C,

Income-Tax on Corporatio~s .
-,

'
CORPORATION .DEFINED .

·Section 2 of RA 11232 - the Revised C .. t. . ·

. · . orpora ion Co.de of the Philippines

. . . Section _2: of RA 11232 or the Revised Corporation Code of the

Philippines
. - f provides that a . Cor,poration is "an art·f· · 1 bemg
11c1a · created by
t
opera ?n 1 ° 1
· •
aw, having the right of succession and the powers attributes and
prop~rt1es e~pressly -authorized by law or incident to its existen~e".

The Tax Code, as

/ .
amended under. CREA TE Act

The . term "corporation" shall include one-person-corporations,

partnerships (no matter how created or organized), joint stock companies, joint
accounts (ceuntas en participacion ), associations, or insurance companies,.but
does not include general professional partn,erships and a joint venture or
consortium formed for the purpose of undertaking construction projects or
engaging in petroleum, coal, geothermal and other energy operations pursuant
to an operating ~onsortium agreement under a service contract with the
government. The term corporation, for tax purposes, also includes mutual
fund companies and _ regional operating headquarters of multinational.
corporations.

Excluded in the definition of Corporation, for tax purposes are the following:

1. GENERAL PROFESSIONAL PART~ERSHIP (G~~)- ~ ~artnership

formed by persons for the sole purpo~eh~f edxe_rc1sdmfg t eir co':1m~n
• rt of the income of wh1c 1s enve ram engaging in
pro f ess1on, no pa
any trade or busine~s.

229
 '

1/t{XJl!tC,·Ttte tHv Cr,eu:Wtr_s

2 . .JOINT VENTURE OR CONSORTIVM:

• Form~d for the purpose of u~dertaking construction projects

pursu~nt to Presiden~ial ~ecre~ (~D) No. 92~ ~ dateq 4 ~ay 1976)
to assist local contractors in ac~1ev1,ng compet!t,veness w,t~ foreign
.contract~xs by .pooliQg their. ~esources · 1n undertaking big
construction projects; and

·• A joint venture ~r c~nsortium for engaging ,iri petroleur:r,, coal,

··g~othe~mal and o~her ene·rgy op~r,ations pursuant to an ,operating
· consortium agreement under a service · contract . with the
government .

JOINT VENTURE OR CONSORTIUM

. t

". Joint venture is a co~mercial undertaking by two qr more perso!7s,_ differing

from a partnership in that it relates to the disposition of a s_ingle lot of.goods or
'I
th~ .completion of a,single project. . Joint .ve'nture or consortium, in general, is
. taxable as ·corporation. · However, there· are .two ·types of tax exempt joint .
· ventures described above as _provided fo,r. under Section 3 ·of RR 10-2012. A
. .joint venture or c.on~orti~m formed for .the purpose of undertaking construction
projects· is· not cor:,sidered pS corp9ratior:, under Section 22 of the Tax Code
provided: . ·
' .

a) ·The joint venture was .formed for the PWPO_ se of

underta~ing a construction project; and ·
·b) Shoul_d involve joining/pooling-· of resources by • · The tax-exempt
licensed local contracts; that is, licensed as joint .venture shall
1•· ,'. · . general. contfactor by the philippine Contractors not include those
_ , Accreditation Board (PCAB) of the Department' of who are mere
.Trade and lndu~try .(DTI) . . suppliers of goods,
· c) .The · .,local contractors are engaged in services or capital
construction business; ·and . . to a construction
d) '.he Joint Ventur.e_itself must likewise b~ duly project.
•licensed_as such by the Philippine Contractors
Accreditation Board .(PCAB) of the Departme.nt of
TradEf and ·Industry (DTI). . , ~
. ' .
. Ab~ent any one the aforesaid requirements the J·oint venture or .
consortium formed for the pu · f · ' · ·
shall b 'd · · fpose O undertaking construction proJects
. e cons, e~ed as taxable corp~rations. The members to a Joint
Ven ture not taxable as corporat· · . h .
and ' • . . . ton s a11 each be responsi ble in reporting
vent~::t;;ririt~ropnate income taxes on their respectiVe share to the joint
 ·/ µ r,,..,. rr '
C
F~reign Cont~actors
' "'1.A./Yl U
· .
l tl,;/,',, {}-//_,,,
c · r rtU-uJ.fus
.,,,.L '

Joint ventures involving forei' , ·

taxable corporati9n provided?n con~ractors rnay also be treated as a non-
■ ,The member foreign . · ,
t contractor i
con rac tor by the PCAB s covered by a special license as
• The construction project is ce : . · ·
~gency: (government' office t rt,t,ed by t~e appropriate Tendering
internationally-funded P . ) hat th e proJect Is a foreign financed/
allowed under th€! Bil;~~clt and that internation~I biddirig is
between the Philippine G a Agreement entered into by and
financing institution overnment and .the 'foreign I international
regulations of Repubi~~su:;t to -the . 1mplemen~ing rules and
I
Contractor's -License Law. t No. 45~6 otherwise known as

JOINT STOCK COMPANIES and JOiNT ACCOUNTS

. . J_Oirit stock .~ompanies are constituted when a group of individuals,

acting Jointly, est_a blish and operate business enterprise under an artificial·
_name, with an invested capital divided into transferable shares, an' elected
board ·of directors, an.d 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
agre~d upon. They are not subject to any formality and may be privately
.contracted orally or in writing. The term "associations" includ~s all
organizations which have substantially the salient features of a corporation to
· be taxable as a "corporation." · ·

, U nd er S ectwn . 30 of the Tax· Code,·the followingh organizations shall not

be taxed fn respect to income received by _th ~m ~s. sue : ·. • •
·. . It ural or horticultural organrzat,ons
a) La bor, agncu _ not -organized pnnc,pally

for profits. . . ·n a ca ital stock represented by shares, and

b) Mutual savmg_s ban~ not hav,,? 1stoik organized and operated for mutual
_cooperative bank without cap, a '
purposes and with~ut profit. sociation, operating for the exclusive
rd
c) A beneficiary, society, o e~ ~: :sfraternal organization operating. un?er
benefit qf the members sue .d association or a non-stock corporation
the lodge system , or a mutua ~~ . g 'for the payment of life, sickness,
1
I
organized by employees prov,, ~ ly to the members of such society,
b nefits exc us1ve .
accident, or ot.h e er d t
tick corporation or their depen en s. .
order or assoc1atIon , or nons ated exclu sively for the benefit of ,ts
'
d) Cemetery compary owne d and aper
members.

23 1
 111,C(}m,e, T«t.{}It/ cr«t0 1ls
e) Nori-stock corporation or a·s sociation or.gar,!zed and_operated exclusive1
· ·. for 'religious, . charitable, scientific, athl~t,c, or cultural purposes,
rehabilitation of veterans, no part of its n~t mco~~ or asset shal_l _belong or _
i
1

• inure to the benefit of any member, organizer, officer or any specific Person
f) · Business leag·L:Je, chamber of commerce, or_ bo~rd of trade, ,not or~anized
for profit and no part.of the net income of which inures to the benefit of any
private stockholder or jndividual. .
g) Civic league or organization not organized for prof~t but operated
exclusively for the promotion of social welfare.
-h) A non-stock n'on'profit edu9.ational institution.
i) : Government' educational institution. .
j) . Farmers 0r other mutual typhoon or fire insurance comp~ny, mutual ditch
or irrigation company, mutual or cooperative t.e lephone company, or like
organizations of a purely lo.caf character, the income of which c·onsists
~olely of a&sessments, dues, and fees collected from members for the sole
purpose c;>f meeting its expenses;_and ·
k) Farmers, ~fruit growers, or like qssociation organ.ized and operated as a
sales agent for the purpose of marketing the products of its members and
turning back.them the proceeds qf sales, less the necessary selling on the
basis ofthe quantity of produced finished by them. ·.

Notwithstanding the provisions in the preceding paragraphs, the income

. . of whatever kind and character of the foregoing organizations from any of their
properties; real or personal or from any of their activities conducted for profit,
. ·. regardless of the disposition made of .such income; st,all be subject to tax
'> ·· imposed uhder the Tax Code. ·

TAXATION OF OR.GANIZATI.ONS AND CORPORATIONS UNDER SEC.

30 OF THE NIRC OF 1997, as amend~d; RMO 38-2019

The req~irements _ f or the grant of tax .exemption are specified by the

law granting it a~d such grant is strictly constru·ed against the taxpayer because
an exemption restricts th~ collection of taxes necessary for the existence of the
government_.··"!"hus, a ~orporation 'claiming tax exemption must be able to show
clearly ~hat 1t 1s org~ni~~d and operated fo'r the purpo'ses under Section 30 of
the NIR~., ~nd that its inco~e is deriv~d pursuant thereto.

(1) Income Tax Exemption, Not Absolute ·

~nc~~e. tax e~emption covers only the income derived by the
corporation. in furtherance _of the purposes for whi ch it was organized
nd
u er Section 30 of the NIRC. Sect. 30 corporations are still subject
· to t_he corresp?nding internal revenue taxes imposed under the NIRC
~~t:~i~ome derived fr~m any of their properties, real or personal , or anY
. t Y ~Ond ucted for profit regardless of' the disposition thereof (i.e.
st
in ere ·income from bank deposits,. gains from investments, rental

23i
 l /lC{}#[& Ttf!': IHv C rtdl/JIU
' in~ome ·from rea~ or perso.nal properties), which income should be
reported for taxation purposes. .

(2) Obligations as withholding agent for the Gove(nment

· The t~x e~emption granted does not cover withholding taxe~
o~ .com~~nsat1on 1_ncome of the employees of the corporation, or the
w1th~ol?mg tax on income payments to p~rsons 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 fbr VAT _ .

1
.Purchase of go_
ods 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 busine?s
pursuit, including trar1sadions incidental thereto, its revenues derived
th_e refrom shall be subject to the 12% VAT, in case the gross receipts
from such sales , exceed P3,000,000, or to Percentage Ta?< under
Section 116 of the Tax Code, as amended, if gross receipts do not
exceed P3,000,_Q00.

OPERATIONAL arid ORGANIZATIONAL TESTS IN DETERMIN ING ·

EN~ITLEMENT TO .EXEMPTION under Sec. 30 of NIRC (RMO 38-2019)

Organizational Test . , . .
This requires that the corporation or association's constitutive
. documents (SEC Registration, Articles of. Incorporation and By-Laws)
must show that its primary purpose/s of incorporation fall under Section
30 of the NIRC. It must not be organized or operated for the benefit of
private interests such as specific individuals, incorporators or his
· family, shareholders of the organization, or persons controlled directly
or indirectly by such private interests. The organization must serve a
public rather tha'n a private purpose. . .

Operational Test:
·; This requires that the regular activities of the corporation or
association be exclusively devoted to the accomplishment of the
purposes specified in Section ·30 of the- NIRC . A corporation or
association fails to meet this test if the corporation has no activiti~s
conducted in furtherance of the p~rpose for which it was organized , or
if a substantial part of its operations constitutes "activities conducted
~or profit".

233
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. l /tC{Jl1l& Tfl{; oti cra1~

· ' : Corporations falling · under ~ection 30 °! the ~IRC, as
amended, must be non-pro(it,. Nonprofit means ~~at no net ,~come or
, i,isset aecru.es to_or behefits any mem~er ?r ~pe?ific person, with all the
net iricome or asset devoted to the · ins~1tut1on.s purpose~ and all its
.aCtivities cbnducted not for profit". Thus; in orde~ for an entity t~ qualify .
-as a non-profit corporat10~ ~ exempt from ,~come tax, 1t must
·demonstrate tt:iat its ·earnings or as.sets do not inure to the· benefit of
any qf -its trustees, prg·a_ nizers, . officer.s, members or any ~pecific
· person .
• I ABC _Cortjp-any -i'~.a.·non-,sto~k· non_
-p_rqfit C?rporation ,organized primarily for
advocating and .promoting Filipino Psychology.(Sikolohiyang Pilipino). Its
._ regul·ar activitie~ usually involved the conduct o'f seminars, .conferences, or
._ ·research and training progr~fns to promote Sikolohiyang Pilipino and the
• ~study thereof. ·- AB G's incomes are from gra.nts and dorn~tions, conferences
·tees ahd .s·po.nsorship, membership fees and .related a'nd sale of related
. materials l*e books and pins. '· ·

· ·· · · Question: Is ABC's income exempt under Section 30(E) of the Tax Code?
Answer: - . .. .
~o. N_o~-stock no~_ '.:profit co_rpo'.ations 'organized and operated exclusively
~or r~_h_g1o_LJs, charitable, sc1ent1fic, athletic, or cultural purposes, or for
rehab1htat1on of veterans ~re exempt from income tax under Section 30(E)
of the Tax Cod~. Howeve·r, being a non-stock non-profit corporation
d9~s not, by this s?le reason ~lone, exempt an institution from tax. The
I

\ '

entity should _prove by -_actual operation that_it · is really a corporation

cont~mplated .under Section 30(E) of the Tax Code, as amended.

In th? case of ABC Co., its pl.lrposes are nota~ong those contemplated by .
Section -30 (E). ~s such, A~~ Co. failed to prove that it is organized and
. I operated exclusively f?_r r~hg1ous, charifable, scientific, athletic or cultural
purposes, or _for rehab~htat1on of veterans. Consequently ABC C h II b.
treated
·· · · carporarion .which
as an. ordinary . .is subJect
. to ,· regular o.corporate
sa e
mcom~ tax as well as other applica~le _internal revenue taxes.

A_
26,ssoci~tion
2019· · of Non-Profit
- .Clubs- (ANPC)
. · vs. CIR
· ,G.R. No. 228539. June
The BIR issued RMC No 35 _2012 . . · _. . .
rec~eational cJubs \ 0 incom~ tax· ~hich (a) subjects non-pr?f1t
1
-of recreational clubs including b' td (b) f!lPOses VAT on gross receipts
a_
ssessment dues.· · . u not limited ·to _
membership fees and
' '

The association ?ssailed the circ I . . .

rule-making authority in· inter u_ar.alleging that the CIR acted beyond its
assessment dues and se . pref ting th at payments of membership fees,
. ·income tax, as· well' as a s rv1cef ees. ·are cons,'d-ered as income subject to
: aIe o service that is subject to VAT.

234
 .. l flCdttU, ~II(; IHu C rrdUHU
The Court held that them b h' f - · , . ·
oft similar nature oril · e~ ers 1P .~e~, assessment dues, and other fees
·funds for th . .-. y constitute contnbuti~n~ to and/or replenishment of the
recreational e mamten~nce a~~ operations of the facilities. -offere~ by
trust" b theilubs_to their exclu~1v~ hlemb~rs. They represent funds "held in -
., Y .. e ,?IU~~ to defray their operating and .general costs and hence .
only constitu_
te 1nfus1qn ~f capital ~hich are not subject to income-tax. · ' ·
Wh . · . · ·. .
. . en the du~s_are paid, the members are not buying services from the club;
hence, there 1s no economic or commercial activity to speak of as these·dues
· are · ~evoted for . the. ,operations/maintenance ·of the facilities of the
org_aniz_ation. Thus, there is ,no "sale, barter or exchange ·of goods or
prope~1es, or sale of service" Jo speak of. ·

INCOME TAXES OF CORPORATIONS ... .. -· ·

Generally, there are three (3) types of income tax under.the Ta~ Code,
na~ely;· (1) regular corporate income tax (RCIT), ·also known as basic income
tax, (2) fi~al -withholding tax (FWT) on certain passive incomes, and (3) capital
gains tax (CGT). The applicable income tax of a corporation, just like the
income.'taxes applicab!e to individual taxpayers as discussed in Chapter 2, also
depe.nds on several factors such as the type or classification of the corporation
and .the income subject to tax. ·

CLASS,ICAilON OF CORPORATIONS
'. Corporations, for taxation purposes, .are classified as:
1. Domestic (DC);
2 .. _Resident foreign coriporations (RFC); and
3. .Nonresident foreign corporations (NRFC).
. '\ .
-It . is important • to properly classify corporate taxpayers because
domestic corporations are.taxable oh their income derived"from sources within
/ and without the Philippines while foreign corporations (resident or nonresident)
are taxable ·only· on their income derived fr,om philippin_ e sources. .Moreover,
domestic corporations and resident foreign corporations c;3re taxable based on
··n.et income while nonres·ident foreign corporations are ·taxable based on their
"gross income".

1 Domestic Corpo'rations are corporations created or incorporated in the

. , Phinppines or under its laws., A 'foreig~· corporation is a corporation-organized
-or incorporated by a. foreign ·law. A foreign cor'poration may be a reside~t
-(engaged ·in b_usiness· in the Philip.pines) or r10n·resident (~ot engaged in
, busine~s fn the Phi!ippin~s). A resident foreign corporation _ is not c~~ated or
incorporated,' urider Philippine laws. It only secures from the Secunt,es and
, Exctiange Commission (SEC) a license fo operate in the Philippines.
(

I /
235
 Domestic and foreign corporations may be further classified as ordinary or
sp_ecial corporations (refer to page 263).

TYPES OF INCOME

- Under the Tax Code, the three (3) types of income subject to income
tax (also discussed in Chapter 2) are as follows:
• Ordinary or regular income
• Passive income derived from Philippine sources; and
• Capital gains subject t9 capital gains tax

Ordinary _o r regular income refers to income deriv~d frorn \the regular

conduct of trade _o r business income_, including incidental income Other than
income subject to final taxes and capital gains tax. The concept of ordinary
· income discussed in Chapter 2 (individual taxpayers) also applies to corporate
taxpayers. Regular or ordinary income are generally subject to the Regular
Corporate Income Tax (RCIT) under the Tax C~de, as amended by RA_11534
or the CREATE Act as follows: -

TRAIN Law CREATE Act

DC RFC and
{MSMEs} . Other DC NRFC
Gross Income Pxxx - Pxxx Pxxx Pxxx
Allowable Deductions (xxx} (xxx} (xxx} NA
Taxable Income Pxxx Pxxx Pxxx Pxxx
Rate 30% 20% 25% 25%*tt
RCIT /FWT . Pxxx · Pxxx ·.Pxxx Pxxx

NOTE: Refer also to Table 5-1

, Passive incomes are certain types of income _derived from sources

within the Philippines ·.that are- subject to Finql Withholding Taxes (FWT).
Specifically, for corporate ~axpayers, these incomes pertain only to interest
income, ·royalties and dividends described in Table 5-2. Moreover, these
incomes are excluded in the determination of taxable inconie and in the
preparation of income .tax return -(ITR). The types of passive incomes subject
to FWT that were discussed in Chapter 2 (individual taxpayers) are the same
with passive incomes subject to FWT for corporate taxpayers , except for prizes
and winnings. Howeve·r, if a corporation receives income classi fied as prize(s}
and/or winnings, .it is generally subject to RCIT since these income are not
included in passive incomes subject to FWT.

. Capital gains a~e incomes derived from sale of capital assets. T~e
difference between capital assets and ordinary assets are discussed 1n
Ch~pters _2 and 9. . B_a~ically, the types of capital gains that are subject to
capital gains tax for ind1v1dual taxpayers (Chapter 2) are also the same with the

236
 . . . . . l acrJhle,, T~ (HI/ C}rdUHU
capital gam~ subJect to capital gains tax (CGT) f
follows: or corporate taxpayers as
1. Capital gains from sale of sh f . · ·,
not traded in th I I ares o stocks of a domestic corporation ·
.. e oca , stock exchange [Sec 27(0)(2)]· [S
_· 28(~)(7)(c); [Sec. 28(8)(5)(c); and . · . , ec.
2. Capital gains from sale of real property in the Philippines [Sec. 27(0)(5)

. , Capital gains not subJ·ect to cap1·ta1 gains

• • ·
. tax are generally subject
basic tax. The different CGT rates are summarized in Table 5-3. .
to
.l

Regular Income RCIT** Table 5-1

Passive income, Phils. Final Withholding Tax (FWT) Table 5-2
Ca ital ains Ca ital Gains Tax CGT · Table 5-3
GUIDE:
m **UN_LESS EXEMPT under the law, incomes not subject to FWT (passive.incomes) and
CG Ts are generally classified as ordinary income and are subject to RCIT if the corporation
is a DC or RFC. and FWT if derive~ by NRFC.

TABLE 5-1: CORPORATE INCOME TAX RATES _ON REGULARIN~Orv,E .

BASED ON CREATE-ACT · .
DC RFC NRFC
RCIT .
■ Tax Rate 25% / 20% of Net 25% of Net income 25% of Gross
■ Basis · Income within and within only income within only
without
MCIT**
July 1, 2020 to 1% of Gross Income 1% of Gross Income . Not applicable
June 30, 2023 within and without within only ~

MCIT*~beg. 2% of Gross Income Not applicable

July 1, ~023 2% of Gross Income within only
within and without

NOTE:
· 1. · RA 11534 also known as the Corporate Recovery.and Ta~ Incentives for Enterprises (CREATE Act),
which wa~ published on March 27 , 2~~ 1, took eff~ct on Awil 11, 2021_. However, there are ce~ain
provisions in the law with specific effectIvIty dates which are earlier than April 11, 2021, such as the revised
RCIT rate~ for DCs and RFCs as well as the revised FWT rate for NRFCs. .
'2. RCIT _ Regular Corporate Income ~ax. · RCIT is also referred to as the normal corporate tax or basic
income tax. The effectivity of the revised RCIT rates under the CREATE Act shall be as follows:
· ■ · Domestic Corporations and ~FCs-JLily 1, 2020
■ NRFCs.- January 1,_· 2021

237
 ❖
PRIOR TO JULY 1, 2020, the income_tax ~ate of.Corporation~ was at 30% a~~ the MCIT rate
was 2%,. A separate RCIT rate tor MSME rs npt applrcable pnor to the effectrvrty of CREATE

❖ ~~~~rally,·RCIT rate f~r domestic c~,p~ratiofs (DC) under CR~ATE.Act s~all be 25%.
· However, if it the DC is classified as MSME (Mrcro Small anq Medi~m ~nterp~rses),·the RCIT
rate to be applied shall be 20% of net income. MSMEs ~r~ domestic corporatrons with:
a) ~et taxable income of NOT m_ or~ than P5,000,0~0;_AND . . ' ,,
b) Assets of NOT more than P100,000,000, ex~lu?1hg the l~nd on which the particular
busines.s entity's office, plant,_and eq~ipment are situated d~n~g the taxable year for which
the ,tax is imposed. ·. . · '
. ' ' ,. .

❖
The .20% inco.me t~x rate for MSME is NOT ~pplic_able to forei~n corporations (resident or
· nonresident). . ,. . : 1
''·
3. ' '**MCIT - Mini~um Corporal~ inco.m'e· Tax. MCIT ~ha-u° be computed ~EGINNING on .the' 4~ year of
operations immediately following the·taxable year in which such corporat,~n _commenced its ~us,ness (RR
2-98 as amended by RR 12-2007,. RR 5-2021). The amount of MCITshall be compared wrth the RCIT.
, The tax due shall be the-higher between the RCIT and MCIT. The revised MCIT rate of 1% of Gross income
spall applied from July 1, 2020 to' June 30, 2023_. However, qeginning July 1, 2023, the Men: rate shall_be
·increased to it~ original -rate of 2% of gross in~ome (refer to p_
age 241 for a more detailed discus~ion about
··- MCIT). . . , . .
.' , I_ .

NONRESIDENT FOREIGN CORPORATIONS

· ( Under the. CREATE Act, .Nonresident .foreign corporation not engaged

in fraoe or business in the Ph.ilippin,es · shall. pay a tax equal to .25% (previously
30%) of ."gross" .income · beginni·ng January 1, '2021 from all sources in the
Philippines such as..interests, rehts, premiums (except reinsurance premiums),
annuities, emoluments, or other fixed or determinable annuities, periodic or
casual gains, profi1s and _income ·and capital gains, except. income subject to -
capital· gains tax. ,

GO\/ERNMEN'f '
OWNED ' AND CONTROLLED CORPORATIONS
(GOCCS)

f. Government Owned and Controlled C~rporations (GOCCs) refer to all

corporations, .agencies, ~r in~trumentaliti~~ owned or controlled by the
Government. · Und~r Section 27(C) of the Tax Code, as amended , GOCCs shall
'pay such :tax ...rate_ of tax upon their taxable incorne as are imposed upon
corporations or ~s_ sociat!ons engaged in similar business, _industry or activity,
except the foll~wmg tax_exen:,pt GOCCs as p~ovided by law:

• Government Service· Insurance System (GSIS)

■ .· S_
~cial Security System (SSS) . .
• Philippine Health Insurance Corporation (PHIC)
· , Local Water Districts under RA 10026
• Upon effectivity of CREA TE Act, Home Development Mutual
Fund (HDMF, also Rnown ~s Pag-lbig ·Fund)

238
 .. . J~ Tttt dtf,, crru:UMU
. Corp?rat_,_
o ns created by special laws or charters shall be.taxed based ·
on the provi~ions of the special law or ch~rter creating them or applicable to
the~,- supplemented by the provisions of the Tax Code, insofar as they are
appl1c.able, such a~ the 1;3angko Sentral ng Pilipinas. - . ,

Section 3 9f RR 2-2019. dated J~nuary 15, 2020 provides that, the BSP
shall be exempt from all national•inte·rnal revenue taxes on income derived from··
it~ goyernmen~al functions, ~pecifically: ·
/

·_a) Income from its activities or transactions in the exercise of its

supervision over the operations of banks and its regulatory and
~xamination powers over non~bank financial'institutions performing
. · quasi-~a~king functions, - money service business.es, · credit
granting businesses and payment sy~tem oper~tors; and

. b) Income in pursuit of its primary objecti~e to maintain p~ice stability

conducive to a ·balanced ·and sustainable growth of the economy,
and th_e promotion and maintenance of monetary and financial
stability and the convertibility of the peso.

_All other incomes not included in the above enumeration shall

·be considered as proprietary income and shall be subject to
_ ali applicable national inter~al revenue taxes.

SIMPLE GUIDE: · . . · ,
■ ,Income of a government agency arising from govern·mental functions -exempt.
■ Income of a government agen·cy arising from pr~prietary functions --taxable
t '

ILLUSTRATION 1: . ·
Assume the following data for Hananiah Corporation during 2021 taxable
year:
Gross Income, Philippines P9,750,000
Expenses, Philippines 5,500,000
Gross Income, Malaysia 7,700,000
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 P9,750,000 ·
Gross Income, Malaysia I 7,700,000
Exp-enses, Philippines (5,500,000)
Expenses, Malaysia (3,300,000)
Taxable income PB,650,000
Tax Rate 25%
Income Tax Due P2, 162,500

239
 ❖ Under the CREATE AcUJomestic corporations (DC) _are ge~erally subj~ct
to 25% regular corporate income tax (R~IT~ on their regular_net income
•from sources within and without the Philippines. .However, 1f the DC is
classified as MSME (page 238), the·RCIT rate shall be 20%.

•!~ The RCIT rat~ applied in the ·problem was 25% even in the ab$ence of
information pertaining the a·mount of the domestic corporation's assets
because its net taxable income was more than P5M. Tt)us, the DC will not
qualify as MSME. ~ . . . . " .
❖ The interest income on bank deposit 1s not a regular income. It 1s a passive
. income'.' subject to final ·tax of 20% (refer to Table 5-2 for the list of certain
passive incom~s subject to final taxes).

Case-B: The corpo·ration is a resident corporation '

❖ ~ns~er: P1 ,062,500
Gross·lncome, Philippines . . P9, 750,000 .
Expenses, Philippines (5,500,000).'
· Taxable income P4,250,000 .
Tax Rate 25%
Income Tax Due , Pf,062,500

❖ The 20% rate for MSMEs under the CREATE Act is a NOT applic~ble to
foreign corporations. Consequently, the RCIT rate applied in the problem
was 2~ 0/o regardless of the amount _
of company assets and net income.

Case C: The corporation is nonresident corporation

❖:c Answer: P2,500,000
Gross Income, Philippines P9,750,000
.Interest on bank deposit 250,000
Total gross income I 10,000,000
Tax ·Rate 25%
Income Tax Due . P2,500,000
•!• Nonresident fore·ign corporations (N~~C) are·$Ubject to 25% ·income tax
on their "GROSS" income from Philippine sources (except income subject
to CGT _and_tax-exempt income).

Case D: The corporation i~ -~ 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, Philippines· (5,500,000)
Expenses, Malaysia {3,300,000)
Taxable income PB,650,000
Tax Rate 21.5%
· Income Tax Due . P2,378,750

240
 0
**Duri~g •the transition period (from TRAIN law to CREATE_Act), th~
foll~wmg average tax rates (assume the Company is using calendar year
basis) shall be used:
◊ 2020 DCs othe·r than MSME: 27.5°//*
◊ 2020 MSME: 25% •

0 · The 27 .5% RCIT rate is computed by getting the average RCIT rate of
30% for January to June and 25% ·froll)..July to December, 2020. ·
o The 25% RCIT rate for MSMEs is computed by getting the average RCIT
rate of 30% for Ja.miary to June and 20% from July to December, 2020.
·o The CREATE Act provides that in the computation of the taxable income
during the transition period, there should be no regard to the dates of the
transactions within the calendar year. The income and expenses for the
year shall be considered earned and spent equally for each month or
eriod CREATE; RR 5-2021 .

MINIMUM CORPORATE INCOME TAX .

Section 27(E)(1) of the Tax Code for Domestic Corporations and Section 28(2)
for Resident Foreign Corporations, ias amended, under CREATE Law provides:

A Minimum Corporate Income Tax MCIT of one two percent (2%) of

the gross income as of the end of the taxable ,Year is imposed upon any
domestic corporations and resident foreign corporations beginning on the
4th taxable y~ar immediately following the taxable year in which such
·corporation commenced its business operations, When the MCIT is.grec;1ter than
RCIT, Provided: That effective July 1, 2020 until June 30, 2023, the rate sha!I
·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 great.er than the- regular corporate
inc,ome tax (RCIT) due from such corporation. Hence, MCIT is always
computed and compared to RCIT starting on the fourth year of
. operations.

RULES . FOR DETERMINING THE PERIOD WHEN A

CORPORATION _BECOMES SUBJECT TO MCIT (RR 2-98 -as
amended under RR 9-98)

Meaning of" ... ;·in the 4 th taxable year immediately fol/9wing the tr1xable
year in which such corporation comm~nced its business opera_hons"
o Jn .determining the 4 th taxable year, the year the Corporation was
registered shall be disregarded. ·

241
 · Under RR 12-2007, MCIT, sh~II be comput~d not only on a yearly bas·is
but also in the compu~atiort of quarterly tax due. .

