Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao

Since 1977

TAX.3609-1 NARANJO/SIAPIAN/WONG/CRUZ/GUDANI
TAXATION OF NON-INDIVIDUAL TAXPAYERS MAY 2024

LECTURE NOTES
CORPORATION
- includes:
1. One-person corporations – a corporation with a single stockholder who can only be a natural person, trust or
estate
2. Ordinary partnerships (no matter how created or organized) – two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the profits among
themselves
3. Joint stock companies - a business owned by investors, with each investor owning a share based on the
amount of stock purchased
4. Joint accounts (cuertas en participacion) –
• A partnership constituted in such a manner that its existence was only known to those who had an
interest in the same, there being no mutual agreement between the partners, and without a corporate
name indicating to the public in some way that there were other people besides the one who ostensibly
managed and conducted the business (G.R. No. 2800 dated December 4, 1906)
• is one that is held jointly by two or more natural persons, or by two or more juridical persons or
entities. Under such setup, the depositors are joint owners or co-owners of the said account, and their
share in the deposits shall be presumed equal, unless the contrary is proved
5. Insurance companies
6. Associations – any organization or group of persons other than those mentioned

Exceptions to the definition of a corporation:

1. General Professional Partnership (GPP) – a partnership formed by persons for the sole purpose of
exercising their common profession, no part of the income of which is derived from engaging in any trade
or business
2. Joint venture:
a. undertaking construction projects under a service contact with the Government
b. engaging in petroleum, coal, geothermal and other energy operation pursuant to an operating or
consortium agreement under a service contract with the Government.

Note: Co-ownership can be taxable as a corporation (partnership) or exempted from taxation depending on the
situation.
TYPES OF CORPORATIONS
1. Domestic Corporation – organized and established under the laws of the Philippines and is taxable on all
income derived from sources within and outside the Philippines
2. Resident Foreign Corporation - corporation organized and established under the laws of a foreign country
and is engaged in trade or business within the Philippines (taxable only on income derived from sources within
the Philippines)
3. Non-Resident Foreign Corporation – corporation organized and established under the laws of a foreign
country and is not engaged in trade or business within the Philippines (taxable only on income derived from
sources within the Philippines)
CORPORATE INCOME TAX RATES
Higher between the RCIT or MCIT
Type of Corporation RCIT MCIT
Rate Effective Date Rate Effective Date
Domestic Corporation (DC)
Domestic Corporation, In General January 1, 1998 January 1, 1998
30%
to 2% to
OLD
June 30, 2020 June 30, 2020
July 1, 2020
1% to
25% July 1, 2020 June 30, 2023
July 1, 2023
2%
Onwards
For corporations with net taxable income July 1, 2020
not exceeding Five Million Pesos 1% to
(P5,000,000) AND total assets not June 30, 2023
exceeding One Hundred Million (P 20% July 1, 2020
100,000,000), excluding the land on which July 1, 2023
the particular business entity's office, plant 2%
onwards
and equipment are situated
Proprietary Educational Institutions and 10% January 1, 1998
Not Applicable
Hospitals OLD to

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EXCEL PROFESSIONAL SERVICES, INC.

June 30, 2020

July 1, 2020
1% to
June 30, 2023
10% July 1, 2023
Foreign Corporation
On taxable income (e.g., net or gross income, as applicable) derived from all sources within the
Philippines)
Resident Foreign Corporation January 1, 1998 January 1, 1998
30%
to 2% to
OLD
June 30, 2020 June 30, 2020
Upon effectivity of
1% the CREATE until
25% July 1, 2020 June 30, 2023
July 1, 2023
2%
onwards
Offshore Banking Unit (OBUs) January 1, 1998
10%
(Note: OBUs shall now be taxed as to Not Applicable
OLD
resident foreign corporation upon April 10, 2021
effectivity of the CREATE) Upon effectivity of
Upon the
1% the CREATE until
effectivity
25% June 30, 2023
of the
July 1, 2023
CREATE 2%
onwards
Regional Operating Headquarters January 1, 1998
10%
(ROHQ) to Not Applicable
OLD
Dec 31, 2021
January 1, 2022
1% to
25% January 1, 2022 June 30, 2023
July 1, 2023 and
2%
onwards
Non-Resident Foreign Corporation (NRFC) January 1, 1998
to
30% Not Applicable
December 31,
2021
25% January 1, 2021 Not Applicable
Notes:
• Domestic corporations shall account separately in their Annual Financial Statements (AFS) the
cost of the land on which the particular business entity's office, plant and equipment are situated,
and shall not lump the same in one account title nor consolidate its cost with other fixed asset
accounts.
ILLUSTRATION:
ABC Corp disclosed the following financial information:

Gross Income – Philippines Php 2,000,000

Expenses / Deductions – Philippines 1,000,000
Gross Income – United States 1,000,000
Expenses / Deductions – United States 500,000
Interest income from Bank Deposits in the Philippines 100,000

Compute the tax due if the taxpayer is (a) DC, (b), RFC, (c) NRFC (Disregard rule on MCIT)
DC RFC NRFC
GI – Ph 2,000,000 GI – Ph 2,000,000 GI – Ph 2,100,000
Ded – Ph (1,000,000) Ded – Ph (1,000,000)
GI – US 1,000,000 Taxable Income 1,000,000 Final Tax (25%) 525,000
Ded – US (500,000) Old rate (30%) 600,000
Taxable Income 1,500,000 Tax Due (25%) 250,000
Old Tax Rate (30) 300,000
Tax Due (25%) 375,000
If rate is 20% 300,000
If old rate (30%) 450,000
Note: Interest income is subject to final tax. The bank, as withholding agent already withheld the final tax. For
NRFC, the payor is required to withhold the 25% final tax before remitting the money to NRFC.
MINIMUM CORPORATE INCOME TAX (MCIT)
• Tax Base: Gross income
Gross Income for purposes of MCIT shall be:
o for sale of goods – gross sales less sales returns, allowances, discounts and cost of goods sold
o for sale of service - gross receipts less sales returns, allowances discounts and cost of services sold

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EXCEL PROFESSIONAL SERVICES, INC.

Cost of services shall include all direct costs and expenses incurred to provide the services required by
the customers and clients and including salaries and employee benefits of personnel, consultants and
specialists directly rendering the services and cost of facilities used directly in providing the service such
as depreciation, rental of property and cost of supplies. For banks, cost of services includes interest
expense.
Note: Public service licenses or rights are intangible assets representing legal or contractual rights granted
by the government and are often capitalized and amortized, hence are considered administrative costs
(therefore not part of cost of service)
• Rate:
o January 1, 1998 to June 30, 2020 – 2%
o July 1, 2020 to June 30, 2023 – 1%
o July 1, 2023 – 2%
Note: For non-individual taxpayers using calendar year for TY 2020, the rates are:
2% - January 1, 2020 to June 30, 2020
1% - July 1, 2020 to December 31, 2021
Hence, effective rate is 1.5%
• The MCIT is imposed beginning on the fourth taxable year immediately following the year in which such
corporation commenced its business operations
• When the minimum corporate income tax is higher than the regular corporate income tax during the
period, the minimum corporate income tax shall be payable
• Excess of minimum corporate income tax can be carried over and credited to the regular income tax for
the next three immediately succeeding taxable years
• Applies only to domestic and resident corporations and excludes those entities enjoying preferential rates
• MCIT applies also on quarterly Income Tax Returns

Illustration using the 2%:

2017 2018 2019 2020 2021 2022
RCIT 3,000 2,000 1,000 2,000 2,000 2,000
MCIT 6,000 1,000 3,000 1,000 1,000 1,000

Tax to pay
Excess

SUSPENSION OF MCIT
The imposition of minimum corporate income tax may be suspended due to:
a. prolonged labor disputes
b. force majeure
c. legitimate business reverses
DOMESTIC CORPORATIONS (including ROHQs and OBUs)
ILLUSTRATION: APPLYING TRANSITORY RATES IN 2023
A. Calendar Year
ABC Corp, a domestic trading corporation, has gross sales of Php 1.4 billion with cost of sales of Php 560 million
and allowable deduction of Php 799 million for CY 2023. Its total assets of Php 480 million includes land and
building in which the business operation is conducted, amounting to Php 100 million and Php 125 million,
respectively. The income tax payable is computed by:

