CORPORATION

CORPORATION DEFINED
 Corporation shall include partnerships, no matter how created or organized, joint-stock companies, joint accounts,
associations, or insurance companies. It does not include general professional partnerships and a joint venture or
consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal,
geothermal, and other energy operations pursuant to an operating consortium agreement under a service contract
with the government.
GENERAL CLASSIFICATION OF CORPORATIONS
1. DOMESTIC CORPORATION - one which is organized under Philippine law.
2. FOREIGN CORPORATION - one which is organized under a law other than Philippine law
a) Resident Foreign Corporation - a foreign corporation doing business in the Philippines.
b) Non-resident Foreign Corporation - a foreign corporation not doing business in the Phils.

LIST OF PASSIVE INCOME SUBJECT TO FINAL WITHHOLDING TAX

Domestic Resident Non-Resident
Foreign Foreign Corp.
1. Interest income from local currency bank deposit and
yield from deposit substitute, trust fund and similar
arrangement
a) Short-Term 20% 20% 25% (Jan. 1, 2021)
b) Long-term ---- ----- -----
c) Less than 3 years 20% 20% 25% 01/01/2021
d) 3 to less than 4 years 12% 12% 25% 01/01/2021
e) 4 to less than 5 years 5% 5% 25% 01/01/2021
f) 5 years or more exempt exempt exempt

2. Interest income from foreign currency bank deposit

from Foreign Currency Deposit Unit/Offshore Banking
Units Depository.
a) Banks 15% 15% exempt
3. Cash/property dividend from domestic corporation exempt exempt 15%
4. Passive Royalties 20% 20% 25% 01/01/2021

RULES:
1. Income subject to final withholding tax shall not be subjected to regular income tax rate. Income subject to FWT shall
be included in the computation of gross income
2. Tax rate is fixed at 20% to 25%. CREATE LAW (Corporate Recovery and Tax Incentives for Enterprises Law - 20%
or 25% starting July 1, 2020.
20% - Taxable income in a year does not exceed P5,000,000 and the total assets (except land in which the business is
located) does not exceed P100,000,000.
3. Except for non-resident foreign corporation, corporate taxpayer shall file quarterly income tax return (Form 1702Q)
for the first three quarters of the taxable year.

Quarter ending Deadline for the filing of 1702Q

3/31/2022 May 30, 2022
6/30/2022 Aug. 29, 2022
9/30/2022 Nov. 29, 2022
Taxable year ending Deadline for the filing of form 1702RT, 1702EX, 1702MX
Dec. 31, 2022 Apr. 15, 2023
June 30, 2022 Oct. 15, 2022
March 31,2022 July 15, 2022

4. Unlike individual taxpayers who observe calendar year, corporate taxpayers may use fiscal or calendar year at its
option.
 DC RFC NRFC
Income subjected to Within & Outside of the Within the Philippines only Within the Philippines only
Philippine Income Tax Philippines
Business expenses to be Within & Outside of the Within the Philippines only no deduction is allowed
deducted from gross Philippines
income

DEADLINE FOR THE FILING OF INCOME TAX RETURN

1. Quarterly income tax (1702Q) –– 60 days after the close of the taxable quarter
2. Annual income tax returns (1702RT, 1702MX, 1702EX) –– 15th day of the 4th month following the close of the
taxable year.

MINIMUM CORPORATE INCOME TAX (MCIT)

–least amount of income tax a corporation should pay
MCIT will be imposed starting the 4th taxable year immediately following the taxable year in which the corporation has
started its operation.

Start of the operation Start of the imposition of MCIT

01/01/2014 ty 2018
01/01/2008 ty 2012
01/01/2000 ty 2004
01/01/1995 ty 1999
01/01/1990 ty 1998

STEPS:
1. Compute for the Regular Income Tax Rate (30% of taxable income); 20% or 25% of the taxable income (July 1,
2020)
2. Compute for the MCIT (2% of gross business income) CREATE LAW: 1% of the gross business income - July 1,
2020 to June 30, 2023
3. Compare MCIT and RIT .Whichever is higher between MCIT and RIT is the income tax due.

Excess MCIT over RIT shall be deducted from the income tax due of the corporation within 3 taxable years immediately
following the taxable year in which MCIT has been paid provided, that RIT is greater than MCIT. If the deferred charges
- MCIT is not used within the 3-year reglamentary period, the same shall lose its creditability.

