Classification of Corporations

(1) Domestic corporations.

(a) In general
(b) GOCCs EXC: SSS, GSIS, PHIC, LWDs
(c) Taxable partnerships
(d) Proprietary educational institutions/Non-profit hospitals;
(e) FCDUs of domestic banks
(f) Service contractors/subcontractors engaged in petroleum operations
(g) Ecozone enterprises
(h) Exempt corporations

(2) Resident Foreign corporations.

(a) In general
(b) Resident international carriers
(c) OBUs
(d) ROHQs/RHQs of MNCs
(e) Service contractors/subcontractors engaged in petroleum operations
(f) Ecozone enterprises

(3) Non-resident foreign corporation

(a) In general
(b) Non-resident owners/lessors of vessels chartered by Philippine national;
(c) Non-resident owners/lessors of aircraft, machineries, and other equipment;
(d) Non-resident cinematographic film owner, lessor or distributor;

(4) Exempt Corporations

Types of Income Subject to Tax

(a) Ordinary Income/Net Income- refer to “Ordinary Income” table
(b) Passive Income- refer to “Passive Income” and “Intercorporate Dividend” tables
(c) “Capital Gains”
Ordinary Income
Corporate Source of Taxable Tax Base Tax Rates
Taxpayer Income
1. Domestic Within and without Net Income 30%
the Philippines
2. RFC Within the Philippines Net Income 30%
only
3. NRFC Within the Philippines Gross Income Final withholding tax
only enumerated by law of 30%

PASSIVE INCOME
Passive Income DOMESTIC and RFC NRFC
Interest on currency bank 20% 30%
deposit
Yield or any other monetary
benefit from:
(1) Deposit substitutes 20% 30%
 (2) Trust funds, and 20% 30%
similar arrangements
Royalties 20% 30%
Interest from a depositary 7.5% (RFC) Exempt
bank under the expanded 15% (DC)
foreign currency deposit
system
Intercorporate Dividend
Payor Recipient Tax
1. Domestic Corporation Domestic Corporation Not taxable
2. Domestic Corporation RFC Not taxable
3. Domestic Corporation NRFC 15% final WT

Capital Gains Tax on Capital Gains

1. Sale, exchange, or other disposition of domestic shares of stock:
(a) Not traded at the stock exchange:

By Domestic Corporation:
Net capital gain 15%

By Foreign Corporation:
Net gain not over ₱100,000 5%
Amount if excess of ₱100,000 10%

(b) Shares listed and traded at the stock exchange:

6/10 of 1% based on the gross selling price.

Notes:
(1) Final tax on capital gains on the sale of shares of stock applies to all corporate
taxpayers.
(2) The exceptions for individual taxpayers also apply for corporate taxpayers.

2. Sale of Real Property Classified as Capital Asset-

(a) Transaction subject – the sale, exchange, or other disposition of lands and buildings
which are not actually used in the business of the corporation and treated as “capital
assets”.

(b) Tax rate and base –

(1) Seller is domestic corporation – Final tax of 6% based on the gross selling
price or FMV, whichever is higher. The FMV is the higher between the
Commissioner’s value and the Assessor’s value.
(2) Seller is RFC – Gain on sale is returnable, and subject to normal tax rate
(30%).
(3) Seller is NRFC – Final tax of 30% of the capital gain realized on the sale.

(c) Exemptions from the CGT –

 (1) Sale of raw lands to be used for “socialized housing” projects, or sold under the
Community Mortgage Program under R.A. No. 7279 (Urban Development and
Housing Act of 1992).
(2) Land transfers under the Comprehensive Agrarian Reform Law of 1998.

DOMESTIC COMPANIES SUBJECT TO SPECIAL TAX RATES

(1) Proprietary educational institutions
Proprietary educational institutions are subject to a special tax rate of 10% of taxable
net income within and without the Philippines

(2) Hospitals which are non-profit

Hospitals which are non-profit are also subject to a special tax rate of 10% of taxable
net income within and without the Philippines

Provided – the gross income from unrelated trade, business, or other activity does not
exceed 50% of the total gross income derived from all sources. However, if it exceeds
50% the normal tax rate will be applied on the entire taxable income (i.e. 30%)

(3) Final tax on income of a Foreign Currency Deposit Unit (“FCDU”) of a local
bank under the Expanded Foreign Currency Deposit System (“FCDS”)
a) Income from foreign currency loans granted to Philippine Residents, (other than
OBUs or other depository banks) – 10% final tax
b) Interest income from foreign currency interbank deposits – 10% final tax
c) Income from foreign currency transactions with non-residents, OBUs local
commercial banks, and branches of foreign banks authorized to transact
business under the FCDS – Exempt

Note: “Income from foreign currency transactions” shall include interest income from
lending operations, including bank charges, commissions, service feeds, and net foreign
exchange transaction gains.