Gross Sales 1,400,000,000

Less: Cost of Sales 560,000,000
Gross income 840,000,000
Less: Allowable deductions 799,000,000
Taxable income 41,000,000
Income Tax Due:
RCIT (25%) 10,250,000
MCIT:
Jan 1-June 30 (840,000,000/12) x 6 mos x 1% 4,200,000
Jul 1-Dec 31 (840,000,000/12) x 6 mos x 2% 8,400,000 12,600,000

Income Tax Payable (higher of RCIT and MCIT) 12,600,000

B. Fiscal Year
Assuming the same information above, except that ABC Corp. has adopted a fiscal year ending August
31, 2023, the computation of income tax payable is:

Gross Sales 1,400,000,000

Less: Cost of Sales 560,000,000
Gross income 840,000,000
Less: Allowable deductions 799,000,000

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EXCEL PROFESSIONAL SERVICES, INC.

Taxable income 41,000,000

Income Tax Due:
RCIT (25%) 10,250,000
MCIT:
Sep 1-June 30 (840,000,000/12) x 10 mos x 1% 7,000,000
Jul 1-Aug 31 (840,000,000/12) x 2 mos x 2% 2,800,000 9,800,000

Income Tax Payable (higher of RCIT and MCIT) 10,250,000

ILLUSTRATION: DOMESTIC CORPORATION (25% RCIT AND 1% MCIT)

LMB Corporation, a retailer, has a gross sales of P1,400,000,000.00 with a cost of sales of P560,000,000.00 and
allowable deductions of P150,000,000.00 for the calendar year 2021. Its total assets of P180,000,000.00 as of
December 31, 2021 per Audited Financial Statements includes the land costing P50,000,000.00 and the building
of P25,000,000.00 in which the business entity is situated, with an aggregate amount of P75,000,000.00 as Fixed
Assets. Assuming CY 2021 is the 5th year of operation of LMB Corporation, computation of income tax (Income
Tax - whichever is higher between Regular Rate and MCIT) shall be as follows:
REGULAR RATE:
Gross Sales 1,400,000,000.00
Less: Cost of Sales 560,000,000.00
Gross Income 840,000,000.00
Less: Allowable Deductions 150,000,000.00
Net Taxable Income 690,000,000.00
REGULAR RATE 25%
TAX DUE 172,500,000.00

MINIMUM CORPORA TE INCOME TAX (MCIT)

Gross Income 840,000,000.00
MINIMUM CORPORATE INCOME TAX (MCIT) RATE 1%
TAX DUE 8,400,000.00

INCOME TAX DUE (Whichever is Higher)

Regular Corporate Income Tax (RCIT) 172,500,000
Minimum Corporate I ncome Tax (MCIT) 8,400.000
TAX DUE 172,500,000
ILLUSTRATION: DOMESTIC CORPORATION (25% RCIT)
JPL Corporation, a manufacturer, has a gross sales of P 190,000,000 for CY 2021, its 2nd year of operation. Its
total assets amounted to P 50,000,000, 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 P
100,000,000 and P 50,000,000, respectively. Compute for its income tax due for CY 2021.

REGULAR RATE:
Gross Sales 190,000,000.00
Less: Cost of Sales 100,000,000.00
Gross Income 90,000,000.00
Less: Allowable Deductions 50,000,000.00
Net Taxable Income 40,000,000.00
REGULAR RATE 25%
TAX DUE 10,000,000.00

Note: Although the total assets, net of the value of the land, is less than P 100,000,000.00, its net taxable income
is above P 5,000,000.00. Hence, the income tax rate is 25%. Taxpayer is not subject to MCIT since it is in its 2nd
year of operation.
ILLUSTRATION: DOMESTIC CORPORATION (20% RCIT)
JPL Corporation, a manufacturer, has a gross sales of P 190,000,000 for CY 2021, its 2nd year of operation. Its
total assets amounted to P 50,000,000, 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 P
100,000,000 and P 85,000,000, respectively. Compute for its income tax due for CY 2021.

REGULAR RATE:
Gross Sales 190,000,000.00
Less: Cost of Sales 100,000,000.00
Gross Income 90,000,000.00
Less: Allowable Deductions 85,000,000.00
Net Taxable Income 5,000,000.00
REGULAR RATE 20%
TAX DUE 1,000,000.00

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EXCEL PROFESSIONAL SERVICES, INC.

