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I. Pro-Forma Computation
For CORPORATIONS, including business partnerships, domestic corporations, resident foreign
corporations, joint ventures, and associations, except non-resident foreign corporations (which is taxable at
gross income):
Gross receipts/sales
Less: Cost of service/sales
Gross income from business or profession
Passive Incomes, not subjected to final tax
Capital Gains, not subjected to CGT
Total Gross Income
Less: Deductions for:
Itemized Deductions or OSD
Net Operating Loss Carry-Over (NOLCO)
Taxable Income
*NCLCO is not applicable since the holding period is also not applicable.
II. Overview
The term ‘corporation’ includes partnerships, no matter how created or organized, joint-stock companies,
joint accounts (cuentas en participacion), associations, or insurance companies, but does not include
general professional partnerships (GPPs) and joint venture or consortium formed for the purpose of
undertaking construction porjects or engaging in petroleum operation, coal, geothermal and other energy
operations pursuant to an operating or consortium agreement under a service contract with the
III. Classes of Corporate Taxpayer
1. Domestic corporations are taxed on worldwide income, at 30% of the taxable income.
2. Resident foreign corporations are taxed on incomes from the Philippines only, at 30% of the taxable income.
3. Non- Resident foreign corporations are taxed on incomes from the Philippines only, at 30% of the gross
a. GPPs are partnerships formed by persons for the sole purpose of exercising their common profession,
no part of the income of which is derived from engaging in any trade or business.
IV. Components of Gross Income
1. Business and/or Professional Income
2. Passive Income
3. Capital Gains

The components of gross income for individuals are also the same in the case of corporate taxpayers . (See
discussions on Gross Income for individuals, Lecture 2)

V. Deductions from Gross Income
1. Optional Standard Deduction
2. Itemized Deductions
(See discussions on Deductions and Dealing in Property.)
VI. Corporate Tax
1. Gross Income Tax (GIT)
It is an optional income tax given to corporate earners equivalent to 15% of its gross income instead of the
30% net income tax.
 Only domestic corporations and resident foreign corporations may avail such GIT.
 Requirements:

Resident foreign corporations engaged in business as “international carrier” subject to tax at 2 ½% of their Gross Philippine Billings. if the quarterly MCIT is higher than the quarterly normal income tax. h. and g. d. 2008 January 1. The election shall be irrevocable for three (3) consecutive year Recommendation from the Secretary of Finance Subject to approval of the Office of the President 2. e. 2005 to December 31. Resident foreign corporations engaged in business as regional area headquarters subject to tax at 10% of their taxable income. the tax due to be paid for such taxable quarter at the time of filing the quarterly corporate income tax return shall be the MCIT. b. A tax ratio of 20% of Gross National Products A ratio of 40% income tax collection of total tax revenues A VAT tax effort of 4% of GNP A 0. or b.Lecture 3: INCOME TAXATION – CORPORATION a. Has no taxable inocome. f. f. Has taxable income but the amount of MCIT is greater than the NCIT (30%) Excess MCIT can be carried forwards for 3 succeeding years and credited againts the normal corporate income tax only when the NCIT is greater than MCIT MCIT can be claimed as a credit against the MCIT itself or against any other losses The following are exempt from MCIT (these are special corporations): a. Firms that are taxed under a special income tax system   VII. e. shall likewise apply at the time of filing the quarterly corporate income tax. “Improperly accumulated earnings (IAE)” are the profits of a corporation that are permitted to accumulate instead of being distributed by a corporation to its . Improperly Accumulated Earnings Tax It is a tax imposed on improper accumulation of earnings. d. Domestic corporations engaged in business as depository banks under the expanded foreign currency deposit system on their income from foreign currency transactions which has been subjected to final tax at 10%. Resident foreign corporations engaged in busines as Offshore Banking Units (OBUs) on their income from foreign currency transactions which has been subjected to a final income tax at 10% of such income. 2009 and onwards Corporate Income Tax Rate 32% 35% 30% 3. Domestic corporations operating as proprietary (private) educational institutions subject to tax at 10% on their taxable income. Domestic corporations engaged in hospital operations which are nonprofit subject to tax at 10% on their taxable income. Domestic Corporations b. g. Resident foreign corporations    The 2% of gross income is imposed whenever a company: a. Minimum Corporate Income Tax (MCIT) The following are liable to MCIT beginning the 4th taxable year in which such corporation commenced its business operations: a. The computation and payment of MCIT.9% ratio of consolidated public sector financial position to GNP Available only to firms whose ratio of cost of sales to gross sales or receipts from all sources is 55%. 2005 November 1. Normal Corporate Income Tax (NCIT) Period January 1 to October 31. In the computation of the tax due for the taxable quarter. b. c. c.

