Section 23. General Principles of Income 6.

Minimum corporate income tax: a tax of 2%

Taxation in the Philippines on the gross income of a domestic and
resident foreign corporation
Tax on Individuals
o Payable only when it is higher than the
Income Tax: a tax on the yearly profits arising RCIT
form property, professions, trades and offices. A 7. Improperly accumulated earnings tax: a tax
tax based on income, gross or net. of 10% on IAE of domestic corporation

Income: all wealth which flows to the taxpayer Kinds of Taxpayers

other than a mere return of capital. It includes
A. Individual
gain derived from the sale or other disposition of
1. Resident Citizen: taxable on all income
capital assets. Income is a gain derived from labor
derived from sources within and without the
or capital, or both labor and capital; and includes
PH
the gain derived from the sale or exchange of
o citizen of the PH residing therein
capital assets.
o citizen of the PH residing abroad with
Nature: income includes earnings, lawfully or no intention to reside permanently
unlawfully acquired, without consensual 2. Non-resident Citizen: taxable only on income
recognition, express or implied, of an obligation to derived from all sources within the PH
repay and without restriction as their disposition. o Establishes to the satisfaction of the
Commissioner the fact of his physical
Kinds of Income Tax
presence abroad with a definite
1. Normal/net income tax: a tax on resident and intention to reside therein
non-resident alien engaged in trade or o Leaves the PH during taxable year to
business on taxable income using the reside abroad, either as an immigrant
graduated rates of 0%-35% or for employment on a permanent
2. 8% income tax: a tax imposed on the total basis
gross sales/receipts and other non-operating o Works and derives income from abroad
income in excess of P250k and whose employment thereat
3. Gross income tax requires him to be physically present
o a tax of 25% in case of non-resident abroad most of the time during taxable
alien not engaged in trade or business year (aggregate stay outside the PH of at least
o a tax of 30% in case of non-resident 183 days)
foreign corporation o previously considered as non-resident
citizen and who arrives in the
on the entire income derived from sources within
Philippines at any time during the
the PH
taxable year to reside permanently in
4. Final income tax: a tax on passive income the Philippines > Treated as NRC with
derived form sources within the PH respect to his income derived from
5. Regular corporate income tax: a tax of 30% sources abroad until the date of his
on the taxable income of a domestic and arrival in the Philippines
resident foreign corporation 3. Resident Alien: taxable only on income
derived form sources within the PH
 o Individual whose residence is within • General professional
the PH and who is not a citizen partnerships
o An alien actually present in the • Joint venture or consortium
Philippines who is not a mere transient formed for the purpose of
or sojourner is a resident for income undertaking construction
tax purposes. projects or engaging in
petroleum, coal, geothermal and
No/Indefinite Intention = RESIDENT: If he
other energy operations under a
lives in the Philippines and has no definite
service contract with the Gov’t
intention as to his stay, he is a resident. A mere
floating intention indefinite as to time, to return
1. Domestic Corporation: taxable in all income
to another country is not sufficient to constitute
derived from sources within and without the
him a transient.
PH
Definite Intention = TRANSIENT: One who o Corporation created and organized in
comes to the Philippines for a definite purpose, the PH or under its laws
which in its nature may be promptly accomplished, 2. Foreign Corporation: taxable only on income
is a transient. derived from all sources within the PH
o Resident foreign corporation
Exception: Definite Intention but such cannot
o Non-resident foreign corporation
be promptly accomplished; If his purpose is of
3. Partnership
such nature that an extended stay may be
Two Kinds of Partnership
necessary for its accomplishment, and thus the
o Trade partnership: tax treatment is
alien makes his home temporarily in the
the same as that of a corporation
Philippines, then he becomes a resident.
o General professional partnership:
4. Non-resident alien engaged in trade or partnership formed by persons for the
business: taxable only on income derived from sole purpose of exercising their
all sources within the PH common profession – exempt form
o If the aggregate period of his stay in imposition of income tax
the Philippines is more than 180 days Exception: persons engaging in
during any calendar year. business as partners in a general
5. Non-resident alien NOT engaged in trade or professional partnership – liable for
business: taxable on income derived from all income tax only in their separate and
sources within the PH individual capacities
o If the aggregate period of his stay in 4. Joint Venture
the Philippines does not exceed 180 o an association of persons or companies
days. jointly undertaking some commercial
enterprise; generally, all contribute
B. Corporations asset and share risks
o Includes partnerships, no matter how o Under PH law, a joint venture is a form
created or organized, joint-stock of partnership and should be governed
companies, joint accounts, association, by the law of partnerships
or insurance companies.
Except: C. Estate and Trust
 o Tax imposed upon individuals shall apply
to the income of estates or of any kind 1. Tax of Purely Compensation Income
of property held in trust Earner

