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BIR Form 1702 Annual Income Tax Return (For Corporations and

Partnerships). Please click here to download a PDF file of the form.

Documentary requirements
1. Certificate of Income Payments not Subjected to Withholding Tax (BIR
Form 2304), if applicable
2. Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if
applicable
3. Duly approved Tax Debit Memo, if applicable
4. Proof of Foreign Tax Credits, if applicable
5. Income tax return previously filed and proof of payment, if amended return
is filed for the same taxable year
6. BIR Form 1702 Account Information Form (AIF) and/or the Certificate of
the independent CPA with Audited Financial Statements, if the gross quarterly
sales, earnings, receipts or output exceed P150,000.00 *
7. Proof of prior years excess tax credits, if applicable
NOTE: Pursuant to Revenue Memorandum Circular No. 6 2001,
corporations, companies or persons whose gross quarterly sales, earnings,
receipts or output exceed P 150,000.00 may not accomplish BIR Form 1702
Account Information Form (AIF). In lieu thereof, they may file their annual
income tax returns accompanied by balance sheets, profit and loss statement,
schedules listing income-producing properties and the corresponding income
therefrom, and other relevant statements duly certified by an independent
CPA.

Computation of income tax due and


payable
The following are the steps to compute the income tax due and payable for
taxable partnerships and corporations:
1. Compute normal income tax.
Total Gross Income (a)
Less: Deduction (Optional Standard Deduction OR Itemized Deduction) (b)
Equals: Taxable Income
Tax Rate (except MCIT Rate) (c)
Equals: Normal Income Tax
Notes:
a. Total gross income equals to your gross income from operation
(Sales/Revenues/Receipts/Fees minus cost of sales/services) plus nonoperating and other taxable income.
b. A corporation shall choose either the itemized or optional standard
(described below) deduction. It shall indicate the choice by marking with X
the appropriate box, otherwise, the corporation shall be considered as having
availed of the itemized deduction. The choice made in the return is irrevocable
for the taxable year for which the return is made.
Optional Standard Deduction (OSD) A maximum of 40% of the gross
income shall be allowed as deduction in lieu of the itemized deduction.
However, a corporation who availed and claimed this deduction is still required
to submit its financial statements when it files its annual tax return and to keep
such records pertaining to its gross income.

Itemized Deduction There shall be allowed as deduction from gross


income all the ordinary and necessary trade and business expenses paid or
incurred during the taxable year in carrying on or which are directly
attributable to the development, management, operation and/or conduct of the
trade and business. Itemized deduction includes also interest, taxes, losses,
bad debts, depreciation, depletion, charitable and other contributions,
research and development and pension trust.
c. In general, domestic corporations and taxable partnerships are taxed at
30% on its net taxable income from all sources effective January 1, 2009.
Other types of corporations such as, non-stock non-profit hospitals,
educational institutions and general professional partnerships are taxed
differently. As provided in the Philippine tax code under Sec. 26, any general
professional partnership, is exempted or shall not be subject to income tax.
But the person engaging in business as partner in a general professional
partnership shall be liable for income tax only in their separate and individual
capacities. General professional partnerships are exempt, but still required to
file their income tax return with the BIR.
To see the complete list of different tax rates for different types of corporations
and partnerships, please refer to page 4 of BIR form 1702.
2. Compute aggregate tax due
Tax on Transactions under Regular Rate (a)
Less: Unexpired Excess of Prior Years MCIT over Normal Income Tax Rate
(b)
Add: Tax Due to the BIR on transactions under Special Rate, if applicable (c)
Equals: Aggregate Tax Due
Notes:

a. The tax on Transactions under Regular Rate is equal to Normal Income Tax
or Minimum Corporate Income Tax (MCIT), whichever is higher. Thus, you
need to determine your to compare it to your Normal Income Tax whichever
is higher will be your Tax on Transactions under Regular Rate. However, a
corporation only starts to be covered by the MCIT on the 4th year of its
business operations. The period of reckoning which is the start of its business
operations is the year when the corporation was registered with the BIR. This
rule will apply regardless of whether the corporation is using the calendar year
or fiscal year as its taxable year.
The MCIT is 2% of the gross income of the corporation at the end of the year.
Gross income means gross sales less sales returns, discounts and cost of
goods sold. Passive income, which have been subject to a final tax at source
do not form part of gross income for purposes of the MCIT.
b. Any excess of the MCIT over the normal income tax may be carried
forward on an annual basis and be credited against the normal income tax for
3 immediately succeeding taxable years. Any amount paid as excess
minimum corporate income tax should be recorded in the corporations books
as an asset under account title Deferred charges-MCIT
c. This is the total tax due on transactions covered by the preferential rate
under special law.
3. Compute total amount payable
Aggregate Income Tax Due (see # 2)
Less: Total Tax Credits/Payments (a)
Tax Payable/(Overpayment)
Add: Penalties (b)
Equal: Total Amount Payable/(Overpayment)

