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M4 - Income Taxation

This document discusses various types of corporate income taxes in the Philippines, including: 1) Types of corporations - domestic, foreign resident/nonresident, and tax-exempt GOCCs. 2) Minimum Corporate Income Tax (MCIT) - imposed if zero/negative taxable income or higher than Regular Corporate Income Tax (RCIT). Excess MCIT can be carried forward 3 years. 3) Illustrations are provided to calculate income tax for different corporation types and determine MCIT vs RCIT for the 4th year of operations.

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200 views

M4 - Income Taxation

This document discusses various types of corporate income taxes in the Philippines, including: 1) Types of corporations - domestic, foreign resident/nonresident, and tax-exempt GOCCs. 2) Minimum Corporate Income Tax (MCIT) - imposed if zero/negative taxable income or higher than Regular Corporate Income Tax (RCIT). Excess MCIT can be carried forward 3 years. 3) Illustrations are provided to calculate income tax for different corporation types and determine MCIT vs RCIT for the 4th year of operations.

Uploaded by

GraceCayabyabNiduaza
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Module 4

•Income taxes for Corporation


•Partnership
•Gross Income
•Inclusions and Exclusions from
Gross Income
Types of Corporation
• Domestic Corporation- corporations created or
organized in the Philippines or under its law
▫ GOCCs- taxable like other corporations.
 Tax exempt GOCCs: GSIS, SSS, PHIC and Local
Water District under RA10026
• Foreign Corporation- corporation which is no
domestic
▫ Resident Corporation (engaged in business in the
Philippines)
▫ Nonresident Corporation (not engaged in business
in the Philippines)
Minimum Corporate Income Tax (MCIT)
• MCIT shall be imposed whenever:
▫ The corporation has zero taxable income;or
▫ The corporation has negative taxable income; or
▫ Whenever the amount of MCIT is greater than the
RCIT due from such corporation. Hence, MCIT is
always computes and compared to RCIT starting
on the 4th year of operations (year the corporation
registered with the BIR). The higher amount
should be the tax due for the taxable period.
Illustration: Refer to Excel
Assume the following data for Hananiah Corporation for the
current year:
Gross income, Phil 975,000
Expenses, Phil 750,000
Gross income, Malaysia 770,000
Expenses, Malaysia 630,000
Interest on bank deposit 25,000
Determine the income tax due assuming the corporation is:
a. Domestic Corporation
b. Resident Corporation
c. Nonresident Corporation
d. Determine the tax due assuming it’s the 4th year of business
operation (MCIT VS RCIT)
Excess MCIT or MCIT carry over
• Any excess of the MCIT over RCIT shall be
carried forward and credited against the RCIT
for the three succeeding years, provided, that the
RCIT is higher than the MCIT in the year
• Net Operating Loss Carried-Over (NOLCO)- net
operating loss may be carried over as part of
deductible expenses of a corporation for the next
three years following the year the loss was
incurred
Illustration: Excess MCIT carried over
A domestic corporation which commenced
operations in 2014 provided the ff:
2018 2019 2020
Gross income 10,000,000 12,000,000 14,000,000
Allowable deductions (9,500,000) (12,200,000) (12,800,000)
Net income (loss) 500,000 (200,000) 1,200,000

Determine the income tax payable for 2018, 2019


and 2020.
Quarterly and annual corporate tax
due
• If MCIT > RCIT for the taxable quarter, then
MCIT of 2% should be taxed on the taxable
quarter
• Excess MCIT from previous year shall not be
allowed to be credited but MCIT paid in the
previous quarter are allowed to be applied
against the quarterly MCIT due
Illustration
A corporations’ computer RCIT, MCIT and income taxes withheld
from 1st to 4th quarters including excess MCIT and Excess
withholding taxes from prior years are as follows:
Quarter RCIT MCIT Taxes Excess Excess
withheld MCIT withholdi
during Prior ng tax
the year Year prior year
1st 200,000 160,000 40,000 60,000 20,000
2nd 240,000 500,000 60,000 - -
3rd 500,000 200,000 80,000 - -
4th 400,000 200,000 70,000 - -
Determine the ff:
a. Income tax payable for each quarter and annual
Relief from MCIT
• The secretary of Finance is authorized to
suspend the imposition of minimum corporate
income tax on any corporation due to:
▫ Losses on account of prolonged labor disputes-
more than 6 months employee strike and resulted
to temporary shutdown
▫ Force Majeure
▫ Legitimate business reverses
Corporations exempt from MCIT
• Domestic Corporation
▫ Proprietary educational institutions
▫ Non-profit hospitals
▫ Domestic corporations engaged in depository anks under
the expanded foreign currency deposits on their income
from foregin currency transactions with local commercial
banks and other depository banks under the foreign
currency deposit system
• Resident Foreign Corporation
▫ International carriers
▫ Offshore banking units
▫ Regional Operating Headquarters (ROHQ)
• Corporations registered under PEZA and Bases
Conversion Development Authority (BCDA)
Optional Corporate income tax (15%
Gross income tax)
• Requisites (all must be satisfied):
▫ A tax effort ration of 20% of Gross National Product (GNP)
▫ A ratio of 40% of income tax collection of total tax revenue
▫ A VAT effort of 4% of GNP
▫ A 0.9 ratio of the consolidated public sector financial
position to GNP
▫ The option to be taxed based on gross income shall be
available only to firms whose ratio of cost of sales to gross
sales or receipts from all sources does not exceed 55%
Note: election of GIT shall be irrevocable for the 3 years
consecutive taxable years during which the corporation is
qualified under the scheme
Final taxes on Passive income and
Capital Gains Tax

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