income tax of corporations chapter 12

8/11/2019 Income Tax of Corporations Chapter 12

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CONCEPT OF CORPORATION

In taxation, a corporation includes joint stock companies, joint acco

associations, insurance companies or partnerships no matter how they

created or organized

For income tax purposes:

however, a corporation does not include general professional partner

and a joint venture or consortium formed to undertake construction proor engage in petroleum, coal, geothermal and other energy re

operation, pursuant to an operating or consortium agreement und

service contract with the government.


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CLASSIFICATION OF CORPORATE

TAXPAYERS Domestic Corporation

Foreign Corporation

Resident Foreign Corporation

Nonresident Corporation

1. Interest, Dividends, Royalties

2. Rents, Salaries,3. Premiums, except reinsurance premiums

4. Annuities, emoluments or other fixed or determinable annual, periodic or

gains, profits and income

5. Capital gains, except capital gains from the sale of shares of stock not trad

stock exchange of a domestic corporation.


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TAX EXEMPT CORPORATIONS1. Government educational institutions.

2. Non-stock and non-profit educational institutions.

3. Nonprofit labor, agricultural or horticultural organization.

4. Associations of Farmers, fruit growers, and the like whose primary function is to market the product of the p

members.

5. Organizations with a purely local operation whose income is derived only from assessments, dues, and fees

members to meet operational expenses such as fire insurance company, farmers or other mutual typhoon a

ditch or irrigation company and mutual or cooperative telephone company.

6. Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, a

purposes or for the rehabilitation of veterans; provided that no individual person owns its assets or no indivbenefit on its earnings.

7. Non-stock/nonprofit mutual savings bank or non-stock/nonprofit cooperative bank.

8. Nonprofit civic league or organization operating exclusively for the promotion of social welfare.

9. Cemetery company owned and operated exclusively for the benefits of its members

10. Nonprofit business league, chamber of commerce, or abroad of trade

11. Associations, orders, beneficiary societies operating for the exclusive benefits of their members.


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TAXES ON CORPORATE INCOME

CLASSIFICATIONS DOMESTIC

CORPORATIONS

RESIDENT FOREIGN

CORPORATIONS

NON-RESIDE

FOREIGN

CORPORATI

Sources of taxable

income

within and without the

Philippines

Within the Philippines Within the

INCOME IN GENERAL

( R.A. 9337)

TAXABLE INCOME

Normal Tax Rate

30% effective

January 1, 2009

TAXABLE INCOME

Normal Tax Rate

30% effective

January 1,2009

GROSS

Normal

30% ef

January


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INCOME TAXES OF CORPORATIONS

Corporations may be subjected to the following taxes:

1. Normal Corporate Income Tax (NCIT)

- starting January 1, 2009 = 30% based on net taxable income.

2. Minimum Corporate Income Tax (MCIT)

- 2% of gross income

3. Optional Gross Income Tax (OGIT)

- Optional effective January 1,200 if requirements are met

4. Capital Gains Tax

- on sale of real property or on sale of shares of stock; and

5. Final Tax on passive income


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THE NORMAL CORPORATE INCOME TAX For taxation purposes, NCIT refers to the use of regular domestic income tax rates on the corporate taxa

starting January 1,2009.

BIR Form 1702 lays out the general format for income tax computation on business income.

Sales/ Revenues/ Receipts/ Fees from within and without xxx

Less: Sales returns, allowances and discounts(if any) xxx

Cost of Sales xxx xxx

Gross income from operation xxx

Add: Non-operating and other income not subjected to

final tax or capital gains tax xxx

Gross income xxx

Less: Allowable itemized business deductions or OSD xxx

Net taxable income xxx

Multiply by normal corporate income tax rate 30%

Normal corporate income tax xxx


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MINIMUM CORPORATE INCOME TAX (MCIT Pursuant to Section 27(E) and Sec. 28 (A2) of the NIRC, domestic and resident foreign corporations shall be taxed with 2%

income and not on taxable income after operating expenses if they have:

1. Been in their fourth year of operation, and

2. Incurred a net loss or zero taxable income, or a normal income tax that is lesser than minimum income tax.

For purposes of minimum income tax, passive income that has been subjected to a final tax shall not be included as a part o

Per BIR Form 1702, the format to compute the minimum corporate income tax would be:

Gross income from operation XXX

Add: Non- operating and other income not XXX

subjected to final/capital gains tax

Total gross income subject to MCIT XXX

Multiply by MCIT tax rate 2%

Minimum Corporate Income Tax (MCIT) XXX


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income tax of corporations chapter 12

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