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SPECIAL INCOME TAX ON CO

TYPE OF TP TAX RATE


Proprietary Educational
1 Institutions and Hospitals 10%

2 GOCCs Rates applied to corporations engaged i


RESIDENT FOREIGN CORP
International Carrier

3 2.50%

Offshore Banking Units


(OBUs)
EXEMPT

10 FT

Regional or Area
Headquarters
5 EXEMPT

Regional Operating Head


quarters (Branch of a Foerign
Multinational Company)

6 10%

NON RESIDENT FOREIGN CO


Non-Resident (NR)
inematographic Film Owner/
7 Lessor/ Distributos25% 25%
Non-Resident (NR) Owner/
Lessor of Vessels chartered
by Phil Nationals (Filipino
8 Citizrns or corporations4.5% 4.50%

Non-Resident (NR) Owner/


Lessor of Aircraft, Machinery
9 and Other Equipment 7.50%
SPECIAL INCOME TAX ON CORPORATIONS
TAX BASE
Taxable Income

Rates applied to corporations engaged in


RESIDENT FOREIGN CORPORATIONS
Gross Philippine Billings (GPB)

Income from 1) foreign currency


transactions with NON-RESIDENTS 2)other
OBUs 3)local commercial banks 4)
branches of ferign banks auth

Any interest income derivd from foreign


currency loans granted to RESIDENTS other
than, OBUs or local commercial banks,
branches of foreign banks

Taxable Income

NON RESIDENT FOREIGN CORPORATION


Gross Income
Gross Rentals, lease or charter fees from
leases or charters to Filipino Citizens/
Corpoations

Gross Rental
ORPORATIONS
Remarks
Exception: If income from unrelated activity EXCEEDS 50%,
then 30% on taxable income
EXCEPTION: SSS, GSIS, PHIC, PCSO, and PAGCOR
RPORATIONS
GPB for international air accier- amount of gorss rev. derived
from carriage of persons. Excess baggage, cargo, and mail
originating from the Phil. In a cpntinuous and unnterupted
flight, irrespectibe.

EXCEPT NET INCOME from such transaction as may be


specified by the Sec of Finance which shall be subject to 30%
regular income tax

Definition of OBUs

RAH: 1) branch established in the Phil. By a multinational co.


2) Does not earn income from Phil 3) acts as supervisory,
communications and coordinating cefnter for mulitnational
co.'s subs/ branches in the Asia/ Pacific region

ROH: 1) branch established in the Phil. By a multinational co.


2) engaged in any of the ff activities (EXCLUSIVE LISTING): A)
general admin and planning; B) Business planning and
coordination C) sourcing and procurement of raw mats D)
Corporate Finance advisory services E) Marketing control and
sales Promotion; F) Training and personel management etc.

CORPORATION
KINDS OF TAX PAYERS
TYPES SUB TYPE

CITIZEN

Resident Citizen

Non Resident

ALIENS

Resident Alien

Non-Resident Alien (NRA)


engaged in treade of
business in the Philippines

Non-Resident
Alien (NRA)
Non-Resident Alien (NRA)
not engaged in trade or
business
Employees
subject to
preferrential
Rates (15)

Alien emplotes by
RAH and ROH of
multinational
companies

Alien employed
by OBUs

Alien employs by

Estates and Trust

Co-ownership Per
se
Co-owners

GPP Per Se

GPP Partners

CORPORATIONS

Domestic
Crporation
Partnership,
except GPP

EXCEMPT JV or Consortium

Joint Venture (JV)


or Consortium

Taxable JV or Consortium

Foreign
Corporations

Resident Foreign

Non-Resident
Foreign (note of
rates of special
NRF)
KINDS OF TAX PAYERS
DEFINITION/ QUALIFICATIONS TAXABLE ON INCOME TAX RATE

CITIZEN
Within and Without 5%-32%

Flat Rates, inc.


