, 2020 2% July 1, 2020 wo dune 30, 2023 a9 Beginning duty 1, 2023 2% “Dung the vanstion pecad (hom TRAIN aw to CREATE Act), the following average lar rates issue e Company m cong caer you! bass) hat be wed 2” 2020 198" 2a The 1.5% MCIT rates computes by geting the average rate (10 2020. 2% hom January o June 2520 and 1% fam Jy Decombe 2020 exsume te corpo usig calendar Ye) cARRY FORWARD OF EXCESS MCIT (MCIT CARRY-OVER) any 2x025 Of the MCIT over RCIT shalll be carried forward and credited against ne RCIT for the three (3) immediately succeeding taxable years. Revenue regulations 2-98 as amended by RR 12-2007 provides that a -inimum Corporate Income Tax (MCIT)" of two percent (2%) of the gross income as of the end of the taxable year (whether calendar or fiscal), depending gn ihe accounting period employed is imposed upon any domestic corporations znd resident foreign corporations beginning on the fourth (4") taxable year immediately following the taxable year in which such corporation commenced ¢s business operations. The MCIT shall be imposed whenever: + The corporation has zero taxable income; or = The corporation has negative taxable income; or = Whenever the amount of MCIT is greater than the regular corporate income tax (RCIT) due from such corporation. Hence, MCIT is always computed and compared to RCIT starting on the fourth year of operations. The higher amount should be the tax due for the taxable period. COMPUTATION OF GROSS INCOME For purposes of MCIT, “Gross Income” means gross sales less sales returns, discounts, allowances, and cost of goods sold, in case of sales of goods, or gross receipts less sales returns, discounts, allowances, and cost of servicesidirect cost, in case of sale of services (RR 12-2007). This means that gross income wil 9/80 include all items gross income enumerated under Secton 32(A) of the tax code or items subject to normal or regular corporate tax However, all income exempt from tax and income subject to final taxes shall be excluded in the determination of gross income for MCIT purposes. 241 |cette Tage OH Cor COMPUTATION oF cit: SELLER OF goons: Gross Sales 5 sles Discount Snes ere atone? Cost of Sales” Gross income ‘Add: Other income subj Corporate tax Gross Income for mciT purposes io rate (CREATE Ac! McIT eat to Normal OF Regular SELLER OF SERVICE: Gross Receipts Sales Discounts Sales Retums and allowances Direct Cost of Services’ Gross income Add: Other income subject to Normal or Regular Corporate tax Gross Income for MCIT Purposes MCIT rate (CREATE Act) MCIT “COST OF SALES (Seller of Goods): Invoice cost Import duties Freight Insurance Total “COST OF SALES (Manutfac 7 Rew mati used Direct Labor Factory overhead Freight cost “hoon, Pax (x) (xx) (ox) ~ ~ eae Pax Pr Px Prax (xx) (xx) (xx) Be lel nRMRe jz: wEP beTecome Cae on Corporations 4 ““DIRECT COST OF SERVICES: Salaries and Employee benefits of personnel, consultants — Pxx and specialists directly rendering the service . Cost of facilities directly utilized in providing the service xx ‘ (@.9. rentals and cost of supplies) ‘| Other direct costs and expenses necessarily incurred tox Provide the services Total Pxx 4 ILLUSTRATION 2: aa Case a: Assume the following data for Hananiah Corporation, a domestic corporation, ‘uring 2021 taxable year (4 year of business operations): Gross Income, Philippines 9,750,000 | Expenses, Philippines 5,500,000 Gross Income, Malaysia 7,700,000 Expenses, Malaysia 3,300,000 Interest on bank deposit 250,000 Gross income, Philippines 9,750,000 Gross income, Malaysia 7,700,000, TOTAL P17, 450,000 Expenses, Philippines (6,500,000) Expenses, Malaysia (3,300,000) Taxable income PB, 650,000 Tax Rate 25% RCIT Due 2,162,500 MCT = P17,450,000 x 1% 174,500 Income Tax Due (higher) __P2,162,500_ Under the CREATE Act, domestic corporations (DC) are generally subject to 25% regular corporate income tax (RCIT) on their regular net income from sources within and without the Philippines. However, if the DC is classified as MSME (page 236), the RCIT rate shall be 20%. ‘> _ As discussed in illustration # 1, the interest income on bank deposit is a “passive income” subject to final tax of 20%. Rules on Final Taxes on. certain passive income are applied regardless of whether the corporation is | subject to RCIT or MCIT because of the different nature of income to which the taxes were based. _ \Tie 02 Copporag, fig, 8 Cliboratigy, Juco ration, 2 reser FO"POration, corporation i ef data for 098 ois operation "9,750,000 80 owind a8 9,700,000 ssa eae 2" Ppp 20,000,000 3 ee Pripeine 45,800,000 Expense ata ervenses, Australia 900,00 , 60,0001 ied only 0 i ts amounte J. ie con oti oe es 9,750,000 Lourie answer a prilppines (6,700,000) pines i rable —iilie Tax Rete ——P12,500_ IT Due 97,500 warr=P97500008 7% a Income Tax Due (higher) js assets and netincome are NOT MORE THAN he + Athogn te conealy fog assets and PEM net income), the 20% Rot tess abe because OmegA COTPOTAtION fs foe compen xcess ‘over RCIT (P97,500 vs. P12,500 = 85,000, as ° town as aly pe shall be carried forward and credited ( agains the RGIT forthe three succeeding taxable years, provided th, the RCI is higher than the MCIT in the year to which the excess MCIT = forwarded. Refer to lustraton #3 for a more detailed discussion on cany. over of excess MCIT. MCIT is also applicable to RFCs, Case C: Assume the following data for Alpha Corporation, a domestic corporation, during 2021 taxable year. Alpha started its operation in 2010: Gross Income, Philippines P9,750,000 Expenses, Philippines 9,700,000 Gross Income, Australia 5,000,000 Expenses, Australia 4,900,000 The company’s assets amounted to 50,000,000. Required: Determine the income tax due. % Answer: P147,500 ae incom, Philpoines & Ausra P14,750,000 ig is 14) or mee Tax Rate for MSME RCIT DueIncome Tage on Coporations 147,500 P147,500 MCIT = P'14,750,000 x 1% Income Tax Due (higher) © Alpha Corporation is dlassified as MSME under CREATE Act Consequently, the applicable RCIT rate shall be 20%. The oxcess of MCIT over RCIT (P 147,500 vs. 730,000 = P117,500, aloo known as excess MCIT, shall be caried forward and credited (Gechucted) against the RCIT for the three taxable years, provided, that the RCIT is higher than the MCIT in the year to which the excess MOTT Refer to lustration # 3 for a more detailed discussion on carry- over of excess MCIT. Case D: Assume the following data for Alpha Corporation, a domestic corporation, during 2021 taxable year. Alpha started its operation in 2010: Gross Income, Philippines 9,750,000 Expenses, Philippines 9,700,000 Gross Income, Australia 5,000,000 Expenses, Australia 4,900,000 The company's assets amounted to P120,000,000 including the land valued at 0,000,000 (on which the company's office, plant, and equipment are lat Required: Determine the income tax due. > Answer: P147,500 Gross Income, Philippines & Australia 14,750,000 Expenses, Philippines (14,600,000) Taxable income 150,000 Tax Rate for MSME 20% RCIT Due 30,000 MCIT = 14,750,000 x 1% 147,500 Income Tax Due (higher) 147,500 In determining the threshold for the company's assets, the CREATE Act provides that the land on which the company's office, plant, and equipment are situated shall be EXCLUDED in the computation. Applying such rule, ‘Alpha Corporation is classified as MSME. Thus, the applicable RCIT fate shall be 20%. | | & The excess of MCIT over RCIT (P'147,500 vs. P30,000 = 117,500, also | known as excess MCIT, shall be cared forward and credited (deducted) | against the RCIT for the three succeeding taxable years, provided, that | the RCIT is higher than the MCIT in the year