.MCIT RATES:

Period . · MCIT Rate

.· Onor ~efore June 30, 2020 .
..
I , 2%
. . b.
July 1, 2020 to ·June 30, 2023 ''! •
. . 1,Yo .
I •
·B·e 'innin Jul · 1 . 2023 .: . 2% .
. I

.CARRY -FORWARD OF EXCESS MCIT (MCIT C,A RRY-OVER)

Any exC:ess of the·MCIT o~er RCIT shall be c~rried forward and credited ~gainst
the RCIT for the three (3) immediately succeeding ta~able years. ·
1
I 1 •

.. ~· . Revenue regulations 2-98· as amendeo ·by RR 12-2007 provides that a

"Minimum Corpora_ te lnc,or:ne Ta~ (MCIT)" of two percent (2%) _o f the gross
inGome as of tne end of the taxable year (whether caIe·n9a·r or fisccJI), depending
on the accounting period employed is impo_sed upon any domestic corporations
· and resident for~ign corporation~· beginning .on the fourth (4 th ) taxable year
immediat0IY following the· taxable year in•whjch such corporation commenced
· its busfness operations. The MGIT shall be imposed whenever:
' .: '. .. . . ' . \.' '. \ ·. . .' .
• Tt:,e corporation .has zero ·taxabl~ income; or
• The corporation has negative ·t~xable income·; or . .
• · Whenever the amount of fy'ICIT · is· greater than the regular
corporat~ in.come tax (RCIT) due from such corporation. ·Hence,
MCIT is· always computed and compar ed tq RCIT starting on the
· fourth year ·of operations .. The high.er amount should be the tax
due for the taxable per.iod.

·COMPUTATl,ON·OF GROSS INCOME

For purposes' of MCft, "Gross Income;, means ·gross sales less sales
· · returns, discounts, allowance$, and cost :of goods sold, in case of sales of
. goods, or gross receipts less sales r~turns, discounts, ·allowances , and cost of
· services/d!re9.t cost, in 'case .of sale pf services (RR 12-2007). This means
· that gross. income· will also include all items gross income enumerated under
Section 32(A) of the· ~ax code or items subject to normal ·or regular corporate
tax. However, -all income exempt from tax and income subject to final ·taxes
sh~II be excluded in the _ determination ·of gross income ·for MCIT purposes.
/ '

242 ,
 \

1/l,C,(}-/r[& Tttc: /Jiu crcctllNU

·coMP.UTATION OF MCIT:

SELLER.OF GOODS:
Gross Sales Pxx
sa·les Discounts ' . (xx) _,
Sales Returns and allowances · (xx)
Cost of Sales** · (xx)
Gross income · . xx
Add: Other' jncome subject to Normal or Regular xx
Corporate tax · , ·
Gross lricom_
e for MCIT Purpose~ 'Pxx
~CIT rate (CREATE Act) r: . 1%/2%
MCIT , . Pxx
',

.. SELLER OF SERVICE:
Gross Receipts Pxx
Sales Discounts . (xx) .
Sales Returns and allowances (xx)
Direct Cost of Services*** (xx)
Gross income xx
Add: Other income subjec't to Normal or Regular xx
· Corporate tax
Gross Income for MCIT Purposes Pxx
MCIT rate (CREATE Act) '1% / 2%
. MCIT Pxx

**COST OF SALES (S_ eller of Goods):

Invoice cost Pxx
Import tju~ies xx
Freight xx
Insurance xx
Total ) Pxx

**COST OF SALES (Manufacturer):

Raw materials useo Pxx
DireQt Labor xx
Factory overhead xx
Freight cost , xx
·Insurance premiums xx
Other production cost xx
Pxx
Total

243
 l /lCO'lll,& '!~ rJ-tv C7°'«tW!fs.
***DIRECT COST OF SERVICES:
Salaries and Employee beriefits of personnel, consultants Pxx
and specialists directly rendering the service .
Cost of facilities directly utilized in providing the service xx
(e.g. renfals and cost of supplies) . . .
·other direcf'<;;osts and expenses necessarily incurred to xx
provide the services
~I ~

ILLUSTRATION 2:

Case A: .
Assume the following data for Hananiah Corpo.ration, ·a domestic'corporation,
· during 2021 taxable year (4th year of .business operations): - ,
Gross Income, Philippines P9, 75g,ooo
Expenses, Philippines · 5,500,000
Gross Income, Malaysia 7,700,000
Expenses, Malaysia 3,300,000
Interest on bank deposit 250,000

Required: Determine the incdme tax due.

❖. Answer: P2, 162,500

Gross Income, Philippines. P9,750,000

Gross Income; Malaysia 7,700,000
TOTAL . P17,450,000
Expenses, Philippines (5,500,000)
Expenses, Malaysia (3,300,000)
Taxable income PB,650,000
Tax Rate 25%
RClTDue P2, 162,500
MCIT= P17,450,000 x 1% P174,500
Income Tax Due (higher) ' P2, 162,500

❖ · Under the C~EATE 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
dassified as MSME (page 238), the RCIT rate shall be 20%.'
❖ As discussed in illustration # 1, the interest income on bank deposit is a
_ "passi,ve income" subject to final tax of 20%. Rules on Final Taxes on
ain passive income are applied regardless of whether the corporation is
' cert_
subject to RCIT ·or MCIT because of the different nature of income to which
the t~xes were based.

244
 7~ ·7'~ (/11/ CridUNU .
Case 8: , ·
Ass_
during 2021 taxable y
. . G·
ir
ume the following data i O · . . · · . . ·
mega Cor~orat,on, a resident corporation,
ear. mega started its operation in 2017:
Eross Income_, , Ph!lippines P9,750,000
~pen~es, Philippines . .~ . 9 700 ooo
.Gross Income, Australia 20:000:000
Exp~n~es, Australia 15,800,000

The c~mpany's ass_ets alllou~ted ohly t~ pso,ooo.~oo

Reqwr~d: Determ~ne the income tax due. · ..
· 1 ❖ Answer:· P97,500 .
' .
Gross·(ncome: Philippines P9,750,000
· Expenses, Philippines . (9,700,000)
Taxable /ntome PS0,000
Tax Rate 25%
.RCITDue P12,500
MCIT= P9,750,000 x 1% P97,500
Income Tax Due (higher) P97,500

❖ Although the company's assets and net income are NOT MORE THAN the
thresholds for MSMEs (P100M assets and PSM net income), the 20% RCIT
rate is not applicable because Omega Corporation is a.foreign corporation .
./
❖ .The excess of MCIT over RCIT (P97,500 vs. P-12,500 = P85,000, also
known as excess MCIT, shall be carried forward and credlted (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 Illustration#~ for a more detailed discussion on carry-
over of excess MCIT: MCIT is also applicable to RFCs. ·

Case C: .
I
·Assume the following data for Alpha Corporation, a domestic corporation,
during 2021 taxable yea'r. Alpha started its operation in 201 Q:. · · ·
- . Gross Income, Philippines P9,750,000
Expenses, Philippines 9,700,000
GrossJncome, Australia 5,000,000
· Expens~s, Australia · . '· :LJ,900,000
the company's assets amounted·to PS0,000,000.
Required Determine 'the income -tax due.
❖ Answer: P147,500

Gross Income, Philippine_s & Australia P14, 750,000

Expenses, Philippines · {14,600,000)
Taxable income P150,000
Tax Rate forMSME 20%
. RCITDue PJ0,000·
. l
 MCIT= P14,750,000 x 1% P147,590
Income.Tax Du_e (highe_r) P147,soo ---
. .
❖ Alpha Corporation . is classified_as MSME u~der CREATE Act.
Consequently, the applicable ~CIT rate shall be 20%. _

❖ The excess of MCIT over RCrT (P147,500 vs. P30,000 = P117,500, also
.known as excess MCIT, sh~II be carried forward and credited (deducted)
a·gainst 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
· forwarde9. Refer to·Illustration # 3 for a more ~etailed discussion on carry-
over·of excess MCIT.

Case D:· .
Assume the following data for AJpha Corporatipn, 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 P120,000,000 including the land valued

at P40,000,000 on which the company's office, plant, and equipment are
situated. ·
Required: Determine the income tax due.
❖ .'Answer: P147,500
Gross Income, Philippines & Australia . P14,750,000
Expenses, Philippines (14,600,000)
· -Taxable income P150,000
Tax Rate for MSME 20%
RC/TDue PJ0,000
MC/T= P14,750,000 x 1% P147,500 -
·Income Tax Due (higher) P147,500

❖ In determining the threshold for the company's assets, the CREATE Act
provi~es that the land on whiGh 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
rate shall -be 20%. .

·❖ The excess·of MCIT over RCIT (P147,500 vs. P30,000 = P117,500, also
kno~n as excess MCIT, shall be carried forward and credited (deducted)
against th_e ~CIT for the three succeeding taxable years, provided, th~t
the RCIT Is higher than the MCIT in· the year to which the excess MCIT is
,, forwarded. Refer to Illustration # 3 for a more detailed discussion on canY·
over of excess MCFr.

246 .
 Case E: . .Assum~ t~at Alpha Corporation in Case D is a~oriresident ·
corpo:ation, d~termme the income tax.due for 2021 ·taxable year.
••• Answer:· .P2,437,500 · ,, ·
GFWTross lncom_e, PhilipRines P9,750;000
, rate for NRFC . · 25% .
RC/T Due P2,437,S00 ·

❖ Under th~ CREATE Act, · nonresident foreig~ corporations are ·

tax~bl~ at 25% of th~ir. gross income deriveq ·in the Philippines
beginning_January 1, ~021 ,. -.

❖ . MCIT is NOT a licable to nonreside~t cor orations . .

EXCESS MCIT OR MCIT CARRY-OVER

. .
Any excess of the minimum corporate income tax over the regular
corporate income tax shall be carried forward and credited (deducted) against
the regular i'ncome tax for the three succeeding .taxable years·, provided, that
the.·regular tax should be higher than. the .minimum corporate tax in the year to
·which the. excess MCIT is forwarded. ·

ILLUSTRATION 3:. · ·

.A domestic corporation which commenced operations in 2015 . proviqed the

,following data:
2019 2020 2021 .
~ross income P10,000,000 P12,000,000 P14,ooo,ooo
7 .
Allowable deductions (9,500,000) 12,200,000 12,800,000
Net 1ncome (loss) · P500,000 P(200,000) P1,200,000

oeter~ine the ·Income tax payable for 20-19, 2020 and 2021. Assume further
tha_
t the corporation is not classified as MSME.

Answers: ·
2019: P200,000
I

RCIT or Basic tax (P500,000 x 30%) P150,000

/MCIT (P10M x 2%) 200,000
Tax Due/payable (Higher amount) P200,000_
· P50,000
Excess MCIT 2019
' ' '

◊ RCIT rate prior to July 1, 2020 was 30%

◊ · MCIT rate prior to.July 1, 2020 was 2%
. )

247
 I ,

l ll,C/}l!t,e; 'Tttt {Nv C ruiotu

I •

. ' 2020: P180,000

. ··· RCIT@ 27.5% ·' PO
MCl,T(P12M x 1.5%) .,, 180,000
Tax Due/payable (Higher amount) P180,000
Excess MCIT 2020 . P180,000 .

❖ The ·amount of.RCIT is PO because th~ operation of the company resulted

to a_loss1

❖ ·. The RCIT rate for 2020 '(transition p~riod from \RAIN Law to CREATE Act)
should be 27.5%, assuming the DC Is not classified as MSME. Otherwise
· the ·transition rate shall be 25%. · '
' . .

❖ The MCIT rate for 2020 (transition period from TRAIN Law to CREATE Act)
should be.1.5%, the average rate for 4% and 1% MCIT. .
. . .
· · . ~:~ . The excess MCIT for 2019 was not carried over or deducted in 2020 tax
due because MCIT in -2020 was higher than the RCIT. As a rule, MCIT can
. be ca~rieci'over only'if,. at the time .the .excess MCIT is claimed; RCIT is.
higher than MCIT.

2021: 'p20,ooo
, Gross income 2021 P14,000,000
Allowable deductions 2021 12,800,000
. ·Net income 1,200,000
Less: 2020.NOLCO*** (200,000)
Taxable income 2021 1,000,000
RC/Trate 25%
. . Income Tax Due P250,000 .

MCIT(14M x 1%) P140,000

Tax Due (RCIT-higher amount) P250,000

Less: Excess MCIT
2019 ·(50,000)
, 2020 (180,000)
INCOME TAX PAYABLE 2021 P20,000

❖ . **t..Jet ;Operating Loss during the year r:nay be .carried over as part of
deductible expenses of a corporation for the next three succeeding years
following . the year the loss. was incurred. Such loss is known as Net
Operating Loss Carry-Over (NOLCO). HOWEVER, under RA 11494, also
known as Bayanihan Act 11, the N'OLCO of a business or enterprise for
taxable years 2020 and 2021 shall be carried over as .a deduction from
gross income for the next five (5) consecutive taxable years immediately
following _the year of loss. . ·
I .

248
 . : IUXJ-lr[e_, Tilt (Hu C rdUJ-fl6
QUARTERLY AND ANN~AL CORPORATE TAX DUE .
carfy-Over of Excess MC/T 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 f~:>r the taxable qu_arter, if the computed quarterly MCIT is higher
thafl the quarterly regular income tax, the. tax due to be paid for such taxable ·
quarter at the time of filing the ·ql)arterly corporate income tax return shall be
the MCIT. based on the gross income as.·of the end of the taxable quarter.
. . '

. In the payment of said, "qua.rterly" MClt, excess· MCIT from the

previous taxable year(s) shall not be allowed to be credited. However, the
· expa.nded withholding. tax and quarterly corporate income tax payment~ under
the regular income tax and the MCIT paid in the previous taxable quarter(s) are
· · allowed to be applied against
'\, ' -
the quarterly MCIT due.

l~L~STRATION 4: (Based on illustrations from 'RR 12-2007)

CASE A:
A corporation's ~omputed Regular Corporate ·Income Tax (RCIT), MCIT and
Income taxes withheld from 1st to 4th quarters including excess MCIT and
·Excess withholding taxes from prior ye,;ir(s) are as follows:
Quarter RCIT MCIT Taxes Excess Excess
Withhheld MCIT Withholding
during.the Prior tax of Prror
-year Year Year·
1st P200,000 160,000 40,000 60,000 20,000
. .2n~· · 240,000 _
500,000 60,000
3rd . 500,000 200,000. 80,000
4th 400,000 200,000 70,000
Determine the following:.
1) 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/SQLUTIONS

Question #1: PS0,000 computed as follows:

. · Quarterly tax due (Higher-RCIT) P200,000
Less: (20,000)
Excess with~olding tax-previous year
(40,000)
Taxes withheld-this quarter .
(60,000)
**Excess MCIT-previous year ·
PB0,000 _
Income tax paid/payable

249 ·
 /.
.. ' . ' ...
,.....The carry~over'of excess .MPT from previous,yea,r is all<;>wed if the tax ·due.
for the quarter is based on-RCI~. '
r .

Question # 2: P460;000 ,· .
,·.. Quarterly 'tax ~ue (Higher~MCIT) P66o,ooo
Less: ' .
Excess withholding tax-previous year , (20,000)
Taxes withtierd-1 st and 2nd quarters·, . (100,000)
lncome tax.paid-1 st quarte~ ' .: (80!000)
**Excess MCIT-pr~vi~Ds year
Income tax paid/payable .- 1. P460,000
. ~

■. *~The carry-ove'r ~f;excess MCIT from pr_

I evio_
us .year is not allowed if the
. tax due for- the quarter is ba_sed_ori MCIT. ·· . ·
I I
• < ■ ~ Jhe P660,000 quarterly tax 9ue was computed ·. by adding the MCIT of the .
·1st'and 2nd quarter: The amo.unt' is higher co_mpwed to the total of the
RC IT for the ·1~1-~nd ·2nd quarter
. I
. ' '

Question.#_ 3: P140,000.computed as follows

Quarterly tax due (Higher-RCIT) · P940,000
Less: 1

~ ·· Excess withholding tax-previous-year (20,000)

· Taxes withheld-1 st , 2nd· and 3rd qu'arters · (180,000)
,. . Income tax paid-1st and 2nd quarters :. (54,0,000)
...... Excess MCIT'7previous·
., '
year. (60,000)
lncom~ tax paya~le P140,000
■ . · **Refer to the explanation in question # 1. . _
• ., • I

·question # 4: P330,000 cor:np~ted ai follow~ - :

Quarterly tax due (Higher-RCIT) . P1 ,340,000
Less:
Excess whhholding tax.:previousyear (20,000)
Taxeswithheld-for _
the year (total) (250,000)
st
.. lncom~ fax paid-1 ', 2nd an.d Jd qua'rters (680,000)
,Excess MCIT-previous year · (60,000)
Income.tax payable : .: ,
P330,000
' . _,,, ' 1
-
• I 1. (

CASE B: (MCIT at Year--End is higher than RCIT): ··._

Assume the following data: · ·
Quarter RCIT MC.IT Taxes Excess Excess
· Withhheld MCIT Withholding
during the Prior l tax of Prior
. year Year Year
1st / P200,000 150·,ooo ,: 40,000 60,000 20,000
2n~ 240,000· . 500,r000 60,000 I

3rd
500,000 200,000 80,000 '
4th ·100,000 .240,000 . · 70,000
Determine the income tax a able at ear-end

250
 ANSWER:
❖ P150,000 ..
Solution:
~:al tax due (Higher-MCIT)
P1,109,ooo
Excess withholdi · .
Taxes withh ld-fng tax-pr~v1ous year (20,000)
T . e or the entire year (250,000)
axes paid-for the first 3 quarters
Excess MCIT p • · (680,000)
Income tax pai~/payab~ rev1ous year (not allo~ed)
.. . . P150,000
m . The computation of the t .
same with the com ut t·axes paid ~or the first three quarters (P680,000) is the
· a ions made in Illustration No. 4. · .

RELI_EF FROM MCIT

.The. Sec'reta·ry of F . · I

minimum corporate. inco~~-~acxe is authorized

on any corporation due to·
lo
suspend the imposition. of

.. 1 · Loss~s ~ a.cco,u nt of prolonged labor disput~s

0
2 . · Force maJeure
3. Legitimate bus·i_ness reverse~.

. Subs~antial los~es from a "prolonged labor dispute" means losses arising

fr~~ a stnke staged ~y the employees that lasted for more than six (6) ~onths
. w1th,m a taxabl~ penod and the strike resulted ,to temporary shutdown of
. business operations. ·

CORPORATIONS EXEMPT FROM MCIT

The following corporations shall not be subject~d to MCIT:
. 1) pomestic_Corporations
a. Proprietary Educational Institutions
b. Non-profit hospitals
c. Domestic corporations engaged in depository bank$ under the
expantjed foreign currency deposit unit (FCDUs) on t~eir income from
foreign currency transaction·s with local commercial banks and other
depository banks under the foreign curre(!CY ~eposit system.

2) Resident Foreign Corporations ·

a. International carriers
b. Regional Operating Headquarters (ROHQs) up to 2021 ta . ble year
under CREATE Act.
3) Corporations· registered under Philippine Economic Zone Authority (PEZA)
and Bases Conversion Development Authority (BCDA).

251
FINAL TAX ON PASSIVE INCOME
An~ther type of income tax on corporations is the so-called fi1
wit~_hol_ding tax on certain passive income ~eri~ed from sources _within
Philippines. As discussed in page 236, passive mcomes are certam types
;!
in~ome ~erived from sources within t~e Philippines that are subject to Fin~:
Withholding Taxes (FWT}. Specifically, for corporate taxpayers, these income
pertain only to int,erest income, royalties and dividends as described below: s

DC RFC .TRAIN Law

.-,,

A. INTEREST INCOME
1.), Interest in any currency bank. . 20% 20% 30% 25%
deposit
2.) Yield/monetary benefit 'from 20% 20% 30% 25%
deposit s~bstitute
)

3_
.) Yield/monet~ry benefit from tru§t 20% 20% -30% 25%
fund and other similar

-
a~rangements
4.) Interest income derived from 15% Exempt Exempt
depository bank under expanded
foreign currency deposit system
(FCDS):
◊ ·. TRAIN LAW (Prior to

◊
CREATE Act)
UNDER CREATE Act
15%*
- Exempt Exempt

B. ROYALTIES 20% 20% 30% 25%

"The inconsistent FWT rate of. inte;est incom d . ·

correcte~ by RA _11534 (CREA TE Act). e enved from FCDS deposit by RFC ~ a
FWT o~ mterest mcome derived from FCDS . . . .
Nonresident taxpayers such as NRFC . deposits is app/Jcable only to re 1dent ta payers.
FCDS deposits. · · 1s exempt from ~WT on interest incom derived from

252
 DC RFC NRFC
TRAIN Law
c. DIVIDEND INCOME • UNDER THE TRAIN LAW
Oiv.idends received from a
dome$tic corporation (inter- exempt exempt' *·*15%/
corporate dividends) 30%

DIVIDEND INCOME - UNDER THE CREA TE ACT

. .

Dividend Income received :

exempt exempt
FRO_ M a\domestic corporation · **15%/
Dividend Income received 25%
FROM Resident Foreign
Corporation (RFC)
(RR 5-2021 and RMC 62-2021)

0 DERIVED FROM Philippine Exempt 25% 25% FWT

sources
RCIT
0 DERIVED FROM without ***
the Philippines (foreign- Exempt Non- Non-taxable
sourced dividend) under taxable
certain
conditions
Dividend Income received ***
FROM -Nonresident foreign Exempt Non- Non-taxable
Corporation (NRFC) under taxable
0 Foretgn-sourced dividend certain
(RR 5-2021 and RMG 62- conditions
2021

NOTE: - -
0 **DIVIDEND INCOME FROM DC TO NRFC

- 30 o FWT. However, if the country where the NRFC is domiciled allows

TRAIN law. Generally, Yo_ 1. the Philippines equivalent to 15% {also known as tax sparing)
a credit for taxes deemed paidd' ~d nds the tax rate shall be 15%, otherwise, 30% (without tax
or does NOT impose tax on ivi e ' . ·
sparing). .

2 ..d d income received by NRFC from DC:

CREATE law, R~ _2-2o ~: DIVI 2e;% FWT. However, a r~duced rate of fifteen percent ~1_5%)
o In general, 1t 1s subJ~ct to h ndition that the country in which the NRFC is dom1cIled:
shall be applied, subJect tot e co .

253
 l lfU)ttiC, Tf:; {Hu C~ru:Wfu
a. Shall allow a credit against the.tax due from t~~ s~id NRFC which are equivalent to
taxes deemed to have been paid in the Ph1hppme_s equal to ten percent (10°lc)
effective January 1, 2021, which represents the difference between the regul;r
income tax rate for NRFC under Sec. 28(8)(1] of th~ NIRC, as amended, and the
fifteen percent (15%) tax on dividend~ as herein provided; OR

b. Does NOT impose any income tax o~ dividends received from a domestic
corporation. ·

o *** FOREIGN-SOURCED DIVIDENDS may be exempttrom tax subject to the following

conditions (RR 5-2021 and RMC 62-2021):

• I a) The dividends actually received or remitted into the Philippines are reinvested in the
business operations of the domestic corporation within the ~ext taxable year from the
time the f9reign-sourced dividends were received or remitted;

b) ' The diyidends received shali only be used. to fund t~e. working ~apital r~qui:ements,
capital exp~nditures, dividend payments, investment in domestic subs1d1anes, and
infrastructure project; and

c) The domestic corporation holds directly at least twenty percent (20%) in value of the
outstanding shares of the foreign corporation and has held the shareholdings
'uninterruptedly fpr a minimum 9f two (2) years at the time of the dividend distribution. In
case the foreign corporation has been in existence for less than two (2) years at the time
of dividends distribution, then the domestic corporation must have continuously held
directly at least twenty_percent (20%) in value of the foreign corporation's outstanding
shares during the entire existence of the C9rporation.

Absent any one of the above cona'itions, the foreign-sourced dividends shall be considered as
taxable income bf the domestic corporation in the year of actual receipt or remittance, subject
to surcharges, interest and penalties, as applicable (RR-2021 ).

•
SITUS OF DIVIDEND INCOME FROM FOREIGN CORPPORATIONS (RMC 62-2021 i ! :
RR 5-2021 in relation to Sec. 42 of the Tax- Code, as amended): . 1
, ·' •

■ Dividend income received by DC from NRFC is c~nsidered 'as. foreign sourced dividend as
- provided under RR 5-2021. . .

• Dividend income received by DC from RFC (RMC 62-2021)

◊ Jhe tax treatment of dividends received by a domestic corporation from RFC v ill
depend ·on the sources of income of the RFC. Under Section 42(A)(2)(b) of the
Tax Code, as amenped, dividend from a foreign corporation shall be treated as
income derived from sources WITHIN THE PHILIPPINES UNLESS less than
50°~ of t~e gross incom~ of the foreign ·corporation for the three-year period
e~~mg with the close of its taxable year preceding the declaration of uch
d1~1dends (or for such part of the period as the corporation has been in
existence) was derived from sources within the Philippines.

254
 . . .l 7:t
. · . . ~ ~ tNu Cur;UJratuJ-IU
sHARE IN THE NET ! NCOME OF A J · ·
JO/NT VENTURE , .
In general, a joint v ·t OR CONSORTIUM
en Ure or co ,
ess· exempt as .provided for by 1aw (refe t · .is taxable
~sort,um as t·
unl ti th h . ·. . a corpora 10n
.consequen y, . e s are m income receive r o the _d~scussion in page 230).
·p!VIDEND INCOME. · d from~ Joint venture is treated as

The applicable inGome tax of h .

· · s are in the t · · · •
or consortium 1s summarized as follows:· ne income of a Joint venture

• 1iifmrd-
•
,MRWWZJ 4mm1,i,waAWidiN1UiiWJh1,)ifi•flJ-
· ·
1

raxable Joint· · The respective 5h . . ..

Venture dividend inco ~re _in th eJoint ventu~e pr?fit is considered qs
. me received by a domestic corporation from a domestic
c~p~r~ti~n. Hence, it shall be treated as inter-corporate dividend
w IC 15 tax exemptrfrom tax (Refer to Table ~-2). .
· . Tax-Exempt The respecti~e share in the joint venture profit shall be included in
Joint Vef)fure the ~omputat1on of the corporate co-venturer's taxable income
.subject to regular corporate income tax of either 20.% or 25%, as the
case may be, under CREATE Act. ,

TAX TREATMENT OF.INTEREST INCOME DERIVED FROM

GOVERNMENT DEBT INSTRUM~NTS AND SECURITIES

As discussed in Chapter 2, the Tax Code as amended , defined

11
beposit Substitutes"· as an alternative form of obtaining funds "from the public' 1

other than deposits, through the is·suance, endorsement, or acceptance of debt

instruments for the borrower's own account, for the purpose of re-lending or
purchasing of receivables and other oblig~tions , or financing their own needs
or the needs of their agent or dealer.

"Public" is defined as borrowing from twenty .(20) or more individual or

corporate lenders at any one time. · Interest income. deri~ed the_refrom is subject to
final tax payable upon the original issuanc~ of the deposit substitutes. Gover_ nment
Debt Instruments and Securities, including Bureau of Treasury {B~r) 1ss~ed
· t t d ur· t·es such as Treasury bonds (T-bonds), Treasury bills (T-_ bi_lls)
ms rumen s an sec 11 be considered as· deposit• su bst·tI utes ·irrespect·1ve of th e
an d Treasury notes, shall time of origination . de bt ·mstruments an d secun·t·1es_are
. 1f. such
number of lenders at th e d arket The mere issuance of government
to be traded or exchanged in_t~e ~ecdon arydmas taliing within the coverage of deposit
debt ms. ·t t and secunt1es is eeme
rumen s . . b f lenders at the time of origination and therefore
th
~ubstitut_es irrespec~1ve of e num e~~II be subject to the applicable final withholding
interest ~ncome derived th~refrb o ~/ tes as prescribed under the Tax Code.
tax rate imposed on deposit su 5 1u . .

255
 ILLUSTRATION 5: ,
CASE A: . . 'd h f II . d .
CHEN Corporation, ·a ·domestic corporation, prov1 es t e O owin_g ata during 202 1
taxable year:
Gross income from
Sale of merchandise . P10,000,000
Rent Income (gross of 5% withholding tax) · 2,000,000
Miscellaneous income _ 3,000,000
Operating expenses 7,000,000
lnt~rest income from savings deposit 100,000
· Interest income from government bonds 100,000
Interest income·on FCDU bank deposits 150,000
Dividend income from a domestic corporation _ 125,000
Gain on sale of shares of a domesti~ corporation sold · 125,000
directly to a buyer ·
Gain on sale of real property in the Philippines held as 200,000
investment. The property was acquired at a cost of
P2,000,000 .
Gain on sale of real property abroad held as . . . 250,000
i'nvestment. The property was acquired at a cost of
P3,000,000 .
Withholding tax on rent income 100,000
Income tax paid for the first 3 quarters of'the year 100,000

Question 1: Determine CHEN's income tax_payable.

f Answer: P1 ,862,500
Gross income from:
Sale of merchandise , P10,000,000
Rent Income (gross of 5% withholding tax) 2,000,000
Miscellaneous income 3,000,000
Gam on sale ofrealpr,operly abroad held as,investment. 250,000
Operating expenses ' (7,000,000)
Net (taxable) income 8,250,000
Basic Tax Rate 25%
Tax Due P2,062,500
Less;
Tax withheld on rent income · (100,000)
Quarterly income tax payments (100,00)
Income Tax Payable · ., Pt,'862,500

Question 2. Determine the corporation's final tax on passive income

•· Answer: P62,500
Interest from savings deposit (100,000 x 20%) P20,000
Interest from gov't bonds (100,000 x 20%) · 20,000
Interest from FCDU deposits (150,0qo x 15%) 22,500
Total final tax on passive income · P62,500

256
CASE 8:
ACB Corp~r~tion, ~ domestic corporation, has earned the following income during 2021:
Dividend mcome from: ·
IBM, a non-resident corporation · · P180 000
Fox Tech., a resident foreign corporation (dividend within) 32s:ooo
lsabe_la Corp., a dome~tic corporation 200,000
Interest mcome from: ·
Current
.
account ' BPI 150,000
Savings depqsit, United Overseas Bank, Singapore 410,000
US $ deposit (FCDU) - Metrobank·Makati -100,000
Royalty income .from various domestic' corporations
.
500,000

Question: .How much is the fihal tax on passive income assuming that the dividend income
fron:1 IBM were not reinvested in ABC Corporation?
❖ Answer: P-145,0o·o
Interest income - BPI @ 20% . 30,000 .
US $ deposit (FCDU) - Metrobank @ 15% 15,000
Royalty income @ 20% 100,000
Total Final Taxes on passive income P145,000
o . The dividend income from IBM (NRFC) is ·suqject to RCIT.
o The dividend income from Fox Tech (RFC) is exempt because the problem
provides that the income was derived from sources within the Philippines.
o The dividend income from lsabela, a domestic corporation, is exempt
o Interest income earned abroad is subject to RCIT (ABC is a domestic
corporation, taxable on income derived from within and without the Philippines).
FOREIGN-SOURCED DIVIDENDS (RR 5-2021),
■ RR 5-2021 provides that dividend income from NRFC is considered as a foreign-
sourced dividend. Foreign-sourced dividends, if received by a domestic
corporation, is exempt under CREATE law subject to the following condffions:
(a) reinvestment of the dividend received in the domestic corporation within f e
next taxable year;
(b) 20% or more ownership of the NRFC; and
(c) 2 _years or mor~ holding period.

