CORPORATIONS

CORPORATION
- an artificial being created by operation of law, having the right of
succession and the powers, attributes, and properties expressly
authorized by law or incidental to its existence. (RA 11232/ Revised
Corporation Code)
CORPORATION
-for taxation purposes, it is defined under Section 22 of the Tax Code/
RA 8424 as amended under RA 11534 or the Corporate Recovery and
Tax Incentives for Enterprises Act (CREATE) and RR 5-2021 as
follows:
1. One Person Corporations;
2. Partnerships, no matter how created or organized;
3. Joint stock companies;
4. Joint accounts (cuentas en participacion);
5. Associations; or
6. Insurance Companies
ONE-PERSON CORPORATION
- a corporation with a single stockholder; Provided, That only a natural
person, trust, or an estate may form a one person corporation.
Exclusions:
1. General Professional Partnerships; and
2. A joint venture or consortium formed for the purpose of
undertaking:
a. Construction projects; or
b. Engaging in petroleum, coal, geothermal and other energy
operations pursuant to an operating or consortium agreement under a
service contract with the government.
JOINT VENTURE OR CONSORTIUM
- a commercial undertaking by two or more persons, differing from a
partnership in that it relates to the disposition of a single lot of goods or
the completion of a single project.
- generally taxable as corporation unless it refers to joint ventures
previously described.
- additional requirements for tax exemption are as follows:
1. A joint venture or consortium formed for the purpose of undertaking
construction projects is not considered as corporation (RR 10-2012,
effective June 2012) provided:
a. The joint venture was formed for the purpose of undertaking a
construction project; and
JOINT VENTURE OR CONSORTIUM
1. A joint venture or consortium formed for the purpose of undertaking
construction projects is not considered as corporation (RR 10-2012,
effective June 2012) provided:
b. Should involve joining/pooling of resources by licensed local contracts;
that is, licensed as general contractor by the Philippine Contractors
Accreditation Board (PCAB) of the Department of Trade and Industry
(DTI)
c. The local contractors are engaged in construction business; and
d. The Joint Venture itself must likewise be duly licensed as such by the
Philippine Contractors Accreditation Board (PCAB) of the Department
of Trade and Industry (DTI).
FOREIGN CONTRACTORS
Joint Ventures involving foreign contractors may also be treated as a non-
taxable corporation provided:
• The member foreign contractor is covered by a special license as
contractor by the PCAB of DTI.
• The construction project is certified by the appropriate Tendering
Agency (governing office) that the project is a foreign
financed/internationally-funded project and that international bidding is
allowed under the Bilateral Agreement entered into by and between the
Philippine Government and the foreign/international financing institution
pursuant to the implementing rules and regulation of Republic Act No.
4566 (Contractor’s License Law)
JOINT VENTURE OR CONSORTIUM
2. A joint venture or consortium for engaging in petroleum, coal,
geothermal and other energy operations pursuant to an operating
consortium agreement under a service contract with the government.
TAX Treatment of Co-venturer’s share in the JV Profit
TYPE OF JOINT VENTURE CO-VENTURER
CORPORATION INDIVIDUAL
Taxable Joint Venture *Exempt **Final withholding tax
Non-taxable Joint Venture RCIT*** Basic Tax

*Treated as inter-corporate dividend

**Treated as dividend income which is generally subject to FWT of 10% but may also be subject to 20% if
received by NRAET and 25% if received by NRANETB.
*** TRAIN: 30%; CREATE: either 25% or 20% except if derived by special corporation.
JOINT STOCK COMPANIES
- constituted when a group of individuals, acting jointly, establish and
operate business enterprise under an artificial name, with an invested
capital divided into transferable shares, an elected board of directors,
and other corporate characteristics, but operating without formal
government authority.
JOINT ACCOUNT COMPANIES (cuentas
en participacion)
- constituted when one interests himself in the business of another by
contributing capital thereto, and sharing in the profits or losses in the
proportion agreed upon.
- not subject to any formality and may be privately contracted orally or
in writing.
Associations
- includes all organizations which have substantially the salient features
of a corporation to be taxable as a “corporation.”
CLASSIFICATION OF CORPORATE TAXPAYERS
Domestic Corporation
- a corporation created or organized in the Philippines or under its laws
Resident Foreign Corporation(RFC)
- a corporation created or organized in a foreign country or under the
laws of a foreign country and engaged in business in the Philippines.
Nonresident Foreign Corporation (NRFC)
- a corporation created or organized in a foreign country or under the
laws of a foreign country and is not engaged in business in the
Philippines.
CORPORATIONS MAY BE CLASSIFIED FURTHER INTO:
Ordinary Corporations
- corporations subject to normal tax or basic tax on the corporate
income tax (RCIT) rate of 30% under TRAIN Law and either 25% or
20% under CREATE Law.
Special Corporations
-corporations subject to income tax rate which are lower than the
regular corporate income tax(RCIT) rate of 30%, 25% or 20%, as the
case may be
CORPORATE TAXATION
SPECIAL CORPORATION TAX RATE
a. Domestic Corporations TRAIN Law: 10%
*Proprietary educational institutions and Hospitals CREATE:
*July 1, 2020 to June 2023: 1%
* Beg. July 1, 2023:10%
b. Resident Foreign Corporation
* International Carriers * Generally 2.5% of Gross Philippine
Billings (GPB) but it may be subject to
a lower rate or exempt under certain
conditions
* Regional Operating Headquarters TRAIN Law: 10% of net income
(ROHQs are no longer considered special corporations beginning January 1, 2022) CREATE:
* Until Dec. 31, 2021: 10%
* Beg. Jan. 1, 2022: Subj. to 25% RCIT;
Taxable as RFC
c. Nonresident Foreign Corporations
* Non-resident Cinematographic Film Owner, Lessor or Distributor 25% of Gross Income