to which the excess MCIT is forwarded. Refer to litustration # 3 for a more detailed discussion on camry- | \ over of excess MCT. boo |ie on Clipon pce Lae Por ebion case Dis a nonresi Gip021 taxable veer ume that Al " Siporaon deter i 1500 PX ag inawor: P2 ° st fer ne mani ae eign corporations ar cori : Under the orEATE ome Ad, nove in the re mlippines beginning we Bo resident corporations: 221 204, wor append? me tax over the ad coredited (deducted) S9ular taxable Years, provided, ‘Any excess of the mit m corporate tax in the Year tg fe income tax shall be C2! the regular income tax for the the regular tax should be higher tt which the excess MCIT is forwar an ree nd than the minim rs ILLUSTRATION 3 ‘Addomestic corporation which commenced operations in 2015 provided the following data: 000 2021 2022 wx Gwossincone Prognqg00 P12,000.000 14,000,000 paw Gosmeme, —“eettcoo) 12200000 12,800,000 (19 000,000 wereens oss) s0n000 — (P200.000) 1.200.000 ( an) Determine the Income tax due from 2020 to 20: 123 t Assume further that the corporation is not classified as MSME. —— Answers: 2020: P150,000 Soliton RCIT or Basic tax (P5600; ime ee Ps37. 500 igher ; Excess MCIT 2000 MOM ap P12,500Jecome Tage on Corporations — | © The RCIT rate for 2020 (transition period from TRAIN Law to | CREATE Act) should be 27.5% for DCs not classified as MSME, | computed as follows: © RCIT from January 1 to June 30, 2020 = 30% | © RCIT beginning July 1, 2020 = 25% \ (© RCIT rate for 2020 taxable year (30% * 25%)2] = 27.5% | | © The MCIT rate for 2020 (transition period from TRAIN Law 10 | CREATE Act) should be 1.5%, the average rate for 2% and 1% MCIT. | © MCIT from January 1 to June 30, 2020 = 2% | © MCTT from July 1, 2020 to June 30, 2023 1% | © MCIT rate (average) = (1% + 2%)2] = 1.5% | 2021: P120,000 | ‘Solution: RCIT @ 25% PO | MCIT (P12M x 1%) 120,000 | Tax Due/payable (Higher amount) 120,000 | Excess MCIT 2021 P 120,000 © The amount of RCIT is PO because the operations of the company | resulted to a loss. | © The RCIT rate beginning July 1, 2020 of DCs not classified as MSME | is 25%. | © The MCIT rate from July 1, 2020 to June 30, 2023 s 1%. \ © Theexcess MCIT from 2020 was not catied over or deducted in 2024 | tax due because the MCIT in 2021 was higher than the RCIT. AS a | rule, MCIT can be carried over only if, at the time the excess MCIT is aimed, RCITis higher than MCIT. 2022: P117,500 Gross income 2022 Operating expenses 2022 Net income 2022 Less: 2021 NOLCO™ Taxable income 2022 RCIT rate Income Tax Due, 2022 MCTT (14M x 1%) Tax Due (RCIT-higher amount) Less: Excess MCIT 2020 2021 INCOME TAX PAYABLE 2022prcone Te erating ie TT may be tied Ove as aq, Loss during tne yoo oe the aa tree stent eter tapnset me ss MAST CO) a as rt Yea One (NO The NOLCO of abe rang LO eayaniog and 2021 shallbe cared ners ble years 202" he next fve (5) Consecutive as re ar lS ow ly fol 2023: P150,000 Solution: a CIT or Basic tax (600,000 * 25%) "0000 | MOIT (P11M x 1.59) a pics | Tax Due (Higher amount - M "8000 | Excess MCIT 2023 | cr rate fr 2023 should be 1.5% the aVerag6 ate fo 2% ang | 0 Re MOT detemined 2 OWS: MCIT from July 1, 2020 to June 30, 2023= 1% ‘ MCIT beginning July 1, 2023 = 2% MoIT rate for 2023 (average) = [(1% + 2%)2]= 1.5%, | ° i dnt nied | QUARTERLY AND ANNUAL CORPORATE TAX DUE Carry-Over of Excess MCIT from previous taxable year The computation and the payment of MCIT shall likewise apply at the time of filing the “quarterly” corporate income tax as prescribed under Section 75 and Section 77 of the Tax Code, as amended. Thus, in the computation of the tax due for the taxable quarter, if the computed quarterly MCIT is higher than the quarterly regular income tax, the tax due to be paid for such taxable quarter at the time of filing the quarterly corporate income