TAXATION OF

FCDUs AND EFCDUs

Taxation Rules on FCDUs/EFCDUs/OBUs

FROM RESIDENT FROM OTHER FROM

INCOME OF (E)FCDUs/OBUs
(E)FCDUs/OBUs RESIDENTS NON-RESIDENTS

1. Income from foreign exchange

transactions
Interest income:
-forex loans and receivables Exempt 10% Final tax Exempt
-forex deposits Exempt - Exempt

Other income Exempt RCIT Exempt

2. Income from non-foreign exchange

RCIT RCIT RCIT
transactions
Sample 1: Income from Resident FCDUs/OBUs

INCOME AMOUNT TAX RATE INCOME TAX

EXPENSE
Interest income from foreign currency deposits P 2,800,000 EXEMPT P -
Interest income from foreign loans 10,000,000 EXEMPT -
Realized foreign exchange trading gains 13,000,000 EXEMPT -
Rental income 2,000,000 25% RCIT 500,000
Miscellaneous income 200,000 25% RCIT 50,000
TOTAL 28,000,000 P550,000
Sample 2: Income from Other Residents

INCOME AMOUNT TAX RATE INCOME TAX

EXPENSE
Interest income from foreign currency deposits P 2,800,000 - P -
Interest income from foreign loans 10,000,000 10% final tax* -
Realized foreign exchange trading gains 13,000,000 25% RCIT 3,250,000
Rental income 2,000,000 25% 500,000
Miscellaneous income 200,000 25% 50,000
TOTAL 28,000,000 P3,800,000

*10% final tax is not included in the quarter/annual income tax returns of the Company and is reported separately to the BIR by the
party who withheld such final tax.
Sample 3: Income from Non-residents

INCOME AMOUNT TAX RATE INCOME TAX

EXPENSE
Interest income from foreign currency deposits P 2,800,000 EXEMPT P -
Interest income from foreign loans 10,000,000 EXEMPT -
Realized foreign exchange gains 13,000,000 EXEMPT -
Rental income 2,000,000 25% RCIT 500,000
Miscellaneous income 200,000 25% RCIT 50,000
TOTAL 28,000,000 P550,000
Sample 4: Combined Income from Multiple Sources

INCOME FROM FCDUs OTHER RESIDENTS NON-RESIDENTS TOTAL

Interest income – forex deposits P 3,000,000 P 5,000,000 P 2,000,000 P10,000,000
Interest income – forex debt 8,000,000 4,000,000 2,500,000 14,500,000
securities
Realized gains on forex 1,800,000 2,300,000 1,400,000 5,500,000
Rental income 700,000 500,000 100,000 1,300,000
Gain on sale of properties 2,000,000 1,000,000 500,000 3,500,000
TOTAL P15,500,000 P12,800,000 P 6,500,000 34,800,000

How much income is exempt from income tax?

How much income is subject to regular corporate income tax (RCIT)?
How much is the total income tax expense?
How much is the total final tax expense?
Sample 4: Combined Income from Multiple Sources

INCOME FROM FCDUs OTHER RESIDENTS NON-RESIDENTS TOTAL

Interest income – forex deposits P 3,000,000 P 5,000,000 P 2,000,000 P10,000,000
Interest income – forex debt 8,000,000 4,000,000 2,500,000 14,500,000
securities
Realized gains on forex 1,800,000 2,300,000 1,400,000 5,500,000
Rental income 700,000 500,000 100,000 1,300,000
Gain on sale of properties 2,000,000 1,000,000 500,000 3,500,000
TOTAL P15,500,000 P12,800,000 P 6,500,000 34,800,000

How much income is exempt from income tax? P18,700,000

How much income is subject to regular corporate income tax (RCIT)? P7,100,000
How much is the total income tax expense? P1,775,000
How much is the total final tax expense? P400,000
Sample 5: With Directly Attributable Expenses

ACCOUNTS FROM FCDUs OTHER RESIDENTS NON-RESIDENTS TOTAL

Revenue from RBU P 3,000,000 P 5,000,000 P 2,000,000 P10,000,000
FCDU Interest income 8,000,000 4,000,000 2,500,000 14,500,000
(from foreign loans)

Expenses – RBU (1,800,000) (2,300,000) (1,400,000) (5,500,000)

Expenses – FCDU (700,000) (500,000) (100,000) (1,300,000)
TOTAL P8,500,000 P6,200,000 P 3,000,000 P17,700,000

How much is the final tax?

How much is the corporate income tax?

RBU – regular banking unit

How much is the final tax?
FCDU Interest income - Other residents 4,000,000
Final tax rate 10%
Final tax 400,000

How much is the corporate income tax?

Revenue from RBU 10,000,000
Expenses – RBU (5,500,000)
Taxable income 4,500,000
Income tax rate 25%
Income tax expense 1,125,000
Sample 6: With Indirectly Attributable (Common) Expenses

ACCOUNTS FROM FCDUs OTHER RESIDENTS NON-RESIDENTS TOTAL

Revenue from RBU P 3,000,000 P 5,000,000 P 2,000,000 P10,000,000
FCDU Interest income 8,000,000 4,000,000 2,500,000 14,500,000
(from foreign loans)
FCDU other income 2,000,000 1,000,000 1,500,000 4,500,000

Expenses – RBU (1,800,000) (2,300,000) (1,400,000) (5,500,000)

Expenses – FCDU int. income (400,000) (250,000) (70,000) (720,000)
Expenses – FCDU other income (300,000) (250,000) (30,000) (580,000)
General/Common Expenses (3,000,000)
TOTAL P10,500,000 P7,200,000 P 4,500,000 P19,200,000

How much is the corporate income tax?

 How much is the total corporate income tax?

RBU FCDU INTEREST FCDU INTEREST - FT FCDU OTHER - EX FCDU OTHER - RCIT TOTAL
Income 10,000,000 10,500,000 4,000,000 3,500,000 1,000,000 29,000,000
Direct expenses (5,500,000) (720,000) (330,000) (250,000) (6,800,000)
Allocated expenses (1,034,483) (1,086,207) (413,793) (362,069) (103,448) (3,000,000)
Taxable Income 3,465,517 8,693,793 4,000,000 2,807,931 646,552 19,200,000
Tax rate 25% EXEMPT 10% FINAL TAX EXEMPT 25%
Income tax expense 866,379 - - - 161,638 1,028,017

ALLOCATION OF COMMON EXPENSES

INCOME % ALLOCATION COMMON EXP ALLOCATED EXPENSES
RBU 10,000,000 34.48% 3,000,000 1,034,483
FCDU INTEREST 10,500,000 36.21% 3,000,000 1,086,207
FCDU INTEREST - FT 4,000,000 13.79% 3,000,000 413,793
FCDU OTHER - EX 3,500,000 12.07% 3,000,000 362,069
FCDU OTHER - RCIT 1,000,000 3.45% 3,000,000 103,448
TOTAL 29,000,000 100.00% 3,000,000