NOTE: Absent any one of the abov~ conditions, the foreign-sourced dividends shall
be considered as taxable income of the domestic corporation in the year of . tual
receipt or remittance, subject to surcharges, interest, and penalties, as applicabfe.
I

CASE C (Based on illustrations from RR 5-2021 ): .

1 RU Corporation, a domestic corporation, owns twenty percent (20%) of the
outstanding shares of USA Corporation, a non-resident foreign corporat!·on
(NRFC), since August 1, 2015. On June 30, 2021 it received dividends amountm~
to P 1,000,000 from the said· NRFC. The said dividend has not been used untJI
January 13, 2023.

257
 /,u;,tHrt,e, T~ {}-/t, Co/4"«t-llJ!ts
Question: What is the correct tax treatment of the dividend income?
Answer. In.this case, the P1 ,000,000 dividend inco~e shall be declared as1axabl
income (subject to RCIT) for calend~r year 2021, subject to surcharge, interest, an~
· penalty, since it was not utilized within the next t~xable year, which is in 2022.

2 RSDY Corpor~tion;· a d?~estic corporation, owns twentr percent (20%) of the

outstanding shares of UK Corporation, a no~~reside~t fore1~~ corporation (NRFC),
since August 1, 2015. On May 1,. 2021, .1t r~ce1ved d1v1dend~ _amounting to
P1 ,000,000 from the said NRFC. Oh. Septe~ber 1, 2022, RSDV Corporation
utilized PB00,000.00 for,its diyidend ,p~yments. On January 1, 2023, it utilized the
remaining P200,000 tor its working capital requirements.

, Question: What is tt,e correct tax trea\m~nt of the dividend income?

.Answer: In this case, P800,000 shall t;>e- treated as ~ax-exempt since this was
properly utilized within 2022. On the other hand, the P200,000 shall be declared as
- taxable income (subject to RCIT) for the taxable y~ar 2021, subject to surcharge,
interest, and penalty, since the utilization is not within the following taxable year,
· which·is in 2022'.
J

3 .· BKTD Corporation, a domestic corporation, holds 20°% of the stocks of EU

. Corporation, · a non-resident for~ign corporation. BKTD is a wholly-owned
• subsidiary of GKCM Corporation, a non-resident ·foreign corporation. BKTD's
holding in EU Corporatio11 sta_
rted in 2°018, and the holding period is uninterrupted.
On ·July 1, 2021', BKTD C~rporation received dividends from EU -Corporation
amounting to P2,000i000 and su~sequently -paid out dividends on December 31 ,
2022, in the amount of P 1,500,000. The remaining amount _ of PS00,000 has not
been used in any qualified activity for exempt foreign-sourced dividends.
• I I

Question: What is the correct tax treatment of the dividend income? I

Answer: In this situation, BKTD Corporation shall be subject to income tax (RCIT) 1'

on .the unused_amount in ,the taxable period 2021,. subject to surcharge, interest

1
and enalt . . . · .

TAX TREATMENT OF INCOME DERIVED BY.A DEPOSITORY BANK

UNDER EXPANDED FOREIGN CURRENCY DEPOSIT SYSTEM (FCDS)

· This pertains to income derived "by depository banks" under FCD~-

This income is different from interest income derived by depositors on th~,r
bank deposits · under FCDS. The applicable income tax as provided for ~n
Section 27(0)(3) and Section 28(A)(6)(b) of the Tax Code, as amended 1~
summarized as follows:

258
 Income derived by ·a depository bank under FCDS from foreign
currency transactions with: ·· . ·
• Nonresidents
• . OBUs in the Philippines EXEMPT
• local commercial bank including branches of foreign
1
\
banks·

lntere~t income from foreign currency loans granted by a

depository bank under FCDS to residents other than depository 10% FWT
banks under,the expanded system ·

Any . income of non-reside_nts,. ~hether individuals or corporations, EXEMPT

from transactions with depository banks under the expanded
s stem shall be exem t from income·tax.
' -
Net income frorn FCDS transactions, as may be specifie'd by the
Secretary of Finance, upon recommendation by the Monetary Boar-d , may be
subject to the regular corpor~te income tax (RCIT).

The· provisions of the Tax Code pertaining to the incomes described

above .were not amended under RA 11534 or the CREATE Act.

CAPITAL GAINS TAX CGT ·

Under · the Tax Code, as amended, there are only two (2) types of
capital gains subject to .capital gains. These types of capital gains were also
qiscussed in Chapter 2 (l ~dividu~I taxpayers). Capital gains tax is imposed on
. the sale of the following types of capital assets: ·
1. Shares of stock of a domestic corporation not listed in the local
stock exchange; and
2. ·. Sale of real properti_es located in the Philippines.

Capital Ga.ins Tax (CGT) on Sale of Shares of Stock of a Domestic

~ orporation

REQUISITES:
1. T he shares of stock sold, bartered, exchanged or di ose , mu
be from a domestic corporation . ·
2. T he transaction mu st be not through the lo ch ·,nge sale
is made directly to a buy r) .
3. The seller should not be d I r in cu riti s (held capital asset
or for investment purpos s only)
4. The transaction shou ld result to a capita l gain bas d 0
computation shown qelow:

25
 (

FORMULA:

DC -·
Selling Price Pxx xx
Cost (xx) (xx) (xx)
Capital Gain ·Pxx Pxx Pxx
Rate 15% 5% & 10%** 15%
CGT Pxx Pxx Pxx

Prior to the effectivity of the TRAI_N law, the CGT rate·on s·hares
of stock is computed as follows:
■ · 5% on the 1st P100,000 capital gains; and
■ , 10% in excess of P100,000
' '. .capital ·gains

· The CGT rate was . increased to fifteen pe~cent ( 15%) for

domestic corporations under the TRAIN law (beginning January 1,
2018). However, the CGT _rate for foreign corporations (RFC and
NRFC) was not amen·ded under such law, creating inconsistency in the
imposition of the tax. This inconsistency, nonetheless, was addressed
under the CREATE Act by increasing the CGT rate to 15% of capital
gain, same rate with domest~c corporations.

Sal~ of, shares of stock of a domestic corporation through ·the

local stock exchange is not subject to income tax· b~t to a "business
tax" of 6/1 d of 1% (also known as Stock Transaction Tax) under Section
127 of the Tax Code, as amended.

Sale ot shares of stock by a dealer- in sec_ urities such as

brokerage firms, regardless of whether the s_
hares were sold directly to
/
a buyer or through the local stock exchange. is subject . to regular
corporate income .tax (RCIT).

Capital Gains Tax (CGT) from the Sale, Exchange or Disposition of

Lands and/or BuiJdings

Section 27(0)(5) of the Tax Code provides that a ·final tax of six percent
(6%) is imposed on the gain presumed to have been realized on the sale,
exchange or disposition of lands and/or buildings which are not actually used
in the business of a corporation and are treated as capital assets, based on the ·
' gross selling price or .fair market value as determined in accordance with
Section 6(E) of the Tax Co9e, whichever is higher, of such lands and/or
buildings. - . ·
.· REQUISITES: ..
1. The land and/or building must be a capital asset; and
2. It must be located in the Philippines.

260
 FORMULA:
. Tax Base Pxxx
Rate 6%
CGT · Pxxx

Capital gains tax on ~eal properties shall qe imposed

re~ardless of whether. the sale, exchange or disposition resulted to a
gain ~r loss.

TAX BASE:
1. Selling Price
2. Fair Market Value
·3. Zonal Value

· .The applicable capital gains tax on sale of shares of stock of a domestic

corporation _ and real properties (lands and/or buildings) located in the
Philippines are summarized as follpws: ·

TABLE 5-3: Capital Gains sub·ect to CAPITAL GAINS TAX- CGT

, 1.) CAPITAL gains from sale of shares of stock
df aDC not traded in the local stock e~change
DC RFC NRFC
UNDER TRAIN La

Bv Domestic Corporations (Beg. Jan. 1, 2018)

Tax Base: Net Capital gain
Tax Rate: 15%

Bv Foreign Corporations
First P100,000 capital gain 5% 5%
Amount in excess of P100,000 capital gain 10% 10%

UNDER CREATE AC 15% 15% 15%

2.) CA,PITAL gains realized · from sale or

exchange or disposition of ta~d or/or
buildings (Basis: Selling Price or Fa1r Market 6% NA NA
Value**, whichever is higher)

26 1
 l~ T.re rJtf/ C°j°rrdWtu
• **FMV shall refer to the higher amount between FMV provided by City/Provincial Assessors
(also known as assessed value or FMV for real_es~ate tax purposes) and Zonal Value as
_provided by the Commissioner of Internal Revenue or the B_IR'. ·

• The 6% CG, regardless ~f whether the sale· res~lted to ·a-gain or loss is imp~sed to' domestic corporations
only. Moreover, the option available to individual taxpayers (Chapter 2) t? subJect t~e sale to either 6% CGT
or Basic Tax, if the buyer is the government, is.not applicable to domestic corporations.

.. CGT is due withir 30 day·s from date of sale

ILLUSTRATION 6: .
Assume the same data with illustration No. 5~ Case A.
Question. Determine the _corporation's total capita_
! gains.tax
♦ 'Answer: P150,750
Gain on sale of shares of a domestic corporation sold
·directly"(o a buyer (capital asset): ·
P125,000 X 15% ~ P18,-750

Sale of real property in the Philippines "held as

investment" (capital asset)
6% of Gross selling pric~ or F.air market
value, whichever is higher.
(SP=Cost + Gain)
·(SP=P2M + 2~0,000=P2.2M)

.Capital Gains Tax_(6%x 2.-2M) 132,000

TOTAL CAPITAL GAINS TAX P150,750
.• Sale of real property in the Philippines, held as investment are "capital assets" subject to capital
gains tax of 6% of the higher amount between gross selling price and fair market value (FMV).-
.FMV shall pertain to the higher between the FMV provided by the City or Provincial Assessor and
Zonal Value as· rovide.d b the Commissioner of Internal Revenue CIR

BRANCH PROFIT REMITTANCE TAX BPRT •

. 'I, •
. ·.
.

Section 28(A)(5) of the Tax Code provides:_

Any profit remitted by~ branch to its head office shall be subject to a tax of fifteen
percen_ t (15%) which shall be based on the total profits applied or earmarked for .
· remittance without ~ny deduction for the ~ax component thereof (except those activities
which we registered with the Phili_pp_ ine Economic Zone Authority). The tax shall be
collected anq paid in the same manner as provided in Sections 57 and 58 of this Code:
Provided, That interests, · dividerds, rents, royalties, including remuneration for
technical services, salaries, wages, premiums, annuities, ·emoluments or other fixed or
de!ermfnable annual, periodic or casual gains, profits, income and capital gains
received by a foreign corporation during each taxable year from all sources within the
1
Philippines shall not be treated as branch profits unles~ the same are effectively
.connected with the conduct of its trade or business in the Philippines.

262
 'I
/'IWHrl,e, 7~ {Ht, CrrdltflU

Bra~ch profit rl:!mi~anc~ tax (BPRT) is applicable only to a resident foreign

corporation (RFq). which 1~. a bran~h of a nonresident foreign corporation
~NRFC). _As a resident f~_re1g,n ~orporatidn, it is subject to regular corporate
1ncom~ tax (Rc;;I~) .of 251/o on net incomef derived wit~in ·the Philippines, as
ame~ded by the CREATE Act. The tax rate and items of income subject to
branch profit remittance ~ax was not amended under the CREATE Act. ·

FORMULA: .
Branch Profit remittance .Pxxx
-BRT rate 15%
BRT Due · Pxxx

_BAS.IS:
◊ Total branch profits applied ·or earm~rked for remittanc·e without
any deduction for the tax component thereof. The branch profits
subject to BPRT ,shall be,effectively connected with the conduct of
· its trade or busine-ss in the Philippines. Items of income which are
·not effectively connected with the conduct of its trade or business
in the Philippines are not considered branch profits, hence, not
subject to BPRT. However, to be effectively connected, it is not
necessary that .the income. be -derived from the actual operation. of
the branch's trade or business. It is sufficient that the income arises
. from business a·cti_vity in which the branch is engaged.

SPECIAL CORPORATIONS· , . . . : ··

Under'the Tax Code; certain corporations are_subject to lower tax rates on

their regular income instea'd of the regular corporate tax of 20% or 25%, as the
·case may be, as amended by Rf\ 1 ~ 534 or the CREATE Act. These
corporations are classified as ·spe-cial corporations. ·However, certai n passive
incomes and capital gains on sale of shares of closely held domestic
corporations and real properties situated in the Philippines are still subject to
the applicable final withh9lding taxes and .capital gains tax as discussed in the
preceding pages.

Ordinary Income DC: . 20% I 25% RCIT

RFC: 25% RCIT Lower income tax rates
NRFC: 25% FWT
Passive Income FWT rates Same FWT rates
Ca ital Gains • CGT rates Same CGT rates

263
 / ltClHf[e,, ' [ ~ tflv crcd~
The follqwing are classified as Special Corporations under the. Tax Code as
amended by RA 11534 or the-CREATE Act. .

TABLE 4..4: INCOME TAX RATES OF SPECIAL CORPORATIONS

DOMESTIC CORPORATIONS:
Non-Profit.Proprietary educational institutions; and
Non-profit hospitals ,.,
TRAIN Law 10%
CREATE Act (July 1, 2020 to June 30, 2023)
■ July 1, 202·0 to June 30, 2023 1%
■ Beginning July 1, 2023 - 10%

RESIDENT FOREIGN CORPORATIQNS:

■ International carriers **2.5%
• · Regional operating he~dquarters (ROHQ) of multinational 10%
corporations [Subj. to 10% rate up to Dec. 31, 2021 only. Beg. Jan. 1,
. 2022, ROHQs will be subject to 25% RCIT under ~REATE Act]

NONRESIDENT FOREIGN CORPORATIONS: ·

. I

• Nonresident owner or lessor of vessel 4.5%

• Nonresident cinematographic film owner, lessor or distributor 25%
■ Nonre.sident lessor of aircraft, machine and other equipment . 7.5%
**may be subject to a preferential income tax rate (lower than 2.5%) or exempt from income
tax based on a tax treaty or reciprocity (RA 10378 and RR 15-2013).

SPECIAL CORPORATIONS
(RR 5-2021 and RMC 62-2021)

❖ Non-Profit Proprietary Educational Institutions (PEls) and

_ Hospitals

The rules applicable to ordinary corporations will also apply tq proprietary

educational institutions antJ hospitals which are nonprofit, except the
following:

1) Subject to special income tax r~te as provided under Section 27(8) of

the- Tax Code as amended by RA 11534 (CREATE Act):

Proprietary educational institutions and hospitals which are nonprofil

shall pay a tax of ten percent (10%) on their taxable income: Providef/i.
that beginning July 1. 2020 until June 30, 2023, the tax rate hereJJJ.
imposed shall be _one percent (1%): Provided, further, that if the gross
income from 'unrelated trade, business or other activity' exceed~ fi~
percent (50%) of the total gross income derived by such educationa

264
 . . .. . . lrlCIJl,ie, T~ tHt, CratUHU
~;~tut1ons or ~~sp1~als fro':1 .all sources, the tax shall either.be 20 % or
- o as prescn ed in Section -27(A) of the Tax Code as · d db
. CREATE Act, shall .be imposed on the entire taxable inco~:~n e Y

SUMMARY
Under TRAIN Law 10%
Under CREATE Law
• From July 1, 2020 to June 30, 2023 1%
• Beginning July 1, 2023 10%

Section 2_(C) of RR 5-2021 issued by the BIR on April 8, 2021

defined Proprietary Educational Institutions (PE!s) as follows:

PEls refer to any private schools, which are non-profit, maintained

and administered by private individuals or groups, With an issued
permit to operate from the Department of Education (DepEd) or the
Commission on Higher Education (CHED) or the Technical Education
and Skills Development Authority (TESDA), as the case may be, under ·
1
existing laws and regulations.

Non-profit, as used in the definition of. Proprietary Educational

Institutions and Proprietary Hospitals, rrieans that no net income or
asset accrues to or benefits any member or specific person, with all the
net income or assets devoted to the institution's purposes and all its .
activities conducted not for profit [Section 2(C) of RR 5-2021].

"Unrelated trade, business or other actj vity" is an activity which is

not substantially related to the exerc_ise or performance of the school
or hospital's primary purpose or function such as but not limited to
rental income from available school spaces or facilities.

Exampl.es of Related Income of PEls (RMC 4-2013):

o Income from tuiti'on·fees and niiscellaneou·s school fees
o In·c ome from hospital where medical graduates are trained for
residency
o Income from canteen situated within the school campus
o Income from bookstore situated within the school q:lmpl:JS

ILLUSTRATION 7:

Case A {Related income> Unrelated income): . . .

lnfote·ch College is a non-profit private educational institution. It owns a six (6) storey
building where the first 3 floors are b~ing u~~d for its ope.rations ·a~d _t~e other 3 .
floors are being rented by other entities. During 2021 taxable year, its income and
ex enses were as follows:

265
 Gross ·income from
. Tuition fees. P4,000,000
Rental Income I · 1,000,000
, Operating expenses . · -1,500,000
I ' ' Total QSSets excluding·land ' ' · 108,000,000

Question. How much is'the income tax due of lnfotech?

• Answer: P35,000
(5M-1.5M) x 1% ,

c·ase B'(Related income< Unrelated income): I

~slng tt]e same data in Ca?e A except that .tt,e rental income for the year amounted
to_P7,50Q;000. · .

Question. ~ow r11uch is ·the income .tax due of lnfotech?

. • Answer: P2,500,00Q _ _
. • (4M + 7.5M-1.5M) x 25%
• The related income < unrelated income: Consequently, the
educational ._
institution js subject to RCIT of 25% based on net
income as rovided for under CREATE Act.
' I

2) PE~s are NOT subject to M91T

~) CAPITAL EXPENDITURES,' for expansion of school facilities may-not

·be capitalized bµt instead claimed as outright expense. This rule shall
n·o t apply, however, to· a non-profit hospital.
' . '

Special rules on Capital expenditures of .Proprietary Educa tional

· Institutions -
'i

The taxable income of •a proprie_tary educational institution is

cqmputed in th~ same manner as an ordinary domestic corporation .
.Howeyer, ,in addition to allowabl~ 'business expenses under the tax
code, a private _edu~atio.n af institution, may, at its option, elect either:

♦ To deduct-exp.enditures otherwise considered as ca pital

·. outlays of depreciable assets incurred during the taxable year
such as capital expenditures for the expansion of school
facilities; or

• To capitalize such expenditure and claim deduction from

gross income for an allowance for depreciation thereof.

266
 7
~ T~ ~ Cratimu
. ILLUSTRATION 8: .
Assume the same data in .Illustration 7 Case A · A f . ..
taxable year Int t h · ·' · ssume urther that· during the
·'. o.ec .. c_onstructed an additional school facility at a cost -of
P1 ,500,000with a useful hfe of five (5) years~
Case A: _ . . . .
AQssu~~ tha~lr,fotech ?~cide~ to capitaiize and depr~date the new school facility.
_ues.1on..,, QW ~uch 1s t~e income tax due.of lnfotech for the year? ·
. . . . ♦ · Answer: P32,000 .
1
:. · • •
1

. • (5M-1.5M-:.300,006***) x 1%
• · **~ depreciation expense = P.1.5M/5yrs

Case B: ·
Question. How much is the inco~e tax due of lnfotech for the year assuming it
opt~d to claim-or deduct outright the ~ntire 'cohsfruction cost of the school facility?
• Answer: P20,00o;· · (5M-1.5M-1.5M) x 1%

Sl)rJIMARY OF APPLICABLE INCOME TAX-OF EDUCATIONAL

INSTITUTIONS IN TH.E PHILIPPINES

EDUCATIONAL · ' , PASSIVE CAPITAL

INSTITUTION ORDINARY INCOME · · INCOME** GAINS*tt -

· Proprietary educational • Gene.rally 10% or, 1% of net income, as FWT CGT

institutions (PEls} the case may be (SPECIAL CORP.)
which are NONPROFIT •· TRAIN: 30%; CREATE: 25% or 20% if
(BASIS: RR 5~2021; RMC unrelated income is higher than related .
62-2021.) ·. · income

PEls distributing · Regular Corp~rate Tax of either 20% or

dividen'ds to ·25% (Ba~is: RMC 62-202~ FWT CGT
shareholders ·

Non-stock non-profit · ■ . .Philippine Constitution, Art. XIV, Sec. 4(3):

educational ALL REVENUES and ASSETS of non-stock, non-profit educaHonat
institutions (NSEls) institutions used actually, directly and exclusively for educational
purposes shall be exempt from taxes and duties; and

• Exempt under Section 30, N(RC FWT CGT

The following shall not be ta?(ed i!1
'respect to income r~ceived by them as
such:
(H) A·non-stock non-profit educational
institution
Exempt under Section 30, NIRC - The FWT CGT
Government •
educational following shall not be taxed in respect to
· Institutions (GEis) income received by them as such: .
(If Government educational Institution; & .
• As rovided for in the Jaw or charter creatm the GEi

267
 /ltC()m,e, 'l«t /Nu crrd:l¾J
**On certain passive income derived fro_m Philippine _sources. .. . . ·
***On sale of shares of stock of a non-listed domestic corporation and real properties located in the
Philippines classified as capital assets. '

Exemption from .Real Property Tax .

Section 234 of the Local Government Code (LGC) - The following are exempted from payment of the
real property tax: (b) Charitable institutions, churches! parsonag~s.or covena~ts appurtenant thereto,
mosques, nonprofit or religious cemeteries and all _lands, bu_1ldmgs, and 1mprovemen~s actually,·
directly, and exclusively used for religious, charitable or educational purposes. Real property tax, a
local tax, is different from _CGT.

❖ NON-PROi=IT PROPRIETARY HOSPITALS ·

The applicable income tax ·rate of non-profit proprietary hospitals and
educational institutions impo?ed un,der Section 27(8) of the Tax Code, as
amentjed by CREATE Act are discussed in page 264 of this book.

th·e implementing rules and regulations of CREATE Act, RR 5-2021,

. ·pertaining to proprietary hospitals and educational' institutions defined
proprietary hospitals and non-profit as follows: _
• . Proprietary Hospitals - ·refer to any private hospitals, which are
non-profit, maintained and· administered by_private individuals or
groups.

• Non-profit - as used in the definition of Proprietary Educational

Institutions and Proprietary Hospitals, means that no net income
or asset accrues to or benefits any member or specific person, with
1
all the net income or assets 'devoted to the institution's purposes
and a_ll its activities conducted not for profit.

Moreover, the _applicable taxes of hospitals were also properly defined

by the Supreme Court in the case of St. Luke's Medical Center. Inc.
(SLMCI) vs. Commissioner of Internal Revenue (CIR) in a CTA.Case
No. 7857 dated June ,3, 2011.
' .

In· the above mentioned case, the term "proprietary" means "private",
following the definition of "proprietary educational institution". On the other
hand, "non-profit" means no net income or asset accrues to or benefits
any member or specific person, with' all the nef income or asset devoted to
. . the institution's purposes ·and all its activities conducted for non-profit.

,, ~ "~rivate" hospit~I organized as nonstock-nonprofit that is operated

for c~antable and social welfare purposes is exempt from income tax und~r
Sect!on 30 of the Tax Cc;>de. H9wever, as provided in the case of St. Lu~
Medical Center, Inc. (SLMCI) vs. Commissioner of Internal Revenue (CJ..!3}

268 .
 '

. l llCO-hu, Tttt /Hu CrduM,s

in a CTA Case No. 7857; the n~n-stock . · ..
following requisites in order to be entitf odnpt rofit hospital ~ust satisfy the
tax: ,
. e O th e exemption from income .

• !
. It 8 a r)o,n -stock ·corporation
• It is operat~d exclusively for charitable purposes· and
■ . ~o part of its net income or asset shall belong to' or inure to
e benefit of any member, organizer, officer or any spec·1fi1c
person. · · · . ~

. .

· "Non-profit" does n~t. ne_cessarily mean "charitable". T_he court defined "charity" in the
a~e. of Lung Center of the Ph1hpp1~e~ v~. _Quezon City as •"a gift, to be applied consistently with
x1stmg_laws, for the. benefit_ of an indefinite number of persons; either by bringing their minds
n~ he~rts under t~e mfluen~e of education or religion, by assisting tbem to establish themselves
1 hf~ or by otherwise lessening the burden df government". In other words, charitable institutions

rov1de for free goods and ~ervices to the public which would otherwise-fall on the shoulders of .
ie gove~nme~t. Charitable institution,s,_h9wever,_are not ipso facto entitled to tax exemption. ,
he requirements for a tax exemption .are stdctly construed against the taxpayer because an
xemption restricts the coUection of taxes necessary forthe ·existence-of the government.

SLMCI vs. CIR

"Petitioner" is a non-stock, non-profit corporation duly organized and existing under and
.by .virtue of the laws of the Republic of the Philippines. URespondent" is the duly appointed
Commi~sioner of the Bureau of Internal Revenue (CIR) vested with authority to exercise
the·functions of said office, including, inter alia, the power to abate or cancel a tax liability
_when the tax or any portion thereof appears to be unjustly or excessively assessed.

CIR asses·sed SLMCI for deficiency,income tax mainly due to the finding ofthe former that
petitioner is allegedly a non-profit hospital that is liable to pay ten percent (10%) tax [1 %
·from July·1, 2020 to June JO, 2023 under the CREA TE Act] on its net income pursuant
to Section 27 (B) of the National Internal Revenue Code (NIRC) of 199r SMLCI, on the
other hand, maintains -that it is exempt from income tax as provided for. under Section 30
of the Tax Code. The Court provides that to qualify for exemption-under Section 30 of the
Tax Code, the following requirements mu~t be complied with':
a
1. It must be non -stock corporation or association;
2. Organized exclusively for charitable purposes;
3. Operated exclusively f~r charitable purposes; and .
4. No part of its net income or asset shall belong to or inure to the benefit of any member,
organiz~r, officer or any specific person.

· Th Court further provides that though "there is no dispute that St. Luke'~ is org~nized as
a ion--stock and non-profit charitable institution, this does not automaticaliy exem~t St.
Luke'.s from paying taxes. This only refers ~o t~e ?rg~nizati?n-of St. Lukes. Even 1f St.
Luke's meets the test of charily, a coaritable mst1tut1on 1s not ipso facto tax exempt.

"St ·Luke's fails to meet the requirements under Section ~O(E) a~d (G) of t~e NIR~o~~
be ~ompletely tax exe~ pt from all its income. Howeveri'i ~~:~~~i5dfsf:i~1:e!~~ its
of
profit hospital under Section 27(8) of the NIR_C as tlo~gpir~uant to its corporate purposes.
profits to its members and such profits are remves e
 //te,{J-hU',, 7~ d-tv cjM't:t:tlf¾i
St. Luke's, as a proprietary nan-prollthospi~al, is entitled to the preferential tax rate of 100
[1 %from July 1, 2020 to June 30, 2023 under the·CREA TE Act] on its ·net income~
its,for~profit activities. · · ·ram

APPLICABLE
,
INCOME
. .
TAX OF HOSPITALS IN Tl-;fE PHILIPPINES
. I , .

PASSIVE CAPITAL
HOSPITAL ORDINARY INCOME INCOME GAINS

For PROFIT • RCIT . · FWT CGT

Hospitals TRAIN: 30%; CREATE: 25% or 20% .·
. '

For Non-profit • G~nerally 10% or 1% of net income_ , as the · FWT . CGT

·Hospitals . case ~ay be .
·(SPE~IAL CORP.) 1
• ■ TRAIN: 30%; CREATE: 25% or: 20% if
: _unrelated ,incon:ie is higher than related income
} '

· -May also be exempt if all the requirements for

exemptions under the law.are complied with a.s
decided by the·Supreme Court in the case of St.
Luke's Medical 'center vs. CIR.

❖ ln~ernational carriers

ln~ernational ca.rriers are resident foreign corpora{ions· and are subject to

income tax rate of 2.5% on.its Gross Philippine Billings (GPB), unless it subject
to a lower preferential tax rate or exempt on the_basis of tax treaty to which the
· Philippines is· a s·ignatory or on ·the basis of reciprocity, such that an
international carrier, whos~ home country grants -income ta_?< exemption to
Pf:iilipp.ine carriers, shall likewise be exernpt from income tax imposed under
the· Ta~ C_ o de .- as amended (RA10378;RR 15-20'13).

·FORMULA:
G~oss Philippine Bill_ings Pxxx
Rate 2.5%**
Income Tax Pxxx

**International carriers·may avail of a lower tax rate (preferential rate) or exemption under
RA1·0378 on· the basis of: · · ·
a. Tax Treaty
h. International ag~eement . .
c. Redprocity - An international carrier, whose ·home country grants income tax
exemption to Philippine carriers, shall li~ewise be exempt from income tax.

GROSS PHILIPPINE BILLINGS (GPB); .

A. International Air Carrier - refers to the amount of gross revenue derived from carnage
of persons, excess bag_gage, cargo and mail:
·- Originating from the Philippines;
- In a continuous and uninterrupted flight;

270
 t .. !

. ·._ · . l~To: ;' . C

.Irr , . . ~ 0-/u ' .~r---.L/.r1.ur
~~7w ,
espective of the place of \ . ,
or .passage of doc~riient. .sale or issue and the place of pay~ent of the ticket
NOTE: I ' I '

1) Tickets revalidated . : , ·
part of th G'P ·· ' exchange.ct and/or indorsed t . · .
. . . ' . e B if a passeng~r boards a plane in~ a~other_1~te'.national airline form
-. f • 'l
2) Fli hi ·· . . . ' · . p rt or pmnt mthe Philippines. ·
9_ which originates from the Phili . - .. . .~
.f~ace at.any port outside the Philippin~p1nes, but tra~s~hipment of passenger takes
.. e cost o!.th~ ticket correspondiri to s?n another a1~lme, only~~~ ~liquot portion of
of transshipment shall form part o?ihe ~~~~g flown from the Ph1hppmes to the point

B. International Shippi~g _·niean ·.

,. .originating from-the' Phili ille: gross revenue_ wh~ther for passenger, -cargo or mail
or payments of the passpagpe or fup_ tohtfidnal destmat1on, regardless of tbe place of sale
V • re1g · ocuments.
• _ ·

, RECIPROCITY. may be .invoke~ b . . .. .