Note:
a. The following are the tax credits/ payments a corporation can claim:
Prior Years Excess Credits other than MCIT
Tax Payments for the First Three Quarters
Creditable Tax Withheld for the First Three Quarters
Creditable Tax Withheld Per BIR Form No. 2307 for the Fourth Quarter
Foreign Tax Credits, if applicable
Tax Paid in Return Previously Filed, if this is an Amended Return
b. The following penalties are imposed on the corporation on the following
circumstances:
A. A surcharge of twenty five percent (25%) for each of the following
violations:
a) Failure to file any return and pay the amount of tax or installment due on or
before the due dates;
b) Unless otherwise authorized by the Commissioner, filing a return with a
person or office other than those with whom it is required to be filed;
c) Failure to pay the full or part of the amount of tax shown on the return, or
the full amount of tax due for which no return is required to be filed, on or
before the due date;
d) Failure to pay the deficiency tax within the time prescribed for its payment
in the notice of assessment.
B. A surcharge of fifty percent (50%) of the tax or of the deficiency tax, in case
any payment has been made on the basis of such return before the discovery
of the falsity or fraud, for each of the following violations:
a) Willful neglect to file the return within the period prescribed by the code or

by rules and regulations; or


b) In case a false or fraudulent return is willfully made.
C. Interest at the rate of twenty percent (20%) per annum on any unpaid
amount of tax, from the date prescribed for the payment until it is fully paid.
D. Compromise penalty.

Procedures for payment and filing


1. Fill-up BIR Form 1702 in triplicate.
2. If there is payment:
-Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District
Office where you are registered and present the duly accomplished BIR Form
1702, together with the required attachments and your payment.
-In places where there are no AABs, proceed to the Revenue Collection
Officer or duly Authorized City or Municipal Treasurer located within the
Revenue District Office where you are registered and present the duly
accomplished BIR Form 1702 with the required attachments and your
payments.
-Receive your copy of the duly stamped and validated form from the teller of
the AABs/Revenue Collection Officer/duly Authorized City or Municipal
Treasurer.
3. For No Payment Returns including refundable/ creditable returns and
returns with excess tax credit carry over:
-Proceed to the Revenue District Office where you are registered or to any Tax
Filing Center established by BIR and present the duly accomplished BIR Form

1702, together with the required attachments.


-Receive your copy of the duly stamped and validated form from the RDO/Tax
Filing Center representative

Deadline
Final Adjustment Return or Annual Income Tax Return On or before the 15th
day of the fourth month following the close of the taxpayers taxable year
For more information, please visit this web page (Tax Info) from the Bureau of
Internal Revenue (BIR). Updates to this article will be provided as necessary.
Update: The BIR issued Revenue Regulation No. 19-2011 on November
2011 requiring corporation, partnerships and non-individual taxpayers to use
the revised BIR Form 1702 for the income tax return covering and starting
December 31, 2011 for filing on or before April 15, 2012. Furthermore, all
juridical entities that follow a fiscal year of reporting are also required to start
using the new form if they are under the fiscal year ending January 31,
2012. For more information about the instructions and guidelines on filing the
said return, please refer to the last page of the new form provided in the link
above (in the tax form you will use section).

The tax form you will use


For self-employed individuals such as proprietors, professionals and those
with both business and compensation income, you will useBIR Form
1701 (please click here to download form). It must be prepared in 3 copies
(one for BIR, one for the Authorized Agent Bank and one for your copy).

