INCOME TAXATION Tax-paid income or income already subjected to final withholding tax (supported

with BIR Form No. 2306)

CORPORATE INCOME TAX RATES
RCIT Regular Corporate Income Tax 30%  Interest earned banks deposits (C/I)
PTR Preferential Tax Rate based on GI (Gross Income) 5%  Gains from sale, exchange or other disposition of shares of stock not
MCIT Minimum Corporate Income Tax 2% traded in the stock exchange
IAET Improperly Accumulated Earnings Tax 10%
BPRT Branch Profits Remittance Tax 15% Inter-corporate dividends or dividends received by domestics and resident foreign
corporations from another foreign corporation

Gross Income – All income from whatever source: Inter-corporate Dividends

Corporation to Corporation Corporation to Individual
 Compensation for service in whatever form paid (Tax Exempt) (Taxable)
 Gross Income derived from trade or business or the exercise of a
profession Gains from sales, barter, exchange or other disposition of shares of stock listed
 Gains derived from dealings in property (sale of real or personal and traded through the local stock exchange or through IPO
property)
 Interests  IPO – Initial Public Offering
 Rents
 Royalties Final Withholding Tax – Advance Income Tax Payment
 Dividends
 Annuities  FWT – Final Withholding Tax
 Prizes and Winnings o All Passive Income are subject to Final Withholding Tax
 Pensions o BIR Form No. 2306 – proof of Final Withholding Tax
 Partner’s distributive share from the net income of the general  PSE – Philippine Stock Exchange
professional property  CWT – Creditable Withholding Tax (BIR Form No. 2307)

Taxable income computed: Allowable Deductions

1. Annual accounting period Itemized Deduction:

Regular Itemized Deductions Optional Standard Deductions
Types of Period Special Itemized Deductions
Calendar January to December
Fiscal Every 12 months Deadline of Filing

2. Method of accounting regularly employed in keeping the books. Individual Corporation

May 30
Quarter 1 – May 30
3. But if does not clearly reflect the income, method as the opinion of the BIR. April 25 45 days after every Quarter 2– Aug 30 60 days after every
May 15 quarter Quarter 3 – Nov 30 quarter
 Approved standard methods Quarter 4 -Annually
 Clearly reflecting income
 With reasonable consistency Place of Filing

Imputation of Interest Income With Payment Without Payment

Accredited Agent Bank (AAB) BIR
SC Gr Nos. 163653 and 167689 dated July 19, 2011 Electronic Filing Payment System Municipal Treasurer
(EFSP)
The CIR’s power of distribution, apportionment or allocation of gross income and Municipal Treasurer
deductions does not include the power to impute “theoretical Interests” to the
taxpayer’s transactions. Moreover, no interest shall be due unless it has been Penalties
expressly stipulated in writing. Likewise, it is settled that statutes must be
construed strictly against the government and liberally in favor of the tax payer. Surcharge – 25% Example: Forgot to pay 1,000
Interest – 12% Surcharge (1,000 x 25%) 250
Exclusion from Gross Income Compromise – 1,000 – 25,000 Interest (1,000 x 12%) 120
(review this example) Compromise 1,000
1. Life Insurance Total Penalties 2, 370

2. Amount received by the insured as return of premium Regular Itemized Deductions

3. Gifts, bequest and devises (estate)  Ordinary and necessary trade, business or professional expenses
 Interest
4. Compensation for injuries or sickness  Taxes
 Losses
5. Income exempt under tax treaty binding upon the Philippine Government  Bad Debts
 Depreciation
6. Retirement Benefits received under RA No. 7641 and those received by officials  Charitable and other contributions
and employees of private firms, whether individual or corporate in accordance with  Pension Trusts
a reasonable private benefit plan maintained by the employer.  Research and Development

7. Amount received as consequence of involuntary separation. Time of Availing Deductions

8. Prizes and awards in recognition of religious charitable, scientific, education,
artistics, literary or civic achievement, as well as awards in authorized sport
competitions.
9. 13th month pay and other benefits (subject to Php 90,000 limitation under RA
No. 10653, as amended).
A tax payer has the right to deduct all authorized allowances (paid or incurred) for
the taxable year
Expenses not being claimed as deduction by a taxpayer in the current year when
they are incurred cannot be claimed as deductions from income for the
succeeding year.

10. GSIS, SSS Medicare and Pag-Ibig contribution and union dues of individuals.

11. Gains from sale of bonds, debentures or other certificate on indebtedness with
a maturity of more than 5 years

12. Gains from redemption of shares in mutual fund (return of capital)

 Expenses – General Requirements corporation that the corporation sustained substantial loses on account of
following:
1. Ordinary and necessary expense
2. Substantiated by adequate proof  Prolonged Labor Dispute
3. Subjected to withholding tax  Force Majeure
4. Not contrary to the law  Legitimate Business Reverses

Minimum Corporate Income Tax (MCIT) To get Gross Income

Rate – 2% of the gross income Gross Revenue (Service)/ Sales (Goods) xxx
Less: Cost of Sales (Direct Costs)
Persons Liable – Domestic and Resident Foreign Corp (RFC) Raw Materials xxx
Labor xxx
Types of Person Other Expenses xxx
Natural Gross Income xxx
Juridical
To get MCIT

Whenever such corporation has zero (no operation) or negative (net loss) taxable Gross Income xxx
income or Multiply by: 2%
MCIT xxx
Whenever the amount of MCIT is greater than the normal income tax (RCIT) due
from such corporation To get Taxable Net Income

Limitations Gross Income xxx

Less: Administrative/Operational Cost (Not related to Cost of Sales)
In the case of a domestic corporation whose operations or activities are partly Salaries xxx
covered by regular income tax system and are partly covered by special income Utilities xxx
tax system, the MCIT shall apply on operations covered by the regular income tax Transporation xxx
system Rental xxx
Depreciation xxx
In computing the MCIT due from a resident foreign corporation, only the gross Taxable Net Income xxx
income from sources within the Philippines shall considered for such purpose.
Tax Filing and Payment
Registration Process
Time of Filing
1. SEC – Security Exchange Commission
2. LGU – Local Government Unit Shall be filed on or before April 15 (calendar year) or on the 15th day of the 4th
3. BIR – Bureau of Internal Revenue month following the close of Fiscal Year.

