It is an artificial being created by

operation of law, having the rights

of succession and the powers,
attributes and properties,
expressly authorized by law or
incident to its existence. (Sec. 2,
BP No. 68 Corporation Code)
Section 22(B),NIRC - corporation shall include
partnerships, no matter how created or organized,
joint-stock companies, joint accounts ( cuentas en
participacion), associations or insurances
companies, but does not include General
professional partnerships, Joint venture &
consortium formed for the purpose of undertaking
construction projects or Joint venture &
consortium formed for the purpose of engaging
petroleum, coal geothermal and other energy
operations pursuant to an operating or consortium
agreement under a service contract with the
Government.
GR: taxable no matter how created or
organized.
Exception:
1. General professional partnerships;
2. Joint venture & consortium formed for the
purpose of undertaking construction projects; or
3. Joint venture & consortium formed for the
purpose of engaging petroleum, coal
geothermal and other energy operations
pursuant to an operating or consortium
agreement under a service contract with the
Government.
A, and other 15 individuals Put up money to
buy a sweepstakes ticket for the sole purpose
of dividing equally the prize which they may
win as they did in fact the amount of
P50,000.00.

Is the prize taxable?

YES. An unregistered partnership was formed in
this case therefore the prize they won therein is
taxable.

A and B are co-owners of inherited properties. They
agreed to use the said properties and the income
derived there from as a common fund with the
intention to produce profits for them in proportion
of their respective shares in the inheritance.

Is there a co-ownership or partnership?

There is co-ownership which was automatically
converted into a partnership as the heirs allow their
shares to be held in a common fund under a single
management and be used to the intent of making
profit which shall be divided among themselves.
A, bought two lots and then transferred his rights to his four
children, B,C,D, and E , to enable them to build their
residences. B resold the two lots after a year to F for a
higher price treating the profit as capital gains and paying
an income tax of their respective shares of the profit. The
Commissioner required them to pay corporate income
tax.

Is there a partnership liable for corporate tax?

NO. the division of profits was merely incidental. C and his
siblings were merely co-owners.

NOTE: Article 1769(3) of the Civil Code provides that "the sharing of gross
returns does not of itself
establish a partnership, whether or not the persons sharing them have a joi
nt or common right or interest in any property from which the returns are der
ived". There must be an unmistakable intention to form a partnership or joint
venture.


Exception:
General professional partnership (GPP)- is
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 (Section 22(B), NIRC)
shall be liable for income tax in their
separate and individual capacities

GR: Joint accounts or Joint ventures formed for
profit are taxable.
Ex. Joint Emergency operation although
no legal personality may have been created
by the joint emergency operation,
nevertheless said joint venture or joint
management operated the business affairs
of the 2 companies as though they
constituted a single entity, company or
partnership, thereby obtaining substantial
economy and profits in the operation.
(Collector vs Batangas Transportation Co., G.R. No. L-
9692,January 6, 1958)

Exception:
Joint venture undertaking
construction activity (BIR Ruling No. 317-92);
and
Joint venture engaged in energy-
related activities with operating
contract with the government.

1. Domestic corporation corporations
created or organized in the Philippines or
under its laws.(Section 22 (c), NIRC)
2. Foreign corporation corporations created
or organized under the laws of a foreign
country.
1) Resident foreign corporation - a foreign
corporation engaged in trade or business within
the Philippines; or
2) Non-resident foreign corporation - a foreign
corporation not engaged in trade or business
within the Philippines

1) Domestic Corporation taxable net income
from sources within and outside the Philippines.

Net taxable income = gross income ( - ) allowable
deductions.

1) Foreign Corporation
a) Resident Foreign Corporation - taxed similarly as
a domestic corporation on incomes derived
from sources within the Philippines.
b) Non-resident Foreign Corporation - taxable upon
the entire gross income received from all
sources within the Philippines.
Gross Income = Gross Sales( - ) Sales returns,
discounts and allowances
( - ) Cost of goods sold

If taxpayer is engaged in sale of service:
Gross Income = Gross receipts( - ) Sales
returns, allowances and
discounts

The following are not included in the computation of
the gross income of taxpayers:
1) Proceeds of life insurance policies but not the interest
paid to the heirs or beneficiaries;
2) Amount received by the insured as return of
premium;
3) Value of property acquired by gratuitous transfer but
not the income from such property;
4) Compensation for injuries or sickness including
damages received;
5) Income exempt under treaty;
6) Retirement benefits, pensions, gratuities, etc. under
certain conditions;
7) Income derived by foreign governments, financing institutions
owned, controlled or enjoying financing from foreign
governments, and international or regional financing institutions
established by foreign governments, from their investments in
loans, stocks, bonds or other domestic securities or from interest
on their deposits in banks in the Philippines;
8) Income derived from any public utility or from the exercise of any
essential government function accruing to the Philippine
government or to any political subdivision;
9) Prizes and awards made primarily in recognition of religious,
charitable, scientific, educational, artistic, literary, or civic
achievement but only if the recipient was selected without any
action on his part to enter the contest or proceeding, and is not
required to render substantial future services as a condition to
receiving the prize or award
1) Domestic Corporation
Same deductions allowed for individual taxpayers
2) Resident Foreign Corporation
Same deductions allowed domestic corporations and
conditions and limitations except on the following items
of deductions:
1. Taxes
2. Losses
3. Bad debts
4. Depreciation
5. Depletion of oil and gas wells and mines
3) Non-resident Foreign Corporation
No deductions are allowed.

