2. Non- resident.
Those not
Chapter 3
(Corporations)
Classification of Income
Taxpayers
Definitions of Terms
Corporations
1. Corporations
 Domestic. Those created or
organized under and by virtue
of Philippines
1. Domestic corporation,
in general, including
One Person
Corporation
2. Government - owned
and – controlled
corporations
3. Taxable partnership
4. Non- profit hospitals
 Foreign. Those organized
in accordance with laws of
their respective countries.
1. Resident. Those
engaged in trade or
business within the
PH.
engaged in trade or
business in the
Philippines.
3. General Professional
Partnership.
4. Estates and Trust.
 Artificial being created by
operation of law. Having
the right of succession and
the powers, attributes and
properties expressly
authorized by law or
incident to its existence
 Section 10 of the RCCP
provides that any person
that any person,
partnership, association or
corporation, slightly or
jointly with others but not
more than fifteen (15),
may organized the
organization.
  These are the considered
Corporations:
1.One-person Corporation
2.Partnerships
3.Joint stock Companies
4.Joint accounts
5.Associations
6.Insurance Companies
Note: it does not include general
professional partnership & joint
venture/ consortium for the
purpose of undertaking
construction projects under the
service contract of the
government
 Tax exceptions of Joint
Venture formed for the
purpose of construction
projects was pursuant to
Presidential Decree 929
(dated May 4, 1976) to assist
local contructors in achieving
competitiveness with foreign
contractors, but foreign
contractors can be non-
taxable corporation only if the
foreign contractor is covered
by a special license as a
contractor of the PCAB of the
DTI; and If it’s certified by the
Tendering Agency
(government office) that the
project is a foreign-financed
project and that international
bidding is allowed under the
bilateral agreement entered
into by and between the
Philippine Government and
the foreign national of
International financing
institutions pursuant to the
IRR of the Republic Act 4566,
the Contractor license law.
Absent of one Requirements
shall be considered as taxable
corporation.
 Section 3 of Revenue 10-2012
states that Joint Venture or
Consortium undertaking
constriction projects not
taxable as corporation under
Sec. 22 of NIRC of 1997 as
amended, should be:
1.For undertaking of
construction project; and
2.Should involve joining or
pooling of resources by
licensed local contract; that
Is licensed as general
 contractor by the Philippine 3. Foreign
Contractor Accreditation
 When applied to
Bored (PCAB) of DTI;
corporation, means a
3.These local contractors are
corporation engaged in
engaged in construction
trade or business within
businesses; and
the Philippines.
4.The joint venture itself must
likewise be duly licensed as 4. Resident Foreign Corporation
such by the PCAB of the DTI.
 Applies to foreign
corporation engaged in
2. Domestic trade or business within
the Philippines
 When applied to
corporation, means created
or organized in the 5. Non- Resident Foreign
Philippines or under its Corporation
laws.
 Applies to foreign
 One Person Corporation
corporation not engaged in
(OPC) a new type of
trade and business within
corporation under the
the Philippines.
Revised Corporation Code
of the Philippines (effective
March 8, 2019) OPC is a 6. General Professional
corporation with a single Partnerships
stockholder, who may be
 Partnerships formed by
natural person, a trust or
persons for the sole
an estate (Sec. 116). One
purpose of exercising their
person may incorporate
common profession, no
two or more OPCs.
part of income of which is
derived from engaging in
any trade or business.
7. Government- Owned of Categories of Income and
Controlled Corporation Tax Rates
(GOCCs), Agencies or
instruments.

 All Corporations, agencies, 1. Business Income

or instrumentalities owned
 Earned by a corporation is
or controlled by the
taxed at the following rates
Government.
(Sections 27(A)(1) and 28
8. Foreign- Sourced Dividents (B)(1)):

 Dividends received from non- Year Tax Rate

resident foreign corporations.
- 1997 35%
- 1998 34%
Sources of Income - 1999 33%
- 2000- Oct. 2005 32%
- Second most important thing to
determine- whether it is from - Nov. 2005- 2008(1) 35%
within the Philippines or without - 2009(2) 30%
- 2020(30) (effective
July 1) 25%
1. Domestic Corporations

 Are taxable on income from

sources within and without
the Philippines.
2. Foreign- Sourced Dividend
 Dividends received from non-
resident foreign corporations.
Republic Act 11534, Corporate
Recovery and Tax Incentives for
Enterprises (CREATE) Act, was
signed into law on Mar. 26, 2021
and published on Mar. 27, 2021.
CREATE Act took effect on Apr. 11,
2021.
2. Passive Income

