Corporate Income Taxation Philippine income taxation

What is taxation subject? HEADACHE/DIZZYNESS NO REACTION EXCITED BORING

Corporate Income Taxation Definition of corporation is accounting and taxation viewpoint Classifications Different taxes paid by the corporation Other Taxes Filling of corporate income tax

Definition of Corporation Section 2, Corporate code of the Philippines A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. Section 22, National Internal Revenue Code of the Philippines INCLUSIONS Partnership, no matter how created or organized Joint stock companies Joint accounts (cuentas en participation) Association Insurance Companies EXCLUSIONS General professional partnerships Joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations

Philippine corporate income tax as highest tax rates in Asian

What is partnership? Is the partnership Income earned from trading? Yes No Type COMMERCIAL PROFFESIONAL Income Tax NCIT – 30% or MCIT – 2% Exempt from Income Tax Distributive Shares Distributive Share Withholding Tax Final Withholding Tax (FWT) of 10% Creditable withholding Tax (CWT) P720, 000 and below = 10% More than P720, 000 = 15% (RR. 30 – 2003)

What is Joint Stock? A joint-stock company is a business entity where different stocks can be bought and owned by shareholders. Each shareholder owns company stock in proportion, evidenced by his or her shares (certificates of ownership).

What is Joint Accounts (Cuentas en participation) What is Joint Accounts (Cuentas en participation)? An account at a bank or a brokerage where there are two or more account holders. The holders of a joint account share all rights and responsibilities regarding the account. That is, one may deposit or withdraw money from a joint account without the consent of the other and both may be held liable for an overdraft or loss. Joint accounts are most common for married couples. What is Associations? A voluntary group or union (also sometimes called a voluntary organization, common-interest association, :or just an association) is a group of individuals who enter into an agreement as volunteers to form a body (or organization) to accomplish a purpose.

Classification of Corporation as to creation Domestic Corporation (DC) created and organized in the Philippines or under its laws Classified as Exempt corporations Exempt non-profit corporation under the NIRC Government agencies and instrumentalities Government-owned and controlled corporation Cooperatives Special Domestic Corporation Proprietary educational institutions and non-profit hospitals Foreign currency deposit units (FCDs) and Expanded FCDU’s PEZA or BOI-registered enterprises

Resident foreign corporation (RFC) foreign corporation engaged in trade or business within the Philippines (Philippine branch of foreign corporation, regional operating headquarters of multinational companies, regional or area headquarters of multinational companies and representative offices) Special resident foreign corporation Offshore banking units (OBU) and Expanded FCDUs Regional Area Headquarters and Regional Operating Headquarters of Multinational Companies International carrier BOI or PEZA-registered enterprises

Non-Resident foreign corporation (NRFC) engaged in trade or business in the Philippines in which permit license is not necessary Special non-resident foreign corporation Cinematographic film owner, lessor or distributor Lessor of vessels, chartered by Philippine nationals Owner of lessor of aircraft, machineries and other equipment

Different classification of Taxes Regular corporate Income Tax (NCIT/RCIT) NCIT is subject to 30% of taxable income Taxable income is computed by deducting all the expenses to the gross income MCIT is an option to NCIT to Domestic and Resident Corporation it is subject to 2% of gross income RR12-2007 includes all other items of taxable income not subject to final tax and capital gains tax applicable when The corporation has zero or negative taxable income in fourth year of operation MCIT is greater than the NCIT

limitation Real Estate Investment Trusts under RA 9856 Domestic corporation opted to be taxed under 15% GIT Domestic or resident corporation subject to special tax rates All non-resident foreign corporations Benefits/Advantage Excess of the MCIT over the NCIT in any year is a tax credit that is deductible against any NCIT tax due in the immediately succeeding three years. Excess MCIT can be used only as a tax credit against NCIT in any of the 3 subsequent years. The application should be first in-first out basis Unused Excess MCIT at the end of the 3 years shall expire

Discharge from MCIT Prolonged labor dispute Force majeure Legitimate business reverses 3. Gross Income Tax (GIT) 15% GIT for Domestic Corporation still remains in law but not in practice A tax effort ratio of twenty percent (20%) of Gross National Product (GNP) A ratio of forty percent (40%) of income tax collection to total tax revenues A VAT tax effort of four percent (4% of GNP) A 0.9% ration of the Consolidated Public Sector Financial Position to GNP A ratio of cost of sales to gross sales or receipts from all sources does not exceed fifty-five percent (55%).