Estate: created by operation of law when an Mandatory Contributions: allowable deductions

individual dies, leaving properties to his
1. 13th month pay and other benefits
compulsory or other heirs
2. Employee’s share in SSS, GSIS, PHIC,
Trust: a legal arrangement whereby the owner of Pag-ibig
property transfer ownership to a person who is to
Summary of Tax Liabilities
hold and control the property belonging to the
owner’s instructions, for the benefit of a Classification Tax Liability
designated person Purely Compensation Graduated Rates (0%-35%)
Income Earner
Section 24. Income Tax Rates Self- Gross sales/receipts and
Employed/Profession other non-operating income
A. Rates of income tax on individual citizen
als a. Not exceeding P3M
and individual resident alien of the PH o Graduated
rates
o 8% of gross
• For married individuals: husband and wife, sales/receipts
and other non-
shall compute separately their individual
operating
income tax based on their respective total
income in
taxable income excess of
o XPN: if any income cannot be P250k
definitely attributed to or identified b. Exceeding P3M –
Graduated Rates
as income exclusively earned or
Mixed Income Earner A. Compensation
realized by either of the spouses:
income - Graduated
divide equally for the purpose of rates
determining their respective taxable B. Business
income income/practice of
• Minimum wage earners: exempt from the profession
Gross
payment of income tax on their taxable
sales/receipts and
income other non-
o Holiday pay, overtime pay, NSD pay and operating income
hazard pay received: also, be exempt a. Not exceeding P3M
from income tax o Graduated
Rates
o 8% of gross
1. Normal/Net Income Tax and the Schedular sales/recei
Income Tax pts and
other non-
Types of Personal Income Earners operating
income
1. Purely compensation income earner b. Exceeding P3M –
2. Self-employed individual/professional Graduated Rates
3. Mixed income earner
2. Final Income Tax on Certain Passive Income o Prizes amounting to P10k or less – subject
to normal/net income tax
B. Rate of tax on certain passive income
o Prizes amounting to more than P10k –
1. Interest from any currency bank deposit and subject to final income tax of 20%
yield or any other monetary benefit from o Winnings regardless of amount – 20%
deposit substitutes and from trust funds and o PCSO and lotto winnings – 20%
similar arrangements ▪ Except PCSO and lotto winnings
amounting to P10k or less – exempt
o A final tax of 20%
Note: Income sources referred to above are
2. Interest income received by an individual
derived within the PH
taxpayer (except non-resident individual) from a
depositary bank under the expanded foreign • For non-resident citizens and aliens, passive
currency deposit system income from abroad is not taxable in the PH
• For resident citizens, passive income that
o A final tax of 15%
come from abroad goes into their gross
3. Interest income from long-term deposit or income (thus, subject to graduated rates)
investment in the form of savings, common or
7. Dividends: any distribution made by a
individual trust funds, deposit substitutes,
corporation to its shareholders out of its
investment management accounts and other
earnings or profits and payable to its
investments evidenced by certificates in such
shareholders, whether in money or in other
form prescribed by the BSP
property
o Interest income is exempt from final
Classification of Dividends
income tax
1. Cash dividend – distribution of corporation’s
4. Proceeds of pre-terminated long-term
profit through cash or money. This is treated as
deposit or investment in the form of savings,
income.
common or individual trust funds, deposit
substitutes, investment management accounts 2. Property dividend – distribution of
and other investments evidenced by certificates corporation’s profit in the form of company’s
in such form prescribed by the BSP asset. Also treated as income.