'.'Gross Philippine Billihgs Tax exem . Y,,an 1nter~at1onal earner as basis for .
income tax exemption to Pt{ilippine pt1~n when ,ts Home Country grants
Gpyntry granting exem tion carn~rs. The domestic law of the Home
other types 'of taxes th~t ma s~all ,cover__income taxes and sh_all not refer to
The, fact that the tax ·laws {the ,~posed by th e rele~ant taxing jurisdiction.
b . . 0 e Home Country provide for exemption from
us,_ness ~a~i such as gro~s Sales tax, in respect of the operations of .Philippine
. ?arners:s a not ~e considered as valid ,and sufficient basis for exem tin an
mte~nat,~nal car_ner from ~~ili~piile income tax on account of reJpro~ity .
. ~~~1proc1t~ re~u1re~. that Ph1llppm~ carriers operati~g in the Home Country of
a~ international carr!er are actually enjoying the income tax ·exemption.

, ·._G ross Philippine Billings of International Air.Carriers

··. · li-i computing for"GroSs Philippine Billings" of international air carriers,

there s~aH ~e .included_the total amour:it of gross revenue deriyed from passage_
. ?f person_s, excess baggage, cargo and/or mail, originating from the Philippines
·.m a continuq"U$ and-uninterrupted f/ig~t, irrespective of the place of sale or issue
anc;i t~_ e place of payment of the passage documents.'

'.· The.· gross revenue fo'r passengers whose tickets are sold in the
· Philippines ?hall be the actual amoun't derived for transporta~ion services, for a
first _
class, busine.ss·class or economy .class passage, as the case may be, on
its continuous and uninterrupted flight from any port or point in the Philippines
to its final destination .in any port or point of a foreign country, as reflected in
the-remittance area of the tax coupon forming an integral part of the plane ticket.
For ; this purpose, · the· Gr6ss Philippine Billings shall be determin~d by
computing the monthly average net fare of all the tax coupons of plane t1c~ets
issued for the month per point of final destination, per class of pa~sag~ (1.e.,
first .class, business class, or economy class) and per class1fic~t1on of
passenger (i.e., adult, child or infant), and multiplied by the cor~espond1~g total
,number of passengers flown for the month as declared in the flight manifest.

271
 The gross · revenue for passengers whose tickets sold outside th
~hilippines, the gross revenue for passengers for first class, business class 0~
economy class passage, as the case mc)y b~, ~n a continuous anct
uninterrupte·d flight from any port or point in the Ph1hppin~s to fi~al destination
in any port ·or point of a foreign country shall be determined using the locally
available net fares applicable to such flight taking into consideration the.
seasonal fare rate established at the time of the flight, the class of passage, the
classification of passenger, the date of embarkation, and the place of final
destination.

Non-revenue passengers as well as .refunded tickets shall not be

inclu~ed in the computation of Gross Philippine Billings.

Gross Philippine Billings of ·International Sea Carriers

· · In computing for "Gross Philippine Billings" of international sea carriers,

there ' shall be included. the total amount of gross revenue whether for
passe·nger, cargq, and/or mail origin-ating from the Philippines up to final
destination, regar,dless of the place of sale or payments of the passage or
freight ~ocuments. · ·
. . . . .

"OR/GINA TIN_G FROM THE PHILIPPINES" shall include the following:

. . .

a) Where passengers, their excess baggage, cargo and/or mail originally

commence their flight or voyage from any Philippine port to any other port
or point outside the Philippines.

b) Chartere~ flights or voyages (?f passengers, their excess baggage, ca rgo

and/or mail _originally commencing their flights· or voyages from any foreign
port and whose stay in the Philippines is for more than forty-eight (48) hours
prior to embarkation.save in cases where the flight of the airplane belonging
to the same airlin'? company or the voyage of the vessel belonging to the
same international sea carrier failed to depart within forty-eight (48) hours
by reason of force maje~re. ·

c) Chartered flights of passeng·ers, the.ir excess baggage, cargo and/or mail

origin~lly commencing their flights or voyages from any Philippine port to
any foreign port.

d) Where a passenger, his excess baggage, cargo and/or 'mail originally

commencing his flight or voyage from a foreign port alights or is discharged
in any Philippine port and thereafter boards or is loaded on another airplane
owned by the same airline company or vessel owned by the same
international sea carrier, the flight or vqyage from the Philippines to anY
foreign port shall not be considered originating frorn the Philippines unles

272
 . . . ,. / llCdhte, T~ rHu crrduHis ,
the time intervening between arrival a d · _ -: · .
excess baggage, cargo and/or mail fro n depa~ur~ of said passenger, his
(48) hours, except, however, when thm ~h~ Philippines exc~e~s forty-e!ght
81
(48) hours is due to reasons bey d ~- ure to depart within forty-eight
next avaHabl~ flight or voyage lea~:s
force majeure Provided h ·
~!·
control, su~h as, when the only _
· .Y0nd .forty-eight (48) hours or by
"d'ff t" . r· ' owever, that if the second aircraft belongs to a
. 1 ere~ air me co~pany,' or the second vessel belongs to a different
inte~national sea earner, _the flight or voyage from the Phil.ippines to any.
for~ign port sha~I be co~~1dered originating from the Philippines regardtess
!
· 0 -.t~e. mtervem~g period -b~tween the _· arrival and ·departure from the ~
.f?h11tppi~n es by said passe;nge_
r, his excess baggage, cargo and/or mail.

Passage · :docu~en_ts or . tickets , revalidated, . exchanged and/or

endorsed to .a nother on-.hne international airline shall be included in the taxable
~ase of the carryi~g ~irline an~ shall be subject to Gross Philippine Billings tax
1f t~~ ~assenger ·1s lifted/boarded on an aircraft from -any port or point in the
Ph11tppmes towards a foreign .destination. ·

~ The gro.ss revenue on ·excess baggage which originated from any port
a
or point in the .Philippines and destined to any part of foreign c;ountry shall be
computed based on th~ actual revenue derived as appearing on the official
receipt'or any similar document for the said transaction. The gross revenue for
·freight or cargo and .mail shall be determined based on the reve·nue realized
:. . _from the carriage thereof. The amount realized for freight or cargo shall be
based on the amount appearing on the airway bilrafter deducting therefrom the
amount of discounts granted which shall be validated using the monthly cargo
sales reports generated by the IATA Cargo Accounts Settlement System (IATA
CASS) for airway bills issued through their cargo ,agents or the monthly reports
prepared by the airline themselves or by ·their general sales agents -for direct
issues made. The amount realized for mails sh~II, on the other hand, be
determined based on the amount as reflected in the cargo .manifest of the
carrier.

Re~urn trip and transsh-ipment

. . f

. In the case of th~ passenger's passage documents or flight~ from any

. port ·o r point in the Philippines and back, that portion of revenue pertaining t?
the_-return trip to the Philippines shall_ not be _i~cluded as part of__"G~oss
· ·. Philippine Billings." In the case of a flight that originates from the Ph1l_1ppmes
·but trans~h_ i pment of passenger, excess baggag~, cargo. a_nd/or mail takes
-place elsewhere in another aircraft belonging to a different airline co~pany, the
Gross Philippine Billings shall be determined bas_ed , on that -~ort_1on of the
revenue corresponding to the leg flown from any point in the Ph1hppmes to the
point of'transshipment. ·

273
 ..
. '

· , In ca_ s es where a flight is interrupted by .force ·!"Dajeu_re resu,iting·,in th

-transshipment of the passengers, their excess baggage, freight, cargo anct/ e
mail to another a'irplane operated by another airline company a or
transshipment takesi)lace in ano~her c.o~nto/, the Gr~ss :,hilippine Billings sh~~
·be det~rmined based on that portion.of flight from the _Ph1lrpp1n~s. up t~ the Poi t
of said, t~arysshipment , n
.
j , . • · • ;, • • •

'·. RATIONALIZATION OF TAXES ON ,·NTERNATIONAL GARRIERS .

• • • ~ • • .. I • • • • ,

.!The policy ·behind the ·rationa_l.ization of taxes on in~ernationar carriers

as provided for in RA103~8 ancJ RR 15-2013 is. to improve the competitiveness
of the .Philippine Tourism Industry by encouraging more internatio·~al carriers
to maintain• flight and ·$hippi'ng operations ·in the country and by the eventual
reduction,of, internatior:1al plane and ship fares .. These are intended to facilitate
_ the move·m ~nt 9f good~ and services andJo attract more foreign tourists and
. investments.- · . i ·
1
.

. .

Applicable l~come Tax of Common Carriers (~ummary)

I ''',
' . ' .
I

PASSIVE CAPITAL
Common Carrier ORDINARY INCOME .INCOME* GAINS
.·oonit'ESTIC Comnion (Higher): ·20%i25% RCfT or 2% ·. · FWT , .. - .CGT
·Carriers ' I
MCIT I , • \.,.

I ■: TRAIN La'w 30%

• ,.'f, I

■ CREATE Law 20% MSME;' 25%,. non-MSME

I

..
- '' l '

·JINT-ERNATIONAL
· •.
GR: 2.5% G~B; or . FWT CGT**
.Garriers ·(RFCs) . -,
Preferential % or Exempt on the
'' .
basis of a treaty.or reciprocity
•, ' I • I • ' I

**O,n certain passive lncome derived from Philippine sources.

***Orily on ,sale·of shares of stock of a closely-held dom~stic corporation classified as capital assets. ·

ILLUSTRATION 9:
/

CASE A .
Dub_ai Air,.~n internatio~al air cprrier provided the following data for the current
. year:
Gross receipts - transport of passengers P10,000,000
Gross receipts - transport of cargoes 5,000,000
Operating expenses 6,000,000

Questkx1 1: How much is the income tax due?

274
 ❖ Answ~r: P375,000 (P15Mx 2.5%) ·.
-lnt~mat1ona( ?arriers are subject to 2.5% income tax based on gross
Ph11tppme bt/lmgs unte~s it is sub;ect to a ereferential rate or exemet on
· the basis of an applicable tax treaty/international agreement to whii:h the
Philippines is a signatory or on the basis of reciprocity.

Question 2 How much is the income tax due c;1ssuming the international
carrier is subject to a prElterential tax rate of 1.5% on gross Philippine billings
under an existing tax treaty or internc;1tional agreement?
❖ Answer: P225,000 · (P15M x 1.5°/4)

Question 3:,. Howmuch is the income tax due assuming the international
c~rrier is exempt from income t~x- based on reciprocity?
•!• ·Answer: nil
CASE B . .
Air Jordan, an international air .carrier provided the following data for the
current year; · .
Gross receipts - transport of. passengers P12,000,000
·Gross receipts - transport of cargoes 4,·ooo,ooo
_Operating expenses 6,000,000

Questioo: How much is the incon:e tax due of Air Jordan?

❖ Answer: P400,000, ·
Gross receipts -p~ssengers & cargoes (P12M + 4M) P16,000,00D
x Income tax rate 2.5%
· Totai income tax due P400,000

CASE
The C . data were ~~ov_I.d ed. by Air Jordan, an international air carrier
following
doing·business in the Philippines. . P10,000,000
Gross ticket sales in the Philippines .
(Manila. -Macau flight) . ... fl' ht)
- . t· k t sales ·1n China (Manila. - Beijing 19 5 000 0 0
Gfoss 10 e ... ·1 fl' ht)
. . I 1. China (Beijing - Marn a ig 5,000,000
Gross ticket sa es ~ J ·(Tokyo _ Manila flight)
Gross ticket sales in apan . . 3,000,0 0

. . h PhTppines (Manila .... L.A.)

: Gross ticket sales in t e 11h' . din Tokyo to L.A. by
. • Passengers were transs ippe 8,000,000
another airline . .
• Estimated hours dunng the flight
Manila to Tokyo- 5 hrs;
Tok o to L.A.-15 hrs,

275
 Gross ticket sales in L.A., USA(Manila - L.A.) . 8,000,000
•■ Passer1gers were transshipped in Tokyo to L.A. by
•: a.different plane of same airline company
■ , Estimated hours during the fli~ht
Manila to Tokyo-5 hrs;
Tokyo to L.A.-1.5 hrs.)

Expenses, Philippines,
'
: 5,000,000

Question.~ How much is the'income tax due of.Air Jord~n?

. Answer: P625,000
Solution: ..
Gross ticket sales in the Philippines (Manila. -Macau flight) P10,000,000
Gross ticket sales in China (Manila. - Beijing flight) 5,000,000
Gross ticket sales in the Philippines·(Manila- L.A. flight);
. Manila to Tokyo only (PBM x 5/20) 2,000,000
Gr9s~ ticket sales in USA (Ma~ila - L.A. flight) 8,000,000
Total Gross "Philippine" Billings P25,000,000
Income Tax Rate 2.5%
Income Tax Due P625,000

❖ REGIONAL .OPERATING _HEA~QUA~TERS (ROHQs)

The.rules appl'icable to ordinary corporations_will also apply to Regional

Operating Headquarters, except the following:
.
1. In computing basic ir:,come ·tax, the rate is 10%.
2: It is not subject to MCIT .

.However, with the amendment of the Tax Code introduced by RA

11534, also known as the CREATE Act, , The 10% preferenti~I tax on
· regional operating _headquarters (ROHQs) shall continue only up to 31
pecember 2021. Beginning January· 1, 2022, ROHQs shall no longer be
- considered special corporations and shall therefore be subjected to the
_) regular corporate income tax of 25% of net income, just like an ordinary
resident foreign corporation.

Section 22(PD) of the Tax Code, as amended, provides that the term
'regional or area headquarters (RHQ} ' shall mean a branch established
in the Philippines by multinational companies and which headquarters do
not earn of derive income from the Philippines and which act as
supe~_is~ry, communications and coordinating center for their affiliat~s,
subs1d1anes, or branches in the Asia-Pacific Region and other foretgn
markets. · ·

276
 h
IU.dhie,
7ct«t [J./t, Co-r,4-o-rduJIU
I

_On the other hand, Section · _/ '

22
provides that the term 'Re iona/ 0 e~E) of the _Tax ·Code, as amended
mean a branch established in the Ph·ftm_ . Head uarters ROH s 'shall
1
which are engaged in any of then _ippmes ?Y multinational companjes
11
and planning; business pla'nn~nowmq service~: g~neral administration
nd
procurement of raw materials and c; ~ c~ordmat1on; sourcing and
services; marketing control and sal r}lponents: c~rpo~a~~ finance advisory
management; logistic services· es promotion ; training and personnel
?
product development; technical' research and 0 velopment services and
and communications· and b . support and maintenance; data processing
.· , usm~s.s d~velopment. ,
I

· ~HQ is a tax exempt entity while ·ROHQ is a ta~~ble entity.

However, an R_ HQ, ttiough tax-exempt, is also constituted as a witht:\olding
agent of th~ go~er~~ent if i~ acts as an employer and its employees receive
compensation ·t_nc~n:,e subJect to withholding tax, or if it makes income
payments to md1v1duals or corporations subject to the expanded
withholding tax (EWT). .
. .
Wnat constitute an RHQ and an ROHQ?

An ·R~Q is an office whose purpose is to act as an administrative

branch of a multinational company engaged in · international trade which
principally serves as a supervision, Qommunications, and coordination
center for its subsidiaries, branches, ·or affiliates in the Asia-Pacific Region
and other foreign markets, and_which does not earn or derive income in the
Philippines. An ROHQ refers to a foreign business entity which is allowed
to derive income in the Philippines by performing qualifying services o its
affiliates, ,subsidiaries, or branches in .the Philippines, in the Asia-Pacific
Region and in -other foreign markets. Such services are general
administration and planning, business planning and coordination , sourcing
and procurement of raw materials and components, corporate governance
advisory services, marketing control and sales promotion , training and
personnel management, logistic · services, research
and development.~ervices and product development, technical support and
maintenance, data processing and communication , and business
development.
I

ROHQS QUALIFYING SERVICES:

• General administration and planning
·• Business planning, coordination and_business development
• Sourcing/procurement of raw materials and components.
• Corporate finance advisory service~
■ Marketing control and sales promotion
• Training and personnel management
• Logistic services . . . C

• Research and development services and proJect development

277
 · ■ . Technical support and 'maintenance
"-■ Data processing and communi•cati~n · · ·

❖ SPEC.IAL CORPO~TIO.NS - , N·onr~sider:it·Foreign Corporations

_ -Just like or~inqry nonresident foreign c~rporatiohs, the special

.corporation? described below shall_ be taxable at a ra.te lower than 25°/40
under the CREATE Act bqsed ~n their ·"gross income". · ·
• , . I .

TYPE . : · ". ,
~ . TAX BASE RATE
Non~resident Cinematogra_phic, Film Owner, Le~sor or Distributor Gross Income
Non-residenf Owner or Le~sor of Vessels ·Chartered by, Philip.pine Gross rentals, lease or
Nationals , ·· · - · · . · charter fees 4.5%
Non-resident Owner or 1essor of Aircraft, Machineries.and. .9ther Gross rentals,
Equipment .,. . . ,, charters/other fees 7.5%
'l
)
.,. . \~ I I

OFFSHORE BANKING UNITS (O~Us} \jnder Sec. 28(A}(4} of NIRC

(REPEALED/DELETED UNDER CREATE ACT} . ..

. "Offshore Bar:iking Unit (.OBU)" is abranch, subsidiary or affiliate or a

·. fqreign banking cqrporation · located in ari Offshore Financial Center (OFC)
· which is. dul~ .authqrized by the BSP to transact offshore banking business in
. the Philippin_es_in ~ccordance with the provisions of P.O. 1034 as ·implemented
by BSP Circular_No. 1389. Th~y do foreign-currency banking transactions ·
I,

· primarily wit~ · foreign banks, non~residents, other OBUs .and corporate and
institutional clients. They can lend to, resident importers and exporters as long
as the· funds are remitted from abroad through the banking system.

The following are exaJnples of reported OBUs in the Philippines:

1') BNP Pariba~ with,office address at Philamlife Tower, Makati City; an_d
:2) . Taiwan Cooperative Bank with office addres,s at Citi Bank Tower, Makati City
3) JP, Morgan International.Fin~nce, Ltd. (formerly located at Zuellig Building, Makati City) -
.. has.stopped its,.ope,rations as an offshore banki.ng unit in_the Philippines. The BSP noted
the cessation of operations on February 22, 2018.

OBUs are allowed to 'provide all traditional banking services to n?n- ·

residents in any currency other than Philippine national currency. · Banking
transacti9ns to residents are limited and restricted.
❖ Income Exempt from tax: Income derived from:
1. nonresidents
2. Fo'reign currency transactions with local co~mercial banks; and
3. Foreign currency transactions with branches of foreign banks
authorized by the Bangko Sentral ng Pilipinas (BSP)
4. Foreign currency transactions with OBUs in the Philippines

278
 ,,
❖ 1ncome Subject to 10% Final Tax· Inter . · . .
· currency loans granted to resid t
th eSt income derived from foreign
. banks. · : en s O er than OBUs or local com·mercial
\

Section 28 (A)(4) of th eTax Gode·as amended by RA 10963 - TRAIN La~

· Offs~or!) Banki~g Units . .- The provisions of any law to the contrary

notwithstanding,· me~~~ derived by offshore banking units authorized by the
Ba~sko Sentral .ng P1hpmas (BSP), from foreign currency transactions with non-
residents, other_. offshore banking units, local ·comr:nercial banks, i_ncluding
b~~n-~hes of foreign banks that may ·be authorized -by the Bangko Sentral ng
· P1llpmas (BSP) to transact business with offshore banking units shall be exempt
from all.taxes except net income from such transactions as may be specified by
the ·Secretary of Finance, upon recommendation of the Monetary-Board, which
- shall be subject to the regular income tax payable by banks: Provided, however,
·That any interest income der.ived from foreign currency loans granted to residents
other than offsho_re -banking units o'r local commercial banksJ including local
branches of foreign banks that may be authorized by the BSP to transact business
with offshore banking units, shall be subject only to a final tax at the rate ·of ten
perGent (10%). Any ir)Come of non-residents, whether individuals or corporations,
from transactions with said offshore banking units shall be exempt from income
tax.
The above proyision of the Tax Code was deleted under RA 11534 or
the CREA1E Act. Consequently, OBUs are now taxable just like an ordinary
resident foreign corporations. They ~re now subject to th~ revise? R~IT rate
.of 25% under the CREATE Act as well as final tax- on certain passive incomes
and capitaJ gains tax o~ gain on .sal~ of shares of a closely-held domestic
corporation. _ . · ·

The income tax liabilities of OBUs on their incqme derived from

,Philip ine sources are summari~e~ as follows:

TRAIN Law
Income derived. from ·foreign currency
transactions wrth:
Exempt 25% RCIT
• . Non-residents
Exempt 25% RCIT
• Other OBU's
Exempt 25% RCIT
• . Local Commercial Banks
Exempt 25% RCIT
• Branches of foreign banks
10% 25% ROT
• Other reside~ts
I

30% RCIT . 25% RCIT

income other than those derived from
FCDS transactions

279
 IMPROPERLY ACCUMULATED EARNINGS TAX (IAET) ·
REPEALED UNDER THE CREATE ACT

Prior to the effectivity of RA 11534 or th~ OBJECTIVE:

CREATE Act, a tax- of_10% -is imposed on the To force corporations
to . distribute
improperly accumulated taxabl.e income of dividends to
corporations formed or availed .o f for the purpose shareholders in order
of · av.aiding -the inco.me tpx with respect to its that related tax in
shareholders or the shareholders of .any other dividends will be
corporation, by permitting the earnings and profits collected.
of the corporation to · accumulate instead of
dividing them among or distributing them to the
shareholders (Section 29 NIRC). This ta_ x is in
addition to th~ regular cor·porate income tax -of a
domestic corporation.

The rationale ·is that if the earni_ngs and profits were distributed, the
shareholders would then be ·liable to income tax thereon, whereas if the
distribution were not made to them, they would · incur no tax in respect to the
un'distributed ear~ings and profits of_the corporation.

NATURE OF IMPROPERLY ACCUMULATED _

EARNINGS TAX (IAET)

Improperly accumulated earnings tax is being imposed in the nature of

. ·a penalty to the corporation· for the improper accu·mulation of its earnings, and
· ·as_a form of deterrent to the avoidance of tax upo·n ,shareholders who are
supposed to pay dividerias tax on the earnings disrributed to them by the
co"rporation (RR .2-2001 as amended by RMC 35-2011 ).

Section 29 of the Code under ~he TRAIN law provides:

I

In addition to other taxes imposed by this Title, there is hereby imposed for each
.taxable year on !he improperly accu~ulated taxable income of each corporation
described in Subsection_B hereof, an improperly accumulated earnings tax equal
to ten percent (10%) of.the improperly accumulated taxable income.
I • •

Section 29 of the Tax Code was repealed under RA 11534 or ·

the CREATE Act. Thus, upon effectivity -of the CREATE Act, IAET
should no longe_r be impos~_
d.

280
 ,I,.

SUMMARY OF INCOME TAX RATES

UNDER CREATE ACT; RR 5-2021

The higher bet. the "Regular''. or "Minimum Corporate l~come Tax

· ·(MCIT)" rates
.TYPE o·F·CORPORATION ,REGULAR MCIT
. . Rate I I
Eff~ctivity · Rate I Effectivity

Domestic.Corporation:
Domestic corporations, in 25% July,1, 2020. 1% July 1, 2020 to
general . 1 ' . •

June 30,.2023

,.

r . -
2% July 1, 20~3
! I

I
I

For corporations with net · 20% · July 1, 2020 1% July 1, 2020 to

taxable income not
Q

. June 30, 2023

exceeding Five~Million P_ esos
(P5,000,000) AND total
assets not exceeding One 2% July 1, 2023
Hundred Million (P
100,000,000), excludfng the. '

land on ·which the particular.

business entity's' offi~e, plant
and equipment ar~ situated
Proprietary Educational 1% July 1, 2020 to Not Applicable
.lns!itutions and ·Hospitals . June 30, 2023
I

10% -July ~, 2023

.

281
 . .

/~ r~ crtli¼t.s' /Jlf,,

. . ·The higher bet. the "Regular" or "Minimum Corporate Income Tax

· , (MCIT)" rates

TYPE OF CORPORATION
Rate
REGULAR
j Effectivity Rate /.
MCIT
-----
Effectivity ~

. '
-
FOREIGN.CORPORATION [.on taxable income(e.g., net or gto_ss
iDcome, as applicaqle) derived from all sources within the '
Philippines]: . · · ·

. Resipent foreign ...

25% July 1, 2020 1% july 1, 2020 to
I

Corporation June 30, 2023

-.
' ~

·' 2% July 1, 2023

I

Offshore Banking Unit 25%

. Upon the 1% Upon the
(OBUs) (Note: O.BUs shall e~ectivity of the effectivity of
now be ta·xed as resident ·cREATE CREATE until June 30,
foreign corporation upon 2023
..
effectivity of th_
a CREATE)
'.

2% . July 1, 2023

Regional Operating 25% January 1, 2022 1% January 1, 2022 to

Headquarters (ROHQ) June 30, 2023
'
/

. 2% July 1, 2023
...

- -
Non-Resident Foreign 25% January 1, Not applicable
·Corporation '
2021

282
 . The filing of, i~corne·lax return shall be m~ ' . ' . .. .' '
c
· · Pres1d~nt or,other principal officers in .behalt'the de by t~e President, Vice-
. sworn to by. the above.- officer and b t.h ~ ornpany. T~e return -srall be
· -1 t· f- . . Y e .·i.reas_
u rer or· Assistant Treasurer.
Dec ara ion·o quarterly corporate income tax on·a cumul t· · b · · · · ·
· II th · h El · - • . . - a 1,ve as1s 1s required
. rnanua y, r.o ug
electronic BIR.form's. ·
ectrornc Filing :. and Payment System (EFPS)
· · ,; , : .-
th
·. , or roug
h-

! l.

section 52/A) Or the Tax Code prOVidE!s " every corpOrailon Subject to the tax herein
_
..-1m~?s~d,'. exc~pt ·foreign corporations • not engaged in trade ·or ·busthess in the
.P~1hpp!ne,s, .~hall-re~der,i in duplicate, a true and accurate quarteriy income tax return
a~d·fin~I .or •adju~tment return in accordance with the provisions of Chapter XII of.the
Tax C~d~, as amended. The income tax:return shall-consist of a maximum of four (4)
,page~-m paper form or electronic fqrm; be filed by the president, vice-president or other
.Prineipal offiter,.·shall be sworn to by such officer and by the ·treasurer or as~istant
. _ . ~reas_ urer, ~,id shall o,nly contain the fo_lJowing information: · ,

(1). Corp'orat~ ·profile an·d information; . ._ . ,

, ,. -(2).'Gross· sales·, rec·eipts-or income -from services riendered, or condµct of trade or
-.'l?L!Sine~$,· except income 'S~bJect to fin"al tax as provided under this Code;
I •

·~ (3) All9wabie d~duGUons.under this Code; ··

_(4) Taxable income as defined in S~ction, 31 of this Coqe; and
(5f lncome.·tax due ~'ld .payable. · _.i.

.- 1.): Manual Filing

·, ' .
·_ , · Every corp~:>rat10~ subject to .tax shall rehder, in duplicate a true and
accurate quarterly return and_' fir1al or adjustment return ·except corporations _not
engaged ·in traqe or busin~ss in the Phi-lippines (NRFC). For manual filing ,
the filing ,of c:tuarterly return should be ma.de not .later than 60 days from the
close of each of-the first-three quarters of the taxabl~ year, whether, calendar
or fisc_al year summarized as follows: ·

MANUAL FILING OF QUARTERLY INCOME TfJiX RETURN

. I •

• , ·Quarterly ref urn On or before _the 60th day following the

close of the taxable quarter.

·• Annual return .·On or before the 15th day of the 4 th

month following the end of the taxable
year (i.e.; April 15 for corporations using
calendar _y ear period)

283
 / l(,Cl!l1tb . 74<:; 011,, C7'n:ct~
. The tax so computed shall be decreased by the amount of tax previo
·paid or asses?ed durin~ th~ pre.ceding qua~ers. Final A~justment Re~:y
. covers the total taxable income for the preceding calenda~/f1scal year filed ·on
or before ,15th day of the' 4 th month following the close of the taxable year (A ~
· 15 of ·the following year using calendar period). If the sum of the quarterly nl f
payments made during the taxable year is not ~qual to th~ total tax due on t~~
e!7tire taxable income of that year, the c~rpo~at,on shall et~her pay the balance
of tax still due, or carry over the ex,cess ~red1t,. or ~e cr~d1ted or refunded With
the exGess amount paid ~ In case the corporation 1s entitled to a tax refund or
credit of the excess estimated quarterly income taxes paid, the excess amount
shown on its final adjustment return may be carried over and credited against
the estimated quarterly income tax liabilities for the taxable quarters of the
succeeding taxable years. Once the option·to carry-over has been made, such
option shall be considered irrevocable for that taxable period.

PLACE OF FILING
.,
The quarterly income tax declaration and the final adjustment shall be
filed with Authorized Agent Banks (AAS), or Revenue District Office (RDO), or ·
Collection Agent, or Duly authorized Treasurer of the City or Municipality·having
jurisdictio.n over the location of the principal office of the corporation filing the ·
return or place vyhere the main books of accounts and other data from which
the return is prepared are kept.

2.) Electronic Filing and Payment System (EFPS)

(
To provide taxpayers a more efficient manner of filing tax returns and
payment of tax dues, the Bureau of Internal Revenue (BIR) introduce Electronic
Filing and Payment System (EFPS) in 2001 under RR 9-2001.

· RR 9-2001 defines EFPS as the system developed and maintained by

the BIR for electronically filing tax returns, including attachments, if any, and
payirig taxes due ther~on, specifically through the internet. Upon filing 1 a '_
'Filing
Reference Number'' is issued by the EFPS as a control number to acknowledge
that a tax return, including .attachments, has been successfully. filed •
electronically. This shall serve as evidence of filing and the date of filing of the
feturn. Upon payment of the tax due _to an Authorized Agen~ Bank(AAB) under
EFPS, the AAS shall issue "Acknowledgement Number" as a control number
to the .BIR to confirm that tax payment has been credited to the account of the
government or recognized as revenue (internal revenue tax collection) by the
Bureau pf Tr~asury. Likewise, a "Confirmation Number" shall be issued by the
AAB as a -control number to the taxpayer and BIR.lo acknowledge that the
taxpayer's account has beeri successfully debited electronically in payment of
nis tax liability. This shall serve a~ evidence of the fact of payment of '!he
taxpayer'. s liability to the ·extent of the amount · reflected in the Confirmation
Nu.mber, and t_ he date ~f payment by the ·t~xp~y~r.