 Passive income is subject to separate and final tax. These are taxed at
fixed rates ranging from 6% to 20%. Passive income is not to be
included in gross income computation.
NOTES:
1.Income tax treatments for
domestic and resident
foreign corporations are
almost the same. Foreign
Corp. are taxed only on their
income in PH.
2.Interest income received
by a domestic Corp. or
resident foreign Corp. from
long-term deposits not
issued by banks or
investment certifies that are
not considered deposits
substitutes shall be 20%
Creditable WT and reported
as part of taxable income
subject to regular corporate
income tax 30%
3.Per Revenue
Memorandum Circular 62-
2021, the tax treatment of
dividends received by a
domestic Corp. form a
resident foreign corporation
(RFC) will depend on the
sources if income for the
RFC. Under Section 42(A)(2)
(b) of Tax Code, as
amended., “dividend
received from a foreign
corporation shall be treated
as income derived from
sources within he PH, unless
less than 50% of the gross
income of the foreign
corporation for the 3-year
period ending with the close
of its taxable year preceding
the declaration of such
dividends (or for such part
of the period as the
corporation has been in
existence) was derived from
sources within the PH xxx
xxx”
4.As defied in Sec. 2 of RR 5-
2021, foreign- sourced
dividends are dividends
received from non-resident
foreign corp. (NFRC).
5.Per Sec. 6 CREATE Act, and
Sec. 5 of RR 5-2021, in
general, foreign-sourced
dividends received by
domestic corp. are subject
to income tax. However, the
same shall be exempt if ALL
the ff. conditions concur: c) The domestic
received hold
a) The dividends directly at least 20%
actually received or in value of the
remitted into the PH outstanding shares
are reinvested in the of the foreign corp.
business operations and has held the
of the domestic shareholdings
corp. within the uninterruptedly for
next taxable year a minimum of 2
from the time the years at the time
foreign-source dividends
dividends were distribution. In case
received of the foreign crop.
remitted; Has been in
existence for less
b) Dividends received than 3 years at the
shall only be used to time of dividends
fund the working distribution, then
capital requirement the domestic corp.
capital must have
expenditures, continuously held
dividend payments, directly at least 20%
investment in in value of the
domestic foreign
subsidiaries, and corporation’s
infrastructure outstanding shares
project; and during the entire
existence of the
corporation.
Absent any one of the above not exceeding P5,000,000 AND
conditions, the foreign-source total assets not exceeding
dividends shall be considered as P100,000,000, excluding the land
taxable income of the domestic on which the particular business
corp. in the year if actual receipt entity’s office, plant and
of remittance subject to equipment are situated, shall be
surcharges, interest, and taxed at 20% effective July 1,
penalties, as applicable. 2020.

Domestic and Resident

Foreign Corporations, in Formula for determining the
General total tac due for the year

The computation of the normal

income tax of domestic & foreign
Corp. follows:

Revenue Regulations 5-2021

Gross income xxx provides the applicable income tac
Less; Allowable rate under calendar year 2020
Deductions xxx
basis.
Net Income xxx
Multiply by Tax Domestic & resident
Rate (effective 25% Corp. 27.50%
Jul 1, 2020) MSMEs 25%
Tax Due xxx

Domestic Corp. classified as Micro,

Domestic &resident foreign corp.
Small and Medium Enterprises
are subject to minimum corporate
(MSMEs) with net taxable income
income tax (MCIT).
Domestic Corporations, in Overseas Filipino Investor
Particular  A citizen of PH who is
working abroad, ho
retained or required his
Real Estate Investment Trust Philippine Citizenship
(REIT) under R.A. 92225

 REIT is considered a Principal Stockholder

taxpayer engaged in real
 A stockholder who is,
estate business. Hence,
directly or indirectly, the
rea properties owned by a
beneficial owner of more
REIT are considered
than 10% of any class of
ordinary assets
investor securities of the
Income-generating real estate REIT combined.