o Final tax shall be based on the remaining 3. Liquidating dividend – distribution made by a
maturity of the investment: corporation as payments for surrendered or
1. 4 years but less than 5 years – 5% relinquished stock in a corporation in complete
2. 3 years but less than 4 years – 12% liquidation
3. Less than 3 years – 20%
o A type of payment made by a corporation
5. Royalties to its shareholders during the process of
dissolving its business. Unlike regular
o GR: final income tax of 20%
dividends, which are paid from a company's
o XPN: Royalties on books and other literary
profits, liquidating dividends are
works and musical compositions – 10%
distributed from the company's capital
6. Prizes and Winnings base.
4. Stock dividend – the transfer of surplus to • Sale or disposition of real property to
capital account. What the shareholder receives the Government
are the corporation’s own shares of stock. o Taxpayer is given an option to be
taxed at graduated rates or at the
o a payment to shareholders that consists
final tax of 6%
of additional shares of a company's stock
• Sale of principal residence
rather than cash.
o Exempt from CGT
o GR: stock dividend is not subject to tax
o XPN: may be subject to tax if the issuing Requirements for the exemption to apply:
corporation cancels or redeems stock
1. The property sold is a principal residence of the
issued as a dividend at such time and in
seller
such manner as to make the distribution
and cancellation or redemption, in whole or 2. Reason for the sale – to acquire or construct a
in part, essentially equivalent to the new principal residence
distribution of a taxable dividend
3. Proceeds of the sale must be fully utilized in
3. Capital gains from sale of shares of stock constructing the new principal residence.
not traded in the stock exchange
o If there is no full utilization of the
Capital gains tax: tax on the gain presumed to proceeds, the portion of the gain
have been realized by the seller from the sale, realized from the sale shall be
exchange, or other disposition of capital assets subject to CGT.
located in the PH
4. Construction must be within 18 calendar
• Under the TRAIN law, the net capital months from the date of sale
gains realized during the taxable year
5.
from the sale, barter, exchange or other
disposition of shares of stock in a 6.
domestic corporation not traded in the
stock exchange – subject to final tax of
15% Capital Gains Tax on Foreclosed Property
o If sales are sold or disposed
• Subject to final CGT only in the event the
through stock exchange – 6/10 of
owner of the property failed to exercise
1% of the gross selling price or
its right to redemption within the
gross value in money of the shares
prescriptive period.
of stock shall be paid
• Where the right of redemption of the
4. Capital gains from sale of real property mortgagor/owner exist: certificate of
title of the mortgagor will be cancelled
• 6% of the gross selling price, or the
yet, even if the property had already been
current market value at the time of sale,
subjected to foreclosure sale
whichever is higher
• Mortgagor exercises his right of
• Actual gain is not required before income
redemption within 1 year from the
tax may be imposed because gain on sale of
issuance of certificate of sale: no CGT
RP classified as capital asset is always
will be imposed because no capital gain was
presumed.
realized
 • In the even of non-redemption: CGT on f. Interest income from long-term deposit or
the foreclosure sale shall become due investment in the form of savings: exempt
based on the bid price of the highest
g. Proceeds of pre-termination of deposit or
bidder
investment before the 5th year
o But only upon the expiration of 1-
year period of redemption o Final tax shall be based on the remaining
o And will be paid within 30 days maturity of the investment:
form the expiration of the 1. 4 years but less than 5 years – 5%
redemption period 2. 3 years but less than 4 years – 12%
• Property foreclosed is an ordinary asset: 3. Less than 3 years – 20%
subject to normal/net income tax and the
3. Capital gains on sale of shares and real
corresponding creditable withholding tax
properties

Capital gains on expropriated property

C. Non-resident alien NOT engaged in trade or
• Profit from the transaction constitutes business
capital gain
1. Gross income tax
Note: Since CGT is a tax on passive income, it is
o 25% of the entire income received from
the seller who is liable to shoulder the tax
all sources within the PH
o In the determination of the gross income,
no deduction is allowed.
B. Non-resident alien engaged in trade or
business 2. Capital gains on sale of shares and real
properties
• NRAETB is taxable only on income derived
within the PH