by permitting earnings and profits to accumulate instead of being divided or distributed. 4. Earnings reserved for definite corporate expansion or projects as approved by the board. Earnings required by law or applicable regulations to be retained by the corporation. 2.A. 7916 and enterprises registered pursuant to the Bases. Taxable (business) partnerships (deemed to have actually or constructively received the taxable income under Sec. Domestic corporations ii. In case of subsidiaries of foreign corporations in the Philippines. 7227 Income Tax Return Filing and Payment of Income Tax Income Tax Return (BIR Form) Annual Income Tax Return – Corporate (BIR Form 1702) Deadline for Filing and Payment On or before the 15th day of the 4th month of the following the close of the taxable year . 3. Banks and other non-banks financial intermediaries c. plants or equipment acquisition as approved by the board. Earnings reserved for building. General professional partnerships f. 5. Enterprises duly registered with the Philippine Economic Zone Authority under R. computed as follows: Taxable Income for the Year xx Add: Income exempt from tax xx Income excluded from gross income xx Income subject to final tax. These are: i. 22001]: 1. VIII. inclusive of accumulation taken from other years. net xx NOLCO xx Less: Income tax paid for the taxable year (xx) Dividends actually or constructively paid/issued from the applicable year’s taxable income (xx) Amount reserved for the reasonable needs (xx) Tax Base for IAET xx Note: Earnings for the reasonable needs are enumerated as follows [Revenue Regulation No. Publicly-held corporations b.A. Conversion and Development Act of 1992 under R.  The rate of 10% of the Improperly Accumulated Taxable Income. Closely-held corporations  Exceptions: a.Lecture 3: INCOME TAXATION – CORPORATION shareholders for the purpose of avoiding the income tax with respect to its shareholders or the shareholders of another corporation. 73D) e. all undistributed earnings intended or reserved investments within the Philippines as can be proven by corporate records. Non-taxable joint ventures g. Allowance for the increase in the accumulation of earnings up to 100% of the paid-up capital of the corporation as of the balance sheet date. Insurance companies d.  Applicability: a. 6. Earnings reserved for compliance with any loan covenant or pre-existing obligation established under a legitimate business agreement. Shall apply to every corporation formed or availed for the purpose of avoiding the income tax with respect to its shareholders or shareholders of any other corporation.

.No deduction will also be allowed notwithstanding payments of withholding tax at the time of audit investigation or reinvestigation/reconsideration in cases where no withholding of tax was made in accordance with Sections 57 and 58 of the Code. Validity of Principal and Supplementary Receipts/Invoices  Revenue Regulations No. 2014 . Amount of donation or contribution –if cash b. This is because the condominium corporation furnishes its members and tenants with benefits. 2012 .This circular is issued to clarify the valuation of contributions or gifts actually paid or made in computing taxable income as part of the substantiation requirement under Revenue Regulations No. and  Amount of donation a. BIR Issuances and Court Decisions Related to Income Tax 1. 3. .Lecture 3: INCOME TAXATION – CORPORATION Annual Income Tax Return – Self-Employed Individual (BIR Form 1701) Quarterly Income Tax Return (BIR Form 1702Q) On or before the 15th day of the 4th month of the following the close of the taxable year Within 60 days after the end of each first 3 quarters of the taxable year IX. 2013 .2012 dated October 22. advantages. 12. .All ORs and Sales invoices shall be valid only until full usage of the approved serial numbers or five years from its issuance whichever comes first. Other assessments/charges .Amounts paid in as dues or fees by members or tenants of a condominium corporation form part of the gross income of such corporation subject to income tax. Association dues b. 65-2012 dated October 31. Membership Fees Received by Condominium Corporations  Revenue Memorandum Circular (RMC) No. the following constitute income tax payment or compensation which are subject to income tax: a. and privileges in return for such payments. Taxability of Associations Dues. 2013 4. Membership fees c. 2012 . . 18.All taxapyers are mandated by the BIR to make new sets of ORs and Sales invoices wuth special security marking features printed by BIR – Accredited printers only. 2.For tax purposes. Acquisition cost – if real or personal property Net book value of the property donated as reflected in the financial statements of the donor.The previous interpretation that the assessment dues are funds which are merely held in trust by a condominium corporation lacks legal basis and is hereby abandoned. 2322) of Allowable income tax deduction (on the part of the donor)  Actual receipt by the accredited NSNP/ NGO of the donation or contribution  Date of the receipt of donation. 13-98: Information Required in Certificate Donation (BIR Form No. Requirements for Deductibility of Certain Income Tax Payments  Revenue Regulation No. .2013 dated July 12.Requirements for deductibility: Any income payment which is otherwise deductible under the Code shall be allowed as a deduction from the payor’s gross income only if it is shown that the income tax required to be withheld has been paid to the Bureau in accordance with Sections 57 and 58 of the Code. 86-2014 dated December 5.This should be effective starting January 18. Valuation of Contributions or Gifts Actually Paid or Made in Computing Taxable Income  Revenue Memorandum Circular (RMC) No.