* Non-resident Owner or Lessor of Vessels Chartered by Philippine Nationals 4.5% of Gross Income

* Non-resident Owner or Lessor of Aircraft, Machineries and Other Equipment 7.5% of Gross Income
EXEMPT CORPORATIONS
(Sec. 30, RA 8424; NIRC)
a. Labor, agricultural or horticultural organization not organized
principally for profit;
b. Mutual savings bank not having a capital stock represented by shares,
and cooperative bank without capital stock organized and operated for
mutual purposes and without profit;
c. A beneficiary society, order or association, operating for the exclusive
benefit of the members such as fraternal organization operating under
the lodge system, or a mutual aid association or a non-stock
corporation organized by employees providing for the payment of life,
sickness, accident, or other benefits exclusively to the members of such
society, order, or association, or non-stock corporation or their
dependents;
EXEMPT CORPORATIONS
(Sec. 30, RA 8424; NIRC)
d. Cemetery company owned and operated exclusively for the benefit
of its members;
e. Non-stock corporation or association organized and operated
exclusively for religious, charitable, scientific, athletic, or cultural
purposes, or for the rehabilitation of veterans of no part of its net
income or asset shall belong to or inure to the benefit of any member,
organizer, officer or any specific person;
f. Business league, chamber of commerce, or board of trade, not
organized for profit and no part of the net income of which inure to
the benefit of any private stockholder or individual;
EXEMPT CORPORATIONS
(Sec. 30, RA 8424; NIRC)
g. Civic league or organization not organized for profit but
operated exclusively for the promotion of social welfare;
h. A non-stock and nonprofit educational institution;
i. Government educational institution;
j. Farmers’ or other mutual typhoon or fire insurance company,
mutual ditch or irrigation company, mutual or cooperative
telephone company, or like organization of a purely local character,
the income of which consists solely of assessments, dues, and fees
collected from members for the sole purpose of meeting its
expenses; and
EXEMPT CORPORATIONS
(Sec. 30, RA 8424; NIRC)
k. Farmers’, fruit growers’, or like association organized and operated
as sales agent for the purpose of marketing the products of its
members and turning back to them the proceeds of sales, less the
necessary selling expenses on the basis of quantity of produce finished
by them.

*Provided, that the income whatever kind and character of the

foregoing organizations from any of their properties, real or personal,
or from any of their activities conducted for profit regardless of the
disposition made of such income, shall be subject to income tax.
GOVERNMENT-OWNED OR
CONTROLLED CORPORATIONS (GOCCSs)
RR 5-2021, implementing the provisions of CREATE law provides that GOCCs, agencies
and instrumentalities shall pay such tax rate upon their taxable income as are imposed
upon corporations or associations engaged in a similar business, industry, or activity,
EXCEPT:
1. Government Service and Insurance System (GSIS)
2. Social Security System (SSS)
3. Home Development Mutual Fund (HDMF; also known as Pag-ibig)
4. Philippine Health Insurance Corporation (PHIC)
5. Local Water Districts (RA 10026)
Note:
*PCSO is taxable beg. Jan. 1, 2018 or upon effectivity of the TRAIN Law.
* HDMF or Pag-ibig is exempt only upon the effectivity of CREATE Law (4.11.2021)
 SOURCE

TABAG, ENRICO D. 2021. CPA Reviewer in Taxation with

Special Topics and Sample Filled-Up BIR Forms. EDT
Book Publishing. Tandang Sora, Quezon City.
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