1. Normal/net income tax D. Special Aliens

2. Tax on certain passive income • These are alien individuals who are
employed by Regional or Alien
a. Dividends: 20%
Headquarters and Regional Operating
b. Interest: 20% Headquarters of Multination Companies
(RHQ and ROHQ), Offshore Banking Units
c. Royalties: 20%
(OBU), and Petroleum Service and
d. Prizes and Winnings Contractor and Subcontractor (PSC)
• Income tax liability for salaries and
o Prizes more than P10k – 20%
compensation
o Winnings regardless of amount – 20%
o a final income tax of 15% based on
e. Interest income received from a depositary gross income
bank under the expanded foreign currency o this gross income comprises of
deposit system: exempt salaries, wages, annuities,
compensations, remuneration,
allowances
 • Income tax on other income • Overseas contract workers: refer to
o Income liability will depend on the Filipino citizens employed in foreign
classification as taxpayer countries commonly referred to as OFWs,
o RHQ and ROHQ: may either be RA who are physically present in a foreign
or NRA (engaged or not engaged in country as a consequence of their
ToB) employment. Their salaries and wages are
o PSC: classified only as NRA paid by an employer abroad.
• Tax on Filipinos: same tax treatment as • Seafarers or seamen: are Fil citizens
that of the alien who receive compensation for services
o Filipinos in a managerial or rendered abroad as a member of the
technical position shall have the complement of a vessel engaged
option to be taxed at either 15% of exclusively in international trade.
their gross income or at the
regular income tax rate on
F. Minimum wage earner
compensation income
• Refer to a worker in the private sector
To be eligible to the 15%; requirements:
who is paid with statutory minimum wage
a. Position and Function Test (SMW) rates, or to an employee in the
public sector with compensation income of
b. Compensation Threshold: gross annual taxable
not more than the SMW rates in the non-
compensation of at least P973k
agricultural sector where the worker is
c. Exclusivity Test: must be working exclusively assigned.
for the RHQ or ROHQ • Statutory minimum wage: rate fixed by
the Regional Tripartrite Wage and
Managerial employee
Productivity Board
• one who is vested with powers and • MWE are exempt from the payment of
prerogatives to lay down and execute income tax on their SMW
management policies o Holiday pay, OT pay, NSD pay, and
• and/or to hire transfer, suspend, lay-off, hazard pay are likewise exempt
recall, discharge, or assign or discipline o Service charge - exempt
employees
Question: If MWE receive income other than the
Technical position statutory minimum wage, will it lose its
exemption?
• limited only to positions which are highly
technical in nature o GR: No. MWE will not lose its
exemption. Their status as MWE
remains.
E. Overseas contract worker and seaman o XPN: Taxable income they receive
other than (those enumerated) as
o taxable only on income from
MWEs may be subjected to
sources within the PH
appropriate taxes.
o understood as exempt from PH
income tax
Tax on Corporations d. Interest from a
depositary bank under
the expanded foreign
currency deposit
A. DOMESTIC Corporation
system from foreign
1. Regular Corporate Income Tax currency transactions
with non-resident,
• Domestic corporation: liable to pay RCIT OBU in the PH, local Exempt
of 30% based on its taxable income from commercial banks
including branches of
sources within and without the PH during
foreign banks that may
taxable year
be authorized by the
o Also subject to MCIT BSP to transact
business with foreign
Taxable income: pertinent items of gross income
currency deposit
sales less the deductions authorized for such system
types of income by the Tax Code or other special
laws e. Interest income from
foreign currency loans
2. Final Income Tax on Certain Passive Income granted by such
depository banks under
• To be subject to final income tax, passive
said expanded system 10%
income must be derived from sources to residents other than
within the PH OBU in PH or other
• As a rule: If the passive income is derived depository banks under
from sources without the PH, passive the expanded system
f. Any income of non-
income is included in the gross income and
residents, whether
is subject to RCIT.
individuals or
Particular Rates corporations, from Exempt
transactions with
a. Interest from depository banks under
deposits and yield and the expanded system
any other monetary
benefit from deposit 20%
substitutes and from 3. Inter-Corporate Dividends
trust funds and similar
arrangements • Domestic corporation can be a stockholder
of another domestic corporation
o Entitled to dividends
• Dividends received: not subject to income
tax
b. All royalties derived 20%
within the PH 4. Capital gains from the sale of shares of
c. Interest income from stock not traded in the stock exchange
a depository bank under
the expanded foreign • Subject to final tax of 15% - regardless
15%
currency deposit of amount of net capital gains
system • Shares disposed through stock exchange:
15% does not apply
 o A stock transaction tax of 6/10 of 3. Inter-Corporate Dividends
1% shall be paid by the seller or
• Resident foreign corporation can be a
transferor
stockholder of another domestic
5. Capital gains realized from the sale, corporation
exchange, or disposition of lands and/or o Entitled to dividends
buildings o Not subject to income tax
• Dividend is received from a foreign
o Not actually used in business of a
corporation – dividend included in the
corporation and are treated as
gross income and is subject to RCIT
capital assets
• Subject to a final tax of 6% 4. Capital gains from the sale of shares of
o Based on: (whichever is higher) stock not traded in the stock exchange
1. Gross selling price
• In a domestic corporation:
2. Fair market value as determined
o Subject to final tax of 5% for the
by Commissioner
first P100k
3. Fair market value as shown in the
o 10% - in excess of P100k
schedule of values of the Provincial
• Through stock exchange: Final tax of 5% -
and City Assessors
10% does not apply
• Exemption on final tax on capital gains if
o 6/10 of 1% of the gross selling
the property sold by individual is principal
price or gross value in money of
residence does not apply to domestic
shares sold shall be paid by the
corporation
seller or transferor
o Domestic corporation cannot
acquire principal residence 5. Capital gains realized from the sale,
• Option to be taxed at normal/net income exchange, or disposition of lands and/or
tax or at 6% if sold to Gov’t does not apply buildings
to domestic corporation
• No provision providing for the specific
final tax rate
• Gain is included in the gross income
B. RESIDENT FOREIGN Corporation
o Thus, subject to RCIT
1. Regular Corporate Income Tax
6. International Carrier
• Liable to pay RCIT of 30% based on its
a. International Air Carrier
taxable income from sources within the PH
during taxable year • Refers to a foreign airline corporation
• Also subject to MCIT (2% on gross doing business in the PH having been