'284
 . .

EFPS Authorized Agent Ba?k~ refe~s to a BIR authorized agent bank

(~B) that has passed ~he -accred1tat1on criteria for EFPS MB such as being
an internet-ready bank, mdorsed by Bureau of Treasury for EFPS accreditation ·
certified_ by the ~nformation .Systems Group of the BIR that th~ applicant bank'~
isystem 1s acceptable ~nd compatible with the EFPS of the BIR. EFPS is open
to all t~xpayers who w ~sh to make use of the system. It was initially introduced
. .to the .taxpay~rs under _the_Larg·e Taxpayers Service·. However, the BIR has
seen .the .need to ide~tify taxpayers who will pe mandated .to use the system;
hence, the following .t axpayers are ma-'ndated to make use of the eFPS:
I

PERSONS REQUIRED TO FILE AND PAV. UNDER eFPS (RR 1-2013)

a) Large Taxpayers duly notified -by the BIR, as a.mended
b} Top 20,000=-Private Corporations Taxpayers duly notified by the BIR, as
•
· amended · • • I •

_c) Top 5,000 lndivid~al Taxpayers duly notified by the BIR (RR 6-2009)
· · d) . Corporations with Pa.id-Up ·capital Stock of P1 O Million and above (RR
No. 10-2007) . · _ . \ . .
e) ~-Procuring Government Agencies · with respect to withholding of Vat and
. Percentage Taxes .(RR 3-2.005) .
' f) Taxpayer Account Ma·n ag~ment Program (TAMP) Taxpayers:(RR No._10-
2014) . · . _· : .
.g) Accredited Importer and Prospective ·importer required .to secure the BIR- _
ICC & BIR-BCC (RR No. 10-2014) - _
h) . National Government Agencies (NGAs) (RR 1-2013) ,
·i) Insurance companies and Stock brokers (RMC No. 71-2004)
j) _ Al i Licensed Local Contractors (RR No. 10-20_12) - ..
k) Enterprises Enjoying .Fiscal Incentives (PEZA, 801 , Vanous Zone . ·
Authorities,·Etc.) (RR No. 1-2010) ·. •
o Philfppine·Economic Zone Authority .(PEZA) .
◊ Board of Investments (B0I) ·
I ◊ Various zone authorities
o Cagayan Special Economic Zone Authority
o Export Development Council · .
o Tourism Infrastructure and Enterprise Zone Authority; and
o PHIVIDEC Industrial Authqrity: .

TOP WITHHOLDING AGENTS (TWAs) (RR 7-2019)

, T withholding agents (TWAs) shall ref~r to taxpayers whose gross

op - I · d deductible expenses amounted to
sales/re~eipt, gross purchases,_or c aime ·· · · tin · TWAs before the
P12 million during the pre~ed1ng t~xable y~~r. unTit: he; fail to satisfy the
f
.e ffectivity of R~ !-2019 will rbema1~ sp~~lished as delisted from the list of
P12,000,000 cntena and have een u Y
TWAs.

285
 ,. ; .. lltC(Ht(£ ,f tit tHv c;r«f~
I . ' '

_· . ··:Large Taxpayers who will e~pay . shall enroll with · -any EFPS AAB
.authorized to . serve ther:n and who_.are capable·.to a~cept .e"'.payments. E-
payments shall be _made within . the ?,~Y the .return wa~ electr?nically filed ·
• ' I'

• 1, •

following· the "p~y-as.:you.-fi)e .system . . Unles~ .otherwise_ notified b'y the

Commissioner of lritemal Revenue (Cl~), for all·r~turns _that will be file_
d starting
August 1, ,2oq2, e-payment of the taxes due thereo n ,hru EFPS shall become
1

. mandatory (RR No. 9-200~). .. . ., -. i:

1
. _.,

a:· Non-Large Taxpayers · ·· . · .

❖-, ·Volunteering '200, or, mo_re Nori-Large T~xpayefS
❖ Top 20,0000 pri~ate cprporation~ (~tartm~ Apnl 2009)
\. ' , ' ·.,· '

. - . For Non-Large Taxpayers \Nho •i.ntend to e-pay, electronic payment

,· ·shall be rriade _through ,the internet banking facilities of any AAB. The
volunt_ eering two hundred · (200) _:_or more Non-Lar_ g e Taxpayers
previously identified by the BIR-to have availed of the_option to file their
·return ·under EFPS shall neverthe.less .continue• to file their returns ·
under such method. (RR No. 10-2007). However, upon their repeipt of
, • <( . • .. .

,a notificatioh letter duly signed' by the Comm.issioner of Internal

Revenue, it becomes mand atory for them, induding ·t heir branches ·
1

lo~ated rn the computerized revenu~ district olfices, to file their returns

.. \ an9 · pay. their taxes thru EFPS (RR No. t0-2007). The filing of the
' ,. . return :ahead of.the paym·ent of the tax due the,reon _. is still in accordance
-with ·"pay-as-you-file system" as long as the payment of the tax is made
· .'.' · on·~x·~efore the due date of the applicable tax.

Non-large taxpayers shall have -the option to file a consolidated

retUrn in the head office·following the procedures in RR Nd. 1-98 or to
file ·returns on· a per branch or facil.ity basis. Provi_dea, however, that
they shall u_pdate thefr registration Wit~ ·the . affected or concerned
I
, ' revenue district ·officers by filing_, BIR Registration Update Form (BIR
.Form 1905) before th~y chang·e their manner of filing returns.
: I

3.) Use <;>f Electronic ~IR F·orms ·

, . •(,'

_'The eBI~ Forms, . as proviqed in RR. 6-2014 and RMC 61-2012, as

.· amended, was develope_p to provide taxpayers· particularly'the non-eFPS filers
. I. with ~ccessible and conveni_erit s~rvice through easy preparation of tax returns.
eBIR Forms Will improve the BIR's tax return data capture and storage thereby
enhancing .efficier:,cy and acc~racy in th~ filing of tax returns . eBIR Forms refer 1

·, to the two (2) ·types of electronic services ·provid_ ed by the• BIR relative to the
preparation, generation and submission of tax returns, which are the:
■ · eBIR Forms Sy~tem for Online filing; and
■ eBIR Forms PackaQe to fill-up fotms offline

286
 : \
. , .·

. . -.. ,\ I ~ T~ ~ Crrctu/lU
The .:eBIR Forms" Package-can be .· ·
.- or q copy of ·the software packa e · ma.do~nloact~ct. thr~ugh the BIR website
register~d RDO particu~arly in the ~esig Yt bdeBrlequested ._from · the taxpayer'$
. • •
1
na e R e-Lounge.
, ., • ,

·"eBIRForms Softwa;e Packa e" ( . • · . · ·

Pack.a ge) is ·a taX preparation Softw~re t~af
. Tax Agent (ATA) .to' .accom lish or ..
10
t"C17;
as Offhne eBIR Forms
a ows e t~xpaye~ and Accredited
mode of preparing tax · retu~ri • h' f~I up ~ax forms offhne, It 1s an alternative
• . f fill' . .. · s w .\C deviates_from the conventional manual
1

p~ocess O I mg-~P .tax returns_on pre-p~int~d forms that.is highly susceptible

to human_ err_ o r .. Taxpayers/ATAs can directly encode data validate edit save
delete, · v~e~ and .print the t~x returns. The form package tia; aut~mati~
.computation~ .a nd ha_ ~ ·the ·capabil_ity ,to . yalida_te information inputted by the
taxpayers/ATAs, · • ·
1

_'"Online_ .eBl,RF~rms ·System" is ..? filing infra~tructure that accepts tax

_

.retur~_s •sub':1?1tted onltn~ and auto~atically com·putes penalties for tax returns
subr~rntted be~o~d ~due -d~te. The Syste·m creates secured user accounts thru
enrollment for use of the ·onli.ne System, and allows AT As to file on behalf of
. their client~. The ~ystem also has a facility for Tax Software. Providers (TSPs)
~o ·test and certify the · data generated by their fax preparation software
(certificatior.i is by ''f(?rm). · .It is capable ·of accepting eturns data file_
d using
certi~ed TSP's tax preparation software·..
,· \

MANbATORYeBIRFORMS -and MANDATORY.e-FILING

Only those non-EFPS filers .are covered by RR 6-2014 _(as amended by RR 9-

~016), particularly the follow_
ing:

-a) Accred.ited Tax Agents/Practitioners and all its client-taxpayers

,. . -

.Per RR 11-2015·dated March 27, 2015, "client-taxpayers" shall mean those

1 taxpayers who are otherwise -authorizing their tax agents/practitioners to file on
· , their behalf. Thus; client taxpayers whose tax agents/practitioners only sign the
audit certificate but have no authority to -~le the returns in their behalf are not
covered under this provision .. The linking module of authorization of authorization
. by the client-practitioner to his/her tax agent/practitioner is available online via
eBIRFORMS. It shall be noted, however, that the taxpayer may cancel anytime
his/her authorization prior to the.termination of their client-agent relationship. ,.

b) Accredited _ Printers of Principal and Supplementary

Receipts/invoices

c) One-Time Transaction (ONETT) taxpayers who are cl~ssified as

real est~te dealers/developers; those who are considered as
habituaily engag·ed in the sale of real property and regu~r
0
taxpayers alrea?Y covered by eBIR Forms. Thus. Taxpayers w

287
 1lt(X};,[& 74t: tflv c~«t~
are filing BIR Form No .. 1706, 1707, 1800, 1801 and 200-OT (Fo
BIR Form .1706 only) are excluded in the mandatory coverage fro r
using the eBIR Forms. . rn
d) Those who .shall file a "No Paym~nt" Return

\ Under RR 12~2015, however, the f~llo~ing taxpayers may-file manually

."no payment returns" to the Revenue ,D1stnct office (RDO) where registered
using officially printed forms/photocopied or el~ctronic/computer-generated
returns:

• Senior Citizt3n (SC) ·or Person~ With Dis'ability (PWD) filing for their
, ·own returns;
·■ Employees deriving pure_ly compensation income and the income
tax of which has been withheld correctly showing tax due is equal to
, ·the ta_ x withheld whether single~qr ·multiple employers (with two or
··. more employers concurrently and successively at anytime during
the taxable year); .
• Employees qualified for substituted filing under, RR 2-98 Sec. 2.83.4,
as am.ended,·but opted to file for an Income Tax Return (ITR) and
are filing for purposes of_promotion (PNP/AFP), loans, scholarships,
foreign travel requirements, etc. ·

The .above t~xpayers are encouraged to use offline

eBIRForms for ease and convenience in ·the preparation,
·-validation, computation rules and efficiency check for
completeness and correctness of t~xpayer input. However,
they. are en~ouraged as niuch as possible to fil_ e their returns
. electronically to avoid the crowd and long lines.

It is further clarified, under this revenue regulation , that

all business taxpayers with no payment returns mandated to
. use eBIRForms/EFPS must electronically file return.

e) Government-Owned or -Controlled Corporations (GOCCs)

f} Local Government Units {L~Us ), except barangays; and
g) Cooperatives registered with National Electrification Administration
(NEA) and Local Water Utilities Administration (LWUA)

Taxpayers who are not covered by. the regulation may opt to file their
returns using the manual filing or eBIR Forms.

288
PREPARATION OF INCOME TAX RETURN ·
Based on CREATE Act . .

Use the fol/o~in? data for the next three (31_questions:

Mega Construction Corpor~tion, a domestic corporation, has the .following data for 2021 taxable
year:

Gross income, Phil. P100,000,000

Gross income, USA 50,000,000
Gross income, Japan 50,000,000
Expenses, Phil. 30,000,000
Expenses, USA 20,000,000
Expenses, Japan 10,000,000

Other income:
Dividend from San Miguel Corp., a·domestic corp. 7,000,000
Dividend from Ford Motors (RFC; income within) 12,000,000
Gain on sale of shares of a domestic corporation sold 15,000,,000
. directly to buyers
Royalty income, Philippines 5,000,000
Royalty income: USA 10 000,000
Interest income on peso ~ank deposit 8,000,000
Interest income on FCDS,deposit 3 000,000
Interest from receivables in the Philippines 6,000,000
Rent Income, l~nd in USA 25 000,000
Rent income, Building in the Philippines 10,000,000

The Company also sold a condominium classified as capital asset for P200,000,00 .
cost of the Condominium is P100,000,000 while its Zonal Value is P-300,000,0 .
Company's total assets excluding the. condominium sold and the land on ',hi _
bu·siness office building is situated amounted to P680,000,000.

Determine the following and fill-up the applicable Income Tax Return.

1. Ho much is the income tax due in 2021 ?

a. P47.750,000 c. 52,500,600
b. 50,750,0000 d. -0,900,000

❖ Answer· A
 Solution:
i
Ph/ls, Abroad Tota,/
Gross income, phi/. P100, 000,000 121 00:000,ooo
Gross income, USA · 50,000,000 so,ooo,000
Gross income, Japan 50,000,000 so,000,000
Expenses, Phil. (30,000,000) (30,000,000)
Expenses, USA (20,000,000) (20,000,000)
Expenses, Japan . (10,000,000) ,(10,000,000)
Dividend from Ford Motors, RFC exempt •
Royalties, USA · 10,000,000 10,000,000
Interest from receivables - Phis. · 6,000,000 6,000,000
Rent Income, land in USA 25,000,000 25,000,000
Rent income, Phils. 10,000,000 10,000,000
,. Total PB6,ooo,opo P117,ooo,ooo P191,000,000
..x RCIT rate 25%
• Income Tax- Due P47,150,000

2. How rhuch i~ the .final-withholdi~g .tax on passive income in 2021? ·

a. P.1 ,600,000 3,050,000
C.
b.· 2,?50,0000 - d. 60,900,000_·. ·

. ❖ Answer: C

Solution:
Royalty income, Phils.; P5M x 20% P1,000,000
Interest income on peso bank deposit; PBM x 20% ' 1,600,000
Interest income on FCDS deposit; P3M x 15% 450, 000
Total Final Tax on Passive Income P3,050,000

3. ·How much is the total capital gains tax in 2021?

a. P2,250,000 c. P19,875,000 .
b. 18,250,0000 . d. P20,250,000'

❖ Answer: D

Solution:
CGT on shares of stock= P15M x 15% P2,250,000
CGT on real property= P300M x 6% 18,000,000
Total Final Tax on Passive Income P20,250,000

4
• 290
irorerRi scS/ Republic of the Phlllpplnes
[U.!e_onlY'J Item : • Department of Finance
. . Bureau of Intern al Revenu e ·
- BiR Form No.
Annual Income T R
110·2-RT
January 2018 (ENCS)
Page 1
.
Corporation , Partnershl
Subject
Etier all required Onl t / an
d th eturn
er Non-Individual Taxpayer
inforrm tion rn CAP~~~LAR l~come Tax Rate ,
°
Two cooies MUST be filed With.th; !"J:RS. Mark applicable boxes with an "X".
ax II
II lfi!Mlllll
.
\11 1
I I
X CaJend~u D . I ,

j For
[Kl Fiscal 3 Arper,ded Return?
and one held bv lhe taxoav,
Sh , .~ er. 1702-RT 01118ENcs P1
. , · . 4 ort Period Return? 5 Al h . ··
2 Year Ended QM[ £{)?
IT I:U/20 2 1
Q Yes CK! N!)
,
□ Yes [x] No .
~ · l!f..Q&J
~nc Tax Co~A TCJ
I Minimum §crate Income Tax (Mei n I
•.
'[X]
-:: . ._. . . _ . · , · "c=i r 1 □
-r ~ ·· ' ·• Pa~ 1- B ackQr'ound lnfor . ti · ·

I I i° I II I I I I I I I I I I I I .I
- I I I I I I I I .I I I I I II I I II I I I I r, I I
' I 1• I I I I I I I I I I I I . . . .
1
9 Registered Address (lndicai~•co"ni~kteaddress. IJ~:~ red ~ .. I I I I I I .~ I . 1 I I I I I I I I I I I I
R D F L R , ~,sfiffM!rtfrombiamntadd~ss. goti,fleROOtoupda~reg:JeredaddessbyusingPJRFcnnNo. 19?5)
3I I I I I I I • I I A I NI T I O I NI I I A i I B I L ID I G I . I· I BI RIG I y I • I IH I I I N I D"1 I I I I I
MI A IH I A I N I A Ip I I I , I IM IA 1.K I A IT I I I C I
I 1! 1T 1Y 1 I ,I I · 1. I I I I I I I I I

15 l ess: Tota tT; 'x C redits/Payments (From Part IV Item 55)

I I I I I I I I I I I 0
16 N~t,Tax P~yable I (O~erp ayment) (Item 14 Less Jtem 15) (F.rom·Part IV Item ~6) _
'✓
A:dd: Penalties ··
17 Surcharge ..
I I I I I 'I I I I
18-lnterest'
? • , ; . ., '
' I I I I I I I I I I ,0
I I I I I I I I I I I 0
20 Total Penalties .(Sum of/terns 17110 19)
I I I I I I I I I I 10
21 TOTAl AMOUNT PAYA BLE/ (Ove!Payment) (Sumo! Items 16 a~ 20) I I I
If overo,3vme11t, mark one (1 box onl v. (Once the choice is made, the same is irtevocableJ ·
0 To be refun•ded , f l
To be issued a Tax .Credit Certificate (TCC) , To be Ccl(ried over as tax credit for next year/quarter D
We de.clare undfr t/Je pena/lie$ of petjury that this re/um, ,md all its attachm ent: , h11ve been me~e in .goM faith, verified ~Y us, and lo lh_e best of our knowlwge and ~kf. ·• ~ a."11
,correct, pur.:vant lo l/,e provisions of/he Nalional Internal Revenue Code, as amended, and /he regulabons issued under suthonly thereqf. ~f sig~ b;' .lll A,rro,,; -~R~ser.ia5•t, •~cc.id r.·, .J

•~, ;;i,lltwuliPl/ let.tPrl , '

22 Num:ier of
Jenrli fer D. Di Magiba Attach men
(Pres t d e n t)
Siaoature ov,er Priit~ Nllinei of Presidenl/Princioal Officer/ Authoriz ed Repre&entativo Slonature Qver Print ed Name of Treasurer/ Assistant Treasu rer
I I TIN I
I I I I
Title of Signatory 1· I I ,:1N I Title of Slg/lotory

Part Ill - Details of Payment

Number Da~e (MMIDOIYYYYJ A mount
Pa rticulars Draw11e B,1n_k/Agoncy

23 Cash/Bank. Debit Memo ·• I I I I I I I I I I I I I I I I I I I I I I

I I I I

1,24 Check I I I I I I I I I I I · I I I I I I I I
I I I · I I I I

25 Tax Debit Mem6 I I I I I I I I I I I I I I I I I I

I I I I
26 Others (sp<'JCW below)
I I I I I I I I I I I
I I I I I I I I I I I I I I I I I I I I I Stomp of Rec, IWJO OifK:elAAB and Dole of
Machi nf! V aliq atlon/R evenue Off ici I Receipt Deta ils [If not filed with on Authorized Agent Bank (AA.8)/ Rec /p t (RO 's Sign I B Te 's lni~·

291
 -/ll

OtRr No.

1702-RT Annual Income Tax Return

Corpor tlon , Partn r hip and.OU, Non-Individual Ta,:p v
Subj ct Only to REGULAR ln corn Tax R t

Corporate Income Tax (M CIT ) (llem39x llem40)

......- BIR Form No. .
1702-RT ~nnual Income Tax Return
January 2018 (ENCS)
Page3

~Taxoaver Identification Number (11 t,JJ

Corporation,_Partnership and Other Non-Individual Ta
Subject Only to REGULAR Income Tax Rate xpayer .
Re/'li ~terad Namo
II !~);~ti? I 1702-RT 0111 BE C. S P3

_ . : - .- Part VI - Schedules . -
schedule I - Orclinary Allowable Itemized Deductions 'cmachllcldi i"'l(lf S~ ,.., r -·
l' _ l,Y I IOwlJ, I n<Y:0.~.10fll)
1Amortizations

2 Bad Debts
. '
I I I I I I I I I I 10

I I I I I I I I I I 10
3 - haritabla and Other Contributions
I I I I I I I I 1 I 10
4 Depletion
I I I I I I I I I I 10
5 Depreciation
I I I I I I I I l I I0
6 EntBrtainment. Arnusemen~ and Recreatioh
I I I I I I I 1 I I 10 .i
7 Fring~ ~enefit2
· I I I I I I I I I I 10 '
BInterest
I I I I I I I I I I 10.
91.Dsses
11
10 Pension Trusts
I I I I I I I I 1 I 10 1
11 Rental
I I I I I I I I I I I
o1
:
: 1

12 Research and Development

I I I I I I I I J I 10
13 Salarie-s , Wages and Nlowanc es

14 SSS , GSl S, Philhealth, HDMF and Other Contributions

15 Ta<es and Licenses

16 Transp'.)rtation and Travel

I I I I ' I I I ' I I I

17 ethers (Deduction; Suq ect ID VVithholding Tax and other Expenses) [Spocify bekJw; Add adiilionai sh3!>!(5>, f r:-a:e:;slr;J 1

a Jaritorial and Messengerial Services I I I I I I l I 1 I 10\

b Professional Fees

c Security Ser'lic~s- I I 1 I I I I I I I
l-~f------------.:....__----------r1r___.___.__.___.___..___.__.__.___.__---11: I

d I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I
,I

e
1

I I I I I I I I I I I I I I I I I I I __I I I I I I I I I I I I I I

f I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I 1 1
I

9 I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I i

L~t,LLJll_ll_LJ
l l_il_LJIILJI_LI_jlL..J.I.......J._I_JILJ.I_.L.J
l l---1.l_.1_.111~1_ 1 -t_lL-J.I-..LI-ll-....1..l-1~1......a..l_t.___1_ 1
7 1 1

I I I I I I I I I I ' I
I I I I I I I I I I I I I I I I I I I I I I
, 18Total Ordlnarv Allowable I mlz d Deduction (Sum ,o,m 1 to 171) (To P,1 IV It m ·;1) l I I I~ I I I I ") I I I

Schedule 11 - Special Allowable ltemlzed _Ooductlons (,'llll,ch nt.flf.wn:il sjltlctls, 1/ ru~'O:!S,71', )

- . l)11scr~1t1on I 0(.f1J 8n "1 ,
1
I I I I l I I I 1 1 I
1 I l I I I I I I I 1 I I I I I I I I I I I I
1
2 I I I I I I I I I I I I I I I I I l I
I I I I I I I I I I I I I I
:,
I I I I I I I I I I I I I I
I I I I I _ I•I_ .t_l~ ~ _l_.1-ll-1.-1--l-..J-...J,..___.____._-:,
Ll I l 1 1 t I I I I : IQ
I I I I I I I I I I I
I I I t t I I I I I I I J I I I 1 I l I l I I
5To ISp 11 now bl l mlz dD ductlo (S1•r11t ,,,, , 1fu'1! :c,i· ,,\',, 1 : I L ,I l _I I I t I, I 101

2
 BIR Form No.
1702 RT Annual Income Tax Return
• · Corporation: Partnership and Other Non~lndividual'Taxpay·er ,
January 2018 (ENCS) - . Subject Only to REGULAR Income Tax Rate
. Page4 .
Tex er ldentift!iatfon ·N1.mber ~

2 5 .6 7 3 STRUCTI
Schedule Ill-: C

8) NO~O Applied Previous Y':-ar/

0
E) Net Operating Loss {Unappti1:d)
E =A'Less 8 +·c +D

0
0
0

tibn of Mnimum·eo
N.ormal Income Tax as · ICIT over PJorrral lnrorre Tar

0 0
2 0 0 0
3 0 0
G) Balance of Exai s=i MCIT JJ. ~ a
D) E) Expired Pol:ti o'n of F) Excess MCIT Applied this as Tax Credi lor Si;o:;,ecfur; Ya?Jls
'Used ·in 'Previous Years Exe.ass tv1Clf •. Current Taxabl e Year
' , G:CL.ess D+E+

0 0 0
2 0 0 0
3' 0 0
0
fNe-t'lncome~(Loss per · 1 9 1 0 0 0 010 0
Add; Non-Deductible Ex
2 0
3 0
4 Tctal (Sum of hems 110 3) 191 00000°
- Less: A Non~Taxable Income and Income s·ub ected to Final T it(
5

6
Bl s · clal !:>eductions
7

9 Total (Sum of llems 5 to 8)

10 rJ et T2:1able lncome/(Lc.tss) (llem4 Less llem9)

294
 I
Ro public of Iha Phlllpplnas
BCS/ Dop rtmont of Finance
Item : Bureau of Intern DI Rovonuo
FormNo. Quarterly Remittance Return
1-FQ of Final Income Taxes Withheld
r'2020 (ENCS) Ert., •ll required fnforme tlon /n CAPITAL LErt'ERS ualna IJLA CI< Ink. M• rk al/ apptk:abla ooxe.t wl l)
Pago 1 ' '&$ MUS T bo fllfld w/f

ATC

14 WC Q 5 0
15
16
17

18

19 I I
20 Taxes Wrthheld tor.the Quarter ~don Regular Rates (S1.(171 ofI1ems 14 to 19)

21 Taxes Withheld for.the Quarter Based on Tax T~eaty Rates (from P~rl tV-Scheclule. 1) •

22 Total Taxes Withheld for th e Q ua rte r' (Sum of_tte":s 20 and 21)
23 Less: Remittances Ma<le: 1 51 Month of the _Quarter
24 2"" ~1onth cf the Quarter

2:5. Tax Re;mrtted in Return Previously Filed , if th is is an amended retu rn

26 Total Remittances Made /Sum of /!ems 23 to 25)

27 Tax Still Due/{O,er-remrttance) {/em 22 Le.s11 Item 261

Add: Penalties 28 Su rc:iarge

29 Interest

30 Compromise

31 Total Penallier; /Su

3 .

2
 BIR Form No .

·1601-FQ
September 2020 (ENCS)
Page2
Quarterly Remittance Return
of Final Income Taxes Withheld If1~1~~1,f!l 1601-F0 rna:ie C
TI N

2 I 5 I 6 I 7 13 I 5 I OI 5 I 4 I OI OI 0 1 Or 0
I
Withholdino .A.aera.'s Name (La.1t f-Jarm forrncM:J1J.JIORRooiwm,t1fJeroofor flcn-lrrJJ.Nt ,~
MI EI GI AI
Part IV • Schedules
Schedule 1 -D Etails of Final Tax Based on Tax Treatv Rates .
1C 1O 1N1 S 1T1 R , U , C 1T1I 1O 1N1 1 c , O1R I P, . ,
------
I I

SEq.
Treaty Code/Country NatJ-e of lncorne Payment Amount of lncoo1e Tax Amount Gf Ta< v~
No. ATC
(Refer lo Scfledv/e 3) I Payment Rate (/IC (JP,(f U:J
(~

2
1
(8)
.
(C) (D) (E)
0
0
0
0
0
0
(F)
0 00
0.00
(G)=(E1Fj

-
~
3 0 0 0 0.00
000
ooo -
4 I
0 0 0 0 00
oon
5 0 0 0 0 00
. 000
Total Ta<es Withheld (Sum d flem, 1 to 5) (To Part II Item 21) 0 . 0 0-
Schedule 2 - Tax Treaty Code
Treaty · Treat y Treaty Treaty -
Country Country Country Co ,rry
Code . Code Code Cn de
AU hlstralia FR France MX Mexlco LI( Sn Lanka
AT .AJ.Jstria DE Germany NL Netherlands fiS Soain
BH Bahrain HU Hun·aarv NZ New Zealand SE 8-'edffi
BO Banqladesh IN India NG Ni(l eria CH S#rtze r1anc,
BE Belalum ID ·Indonesia NO Norwav TH Thai and
BR Brazil IL Israel PK Pakistan TR Ttire·,
CA Canada IT Italy PL Pola nd U.AE Unled Nab Emr aes
• CN · China JP Japan QA, Qatar GB Unled Krladom
CZ Czeeh Republic KR Korea RO Romania us Unrted Siaies c1 .timenc.i
DK Denmark ~ KJ.Jwalt RU Russia VN Vietnc:fll
Fl Finland MY Mala ysia SG Sil1Qaoore
Schedule3 :- Nature of Income Payment
- - Tax AC
Particulars,
Rate 1na:v101Ji!' corriora:c
Interest on foreiqn loans payable to Non- Resi dent Fore1qn Corp orati ons (NRF Cs) 20% WC180
lnterest ,and other income payments on foreIqn curren cy transactions/loan s pa yable to Offshore Bankinq Units (0 BUs) 10% WC1 90
Interest and other income payments on foreign cur rency tran sa ct Ions/loan s payable to Fore ign Curr ency DepoSII Units
10% WC191
(F CDUs)
10% W1202
Ca sh dividend payment by domest c co rporation to citizens and resident alie ns/NRFCs
3)% WC2l 2
10% Wl2fG
Propert y dividend paym ent by domestic corporation to citizens and residen t alienstNRF Cs
30% WC2l 3
Ca sh dividen d payment by domestic corpora tio n to NRFCswhose countri es allowe d tax deemed paid credit W _2
15%
(suqect lo lax SJarinq rule)
Propert y dividend paymf!nt by domestic corpora tion to NRFCs whose countr ies allowe d tax deeme d paid cre dit WCTJ.3
15%
(sul:i ect to tax SJarinq rule)
Cash dividen d payment by domest ic co rp oration to Non-res1den1 Alien engage in Trade or Business Within the WI_ ~
20%
Ph ili ooines (NRAETB) ·
Prooert v dividend payment by dome stic corporation to NRftfTB 20% Wl225
Share of NRAETB ,n th e distributable net mo me after tax of a partnership (exce pt Gene ral Pro fessional Partnership) or
which he is a pa rtn er, or sha re in the ne t incorne aft er tax of an associa tion.Join t account or a joint venture taxable as 20% W122fi
a co rporat ion of whrch he rs a member or a.co-v enturer
On other pa yme nts to NR FCs 3)% WC'.:30
D1-:;tnbutue share of individual partoers n a taxable partn ership, association, ,:iint account or Ioint venture or consonium 10% W1240
.Ml kinds of royalty payments to citizen?, resident s aliens and NRAETB (other than W1380 and Wl341). domestc and
'.10% W128J
w _-_
rer,ident for e1an Cor porations -
On prizes exc eedma g,opoo an d oth er winnrnq s paid lo individuals 20% Wl:.ia)
Branch orofrt remI1tances by all co rp orations exce pt PEZNSBMNC DA rearstered 15% \\ -~Q_
On the cross renlals, lea se and charter fees derive d by non-resident owne r or lessor offoreiqn vessels 45% \', -~~
VI ;_~·v_
On the gross rental s, charters and other fees derwe d by non -reStdent lesso r or arcrafl , machineries and equipment 75%
\\ ~•l ll_
On payrnent s to oil et plor atIon service con tractors/sub-contractors 8% WIJIO
Payments to tl on- re~1 dent alien not engage in lrade or bu sinessw~ hin the Philip pine s (NRANETB) ex.cept on sale of W133J
25
shares in dome stic co rCJ oraIIon and real orooertv ~

On payments lo non-res1denI ind1'1dualifore1An co rporate cmemal0Araph1 c film owners, lessors or drstnb utors
Royaltie s paid to MRAETB on cme matoqraohrc f1lrns and G1mlar works
Final lax on Irrteres1 or other payments upon tax-free covenan t bonds, mortgag es, aeeas ot trust or other obi 1at1ons
under Sec 57C of the Nat onal Internal Revenue Code of 1997 , as amended
?.I~
~~

JJ
V-13.W
W1J4I

Wl:B1
WJ:J})
~
---
\~

~
Ro .-allies oa1d to cIbzens resident aliens and NRAEiB on books oth er literary wor~&and musical comoosItIons 10%
Informers Cash Reward to indr" duals/Iurlll1cal persons 10% \',1410_
, '-,\'(, J
Cash or prooertv div iden d oard bv a Real Estate Investment Tru&l (REil) 10~ WITOO

296
 Republic of tho Phlllpplnos
,for 61R BCS/ Department of f'lnance
yse dnly Item: • Bureau of Internal Revenue

•· BIR Form No.

