INCOME TAXATION OF CORPORATION

Illustration #1
Palangga Corporation presented to us the following information regarding the result of their
activities in the year 2022.
Gross profit from sales of merchandise
From Philippines sources P50,000
From Japan sources 75,000
Rent Income
From properties located in the Phil 25,000
From properties located in Spain 45,000
Interest income from trade notes
Debtors reside in the Phil. 25,000
Debtors reside in the USA 80,000
Unidentified Income 60,000
Allowed deductions:
On income earned in the Phil. 50,000
On income earned abroad 90,000
Based on the above information, compute the taxable income and the income tax due
assuming Palangga Corporation is:
1. Domestic Corporation
2. Resident Foreign Corporation

Illustration #2
Atima University presented the following information regarding its income for the year 2022.
Gross Income P500,000
Allowed deductions 250,000
------------
Taxable Income P250,000
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Required:
1. Proprietary educational institution whose income from
a. Unrelated activity does not exceed 50% of gross income
b. Unrelated activity exceeds 50% of gross income
2. Non-stock, non-profit educational institution
3. Government educational institution

Illustration #3
Income:
From school operations P500,000
From unrelated and other activities 250,000
Expenses:
From school operations 300,000
From unrelated and other activities 100,000

Required:
1. Compute the income tax due of the school for the year 2022.

Illustration #4
Megastar Hospital presented the following information pertaining to the result of their
operations and other transactions during 2019.
Gross income from pharmacy P25,000
Gross income from Lab fees 40,000
Rental income 85,000
Other gross income from patients 20,000
Cost of medicines 10,000
Depreciation of equipment 15,000
Rent expenses 30,000
Utilities expense 12,000
Salaries expense 85,000

Required: Compute the income tax due of Megastar in accordance with the provision of the
NIRC.

Kinds Sources Tax Base Rates

International Carrier Phil. only Gross Billings 2 ½%
Offshore Banking Unit Phil. only Gross Income 10%
Branch Profit Remittances Phil. only Gross 15%
Remittances*
Regional or area HQ Exempt Exempt Exempt
*Subject to 25% ordinary rate effective July 1, 2020.
Illustration #5
ABC Corporation has the following income for 20X2
Interest on bank deposit, BPI, Makati (Gross) P200,000
Interest, US Dollar deposit, BPI, Makati (Gross) in peso 80,000
Royalty, Philippines 700,000
Royalty, U.S.A 300,000
Dividends from resident foreign corporation 100,000

Required: Compute the final taxes paid if the taxpayer is:

1. Domestic corporation
2. Resident foreign corporation
3. Nonresident foreign corporation

MCIT

Illustration #6
Quarter NCIT MCIT Taxes Excess MCIT- Excess
W/held PY W/tax-PY
1st P100,000 P 80,000 P 20,000 P30,000 P10,000
2nd 120,000 250,000 30,000
3rd 250,000 100,000 40,000
4th 200,000 100,000 35,000

Required: Based on the above information, compute the quarterly and the annual (final)
income tax payable of the corporation.

Illustration #7
Lena Corporation, which started business operations in 2021, shows the following information
for the year ended December 31, 2022.
Income tax paid quarterly in 2021 P110,000
Less: Income tax due in 2021 85,000
-------------
Overpaid income tax-in 2021 P25,000
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For the year 2022, the corporation determined the following financial statement data:
Qtr. Sales Cost of Sales Gross Profit Allowed
Deduction
1st P1,000,000 P600,000 P200,000
2 nd
500,000 300,000 100,000
3rd 1,000,000 600,000 300,000
4th 1,000,000 600,000 200,000
Total P3,500,000 P2,100,000 P800,000
Based on the foregoing information, assuming that the corporation availed of tax credit for
overpaid income tax in 2021, determine the following:
1. Income tax due after tax credit for the first three quarters of 2022.
2. Compute the income tax payable on the final return of the company.

Illustration #8
A domestic corporation which commenced business operations in 2015 has the following data:
2021 2022
Sales P1,700,000 P2,300,000
Cost of Sales 850,000 1,425,000
Operating expenses 825,000 480,000
Required: Compute the following:
1. Income tax payable in 2021
2. The journal entry in 2021 to record excess MCIT
3. The income tax payable in 2022
4. The journal entry in 2022 to record the carry forward of excess MCIT against normal
income tax liability in 2022
5. What if even after 2022 the MCIT still continues to be higher than the RCIT? The
journal entry at December 31, 2024, to cancel the excess MCIT in 2021 is.

Illustration #9
ABC Corporation, a manufacturer, has a gross sales of P190,000,000 for CY2021, its 2 nd year
of operation. Its total assets amounted to P50,000,000, net of the value of the land of
P6,000,000 where its manufacturing plant and business operations are situated. Its cost of
sales and allowable operating expenses amounted to P100,000,000 and P50,000,000,
respectively.
Compute for its income tax due for CY2021.

Illustration #10
Given the same facts in Illustration #9, except for the allowable operating expense, which
amounted to P85,000,000. The net taxable income will be P5,000,000.
Compute the income tax due for CY2021.

Illustration #11
The gross sales of ABC Corporation for 2018 amounted to P6,500,000, with cost of sales
amounting to P4,300,000. It incurred operating expenses amounting to P1,500,000, and on
the filing of its First Quarter Income Tax Return, it signified its intention to avail of the OSD.
Compute the Income tax due.

Illustration #12
The following data were reported for 2022 business activities of UnoUno University, a private
educational institution.

Tuition fees P3,000,000

Miscellaneous fees 200,000
Rent income, net of 5% withholding tax 475,000
Cash dividend (domestic) tax exempt 200,000
Interest income, net of 20% final tax 80,000
Operating expenses 1,200,000

Compute the income tax of UnoUno University for 2022.

Illustration #14
Astex Corporation, Phils., a branch of a foreign corporation located at Texas, USA doing
business in the Philippines, reported the following during the year.

Net operating income after tax P7,000,000

Tax-exempt dividend income 2,000,000
Total Net Income P9,000,000

The following year, the branch earmarked for remittance to the head office the P2,000,000
dividend and P5,000,000 of its net operating income after tax.
Required: Compute the amount to be remitted.