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CORPORATION
S
CHAPTER 3
CLASSIFICATION OF INCOME
TAXPAYERS
(Other
than
individuals)
1.Corporations
a.Domestic. Those created or organized under
and by virtue of Philippine laws.
1.Domestic corporation, in general
2.Government-owned and -controlled
corporations
3.Taxable partnerships
4.Proprietary educational institutions
5.Non-profit hospitals
b.Foreign. Those organized in accordance with
laws of their respective countries.
1.Resident. Those engaged in trade or
business within the Philippines.
2.Non-resident. Those not engaged in trade
or business within the Philippines.
2.General Professional Partnership
CORPORATION
Corporation. It includes partnerships,
no matter how created or organized,
joint- stock companies, joint
accounts (cuentas en participacion),
associations, or insurance
companies, but does not include
general professional partnerships
and a joint venture or consortium
formed for the purpose of
undertaking construction projects
or engaging in petroleum, coal,
geothermal and other energy
CORPORATION (contd)
Section 3 of Revenue Regulations 10-2012 states
that a joint venture or consortium formed for the
purpose of undertaking construction
projects not
taxable as corporation under Sec. 22 of the NIRC of
1997 as amended, should be:
1)for the undertaking of a corporation project; and
2)should involve joining or pooling of resources by
licensed local contracts; that is, licensed as
general contractor by the Philippine Contractors
Accreditation Board (PCAB) of the Department of
Trade and Industry (DTI);
3)these local contractors are engaged in
construction business; and
CLASSIFICATION OF
CORPORATE TAXPAYERS
1.Domestic. When applied to a
corporation, means created or
organized in the Philippines or
under its laws.
2.Foreign. When applied to a
corporation, means a corporation
which is not domestic.
3.Resident Foreign Corporation.
Applies to a foreign corporation
engaged in trade or business within
the Philippines.
SOURCES OF INCOME
Source of Income
Corporation Within the Without the
Philippines Philippines
1. Domestic
2. Foreign
Tax
Rate
Tax Base
DOMESTIC CORPORATION
1.
a. In General
b. Minimum Corporate
Income Tax
c. Improperly Accumulated
Earnings
30%
2%
10%
2. Proprietary Educational
Institution
10%
3. Non-Stock, Non-Profit
Hospital
10%
(see
1a-1b)
(see
1a-1b)
6. Taxable Partnership
(see
1a-1b)
Tax
Rate
Tax Base
RESIDENT FOREIGN
CORPORATION
1.
a. In General
b. Minimum Corporate
Income Tax
c. Improperly Accumulated
Earnings
2. International Carriers
3. Regional Operating
Headquarters
30%
2%
10%
2.50%
10%
4. Corporation covered by
Special Laws
5. Offshore Banking Units
(OBUs)
10%
30%
Resident
Foreign
20%
20%
7.50%
7.50%
ON PASSIVE INCOME
Interest
Domes
tic
Resident
Foreign
Exemp
t
Exempt
5%
10%
5%
10%
6%
12
Nov. 2005 - Mar. 2006:
P600,000 x 5
mos.
12
3,000,000
Net Income
P12,000,0
00
gross
30%
Tax Due
P3,600,000
The gross income from unrelated trade or
business is more than 50% of the total gross
income. It is actually 60% (P9M/P15M). Hence,
the tax rate that applies is the tax rate
NON-RESIDENT FOREIGN
CORPORATION,
IN GENERAL
Pro-forma Computation of the
Normal Income Tax:
Gross Income
Multiply by: Tax
Rate
Tax Due
xxx
30%
xxx
Non-Resident Foreign
Corporation, in Particular
Non-Resident Cinematographic Film Owner,
Lessor or Distributor is taxed at 25% of
gross income.
Non-Resident Owner or Lessor of Vessels
Chartered by Philippine Nationals is taxed
at four and one-half percent (4.50%) of
gross rentals, lease or charter fees from
leases
or charters to Filipino citizens or
corporations, as approved by the Maritime
Industry Authority.
