pART 4 Copporations ‘A: CORPORATION DEFINED 72, also kr en ast an acca Ce Revised Corporation Code (RCC) of the Philippines defined Cotte powers, atrbutes, ana ores Creaeen oF Ia, having the rghit of succession existence. % @Nd properties expressly authorized by law or incidental to its For taxation purposes, Corporation is defined under Section 22 of the Tax Code (RA 8424,) js amended under RA 11534 or the Corpora ‘Act: (CREATE) and RR 5-2021 as follows: ‘Recovery and Tax Incentives for Enterprises CORPORATION shall INCLUDE: 4) One Person Corporations (OPCs) 2) Partnerships, no matter 5 3 alge, rt how created:or érganized; 4) Joint accounts (cuentas en participacion); 5) Associations; or 6) Insurance companies A one-person corporation (OPC) is a corporation with a single stockholder; Provided, That ae faced pater tink anecas on dcae peoeeareaae ' BUT DOES NOT INCLUDE: 1) General professional partnerships; and 2) Joints ventures or consortiums formed for the purpose of undertaking: ‘a. Construction projects; or b. Engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the government. JOINT VENTURE (1V) OR CONSORTIUM Joint venture Is a commercial undertaking by two or more persons, differing from a partnership In that it relates to the disposition of a single lot ‘of goods or the completion of a single project. « : IN GENERAL, a joint venture or consortium Is taxable as corporation unless it refers to joint ventures described above. Additional requirements for tax exemption are as follows: : 1, A joint-venture or ‘consortium formed for the purpose of undertaking Construction projects is not considered a5 corporation (RR 10-2012, effective June 2012) provided: ; §) The joint venture was formed for the purpose of undertaking construction project; and 173SS Coy rion, b) Should iavalve Jolning/pooting of resources by cen Contracts; that |s, licensed as general contractor by the i Nocay Coveractrs Acredtaton Board (PCA) ofthe Departmen Pn and Industry (O71) Trade ©) The local contractors are engaged In construction business. 4) The Joint Venture itself must Whewse be duly licensed ss! @hd the Phiippine Contractors Accredtation Board (Peagy Ut by Department of Trade and Industry (OT1). of the FOREIGN CONTRACTORS . Joint ventures involving foreign contractors may also be treated = taxable corporation provided: Bray, * The member foreign contractor Is covered by & special f contractor by the PCAB of DTI, i Sense as * The construction project is certified by the appropriate Tend (ovement office) that’ the project is’ a foreign eAD%y Internationally funded project and that Intemational bidding jg sn°*4/ under the Bilateral Agreement entered into by and benetlMed Prilpine “Government. and the foreign internationale, Institution pursuant to’ the implementing rules and Teguatigne "2 Republic Act No, 4566 otherwise known as Contractor’ License ions °F 2. A Joint Genture or consortium fot engaging in petroteum, Geothermal and other energy operations pursuant ta an or Consortium agreement under a service contract with the gover Coal, perating ment, Oe ee OF Taxable Joint Venture Non taxable Jont Vente b Sean inet n Sted eorel bo ine carporaion, hence, Nax-exerf” (refer asc la Page 184), ‘Under CREATE Law. eet 25% of 20% RCIT "Under TRAIN Law: 30% RCIT ‘corporation fom nother domes “IM Received by Individual Coventurers; Trea'ed as dnidend income fom arpeaton whch a sutjecio 10% FAT. However, fe FHT rae shallbe 20% recaea INRAET and 25% i recetved by NRANET. JOINT STOCK COMPANIES Joint stock companies are constbted when a group of indhiduals, acting Jointy, ‘estabish and operate business enterprise under an artificial name, with an Invest} capital divided into transferable shares, an elected board of. directors, end other ‘corporate characteristics, but operating without formal government authority, JOINT ACCOUNT COMPANIES Joint account (cuentas en perticipacion) is constituted when one interests himself nthe business of another by contributing capital thereto, and sharing in the profits orcsses In the proportion agreed upon. They are not subject to any formality and may be Privately contracted orally or in wring. The term “associations” includes. al ‘Organizations which have substantial the sallent features of a corporation ta be taxable 88 “corporation.” 174Corporations B. CLASSIFICATION OF CoRPon sre. TAXPAYERS 1) Domestic Corporation (oc) 0 2) 32 ‘A corporation Created oF orgarized in the Phi ° MDE may a be deste as Aa Smal an Meduen Eur (ASHE) Resident Foreign Corporation (RFC © Acorporation created or organized in engaged In business inthe Pippin 709" COUTREY Under laws 2nd nes. Nonresident Foreign Corporation (Nac) 9 A corporation created or organized In 5 engaged In business inthe Phang: °°" COME Under ts ows and isnot (CORPORATIONS MAY BE CLASSIFIED FURTHER ITO: 4) 2) Ordinary Corporations ~ corporations subject to requar corporate income tax Rom, ae, Know 2s orm tax or base tar, at a ite of coer an ee Sn foregn comport ae MNES Or 25%, for domestic corporations other than MSMEs ind foreign corporations. Under the the RCI rate was 30%, ‘TRAIN Law (From Jan. 3, 2018 to uy 1, 2020), Special corporations ~ corporations subject to income tax rte which is Jowerthan the ‘equlr corporate Income tax (RCIT) rate of 20% or 25%, as Um case may be, TRAIN Laws 10% (before July 1, 2020) CREATE: * 1%: July 1, 2020 to June 2023 * 10%: Beg. July 1, 2023 b. Resident Foreign Corporations ' + Intemational carriers 2.59% of Gross Philippine Bilings (CPB); however, it may be subject. to a lower rate or exempt under certain conditions +1 Regional ting + TRAIN Law: 10% of net income. Headquarters (ROHQs) + CREATE: © 10% -uptoDec. 31, 2021 only 175+on ms FE yer pn OR Corpora, lion (See © _ Nonresident Foreign Corporations + Non-resident Gnematographic 25% Of Gross Income. Film Owner, Lessor or Distributor ‘+ Non-resident Owner or Lessor 4.5% Of Gross Income Of Vessels Chartered by = Philippine Nationals + Non-resident Owner or Lessor 7.5% of Gross Income Of Aircraft, Machinertes and EXEMPT CORPORATIONS The following organizations shall not be subject to income tax ((Secben 20, RA 6424); National Internal Revenue Code): Labor, agriauttural or horticuttural organization not organized principally for rote; Mutual savings bank not having 2 captal stock represented by shares, a bank whet cpl ck oar td pert fer ml papers sng te pro Witho A beneficiary socety, order or association, operating for the exclusive benefit members such as a fraternal organization operating under the lodge system ‘mutual aid association or a non-stock corporation organized by employees provay, for the payment of ie, sickness, accident, or other benefits excusively tothe mend of such Society, order, or association, or nar-stock carporation or ther depengen = Cemetery company owned and operated exclusvey forthe benefit of ts member NNorestock corporation or association organized and operated exclusively for reigy chantable, scenic, athletic, or cutturl purposes, or for the rehabilitation of vera ‘0 part of ts net income or asset shall belong to or inure tothe benefit of any ment” organizer, officer or any specific person; a a Business league, chamber of commerce, or board of trade, not organized for prt no part of the net income of which inure to the benefit of any private stockhoyge individual; : ve Gvic league or organization not organized for profit but operated excuswely for tne promotion of socal welfare; . ‘A non-stock and nonprofit educational institution; Government educational instintion; Farmers’ or ather mutual typhoon or fire insurance company, mutual ditch or irigatin company, mutual or cooperative telephone company, or like organization of 3 local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses; and Farmers, fruit growers, or like assodation organized and operated asa sales agent fy the purpose of marketing the products of its members and tuming back to them the proceeds of sales, less the necessary selling expenses on the basis of quantity of produce finished by them. PROVIDED, hat the iicome of whatever Kind and character af the foregoing orgenizatons tom any ‘oftheir properties, real or personal o rom any cf their activities conducted fr proft regardless of (he dispositon made of such income, shallbe subject io income tax. 176a Corporations 0 \yERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCs) 15-202, Implementing the provsions of CREATE lon, provides that GOCS, 9°00 instrumentalities shall pay such rate of tax upon their taxable Income 25 are Br corporations OF assoGatns engaged In a sida business, Indusuy, oF OCR, excerT? Government Service and Insurance System (GSIS) 3) socal Secutty System (555) . 