CHAPTER 12: INCOME TAX OF CORPORATIONS

In taxation, a corporation includes joint stock companies, joint accounts, associations, insurance
companies or partnerships no matter how they were created or organized.
Corporations - an artificial being created by operation of law, having the right of succession and
the powers, attributes and properties expressly authorized by law or incident to its existence.
Partnerships - consists of two or more persons who bind themselves to contribute money or industry to a
common fund, with the intention of dividing the profits among themselves.
Classification of Corporate Taxpayers
1. Domestic Corporation is one organized and existing under the Philippine Laws.
2. Foreign Corporation is a corporation organized and existing under the laws of foreign country irrespective of the
nationality of its stockholders.
a. Resident foreign corporation refers to foreign corporation that is engaged in business or trade in the
Philippines.
b. Non Resident foreign corporation does not engage in business or trade in the Philippines.
Tax Exempt Corporations

1. Government educational institutions

2. Non Stock and nonprofit educational institutions
3. Nonprofit corporations such as mutual savings, religious, scientific, athletic, charitable or
cultural, social welfare, cooperative, chamber of commerce, and cemeteries.
Income Taxes on Corporation
Normal Corporate Income Tax
Refers to the use of regular domestic income tax rates on the corporate taxable income which is
30 % starting
January 1, 2009.
Minimum Corporate Income Tax
Domestic and resident foreign corporation shall be taxed with 2 % based on the gross income
and not on taxable income after operating expenses if they have: been in the fourth year of
operation and incurred a net loss or zero taxable income, or a normal income tax is lesser than
minimum income tax.
Carry forward of excess of MCIT
Any excess of the minimum corporate income tax (MCIT) over the normal tax shall be carried
forward and credited against the normal tax immediately for 3 succeeding taxable years.