NRC MEANS: 1) Citizen of the Philippine Within 5%-32%
established satisfactority to the CIR the fat
of

A)) his physical presence abroad with B)


definite intentionto reside therein
2) Citizen of the Philippines leaves
Philippines dring taxable year to reside
abroad, either as an a) immigrant b) for
employment on a permanent basis

3) Citizen of the Philippines a) worls and Flat Rates, inc.


derives income from abroad and b)
employment requires his physical presence
abroad "most fo the tie", i.e. more than 183
days though not continuous

4) Citizen previously considered as NRC and


who arrives in the Philippines AT. Any time
during taxable year to reside permanently
in Philippines

ALIENS
Within 5%-32%

Flat Rates
If aggregate stay in Philippines during any Within 5%-32%
calendar year is MORE THAN 180 DAYS

Flat Rates
Within 25%

Flat Rates
Within and Without 5%-32%

Flat Rates, inc.


NOT SUBJECT TO TAX

Created for sole purpose of exercising NOT SUBJECT TO TAX


common profession
Within and Without 5% -32%

Flat Rate
CORPORATIONS
Organized under the laws of the Philippines Within and Without 30%

Flat Rates, Inc


Within and Without 30%

Flat Rates, Inc


Following elements required to constitute a
JV:

~Unincorporated JV, ~formed for the


purpose of undertaing constructionn
projects ~ engageing in petroleum, coal,
geothermal, and other energy operations
pursuant to an operating or consorium
agreement under a service contract with
the Govt ~excempt JV may become taxable
if after completion of construction parties
engage in the lease and/or sale of
completed units

Within 30%

Flat Rates
Organized under the laws of foreign Within
countries
FC engaged in trade r business in the Within 30%
Philippines
FC not engaged in trade r business in the Within 30%
Philippines
TAX BASE

Taxable income

Passive Income
Taxable Income

Passive Income

Taxable Income

Passive Income
Taxable Income

Passive Income
Entire Income

Passive Income
Taxable incom
(only allowered
personal
exemption =single
ind)

Passive Income

Taxable income
(distributive share
in GPP= Gross
Income-net profit
of GPP; deemed
distributed to
partners (even
without actual
distribution)

Passive Income

Taxable Income

Passive Income
Taxable Income

Passive Income

Taxable Income

Passive Income

Taxable Income

Gross Income
PARTY RECEIVES
Transferror (of property) Shares
Transferee (NEWCO) Property

MEANING
Acquisition Cost/ Original Cost of property PRIOR the
Basis transfer
Cost of the shares/ property
Substituted Basis AFTER the transfer

When NEWCO sells


subsequntly BASIS OF TAX SP- Substituted Bases= Gains
PARTY INVOLVED

Transferor
Shares now with Transferor;
and Property now with
NEWCO
Substituted Basis
Subject to Tax

NEWCO SELLS P2/ Share:

Cost (Gain was not taxable


so P1000)
TOR
Acquisition Cost 1000
FMV 5000
Assets xxx
Shares 5000
AC 1000
REAL Gain 4000
Recognized Gain 0

TOR TEE
Shares Property
1000 1000

10,000

(no change in Subject to


benefitial 40c-2
1,000 ownership tansaction
9000
JAPANCO
PHILCO (NRFC)
Gross Income 100.00 400.00
Dividend income 21.00
Deductions 70.00 300.00
Net Income 30.00 121.00
Income Tax 9.00 42.35
Retained Earnings 21.00

Assumed Income Tax Rate of Japan 0.35

I. If with Tax Spairing:


A. JAPAN CO will be paid Phil. Government (Thru PHILCO)

Income tax 9.00


Dividends tax (21*15%) 3.15
Total 12.15

B. JAPAN CO will pay Japanese Government

Income Tax 42.35


Less: 15% dividends tac 3.15
Less: 15% tax deemed paid to Phil.
Govt. 3.15
36.05

Total payments of JAPANCO 48.20

II. If NO tax sparing


A. JAPAN CO will be paid Phil. Government (Thru PHILCO)

Income tax 9.00


Dividends tax (21*15%) 3.15
Total 12.15

B. JAPAN CO will pay Japanese Government


Income Tax 42.35
Less: 15% dividends tac 3.15
Less: 15% tax deemed paid to Phil.
Govt. 0.00
39.20