3) _ Philippine Health Insurance Corporation (PHIC) 2) Local Water Disuicts (RA 10026) 5) Home Development Mutual Fund (HOMF; elso known as Pag-big) NOTE uF oc Papi i exempt mic upon th eflcviyof CREATE Law cn Ape 11,2021. = PCSO.and PAGCOR are taxable GOCE. p, INCOME TAXES OF CORPORATIONS GENERAL PRINCIPLES A SOURCE OF INCOME SUBJECT TO TAX: 1. DC-We 2. RFC and NRFC— Within the Philippines only B. BASIS OF INCOME SUBJECT TO TAX: 1 NRFCS: Final Withholding Tax (PWT) 2. Passive income we PWTs ‘3.Capital Gains on Sale of shares of stock of 15% Capital Gains Tax (applicable to domestic corporation all corporations) Sold directly to a buyer; and Sale of real property in " 6% Capital Gains Tax (applicable the Phitippines classied only t domestic coxporaion) 7E. REGULAR CORPORATE INCOME TAX (RCIT) ae SMEs) RFCS Gross income Pox Prat Pro irc ‘towable Deductions __ co) (v0! ox) NA Taxable reome Pox Poo Pr a Rate Ww 20% 25% 25%" ROIT/FWT — Box Prox Prox a —Pex NOTE: ' * Effectivity of the RCIT rates under CREATE Law (RR 5-2021): > For DC and RFC - Beginning July 1, 2020 > For NRFC- Beginning Jenuary 1, 2021, CREATE aw, which was published on March 27, 2021, tool 21, ‘Aibeugh CREATE w ok tle ely on Api, 20a eo Forty, provisions i tho law wt spect efectnty dle which ee eatin nas 88 £2021, such us the revised RCT rates for DCs and RFCS 8s wo ag gy, PWT ate for RFCs, ‘erg » Micro Small and Medium Enterprise (MSME) > Refers to a domestic corporation with: = Total assets of P100 rrilion and below; and ~ Net Income of PS million and below 0 The total assets excludes. ¥c ticular | ‘fc, ple end equpmert are sueled dung the taxable year ts the taxis imposed, Thus the land is held primatiy forsale fern” ME purposes, the value of is land tobe inched in teminog eae Tegardless of whether the business of the company is the leasing otiang © Incase there ar aress in he company’s ofc buldng that ae being cout the percentage ofthe foo srea devoted to he company’s ote ‘mulled wih the total vel ofthe land in deter eg bbe excluded inthe computation of total asses, ‘0 + Allother “domestic” corporations are subject to RCIT rate of 25% July 1, 2020, eineg + The 20% RCIT rate for MSME is not applicable to foreign corporations, F, MINIMUM CORPORATE INCOME TAX (MCIT) ‘Section, 27(E)(1) and Section 28(2) [for DCs and RFCs, respectively], as amended, under CREATE Law, provide: ‘A Minimum Corporate Income Tax NCIT of two percent (2%) of the gross income a3 of the end of the taxable year is imposed upon any domestic corporations nd resident foreign corporations beginning on the 4° taxable year immedatey following the taxable year in which such corporation commenced its business ‘operations, when the MCIT is greater than RCIT, Provided: That effective July 1, 2020 until June 30, 2023, the rate shall be one percent (1%). 178> Corporations ‘THE MCTT SHALL BE IMPOSED wateniever: The corporation has zero taxable income; or + The corporation has negative taxable income; or + Whenever the amount of MCIT is greater than the reguar corporate INcome tax (RCTT) due from such corporation, Hence, MCIT 1s always computed and ‘compared to RCTT starting on the fourth year of operations. MCIT RATES: © TRAIN Law (beginning Jan. 1, 2018) 12% * CREATE Law ts 9 From July 1, 2020 to June 30, 2023: 1% Beginning July 1, 2023 2% MCTT Is not applicable to NRFCs, Special Corporations and corporations subject to other types of Income tax regime such 2s PEZA registered entities. CARRY FORWARD OF EXCESS MCIT (MCIT CARRY-OVER) + Any excess of the MCIT over RCIT shall be camied forward and credited ‘against the RCIT for the three (3) immediately succeeding taxable years. RULES FOR DETERMINING THE PERIOD WHEN A CORPORATION BECOMES: SUBJECT TO MCIT (RR 2-98 as amended under RR 9-98 and RMC 62-2021) 9 Question (as illustrated in Q10 of RMC 62-2021): : What Is the reckoning date of determining the corporation's fourth year coftoperation? © Answer(as illustrated In Q10 of RMC 62-2021): The phrase "4th year of business operations” should be construed to ‘mean “fourth taxable year immediately following the year In which such Corporation commenced its business operation’ as Indicated under ‘Section 3 of RR No. 5-2024 on MCIT, ©» Mustration (as illustrated in Q1O of RMC 62-2021): ~ _ ABC Corporation commenced its business operations in 2017 ~ _ MCIT shall be computed beginning 2021 ~The MCIT shall be imposed beginning 2021 if it exceeds RTT GROSS INCOME FOR MCIT PURPOSES 1) Seler of Goods Gross Seles Pox Sales Discounts (x) ‘Sales Retums and Alewances (a) Costot Sales im) Gross Income Pax ‘Add: Other Income subjectto RCT = _xx Total Gross Income for MCIT purposes ax 1792) Seler of Services Gross ~ GOST OF: ‘ Marulactunng Freight cost Insurance premiums ‘Omer costo production Tota! Receipts Sales Discounis and allowances, Cost of Services Gross Income ‘Add: Other Income subject 1o RIT Total Gross Income for MCIT purposes + fase e Salanesfmpeyee banat of pereroaconaanis and specs chet ending ty Pe Cost cies drecty uzedinprovideg th servca (0g, renal nd cost of suppian Other croc costs end expences nacassayinced to provide the sances ay sTOTAL a © Incase of banks, ‘cost of srvicas halinlud interes expenes. ar . RELIEF FROM THE MCIT ‘The Secretary of Finance Is authorized to suspend the postion oF the Mery ‘on any corporation which suffers lasses on account of 1) .' Prolonged labor dispute 2) Force ma] 3) Legitimate business reverses. CORPORATIONS EXEMPT FROM MCIT ‘Special Corporations such 1 a. Propet educatnal Instutos and hospas Intemational carrier € _ Regional Operating Headquarters (up to Dec. 31, 2022 only) ‘Nonresident Forelgn Corporations (NRFCS) Corporations that are tax exempt’ under the law such as Regional or Area Headquarters Firms that are taxed under special tax regime (e.g. Covered by PEZA law & Bases Conversion Development Act) 180os Corporations NET OPERATING Loss canay, “Net Operating Loss (NOL) means we MOLLO! Income of the business in taadle * _Fecarporuions adopting Fiscal Year prod, trate year 2029 and 2021 chal nce at peaecrporbons wth cal years end oo bles dune 30,201, and June 30,202, ‘respectively (RR 25-2020), REQUISITES FOR DEDUCTILIT 1, Atthe time of incurring net loss, the st not be from tae ond loss, the taxpayer mi eempt 2 Tse 8,02 Substantal change inthe ownership of the business or a) Not less than seventy-five (75%) In nominal value of outstanding {sued shares, if the business i athe name ofa corporation ished by or on behalf of the same persons; oF ¥ b) Not less than seventy-five (75%) of the paid-up capital of the SDrPoraton, if the business is in the name of a corporation, is held by or on behalf ofthe same persons, Presentation of NOLCD in the Income Tax Return (ITA) and Unused NOLCO In the Income Statement: 1. The NOLCO shall be separately shown in the taxpayer's (also shown In the Reconclation Section ofthe Tax Return); 2 The Unused NOLO shall be presented In the Notes to Financial Statements showing, In detal, the taxable year In which the net ‘operating loss was sustained or Incurred, and any amount thereof claimed a5 NOLCO deduction within five (5) consecutive. years Immediately folowing the year of