INCOME TAXATION OF CORPORATIONS

CORPORATIONS
RESIDENT NON-RESIDENT
DOMESTIC FOREIGN FOREIGN
Definition Sec 22 (B) & (C ) Sec 22 (H) Sec 22 (I)
Applies to corporation Applies to foreign
Applies to a foregin
created or organized corporation engaged
corporation not
in the Philippines or in trade or business
engaged in trade or
under its laws within the Philippines
business within the
Philippines
Tax Code Reference Sec 27 Sec 28 (A) Sec 28 (B)
Tax Base taxable income from taxable income from gross income from
all sources within all sources within all sources within the
and without the the Philippines Philippines
Philippines

Tax Rates - In general 34% in 1998 34% in 1998 34% in 1998

33% in 1999 33% in 1999 33% in 1999
32% in 2000-2005 32% in 2000-2005 32% in 2000-2005
35 % in 2006-2008 35 % in 2006-2008 35 % in 2006-2008
30% in 2009 & 30% in 2009 & 30% in 2009 &
thereafter thereafter thereafter
Tax Rates - on Passive Income (Subject to Final Tax [FT])
Interest on any currency bank deposit and 20% FT 20% FT 34% in 1998
yield or any other monetary benefit from 33% in 1999
deposit substitutes and from trust funds 32% in 2000-2005
and similar arragements 35 % in 2006-2008
30% in 2009 &
thereafter
Interest on foreign currency deposit system 7.5% FT 7.5% FT EXEMPT

Interest Income on Foreign Loans N/A N/A 20% FT

contracted on or after August 1, 1986
Interest Income received by a FCDU
Income derived by a depository bank under EXEMPT [RA No. EXEMPT [RA No. N/A
the expanded foreign currency deposit 9294] 9294]
system from foreign currency transactions
with nonresidents, offshore banking
units in the Philippines, local
commercial banks including branches
of foreign banks that may be authorized
by the Bangko Sentral ng Pilipinas (BSP) to
transact business with foreign currency
deposit system
 INCOME TAXATION OF CORPORATIONS

CORPORATIONS
RESIDENT NON-RESIDENT
DOMESTIC FOREIGN FOREIGN
Interest income from foreign currency loans 10% FT 10% FT N/A
granted by such depository banks under
said expanded system to residents other
than offshore banking units in the
Philippines or other depository banks
under the expanded system

Interest Income received by an OBU

Income derived by a depository bank under N/A EXEMPT [RA No. N/A
the expanded foreign currency deposit 9294]
system from foreign currency transactions
with nonresidents, offshore banking
units in the Philippines, local
commercial banks including branches
of foreign banks that may be authorized
by the Bangko Sentral ng Pilipinas (BSP) to
transact business with foreign currency
deposit system

Interest income from foreign currency loans N/A 10% FT N/A

granted to residents other than offshore
banking units or local commercial
banks , including local branches of
foreign banks that may be authorized
by BSP to transact with offshore
banking units

Royalties 20% FT 20% FT 34% in 1998

33% in 1999
32% in 2000-2005
35 % in 2006-2008
30% in 2009 &
thereafter
Dividends EXEMPT EXEMPT 15% FT (conditional)

Tax Rates - on capital gains

On shares of stock not traded (based on 5% / 10% FT 5% / 10% FT 5% / 10% FT
net capital gains)
On Land or Buildings (classified as capital 6% FT 34% in 1998 34% in 1998
assets) based on gross 33% in 1999 33% in 1999
selling price or FMV 32% in 2000-2005 32% in 2000-2005
whichever is higher 35 % in 2006-2008 35 % in 2006-2008
30% in 2009 & 30% in 2009 &
thereafter thereafter
Tax Rate - Minimum Corporate Income Tax 2% 2% N/A
(MCIT)
 INCOME TAXATION OF CORPORATIONS

CORPORATIONS
RESIDENT NON-RESIDENT
DOMESTIC FOREIGN FOREIGN
Tax Rate - Branch Profit Remittance Tax N/A 15% N/A
(BPRT)
Tax Rate - Improperly Accumulated 10% 10% N/A
Earnings Tax (Sec 29)
Atty. Marissa O. Cabreros (Ateneo School of Law)