Note: MCIT is not yet applicable.

IMPROPERLY ACCUMULATED EARNINGS TAX (IAET)

• Basis of assessment - improper accumulation of profits
• Tax Base - improperly accumulated earnings
• Tax Rate – 10%
• Imposed on the 15th day following the close of the taxable year
• Nature of IAET – penalty. It is a form of deterrent to avoid payment of final tax on dividend declarations
by qualified corporations

IAET: EXPRESS REPEAL UNDER CREATE LAW

The improperly accumulated earnings tax shall no longer be imposed on corporations upon the effectivity of the
CREATE onwards. This shall apply to the entire taxable year for all fiscal years/taxable years ending after the
effectivity of CREATE.

ILLUSTRATION:
JDS Corporation, a domestic corporation, has unappropriated retained earnings in excess of its paid-up capital
stock amounting to P20,000,000 and P50,000,000 as of the fiscal years ending June 30, 2020 and June 30, 2021,
respectively. JDS Corporation shall be subject to the 10% improperly accumulated earnings tax as of June 30,
2020. However, JDS Corporation shall no longer be subject to improperly accumulated earnings tax for the entire
fiscal year ending June 30, 2021, which is after the effectivity of CREATE.
Proprietary Educational Institutions and Non-Profit Hospitals
1. Proprietary Educational Institutions - refer to any private schools, maintained and administered by private
individuals or groups, with an issued permit to operate as the case may be, under existing laws and
regulations from any of the following:
• Department of Education (DepEd) or
• Commission on Higher Education (CHED) or
• Technical Education and Skills Development Authority (TESDA)

Types of Educational Institutions:

Government
Stock Non-Stock Non-Stock,
educational Other
Corporations Corporations Non-Profit Individual
institutions Corporations
(DC) (DC) (DC)
(SUCs)
Nature With capital No Non-stock Fully-owned Sole Resident
stock/shares stock/shares and non- or and proprietors Foreign
For profit Generally not profit subsidized by Corporations
for profit (mentioned in the State and
the created by
Constitution Law and/or
and Section has its own
30H) Charter
Owners Stockholders Members Members State Individuals, Stockholders
Estates or
Trust
Governing Board of Board of Board of Board of Board of
Owner
body Directors Trustees Trustees Regents Directors
Authorized to
issue Yes No No No No Yes
dividends
Tax Rate:
With 10% 10% Exempt if Exempt with G.R. 25% RCIT
accreditation revenues or or without Graduated
and income 1% (June 30, 1% (June 30, assets are express tax or 8%
from related 2020 to June 2020 to June used actually, provision in on
activity 30, 2023) 30, 2023) directly, and Charter or business
exceeds 50% exclusively Law income
of total gross for
income educational 25% for
purposes and NRANETB
that no net
income or
asset accrues
to the benefit
of any
member of

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EXCEL PROFESSIONAL SERVICES, INC.

the
corporation

10% (1% -
June 30,
2020 to June
30, 2023) if
net income or
assets
accrue/inure
to or benefit
any member
or specific
person

Without 25% (Sec. 4 of 25% (Sec. 4 25% on the 25% RCIT

accreditation RR 3-2022) of RR 3-2022) portion of its
or income from revenues or
unrelated assets not
activity used directly,
exceeds 50% and
of total gross exclusively
income for
educational
purposes
2. Non-Profit Hospitals - refer to any private hospitals, which are non-profit, maintained and administered
by private individuals or groups.

3. Non-profit - means that no net income or asset accrues to or benefits any member or specific person,
with all the net income or assets devoted to the institution's purposes and all its activities conducted not
for profit.
Note: The grant of per diems such as transportation allowance in attendance of meetings, compensation
and/or endowments for services rendered, or any other similar emoluments to the Board of Trustees,
officers, employees, or any members of the above-mentioned institutions shall not be prohibited and shall
not necessarily be considered a private inurement that would negate the status of the institutions as non-
profit; Provided, that such per diems, compensation or emoluments are subject to proper liquidation or
reimbursement procedures, and commensurate to the functions and services rendered. ln such a case the
same shall be considered as legitimate and reasonable expenses incurred in furtherance of the duties and
responsibilities of the trustees, officers, employees, members, or any persons, and ultimately, the
objectives of the organization. The reasonableness of the expense shall be determined by the BIR on a
case-to-case basis.