·1so2Q
January 2019 (ENCS)
Quarterly Remittance Return
of Final T~xes With held _on Interest Paid on Deposits
and Yield on Deposit Substitutes/Tru sts/Etc.
II,~~~\ijli
~i . .
[,.
.
,
Pago 1 Enlor aH llt(IUlred ln~ormation In CAPITAL LETTERS utlng BLACK Ink M
an "X". Two cot:>ie~ MUST be fllod with tho BIR and one held ~:it:~:::~: .
boxe, with
n ~~ . ~ , .., 1602Q 01/19Er'ICS P1

1 For the Year I 2 Quarter 3 Amendecl,Return? . 14 Any raxes Withheld? I 5 llo. of Sheet/s /Jtact)ed
b 10121l l' I [XI , 1st O 2np D 3rd O 4th D Yes lx]No I [X] Y;sO No I I0,01
Part I - Backa'round lrJformation
6 T~payer Identification Number (TIN) . , 2 I5 I6
8 Withhe>ldinQ AQent's Name (Realsterecl Name~ Non•lndivldual)
I j: /. 7 I 3 I s I I OI5 I4 1, 0 I O IO ' 0 IO 1 RDO Code I IO I 5 I 0
M1E~G1A1 1C10 1N 1S 1T 1R 1U1 C 1T 1I(0 1N 1 1C10 1R 1P 10 1R 1A 1T I 0 N .
1 1 1 1 1 1 1 1 1 1 1 1 1 1
9 Reaistered Address (l11dioote ccmpfllte oodres:. ff !111n'1\lndcateH~trmmess If tier&.,strlJdadrte:~i,dJ'!1!l'dflrmtrnarre,,,0!ttF~.g,tntt~f<COt,1¢1,er~,u-r-,,a,-n~/rr r.-q B'-Frr., t.r;; --'J£J

3 1R 1D1 1F 1L 1R 1 .• 1 1A 1N 1T101N 1I 1A 1 1B , L 1D 1G 1 · I 1B1R1G1Y1 . ; 1H 1I1N 1D1 I, I I

1 I 1
M,A 1H 1A 1N 1A P1, ,M 1A1K 1.A 1T 1I 1 ,C 1I 1T1Y1 I I I I i , I. I 1. 1 I leAZIPCod.e 11, 2 ,2 16
10 Contact Number. Q 19 t 1 1g I Q i 6 17 14 13 t 1 t 3 1 11 Category ofWrt~holding Agent • 1K] PrivateI D Gc·,e nrrem
12 Email_Mdress ffi I e I 9 1a 1·C I O I n I S I · I e I d I t I @ I 9 Im I a I i I 1 i· I C IO Im I I I I I I I I I I I I
1-3 Aretherepayeesavailingoftaxreliefundet Yes D·No 1 'X7
13A tfyes specify .,
Speclal Law or lnternatl onnl lax Treaty? l.i),J . ' 1 1 1
1 1 1 I I I I I I I I I I
, Part 11 - Computation of Tax
14 Taxes With held forthe Quarter B?sed on Regular Rates (from Part IV - Schec!ute 1 )
I I' I 12 10,s,0 10 10 10 0 ()
1~ Taxes Wrthheld tor the Quarter Based on Tax Treaty Rates (from Part IV-Schedu/e2)
I I I I I I I I ·I 10 0 10
16 Taxes Wrthheld for the Quarter Based on Preferential Rates (from Part JV - Schedule_ 3)
I I I I I I ·1 I I 10 • 0 10
17,Total Taxes Withheld for the Quarter (Sum of Items 14 to 16)
-1 I I 12 101510 10 10 0 • 0 ,o
18 Less: Remittances Made: 1 t t Month of the Quarter ·
I I I I I I I I I 10 0 ,o
19 2n~ Month of the Quarter
I i I I I I I I I ,o . 0 ,o
20 Tax Remitted in Return Previously ~iled , if this is an amen_ded r~turn 10 • 0 ,o
I I I I I I I I I
21 Over-remittance from Previous Quarter of the same taxa ole yea r
I I I I I I I I I 10 .. 0 ,o
22 Total Remittances Made (Sum of Items 18 to 21) 0 • 0 10
I I I I I I I 1 I
23 Tax Still Oue/(Over-remittance) (Jte017 Less Item 22)
I I I 12 101510 1010 0 0 ,o
Add: Penalties 24 Surcharge
I I I I I I I I I 0 0 ,o
25 Interest I I I I I I I I I 10 • 0 10
26 Compromise I I I I I I I I I iO • 0 10
27 Total Penalties (Sl.{mofllems 24to26) I I I I I I I I I IQ O i0
28 TOTAL AM OUNT STILL DUE/(Over-re,:nittance) (Sumof/tems23and27) I I I 12 I O 1510 I O 10 1 0 • 0 10
If over-rem ittance , mark on e (1) box only
·
Oro be refunded O
.
To be issu ed Tax Credll Cerhficale
. D
Tobe t,1n\edo~r!Otti,ne: q• .
calendarye3r(not appwb!e b s=-~±n0 ~m
.:;~ •·:san

· • . 1-i . · ~nee rebJm and all it! attachments have been made i1 good farth, vertied by ~ . and to lhe be.st cl cl.l"kllCMfedg: i:nd bei.ef. 11 rue a-:1 -en
Wedeciare 111derthe penalttes dpe(prythat_t , s remc de ' rid d and the re,.•lati;ro lmied 111 ~ aulhortythereof Fi.Iller we~ CQnst-11 to the PfQoe~ngdaur
mt to' the pl'()llisioos or the National lrumlll Reven.ie o , as !Ille e , ,,.. , a,=~~
: : 1he •oata Privacv Act cl 2012 IRA No. 10173) fOf leallmal.e ~nd lawful numoses, (If Authcnzed Re(Tes,ntJ,ve. ililch aidh(l)zJ!Ofl i:-~a-1

J e nn,if e r D Di M gi b
( Pr "':s icl e n t )
Signature over Printed Name of Preside ntNice PresidenV
Authoriz ed Officer or Reoresentative/Ta x Agenl (lndicaie nlolDosignation snd TINJ
Tax Agent ~credilation No.I I Date of Issue
(MIWDCWYYY)
I I Date of Expiry
(J\IM/00/YYYYI
I
Altornw''.i Roll No. (If aOtJllcable!
Part Ill - Details of Payment
Drawee Bank/Agency Number Date (MMrOO/YYYYJ Amount
Particulars
29 OathlBank Debit Memo I I I I I I I I I I I I I I I I I 'I I I .I I I I

30 Check I I I I I I I .1 I I I I I I I I I I I I I . . I

• 31 Tax Debit Memo I I I I I I I I I I I I I I I I I I I . I

32 Others (soocify bolow)

I I I I I I I I I I I I I I ' I I
Machine V alldatlon/Revenue Officl I Recelpl Detail (if m:i flltld will n ALAhorlzod A
I I
nt Bonk/
I I I I I I I J I I I I
sro·mp of Roctming orr/Ce/AAB and Dare al RtteJp/ '
(RO 's Sign tire/San T ' s In a

.,

"'vacy Policy found In the Bl~ web s,le (www.blr.gov.phJ

•Non;: F'lc,Dse re ad the BIR Dat a P.,,

297
 '
BIR Form No .

1602Q
January 2019 (EN CS)
Paqe2
Quarterly Remittance Return
of Final Taxes Withheld on Interest Paid on Deposits
and Yield on Deposit Substitutes/Trusts/Etc.
I Er~·:~L;ilJ
TI N I Withhcld/n.CJ Agent's Name ----..:.
2151 6171 3 15 10 15 14 10 10 10 10 10 IM1E1G1A1 1C10 1N 1S1T1R1U1C 1T1 I1 01N 1 ,c,o,R, P~
•I I I
Part rv- D.etalls ofT,1xes Withheld
-----=
_sctntdt.lle 1 - Details- or Interest Payments and Tax 'Nithheld Base<J 0~ REGULAR RATES
ATC Total Intere$i!Yfeld Pald/Accrued/Aniount
Ta x
R'ate
BSP&ha1!l0 ~ on
Ire 03te rf RanitfaiGe T0xcs 'Mlhhf:ld -----
----
Savings Deposit
1 Wl16 I I I I I I I ,o . o,o 20%
I I I I
' . I I I , , ,0 ~
, , I , -----
06
2 ,WC161 I I I I 18 ,o 10 ,o10 10 10 . o,o 20% I 'I I 1l 1610 101010 10 ~ ~
ITimt U eDOSlt .
13 r-
Wl161 I.
I I I I I I I I I ,O ~· 0 I 0 20% , I I I I I I I I I ,0 • 010
4 WC161 I I I I .I I I
~-
I
..I I ·t O • o,o 20% . ,' I
-
I I I I I I I I ,o . o_&
Government Securities " •. ,

5 WI162 I I I I I I I I I I ·, 0 •o,o 20~ · I I I I I I I I I ,o . o,a

6 WC1 62
I I .I I I I I I I I , o . o,o.. 20% '
I I I I I I I I I ,o 0!..2
DADMlt SUbstitutes.lOthers - 1

7 ..Wl1 63 I ., I I I I I I I I ,o .·.o,o 20%

I i
-
I I l I I I I I I ,o o,o
8 WC1 63 I I I I 1· I I I ,.
I 10 .. o,o 20% I I I I I I I I I ,0 . 010
Pre-terminated Long-Term Deposits/Investments 'I ·-
9 Wl440 10 : 0 10 20% I I I I I ,0 010
I I I I I I I I I I
. I I I I
1O Wl441 I I I I I I I I I I 10
' .
.
0 10 12% I I I I I I I I I ,0 . 0,0
11 Wl442 I I I I I I I I I I 10 '• o,o 5% ,, I I I I I I I I I ,o . o,o
12 WC440 I -I I I I I I I I I ,o • · QI 0 -20%, ' I I I I I I I I I ,o o,ori.
Foreign Currency Deposit
13 ~ 1170 . I I I I I I I' I I I ,o • 0 ,o
.;
·15%
I iO , 010 . I I I I I I I I I 10 . o, 0
14 WC170 I I I I I I I 1612 15 10 10 . 010 15% ,418 •· 01 0 I I I I 14 ,s ,0 ,0 10 ,0 . o,0
15 Total Taxes Wilttleid Based on _Regular RatE;_S (Sumsoinems I I I I to 14J(!oPart fl, Item 14) 12 10 1S 10 101010 010
Schedule 2 - Detals of lrteresl Pa rmenl-s and Tax Withheld Based on TAX TR EATY RAlcS raltach addvonal s'1ee:fs. f r~ssa,vJ
Treaty Code ATC Total Interest
Tax
Ta~es ! eld
(Rt/trio Sdled 5} f,J/rte ArCln Sdled If Rate
1 I I I I I I I I I I I I I I I I ,() :; o,0 0.00 I I I I I I I I I ,O 0, 0
2 I I I I I ·I I I I I I I I I ·I I ,o .· QI 0 0.00 I I I I I I I I I 10 010
3 I I I I I I I I I I I I I I I I ,o . 0 10 0 00 I I I I I I I I I 10 . o,o
4 Total T~Y.es Witl)helcf Based 011 T~'X Trepty,Rates (Sum ofltemeJ 1 to 3) (7b Part 11, r.~m 1~) I I I I I I I I I .10 0 ,0
Schedule 3 - Details or Interest Pa·,ments and Tax Wrlltleld on Taxoavers ITP5 En ovin11 PREFERE NTIAL RATES (J/'.Jt .1> J,.1(Jbo." Ji S'i'Fm. l r:ec~\18"}
lrrt'estment PromrAion Ta x
Agency (IPA) Code ATC Total lriterest Taxes\ I d
Rote ..
Refert>Sc/1'11 61 -
1
2
3
I

I
I I I
I
I

I
V.Cl!I
I

I
I I I I I I
I
I
I

I I I I
~·
l!C390 I

4 Total Taxes:Withheld .:in TPs Enj(}fing P"7ferertial Rates (Svrn()( l1.em~ Ito 3) (1b P.Ht 11, Item 16)
·,
I
I

I
I

I
I . I

I I
I

I
I
I
I
I
I
I
,o . o, 0 0.00
,o . 010 0.00
,o . o,o 0.00
I

I
I

I
I

I
I

I
I

I
I

I
I

I
I

I
I

I
I

I
I

I
I

I
I

I
I

I
,O
10
10
10 . 02
o,o
l110
01C

SchldUla 4 - surr.mary or lnteres1/Yield P.iicl and N,crued lor the Month

BANKS
-
~ f•r:.~

----
. . :. ,5 ....
ParticlA"'s Regular Banking Unit f orettn Currency LA?poSit T 31
U~t
1. On 0l!!J!YII Li,it.atle$
Ta10tlle
EIOllDI
l . Ori Btl9·, -- --~,~~ttO't-.<.t fFur~
-
----
---
y

Tir,rable
E lll!lllll

----
J. L1lntl I efffl UeDOSI OTI Jrr..,;trnei(

---
'ti!..,

----
FCU'{41veyr,to~MJ ltl<)l'1 Ill& C"J I
ltr_w (3)';eJr 8 10 lll".21 111.YI •,Oll (') YIPtll!i
Le<lS th••
tnee <J) ""ars.

----
F Jllfflli
4, I.Jlnl

Ji1 bll
Ew• 11:1:
l ent tr .

298
 BIR Fonn No .
1602Q Quarterly Remittance Return
1 of Final Truc es Withheld on Int tp ·
January2D19(EN CS) . and Yield on Depos·t S be~es aid on Dep·oslts
Paqc3 . I u st1tutes/Trusts/Etc.
- TIN . I WiH1hold1na A.Gent's Name
2 , S16 1 7131S ■ 01S 1 4 1 0101010 1 0IM ,E 1G1A1 ,C101N 1S1T1R ,U1 1 I
Scheih.ale5- T.i t Treaty Coda , C T I ,O 1N 1
Ct>do
SlnC.JI DOlt UAE Unh~ Ptab Ern1•tes
Sw in OB Unit~ K.-.qdom
Unlu Slltes of
us ArM,ic.l
Th.lhnd \/ti V,ottum
N ewZ.uLlM RU RussU

Schedule 6- 1{westme11t Promotion Aoencv Tabuta1~n

APECO ....,_pa,:ift<: E «-n>■ 1< Zone ind F"'"l"-"TI .0.1th>ttf coc Cl.JI!< ONtiopmtnt C01poution SBMA Suoic B•l M,bopoll.tn AI.ChOlly
.AfAB Autnotl!y of ther, .. po,tAttJ ot 8,tun JHMC John H•y MJn.ogtmtnt Corpo1 Jtion lo-..ism tntrulruchJr e , nd
PEZA PlllippiM ECQl\om«, Zont Authonty TIEZA
BCOA ~sts Co,,....rsion •n<I Oev,,l<lpmoni Authority Erhrpnso Zont Authorit,
Bo•rd ct ,,.,utm•nts ppr.re Poi,, P"'nt M•nJ9tment C 0<po1J!ion
eo1 ZCSEZA
Z•mbo,ng• ca, Sp t cial
•C •g•y•n Economic Zon<! Alihor~ RBO~ARMM R• ~on•I Board of lnves!mtnt•Autooomo us R,gion of t,llslrn Min d.on•• EoonorricZont Authont)'
CEZA

Guidelines ·and Instructions for BIR For m No. ·1602Q (January 2019)
Quarterly Remittance R eturn of Fi11 al Taxes Witbbd d ·
OU Interest Paid OU Deposits and Yi dd on D~posit Sub stitutes/Trusts/Etc.
WJ,oSl...nPilo
'Ilm tt\un • ~ la ~din tri,& ..i. by .Ub.nks, ron~.,,. fuurciilin!21.~.
fin,.rct coipanllotts, ,m.,,hn,t4 wi twt eotll)WS wi otl"H ir.tti!utioro ?a1Uiled \:l witJ.lold
fiml ucorra ux ai in!erest poid/c:,ued ondop:»it wi }"ield or~ other rroI11!\uy bonefil from
dtpo,it Nbsti\llti ard from !But fun! u-d simlu arr~n1'11h .
Th anm, hill b• filad by the Prts mn\ Vice-Pi,,, idant or other FDOp,1 officu.
Wlm>anl W"- to J'ilo...ia J>..,•/Renat
Th q ~ y w i ~ tax re.mitture nilm shill bt ~d wi th! tax pmlsmitlo!d rot
I.du thin t!-e wt d.oy a tl1' =rdh i,llo,yin; the dose of 0,. 41Wt!r duri,,; w hi:h ,.itl,l,old~
wurnodt .
Pxn-ided, ronver, tl~t with n•p•d 1o ncn-1,q;e ard ~e ~ n wlo ,hill file
thx,u~the D.ectroruc ~o.nl PaynundS},tem (eFPS ). th, de..nino loulttt:oni:.Uy 6lirc;
tho ntlm uid ~}"Ul(/runttiTC tho tans <lie ~on shill be in oco,r,wro with th, provu.1'>1'5
ofexi<llrc; appliab le ro,.,.,, ,.. im~n,u .
Th rtilm ,hill bo liled ard U.. tu p>id/1'?m.t!ed with th, Authciri:2d Agu1 Bm:
(AAB) of th, Re,,.~ Di< birt Offic• (RDO) h•~ jU1isdi:1Dn o,u th, wifr.hold~ ~rd'•
plaa!ofbusin,ss/office . lnp~uwh!rothe,e art roAut!-ormed A;e1d&nla,the n,wn1lwl
ht filedw th! ta.~ paid/"' milled with th, Remue Collectim Ofilcer(RCO) oflhe ROO hn;,,;
jiri<cli<:tion owr t!-e WA 's puce of busin?.ssloff.::e, wlo will issue m El,dronic Re~
Offi:w Rec,.ipt(oROR) the.nfor. · or tle paynao/,enutwr• tle_,eo( ,hill, i,, addition lo olh>r peiultie, px,vid,d for 11nlor tl-e
V,11-en ti-a rehlm is filed with= AAB, ~yer mut ~romplish utl ,ubnut BIR-
p,uc:abtd deposit slip, wrac.h th, bu¼ tellu ,hill rnacii,_,. v.hute ., •wiure that
pa;-menllremittance wo> receiv-ed by the AAB Th AAB recti\'Utg th, tu !!lum slull s\J~
m.u!c th, word ''Receim" on th, rebl111 a.itl &l; o nw:.lun! v.iliiuhl th, retw1>., pro:,foffili11;;
.nd payrrentliemittan::• of tl" tu by th! tnpayu. Tut :rruclw vilida.tion slull rt011Ct the d._te
of paymutfremitt.urt, .n,rur4 p,idlromitted ud b,uuction, coie., th< rune of th! buik,
brurh co~ 11tller's code w b!ller', initw. Bonk debit memo ?llltDU •ni cata slnuld be
inl.i:dtd in iJ.,,eblm furwpayelS payin:/renuttu".wrl ulh2 banlc dtbit ,ysiom . n,guutio,~ , lull. in add iborl to tho other p,nalhe, ~ br Lr.•, up:m conv-.c tton lttleol; be
P•y,iam/Remittanc• m>Y also ~e ,rude tl,ru tlie epaymmtclu,u,tb of AAB, tl1N uth!r
th,eironline facilrty, crtditld..bit/p,epa;d cul,, .ni trobile p•yma:ds ..
n,, ur:hu\;• ,ale to b• used ,hill be th, Daily Bui;!.,, Su,tul ~ Pilipl?W (BSP)
<iwdm;; Roil! on th, ci,11! of payrreri '"' nuttair• . . its a;e.~, &ni inst:a.in-e_ntaht:i.u, its p:,ht:ical subdjvisi:n'l' , as well a.s ~~ntiren!--ovned or
1k:se P•Y""' • ~ ofla;< reliefwuiu ut lro,rrubonol Tu T.,•ty or Sp..: w L=
,hill inlialt unduw h.l ific•tion tho>· b ohn;;. Ifthey are ~ uniuS pee~ La.,r, tl-ey
cw,
shill ,pe:ifywhich S p,cw LM is applieable to them
A tnpa)U m,.y fiL, a separate ,ehun for th, ).,ad offi.,. and lo reach b.ran:h or pke of
busire,s/d!ice or• comolid.tod ieum for th, he~_offu:•_• rd ill the brurb>s.loflke1 . In 0...
cu~ 0 ~ wq,ay-e1S oruy 0111! consob<ated ~um u reqci,ed
Lare hna l>l!poat or In- anent . . ___. atiJic ~ " ,hill ruer to certifica of
TI,, ltrm "l:,rc-Mlll cl,polit ar uvertn""~ c a. . . . t .
d. f>.iln,, '> ~y/amil tl-e d.fi.:ian:.y t.u within tl-e l:im, PJHCnbed for its
P,}-m>.ntl amitwt:t i,,. th, ~ of., It» mort .
2 A •=hlr.:e of lilly pe=nt(!lrl+) ofth, tax er of th, dunn:y tu, inco,e uiy
papreu!/,..mitwct 1w been nwlt bei>• tll! discow.,y of the £tln1y o r fnud, i>r
u:hofthe 6:illo.•~ viol1ction,:
a 'w'lll.'ul noglKI lo file the nown w11rut the petiod Jllecscnbed by tho Calo a by
rolo, ard =!..tion, . 0t
b A filio a fi audu!.nl l<!tlmiswillfullyuwi. .
3. lnte:ut •t th! rot. of drub!! tl10 !!:;al int..!l!Jt ratt for lc,in, er linb•ann:• of uiy
m:,rey in the ..bsen:e of= Uj)'"" stipul>bon ., s•t by tl-e S...>tglco SU!!nl ~
Pihp,nas 6:om tie d.ite l'"",crl,ed for payn-erd/~nuttu-c. u."tlil the unoir4 is fully
paid!l!!mitted: Providod, llu!, in 1D cue shill tho deficierry ....! the d,li,,que,ry
umonst p,escn:,ed unluSection249Sub,octi:ins (B) .,,J. (C) oftle N ..tio....J l&J"Ml
R,-..,m, Coie,u ai.~nltd,be ~,ed sinultareowly
4. Con-.,r0mis• ~t>•., p10vtd•d wmr appocable n,les ml re;ulalio1'5 .
Vs,ation of Withholilic; Tu Prv.,i,irms
A1'/ ~"'' requind lo withh:,ld, occaut fa , url ~};Nml U1f ti: U?90'~ by t!:e
Nabot1.J lrm,.rru.l R.t,= Coie (NIRC), as utl!nl,O. orwl-owill£ill}·fails towilhlDld sach
tax, o r = t 6:irand pa.yhenul such lax, or uls 0 1.btts uuny mume_rtoeva.le U'f ruchlu
U Y, be hol,l,o uponconw:bon\:la pen>~.J\:l Lie bW ur=~cd"tle UX rot wilhhul, or
n:>t ..rowtted i,r utd po ti/remtil!d
Any p,non ,equirtd undtt the NIRC, u .merdtd, o, by~, .ini "'"'latiom pror:ul;ated
tll!roundH topa)1'nnut"1'f tax, rrulc• a return, hop an,; reco:d, o r:aipplyco~cl .,,,I ...~
i,u"orma.llm, w it> willfully ful, to pay/,enut such lax, nw:• such ?!!tu.'t\ lreep such ..co:d, c,r
rupplysuchcanct .ini accuate infunrutiol\ orw ithltol:l orp>}1',emittaxvwitl¼eld,o: ~
excess \Jxe, wilhleld an compe11s•ltol\ at tle tine or \:in reqci,,,d by law or ~ , .ini
. l"ruh>d by ,.fi.re of rot l!ss than ton th:,usU\d ;:esos (P 10.0CO.al) =l. suiTu1 ,rn.,ri,omntrt of
rot less tlun Oll! ( I) >"~bet mt m:,,e than ten(I0) )"U> .
Iv,,r:y offictr or enlj)loyee of th, Govemm•nl ofth, Repubhc of the Philippi.res or ....,,.of
conb<>lledcQJ10nbon;, ud.1du,;; tle B~0Sen!ral1tg Pthp,n,u,who,u,tluth, p,ovisiors cL ·
11.., Nl RC, a; ure.nled, or•guabons protm¾..ted t!:eieu,-&r, isc~edwithtJ., dutytod..h:I
ard w,thlold Ut}" mtemal ,,...,,.,. \Jx .,,J. to payf,.,mil tho ,..,,.., in a.,co,,i.u,ce wit!\ the
provisiom of tlse NIRC, ~ antenl.ed, and other bws w wh:, is !bur"1 ~ of ilt'J olf~nso
htrembelo.¥ speciS,,d •lull. upon c,o,,w:bonof •~h..,t o: ormssiai. be 6md in• sum rot
lass than five thrus.,rl p,,o, (P 5,000) but rot m,re tlun fifty thrusard pesos (P 50,000) or
in;,risoned Joa tennofllOI !es, th.n si.x (6) nomhs and o re d.oy but rot n1>re Iran !wo (2)
)Un, qrbothc ' •

=
time ~ sit or inV!!stlntrJ in the iinn of s a ~, cannon or ~ . J tn,
._ Those w lo fail or caw e th! £,w,., to de<lid ard withlold u,y i,_a,oul rne.me tu unler
· po · ;.
depas tl
b u,!otherim-eslm!nlsw1thanatlntyptiiodofnol
K,""• "1'/ofthewithlo~w laws ud i,~lurenlii~ re:;uhtions; . . .
,ub,tiilte, ,,....,tin,ntman&..91'ffl!!nl ~ e d b the Bu,;;),, Senlral ~ Pilipil"' tlwn
b 'Thos•w 1-o fail or cause t}., to pay/,.mitk.,,,. deducled ud wilhh,.ld w,thin th,
l,m tlwi fiw (5) yun, U. iormofwlich~b;, P . l Ul!e :._daw an! fuwc~ cC!ll\!,WUfS) tirre ,nscnbed by law, and irnple.m,rtin;; t<Cilitions ; U>i
(BSP)Uldimadby~ "?1y(ro t byro _,~cu(~ 10.n000) ..,.f otherdemmimtiom u c . Thostwl-o ful orca,s• the WAil!! toftle .. remnorst.l.tem>ntwitlrinth@ti= pt"5cr:bed.
kl i,,dmduw in dero,mn.llCDU of Ten tholsaiu pesos or renlH or funli:I h • fw• or frmdulert rtblm or sla.ttltli!lll ""l.uired w,do, tl•

nuybc =~n!,ht~!d ~"'m lorg-tenn deposit or iJtYes t,renl in the iollTI f ,._~ withhold~ ta,c law1 ard ~"1 latians .
If th, witrholdill; ,.r;e,t is n,. Go,-,,l1Un'-r4 or uty of ib ~ncie;, politi:u , u ~ iom er
corm,on o r in!i~AI tnisl funds, deposiisubstibltes, im,eslltli!~cnb~~=~ ;::nluch in,twn,ntalitie.s, or• ,~mm,nt-o.Ynod or con!lolled C01,orali:,n, th, t l \ ~ ttenOf
ond othu invulrn!m evidured bycuhfi.cates U\ such~ ~bjectto• fin>lw~hrold~ respor,sible to, thewithlold~ uid pay,rentlremittuc• oftu shallb• p<lSCtallyli..blR far tho
";11 ., in-t..mun,.tadbytl-e k,ldorbeli>• \re fift!}::~ld f;rn the e.ntil,, i,.,a,n>!lproceeds ~itians to the tJX p1escnbedby tho NIRC, u .,...,nled.
tu u the ra.tes 1-ereinp..,cnbed to be deoic =ri wu liui byth, uxp>}U.
iheaofb.,,d on tho lergthofllm! th.it the imtru · Raie Nole: ·All bad ~ •und irionna&u,nstbe prop~ ~ out
The wt 5 di;ih ofth, 14-<ii;it TIN r,!trs \:l th, brurhcod,,
}L,J,Ung lwiocl 5¼ All ,e\lms filed by ui~c!!!d.iltd tJX ~ nl onbtNifoh tax,ayeulullb4artl-e
rCW' (4) ,,_..., 1o }tis than five (5) yeUS 12'/+ folla•in:: i,,fonnatitt\.
'llut• (3) yun to all tlwifow(4)yean ~¼ A. Forlndiv;du,r(C rAJ, monbus ofGPP,, ard othin)
Lus th&n thrtt (3) ,,_.,. .. 1 Tup•)'Orldtrtiftcatia\Nu.nbu(TIN); c,d
..2 BIR Accmit.tion Nu.ni>e.r, Dalt oflstut, uti Dahl r£ Expi,y.
Pm.Ia B . fornwni>•n oftho Pnlippn, B,r (UW}'O n )
Dea ,lwlbt i:q,osed ud collod2d u put of th. t,.•<:lloNin:: vioJ.tion,:
b .l T"'4'lytr ld.ntilicationNunhotr (11N);
J. . A surd•••~ of..,.triy-l!n ptrtnt(25'~ for !11' £, 1oftu or in,t.Jlrnar4 due on or
b2AttotNy', RollNuni>•,;
... Faw• b file Uff ietum -1 P•»frunt uroun tl- b 3 J,hni.tory C o ~ Ltiu Edu::.t.fon (Mcu;)
b oil• ti. dua cuta; .
b . Filing• nwnwillu ~nonorofl!c•
otlv !hon tl-o,e with whom it is nquutd kl

be flied, un)e,s otluw•uutlctrad byllt

Co,ntissioru;
oftu ,1-ownon tle .um,ortht
b .4 iJ~di~=~~:r, 0..11 o f!,<»», ud Duo of!:xpiry

c . Fwi• lo payfnmit tht !Wlarputof tM ~ n l . d 10 bo ~d 011 orbtfon Ire

fWl UIICJW\loftudue forwhichni 1ttlm• nqu,rt .
dua <Ult;

299
 I •

Republic of the Philippines

Department of Finance
For BIR BCS/
~ Burea u of Internal Revenue
Item

1111~~1111
BIR Form No.