Total payments of JAPAN CO 51.35

*Thus, dividends paid to JAPAN Co will be subject to 30%


dividends tax

A. JAPAN CO will be paid Phil. Government (Thru PHILCO)

Income tax 9.00


Dividends tax (21*15%) 6.30
Total 15.30

B. JAPAN CO will pay Japanese Government

Income Tax 42.35


Less: 15% dividends tac 6.30
Less: 15% tax deemed paid to Phil.
Govt. 0.00
36.05

Total payments of JAPAN CO 51.35

III. Assuming that it is not taxed at all


A. JAPAN CO will be paid Phil. Government (Thru PHILCO)

Income tax 9.00


Dividends tax (21*15%) 3.15
Total 12.15
B. JAPAN CO will pay Japanese Government

Income Tax 35.00


Less: 15% dividends tac 3.15
Less: 15% tax deemed paid to Phil.
Govt. 3.15
28.70

Total payments of JAPAN CO 40.85


Gross Sales XXX
Less: Cost of Sales XXX
Gross Income XXX

Allowable Deductions (Sec. 34)


Fringe Benefit Expense 800,000.00
(1-32%) 0.68
1,176,470.59
0.32
Fringe Benefit Tax 376,470.59

Fringe Benefit (Expense +Tax) 1,176,470.59

Residential Property leased by ER for used of EE-


MV = 50% of value of benefit

Yearly Lease 1,500,000.00


Divide by 12.00
Monthly Rent 125,000.00
Multiplied by 0.50
Monthly MV of Benefit 62,500.00
Divide By 0.68
Grossed-up Monetary Value 91,911.76
Multiplied By 0.32
FBT 29,411.76

FB expense 625,000.00
FBT 29,411.76
Residential property OWNED by ER and assigned
for EES use- MV = (5% of higher of ZV or FMV) x
50%

Higher of ZV and FMV 15,000,000.00


Multiplied by 0.05
Annual Value of Benefit 750,000.00
Multiplied by 0.50
Annual MV of Benefit 375,000.00
Divide by 0.68
GMV 551,470.59
Multiplied by 0.32
FBT 176,470.59

FB expense 375,000.00
FBT 176,470.59

TAX ARBITRAGE

Net Income Before Interest


Expense 1,500,000.00

Interest Income subject to FWT 150,000.00


Interest Expense 120,000.00

WITH the Limitation

Net income before Interest


Expense 1,500,000.00
Less: Interest Expense 120,000.00
Less: 33% x Interest Income 49,500.00
70,500.00 70,500.00
Taxable Income 1,429,500.00
Income Tax Due 428,850.00

WITHOUT the Limitation


Net Income Before Interest
Expenses 1,500,000.00
Less: Interest Expenses 120,000.00
Less: 33% x Interest Income 0.00
120,000.00 120,000.00
Taxable Income 1,380,000.00
Income Tax Due 414,000.00

Interest Expense 120,000.00

Less: Interest Income subj to FT 120,000.00


Multiplied by: Rate 0.33

Interest expense NOT deductible 39,600.00 39,600.00


Deductible interest expense 80,400.00

Multiplied by: Income Tax Rate 0.30


TAX BENEFIT 24,120.00

FT on Interest Income (120K x


20%) 24,000.00
EG. ER paid for foreign travel expenses of his EE
totaling 100K

Net Amount of Money Received 100,000.00


Fringe Benefit Tax 320,000.00
FB-GMV 132,000.00
Limitation on tax credit
Limit on
Net Y from FC Phiiipine Amount of
Net Y from ALL Shources x Income Tax = Tax Credit
TAXATION OF INDIVIDUALS

