INCOME

TAXATION
UNDER THE TRAIN
LAW

Jesrelle Vhon G. Habana, CPA, MBA

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CHAPTER 2
Tax on Domestic Corporations

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DOMESTIC CORPORATIONS
- are entities organized and constituted
under the Corporation Code of the
Philippines. But for income tax purposes.
It includes partnerships, no matter how created or
organized, joint stock companies, joint accounts (cuentas en
participacion), associations, or insurance companies.

The term "corporation" does not include:

(a) A general professional partnership;
(b) A joint venture or consortium formed for
the purpose of undertaking construction
projects; and
(c) A joint venture or consortium for engaging
in petroleum, coal, geothermal and other
energy operations pursuant to an operating or
consortium agreement under a service contract
with the Government. 3
 WHAT IS A GENERAL
PROFESSIONAL PARTNERSHIP?
A general professional partnership is a
partnership formed by per sons for the sole
purpose of exercising their common
profession, no part of the net income of which
is derived from engaging in any trade or
business.

NOTE:
A general professional
partnership is NOT a
taxable entity.
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DOMESTIC CORPORATIONS ARE
SUBJECT TO ANY OR SOME OF:

(a) Capital gain tax;

(b) Final tax on passive income;
(e) Normal tax (acronym of NT or RCIT);
(d) Minimum corporate income tax
(acronym of MCIT); and
(e) Improperly accumulated earnings tax
(acronym of (IAET).
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 (a) On sale of shares of stock of a domestic corporation not listed and
traded thru a local stock exchange, held as capital assets
On the capital gain Final tax of 15%

(b) On sale of land and/or building held as capital asset (regardless of

location of the asset)
On the gross selling price or current fair market value prevailing at the Final tax of 6%
time of sale, whichever is higher

INCOME TAX (c) From sources within the Philippines, on passive income of:

ON DOMESTIC deposit
Interest under the expanded foreign currency
system Final tax of 7%

CORPORATIONS (d) From sources within the Philippines, on passive income of:
Interest on any currency bank deposit, yield or
other monetary benefit from deposit substitute, Final tax of 20%
trust fund and similar arrangement, royalty

(e) Dividend from domestic corporation (intercompany dividend) Exempt

(f) Taxable income (NET) from all sources within and outside the
Philippines-
NORMAL TAX (NT, or RCIT) 25%

But, beginning with the fourth year from start of MCIT Rate: 2% but
operations, whichever is higher of:
NORMAL TAX on taxable income (net) and 1% From July 1,
MINIMUM CORPORATE INCOME TAX (MCIT), on 2020 to June 30,
MCIT gross Income 2023 and 2% after 6
June 30, 2023
THANK
YOU!