such loss, 3. The NOLCO for taxable years 2020 and 2021 shall be presented In the "Notes to the Financial Statements separately from the NOLCO for other taxable years. : 181RT oN Corporatio Mtg G. SUMMARY OF REVISED INCOME TAX RATES UNOER CREATE LAW (RR 5.2921) Regular or Vinirom Corporate Teams ‘between the’ Trehiher between ne MCITY rales GUAR TYPE OF CORPORATION RE uly 7, 20201 tune 30, 2023 5 “om | ouy 1.2028 a | For corporalions with net taxable| 20% uy 1, 2020 1% | duly 1, 202010 ‘income not exceeding Five une 30, 2023 Million Pesos (P5,000,000) ANO {otal assets not exceeding One Hundred Mion (P 2m °| suly 1.2023, 100,000,000), exctuding the land con which the particular business: entity's office, plant and equipment are situated Proprietary Educatonal | 1% | suly 1,2020t0 > Not Applicable Institutions and Hospitals, dune 30,2023 40% | suly 1.2023 ak. 182Coperane {yPE OF CORPORATION Tanuary 1, 2022 to June 30,2023 shy 1,202 Not applicable Corporation |. FINAL WITHHOLDING TAX (FWT) ON “CERTAIN” PASSIVE INCOME derived from Philippine sources Swans Gee INTEREST INCOME/VIELDVOMher = leet income n any casrency bank pack = Yald or any monetary benef tom depost substi Yield or any monetary bene rom st nd an other siedar erangements BRE [8 me . oo 25% 20% = Interest income derived from depository bank undor ‘expanded foruign currency deposit vnitsystem ' {FeDS/FCDU) {‘Peo t CREATE = Pere CREATE Lae MRTCA erry bet 30% FT exc br neo oe CT, rr tha FT lavas 75% to noresidont : bs mare eve Kom FCDSF.CD depo rl pei eer ech hg, reomes Siac ar any (7 MM MA compan tere hm ee ese ap PASSIVE INCOME © CREATE Law (beg Apnitt, 2021) Geraraly, royaties wre considered Income te FT. Nowe ne BF gh, doe Occoe ER ‘SeParaton'a prema purpose, the same is NOT passe nome Du Seep nde OR Ray he 0. esate rennet ete al an nso wh thepones ponte nts ha olcapret le Connon inte tel ocr bars ann, neck 3) DIVIDENDS (RR 22021; RR 52021;RMC £2202) + FROMDC ‘Section 42(A)(() of Tax Coe s amended, proves: ‘nd on repent a hed foie MT Te Raves ARE aK ie ‘rasa incoe of te freign corporation eto te yer ‘ihe cose of 83 lexabl your precedig the declaration of such <@vidends ft for such pat of te pared asthe corporton bas been in ‘existence was derived orn sources win be Pippin, Eramet Exar Exempt Rem 184 «Corporations re TE Lew, RR 2-202'. Devcerd exceme receres e Ane nub AM ete shal NREC which ar eqaraert to tases Geared al en pacer (10%) afer Jaruary |, 2021, wtach the diferonce between the jf he oon lodhenna ra eee Cunt Se) Grdends FA ae of 15% so knw as Tax Spang Rt Minos TexSprs- 25 O0N peru Gare Wi Tax Spanng — 15% s=-§TUS OF ONIDEND INDOME @ FROM dome coperaton. name ened fon wd te Phppmes 0 FROMForeln Caran AUC 82.217 Secon czy forvignaourced dMidend received by a domestic corporation: 1) The deidends acualy received rete fo he Phlgpnes we reinvested n he buses See ne samestecrparaion nahin Pret arbl yar fom te tne the reg > Seeaoes = 2) The Teceive iy be used und the wortng capital requrements, ends. died paynets, esi donestc baci, an maine nerty percent (2%) in value of the ‘Absent any one ofthe above condtons, the forig-sourced dvdenda shall be considered aa taxable Income (x ol the domestic corporation inthe year of actual receipt or romance, sbjecto suche, tet and penalties, at appcable (RR 2071, RMCE2 2021) © Theterm used under Secon 424)2) lhe Tax Code was forign carport, wihou dafncion Soarenadeey ee SHPO Sresden or aonresen. Hence, ene deterng he Seiten came fom reg capraton sl pio bulesden and nner ‘coporaton, © Secton 2) of RR.52021 res tat. den inane recsked frm nenesdent fregn ‘paraiso ead as frgn sourced iden,1 CAPITAL GAINS TAX (CGT) Cina A in CAPITAL GAINS derived from Philippine Sources 1) ONSALE OF pret etrrirg et ale . Under CREATE Law (beg. Apa 11, 2021) ‘Based on Capital Gan, regardess of maint 1% 18% 14, Under the TRAIN Law (Jan: §, 2018 to Apel 10, 2021) eel 15% On capita gain, regardless of ‘On Fert 100,000 capeat % a an On Captal Gan h excess of P1000. rt & 2) ON SALE OR EXC! OF LAND : HANGE : ‘OR DISPOSITION Based on Soliing Prica or FMV, whichever Is. NA TT 6% Car repre beth aot aan ss 8 eC Woy gain ox loss is iy Saportnsaningades aren Mant ne to nlnpyen ate stm eae Tax fe bayer be govenmenl, 8 Tr OPP We ne . Fer purposes of computing ne 6% CGT on rl properties. he Far Mae Uae ae Eager SS pein entree tei acne ne roe he FM deterred by independent paresis nt applicable for CGT poses. eR © CGT is due within 30 days from date of sale. CAPITAL GAINS TAX ¢ Capital Gains Tax on Sale of Land ‘and/or Buildings Requisites: 1) The land andjor building must be capital asset; and 2) Te must be located in the Philippines, : 3) Repardless of whether the transaction resulted 10 again or loss * FORMULA: ‘ - Tax Base Pox -Rale _ 6% CGT Prot TAX BASE: 4, Seling Price 2. Fair Market Value 3, Zonal Value 1863. Corporalions Capital Galns Tax on Sale of Shares of Stock of s Domestic Corporation Te shes ck uh aes, ech cr Speed mut eto 4 domestic corporation, 2) The transaction must be not through the local sock 3) The seller should not be a dealer in securities (held as capital asset Of for Investment purposes only)’ 4) The transaction should resutt to a capital gain based on computation shown below: - FORMULA Seling Price Po Cost (2 Capital Gain Pex fale pe cot Por NOTE. oc sharsol donee through the cal sock exchange not subject to nace ‘tax but lo a “dusmness tax” of 6/10 of 1% (also inown 23 Stock Transacinn Tax) under Sec. 177 of the Tax Code. + (Sale of shares of stock by 2 dealer secures sch as brcheraye ka, regaries of wheticr he shares were sold drecly lo a byer or trough the local stock exchange i subyec bo basic noe vaxand value added tx. ‘SPECIAL CORPORATIONS ‘Special Corporations are corporations subject ta lower RCIT rates as compared to the. 20% or 25% on their regular or ordinary income by (previqusly at 30% under the «TRAIN Law). ‘There are a total of six (6) special corporations under the Tax Code as amended, namely: Domestic Corporation 1, “Proprietary educational institutions 2. Hospitals which are non-profit Resident Foreign Corporation 3. Intemational Carriers Nonresident Foreign Corporation 4 Nonresident Cinematographic Film Owner, Lessor or Distributor 5. Nonresident Owner or Lessor of Vessels Chartered by Philippine Nationals 6, Nonresident Owner or Lessor of Aircraft, Machineries and Other Equipment 1871. DOMESTIC CORPORATIONS (RMC 62-2021; RR ¢ Hospitals which arc: non-profit and Propri Oo" Corpor eon, 44-2021; RR 3-2022): etary Eeveatona Intute og 3 wl 10 APY to Nasal wy, . The rules applicable to ordinary. are non prot and propretary eaucaonal institutions, €X unrelated income "1% based on laxable income ‘© Related income < unrelated incorne 25% RCIT; 20% if MSME “Non-stock, Non-Profit Educational inatulion whose, member or spetfic person. * 3 ; + Related come> uneeed ncome 1% based on laxable income Related Income < unvelaled incare ‘25% RCT; 20% (SME nrtock, Non-Profit Educational inattaton [NOT FALLING under Section 3 of RR 3-2022 (mesning HO PART ‘FAs ret income or assel shal being lo or ince fe banat of any manber, organizer, oficeror any spect person) © Qn the porton ofits revenues or aasels USED sclualy, Exempt from taxes and duties ditectly, and exclusively for educational purposes. under See 4(3), Art. XIV of the : Consitson and Sec 30 oft ‘Tax Code, as *Onthe porn ofits revenves or assels NOT USED aca, directly, end exchsively for educational puposes. 