tax retum shall be the MCIT based on the gross income as of the end of the taxable quarter. __ In the payment of said “quarterly” MCIT, excess MCIT from te previous taxable year(s) shall not be allowed to be credited. However, theIncome Cage on Corporations | ILLUSTRATION 4: (Based on illustrations from RR 12-2007) anal | CASE A: | | A corporation's computed Regular Corporate I e Tax (RCIT), MCIT and | | neaeel Cee withheld rom 11 to ‘am ooae induding ‘excess MCIT and | | S withholding taxes from prio 8 follows: Quarter RcIr ° Men ee ae Excess Excess | | Withhheld = MCIT — Withholding | during the Prior taxof Prior. | | year Year Year | ja 200,000 160,000 40,000 60,000 20,000 | a 240,000 500,000 60,000 - . sa 500,000 200,000 80,000 5 i ” 400,000 200,000 70,000 S - Determine the following: | Income tax Payable for the first quarter 2) Income tax Payable for the second quarter 3) Income tax payable for the third quarter 4) Annual income tax payable | ANSWERS/SOLUTIONS | Question # 1: P80,000 computed as follows: | Quarterly tax due (Higher-RCIT) 200,000 Less: | Excess withholding tax-previous year (20,000) Taxes withheld-this quarter 40.000) Excess MCIT-previous year (60.000) _ Income tax paidipayable 80,000 “The carry-over of excess MCIT from previous year is allowed ifthe tax due for the quarter is based on RCIT. Question # 2: P460,000 | Quarterly tax due (Highe-MCIT) Peeonoa | Less: : Excess withholding tax-previous year (20,000) Taxes withheld-1* and 2 quarters (100,000) | Income tax paid-1¥ quarter Cm | Excess MCIT-previous year habe P46, 000 Income tax paid/payable The carry-over of excess MCIT from previous year is not allowed f the tax due for the quarter is based on MCIT.uote Le J ng wears tote arate ooo ary rad noes a ei an #3: P1400 ae RCM 20, nt nt tin ce, Excess wt a yates com Taxes want and — Inco Ser ors son —_— eames agin ied as follows Pt Question # 4: 0 0002. iaieae Guatety we year foto) en ere ate er 48 Y eucremenr ae Income tax payable —— ASE B: (Morr at Year-End higher #han Rott: data: Assume ie fold : wciT Taxes Excess Excess Withhheld — MCIT Withholding during the Prior tax of Prior Tn Year Year ee 5 500000 700000 80,000 ; ; 4” 100,000 240,000 70,000 - = Determine the income tax payable at year-end ANSWER: % P150,000 Annual tax due (Higher-MC or m) Pr, 100.000 xcess withholding tax-previou: Tate wield be entre yee mam Taxes pair the firs year (250000) Excess MCIT-previous S quarters (680.00) Income tax paidipayable year (not allowed) . ; [2 The computation of the tas Past same wh the computations Paid for the first three quarters (P680,000) made in ttustration No. 4Iucome lige on Copporations nevieF FROM McIT a acon of Finance is authorized to suspend the imposition of ee oeees mooMe tax on any corporation due to: ©n account of prolon 2: Force majeure prolonged labor disputes Legitimate business reverses. Substantial losses from a * : 7 i om a “prolonged labor dispute” means losses arising Lethe st "tomate ty the employees that lasted for more than six (6) months wi : : wisiness operations, and the strike resulted to temporary shutdown CORPORATIONS EXEMPT FROM MCIT The following corporations shall not be subjected to MCIT: 4) Domestic Corporations a. Proprietary Educational Institutions b. Non-profit hospitals c. Domestic corporations engaged in depository banks under the expanded foreign currency deposit unit (FCDUs) on their income from foreign currency transactions with local commercial banks and other depository banks under the foreign currency deposit system. 2) Resident Foreign Corporations a. International carriers b. Regional Operating Headquarters (ROHQs) up to 2021 taxable year under CREATE Act. 3) Corporations registered under Philippine Economic Zone Authority (PEZA) and Bases Conversion Development Authority (BCDA).