A) If Income Is Pure Compensation Income


Sec 34(n)
Gross Compensation Income (within/without) xxx
LESS: Premium Payments (Sec 34n) (xxx)
Net Income from All Sources xxx
LESS: Personal and Additional Exemptions (xxx)
Taxable Compensation Income xxx
Multiplied by: Tax Rate %

xxx
Income Tax Payable

B) If Business Income and/or Income From Profession

xxx
Gross Sales/ Receipts/ Income (within/without)
LESS: Allowable itemized deductions or OSD at 40% OSD (xxx)
Net Income from All Sources xxx
LESS: Personal and Additional Exemptions (xxx)
Taxable Compensation Income xxx
Multiplied by: Tax Rate %
Income Tax Payable xxx
EXCESS of MCIT Expire
Normal
YEAR MCIT OVER NORMAL in
Income Tax
2011 50,000.00 65,000.00 INCOME TAX
15,000.00
2012 60,000.00 90,000.00 30,000.00 2014
2013 100,000.00 60,000.00 2015

Compute the tax payable in 2013


NCIT 100,000.00
LESS: Excess in 2011 15,000.00
LESS: Excess in 2012 30,000.00

Net Amount of Tazable Payable 55,000.00


RCIT/NCIT MCIT IAET
Gross Sales Gross
LESS: Cost of Sales LESS: Cost of Sale Taxable Income
GY GI ADD:
VS
LESS: AD x 2%
NI MCIT
x 20%
RCIT/NCIT

LESS:

ADD:
LESS:

Improperly accumulated taxable income


Multiplied by: IAET Rate
IAET
IAET

Taxable Income xxx


Income exempt from tax xxx
Income excluded from gross income xxx
Income subject to final tax xxx
Amount of NOLCO deducted xxx
xxx xxx

Dividends actually or constructively paid (xxx)


Income tax paid for the TY (xxx)
Amount reserved for reasonable needs of (xxx)
business
(xxx) (xxx)
xxx
Retained earnings from prior years xxx
Amount that may be retained (100% of paid-up (xxx)
capital)
Improperly accumulated taxable income xxx
Multiplied by: IAET Rate 10%
xxx
QTR MONTHS DEADLINE QTR GROSS SALES
1st JFM 30-May 60 days from the
1st 100,000.00
2nd AMJ 30-Aug close of taxable 2nd 150,000.00
quarter
3rd Tax
Annual JAS 30-Nov 3rd 200,000.00
Return OND 15-Apr 4th 250,000.00
700,000.00
**Revenue District Office has Jurisdiction
Long Cut
COS AD 1st Quarter 2nd Quarter
20,000.00 20,000.00 Gross Sales 100,000.00 Gross Sales 250,000.00
25,000.00 20,000.00 (COS) 20,000.00 (COS) 45,000.00
30,000.00 20,000.00 Gross Income 80,000.00 Gross Income 205,000.00
35,000.00 20,000.00 (AD) 20,000.00 (AD) 40,000.00
110,000.00 80,000.00 60,000.00 165,000.00
x Tax Rate 0.30 x Tax Rate 0.30
Tax Due 18,000.00 49,500.00
(1st QTR) 18,000.00
Tax Due 31,500.00
3rd Quarter 4th Quarter
Gross Sales 450,000.00 Gross Sales 700,000.00
(COS) 75,000.00 (COS) 110,000.00
Gross Income 375,000.00 Gross Income 590,000.00
(AD) 60,000.00 (AD) 80,000.00
315,000.00 510,000.00
x Tax Rate 0.30 x Tax Rate 0.30
94,500.00 153,000.00
(1st QTR) 18,000.00 (1st QTR) 18,000.00
(2nd QTR) 31,500.00 (2nd QTR) 31,500.00

Tax Due 45,000.00 (3rd QTR) 45,000.00


Tax Due 58,500.00

Short Cut

4th Quarter
Gross Sales 250,000.00
(COS) 35,000.00
(AD) 20,000.00
195,000.00
x Tax Rate 0.30
Tax Due 58,500.00