25% RCT; 20% 7 MSME 190Corporations i Educational lat tition (GE) ow povereD by the prefrantal corpora cor Ls rte Income from related acres Coasts votes Sec. $40 oh (Ba Tex Cote or by ts own (On incoma not exempt by laa such a inca c nhstver ind and charactor of te foregcing ergareatns fom any ‘Bite ROM, Z% A MSME ‘oftheir properti, real or porsonal,o ram any of tae # cis | bel ‘rade of such income, 8 prided under Ser 30 the Tax, Code. NOTE: Final wiholdng tes on passive incomes and capt gas tax Foal wee ronan aac scandal pees it Hospitals ep Non td nce > une acme ‘based on tale income Related Income < unrelated income Beg July 1, 2020, 25% RCMT; 20% ¢MSME Hospitals organized FOR-PROFTT Bog, Wy 1,200 25% RCIT; 20% « MSUE Phot ta duly 1, 2020: 30% RCIT NOTE: a + The special tax rate for proprietary educational institutions and non-profit hospitals shall be applied as follows: eS Penton RATE From July 1, 2020 to June 30, 203 1% Beginning July 1, 2023, 10% Prior to July 1, 2020 10% Q_**Non-profit hospitals may also be exempt if all the Following conditions for ‘exemption as provided in the case of St. tuke’s Medical Center (SLMCI) vs. CIR in the CTA Case No. 7857 dated June 3, 2011 are present: + It isa non-stock corporation + Itis operated exclusively for charitable purposes; and * No part ofits net income or asset shall belong to or inure to the benefit of any member, organizer, officer or any specific person. ‘The court provides that a “private” hospital organized as nonstock- : onprofit that is operated for charitable and social welfare purposes is exempt from income tax under Section 70 of the Tax Code provided all the requisites for exemption are satisfied. 191’ Crrperetioy 2, RESIDENT FOREIGN CORPORATIONS: INTERNATIONAL CARRIERS In common Carter refers to an Intemational Ale Carr Irena Ca arene Secon 3 FR 15-2013, 2 fay touched of wlenbon of esr erwcnaacirs frm he Phipps lo Boywhere ne wor an business me trmapotaton fonine | r orhaving menianed ne oe ae ina Popes fr te sl of owned Kapaa oouments or iiesipassage documents of ober shipping companies, which shpneg eepunes operas widen any Papo pat. ae 288 fine ea, INCOME TAX * an intemational camier having’ fights or voyages ariginating from any port oF point in the Phillppines, respective of the place where passage documents are sold or issued, is subject to the Gross Philippine Bilings Tay of two and one-half percent (2 ¥2 %) Imposed under Section 28(A)(3}2) and (b) of the Tax Code, as amended, unless it. Is subject to a preferentisy ‘rate or exemption on the basis of an applicable tax treaty or Internationa agreement to which’ the Philippines 15 a signatory or on the basis of reciprocity” (Sec. 4, RR 15-2013). FORMULAE Gross Philippine Bilings™ = Pox Role . ‘25m Income Tax. Prot s=inlematonal carers may aval of aower tax rate (preferential rate) or exemption RA10378 on he basis of: : a. Tax Treaty, or b agreement; OF Reciprocty = An intematonal cater, whose home county grants income tax cexemplin to Philopine carers, shal iewise be exempt fom income tax. 192Corporations GROSS PHILIPPINE BILLINGS (cop) Internavonal Air Carrer Refers to the emaure of grozs revenue derived from cartage of Persons, excess baggage, cargo and mail originating from the septa rine Or isoue and the place of Of the tucker oF passage of document. es International Shipping Carrier Refers tothe amount of gross revenue whether for passenger, ergo oF mall originating from the Pbilppines up to final destination, PRBS Of the pace of Sle or paymerts ofthe passage or fresh focuments, Ne (Re 15.700, Gal Aa Co , Phi Branch v. Conmasines hema Reverse, GR. Ho. 182045, September PHIL 493-505) 18.2 one PER wos kw alee Plea ead rie . for ara dass, besress dea recency cess passe. 2s he cane nay be, ot Ee ay neem APO pont fe Pgs tsa dearaton oy por ‘ar pani ofa ken cour, For ths purpose, te Gross Phippre Béings shal be eierned by comping he rent ere et belt capns el Sn ceed ae passage (i2.frst cass, business lass, er econemy dass) and per lastcaten of passenger .c. achA, cull cx efari) and mulphed by th coresponng tal nurber ol pesenger town fr Be mara es deored the fight mantest g = Tae evalidated, exchanged andiorindorsed be anche nieratona aifne lom pao he GPB da passenger boards a lane na port or pontin he Phigpnes. . which engnales from the Philipines, bu tansshipment of passenger thes place at any port outside the bgt en eter sire oi ie cetpane toca te tee ee ee the Philppines ta fhe port of ransshipment shal kom part of the GPE. + The gross everue on excess baggage which ongated for any port or pantn the Phippines and destned fo aypetcle brig cnn ale onpdedboed nto seco th ee recelpl or any simdar document forthe said transacSon. ‘+The grass revenue for freight or cargo aid mail shal be delemnined based onthe revenue realized from the ‘ariage theo! The amount realized high or caro shal be based onthe amex appearng on he away 193Corporation, xn0uARTERS (ROHOS) 7 “Gat no fnger be consdered as sper Srporatcn, ConseUenIY, Ne ey applicable t0 ordinary reser! toegy orale sal Bt€3CY 2. Such 9 omar rate: 25% ofreincame derveg from Phlppine soUcescniy, ang 9 MCIT (on gross income in the Philippines): PRIOR’ Considered as spec corporation subj wlan’ Gone xl based on oc 4 REGIONAL OPERATINOH! a) and Represeraive Otis (2 NOTE: ‘¢Regjonal or ea Headquarter (RHOIAK are diferent fom ROHQS. 44 Regional or Area Headquaters (RHONAHOs) and Representa Or (Rs) ere Laxexerpl and not nchded in the defion of corporaion £3 income lax purpeses. 24400) of the Ta ‘Code, as amended: a se alo oe yeadqutes: shal mean 2 bach eslbished in Phlppines by ‘conparves and which headquarters " hah acl 5 SPENT, COMMUNAL ang ‘oornatng cenier for ther ails, “sutsidanes, or branches in the AsiaPac Regan and other foregn martes (A) if the Tax Code, ax amen Se eainates pod Scton 200) hal be bet Tncome fox 3, NON-RESIDENT FOREIGN CORPORATIONS: opresitent inematapic Fm vrer, LesororDstibuor "Gloss eons Naren ner Lessor cl Vessels Carre by PRIPPN® Gross rials, lease Nationas corchaerfees 45% Nomen Over or Lessor of Arf, Machines and ter Gross renal, Equipment Li chartersiotherfees 7.5% a 194Corporations ve BRANCH PROFTT REMITTANCES rx (Bonny op _ sae 2(AYS) ts Tat Coa endo poy, taLh alba bse nga en i ab abies el em prt) fer he lx component ere PH et temaad tee A ata coat thou any dotuccn COMO ). The tax, (@8 fegtered wth be Phi secon oe Tax Gate reat tet wd pad ne te ter eon remuneration fr techrical, rues, yen oe caption Baer on sae, rece RET eet rad as anh poten se Fon acs nao at ‘business in the Philippines, fectey corrected wh te conduct ts rade oF NOTE: This provion was mt amended by CREATE Lay FORMULA: Profit Remittance Pox Rate 1% BPRT — PROFIT REMITTANCE "(ee ROBT Connected with the conduct. of &S wade or APPLE TAK business in the Phil ppines ‘Subject to 15% BPRT Others (L.¢., passive Income) Not subject to BPRT: EXEMPT EATITIES + Activities registered with the folowi shall rs 4) Philippine Economic Zane Author ann = 2), Subic Bay Metropolitan Authorty (SEMA) 3) Clark Development Authority (CDA) BIR RULINGS Branch it Remit Ta 1989 For purposes of the 15% proft remittance i form of remittance, drect orindirect, made o the mmoet Company abroad shal be presumed hae batn made kom he accumuaied profs the branch” # 6 Branch Profit Remittance Tax, BIR Ruling No, 583-68, December 19, 19 ‘The 15% branch profit emitance tax in adélion fo the regular corporate income ax ue em resident foreign corporation. s. 9 Ph {tis cardinal rein taxation that exemptions shouldbe constued stctssimi juris because itis ‘highly disfavored in law; and he who cms an exemption mustbe able tojustty his claim by the leerest grant of organic state lew. An exemption fom the common burden cannal be permited to exist upon vague impications, 195he ee oe ta Corperetiy Lg OFFSHORE BANKING (oBu See. 26/A)4) otermcne ) Repealed under CT TNTTETD ‘An OBU Is a branch, subsidiary or affiliate or a foreign banking {Peated In a/an Offshore Financial Center (OFC) which Is duly authorized by Danse offshore banking busines in the Phitppines (PD1034; BSP Craular ng, Sty Us are allowed to Provide all tradivonal banking services to NOn-tesidents Rag ‘Sutrency other than Philippine national currency, lay INCOME TAX OF OBUs * Upon effoctivity of the CREATE Law Under the CREATE Law, OBUs are now taxable just 4 ordinary resident foreign corporations. They a