 A real estate that has a Public Company

purpose of generating a
 A company listed with
stream of income like
exchange and which, upon
rentals, toll fees, user’s
and after listing, have at
fee and the like, as may be
least 1,000 public
further defined &
shareholders each owning
identified by SEC
50 shares of any class and
Investor Securities who in the aggregate, own
at least one-third (1/3) of
 Shares of stocks issued by
the outstanding capital
REIT or derivatives therof.
stock of REIT
Distributable Income incentive & maintain the
listed status of the
 Means net income earned
investor securities on
for the taxable year.
exchange and the
Distributable income
registration of the
excludes proceeds from
investor securities by SEC;
the sale of the REIT’s
3. Distribute at least 90% of
assets the re-invested in
its distributable income
the REIT within 1year from
as required the Act and
the date of the sale.
its RR, as revised; and
Income Taxation on REIT 4. Comply with its
Reinvestment plan, as
 REIT is taxable on all
certified by the
income within or without
commission.
the PH at the applicable
income tax rate of 30%
under Sec. 27(A) of the Proprietary Educational
NIRC. Institutions and Hospitals which
are non-profit
Tax Incentives
The ff. institutions shall be
To qualify under Sec. 5 of RR 13-
covered by the preferential 10%
2011, a REIT must:
corporate income tax rate:
1. A public comp. &
1. Proprietary educational
maintain its status as
institutions
public comp.
2. Hospitals which are no-
2. For the DST incentive on
profit & non-stock
transfer of real property
3. Non-profit educational
provided for under Sec. 6
institutions.
of RR 13-2011, enlist with
an exchange within 2
years from the date if
initial availment of DST
Definition of terms
Proprietary Educational
Institution
 Refer to any private
schools, maintained and
administered by private
individuals or groups with
issued permit from the
DepEd, CHED, and TESDA
Hospitals which are non-profit
 Refer to any private
hospitals, maintained and
administered by private
individuals or groups
Non-stock, Non-profit (NSNP)
Educational institutions
assets to the institution’s
purposes and all its
activities conducted not
for profit.
Unrelated Trade, Business or
Other Activity
 Any trade, business, or
other activity that’s not
substantially related to
exercise or performance
by such educational
institution or hospital of
its primary purpose of
function.
Note: government educational
institutions are exempt from
income tax (Sec. 30 of NIRC)

 Whose revenues & assets

that are used actually,
directly and exclusively for
educational purposes shall
be exempted from taxes &
duties

Non- profit

 No net income or asset

accrues to or benefits any
members/specific person,
with all the net income or
Government- owned or  No longer exempt from
Controlled Corporations, income tax under TRAIN.

Agencies or Philippine Amusement and

Instrumentalities (GOCCs) Gaming Corporation (PAGCOR)

The provisions of existing special  PAGCOR is subject to

las or general laws, all income tax following the
corporations, agencies, or provisions of R.A. 9337
instrumentalities owned by the Tax Treatment of PAGCOR
Government shall pay such rate of
tax upon their taxable income are  Presidential Decree (PD)
imposed by the code upon 1896, as amended, classified
corporations or associations PAGCOR’s income in to two
engaged in similar business, (2): (1) income from its
industry or activity. The ff. are operations conducted under
exempt: its franchise, pursuant to
Sec. 13 (2) (a) thereof
1. GSIS (income for gaming
2. SSS operations); and (2) inome
3. Philippine health and from its operation of
insurance corporation necessary and related
(PHIC) services under Sec. 14 (5)
4. Home development thereof (income from oher
mutual fund (HDMF) services).
5. Local water districts (LWD)  Income from gaming
operations shall be subject
to 5% franchise tax while its
income from other related
Philippine Charity Sweepstakes services shall be subject top
Office (PCSO) corporate income tax rate in
the NIRC.
 Per revenue Memorandum
Circulars 33-2013 and 32-
2022, PAGOR’s income form
gaming operations include,
among others:
1. Income from its casino
operations;
2. Income from dolor pit
operations;
3. From bingo operations,
including all variations
thereof; and
4. Form mobile bingo
operations operated by it,
with agents on commission
basis provided, however,
that the agent’s
commission income shall
be subject to regular
income tac, and
consistently, to withholding
tax under existing
regulations.
 PAGCOR’s income from other
related services shall be
subject to corporate income
VAT and other applicable
taxer under the NIRC, as
amended. This includes,
among others, but not limited
to:
1. Regulatory/ license fees
from private casinos;
2. Regulatory/ license fees
from private bingo
operations, including all
variations thereof;
3. Regulatory/ license fees
from private internet
casino gaming, internet
sport betting and private
mobile gaming operations;
4. Regulatory/ license fees
from private poker
operations;
5. Regulatory/ license fees
from private from junk
operations;
6. Regulatory/ license fees
from private from SM
demo unit;
7. Regulatory/ license fees
from private from all other
electronic derivatives of
brick and mortar games
regulated by PGCOR;
8. Income from other
necessary and related
services, shows and
entertainment.