4. Unrelated Trade, Business or Other Activity of Proprietary Educational Institutions and Hospitals - means
any trade, business, or other activity, the conduct of which is not substantially related to the exercise or
performance by such educational institution or hospital of its primary purpose or function.

Note:
In the case of proprietary educational institutions or hospitals, if the gross income from "unrelated trade,
business or other activity" exceeds fifty percent (50%) of the total gross income derived by such educational
institutions or hospitals from all sources, the tax prescribed for domestic corporations shall be imposed on the
entire taxable income.
PRIVATE EDUCATIONAL INSTITUTIONS APPLYING TRANSITORY RATES IN 2023

ILLUSTRATION 1: CALENDAR YEAR

PRTC Colleges, a proprietary educational institution, has gross income of Php 200 million, all of which are from
related activities, with allowable deductions of Php 160 million for the calendar year 2023. The income tax due is
computed by:

Gross Receipts 200,000,000

Less: Allowable deductions 160,000,000
Taxable income 40,000,000
Income Tax Due:
Jan 1-June 30 (40,000,000/12) x 6 mos x 1% 200,000
Jul 1-Dec 31 (40,000,000/12) x 6 mos x 10% 2,000,000 2,200,000

ILLUSTRATION 2: FISCAL YEAR

Assuming PRTC Colleges adopted fiscal year ending September 30, 2023. The income tax due is computed by:

Gross Receipts 200,000,000

Less: Allowable deductions 160,000,000
Taxable income 40,000,000

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Income Tax Due:

Oct 1-June 30 (40,000,000/12) x 9 mos x 1% 300,000
Jul 1-Sept 30 (40,000,000/12) x 3 mos x 10% 1,000,000 1,300,000

ILLUSTRATION 3: APPLYING THE PREFERENTIAL TAX RATE OF 1%

Rosa Private School of Values or RPSV is a private educational institution with an issued permit to operate from
the Commission on Higher Education (CHED). It is maintained and administered by MCGJ Inc., a private domestic
corporation registered under the Securities and Exchange Commission.

RPSV uses a fiscal year accounting ending July 31st of each year. On July 31, 2021, it recorded total gross receipts
amounting to P18,000,000.00, of which P10,000,000.00 came from education-related activities, while
P8,000,000.00 from other unrelated business activities. Also, RPSV recorded cost of service and operating
expenses from related activities amounting to P2,000,000.00 and P1,000,000.00, respectively, and from
unrelated business activities amounting to P3,000,000.00 and P2,000,000.00, respectively.

Related Unrelated Total

activities Activities
Gross Receipts/Sales 10,000,000.00 8,000,000.00 18,000,000.00
Less: Cost of 2,000,000.00 3,000,000.00 5,000,000.00
Service/Sales
Gross Income 8,000,000.00 5,000,000.00 13,000,000.00
Less: Allowable Deductions 1,000,000.00 2,000,000.00 3,000,000.00
NET TAXABLE INCOME 7,000,000.00 3,000,000.00 10,000,000.00
REGULAR RATE 1%
TAX DUE 100,000.00

Note: The educational institution is subject to income tax at the rate of 1% since its gross income from unrelated
activities did not exceed 50% of the total gross income.
ILLUSTRATION: PROPRIETARY HOSPITAL (25% RCIT)
ILR Hospital, a private non-profit hospital, has gross receipts of P15,000,000.00 with a cost of P6,000,000.00 and
allowable deductions of P3,250,000.00 from related activities, while for its unrelated activities, it incurred
P5,000,000.00 and P2,000,000.00 as cost of sales and allowable deductions, respectively, with a gross income of
P18,000,000.00, for Calendar Year 2021.