000 . as amended.Background: The provision in the NIRC of 1977 which granted income tax exemption to such recreational clubs were omitted in the current of tax exempt corporations under NIRC of 1997. Philippines P 1.000 Expenses. 2012 . A Corporation has the following data for the year 2011: Gross Income. the value of which should not exceed P2. Recreation and Other Non-Profit Purposes  Revenue Memorandum Circular (RMC) No.000 Gain.Lecture 3: INCOME TAXATION – CORPORATION Note: The same rule applies to homeowner’s association per RMC No. USA 500. and service fees are subject to income tax.000 Expenses. All related maintenance expenses on account of a non-depreciable vehicle for taxation purposes are also disallowed in its entirety.000. Japan 100.000 Other Income: Dividend from San Miguel Corp. as amended. 70.000 Royalties. USA 120. Unless the taxpayer’s mainline of business is transport operations or lease of transportation equipment and the vehicles purchased are used in the said operations. helicopters. .000 Expenses. (Published in October 17.000 Rent. Philippines 300. rental income.4 million b. Rules on Deductibility of Depreciation Expenses on Vehicles  Revenue Regulation No. 35 – 2012 dated August 3. 9-2013 dated January 9. sale of San Miguel Shares directly to buyer 150.000 Dividend from Ford Motors. and land vehicles which exceed the said threshold. 2 -2013 dated December 8. including but not limited to membership fees. USA 200. recreation and other non-profit purposes are subject to income tax under the Tax Code. 2012] - Exception: a. Philippines 50.Limitations on deductions: a.000 Other rent income within the Philippines 100. c.000 Gross Income.Clubs which are organized and operated exclusively for pleasure. STRAIGHT PROBLEMS: 1. 2012 . Only one (1) vehicle for land transportation is allowed for the use of an official or employee. No depreciation shall be allowed for yachts.000 Prize. This regulation shall take effect immediately.000 Gross Income. Japan 500.000 Interest from trade receivables 60.000 Royalties. HENCE. assessment dues. contest in Manila 200. the income of recreational clubs from whatever source. land in USA 250. Clarifying the Taxability of Clubs Organized and Operated Exclusively for Pleasure. USA 100. 2012) 6. airplanes and/or aircrafts. d. 2013 5. 12 – 2012 dated October 12. Loss to be incurred from sale of non-depreciable vehicle shall not be allowed as deduction from gross income [Revenue Memorandum Circular (RMC) No.