The following are exempt from the payment of corporate income
tax, subject to certain conditions:

Labor, agricultural, or horticultural organizations not
organized principally for profit;

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;

A beneficiary society, order, or association, such as
fraternal organization, or a mutual aid association or
a non-stock corporation, organized and operated
exclusively for the benefit of its members;


Cemetery company owned and operated exclusively
for the benefit of its members;

Religious, charitable, scientific, athletic, and cultural
organizations or those organized for the rehabilitation
of veterans, under certain conditions;

Business league, chamber of commerce, or board of
trade, not organized for profit and no part of the net
income of which inures to the benefit of any private
individual;

Civic league or organization organized for profit
but operated exclusively for the promotion of
social welfare;

Non-stock and non-profit educational
institutions;

Government educational institutions;


Farmers or other mutual typhoon or fire insurance
company or like organization of purely local
character; and

Farmers, fruit growers, or like associations organized
and operated as sales agent, under certain
conditions.

Domestic Corporations 30% Taxable Income
Proprietary educational
institutions and hospital
which are non profit
10% if total gross income from
unrelated trade, business, or
activity DOES NOT EXCEED
50% of total income
35% if total gross income from
unrelated trade, business, or
activity EXCEED 50% of total
income
GOCC, Agencies and
Instrumentalities, including
PAGCOR
32%(2000-2005)
35%(2006)
Same tax rate upon their
taxable income in a
similar business, industry, or
activity
GSIS/ SSS / PHIC/ PCSO Exempt
Depository Banks 10% On interest income from
foreign currency
transactions including
interest income from foreign
loans
Resident
Foreign
Corporations
30% Taxable Income derived from all sources
within the Philippines
International
carriers
2.5% On Gross Philippine Billings
Offshore
banking units
10% Any interest income derived from foreign
currency loans granted to residents other than
offshore banking units or local commercial
banks, including local branches of foreign
banks that may be authorized by the BSP to
transact business with offshore banking Units
Offshore
banking units
Exempt
Income derived by offshore banking units
authorized by the BSP, from foreign currency
transactions with Non-residents, other offshore
banking units, local commercial banks,
including branches of foreign banks that may
be authorized by the BSP to transact business
with offshore banking units.
Branch profits
remittances
15% 15% on any profit remitted by a branch to its head
office abroad, except profit remitted by enterprises
which are registered with the Philippine Economic
Zone Authority (PEZA).
Regional/Area
Headquarters
Exemp
t
Regional
Operating
Headquarters of
Multinational
companies
10%
On taxable income
Depository banks
under the
Expanded Foreign
Currency Deposit
System (EFCDS)
Exemp
t

Except: Interest income from foreign currency loans
granted by such depository banks under said
expanded system to residents other than offshore
banking units in the Philippines or other depository
banks under the expanded system- 10% final tax
Refers to the amount of gross revenue
derived from carriage of persons, excess
baggage, cargo and mail originating
from the Philippines in a continuous and
uninterrupted flight, irrespective of the
place of sale or issue and the place of
payment of the ticket or passage
document.(Section 28 (A)(3)(a), NIRC)
Originating Rule to form part of GPB,
passenger/cargo must originate from the
Philippines (does not apply to domestic corp.)
Imposed to any profit remitted by a
branch to its head office.
If subsidiary amounts received by NRFC
would be treated as dividends it
becomes part of its Gross Income from
within taxable at 35%
Branch first subjected to 35% ordinary
corporate tax as RFC ,then to 15% BRPT
Non-Resident
Foreign
Corporations
30% Gross Income derived from all sources
within the Philippines
Cinematographi
c Film owner,
lessor or
distributor
25% On gross income
Owner or lessors
of vessel
charted by
Philippine
Nationals
4.5% On gross income
Owner or lessors
of aircraft,
machineries
and other
equipment
7.5% On gross income
Rate : 2% of Gross income
Purpose: to prevent the prevailing practice of
corporations of over-claiming deductions in
order to reduce their income tax payments.
Covers only Domestic and Resident Foreign
Corporations.
Applicable on the 4th year of operation
Excess MCIT carried over to the next 3
succeeding years ; (Note: only if Regular
income tax is greater than MCIT on the 4
th

year)
Secretary of Finance may suspend MCIT
upon recommendation of BIR Commissioner
in any of the following cases:
1) Sustained losses from prolonged labor
dispute
2) Force Majeure
3) Legitimate Business reverses
Paid on Quarterly and Yearly Basis
10% IAET imposed on improperly accumulated
taxable income earned by domestic
corporation as defined under the Tax Code
and which are classified as closely held
corporations.
Closely Held Corporations are corporations
at least 50 % in value of the outstanding
capital stock or at least 50% of the total
combined voting power of all classes of stock
entitled to vote is owned directly or indirectly
by not more than 20 individuals.


Imposed as a form of penalty to corporations retaining
earnings for more than the reasonable needs of business in
order to recoup the lost taxes.
Except:
1) publicly-held corporations
2) banks and other nonbank financial intermediaries
3) insurance companies
4) Taxable Partnerships
5) General Professional Partnership
6) Non-taxable joint ventures
7) Enterprises duly registered with the Philippine Economic
Zone Authority (PEZA)



Thank you!