Documentary requirements
Below are the documentary requirements that should be attached with the
return, if applicable. For taxpayers earning both business income and
compensation income, BIR Form 2316 should be attached.
1. Certificate of Income Tax Withheld on Compensation (BIR Form 2316), if
applicable
2. Certificate of Income Payments not Subjected to Withholding Tax (BIR
Form 2304) if applicable
3. Certificate of Creditable Tax Withheld at Source (BIR Form 2307), if
applicable
4. Waiver of the Husbands right to claim additional exemption, if applicable
5. Duly approved Tax Debit Memo, if applicable
6. Proof of Foreign Tax Credits, if applicable
7. Income Tax Return previously filed and proof of payment, if filing an
amended return for the same year
8. Account Information Form (AIF) or the Certificate of the independent CPA
with Audited Financial Statements if the gross quarterly sales, earnings,
receipts or output exceed P 150,000.00
9. Proof of prior years excess tax credits, if applicable

Computation of Income Tax Due and


Payable

The following are simple steps to calculate your income tax payable.
1. Compute your taxable Compensation Income (positive) or excess of
Deductions over Taxable Compensation Income (negative). Here is how
you will compute it.
a. Determine your Gross Taxable Compensation Income. This is the income
you earn from your employer during the taxable year. If you are earning purely
from your business or you are not employed, then you can leave it blank.
b. Determine your premium paid on Health and or Hospitalization, which
should not exceed Php 2,400 per year. If none, then leave it blank. *
c. Determine your Personal and Additional Exemptions as follows:
Personal Exemptions:
For single individual or married individual judicially decreed as legally
separated with no qualified dependentsP
50,000.00
For head of familyP 50,000.00
For each married individual *P 50,000.00
Note: In case of married individuals where only one of the spouses is
deriving gross income, only such spouse will be allowed to claim the
personal exemption.
Additional Exemptions:
* For each qualified dependent, a P25,000 additional exemption can be
claimed but only up to 4 qualified dependents

The additional exemption can be claimed by the following:


* The husband who is deemed the head of the family unless he explicitly
waives his right in favor of his wife
* The spouse who has custody of the child or children in case of legally
separated spouses. Provided, that the total amount of additional
exemptions that may be claimed by both shall not exceed the maximum
additional exemptions allowed by the Tax Code.
* The individuals considered as Head of the Family supporting a
qualified dependent
d. Add the amounts in (b) and (c), then deduct the total from the amount
in (a) to arrive at your taxable Compensation Income (positive) or excess
of Deductions over Taxable Compensation Income (negative).
2. Compute your gross taxable business or professional income. Here is
how you will calculate it.
a. Determine your sales, receipts or revenues for the taxable year.
b. Determine your cost of sales or cost of services.
c. (a) minus (b) will simply give you your gross taxable or professional income.
3. Compute your total taxable business or professional income by simply
adding result in (2) and your other taxable income.
4. Compute your Net Income. Your Net Income is equal to result in (3) minus
your allowable deductions. Your allowable deductions can be either:
a) Optional Standard Deduction an amount not exceeding 40% of the net
sales for individuals and gross income for corporations; or

b) Itemized Deductions which include the following:

Expenses

Interest

Taxes

Losses

Bad Debts

Depreciation

Depletion of Oil and Gas Wells and Mines

Charitable Contributions and Other Contributions

Research and Development

Pension Trusts

Note: A taxpayer engaged in business or in the practice of profession


shall choose either the optional or itemized deduction (described
below). He shall indicate his choice by marking with X the appropriate
box, otherwise, he shall be deemed to have chosen itemized deduction.
The choice made in the return is irrevocable for the taxable year
covered.
Reminder: There are expenses that have ceilings or limits as deductibles to
your taxable income, such as interest expense, representation and
entertainment expense, etc. To learn more, please read our article Deductible
Expenses (Allowable Deductions) in the Philippines.

5. Compute you total taxable income by adding the result in #4 (Net


Income) to the result in #1 (taxable Compensation Income or excess of
Deductions over Taxable Compensation Income). If the result is negative or it
becomes a loss, then you will not have a tax due for the taxable year,
otherwise, continue to the next step.
6. Compute your Income Tax Due. This is also your income tax expense
incurred during the taxable year. Calculate your tax due for the taxable year
using the following tax rate table.

Note: When the tax due exceeds P2,000.00, the taxpayer may elect to pay in
two equal installments, the first installment to be paid at the time the return is
filed and the second installment 15 of the same year at on or before July the
Authorized Agent Bank (AAB) within the jurisdiction of the Revenue District
Office (RDO) where the taxpayer is registered.

