SPECIAL

CORPORATIONS

What are Special

Corporations?
They refer to corporations not
subject to the normal income
tax rate.

Classification of Special
Corporations:
Domestic Special
Foreign Special
Corporations

Corporation

Proprietary
educational
institutions
Proprietary
hospitals

International carrier
Regional Operating HQ
Offshore banking units
Branch remittances
Owner/lessor/distributor
of cinematographic film
NR Owner/lessor of
machinery/equipment/ai
rcraft
NR Owner/lessor of
vessels chartered by
Philippine nationals

What are Proprietary

Educational Institutions?
Any private school maintained &
administered by private individuals
or groups with an issued permit to
operate from DECS, or CHED or
TESDA.

What is the Predominance Test

on PHEI?
If the GI from unrelated
trade/business/other activity > 50% of
the total GI from all sources, ENTIRE
taxable income shall be subject to the
REGULAR corporate tax rate

Special Types of Domestic

Corporation:
Domestic
Corporation

Tax
Rate

Tax Base

PHEI

10%

GI on related
trade/business/act
ivity, subject to
Predominance
Test.

GOCC, Govt.
Agencies/LGUs

30%

GI on related
trade/business/act
ivity

GSIS/SSS/PHIC/PCSO
Depositary Banks

Exempt
10%

Interest Income
from FC

What is Gross Philippine

Billings?
Refers to 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.

Special Types of Foreign

Corporation:
Foreign Corporation

Tax
Rate

Tax Base

International Air
Carrier/Shipping

2.5%

Gross Philippine
Billings

Owner /lessors of vessel

charted by Philippine
nationals

4.5%

Gross Income

Owner/lessors of aircraft,
machineries and other
equipment

7.5%

Gross Income

OBUs

10%

Interest Income on FC
transactions granted
to Residents only.

Regional Operating HQ

10%

Taxable Income

Cinematographic film owner,

25%

Gross Income

Distinction between ROH and RAH:

Regional Operating HQ

Regional Area HQ

Are branches established by multinational co. which are engaged in

any
of
the
ff.:
general
administration
and
planning;
business
planning
and
coordination;
sourcing
and
procurement
of
RM
and
components; corporate finance
advisory
services;
marketing
control
and
sales
promotion;
training
and
personnel
mgt.;
logistic services; R/D services and
product devt.; technical support
and maintenance; data processing
and
communications;
and,
business devt.

Are branches established

by multi-national co. and
which do not earn income
from the Philippines and
which act as supervisory,
communications,
and
coordinating center for
their affiliates, subsidiaries
or branches.

Subject to 15% tax

Tax-exempt

What is Branch Profit

Remittance Tax?

BPRT of 15% shall be imposed on

any profit remitted by a branch to
its head office.
The Branch will first be subjected to
ordinary corporate tax as a resident
foreign
corporation
(30%).
Afterwards,
the
profits
for
remittance shall then be subject to
15% BPRT.

What is Optional Gross Income

Taxation?
Effective Jan. 1, 2000: the President (upon

recommendation of the Sec of Finance) may

allow corporation an option to be taxed at 15% of
gross income after the ff. conditions are
satisfied:
Tax effort ratio
20% of GNP
Ratio of IT collection to total tax
revenue

40%

VAT tax effort

4% of GNP

Ratio of Consolidated Public Sector

Financial Position
(CPSFP) to GNP

0.9%

Ratio of Cost of Sales to Gross Sales

from all sources

Not exceeding
55%

The election of the option shall be irrevocable for

3 consecutive taxable years during which the
corp. is qualified under the scheme.

- End -