IS THERE A RELIEF FROM MCIT?

The Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, may suspend the
imposition of MCIT upon submission of proof that the corporation has sustained substantial losses on account of:
A. Prolonged labor dispute
B. Force majeure
C. Legitimate Business Reverses

ENTITIES EXEMPTED FROM MCIT

1. Real Estate Investment Trusts or REITS under RA 9856

2. Domestic Corporations which opted to be taxed under 15% corporate income tax (gross income taxation)
3. Domestic Corporations or resident foreign corporations subject to special tax rates.
a) Proprietary educational institutions, and non-profit hospitals
b) Foreign Currency Deposit Units and Offshore Banking Units.
c) Regional Operating Headquarters of Multinational Corporations
d) International Air Carrier
e) Firms subject to special income tax such as PEZA and BCDA locators.
4. All Non-residents foreign corporations

SPECIAL CORPORATIONS
– corporations subject to special tax rates

DOMESTIC CORPORATIONS

A. Private educational institutions - 10% of taxable income (CREATE Law tax rate is 1% starting July 1, 2020 up to June 30,
2023)
B. Non-profit hospitals -10% of taxable income (CREATE Law tax rate is 1% starting July 1, 2020 up to June 30, 2023)
Note:
  Income from unrelated trade or business does not exceed 50% of the total income.
 If income from unrelated trade or business exceeds 50% of the total income, private educational institutions and non-profit
hospitals are subject to 20% or 25% income tax rate.
 Non-stock, non-profit educational institutions are exempted from income tax
 Government schools are exempted from income tax

RESIDENT FOREIGN CORPORATION

1. International Carrier - 2.5% of Gross Philippine Billings

Note: Gross Philippine Billings refer to amount of gross revenue derived from carriage of persons, excess baggage, cargo and
mails originating from the Philippines in a continuous and uninterrupted flight.
2. Offshore banking units from transactions with OBUs, local commercial banks and branches of foreign banks - 25% of taxable
income.
3. Offshore banking units from transactions with residents except those enumerated in #2 - 25% of taxable income
4. Regional Operating Headquarters of Multinational Corporation - 25% of taxable income.
5. Regional or Area Headquarters of Multinational Corporation - Exempt (not profit centers)
6. Branch profit remittance of resident foreign corporations except those registered with PEZA - 15% of income earmarked for
remittance.

NON-RESIDENT FOREIGN CORPORATIONS

1. Cinematographic film owner, distributor - 25% of income from the Philippines.

2. Lessor of vessels chartered by Philippine Nationals - 4.5% of income from the Philippines.
3. Owner, Lessor of aircraft, machineries and other equipment - 7.5% of income from the Philippines.

CORPORATIONS EXEMPT FROM INCOME TAX

1. Labor, agricultural or horticultural organization and not organized principally for profit.
2. Mutual savings bank not having a capital stock represented by shares, and cooperative bank without capital stock organized and
operated for mutual purposes and without profit;
3. A beneficiary society, order or association, operating for the exclusive benefit of the members such as fraternal organization
operating under the lodge system, or a mutual aid association or a non-stock corporation organized by employees providing for
the payment of life, sickness, accident or other benefits exclusively to the members of such society, order, or association, or non-
stock corporation or their dependents.
4. Cemetery company owned and operated exclusively for the benefit of its members.
5. Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural
purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong or inure to the benefit of any member,
organizer, officer or any specific person.
6. Business league, chamber of commerce, or board of trade, not organized for profit and no part of the net income of which inures
to the benefit of any private stockholder or individual.
7. Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare.
8. A non-stock, non-profit educational institution.
9. Government educational institution.
10. Farmers' or other mutual typhoon or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone
company, or like organization of a purely local character, the income of which consists solely of assessments, dues, and fees
collected from members for the sole purpose of meeting its expenditures.
11. Farmers, fruit growers or like association organized and operated as a sales agent for the purpose of marketing the products of its
members and turning back to them the proceeds of sales, less the necessary selling expenses on the basis of the quantity of
produce finished by them.
Note: If the above-mentioned organizations, conducts business activity for profit, they shall be subjected to income tax.
Income from disposal of their properties, whether real or personal shall likewise be subjected to income tax.
12. Social Security System (SSS), Philippine Health Insurance Corp. (PHIC), Government Service Insurance Corp. (GSIS), Local
Water Districts (LWD).