INCOME TAX

OF
CORPORATIO
NS
CONCEPT OF CORPORATION
In taxation, a corporation includes joint stock companies, joint accounts,
associations, insurance companies or partnerships no matter how they were
created or organized
For income tax purposes:
however, a corporation does not include general professional partnerships
and a joint venture or consortium formed to undertake construction projects
or engage in petroleum, coal, geothermal and other energy related
operation, pursuant to an operating or consortium agreement under a
service contract with the government.
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 casual
gains, profits and income
5. Capital gains, except capital gains from the sale of shares of stock not traded in the
stock exchange of a domestic corporation.
TAX EXEMPT CORPORATIONS
1. 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 product of their
members.
5. Organizations with a purely local operation whose income is derived only from assessments, dues, and fees collected from their
members to meet operational expenses such as fire insurance company, farmers or other mutual typhoon associations, mutual
ditch or irrigation company and mutual or cooperative telephone company.
6. Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic or cultural
purposes or for the rehabilitation of veterans; provided that no individual person owns its assets or no individual person receives
benefit 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.


TAXES ON CORPORATE INCOME
CLASSIFICATIONS DOMESTIC
CORPORATIONS
RESIDENT FOREIGN
CORPORATIONS
NON-RESIDENT
FOREIGN
CORPORATIONS
Sources of taxable
income
within and without the
Philippines
Within the Philippines Within the Philippines
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 INCOME
Normal Tax Rate

30% effective
January 1, 2009
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
THE NORMAL CORPORATE INCOME TAX
For taxation purposes, NCIT refers to the use of regular domestic income tax rates on the corporate taxable income which is 30%
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
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% based on gross
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 of gross income.

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