000 1.000.00 .00 50. it had a net income per books of P 500.000  USA Bank 100.500.000 Dividend received from a domestic corporation P 30.000. 2007 ____________________ c. 2007 and 2008. is a domestic corporation and has been in business for six our years.000. 2007 c.200. is a domestic corporation engaged in merchandising business. Refund of taxes (included as part of the net income above):  Allowed by the BIR as deduction 25. 2008 ____________________ ____________________ ____________________ d. but claims itemized deduction for the year 2009 and 2010.00 3.000.000 Assuming the company elects to claim OSD on the year 2006. ABC.500.000 2008 P 6.000 2.000 b. 2010 ___________________ ___________________ 2010 P 9.000 1.000.900. JAMBY Co.000 3. the following: a.000 2.000.000. Bank Interest income:  Philippine National Bank 80.00 d. JAMBY has the following cumulative information: Q1 Gross Sales Sales Returns Cost of Goods Sold Capital Gain on Sale directly to buyer of shares of domestic corporation Q2 Q3 Q4 1. compute the income tax due for: a.560.100.000.000 2.000 Compute the income tax due for: a.00 Dividend received from a foreign corporation 20.00 100.000  Disallowed by the BIR as deduction 30.000 e.00 935. among others. Portion of P150.000. For the calendar year 2014. The total tax liability as a non-resident corporation is ___________________ 2.000 g. 2008 ____________________ 2007 P 5. 2009 e.000. 2006 ____________________ b.00 1.000. 2006 b.00 2. For the year 2013. after considering.00 50. 2010 ___________________ ___________________ 4.000 1.000.00 4.00 50. 2009 e.000 c.00 70.00 115.Lecture 3: INCOME TAXATION – CORPORATION a.000 advance rental already earned 100.00 650.820. The total tax liability as a domestic corporation is ___________________ b.000 4. Provision for doubtful accounts 10.550. Recovery of receivables previously written off included as part of net income above:  Allowed by the BIR as deduction 10.000 2009 P 7.000. A domestic corporation organized in 1998.000  Disallowed by the BIR as deduction 15.000. provided the following information: Net Sales Cost of Sales Business Expenses 2006 P 4.00 890. 5.000.500.000 d.000 The taxable net income is ______________________ The total tax liability is ______________________ 3.300. The total tax liability as a resident corporation is ___________________ c.000 f.

765.00 1. This amount was carried over and claimed as deduction from gross income in 2012. Claudia and Amor.Lecture 3: INCOME TAXATION – CORPORATION Dividend from a Domestic Corporation Interest in Philippine Currency Bank Deposit Allowable Business Expense Income tax paid to paid a. b.000. Mena.000 Expenses on her practice of profession 150. d. ___________________.000. Robyn Ms. and Ms. ___________________.000.000. The income tax still due or refundable of Ms.00 not listed and traded: Selling Price Cost Dividends from Victory Corporation. RM.000. The income tax still due or refundable of Ms. the income tax due in 2012 is __________________. c. the corporation suffered an operating loss of P130.000.00 118. In 2013. Claudia. 6. If the corporation opted to claim OSD.000.000. _________________ 7. The income tax due in 2012 is __________________. the sisters had given you the following data: Gross Income from property P500.700.000.00 5.000.00 In 2011.000 P200. domestic Dividends paid during the year Reserved for Building Acquisition 1. was in charge of the property.00 5.000. Robyn.00 20.000 P600. sisters.00 300.00 20. net of tax Sale of shares of stocks. The data in their operation for 2013 are as follow: RM Partnership Ms. Robyn. participatin equally in the partnership net income or loss. If the corporation has improperly accumulated its earnings and considering that itemized deduction is claimed by the corporation.00 120. with Ms.000 .200.00 10. net of CWT P522. ___________________.00 15. Mena. a general professional partnership.00 15.000 90. They have their own separate practice of their profession and their interest on the property is only to preserve the property and collect the income from the property. Mena Gross Income P700.000 0 Income tax was withheld by the partnership at 10%.650.000.000. 000. the IAET payable is __________________.500. The records of a closely held corporation show the following data for 2012: Gross Income Business Expenses Gain on Sale of Business Asset Interest on deposits with Metrobank. inherited an income producing property from their father.000.00 10.00 35.000. b.00 150.00 115.000. 10.000 Expenses related to the property 100. c.000 Expenses related to the income 500. a. a.00 60. with seven dependent children.776. _________________ b.00 The income tax still due at the end of the first quarter The income tax still due at the end of the second quarter The income tax still due at the end of the third quarter The income tax still due (refundable) at the end of the year ___________________.00 48. the elder sister. 5.000 500.00 2.00 600.000.00 20.00 600.909.000.00 1.000.000 Drawings by the partner from 2013 income 24.000 Withholding income tax by the co-ownership on income distributed to sisters 10% Separate data for Amor: Gross income from profession.

Lecture 3: INCOME TAXATION – CORPORATION a. The income tax of Amor. b. ________________ ________________ . The income tax of the co-ownership.