now subjecr ye 2" Fevised RCTT, rate of 25% an thelr Income derived from sources withys C8 Philippines. the ‘* PRIOR to the effectivity of the CREATE Law Income derived by offshore banking units (OBUs) from foreign transactions shal be taxed 2s follows: Cure ‘couneR PARTY AE Non-residents Exempt ‘Other OBU'S. Exempt Local Commercial Banks Exempt Branches of foreign banks Exempt Other residents, 10% : M. TAXATION OF POGO ENTITIES AND SERVICE PROVIDERS RMC No. 107-2021, dated October 2021, was Issued to clrlarze Republic Ac (eq) No. 11590 Entitled “An Act Taxing Phiippine Offshore Gaming Operations, ementin for the Purpose Sections 22, 25, 27, 28, 106, 108, and adding New Sections 125.4 ang 288 (G) of the National Internal Revenue Code of 1997, as Amended, and For Other Purposes”. . ‘The salient changes in the 1997 National Intemal Revenue Code (NIRC or the Tay Code), as amended by RA 11590 in relation to corporate taxpayers are 2s follows: +The definition of "offshore gaming licensee” was added to Section 22 of the Tax Code and shall be constlered engaged In doing business in the Philippines. «The definition of “offshore gaming licensee-gaming agent” was added to Section 22 of the Tax Code who acting as such, shall neither be involved with tthe business operations of the offshore gaming licensee nor derive Income - therefrom, 196. Corporations DEFINITION OF TERMS (Based on RR 20-2024 dated tlovember 26, 2071) o Philippine Offshore Gaming Operaten (POGO) > Relea tothe opereton by an Otfshore Gaming Licensee ontne games of ig chance o sparing even va ba inmel wr retard ricbane nore xcusvely for ofshare cuslemeraplayers who ar nen Filpnos. > The fer POGO shallaso refer OGLs and Acereded Service Providers Offshore Gaming Licensee (OGL) > ‘Refers fo an offshore gaming operator, whether arpanized in the Philippines ” Pilpietase) or sed (Sten. 9 customers. > — OGLs, also known os Interactive Gaming Licensees, shall be considered engaged {in dolng business I the Philppines. ‘Accredited Service Provider (ASP) Y Refer lo any natural person regarcess of clizenship or residence, or urcal person ‘regardless of place cr erganizaton, which POGO Licensing Autonty rept by tet respect charters ss gaiegKenses and ecredtabo0 (061-Gaing Agent > Refers toa represenatve nthe Phliphes of a forein based OGL who shal act 28 a resent agent forthe mere pupose of receiving summans, notices and other {egal processes forthe OGL and lo camply wih the ciclosure requrements ofthe 197Coperetny TAX TREATHENT OF INCOME BY POGO ENTITIES (RR 20-2021) INCOME FROM GAMING OPERATIONS site INLIEVof ALL other direct and Indirect inter revenue taxes and locaj tere shall be levied, assessed and coleced fro” OGLs (whether Pring based or Foreign-based) a GAMING Later to (Whichever is pj Gross Revenue (GGR); © BM of Goss Gamig Rev ie minimum monty © 5% of the (AMM) from gaming operations The Gaming Tax shall be directly remitted to the BIR not later than the 244 day following the end of each month. even FORMULA (RR 20-2021): ‘Gross wagers a Less: Payouts Gross Gaming Revenue (GR) Vs. APMMR Higher amount bet. GGR and APMMR. Pot Gaming Tax rate IG TAX ‘Goss Woges refer io he toll amour of money tat shore gaming Payouts nero ll amour pad xt ofshre gang SIME fia ‘Agreed Prodolernined Mima i the amount al ia danved alle dvd Ihe minum monthly fee oft eq cone inpoend by a Phipine Ofdhore Gaming Operation (POGO) Ucersing ans the ra of preserbed reqdatry fe by ‘© Income from Gaming Opéraions on ier to renme or earnings eaized or derved from operzing onine Ree in ers va he amel seg @ rena and stay Progam. 6 Income from Non-Gaming Operations * . tae 2 Refers o any olher ncome of earings realized oF derived by OGLs that are py, classified as incor from garnng operations. eco 4 INCOME FROM NON-GAMING OPERATIONS © Philippine-based OGL. re Subject to 25% RCIT of taxable income derived from Sources within ‘2nd without the Philippines. © Foreign-based OGL ‘© Subject to 25% RCIT of taxable Income: derived from sources withia the Philippines only. NOTE: The non-gaming revenues of operations of al OGLs shall be subject aloe added tax (vat) or percentage tax, whichever Is applicable, 198Oe TAX TREATMENT OF INCOME By pogo Accredited Service Providers (AR 20-2021) 6 ASP Organized In the Phiippines ° Subject to 25% RCIT of taxable ncome dered from sources withia gad thou ve Phlpines, except as othernce proved a te Tae 0 ASP Organized outside the ines © Subjectto 25% RCTT of taxable Income derive from sources wthia the Philippines, xCEpt as otherwise provided in the Tax Code, ‘TAXATION OF PAGCOR (RMC 32-2022 dated March 30, 2072) 1869, 25 amended, classified PAGCOR's Income Into two, namely: Po "Income from gaming operations; ana f 2. Income from other related services the case of PAGCOR vs CIR, et al (G.R. No. 215427, Dec. 10, 2014), the Supreme Curt held that PAGCOR's Income from gaming opera at , ise tax while Its income from related services shall be subject to the corporate toe tax provided In the Tax Code, as amended. INCOME OF PAGCOR FROM GAMING OPERATIONS indudes, among others: ‘0 Income from its casino operations; ‘0 Income from dolar pit operations; ‘© Income from bingo operations, Including all variations thereof; and © Incpme from mobile bingo operations operated by it, with agents on commission basis. Provided, however, that the agent's commission income shall be subject to regular Income ax, and consequent, to witolding tax under existing regu ‘Accordingly, PAGCOR'S income from its operations and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools are, IN LIEU OF ALL TAXES, subject to 5% Franchise Tax pursuant to PD 1869. Is noteworthy to mention that Section 13(2)(a) of PD 1869, as amended, clearty gives PAGCOR a blanket exemption to taxes on its income from Its operations under its Franchise (also known a5 Income from gaming operations) with no distinction on whether the taxes are Grect or indirect, ike value added tax (VAT). : 199| Coy aly, Ns PAGCOR's income from "other related operations/services” shall be sub Income tax (RCIT), vat and other appbcable taxes under the Tax Code ra ed, INCOME OF PAGCOR FROM OTHER RELATED OPERATIONS/SERVICES 9 Regulatory license fees Such as; 2 Regulatory/license fees from licensed private casinos ® Reguiatory/license fees from licensed private bingo operations, Inc Variations thereof ding ay © Regulatory/license fees from private internet casino gaming, bettingand private mobile gaming operations; © Regulatory/iicense fees from private poker operations © Regulatory/license fees from private junket operations . y/license Fees from SM demo units $ license fees from all other electronic derivatives of brick ang Games regulated by PAGCOR mor © Income from other necessary and related services, shows and entertainmerit PAGCOR's other income that are not connected with the foregoin, Operations are likewise subject to corporate Income tax, VAT and other applica” taxes under the NIRC, asamended. . . PAGCOR Is constiuted.as a withholding agent for the government as Fegards the compensation given to its employees subject to withholding tax on. Compensation, and for payments made to individuals or corporations subject to the withholding taxes at source as required under Chapter XIII and Section 57 of the NIRG, as amended. PAGCOR must also collect a qualifying fee from players and remit the same In accordance with Executive Order No. 48, s. 1993, Revenue Regulations (RR) No, 06-93 and Revenue Memorandum Order (RMO) No. 14-93. Particularly, pursuant to Section 6 of RR No.,06-93, PAGCOR shall issue a check, payable to the Bureau of Treasury and to the creditof the account of the BIR, equivalent to the amount of collections for a particular week. Thischeck, together with the necessary supporting documents prescribed by the BIR, shall be Issued to the Bureau of Treasury nat later than Tuesday following each week.. The Bureau offreasury shall then prepare ‘monthly the corresponding Joumal voucher and any other necessary document in favor of the BIR, for the latter to record the amount of collections In its book of accounts. ‘SUMMARY: ‘5% Franchise Tax In LIEU of ALL other Taxes such as income tax and vat. © RCIT and other taxes Imposed under the Tax Code such as vat.