Computation of the tax shall be as follows:

Related Unrelated Total

activities Activities
Gross Sales 15,000,000.00 18,000,000.00 33,000,000.00
Less: Cost of Sales 6,000,000.00 5,000,000.00 11,000,000.00
Gross Income 9,000,000.00 13,000,000.00 22,000,000.00
Less: Allowable Deductions 3,250,000.00 2,000,000.00 5,250,000.00
NET TAXABLE INCOME 5,750,000.00 11,000,000.00 16,750,000.00
REGULAR RATE 25%
TAX DUE 4,187,500

Note: ILR Hospital is subject to the regular rate of 25% since its gross income from non-related activities is more
than 50% of its total gross income.
Government-Owned or Controlled Corporations (GOCCs)
General Rule: All corporations, agencies, or instrumentalities owned or controlled by the Government are subject
to 20% or 25% (Old rate 30%) RCIT on their taxable income

Exceptions:
• Exempted by virtue of existing special or general law
• Specific Corporations or Instrumentalities under the Tax Code and TRAIN Law:
a. Government Service Insurance System (GSIS)
b. Social Security System (SSS)
c. Philippine Health and Insurance Corporation (PHIC)
d. Local water utilities
Exempt Corporations (Section 30 of the Tax Code)
a. Labor, agricultural or horticultural organizations 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 (now governed by RA 8367
or the Revised Non-Stock Savings and Loan Association Act of 1997 and RA 6938, as amended
by RA 9520 or the Philippine Cooperative Authority Law of 2008)
c. A beneficiary society, order or association, operating for the exclusive benefit of the members such as
fraternal organizations operating under the lodge system, or a mutual aid association or a non-stock

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corporation organized by employees providing for the payment of life, sickness, accident, or other benefits
exclusively to the members of such society or order, or association, or nonstick corporation or their
dependents.
d. A 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, no part of its income 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 or which inures to the benefit of any private stockholder or individual
g. Civic league or organizations not organized for profit but operated exclusively for social welfare
h. Non-stock and nonprofit educational institution
i. Government educational institution
j. Farmer’s or other mutual typhoon or fire insurance company, mutual ditch or irrigation company, mutual
cooperative telephone company, or like organizations 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
k. Farmer’s, fruit growers’, or like association organized and operated as a sales agent for the purpose of
marketing the products of its members and turning back the proceeds of sales, less the necessary selling
expenses on the basis of the quantity of produce finished by them.

Note: Income from whatever kind and character of the above organizations from any of their properties, real or
personal, or from activities conducted for profit regardless of the disposition made of such income, shall be subject
to income tax except on non-stock, non-profit educational institution which remain exempt.
Resident Foreign Corporations
Classification Tax Base Rate
1. RFC - In General (including Offshore Banking Taxable Income (RCIT) 25% (old 30%)
Units) Gross Income (MCIT) 1% (old 2%)
2. International Carrier (Air and Shipping) Gross Philippine Billings 2 ½%
3. Philippine Branch of Companies whose Head Profits applied or 15%
Office is outside the Philippines (except PEZA) earmarked for remittance
4. Regional Operating Headquarters of Multi- Taxable Income (RCIT) 25% (old 10%)
National Companies Gross Income (MCIT) 1% (old - no MCIT)
5. Regional Area Headquarters Exempt from taxation
Notes:
1. Offshore banking units – prior to CREATE Law, the rate is 10% of taxable income
2. Regional Operating Headquarter of Multinational Companies – new rates apply beginning January 1, 2022
ILLUSTRATION: REGIONAL OPERATING HEADQUARTERS
EBQ Corporation is registered as a Regional Operating Head Quarter (ROHQ) since 2015. For taxable years 2020
to 2023, its operation showed the financial results:

TY 2020 TY 2021 TY 2022 TY 2023

Annual Income 75,000,000.00 120,000,000.00 130,000,000.00 75,000,000.00
Cost of Services 41,250,000.00 66,000,000.00 71,500,000.00 41,250,000.00
Gross Income 33,750,000.00 54,000,000.00 58,500,000.00 33,750,000.00
Allowable 33,625,000.00 41,200,000.00 42,550,000.00 35,125,000.00
Deductions
125,000.00 12,800,000.00 15,950,000.00 (1,375,000.00)
Computation of Income Tax Due
Net Taxable 125,000.00 12,800,000.00 15,950,000.00 (1,375,000.00)
Income/Gross
Income
Multiply by 10% 10% 25% 25%
Income Tax Due 12,500.00 1,280,000.00 3,987,500.00 0.00
MCIT: N/A N/A
Gross Income P58,500,000.00 33,750,000.00
MCIT Rate 1% 1.5%*
MCIT *585,000.00 506,250.00
Income Tax Due 3,987,500.00 506,250.00

Notes:
1. The regular rate of 25% shall be effective on January 1, 2022 for ROHQ. It will also be subject to MCIT
beginning on the said date, since EBQ Corp. started its operations way back in 2015.