1707 I. Capital Gain~ d!~!}~~!l~!k~xchange)

(For Onerous Trans_fer of Stiares of iJ:;,~~:'t~ETr;RS using BLACK in!<. Mark ap,:Jicalio
January 2018 (ENCS) Erter al requife<! informa/lQ(1,nMUS T be fled wlh the BIR and 006 hdd by the Taxpayer
Page 1 boXes wlh an 'X . Tv.o cop;es . _ ,
1707 01/1 8ENCSp
1
2 Amended Return? 3 AT~de 4 Number o r ~
1 Date of Transaction □ Attached
11
o
30
Indiv idual ~
(M¥JDDNYYY) 0Yes [X]No
[X] j 1c )10 I Corporation ~
Part I - Background Inf orm ati on

5 RD,O Code pf Seller 01s1ol ·

6 Seller's Name (t.ss1Nema.J-;,,M1ame. iAvdl9Ne;m& Seller's Tax:paye~
tor //laNidudis OR R>,<J/Slerw !Vet~ for (VM./ndN!d~B/$] ldenli ficatlon Number tnNI
rAtt&ct> 8d.t1l0Ml sl>e&Va. I' n«8sSSNl . ,
15A MEGA CONSTRUCTION CORPORATION 3RD FLR . ANTONIA BLDG. BRGY . HINDI MAHANAP, MAKATI CITY 256-73> 054-000

15B

7 Buyer's Name (LssrName. First ~.MW.Jeflame Buye(s Regist~red Address Buyer's Taxpayer . -
ft;, fndr.,rw!iils OR RE?is!atad N&me ro, Non-Ind ldualS/ (him cnr,;,~,'ljmdm!S Jt./JlfJndl, l)(Jo; t!J81>-;,,rni1MIYSS: 11 fYl ·;¢dr,;sssdlfflfoot1,•m"8amr,,,t Identifi cation tJumbE< (n/lJ
/l ttec:t> add,l>ona/ S/lee/lS J n,,cesser.•I ' ittl"'-"" oob1"8ROOb11f;([alaffl(J/Slf,/W8ddl9!il!i'"'',..,.,BIRFcrmN<i 19)/') )

ITA BUMILI , ANTHONY , JONES 1890 MAPAYAPA ST. BRGY. PINAGSAMA, MANILA CITY 134-6 98-234-000
Ire
17c

~
.Ate yoo availing of tax relief under ·
, Scecial Law OI' Inter.national Tax T.reatv? '.
y lvlx N O· BA If es specify
es l!:.J Y '
D I
I I I 1 I I I I I I I
1 • 1 1 1
9 Description of T~nsaction KJ
Gash Sales 01nstallment Sale 0 Forecl~sure Sale
(FJqoii f'IJft/\'.SamA!Je •t
D Olhers ,(specify) I' - - - - - - - - - - - - 1 1j
Part II - Computation of Tax
1 O Taxable Base - For Cash Sale/ Foreclosu re Sale (From Pa1IV Schedule 2J I I I 1 11 ~1 n I n I n1 n In In • n 10
11 Less: ~ost and Other Allowable Expenses (Fro'mf?art IV Schedlie 3 ) ,
I I I I I I I I 10 . 010
I I
12 Net Capital Gain/(Loss) (ltem ·10 Less Item 11) I I I 11 1s10101 0 101010 010
13 Tax Due on the Entire Transaction (Cash sa.relForecloSln Sa») (/rem 12 Muliplyby Applcoble Tax Rale)
I I I I 12 12 15 10 10 10 10 • 010
14 Tax Due fort l1is Payment Period (From Part IV Schedtie t Hem 7)
llf tax is oavable under the installment method or computation 1 I I I I I ·1 I I I I 10 0 10
1~ Less: Tax Pa id in Return Previ~usly Filed, if this is• an Amended Return I I I I I I I 10 010
I I I
16 Tax Payable/ (Overpayment) (Item 13 or 14 less /fem 15)
I I I I I I I I I I 10 010
I
17 Add: Penalties 17A Surcharge I I I I I I I 10
I I I 010
178 Interest )
I I I I I I I I I I 10 . 0 IO
17C Compromise I I I . 1· I I I I I I 10 o,o
17D Total Penalties (Sumciltems 17A b 17C) 1 I I I I I I . I I I I ,o . 0 10
181otal Amount Payable/(Overpayment) (Sum of Items 16 and 17D) 0 10
I, I I I 121215 101010 10
In case of overoavment, aonlv for tax refund usinQ BIR Form No. 1914 (Application for Tax Credits/ Refunds)
WI e declit'e urder Ile penalties rl peiµy tint !tis rdum. !l1d ill ls lttlmnerb, have been mclle i1 good fa'!h;verified by me-'\D, and to m best cf my/w: knolMedge ml belct, is true inl arrea pusun b t1L'
prlMSions d the Nalional lriemal Reveooe Code, as -ded, and llie reg.tmm issued'tnd(!f llJ!tmy therecf. Fll'thef, !,we tj.Je mylw: coosert to the processiig ct ll)'jW . . IIS art!mji!:tg lRi!r tie
'Oliaf>rw;v Ado'20121R 4 No. 101731 for leaiimalellldl.Mlulnun<><l'S. flfAl.lhorized ReoresentatMt, altachSpecia/Powerofktomevl
For Individual : For Non-Individual :

J e nnifer D. Di Ma giba
( Presid e nt ).
Si171alure over Pnnted Name of Taxpayer/Authorized Representative/I ax Agent Slgnahn over Prfnled Name or P,esldentNlce Presldert/AUlhortzed omce, 01 Repr s•r:i"1ve/f.u A;.,..

Tax Agent Accredit~tion No./

Atiomev''> Roll No. (If aoolicab/ft)
I
/tndJr:ate ll/alde1JonatJon and TIN)
I Date of Issue
fMMIOD/YYYYJ
I I
{lndi:we tJJe/da.slonarbn snd TIN)
Date of.Expiry
(MMIDDIYYYY)
.,
I Part Ill - Details of Payment .
Particulars Orwwu Bank/ Agoncy Numl>er Date (MMIDDIYYYY) Amount
19 Ca511/Bank Debit Memo
-
I I I I I I I I I I I I I I I I I I I I I I I I I I I
20 9heck I I ' I I I I I I I I I I I .I I I I I I I I I I I I I I
21 Tax Debit Memo I I I I I I I I I I I I I I I I I I I I I I I
22 Others {SmcHv btlCNIJ I
-
I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I · I
Mlchine Validatioo sramp of R.ceJJIJ,g Aut&ort:.a A~III tu:iJ: ud c»re cff~eaf!I
18'tnkTe r's /

"NOTE: The BIR Data Pnvacy Policy is In the BIR website (www.blr.gov.ph)

300
 R I.At~• rig hr. r•1
Kao "' an ng P1n1rial
K Ya~lh11n ng Roni
rl
Intern .
C~pital Gains BIR crm

Tax Return 1706

JtJy. 193& cEhCS J

4 0

EZONCITY

1T
IB
19 Does
► Dr
For ln~llmenl Sale.
Z2 Selling Price
23 Cost and Expenses
24 Mortgage Assumed

29 Fair
29'{ZJ fl

2 80 , 000 , 000 JOE{] Btd Ptice (For r

000
3 00 ,... 000 Joe(] Ta:-.a e lrnt~
·- ••., (Fo• lr~t fmt111 S..
30 0 . 0 0 J0F□ 0 l ~ (spedl )
- rn tJ . , rlJI.

Com u l at)p n o f T ur:

31
o, 1 _ JOB 011t :;oo

32
rn
33
 !Schedule 1
I
Comoutation or Tax Ba~e on the unutillted 1'ort1on of Sal es Proceens lif box nos. 17 and 18 are annhcablef
·-
.
. -- --
l
BIR FORM 1706 -CAPITAL GAINS TAX RETURN
(For Onerous Transfer of Real Property Classified as Capital Asset - both Taxable and Exempt)
Guidelines and Instructions
Who shall Ille: ,
This return shall be filed in lrip!icate copies by all persons (nmural or
juridical) whether residenl or non-residen~ including E.11ates and Trusts, ,wo
sell, exchange, or dispose of a real property located in the Philippines
classified BS capital asset BS defined under Sec. 39 (A) (1) of RA No. 84.24 /
The term •;ale" inch.ides paclo de relro sale and other forms of conditional .
sllles. The tninsaction may be taxable or exempl.
When and Where to FUe;
The return shall be filed by lhe seller with any ,Authorized Agent Bmik
(MB) of the Revenue Dislricl Office (RDO) having jurisdiction over the
place wher~ the property being lransferred is )ocaled. · of the document of sale, exchange, or disposition of principal residence.
In placr.s whm there Ill' no MBs, the return mall be filed with the
Revenue Collection Officer or ci,Jy Authorized Cily or Municipal Treasurer of
the Revenue Dislrict Office having jurisdiction over the place \Were the
property being transferred is located .,
The return shall be filed within thirty (30) days following each sale,
exchange or disposition of real property.
1n case of instalbncnt sale where the taxpayer-is allowed lo pay the
lax by instalhn ent under certain conditions and requirements, the return shall
be filed within thirty (30) days following the receipt of the first down-payment
or following each subsequent installment payment, ",hichever is applicable.
One•return shall be filed for every real property sold, exchanged or
disposed of (for cash sale, or foreclosure sale), or every installment payment
made (forinstalhnent sale).
When and Where to Pay . to be filed on or before the due date;
The total amount payable shall be paid to the Authorized Agent .Bwk
(MB) oocre the .return is filed In places where there arc no MBs,
payments mall be madc directly to the Revenue Collection Officer or duly
Authorized City or Municipal Treasurer \Wo shall issue Revenue Official
Receipt (BIR Fonn No. 2524) therefor.
For payments in MB; the lower portion of the return must be
properly machine-validated and stamped by the Authorized Agent Bank to
serve as the receipt of payment. The machine validatio11 shall reflect the dale
of payment, amount paid ond transaction code, ond the stiinp marlr shall show
the name of the bank, branch code, teller's name and teller 's initial. The MB
shall also issue an Official Receipt or bank debit advice or i;redil document,
ooichcver is applicable, as add!tiooal proof of payment.
Tu Bue/Rate:
There mall be imposed a final tax rate of six pe~ ent (6%) based on
"41ichcver is higher of the following :
I) The fair market value as determined by the Commissioner
(zo~al value);
2) The fair market value as sho"11 in the Schedule of Values o _f
the Provincial and City Assessors; or
3) The _selling price of the property or fair market value of the
prope1fy received in an e,cchlllge Iran.action.
Capital gains presumed to have be.en realized from the sale or
disposition of the~ principal residence by nan1ral persons, ·the proceeds of
which is fully utilized in acquiring or conslructing a new principal residence
within cightcm (18) calendar months from the date of sale or disposition ,
shall be crnnpt from payment of tht capital gains tax : Provided, Thal ,the
historical cost or adjusted basis of the real property so ld or disposed shall be
carried over to the new principal residence built or acquired; Provided,
further, thal the Commissioner mall have bcm duly notified by the taxpayer
within thirty (30) days from the dale of &Ile or disposition through a •
prescribed rcwrn (Form 1706) end "Sworn Dcdarmion of lntcnr•, as
prcscnbed in Rcvenue Regulalions No. 13-99, of his intention to avail of the
tax exemption hmin mentioned: Provided, still further, That tho said tax
cxtmption can only be availed of once every ten (10) years: Provided,
fmally, thal if there is no full utilizmion of die proceeds of sale or
disposition, the portion of the gain presumed to have been realized from the
sale or dispositi~ shell b_e subjcct ,to cupital gains truc. For this purpose, the
. ~oss selling pnce or flllr man:tt value Ill the time of sale, whichever is
higher, shatt be mu~iplitd by afradion \Wich the unutil ized amount bears to
the gross selling price in order lo determine the tll'Cable portion ond the tllt
due .
I'. ~•
seller fails to utilize th: proceeds of sale or disposition in full or in
pwt_with~ the 18~ooth reglcmentary ptriod, his right of mmption from the
captal gams lax did not arise to the extent oflhe unutiliud am~uot, io
302
...
I
--------
--
---
•
which event, the tax• due thmon shall immediiicly become due . flld
demandivle on the 31 day afler the dill~ of the sale, exchange ordisposit ioa
of.principal residente. As such, he shall file his capital gains tax r~um
covering the sale , exch111gc or disposition of his principal midcnce and pay
the deficiency capital gains tax inclusi ve of the twenty five pemnt (25%)
surchir-ge for late payment of the_lax plus twenty percent (20%,) delinquency
{ntercst per annum incident to such late payment computed on the basis of
the basic ta~ assessed. TI1e interest _shall be imposed from the thirty-firs1
(31) day aflcr the date of sale of principal re·sidencc until the date of
payment, provided, thal the ditc of sale shall mean the date of not.rizalioo
Penaltles:
There shall be imposed and collected as part of
the ta'<;
I. A surcharge of twenty five percent (25%) for each of the following
violiiiorls:
a , Failure to file. any return mid pay the
amount of ta'< or installment we on
or before the due mies;
b'. Unless otherwise aud1orized by the Com:.iissioner, filing a return
with a person or office olherthan those with m1om it is requ ired to
be filed;
c. Failure to pay the full or part of the amount of la'< sho"n on the
reh1rn, or the full amount of lax du e for ooich no return is requ irrd
d Failure to pay the deficiency la'< within the time prescribed for its
payment in the Notice of Assessment.
2. A surcharge of fifly percent (50%) of the tax or of the deficitncy la'C, in
cast miy payment has been mad~ on the basis of such return before
discovery_of the falsity or fraud, for each of the following violations:
a \Villful neglect to file_the return i~ithin the period prescribed by the
Code or by rules and regulations; or
b. In case a false orfrwdulent return is willfully mode.
3. Interest at the rate of tweuty percent (2Wo) per onnum , or such
higher rate as may be prescribed by rules and regulations, on any unpaid
amount of ta'< , from the diie pfimibed for payment until the anouol is
fully paid
,4, Compromise penally.
Attachmenu Required:
I. Copy of the Notlllizcd Deed of Sale or Exchange;
2. 'Photocopy of the Transfec Cenifirac of Title (TCT), Origin al Certifical e
ofTitle (OCT), or Condom in ium Certificate of Title (CCTt
3. Certified True Copy of the lalcst ta, declaration on lot and/or
improvement;
4. If whal is sold is lot on!J, a certification from the Asses~r's Office 1h11
lh~re is no existing irnproveme.nl ori the properfy or that the improvcmenl
is in the n1111e of Mother;
5, Copy of BIR Ruling for tal e, emption confirmed by the BIR, if
awlicoble;
6. bu!y ~proved Tat Debit Memo, if ~plicablc;
7. For 1meoded return, proof oft a, payment and the previously filed rerurn.
8. "Sworn E>eclaration of Intent" as prescribed in Revenu e Regulation 13·
99, if the transaction is tll'<-e,xempt b C311Se the ta.~paycr falls undt!
box es 17 & 18. (See Forni 1706)
These requirements mu st be submitted upon field or ofli e audil of thr
lax case. before the TIL'C Clearan ce CertifireJe/Certificale Authori.ring
Registration can be released lo die tn.l payer.
Note; All Background Information mu t be propl'l'I lllled up. .
' Box No. I refers to the transnction period 1111d not the d:lle offilins
the return.
TIN • Tll~poyer Id nlifi Ilion Number.
.:n-
11,e last 3 digits oftbe 12-dig~ TIN ref'" to tilt b1'11ldl co<k
Onerous trw1sfer means trnnsfer for value.
If box No ·. 17 ood IS are appli~lt. nupayer mould file 111
.
orntnded return (Amended Fonu I 06) if the sales proctt
fully utilized to llajUU'f or con lrUd OC\ principal re . ;
However, if an Ass ~ Notice hllS already heed ~
ttrcpayer mou ld u Forni o. 0605.
wcs
 P~OBLEM SOLVING
p5.1 (DC',_MSME)
.The foll~wing data were provided b · M . '
. corporation, for 2021 taxable year: y akibaka Corporation, a domestic
Gross.sales - Philippines . ·
Cost o~ goods sold - Philippines ., P12,000,,000
Operating expenses _ Ph·,i· . . 3,600,000
·
t h . . . . 1ppmes
O er:income - Phillppir:,es. . : 2,200,000
. -" 500,000 .
RE=;QUIRED: ·
Determine the: income tax due assuming: _
1· The -company assets amounted to.PB0 000 ooo
2. .The compan.y assets .amounted to P1 so,000,000 _ . .·
3. · The company assets amo~nted to P125,00o',ooo including
land valued P40,000,000 ·

PS.2 · (DC, MSME) ,

The following data were provided by Matatag Corporation, a domestic
corpora'tion, for 2021 taxable year:
· Gross sales - Philippines · P12,000,000
Cost of go9ds sold - Philippines 5,600,000
Operating expenses - Philippines · 2,aoo,900

REQUIREP: ·
Determine the income,tax' due assuming: ;
. 1 The company assets amounted to PB0,000,000
2. The company assets amounted ·to P150,000,000 . .
, 3:.
The company assets amou_nted to P125,000,000 including
land val~ed P40,000,000

PS.3 (DC, RFC and NRFC) 'd ·d b Mine Corporation for 2021 taxable year:
Pr
The following _data were 0 .~I e_ y PB,000,090
Gross sales - Philippine? . 3,500,U00
Cost of goods sold - Phi~~pini~:s 2,200,000
Operating ~xpens~~ - ~ ~~PP , 750,000
Other income - Ph1lippin 4,600,000
Gross sales - USA SA 1_,430,000
Cost of goods sold - U A 1,250,000
rating expen?es ~ US 3,300,000
0 pe __Australia . 900,000
Gross sales Id _Australia aoo,ooo
50
Cost of goods es_ Australia
Operating expens

303
 REQUIRED: ·n .
Deterrn1·ne the income tax due assumi 9 · .
· · · rpbratIon
1. The corporation is a dome stI c co .
2·. The corporation .is a resident corpor~tion .
3. The corporation is a nonresident corporation

P5.4. (DC; RFC and NRFC) · · . .

The following data were taken from th_e fin~nc,al statements of Chen
Cor~orati~n for 2021 taxable year:
Phrlippines
P10,000,000
~
Gross sales P5,000,0oo
Sales returns 200,000
Cost of goods sold 3,500,000 2,2so,000
Operating expenses 2,800,000 1,1oo·,ooo
ln~erest incorne from .trade receivable 100,000 so,ooo
Interest income from BPI deposits-Phils. 100,000
Interest income from BPI deposits-USA · . 80,00Q
Interest income- FCDU 150,000
Income from money market placement 200,000 100,000
Dividend . income from domestic corporation 75,000
'Dividend income from ABC Corporation, a 45,000
res.ident dorporation (60% of the gross
income far the three-year period ending with
.the close of its taxable year pre·ceding the .
dividend declaration was derived from the
Philippines)
Dividend income from nonresident 30,000
corporation (the dividend received were not
reinvested in the Philippines)
Royalty inconie 50 ,000 25,000
Gain on sale of shares of stnck of domestic 120,000
corp: held _as capital asset thru local stock
.exchange; Selling Price-PS00,000 · ·
· Gain on sale of shares of stock -of domestic 150,000
corp. held as capital asset directly to a buyer
· Selling Price-P650,000 ·
Gain c;m sale of real property in the 5,000 ,000
· Philippines not used in business. Cost-P4M··
I

FMV-P8M

Case A:

!s
Assume the corporation a d~mest~c corporation, determine the following:
1. Tax Due on its ordinary income assuming th ran is
classified as MSME e corpora '

,304
 c~ .r: V-
C ,, C/,6e5
. - .

' 2. Tax Due on its ordinary in . . (!:Cr. CrtdUJIU

as MSME . come ass~r;ning. the cor . . .
3. Total final tax d . poration is not classified
. ue on pas . .
4. Total Capital gain t · Sive income
. s ax .due
case 8: '
Assume the corporation is a re st'd . ·
· (d"
following 1sregard disposition f ent fore1g
n corporation determine the
o real prop rt· . '
5· T ax Due on its ordin . e ,es m the Philippines)
. 6. Total final tax due . ary tn~ome
. 7. Total Capital . on passive income .
9~tns tax due .

case c;·
Assume the corporation is a resid tf . . -
following: , . .· en oreign corporation, determine the
8. Tax D~e on its ordinary incom.e
9-. Total final tax due on ·passive income
10. ·Total C_a pital gains ta>< due .

Case D:
, 11. Deter~ine the t~tal final withholding tax if the corporation is a
nonresident foreign -corporation. Assume ·further that:.
■ _Disregard disposition of real properties in the Philippines; and
·■ there is tax sparing -with regards to the dividend income received
from a D.C.

Case E: ·
12. Determine the total final withholding tax if the corporation is a
nonresident foreign corporation. Assume further that: .
■ Disregard the dispositipn of real properties in the Philippines;
and
■ There was NO tax sparing with regards to the dividend income
received
' ,
from a DC.

PS.S. d' 'd d . d.

Determine the correct tax treatment of the following 1v1 en s receive in
2021·.. . .
.
. d by a domestic corporation from af) other
1• D1v1dend incom(3 receive
dom~stic corporation. · .
. . . . domestic corporation (not classifi~d as
2. D1v1dend income r~ce1ved a ~Y oration. The ratio of the foreign
MSME) ~ram a res1d_ent foreign_c°.~in the Philippines over its to!a_l gross
?orporat,on's gross income denveas forty percent (40%). The d,v,~end
lr)Come for the past three rears iusiness operations of the domestic
received were reinvested in the
corporation in 2023.

305
 '
3. Dividend income received by a · ~ome~tic coTrpor~ti~n (classified a
MSME) from a residen~ foreig_n co_rporation._ . · .~e ratio -~f the foreig~
corporation's _gross income derived m the Philippines over 1~5 t~tal gross
· income for the- past three ye~rs was twenty ~ve p~rce~t (251/a ). The
domestic corporation hold~ . directly ten percent ( 1 ¼) in value of the
9
·outstanding shares of the foreign corporation.

4. Dividend income ·re~eived by a domesti~ corpo~ati~n !rom a r~sident

foreign corporation. The ratio of the fC?re1gn c?rporation s ,gross income
derived in the Philippines over its totql gross mco~e for the past three
I

years was thirty percent (30% ). The dividends re~e1ved were reinvested
in the business operations of the domestic corporation in 2022 and were
µ_sed to fund its working. capit~I -requirements. · The domestic corporation
holds directly twe,nty percent (20%) in value of the outstanding shares of
th~ foreign corporation and has held the shareholdings uninterruptedly for
the past three (3) years ai the time of the.divid~:md di$tribution.

5. Dividend income received by · a qomestic corporation from a resident

. foreign corporation. The ratio of the foreign corporation's gross income
· derived in the Philippines over its total gross income for the past three
years was 60%.

6. Dividend income received by a domestic corporation from a nonresident

foreign corporation. The dividends received were reinvested in the
, ·business operations of the domestic corporation in-2022 and were used to
fun9 its working capital requirements. The domestic corporation holds
directly thirty percent (30%) 'in value of the outstanding shares of the
· foreign corporation a·nd has held the shareholdings ·uninterruptedly for the
past two (2) ye~rs at the time of the dividend distribuUon.
I •

7 _. Dividend income received by a domestic corporation from a nonresident

1

, foreign corporation. Th e ·ratio of the foreign corporation 's gross income

derived in the Philippines over its . total gross income for the past three
years was roh y five percent (45%). The domesti·c corperation holds
directly twenty five perc~nt (25%) in value of the outstanding shares of t~e
foreign corporation and the dividend received were reinvested in its
business .operations after three (3) years.
I ,
·

8. Dividend income received by a resident foreign corporation from a

domestic corporation . •
9. Dividen? income r~ceived by a nonresident foreign corporation from a
d~~est1c _corporation ~assume there is_tax sparing}.
10. D1v1den? income r~ce,ved ~y a nonresident foreign corporation from a
domestic corporation (assume there is no tax -sparing).
p5.~-
Co/er
·. . .
~cist:6 ~ Cur,Mrt:du/M ·
_/ ,
o·isinQ Star, Inc., has earned the foll . . . .
f' o·,IVI.den d.mcome from. . owing in I
come during 2021 tax bl .
- M · - a e year.
asagana, a domestic .
Intel, a resident forei corporation
P300,000
IBM, a resident forei~~ ~orpora~ion 400,000
Canon, a resident foreig~rcporat,on. 200,000
M ·1crosoft , a non-resident
, orporat1on
. 200,000
corporation
. 50,0,000
. Interest income from:
· Curr_
e rit a_
c count, BDO
. Sayings deposit, BPI · . 600,000
500,000
Savings_deposit; ABN-AMRO bank, Canada ·
700,000
Interest ~ncome from government bonds
200,000
· ·lnter~ st -mcome from FCDU account in Metrobank 800,000 .
Royalty income from various domestic corpor~tiohs 100,000
Additional information: ·.
◊ Intel Corporation: The ratio of gross income derived from the·
· Philippines over the entire gross income. of Intel Corporation
· for the three-year .period ending with the close of its taxable
year preceding the dividend declaration, was at 50%.
◊ . IBM Corp0ration: The ratio of gross income derived from the
Philippi~es over the entire gross ·income of Acer Corporation
for the three-year period ending with the close of its taxab_le
year preceding the dividend deciaration, was at 25o/~:
◊ Canon Corporation: The ratio of gross income de~,v~d from
the - Philippines over the entir~ gros~ inc?me of Acer
Corporation for the three-year pe~1~d end,_ng with !he close of
_its taxable year preceding the d1v1dend declaration, w~s at
45%.

REQUIRED: ·
- on •passive in 2021 assymmg R',sing
· St ar
Determine the total final tax
Incorporated is a:
A. Domestic corporation. .
Additional informa~io~: Assume all the requirements for foreign-
■ IBM Corp~r~t,ond t be exempt from tax if received by a
sourced · d1v1den s O t .
domestic corpora~io.~ wRe~e. mge ·star owns 10% of Canon
c porat,on . ,sin
■ Ca~on °~ t t nding shares of stock.
Corporation s ou s .8 .
■ Microsoft Corporation. . d ere NOT USED by Rising s_tar
The dividends rece1v.e w capital requirements, capital
o to fund the working

307
 c;rer ceras~ - u'J°rcu~
expenditures, dividend payments, investment in d
subsidiaries, ·and infrastructure projects.. orne~tic
l

B. Resident foreign corporation

C. Nonresident foreign corporation
Additiona1 information: .
0 The country· in which Microsoft Corporation is don,·1 .
11
does not impose any incom_ e tax on dividends rec ~ ed
from a domestic .c~rporation (tax sparing). eived
• • I

D. Nonresident foreign corporation · .

Additionalinformation: Assume there is no tax sparing.

PS.7. (Qu~rterly Tax Returns) . · _

Selected cu.mulative balances were taken from the . records of a domestic
· corporation in 202'1:
. '
gg
'

91 · 91 SM
Gross profit .from sales P1 ,600,000 P3,200,000 ·, P4,800,000 P6,200,ooo·
Capital gain-direct sale to 100,000 100,000 100,000 200,000
buyer of shares of domestic
-corporation .
Dividend from domestic 50,000 -so,000 100,000 100,000
· corporation
Interest-Phil•. Bank depo_sif · · 10,000 20,000 30,000 40,000
Business expe.nses 1,200,000 . 2,400,000 3,400,000 4,200,000
Income tax--withheld 30,000 70,000 130,000 230,000

. Additio·n al Data: __
◊ The corporation started its operations in 201 B.
◊ The company's assets never exceeqed P100,000,000 and its net
taxable income for the previous taxable years were not higher than
P5M. ·

Required: Determine the followi~g

1. ·The income tax ·due at the end of the first quarter
2. The income tax due at the .end of the second quarter
3. The income tax due at the end of the third quarter·
4. The income tax due (refundable) at the end of the year

PS.8. .. . · . • ns
ABC Company (domestrc corporation) had the following data on computatio
of regular corporate income tax and minimum corporate income tax: 8
Year 4 Year 5 Year 6 Year 7 ~O
MCIT 100,000 60,000 50,000 40,000 20 ' oo
0
RCIT 30,000 70,000 60,000' 30,000 go,
Required: How much is the income tax due for years 4,5,6,7 and 8?

308
 c~uy-ter Ec:;ercuu
·.· -CorµJraiuHU
p5.9- , . /
A BC Corporation's RCIT, MCIT · ·
. ( ) , excess MCIT d .
from prior year s were provided as follows: an . Excess withholding taxes

2021
, Quarter RCIT 2020
M.CIT Taxes Excess Excess
1st
P300,000 · 240,000 Withhheld MCIT Withholding
2nd . 360,006_· 750,000 60,000 90,000 30,000
3rd 750,000 · 90,000
4th
300,000 120,000
600,000 300,000 105,000
)

Determine the following:

1. The income ta~ payable for the first quarter
_2. Th~ ~n~~me tax payable for the second quarter
3. The income tax payable for the third quarter
4. !he.·i nco~e tax payable for the fourth quarter (annual)

PS.10. (Taxable Joint Venture)

ABC .Company and - DEF Company formed a ta)_<able joint · venture. They
agreed to share _profit or loss in the ratio of 70% and 30%, respectively. The .
results ·of operations in 2021 were provided below:
J • Joint Venture ABC Co. DEF Co.
· / Gross· income PS0,000,000 30,000,000. 20,000,000
Business expenses 30,009,000 20,000,000 15,500,000

REQUIRED: Determine.the following:

1. -Taxable incom~·of the joint venture
2 . . ·I ncome ·t ax payabl.e of the joint venture
3. ·Taxable income of ABC_Company
4. Income tax payable of ABC Company .
5. ·Taxable inco'me DEF 'Company · · a1·,t·1ed as MSM
. E
bl as suming the company 1s qu .
6. Income tax paya e .· . .