™~ Corporations TION OF PAGCOR CONTRACTEES AND LICENSEES (auc ‘32-2022 dated March 30, 2022) Income or paccon CONTRACTEES AND LICENSEES FROM GAMING opi P.D. No, 1869, as amended, expressly provides that the payment of the five percent{5%) franchise tax of PAGCOR Inures to the benefit of its Contractees and Ucensees (Bloomberry Resorts and Hotels, Inc. v. BIR, GR. 212530 dated ‘Aug. 10, 2016). Hence, following the ruling in Bloomberry, ike PAGCOR, Its Contractees and Licensees shall be exempt from the payment of corporate income tax realized from the operation of casinos upon payment of the five (5%) franchise tax since the law ts clear that said exemption inures and extends to their benefit. PD 1869 provides: “SEC 13.- Exemptions: (2) Income and olher taxes - Ezanchisa and to Boss receiving compensation or altar remuneration from the Corporation or operator a3 « result of essential facies fumished and/or technical services rendered to the Corporation or ‘operator. The fee dr remuneration of forvign entetainers contacted by the Corporation ‘or operator in pursuance of this provision shell be fee ofanytex. NOTE: The 5% Franchise Tax is IN LIEU OF ALL TAXES whether the taxes are direct or indirect, like value added tax (VAT). The 5% franchise tax shall be payable directly to the BIR, speatically to the concerned Revenue District Office (RDO) where the licensee Is registered. This franchise tax Is different and distinct from the license/regulatory fees paid by licensees to PAGCOR. INCOME FROM OTHER RELATED SERVICES/OPERATIONS The “Income realized by PAGCOR's Ucensees from “other related services/operations" shall be subject to the regular corporate Income tax, VAT and other applicable taxes under the NIRC, as amended. 201C : Hor abio, tg . TARASIITY OF ESABONG OPERATORS (ONC 25-2072 ted Mah yap, oo) © E-SABONG OPERATOR'S INCOME Just Eke other PAGOOR bomnsees as Bustreted in the ages, the gaming income of e-sabong operator is sitar ing revenue Franctese Tax which shall be in bew of ail internal taxes 25% ‘vat or percentage tax, depending on the threshold. Ore Income from e-sbong operation (gaming income) refe gamng andor service income from aco he Suthortond under the e-sabeng leense issued By PAGODR, induc (nck Emit to those derived from the a be © | SERVICE and OTHER INCOME threshold, wetholding taxes and other taxes, as may be on ‘eppropriate. P. FILING OF TAX RETURNS 1 Regular Corporate Income Tax (RCIT) or Basic Income Tax a) ‘Quarterly — on or before the 60° day following the end of the quarts, b) Annual (Firat Quarter) — on or before April 15 of the succeeding yea, 2 Finel Withholding Tax on passive income Month ie 3. Capital Gains Tax 2) Shares of stock iL Ordinary Return - 30 days after each transaction iL Final Consolidated Return - on or before April 15 of the following year b) Real Property 30 days following each sale or other disposition 202Corporations 2 the letter of the correct answer, corporate TaxpayersPrinciples, RRA 10963, herve Kaown es the Tax Plo bocleaton and ncksion bet (TRAM + Law) took effect on ; a. December 13, 2017 ©. December 13, 2017 b. December 14, 2017 4. Servsary 1,208 1. & Answer.D RA 11534, otheswise known 28 fe CorprctsRecoveryand Tax hoartvestorErterpises 2 (CREATE Law) took eficct on a. duty 1,2020 © March27, 2001 b. March 26,2021 4. Aga1t, 2001 @ Answer:D 9 The CPEATE Law took eect 11, 2071, bomen, Aes pomcces wee ‘pecialy race n tabe tse tn oie ee Of bw revwed RCT rate cf 20%, ‘Section 115 ol be Tex Cate, as armrciod fund VIL Mutual fund companies . Regional operating headquarters of mtnitional corporations a landllonly © LIL ULV and V only b. | Nandi onty d. Alol the above > - Answer D . 203Corporation it mse In the business of anoth, is constitute when one intrest er ring capi ert, tsa nt poi oases 0 e Poporen gee ‘pon, They ao nol subject fo any fomalty and maybe oa oral or writ . . cc, Associations 2, Joint stock companies . Joint account None of the above © Ansver’B . itincludes all organizations which have substantaly he salient feanires Cf a corporation to be taxable as a “corporation.” 8, Joint stock companies cc, Associations . Joint account - d. None of the above Answer: C g ‘Wich otha foo st male coro 8. General professional partnersti - 1b. _Ajoint venture or consortium formed forthe purpose of undertaking ©. Ajoint or consortium for engaging in petroleum, coal, geothermal and other ‘energy operations pursuant to an operating consortium agreement under a service contrac with the goverment Allofthe above Answer:D ‘0 General, evoint Venture is txable asa corporation, except or eters C and p, Statement 1: Partnerships, no matier how created or organized, are taxable as ‘corporations for income tax purposes. aig Stalement 2: Associations and mutual fund companies, for income tax purposes, are excluded in the definion of corporations. Only statement 1 is correct Only statement 2s correct iF Both statements are correct Both statements are incorrect pe ee ° Answer: A 9 *Nomattorhow create” simply refer to how the partnership was established, ther coraly orn wring, registered or unregistered, 1. Which ofthe following s nota taxable corporation? ‘2, Ana, Loma and Fe agreéd fo contribute their money ino @ common fund to engage . jin the business of buying and seling consumer goods. Their total investment ‘amdunted to P300,000 and they did not bother to register their business with the DTI and the SEC. 204Copan p, Ped, Juan and Luna, all certified public is ion, They have registered wth the SEC. Bus i : © enna it dy rg eo ee efficiency of ullizing thet asses and to avoid the negate eet of competion, the {wo companies agreed fo pool their resources together and operate 2s a single company. : Rody:and Allan, lawyer and certified public accountants respectively, agreed to 4 contribute their money, property and industy to a common fund to render service of business process outsourcing. > Answer:B (© Pedro, Juan end Luna formed a GPP, coe of se oe Sarre ‘one of the exclusions in the defintion 40. ‘Which is not a characteristic of corporate income tax: . Wie" a. Progressive tax & General tax b. Direct tax d. National tax > Answer A ° Corporate tx is NOT a progressive tax, but a proportional ax. A progressive ‘alo increases es the tax base increases. Examples of @ Direct tari @ type of tax where the incidence end inpac of taratin fll on the ‘same person, The burden of paying the tax canY be shited by the taxpayer to ‘someone else, 9 General tax refers to general levy by 3 goverment thal cfs no special benef? {othe taxpayer, but only super fo govemmertal programs thal benef al. is ‘source of publ reverve. : © Nabonal taxis a tax imposed by the National goverment 41, Which of the flloving is subject to income tax? Answer:D * © PCSOs taxable upon the efectvty ofthe TRAIN Law or begining January 1, 2018. ° HDMF or Pag-ibig is tax-exempt upon the effectiviy of CREATE Law. 205fa. +132. Copperition Mf (noo tha along ramp fo incl 8. Proprietary educational instttions © Gomme stor eos & yment educational ins 4. Mutual savings bank nt Raving a copa tock represented by sharss > Answer: C (Section 30 of the Tax Coe, os amended) {ax are not subject fo income lay connected with the Purposes Statement 1: Corporations exempt from income incomes received which are Incidenil or necessary which thoy were organized and operating. Statement 2; Corporations exempt from Ince tax are subject t incomes tax on ji ‘of whatever kind and character nit any of thelr properties (real ‘or personal) of from clher aciviy conducted for prof, regardless of he dsposiion of such income, ny Only statement 1 is corect Only stalement 2's corect Both statements are correct Both statements are incorrect pese Answer: C |. Which of the following statements is incorrect? “Joint Stock Companies" are con when a group of individuals, acing joinly, establish and operate business enterprise a. Under an artficial name. b, With an invested capital divided into transferable shares. ¢. _Anelecléd board of directors, and other corporate characteristics, d. Operating with formal government authority, i > Answer: |. A “Joint Account” is constituted when one interests himself in the business of another byland |. Contributing capita thereto. 