Non-Resident Owner or Lessor of Aircraft,
ALLOWABLE DEDUCTIONS
Allowable deductions are items or
amounts which the law allows to be
deducted from gross income in order
to arrive at the taxable income. A
domestic or resident foreign
corporation may deduct from its
business income, itemized
deductions under the Tax Code, or,
these corporations may elect a
standard deduction in an amount
not exceeding forty percent (40%) of
xxx
xxx
xxx
Less: Deduction
Optional Standard Deduction
or
Itemized Deduction
Taxable Income
xxx
xxx
20%
7.50
%
Royalties
20%
Exempt
TERMS
1.Accumulated Reserves
2.Business Transaction
3.Capital Assets
4.Certificate of Good Standing
5.Certificate of Tax Exemption/Ruling
6.Cooperative Development Authority (CDA)
7.Interest on Share Capital
8.Patronage Refund
9.Registration
10.Related Operation/Transactions
11.Transaction with Members
12.Transaction with Non-Members
13.Undivided Net Surplus/Undivided Net
Classification of Cooperatives
According to the Extent of the Tax
Exemptions Granted
a.
b.
c.
d.
Classification of Cooperatives
According to the Extent of the Tax
Exemptions Granted (contd)
2. Taxability/Exemption of Duly
Registered Cooperatives which
Transact Business with Members
and Non-Members
2. Taxability/Exemption of Duly
Registered Cooperatives which
Transact Business with Members and
Non-Members (contd)
2) Business transacts with non-members
a) Pay the following taxes at the full rate:
i. Income Tax
ii. Value Added Tax (VAT)
iii. Percentage Tax
iv. All other Internal Revenue Taxes unless
otherwise provided by the law; and
Unregistered Activities
Revenue Regulations 20-2002 clarified
the tax treatment of income earned
from unregistered activities by
enterprises registered under the
Bases Conversion and Development
Act of 1992 and the Philippine
Economic Zone Act of 1995. Income
derived from unregistered activities
shall be subject to the regular
Interest
Interest income from
Philippine currency bank
deposits, yield or any other
monetary benefit from
deposit
substitutes, from
trust funds and
similar
arrangements
Interest income from foreign
currency deposits
Sale of Shares of Stock
Not traded in the stock
exchange
On the net capital gain from
sale,
exchange or other
disposition of shares of
stock in a domestic
corporation
5%
10% Capital Gain
DECLARATION OF QUARTERLY
CORPORATE INCOME TAX
Every corporation shall file in duplicate a
quarterly summary declaration of its gross
income and deductions on a cumulative
basis for the preceding quarter or quarters
upon which the income tax shall be
levied, collected and paid. The income tax
computed decreased by the amount of tax
previously paid or assessed during the
preceding quarters shall be paid and the
return filed not later than sixty (60) days
from the close of each of the first three (3)
quarters of the taxable year, whether
calendar or fiscal .A return showing the
DECLARATION OF QUARTERLY
CORPORATE INCOME TAX (contd)
Every taxable corporation is likewise
required to file a final adjustment return
covering the total taxable income of the
corporation for the preceding calendar or
fiscal year, which is required to be filed
and paid on or before April 15, or on or
before the 15th day of the 4th month
following the close of the fiscal year, as the
case may be. If the sum of the quarterly
tax payments made during the said
taxable year is not equal to the total tax
due on the entire taxable income of that
year, the corporation shall either:
Deducti
on
Net
Income
P300,00 P200,00
P500,000
0
0
2nd quarter
(April 1 to June
1)
3rd quarter
(July 1 to Sept.
30)
Tax
credit for overpaid income tax for the
4th quarter
(Oct. 1 to year
Dec. is P50,000.
