MODULE 11.

CORPORATIONS

CORPORATION DEFINED

For income tax purposes, a corporation as defined under Section 22 of RA 8424, shall INCLUDE:

1.) Partnerships, no matter how created or organized

2.) Joint stock companies
3.) Joint accounts (cuentas en participación)
4.) Associations; or
5.) Insurance companies

But does NOT INCLUDE:

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 government.

JOINT VENTURE OR CONSORTIUM

Joint venture is 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.

IN GENERAL, a joint venture or consortium is taxable as a corporation unless it refers to joint

ventures described above. Additional requirements 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
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 non-taxable corporation provided:

● The member foreign contractor is covered by a special license as contractor by the PCAB.
● The construction project is certified by the appropriate Tendering Agency (government 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 regulations of Republic Act No. 4566 otherwise known as Contractor’s license Law.

2. A joint venture or consortium for engaging petroleum, coal, geothermal and other energy
operations pursuant to an operating consortium agreement under a service contract with the
government.
 ❖ JOINT STOCK COMPANIES
Joint stock companies are constituted when a group of individuals, acting jointly, establish and
operate a business enterprise under an artificial name, 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

Joint account (cuentas en participación) is constituted when one interests himself in the business
of another by contributing capital, and sharing in the profits or losses in the proportion agreed
upon. They are not subject to any formality and may be privately contracted orally or in writing.
The term “associations” includes all organizations which have substantially the salient features
of a corporation to be taxable as a ”corporation.”

CLASSIFICATION OF CORPORATE TAXPAYERS

1) Domestic corporations (DC)

Is a corporation created or organized in the Philippines or under its laws.

2) Resident Foreign Corporation (RFC)

Is a corporation created or organized in a foreign country or under the laws of a foreign country
and engaged in business in the Philippines.

3) Nonresident Foreign Corporation (NRFC)

Is a corporation created or organized in a foreign country or under the laws of a foreign country
but not engaged in business in the Philippines

Reminder: A quiz will be given on Module 11. Study hard to get higher marks.