1. Sharing inthe profits of losses in the propartin agreed upon. Thay are not subject to any formality. 1. tmay be privately conlracled orally orn wring. a. land Il only J, liland Vv b, |, Hand IM only d. None of the above > Answer: C 206Copporations 1: Joint ventures, regardless of tho - sila to tec Iho purpose by they were created, are gereeraly alament 2: Tho sha ol a Covenuer corporation ite neincome of tx exer ort 9¢ consortium Is subject to corporate income tax, venture Orly statement fi cored b._Only statement 2isconect cc. Bolh statements are correct d. Both statements are incorrect Answer: 8 oe, RFC and NRC {tis important fo know the sources of income for tax purposes, ie, from within and without {7 the Philippines, because: Some individual and corporate taxpayers are taxed on ther worldwide income while ‘others are taxable only rom sources within the Philippines. b. _ The Philippines imposes income tax only on income rom sources within. ¢. Some individual taxpayers are cizens while other are aliens, d, Export sales are not subject to income tax. > Answer: A 48, Wich of he following staterents i corect? L The term "domestic", when applied to a corporation, means created or organized in the Philippines or under the laws of a foreign country as long as it maintains a Philippine branch, : 11, A corporation which is not domestic may be a resident (erigaged in business in the Philippines) or| ‘onresident corporation (not engaged in business in the Philippines). i, Resident foreign corporations are subject to income tax based on nat income from sources within the Philippines. . a, Lonly Hand only b. only | land th “Answer: C ' 19, Statement 1: Non-resident foreign corporat trade or business within the Philippines, Statement 2: Resident foreign corporation applies toa foreign corporation not engaged Intrade or business in the Philippines, a. Statements 1 and 2 are false b. Statement 1 is true but stalement 2s false ¢, Statement 1 is false but statement 2is tue d. Stalements 1 and 2 are tue tion applies to a foreign corporation engaged in’ Answer: A 207Cory Val, ee thin, ee Of tho following ts taxablo based on Income tom all sourcas, wilhin an dw Corporation: "hour Resident Foreign Carports Non-resident Foreign Corporations A Allol tho choicos maak > Answer: A 21. The term a : do or busi 1Pplies to a fornign corporalion engaged In trade or business in the 8. Resident foreign corporation Philbin, Nonresident foreign corporation Multinational corporation Petroleum contractor Answer: A pes 22. Which of the following does not have the benefit of cating deductions in income tax? mbutng Domestic Corporations Resident Foreign Corporations ‘Non-resident Foreign Corporations All of the choices peep Answer. C \ 23. Which of the folowing corporations shall pay a tax equal to twenty five percent (25%) ‘Foss from all sources within the Philippines? a. Domestic corporation b. Resident foreign corporation ¢. Nonresident foreign corporation 4d. - None of the choices > Answer:C 24. Aside from the regular corporate income tax, what other tax(es) may be imposed on ‘corporations under tha Philippine income tax laws? Minimum corporate income tax._¢. Capital gains tax | b. Final tax on passive income 4. Allof the above Answer:DCorporations a ew aera aT (RCIT 95, CREATE A Inanctal Statements Includes. tho land costing p50,000,000.00 and the building of P25,000, situated, with 6n aggregate amount of P75,000,000.00 as Fixed Assets. «How much fs the Iicome tax du n 20227 a, F125,000, b. P138,000,000 Answer: C Solution: Gross sales Cost of sales Operating expenses Taxable Net income RCIT tale Income Tax Due «. P172,500.000 4, P207,000,0000 P1,400,000,000 (560,000,000) (150,000,000) ‘P690,000,000 25% ‘P472,500,000 © The Company fs HOT dassified as MSME, hence, subject to the revised RCIT rate of ‘25% under CREATE Lew. The oa the P1O0M threshold for MSME. ‘Company’ assets, excluding the land, is more than Moreover, tha company’s net income also exceeded the thrashold of PSM for MSME. r erat © The 20% RCIT rate for domestic corporat ‘amended by CREATE Law shall ONLY ay ons under Secton 27 of the Tax Code 43 the domeste corporation s dassfied #8 MSME Wi he folowing equities: The Corportca’s nel taxable Income should not be more than PSM; AND The assets ofthe Corporaton should no be more than P100M. 126.’ Maasahan Corporation, a domestic corporation and a retailer of goods has gross sales of 14,000,000 with a cost of sales of P7,600,000 and alowable deductions of 2,500,000 for the calendar year 2022. its total assets of P150,000,000 as of December 31, 2022 per Audited Financial Statements includes the land costing P50,000,000 and the building of 25,000,000 in which tha business entity is situated, with an aggregate amount of 75,000,000 as Fixed Assets. How much is the income tax due in 20227 a, P60,000,000 ©. P375,000 b. P780,000 4, P',170,0000 > Answer: B 209oy Or ition, s 4 Souton’ ‘Gross 14,000,000 Cost of sles 7,80, 000) Operating expenses an Tarablo Net income A RCI rae for MSMEs oe Income Tax Due Frm Company hance, subject tothe revised RCTT ra oS is dase o USVE eo corparaion enous fie ached total eat purpoues of dolamining whether te company i 8s MSE. Ung, EREATE Ln th RT al of 206 ap ares ponies hy > The net income is not more than POM. & The amount of ls axses [sna more fan PIOOM, gxcludlng Lend on wh pertealar business ent’ ofc, plant, and eqUpmert are HUeled ding taxable yearfor which the ln is imposed. 27. Forever Corporat ; ation and a retaller of goods has gross sal 14,000,000 a es PT 0000 nd atowable dducions of 2st ‘ the calendar year 2022. Its total assets of P150,000,000 a8 of December 31, 2022 per Audited Financial Statements Includes the land casting PS0,000,000 and the building gy 25,000,000 in which the business enity (s siuated, with an aggregate amount oy P75,000,000.as Fixed Assets. How much Is the income tax due In 2022? ‘a, P60,000,000 . P975,000 b. P780,000 4, P4,170,0000 © Answer: C Solution: Gross sales 14,000,000 Cast of sales (7,600,000) Operaling expenses (2,500,000) Taxable Net Income * 3,800,000 RCI rele 25% Income Tar Due PATS;000 0 NOTE: The 20% RCIT rale or MSME Is not applicable to loreign corporations. 