income) granted landing rights in any PH port to
perform international air transportation
2. Final Income Tax in Certain Passive Income
service/activities or flight operations
• Passive income earned form sources within anywhere in the world
the PH: subject to final income tax • As it is doing business in the PH, thus, it is
o If without – not taxable in PH a resident foreign corporation.
 • Tickets sold outside the Philippines
o Gross revenue shall be determined
Classification of IAC
using the locally available net fares
1. On-line carrier: refer to international air applicable to such flight taking into
carriers having or maintaining flight consideration established at the
operations to and from the PH time of flight, the class of passage,
the classification of passenger, the
• Having flights or voyages originating from
date of embarkation, and the place
any port in the PH irrespective of the
of final destination
place where passage documents are sold or
• Revalidation
issued
o Subject to Gross Philippine Billings Passage documents or tickets revalidated,
Tax of 2 ½% exchanged and/or endorsed to another on-line
o Items of income that do not form international airline
part of GPB shall be taxed under
o shall be included in the taxable
the rules applicable to resident
base of the carrying airline
foreign corporation
o shall be subject to GPB if the
• GPB of International Air Carriers
passenger is lifted/boarded on an
o In computing for GPB of IAC, there
aircraft form any point in PH
shall be included the total amount
towards a foreign destination
of gross revenue from: (originating
• Excess Baggage
from PH in a continuous and
o Gross revenue shall be computed
uninterrupted flight, irrespective
based on actual revenue appearing
of the place of sale or issue and the
from the official receipt
place of payment of the passage
• Cargo and Mail
documents)
1. Carriage of persons Gross revenue shall be determined based on
2. Excess baggage the revenue realized from carriage.
3. Cargo and/or mail
o Amount realized for cargo: based
• Ticket Sold in the Philippines
on amount on airway bill after
o Gross revenue: actual amount from
deducting discounts which shall be
transportation services (as
validated using the monthly cargo
reflected in the remittance area of
sales report
the tax coupon)
o Mails: shall be determined based
o GBP shall be determined by
on the amount as reflected in the
computing the monthly average net
cargo manifest of the carrier
fare of all the tax coupons if plane
o In case of passenger’s passage
tickets issued for the month per:
documents or flights form any
1. Point of final destination
point in PH and back: portion of
2. Class of passage
revenue pertaining to the trip to PH
3. Classification of passenger
– NOT included in the GPB
o Multiplied by the corresponding
• Transshipments
total number of passengers flown
for the month
 o Flight that originates from the PH 6. Preferential Income Tax Rate or exemption
but transshipment of passenger, of International Carrier with flights or voyage
excess baggage, cargo/mail takes originating form PH ports
place elsewhere in another
May avail of:
aircraft belonging to a different
airline company: GPB shall be o Preferential income tax rate
determined based on that portion o Income tax exemption
of revenue corresponding to the leg
On the basis of:
flown from any point in PH to the
point of transshipment o Treaty to which the PH is a signatory
o Flight is interrupted by force o Reciprocity
majeure resulting in
transshipment: GPB be determined
based on that portion of flight
from the PH up to the point of
7. Offshore Banking Units
transshipment
• Non-revenue Passengers • Income derived by OBU authorized by BSP
o Shall not be given value for from foreign currency transactions with
purposes of computing taxable base non-residents, other offshore banking
to tax units, local commercial banks, including
• Refunded Tickets branches of foreign banks: exempt from
o Not included in the computation of all taxes
GPB • Interest income derived from foreign
currency loans: 10%
2. Off-line Carriers: refer to international air
• Income of nonresidents, whether
carriers having no flight operations to and from
individuals or corp, from transactions with
the PH
OBU: exempt from income tax
o Not subject to GPB tax
8. RHQ or ROHQ
o Shall be subject to the regular rate of
income tax of 30% • RHQ: do not earn income from PH –
exempt from income tax
3. International Shipping
o Act as supervisory for their
subsidiaries
• ROHQ
o Allowed to derive income in PH
4. On-line Carrier o Subject to tax rate of 10% on
taxable income
o Subject to GPB tax of 2 ½%
o Income derived from PH: Subject
to 15% tax on branch profit
remittances when income is
5. GPB of International Sea Carriers
remitted to parent company
9. Branch Profit Remittance Tax derives income from sources within the
Philippines.
• Subsidiary: separately incorporated
entity and has a distinct and independent
legal personality form its parents –
1. Gross Income Tax
treated differently for taxation
o Law to be incorporated: depends if • Shall pay a tax of 30% of the gross income
its domestic or resident foreign o Without any deduction
• Branch office: merely an extension of
2. Tax on Special Non-Resident Foreign
foreign corp in PH without separate and
Corporations
distinct legal personality
o Single Entity Theory a. Non-resident Cinematographic Film Owner,
o Not taxed separately, except on Lessor or Distributor
profits remitted to head office
• 25% of its gross income from all sources
o Liable to pay 15% branch profit
within the PH
remittance tax based on total
profits applied for remittance b. Non-resident owner or lessor of vessels
without deduction chartered by PH Nationals
➢ Note: applied only to profit
• 4 ½% of gross rentals, lease or charter
remitted by branch to head
fees
connected on trade or
business in PH c. Non-resident owner or lessor of aircraft,
o A lower rate of branch profit machineries and other equipment
remittance tax may apply under
• 7 ½% of gross rentals and fees
certain applicable tax treaties
o Remittance of profits by branch
office from activities registered 3. Tax on Interest on Foreign Loans
with PEZA: exempt from BPRT
o Income from transaction not • 20% final withholding tax rate
effectively connected with the
branch office’s business in PH
➢ branch office is treated as 4. Intercorporate Dividends
non-resident foreign • 15% final income tax – Tax Sparing Rule
corporation o Subject to the condition that: the
➢ profits remitted are taxed country in which the non-resident
for the gross amount at a foreign corporation is domiciled
rate of 30% allows credit against the tax due
from the non-resident foreign
corporation taxes deemed to have
C. NON-RESIDENT FOREIGN CORPORATION been paid in the PH
• A foreign corporation not engaged in trade
or business within the Philippines but still
5. Capital gains from the sale of shares of
stock not traded in the stock exchange
If any of the requirements is not met:
• 5% for the first P100k
o General rule will apply: be subject to
• 10% in excess of P100k
30% RCIT
o Thus, MCIT will also be applied