PS.11. (Tax Exempt Joint Venture) n formed a non-taxable joint venture.

Alpha Company and Omega Com pa y The results of operations in ·2021
They ag·reed to share profit or loss equa II yr
Were provided below: Alpha Co. Omega Co.
Joint Venture 20,000,000 8,000,000
Gross income. P40,000,000 0,000,000 2,500,000
30,000,000 1
Business expenses

309
 )

· REQUIRED: Determine th~-following: 1

· 1. Taxable income ·o f the joint" venture

2. · Income tax payable of th~ joint venture .
3. · Taxable .incom~ ot'f\lpha Com~ar:1Y
4. Income tax payable of Alpha Company
'S, Taxable_income Omega Company ~
6. .Income tax payable bf Orne.ga Company

. Ps:1i , , . .
Hananiah Corp·oration provided the followhig data for calendar year ending
Qecember 31, 2021: ($.1-~5) · · . .
Philippines Ab~_o ad
Gross Income P6,000,000 $50,000
Deductions .P4,000,000 .·. . $20,000

Determine the following: ·

1. Income.tax due assuming the company is a d~m~stic corporation with
company assets amounting to more than P1 OOM.
2.' Income t_ax due assuming the company is a resident corporation
3. lnqome tax due assuming the company is a nonresident corporation
4. Income tax due assuming the ·company is an international carrier
5. Income ~ax due as~uming :the company ·i.s an international carrier
subject to a pref~,rential income tax r~te of 1.5% based on a tax
treaty. · .
6. Income tax ·due assu~ing the comp~ny is a a non-resident
cinem~tographic film owner/lessor
7; lncof"De tax due assuming the company is a non~resident lessor of
vessel
8. fncome tax due assuming the qompany is a non-resident lessor of
. aircrafts, machineries and equipment ·
·is
9. Income tax due assuming the company a· non-profit hospital
10. Income tax due assuming the company is a GOCC
1·1. Income tax due assuming .the company is a non-stock non-profit
educational institution·which uses all its revenues or income for
e.~ucation~I and charitable purposes .

PS ..13 ..
Pacific Airlines, an international air carrier showed the following gross
receipts: ' ·
Point of Origin Destination Gross receipts
Philippines U.S.A. 8,000,000
L).S.A. R.ussia 4,000.,000

310
 .· C~er ~a5es - CorµrdufM
oetermine the following under eac . · .. _J ·
1. Income tax payable h mdepende_nt assumption: .
2. -Income ~ax payable ass .
a tax treaty subjecting inuttning .th e Philip.pines and u s A t .
·I t d ernat1onal . · • en ered into
3. .ncome ax ue assuming PhT 11
. carn~rs to ·1% income tax rate
,.ncome tax PPtne ·earners in USA are e tf·
r . . .. - xemp rom
1

p5.14. (Non-profit Proprietary Edu . · · ·

Taxpayer is a private non-profited cat,?nal Institution) ·
government. Determine whether t~c~tional institution recognized by the
unrelated income. · ·' · e income des·cribed below is a related or

Income.
Related Unrelated
1. Tuition fees
2. Miscellan~ ous school fees
3. Income of.bookstore .
4. · tncom~ of school canteen
' . l

5. . Income of hospital .being used as a

training-ground for medical students
6'. Rental income for s·c hool facilities

P5.15. (Non-profit Proprietary Educational Institution) .· .

Pioneer College, a private educational institution has presented the following
data for the 2022 taxable year: -
Gross income, related activities P5,000,000
Gross income, unrelated activities (except rental income) 5,000,000
Rental' income from commercial spaces (gross of 5% WT) 2,000,000
Expenses, related ·activities 2,000 ,000
Expense.s,· unrelated activities 3,000,.000
Dividend income from a domestic corporation 100,000
Quarterly income tax paid for the first 3 quarters . 500 ,000
. REQUIR.E D: 'Determine the correct amount of mcome tax payable.

PS.16. (Non-Profit Proprietary Educational Institution with Capital

Expenditures) • , . .
A private educational institution recognize~ by the government submitted the
2022
following data for the fi,scal year ending Apnl 30, : P9,500,000
. Tuition fees 1,20Q,000
Miscellaneous fees . 80 ,000
CasM dividends from dome st ic corporation 350 ,000
Income from bookstore 70,000
Interests on peso bank deposit 180,000
Income of school canteen 6,400,000
Salary, allowances and bonus 2,600,000
Other operating expenses

311
 C~ qeras~ - C rf[J:~
·mprovement of school
Otber expenditures .for l
. facilities:
. - Construction of additional classrooms 1,300, 000
(depreciation·:. P 75,000) - .
Furniture and equipment of library 400,0 00
{depreciation; P50,000)

Question 1: How. much is the in~ome tax payable for the fiscal -Year
. , enaing April 30, 2022 as·summ~ the sch_ool opted to allocate
_depreciation as an expense ·tor capital expenditures incurred?

_-. Question 2: How·much is the income tax paya~le if the school opted
to deduct in full its capital expenditures during _the year?

PS.17. (Capital Gains Tax)

A domestic co.rporation provided the following data for 2q21:
Gross profit from sa!es · . · · P6,ooo,ooo
Dividend from domesti9 corporation . 50,000
Capital gain on land in the Philippines held for two 500,000
months (Sold at P1 .SM)
Capital gain on ·share of closely · held domestic 180,000
corporation held for 2 monlhs
Business expenses 3,400,000
Capital loss on sale of bonds of domestic .corporation 60,000
held for 6 months

: .Required: Determine the total capital gains.tax

PS.18. .(Capital Gains Tax)

The following tran~actions (sale of shares of stock) .were entered into by a
domestic corporation in 2021: ·

Thru a local stock exchange:

Sale #1: -Selling price of P300,000 and cost of P280 OOO·
Sale #2:· Selling price,of P600,000 and cost of P7oo:ooo'
- '

· o,rectly_to buyer&··
Sale #3: Selling price of P300,000 and cost of P110 1 ooo·1
~ale #4: Selling price of P250,0d0 and cost of P2QQ QQ0
Sale #5: Selling price of P320,000 and cost of p350:ooo.

Required: .
Determine the total capital gains tax.
 tRUE OR FALSE:
c~er E;l:,Pr
c- ¼es -
. '
Crai-UflU
1. The term corporation shall in · · · .
The term "domestic" Wh c1Ude
one Pe · ·
I 2· created or organized' un·d
. en applied .to a ~~on cor.porations.
· t' er the la rporat1on ·
3. A c_orpor~ ion •Which is ws of the PhT1 . , means corporc~tions
business in the Ph·ii· . not domestic m 'PPines. ·
· 1ppInes) ay be a ·d
bu~iness \n-the Philippine ) or nonresident cor r~s, ent (engaged in
4. ~esident foreign corpora~i~ns _ . poration (not engaged in
·income from _sources withi ar~ .~ubJect to income
;6· Asso~ati~ns and mu{Ua1 ~~~e ~o~PPi~es only. tax based on net
excl~ ~d in the definition of corpo
6. ·A mmImum corporate inco
f
an1es, for income tax purposes, are
ra ions. .
)mposed upon ~ny domestic ~~d t:' .(MCIT) base? on gross income is
taxable ,year ·immediately foU . sident corporation beginning on the 4th
corporation commenced its bus?~ing th e taxable year in which such
7. MCIT shall be imposed whene~neerss opherations. .
taxable income or ' when th ' $UC corporation has zero or negative
' e amount of MCIT ·
income tax due from such co t· is greater than normal
. . rpora I0n.
/8· The computation and the payment of MCIT shall l'k · 1 t th e time
·
-. of .filing the quarterly corporate income tax. I .ew1se app Ya

9. Minimun:, Gorpora_te income ~ax is not applicable to nonresident foreign

corporation, sp~cIal corporations and other types of corporations subject
to other tax regime. ·
10~Temporary labor dispute is a valid ground for the suspension of MCIT.
/1 1. Corporatiqns exempt from income tax are not subject to income tax on
incomes received which are incidental or necessarily connected with the
purposes for which they were organized and operating.
12. Corporations exempt from income tax are subject t~ income_ tax on
income of whatever kind and character from any of their properties (real
or pers~nal) ·or from anx other activity conducted for profit, regardless of
. _the disposition of such income. .· .
13'. Joint ventures., regardless of the purpose· by which they were created, are
.. II t from corporate income tax.
genera Y exemp t· · the net income ·of tax-exempt
/14. The share of a co-venturer corpora ion m t . tax
. . · rt' m is subject to corpora e income •
, Joint venture or con so iu • f on in the net income of a taxable joint
15. The share of a co-venturer c_orp~ra ~or orate income tax.
O
venture or consortium is subJe~t . t~eated as special corporations ?nly
16. "Nonresident owners of vesse s are to Filipino citizens or corporations
of the vesse Is
from charters or Iea~~~ st Authority. . .
. approved by the Maritime lndu ~2021, implanting the pro~1s1?ns of ~
,17. Under RR 5-2021 and R~C 62 rivate educational mst1tut1ons which
11534 (CREATE Act) prov1d~ that pt based on net income at the tax
. t to income ax
are non-profit ar'e subJeC to June 30, 2023.
1 2021
rate of 1% beginning July ,

313
 I
cft« q;erciu - crtlf:~
18. The CR.EA~E Act provides that up to £?ecembe~ 3.1, 2021, Regio
Operating Headquarters (ROHQs) are subJect to 1O1/o income tax O na1
net income derived from the .Philippines sourc~s. n their
19. International air carriers may be exempt from mco~e tax.
20. The 25% regular corporate income tax on d?'!1est'c and resident forei
corporations shall be applied upon the effect,vity of CREATJ= Act on Ag~
1'1, 2021. . . Pnl
21. The 25% final withholding tax (FWT) on the gross income of nonresid
foreign corporations derived from Philippin~ sources shall be appl~~
. beginning July 1, 2020. · · . . . ·
22. The 20% regular corporate income tax under the CREATE Act shall als0
apply to resident foreign corporations. . ·
23. Any p•rofit remitted by a branch office(of a foreign_ corporation) to its head
. office is subject to •.15% tax rate. ~he com~utat,on shall_ be based on
profits applied ~r earmarked for remItt~nce without deduction for the tax
component. .
24. Remittance of ·a branch of a .foreign corporation in the Philippines of
passive in·come earned in the Philippines to its head office, is exempt
from branch remittance tax. ·
· · . 25. Proprietary educational ·institutions that distribute dividends to its
shareholders are ·subject to c;me percent- ( 1% ) income tax from July 1,
2020 to June 30, 2023~ .

MULTIPLE 'CHOICE. Choose the letter of the correct answer.

. PRINCIPLES
1. The term "Corporation" shall •include: ·
' I. One person corporations
l .
II. Partnerships, no ·matter how ·created or organized
111. Joint stock companies
1y. Joint accounts (ceuntas en participacion)
V. Associations
VI. . Insurance companies
VIL Mutual fund .companies
VIII. Regional -headquarters of multinational corporations
a. ·I and II only . c. I, 11, 111, IV and V only
b. I, II and Ill only · d. All of the .above

2. "Jo!,:1t ~t?ck Compa~ies" are constituted when a group of individuals,

acting Jointly, establish and operate business enterprise
I. Under an artificial name.
11 . With an invested capital divided into transferable
shares. .
111. An elected board of directors and other corporate
characteristics. ' .
IV. Operating with ,formal government authprity.

3 14
 c£~1u.;c~--
·w_r-• ~~eo
. _:_ CratuJIU
a. I and II only
b. I, II and 111 only c. I, II, Ill and IV .
A "Joint Account" is co t' · d · None cit the cibove
3
· business of another by~~-d,tu~ed When_one int .
. I c ~n e~eSts himself in the ·
· · · ontnbut' . ·
II. Sharing · ing capital thereto
in the p f · ·
uphon. . ro its or losses·_ in the proportion agreed
III. ·. T ey a re not sub· , .
IV. It may be . . . Ject to any formalit
a. I and II only privately ,cof:ttracted orau/~r in writin . .
b_. I, II and Ill only . c. I, II, Ill and IV g
d · None of the above
DC, RFC, NRFG
4. Hananiati Corporation a c· . · · ~
Ph 1
T1ppmes
. ' orporatIon eng
and abroad has th f •
d ..
age in business in the-
1
. · Gross Income ~h~_lo~mg data for 2021:
. Exp~nses, Philipp:~~~i_nes P9,750,000
Gross Income Mai . 4,800,000
Expenses Ma'I _aySia 7,0oo,ooq
· ' aysia 5 300 000
lnte_rest on bank deposit '250:000

D~termine the i:7come tax due if th.e corporation is

Domestic
. · , Res . F ore,gn
· ··
Non-resident Foreign
a. - P1 ,662,500 P1 ,237,500 P1 ,237 ,500
b. P1 ,662,500 P1 ,237,500 P2,500,000
C. P1 ,330,000 P1 ,237;500 P2 437 500
d. P1 ,330,000 P99o,ooo p2:_500:ooo

Use the following data for the next three (3) questions:
Masigasig is a domestic corporation with total assets of P50,000,000. The
following information were taken from the company's 2021 financial
statements·: • · P3,000,000
Gross profit from sales 1,800,000
Business expen~es 100,000
Dividend from domestic corporation -50,000
Dividend income from a resident corporation 40,000
' Dividend ·income from a nonresident corporation . 500,000
Capit~I gain on sale of land in the Philippines
(SP-P2M; FMV-1.8M; Cost-~1.5~) . 200,000
Capital gain on sale of land in China
(SP-P1 .SM; FMV-1.8M; CoSt-P 1-?M) 120,000
Capital gain on shares of dome st'c corp.
50,000
(direct sale to buyer) d · stic corporation thru a
Gain on sale of shares of a
20
g~g
0 . cost P150,000)
local stock exchange (SP-P ' '

315
 Interest income from:
■ Notes receivable 20,000
-■ Bank deposits (peso accounts)_ 30,000
■ Ban~ deposits (fo~ei_gn currencies) 25,ooo
■ Treasury bills 10,000

Additional information: · .
■ · Assume the dividend from a resident corporation was der·
· .. · .IVed
from sources without the Ph1hppm~s.
- • The dividends · were not reinvested in th e business of the
corporation.

5. The 'income ·tax due for the year is:

a. P302,000 c. P426,000
b. P423i000 d. p453,000

6. The total capital gains tax for the yec;1r is: .

a .. P121,750 c. P127,000
b . . P37,000 . d. P138,000

74 • The total final taxes on ·passive income for the year is:
a. P13,000 c. P11,750
_b : P17,000 · d. P9,875

During 2021, a domestic corporation declared and paid dividends to its

shareholders as follows: ·
To Louie, a resident .citizen P100,000
To Floyd, a nonresident citizen. 100,000
To Zeus·, a resident alien 100,000
To JJ, a nonresident alien engaged in trade in the 100,000
Philippin~s
To Francis, a nonresident alien not engaged in trade ·in 100,000
the Philippines ,
To Chen, a domestic corporation 100,000
To a resident foreign corp_ oration 100,000
To a nonresident foreign corporation (with tax spa·ring) 100,000

How much final tax shaU be withheld by the ·corporation?

a. P80,000 . . c. P85,000
b. P90,000 d. P95,000

9. Interest income received from _a depository bank under expanded foreign

currency deposit system upon ·effectivity of the CREATE Act shall be
subject to: ·
DC RFC NRFQ
a. 1'5% 7.5% Exempt
b. 15% 15% Exempt

316
 C~erE · ·•
c.
_; · r:,er~u - CratllH!.S
. 15%
.d. 15% Exempt Exempt
15% . 15%
o.
1 A depository bank Uhd~r Foreig C · . ·
following in·c ome from foreign c~rr urrency Deposit Sysfem has·the
- $1 =P45): ency transactions (Exchange Rate
From Nonresioents ·
From .residents . . , $5,000
From Philippine National 8 -· k $3,000
H . h . an . $2,000
ow muc . is .the final withholding
income?, tax applicabl~ on the above
a. P22,500
,_ . b. P13,500 c: P9,000 .
d. P45,000

a
. 11 . Bank of .M anila, domestic corporation with total assets of P12~ 000 000
- ·excluding the land used_ in_ business, has the following data in 2021: ,
From ~egular Banking Operations:
Interest Income from loans P100,000,000 .
Interest Income from peso deposit with Bank of 10,000,000
Philippine Islands
Dividend Income from various domestic corporations · 15,000,0QO

From Foreign Currency Deposit Unit: ·($1 =P40)

Interest Income from loans to residents $500,000'
Interest Income from loans to nonresidents $125,000

· · Additiona'/ Information: The bank has total operating e~penses of

P-120,000,000. How much is the bank's regular corporate 1r,c~me tax
in 2021?
a. P6,000,000 c. P5,000,000
b. P4,000,000 d. P3,000,000

JOINT VENTURES f d a joint venture. They agreed to

ABC _Company a·nd ~EF Company ~:eand 30%, respectively. The joint
7
share profit or loss in ~he ratio of ot more tharl P100,000;00. The results
venture and co-venturers .a ssets are n f .
-
of operations in 2021 were p_
·ct
rov1. e
d as o 11 ows.
ABC co
·
DEF Co.
.
Joint Venture ·
. O 000 3,000,000 2,000,000
Gross Income Ps,oo 'ooo 2 ooo ooo 1,soo,000
OPEX 3,000, · ' '

. . . O
f the joint venture is .
12. The income tax payable c P300,000
a. P100,000 d. P400,000
b. P200,000 . ·

317
. I ,

13. The total inco~e tax expense of DEF 9°- is:·

. a.· P100,000 - . c. P300,000
. b. P200,000 d. P4 00,000 .

14. Assume the joint venture is-tax exempt, the total income tax expense of
,ABC Co. is: ·
a. P150,000 c. P480,000
b. P220,000 . d . . P720,000

SPECIAL CORPORATIONS. , . '. . · · . . -

1.5. An intern~tional air carrier doing business in the Philippines shall be
subject to: . · · · ·· · ·
.· a. Percentage tax of 3% und_ e r Section 1_ ~ 8 ?n gfoss receipts from
cargo operations origin_ating in the Ph1lIppmes only.
b. 2 ½% income tax on Gross Philippine bi.llings only.
c. s ·oth ·3% percent~ge tax under Sectio.n 118 on their gross .
receipts from cargo operations originating in the Philippines and 2
- ½% income tax on Gross Philippine billings.
d... Neith~r the ·3% Percentage tax under Section 118 on gross
· receipts ·from cargo operations originating in the Philippines nor
1

the 2 ½% income tax on Gross Philippine billings.

16·.· Which of the following is includeq in the-Gross Philippine Billings for

income tax purposes of international. carriers?
I. Tickets s'old outside the Philippines for passengers originating
from outside the Philippines. .
II. Tickets sold in the Philippines fo·r passengers 9riginating from the
Philippines but.are not actua·lly flown.
111. Passage 9ocuments sold outside the .Philippines for excess
baggage originating from the .Philippines.
IV. Passage documents sold in the Philippines for cargoes
originating from outside the Philippines. .
a. II only c. 11 ·and IV only
b. 11_1only d. I, 11, 111 and IV

17. Philippine Air, a domestic ·corporation· engaged in local and inter~ational

operations, has the f~llowing data for the current year: Gross income and
expenses from internationa.I operations, P10,000,000 and P4,000,000,
respectively. The· income tax due of-the corporation is
a. P1 ,200,000 · .· · . c~ P1 ,800,000
b. P1 ,500,000 . d. · P3,000,000

18. Assume the carrier is ah international .carrier (a resident foreign

corporation), the income tax due is
a. P150,000 . . . c. P1 ,800,000
b. P250,000 d. P3,0d0,000
19. Statement 1: lnt~rnational air carriers· and international shipping carriers
shall not be SU?Ject to 1.2% value ~dded tax but to 3% common carrier's
tax unde_r Section 118 of the Tax Code based on gross receipts derived
from their transport of passengers and goods from Philippines to other
countries. .
statement 2: In cases when the Gross Philippines Billings Tax of 2.5%
for international carriers is not applicable (i.e. tax exempt _based on .
1
reciprocity ,or treaty), the 3% common carrier's tax un_der Section 118 of
the Tax Code, as amended, s~all still apply. · •
A. · B. . C. D.
Statement ·1 True True
I
False False
Statement 2 True False True False

the following data for the next tw? (2) q~estions:

~~ific Airlli-ies, . an international air earner, showed the following gross
receipts for the current year:

Point of Origin Destination Gross receipts

U.S.A _ PB,000,000
Philippines
U.K 4 000,000
U.S.A. I

3,750,000
•

U.S.A ·Philippines
Philippine~ 2,100,000
U.K

. information.
Additional . . (4001 ) of the shipments f~om th. e_dPhilippines
m to the
10
F rt percent th United King O ·
• . Uon.,t~d States were later shipfp ~dmtotran~port of cargoes and goods. .
· · eswere ro
• 25% of all its revenu
' ?
. . . tax due for the year.
20 How much is the ''!come . c. P170,000
. a. P127 ,500 d. P200,000
. b. P150,000 .fi. Airlines for the year? .
ense of Paci ic
21 How much is the_total tax exp c. P230,000 .
. . a P187 ,500 · d. P260,000 .
b~ P210,000 . t· nal corporation remitted the
. of a multma ,o da.
a branch offi~e ad office in C~na . 00 000
22. During th~ year, /revenues to its heestic corporationsk P~20o,ooo
following '~~omed ·ncome from dom ments in the ban s,
• O1v1den I . money place
• Interest~ from e p300.o_oo P2 000,000
• Royalty incorn , o erat1ons, . '.
Net income fr_orn . ~p·ttance tax ,s. P375,000
•
The correct bran
. ch rem1 c.
d.. P450,0
oo
a PO
b~ p 30 o,ooo

319
 23. A branch, subsidiary or affiliate of a _foreign ba~_ki~g corporation Which.
duly authorized by -the Ban~ko Sentr~~ n~ Pi_hpinas (BSP) to tr~nsa'S
offshore banking. business tn the Philippines in accordance With ct
provisions of P.O. No. 1034 as implemented by CB (now BSP) Circ~~e
No. 1389, as amended. r
a. Offshore banking ·unit
b. Multinational company ·
c. Petroleum Service Contractor and Subcontractor
d. None of the cho_i~es

24. Prior to the effectivity of the CREATE Act, Off~hore Banking Units (OBUs)
are tax exempt on in_come derived from ·
I. . Foreign currency transactions with local commercial banks .
.IL Foreign currency transactions with branches of foreign banks
authorized by BSP. ·
Ill. / Interest fncome derived from forei_gn currency loans granted to
residents.
a. I only c. I and II only
b. II only d. II and Ill only

25. Which of the following incomes derived by Offshor~ Banking Units

· (OBUs) shall be subject to twenty five percent (25%) regular corporate
income tax upon effectivity of t~e CR~ATE Act?
I. Foreign currency transactions with local ·commercial banks.
11. Foreign currency transactions with branches of foreign banks
authorized by BSP. ,
111. Interest income derived from foreign currency loans granted to
residents. ·
·a. I-only · c. I and II only
b. II .only · d. All of the above
• I

26. Which of the following income is not from a related trade, business or
. activity of a non-profit proprietary educational institution?
a. Income from ·th,e _ hospital where medical graduates are trained for
residency ·
·b. Income from the canteen situated wfthin the school campus
c. Income from bookstore situated Within the school campus
d. Rental income

27. fl:- domesti_~ ~on-profit ~roprietary ~ducational institution improved its . 1

·11brary fac1htIes by adding a new wing to its old library building. The capita
outlay on library improvement, for income tax purposes, may be:
a. Deducted at full at the time of completion of the improvement.
b. Capitalized ·or expensed outright at t he option of the school.

320
 c~ ,. .
c.
. .
CapItahzed and de .
vyter ~cu/!6 -
.
Crdl/JM
. .
. prec1ated o .
,mCpr~v~ment. ver the estimated life of the
d. apItahzed or expe
Governrnent. . nsed outri ht
9 at the option of the
'
,_.,. Pioneer College, ·a private educati . . . '_
presented_ the following data in 20~~~1 institution which is non-profit, has
Gross income,
G . related act·IvI·t·tes ·
ross mcorne, unrelated activiti PS,000,000
(except rental income) es s ooo ooo
Rental.income ' ·'
Expens~s, related activities 2,000,000
E~~ense~,-unrelated activities . 2,000,000
D1v1dend income from a dome t· : 3,000,000
Q rt I . . s ic corporation 100,000
ua er y in~orne tax paid for the first 3 quarters
How much ts the income tax payable? 500,000
a. P.1, 150,000 P2
~~ P1:soo:~~~
100
b. P1 ,aso,ooo

29. ~d~an?e Learnin~ Institute is a non-profit prpprietary educational

• mstItutIon. It provided the following data in 2021:
Income from tuition fees . PS,000,000
School miscellaneous fees 1,500,000
Dividend income:
Domestic corporation 2,000,000
Nonresident Foreign corporation 2,000,000
Rent income (net of~% withholding tax) 475,000
Operating expenses 4,000,000

Additional information:
■ The school holds directly twenty percent (20%) in value of the
· outstanding shares of the foreign corporatio~ and has held the
shareholdings uninterruptedly for one-year penod .

How much is the income tax payable of the school?

PO c. PS0,000
~: P2S,OOO d. P1 OQ,000

30 A . · t f't ducational institution duly recognized by CHED ha

. pnva e non-pro I e d' March 30 2022·
the following data for the fiscal year en mg ' · p 5,000,000
Tultio~ and other fe~s . d bookstore 47,500
Rent tncorne from canteen an .
concessionaire, net of withhold1_n~ tax 500 000
-D. 'd . d f m domestic corporation 16 000
_IvI en ro . t of t x
Interest on bank deposit, ne 1,500,000
Operating expenses

321
 · th
0 urmg th . c·h·oo··1constructed a 2-storey school building .
e year, e s . d th' t• •· costi
P2 ·000 000 ·1t · the school's policy to .de ~ct _,s cos m full durin ng
' , . is . d ble is. .. 9 the
taxable year. The income tax due an paya . ·
· c. P147,500
a. P13,ooo d P150 oo·o
b. P15,000 · ' -
• . j I •

31. A private hospital organized for profit ~ith assets of not more than
' P100,000,000 had the following data in 20~1 -: ·
Gross receipts from ·patients · and laboratory P8,500,ooo
services
Rental income ~et o,f 5'3/o withholding tax 1,42s,ooo
Hospital ·operating expenses · . 8,200,000

How m·uch is the income tax due in -2021,?

a. P200,000 c. P285,000
b. P250,000 d. P360,000 .
. . .

32. Masigasig University, a proprietary educational institution which usually

distribute dividend to its shareholders had the following data in 2021:
Tuition fees · P4,800,000
Rental income (net) \ 4,940',000
Total school expenses · . '6,000,000
. Asse_ts 50, ooo,oqo

The income tax payable should be:

a. P540,000 . · · G- P1 ,000,000 ,
b. PBQ0,000 . - d; P1 ,200,000

MINIMUM CORPORATE INCQME TAX (MCIT)

33. The MCIT shall not-apply to which ·of the following corporations?
I. Propri~tary non-pr~fit educational institutions
II. International carriers
111. Regional operating headquarters ,
IV. Entities ,that are taxed under special income tax regi.me such as
PEZA registered entities enjoying five percent (5%) special
corporate income tax imposed under the Tax Code as amended
by CREATE Act.
a. I only . c .. I, II, Ill and IV
b. I and II only · d. none of the above

34. The minimum corporate income tax (MCIT) doe n t pply if:
a The corporation is exempt from income t x by virtu ft
holidays granted to it by appropriat Inv : tm nt Pro otion
Agencies (IPAs) such as PEZA and B01.
b. The taxpayer is a commercial partnership.

322
 a. I only
Co/er ~CUea - C7°'"atltfM.
b. II only · c. Both I and If .'
d. Neither I nor II
35, corporation,
The min~mu"!11f corporate income tax. (MCIT)
. does. not apply to a

a. lmposlti~n ~as suspended by the Secr~tary of Finance due to a

corporation s heavy losses arising from prolonged labor dispute;
b. Corporation is in its initial year of operation;
c. Corporation is exempt from income tax by·virtue of tax holidays
grahted to it by the Board of Investment;
d. All of the above

.
36. Substantial losses from a "prolonged labor dispute" means . . .
a. Losses arising from a strike staged by the employees ~h1ch
lasted for more than six .(6) rnonths within a taxable period.
b. The §trike resulted to temporary shutdoWn of business
operations.
~- Both "a" and "b"
d. None of the above

37 "Force majeure" includes .

. . a. Irresistible force such as Acts of God
b. Lighting, .earthquake, star~ and flood
C. Armed conflicts like war or insurgency
.
d. All of the above. .

.
38 Legitimate . reverses
"business . " ~hall include substantial losses sustained .
or embezzlement.
. a Due to fire, robbery, the determined by the Secretary of
b: For other economic reasons as
Finance. ·
Both of the above .
. ~: None of the above.

. ht (8) auestions: . d t
. . data fortarted
Use the fol/owmq the next e,q
operations :in year 201 O The following a a on
. bl~·
· A domestic corporatio~i14 to 2021 were made a;;:ess. 1 MCIT over RCIT
Its income taxes from RCIT MCIT 75,000
Year 2 5 000 100,000 0,000
2014 .' 150,000 2
2015 13o,oog ·190,000
2016 200 ,00 300,000
2017 100,000 50,000
2018 150,000 60,000
2019 40,000 32, 000
2020 8,000 50,000 49,000
2021 1,000

323
 DETERMINE THE FOLLOWING:
39. Income tax payable for the year 20 17 c. p ,
105 000
a. P300,.000
b. P200,000 d. PO

40. Income tax payable for the year 2018

a. Pso I O00 · c. (P1051000)
'b. P100,000 d. PO

41. Income tax payable for the year 2019

a. · P6p,ooo c. P105,000
b. P150,000 d. PO

42. Income tax payable for the-year 2020

a. PB,000 c. P32,000
b. P40,000 d. PO

43. Income tax payable for the year 2021

a. P150,000 · c. P118,000
· b. P50,000 d. PO

Tax Exempt Corporations·

44. Which of the following corporations is not subject to income tax?
a. Proprietary educational institutions duly registered with the
Department of education ·
·b. Regional or area headquarters (in·the Philippines) of a multi-national
corporation
c. Closely-held corporations
d:- Government-owned and·.controlle_p corporations (GOCCs)

45. Which bf the following is subject to income tax?

a. Social Security System (SSS)
b. Government Service Insurance System (GSIS)
c. Philippine Health Insurance Co~poration (PHIC)
d. None of the above

324