28. Malatag Corporation, a domesiic corporation and a retailer of goods has gross salos of 14,000,000 with a cost of sales of P7,600,000 and allowable deductions of 2,500,000 for the calendar year 2022, Its total assets of 150,000,000 as of December 31, 2022 per ‘Audited Financial Statements includes the land costing P40,000,000 and the building of 30,000,000 in which the business enity is siluated, with an aggregate amount of 70,000,000 as Fixed Assets, 210Corporations fs the Income tax dua in 20227 Howe 0000 ©. PS, 000 b, P780,000 4. P,t70.0000 & Answer: ‘Solulion: 2 Gross sales 14,000,000 . Cost cee (7.800.000 pean erpenss (in, a « al 25% Income Tax Due PA15 000 © Although the net income of the company isnot more than the companys assets exceeded th threshold of PIOOM, tus, tis NOT dered te : is NOT classed as SME. © Assets excluding and= PISOM ~ Peon = P4{oM, [ATION OF RCIT BASED ON TRAIN LAW and CREATE LAW de trensition period) the data forthe next six(6 ‘Ademestic corporation has the folowing income and expenses fo the yea Phis Pris. ‘Abroad Gross sales 100,000,000 50,000,000 Cost of sales 40,000,000 20,000,000 Operating expenses 30,000,000 12,000,000 much i the income tax due assuming the taxable year is 20197 29, How 12,000000 «. P14,400,000 b. P13,200000 . P18,000,000 4 Answer: Gross sales 150,000,000 Costot sales (60,000, 000) Operating expenses (42,000,000) Taxable Net income "P48.000,000- RCIT rate (TRAIN Law) 0% Income Tax Due + PRA 000 ° ‘Domestic corporations are taxable on thei income derived for all sources within and ‘without the Philippines, 30. How much i the income tax due assuming he taxable year was 20207 a. P12,000,000 «. P14,400,000 b. 13,200,000 «. P8,000,000 m1> Answer: B ‘Souiton Gross tates 150,000,000 PETE Lay Cost of salen (60,000,000) Operating expenses (42,000000) Jan. to June (TRAIN: PABM x 6/12 130% 7,200,000 July to Dee, (CREATE): POBM x 6/12 1 25% 4 Income Tax Due PHS 20 pg 0.00, © The income tax due during the transition period may also be computed as foy, © Income Tax Due = PASM x 27.5%" = P13,200,000 ons CIT rate (ransion period) = (30% + 25%) /2= 27.5%" hn the computalion of the taxable Income duriog_the tanetion poriog ‘should be no regard tothe doles ofthe rensactions within the calender ne, "0 Income and expenses forthe year shall be considered earned and ape{ a” Te ‘spent equaty for each month ofthe period. Tha corpora income ‘poked sabe ancurtcompted by elphng o uor of mona ees at + new rato win tho fiscal yoar by Iho laxable income of the corporaion for tne 2? vided by twat Pere, ‘ © The RCIT rate for domestic corporations under the CREATE law was reduced fom: to 25% begining duly 1, 2820. Moreover, f the domesic corporation is casting Micro Small and Medium Enterprises (MSME), a lower rale of 20% should be apoieq 9 The 20% RCIT rte for MSMEs undor Secon 27 the Tax Code, as amended apply ONLY IF he domest corporeton Is classified as MSME. A domes cones! is classified os MSME under the GREATE law ifthe folowing conditions are present {The corporation's net taxable income should not be more than 5M: AND {D._The assets of the corporation should not be more than 100M land on which the pacar busess ently’ ofce, plan, and earners fre alveled ching the treble year for which the tx is imposed, © Inthe given problem, the net taxable income of the Company Wes more than RSM, tg 25% RCIT rate shall be used forthe periods covered by CREATE law. : 212Cone How much I he incom tax due assuming ha taxable year is 20247 M. ‘a, P12,000,000 ©, P14,400,000 . b, P13,200,000 . P18,000,000 Answers A Gross sales 180,000,000 Casto sales (00,000,000) Operating expenses, (42,000,000) Taxable Net Income 'P48;000,0007 CIT ale (CREATE Law) 3% Income Tax Due ~*~ P12,000;000_ ich Is the income tax due assuming the taxable year is 2021 and the Company's 2 Hen gasetsemouniod to PO milion oni? ‘a, P9,600,000 ©. P14,400,000 b, P12,000,000 4. P18,000,000 > Answer: B Gross sales 150,000,000 Costof sales 160,000,000) Operating expenses (42,000,000) Taxable Net income 'P48,000,000 CIT rate (CREATE Lew) 25% Income Tax Due —F12,000,000— © The revised RCIT rate of 25% for comes: corporations under CREATE Law shal ba since the Company's Net Income during the year amounted tp P48. The domestic corporation is not classified ax MSME. 433. How much i the income tax due assuming? ye The taxable year is 2021; and = The Corporation isa resident foreign corporation a. PT,500,000 ©. P14,400,000 b. P13,200,000 4. P18,000,000 “e@ Answer: A Philippines Gross sales 100,000,000 Cost of sales” (40,000,000) Operating expenses (20,000,000), Taxable Net Income 30,000,000 RCIT rate (CREATE Law) 2% Income Tax Due __P7500,000_ © Foreign corporations are Laxable only on net income derived from Philippine sources. ° The 20% RCIT rate under CREATE Law for MSME Is NOT applicable to foreign « corporations. 213Cor Oralig, Mg M4. How much Is tho income tax duo assuming? + © Tholaxablo year is 2021; = The Corporation isa nonresident foreign corporation ‘8, P7,500,000 , P14,4400,000 b. P13,200,000 d. P15,000,000 + Answer: D Gross sales - Phils. ‘P 100,000,000 Cost of sales ~ Pis. (40,000,000) Operating expenses - Phis. _- not atowed_ GROSS INCOME 'P60,000,000 CIT rale (CREATE Law) 25% INCOME TAX DUE; FHT, 'P15,000,000 © Beginning January 1,2021, NRFCs are subject lo Final Withholding Tax (FW) og (on their gross Income derived from Phiippine sources only. 2%, © The 20% RCIT rate under CREATE Law for MSMES 15 NOT epplicable to fog Corporations (resident or nonresident). ‘an 35. CREATIVE Corporation, @ domestic corporation hs te folowing income and expen, for 2022 taxable year. : ; = SOunter — 24Gurfey Muar Oat Gross sales 1,000,000 1,500,000 P2.500.000 P5009 59 Cost of sales 600,000 so000 1.400.000 2.200 94 Operating expenses. 200,000 500,000 ‘600,000 700,009 ‘Addons! date: + “5. The company’s assets amounted fo P25,000,000. How much is the income tax due? a. P300,000 c, P600,000 b. 450,000 dd, P825,000 > Answer: C Sokution; 2 Gross sales +P 10,000,000 Cost of sales (5,000,000) Operating expenses '__ (2,000,000) Taxable Net Income ‘P3000, 000 * RCTrle _ 20%, Income Tax Due P5600, 000 0 The 20% RCIT rate shall apply because the domestic corporation is classified as MSME {net income is was not more than PSM and the company’s assets ere not mora then YOON). 214Conta the same dala the inmediatey preceding number and assuring futher that the 36 companys. resident fin comoraton, how mh ithe correct ncamnetx 606? a. P300,000 ©, P750,000 b. P450,000 4. P825,000 ‘Answer. C 7 Gross sales 10,000,000 (Cost of sles (5,000,009 Operating expenses 2000,000) Taxable Net Income P0009 2% RCIT ree Income Tax Due PT30,000 NOTE: The 20% RCIT rate thal 10.0 domestic corporations dassiied #3 SME. Nis ot apkabltemgr rpc 1 foreign corporations (RFCs ard NRFCs). {A domestic corporation has the folowing income and expenses for 2022 taxable year: 37. BOO" Gross sales 20,000,000 Cost of sales 10,000,000 Opérating expanses 3,800,000 Assets 48,0000,000 much i the income tax due? Ft 124000 ¢. 1,860,000 b. P1.550,000 4. P3,000,000 ‘ Answer: B ‘Solution; Gross sales 20,000,000 : Costof sales (10,000,000) Operating expenses (3,800,000), Taxable Net Income P6200,000" RCITrate 2%" Income Tax Due 1,550,000 The RCT rate is 25% bet alt the assets of the company are not . fe hes Pi 8 nel income needed ieatalnens id to be considered as SME. 38. ABC Corporation, a domestic corporation has the following income and expenses for 2022 taxable year. year: Gross sales 20,000,000 Cost of sales 10,000,000 Operating expenses 6,500,000 215Corporation, How much fs the Income tax due? 8. 600,000 P800,000 b. P700,000 4. P875.000 > Answer.D Gross aslo 20,000,000 Cont of aes (1.000.000) Operating expenses 00 Taxable Net eae 73,500.00 RCIT rate 15% Income Tax Ove Thais 0 Mthe problem rater te domestic emsportions MSME, Ait th {eepiey ene 298 ROT it must be emphasized that the 20% rere ‘shal be apphed ONLY IF: a ‘aly the corporation is classed as MSWE: > Theproblem specially provdes Ihe ri Y Pesto thal the domestic CxpOrabon sna in ‘more than PSM AND th Pemountotits assets are not more then P1OOM, . 23 en offce, plan, and cadpmen stusled during the table yor for which he taxis inposed. 39. Hananiah Corporation, 8 corporation engaged In business Inthe Philippines and thas the following data for 2022 taxable year Gross Income, Philippines P975,000 Expenses, Philppines 750,000 Gross Income, Malaysia ‘770,000 Expenses, Malaysia ,000 Interest on bank deposit 25,000 Assets 15,000,000 Determine the income fax due assuming the corporation: i Domestic Res, Foreign Com. ‘Non-resident Foreign Com. a. P116,000 P72,000 320,000 b. — P409,500 67,500 300,000, P7300 56,250 250,000 a. P91,250. 56,250 250,000 > Anewer® * Domestic REC ‘REC Gras ncome, Prippies » —-ra7sgoo ATOM = PS75000 . Expenses, Philppines crsngon), (780000) ° Gross Income, Malaysia 770,000 2 Expenses, Molaysia (630,000) : s Interest on bank deposit - : 25,000 Taxable income "365,000 725,000 7,000,000 Tax Rate 25% 25% Tax Due 773,000 250 P250,000_ 216