D. EDUCATIONAL INSTITUTION

• Refers to the school system; includes a

2. Non-stock, Non-profit Educational
college or an educational establishment
Institution

o A private school registered as non-stock

Classification of Educational Institution
corporation to engage in maintaining and
• Government Educational Institution administering a school which is non-
o GR: Exempt profit
o XPN: other income derived from o Non-profit: no net income or asset
the use of its properties for profit benefits any member, with all the net
• Private Educational Institution - income or asset devoted to the
institution’s purposes
May either be:
Tax Liability
1. Proprietary Educational Institution
• Exempt
o Means any private school
o provided revenues are actually,
maintained and administered by
directly and exclusively used for
private individuals or groups with a
educational purposes
government permit
o regardless of source of income:
o Government permit: recognition or
remains exempt
permit to operate issued by DepEd
• revenues derived form assets used of
Tax Liability cafeterias and bookstores are exempt
o as long as they are owned and
• Subject to a preferential income tax rate
operate by the educational
of 10% if:
institution as ancillary activities
a) The proprietary educational
and the same are located within the
institution is non-profit
school premises
b) Its gross income from unrelated
trade, business or activity does not
exceed 50% of its total gross
income
o Unrelated trade, business or other
activity: conduct which is not
substantially related to the
performance by such institution of its
primary purpose
E. MINIMUM CORPORATE INCOME TAX

• 2% of the gross income

• MCIT is imposed to domestic and resident
foreign corporation beginning on the 4th
taxable year immediately following the
year in which such corporation commenced
its business operations