7. Compute your Income Tax Payable. This is the tax you are still liable at
the end of the year. To calculate your income tax payable, deduct your income
tax due with the following tax credit/payments, if available.
-Prior Years Excess Credits
-Tax Payments for the First Three Quarters
-Creditable Tax Withheld for the First Three Quarters
-Creditable Tax Withheld Per BIR Form No. 2307 for the 4th Qtr.
-Tax Withheld Per BIR Form No. 2316
-Foreign Tax Credits
-Tax Paid in Return Previously Filed, if you have already file and this is your
Amended Return
-Other Payments made
8. Compute your Total Payable. If unfortunately, you fail to pay your income
tax on or before the due date, the following penalties will be imposed and will
be added to your total amount payable.
1. A surcharge of twenty five percent (25%) for each of the following violations:
a) Failure to file any return and pay the amount of tax or installment due on or
before the due dates;
b) Filing a return with a person or office other than those with whom it is
required to be filed;
c) Failure to pay the full or part of the amount of tax shown on the return, or
the full amount of tax due for which no return is required to be filed, on or
before the due date;
d) Failure to pay the deficiency tax within the time prescribed for its payment
in the notice of Assessment (Delinquency Surcharge).

2. A surcharge of fifty percent (50%) of the tax or of the deficiency tax, in case
any payment has been made on the basis of such return before the discovery
of the falsity or fraud, for each of the following violations:
a) Willful neglect to file the return within the period prescribed by the Code or
by rules and regulations; or
b) In case a false or fraudulent return is willfully made.
3. Interest at the rate of twenty percent (20%) per annum, or such higher rate
as may be prescribed by rules and regulations, on any unpaid amount of tax,
from the date prescribed for the payment.
A simple illustration of computing total income tax payable is shown
below:
Gross Income (Gross business income, compensation income and other
income)
Less: Allowable Deductions (Itemized or Optional) (refer to # 4)
Equals: Net Income
Less: Personal & Additional Exemptions (see #1)
Equals: Net Taxable Income
Multiply by Tax Rate (5 to 32%) (refer to # 6)
Equals: Income Tax Due
Less: Tax credits & payments (refer to #7)
Equals: Income tax payable
Add: Penalties (Surcharge, interests & compromise) (refer to #8)
Equals: Total amount payable

Procedures for paying and filing


1. Fill-up BIR Form 1701 in triplicate copies.
2. If there is payment:
a. Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue
District Office where you are registered and present the duly accomplished
BIR Form 1701, together with the required attachments and your payment.
b. In places where there are no AABs, proceed to the Revenue Collection
Officer or duly Authorized City or Municipal Treasurer located within the
Revenue District Office where you are registered and present the duly
accomplished BIR Form 1701, together with the required attachments and
your payment.
c. Receive your copy of the duly stamped and validated form from the teller of
the AABs/Revenue Collection Officer/duly Authorized City or Municipal
Treasurer
3. For No Payment including refundable/ creditable returns, returns with
excess tax credit carry over, and returns qualified for second installment:
a. Proceed to the Revenue District Office where you are registered or to any
established Tax Filing Centers established by the BIR and present the duly
accomplished BIR Form 1701, together with the required attachments.
b. Receive your copy of the duly stamped and validated form from the
RDO/Tax Filing Center representative.

Deadline

Final Adjustment Return or Annual Income Tax Return On or before the


15th day of April of each year covering income for the preceding year
For more information, such as who are the individuals exempt from income
tax and other tax related information, please visit this web page (Tax Info)
from the Bureau of Internal Revenue (BIR). Updates to this article will be
provided when necessary.
Update 1 (April 28, 2011)
For professionals and freelancers, such as online entrepreneurs, bloggers,
web designers, mixed income earners, etc., who keep on asking how to
register with the BIR and pay their income taxes, we have published an article
titled How to Register with the BIR (for Professionals) for your guide.
Update: The BIR issued Revenue Regulation No. 19-2011 on November 2011
requiring self-employed individual taxpayers to use the revised BIR Form
1701 for the income tax return covering and starting December 31, 2011 for
filing on or before April 15, 2012. For more information about the instructions
and guidelines on filing the said return, please refer to the last page of the
new form provided in the link above (in the tax form you will use section).

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