MCIT rate of 1.5% was used since the rate from January 1 to June 30, 2023 is 1%, and for July 1 to December
31, 2023, the rate is 2%; thus, the average rate is 1.5%, the income tax rate to be used by EBQ Corporation in
computing the income tax due/payable for TY 2023.

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EXCEL PROFESSIONAL SERVICES, INC.

Non-resident Foreign Corporations

Classification Tax Base Rate
1. NRFC - In General Gross Income (FT) 25% (old 30%)
2. Non-Resident Cinematographic Film Owner, Film Rentals and other 25%
Lessor or Distributor items of gross income
3. Non-Resident Owner or Lessor of Vessels Gross Rentals and other 4 ½%
Chartered by Philippine Nationals chartered fees
4. Non-Resident Owner or Lessor of aircraft, Gross Rentals 7½%
machineries and other equipment
PEZA-registered Enterprises
Type of Pioneer Non-Pioneer Gross Income Regular DC
Registrants Taxation
Tax Rate Income Tax Holiday ITH 20% or 25% RCIT
5%
6 years 4 years (old 30%)
Notes:
1. ITH Exemption and 5% applies only on registered activities
2. Income from unregistered activities is subject to regular taxes
3. Expanding firms may be given ITH of three years
4. ITH may be extended but not to exceed eight (8) years
5. The 5% Gross Income Tax is distributed as follows: National – 3%; Local – 2%
6. If the registrant availed the 5% GIT, no national or local taxes may be imposed anymore
7. PEZA topic discussed extensively under Special Topics
R.A. 11534 – CREATE Law on PEZA and BOI
Effect of CREATE Law on Incentives Granted Prior to its Effectivity (April 11, 2021)
Registered business enterprises (RBE) with incentives prior to the effectivity of CREATE Law shall be subject to
the following rules:
1. With Income Tax Holidays (ITH) only – allowed to continue with the availment of the ITH for the
remaining period of the ITH as specified in the terms and conditions of registration.

Note: if RBE was granted ITH but have not yet availed of the incentive upon the effectivity of the
CREATE Law, they may use the ITH for the period specified in the terms and conditions of registration.

2. With ITH and entitled to 5% GIT after the ITH – allowed to avail of the 5% tax on gross income for
ten (10) years from the effectivity of the CREATE Law or until April 11, 2031.

3. With 5% GIT – allowed to continue availing the said tax incentive at the rate of 5% for ten (10) years
reckoned from the effectivity of the CREATE or until April 11, 2031.
TAXATION OF GENERAL PROFESSIONAL PARTNERSHIPS
• General Rule: GPPs are exempt from taxation.
• Exception: GPPs are taxable like corporation if they have ordinary income other than the income from
practice of profession
• Exception to Exception: GPPs are exempted even if they have other income provided the income are:
1. Subject to final tax
2. Exempt from tax
3. Exclusion from gross income
TAX LIABILITY OF GENERAL PROFESSIONAL PARTNERSHIPS
• A general professional partnership (GPP) shall not be subject to the income tax. Persons engaging in
business as partners in a general professional partnership shall be liable for income tax only in their
separate and individual capacities.

• For purposes of computing the distributive share of the partners, the net income of the partnership shall
be computed in the same manner as a corporation.

• Each partner shall report as gross income his distributive share, actually or constructively received, in the
net income of the partnership

• The GPP is a pass though entity only.

Illustration: Compute the income tax due of ABC & Co., CPAs based on the following facts:
Gross receipts Php 10,000,000
Less: Cost of Service 5,000,000
Gross Income Php 5,000,000
Less: Deduction (Itemized or OSD) 2,000,000
Net Income Php 3,000,000
Income Tax Due Php 0
Notes:
1. GPP is exempt if income of GPP is from practice of profession
2. If GPP has other ordinary income (income is from other than practice of profession), the GPP is taxable
as domestic corporation.
3. If GPP has other income but other income is (1) excluded from gross income, or (2) exempt from taxation,
or (3) subjected to final tax including capital gains tax, the GPP remains exempted.
END

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