preceding
P60,000
50,000
P10,000
P600,0
00
500,00
0
P1,100,0
00
P300,0
00
350,00
0
650,000
P450,000
P500,0
00
2nd quarter
600,00
0
1,100,
000
P1,800,
000
Less: Deductions
1st quarter
P300,0
00
2nd quarter
350,00
0
3rd quarter
400,00
0
1,050,0
00
The final adjustment return shall be filed and the tax due thereon
paid on or before April 15 of the following year. Computation
Gross Income, 4th quarter
P800,0
follows:
00
P500,0
00
2nd quarter
600,00
0
3rd quarter
700,00
0
1,800,
000
P2,600,
000
Less: Deductions
1st quarter
P300,0
00
2nd quarter
350,00
0
3rd quarter
400,00
0
4th quarter
450,00 1,500,00
0
0
1st
Quarte
r
2nd
Quarter
3rd
Quarter
4th
Quarter
Total
Gross Income
this quarter
500,00
0 600,000 700,000 800,000
previous
quarter/s
Total Gross
Income
2,600,
000
500,000
1,100,0
00
1,800,0
00
1,100,0
00
1,800,0
00
2,600,0
00
2,600,
000
300,00
0 350,000 400,000 450,000
1,500,
000
500,00
0
Less:
Deductions
this quarter
previous
quarter/s
Total
Deductions
300,000 650,000
300,00
0 650,000
1,050,0
00
1,050,0
00
1,500,0
00
1,500,
000
Problems
Taxable Income and Tax Due
Dynasty Corporation just completed its third year
of operations. It has the following financial
information for the taxable year 2015, its third
year:
Philippines
China
Gross Income
Deductions
P1,250,000
945,000
P800,000
540,000
P1,250,
000
800,000
P2,050,
000
P945,00
0
540,000
1,485,0
P1,250,
000
945,000
P305,00
0
30%
P91,500
Gross Income
Philippines
Taxable
Income
Multiply by:
Tax Rate
Tax Due
P1,250,
000
P1,250,
000
30%
P375,00
0
2014
2015
Gross Income,
Philippines
Gross Income,
Hong Kong
Gross Income,
Thailand
Deductions,
Philippines
Deductions, Hong
Kong
Philippines
P635,00
0
Hong Kong
610,000
Thailand
890,000
Total Gross
Income
P2,135,00
0
Less: Deductions
Philippines
P495,00
0
Hong Kong
485,000
Thailand
707,000
Total Deductions
1,687,000
P810,0
00
Less:
Deductions
Philippines
Taxable
Income
Multiply by:
Tax Rate
675,00
0
P135,0
00
30%
2.50%
P45,000
Gross Income
Philippines
Taxable
Income
Multiply by:
Tax Rate
Tax Due
P810,0
00
P810,0
00
30%
P243,0
00
P620,0
00
7.50%
P46,50
0
Problem
Quarterly Taxes on Domestic
Corporations
Regime Inc., is a trading company created
under Philippine laws. For the quarter
ending June 30, 2015, it has the following
results of operations:
Gross Sales for the Quarter
P980,0
00
Cost of Sales for the Quarter
492,80
0
Total Deductions Claimed for
315,00
the Quarter
0
Gross Sales for the 1st Quarter
630,00
0
Cost of Sales for the 1st Quarter 318,15
P980,0
00
492,80
0
P487,2
00
315,00
0
P172,2
00
P630,0
00
318,15
P80,4
35
P17,8
50
28,77 46,62
5
5
P33,8
10
P8,45
3
150
10,50 19,10
0
3
Problem
Quarterly Taxes on Domestic
Corporations
Empire Inc., a domestic corporation, started its
operation in 2014. Its records show the following
cumulative balances for 2014.
1st
2nd
3rd
Quarter Quarter Quarter
Year
Gross Income
1,920,0
00
3,840,0 5,760,0
00
00
7,440,
000
Business
Expenses
1,440,0
00
2,880,0 4,080,0
00
00
5,040,
000
Income Tax
Withheld
36,000
84,000
156,00 276,00
0
0
P1,920,
000
1,440,0
00
Taxable Income
P480,00
0
P144,00
0
Less: Income Tax Withheld
36,000
Balance of Tax to be paid
P108,00
this quarter
0
P2,880,
000
1,440,0
00
P5,760,
000
4,320,0
00
P1,440,
000
P432,00
0
Taxable Income
Income Tax Due
(P3,120,000 x 30%)
Less: Income Tax Due for
P5,760,0
00
P1,920,
000
3,840,0 5,760,00
00
0
P11,520,
000
P1,440,
000
2,880,0
00
4,080,0 8,400,00
00
0
P3,120,0
00
P936,00
0
P1,920,0
00
3,840,00
0
5,760,00
0
11,520,0
00
P18,960,
000
P1,440,0
00
2,880,00
0
4,080,00
0
5,040,00
0
13,440,0
00
Taxable Income
P5,520,0
00
P1,656,0
00