Basic Corporate Taxation

Corporation
Domestic Resident Foreign Corp Non-Resident Foreign Corp

a. Regular Domestic a. Regular RFC a. Regular NRFC

b. Special Domestic Corp
1. Non-profit hospital
2. Proprietary Educ. Institution
3. FCDU/EFCDU
4. PEZA nad BOI registered
c. Exempt Corp
b. Special RFC b. Special NRFC
1. OBUs and EFCDUs 1.NR cinematographic film owner
2. RAHQs & ROHQ 2. NR lessor or owners of aircraft
3. International carrier ( by air and sea) 3. NR lessor of vessels chartered by Phil. Naationals
4. BOI or PEZA registered

1. Exempt non-profit inder NIRC

2. Gov't. Agencies and instrumentalities
3. Certain GOCCs
4. Cooperatives
 TYPES OF INCOME SUBJECT TO TAX

1. Ordinary income
2. Passive income
3. Capital gains

Corporate taxpayers, unlike individuals, may be subject to taxes other than

the standard income taxes such as;

4. Minimum Corporate Income Tax (MCIT)

5. Improperly accumulated Earnings tax (IAET)
6. Gross Income Tax (GIT)
 within without tax base tax rate

Domestic corp x x Net income 25% RCIT

1% MCIT
20% MSME

RFC x
Net income 25% RCIT
1% MCIT

NRFC x Gross Income 25% FWT

The records of ABS Corp, a domestic corp. organized in 2015 and engaged
in merchandising show the following;

2018 2019 2020

Sales 2,040,000 2,500,000 2,100,200
Cost of Saless 430,000 310,000 510,100
Operating Expenses 1,540,200 2,100,000 1,300,000

Required:
Compute the regular income tax(RCIT), the Minimum Corporate Income Tax
(MCIT)and the income tax payable for 2018, 2019 and 2020.
SOLUTION:

2018 2019 2020

Sales 2,040,000 2,500,000 2,100,200

Cost of Sales 430,000 310,000 510,100

Gross Income 1,610,000 2,190,000 1,590,100

Less: Operating Expenses 1,540,200 2,100,000 1,300,400

Taxable Income 69,800 90,000 289,700

Rate of Tax 30% 30% 30%

RCIT 20,940 27,000 86,910

Gross Income 1,610,000 2,190,000 1,590,100

Rate of Tax 2% 2% 2%

MCIT 32,200 43,800 31,802

The tax due in 2020 is the RCIT

Tax due RCIT 86,910

Less: Excess MCIT over RCIT in 2019 16,800

Tax Payable 2020 70,110

Notes:

a. Income tax due in 2018 is the RCIT, The company is not yet
subject to MCIT

b. Income tax due in 2019 is the higher MCIT. The company is

subject to MCIT beginning taxable year 2019. The excess MCIT
over the RCIT ( 43,800 – 27,000 = 16,800 ) will be carried over
to 2020
Tax Computation of GPP

Atty. Luke is a partner of LSS and Co., a general professional

partnership who owns 40% therein. For taxable year 2021, the
gross receipts of the partnership amounted to P4,750,000; cost of
services and other operating expenses were P 1,200,000 and P
950,000 respectively. Determine the income tax liability of Atty.
Luke for 2021;
Gross receipts (GPP) 4,750,000
Less: Cost of Service 1,200,000
Gross Income 3,550,000
Less: Operating Expenses 950,000
Distributable net income 2,600,000

Share of Atty Luke

(2,600,0000 x 40%) 1,040,000

Tax due
on 800,000 130,000
(1,040,000 - 800,000 x 30%) 72,000
Tax due 202,000
Assume instead that LSS Corp is a general co-partnership, a taxable partnership.
Compute the taxable income of the partnership.
Gross receipts (GPP) 4,750,000
Less: Cost of Service 1,200,000
Gross Income 3,550,000
Less: Operating Expenses 950,000
Net Income before tax 2,600,000
Income tax rate 25%
Income tax due 650,000

Share of Partners subject to fi nal tax

Share of Atty Luke

Net Income before tax 2,600,000
Income tax expense 650,000
Net income aft er tax 1,950,000
Share in Profi t 40%
780,000
Final tax rate 10%
78,000
Share in the taxable partnership 702,000