When does MCIT commence? Example: February (Fiscal Year End) Deadline: June 15

MCIT is imposed upon any domestic corporation beginning the fourth taxable in How to identify Fiscal Year Beginning: March
which such corporation commenced its business operations.
January (11th) July (5th)
The taxable year in which business operations commenced shall be the year when February (FYE) (12th) August (6th)
corporations registers with the BIR March (FYB) (1st) September (7th)
April (2nd) October (8th)
For the purpose of MCIT, the taxable year in which the business commenced shall May (3rd) November (9th)
be the year in which domestic corporation registered with the BIR (not in which the June (4th) December (10th)
corporation started commercial operations)
No Extension
Illustration of Commencement of MCIT
2011 2012 2013 2014 2015 Late filing shall be subject to legal remedies as provided for by the tax code
(surcharge - 25%, interest -12% and compromise – 1,000 – 25,000).

Signatory of the Corporate AITR

Date of 2nd Taxable 3rd Taxable 4th Taxable 5th Taxable
Registration Year Year Year Year
with BIR (any
1. President
date within 2. Vice President
the year) 3. Other Principal Officer of the Corporation
4. The IT shall be sworn by the officer and by the corporate treasurer or
1st Taxable Subject to assistant treasurer
Year MCIT starting 5. Accredited Tax Agent
Taxable Year
2014
No President – Special Power of Authority or Attorney?

BIR Form No. 2302 – Certificate of Corporation 1. Vice President

2. Chief Financial Officer (CFO)
Quarterly MCIT Computation 3. Chief Operating Officer (COO)
4. Chief Information Officer (CIO)
The computation and the payment of MCIT shall likewise apply at the time of filing
the quarterly corporate income tax Where to File – General Rules

In the computation of the tax due for the taxable quarter, if the quarterly MCIT is No Payment
higher than the quarterly normal income tax, the tax due to be paid for such taxable
quarter at the time of filing the quarterly corporate income tax return shall be the 1. BIR RDO (Revenue District Office) where the corporation is duly
MCIT registered
2. Local Government Unit (LGU) Treasurer
Relief from MCIT
With Payment
The Secretary of Finance upon the recommendation of the Commissioner, may
suspend the imposition of the MCIT upon submission of proof by the applicant- 1. BIR Accredited Agent Banks (AABs) – for Over the Counter (OTC)
 2. No Accredited Agent Banks (AABs) – BIR Collection Agent or BIR 4. Required pages that must be stamped – Audit Certificate, Balance
Authorized LGU Treasurer Sheet and Income Statement (Front Page)
5. Not all pages requires stamping
Electronic Filing & Payment System 6. Extra 2 copies of the AFS shall also be stamped for filing with SEC

1. Online System of the BIR Attachment of AITR

2. Direct Encoding of the information required in the AITR Form
3. Online Submission/filing of the AITR 1. Auditor’s certificate
4. Online Payment – Internet or BIR Website 2. Statement of Management Responsibility
3. SAWT
Time of Payment – EFPS 4. AFS
5. BIR Form 2304 if any (not subjected to WT)
1. Pay as you File Principle 6. BIR Form 2307
2. Or as long as the payment of the income tax is made on or before the 7. Other attachments that is are applicable
due date of the tax
Other Attachments if Applicable
eBIRForms
1. TDM (Tax Debit Memo)
Offline – allows tax payer to accomplish BIR returns and filing/payment can be 2. Proof of Prior Year’s excess credit /TCC
made over the counter (OTC). 3. Foreign Tax Credits
4. Amended Return
Online – allows tax payer to accomplish BIR returns and online filing submission 5. Tax Treaty Relief Applicable Certification
and filing can be made OTC. This feature automatically computes penalties for
returns filed beyond due date.

Upon validation the tax payer shall received a BIR system generated Notification
Email acknowledging successful filing of the return.

The notification email should be printed and attach to each copy of the tax return
when paying OTC.

Summary:

1. Encode
2. File
3. OTC – Bank
4. Notification Email
5. Notification Email must be printed.

EFPS Filing of AITR

Corporate TP availing the EFPS shall submit the following:

1. AFS (Audited Financial Statement

2. Certificate of Withholding Tax (DVD-R/USB)
3. Within 15 days from date of Online Filing

Must submitted within 15 days from online filing:

1. 1702 RT
2. Audited Financial Statement
3. 2307/2306 (Scanned copy USB/DVD)
4. SAWT
5. Notarized Certification
6. Auditors Certificate
7. SMR (Statement of Management Responsibility)

eFPS Attachment

1. Summary of Alphalist of Withholding Agents of Income Payments

Subjected to Creditable Withholding Tax- eSubmission
2. Scanned copies of BIR Form 2307 stored using PDF format
3. DVD—R/USB Labeled property
4. Submitted to BIR Office
5. Notarized Certification of duly authorized officer of the company that
the soft copies are complete and exact copies of the original.

Where to File AITR

Large Taxpayers

 EFPS Facility

Non-Large Taxpayers

 Accredited Agent Banks

 BIR Collection Agent
 eBIRForm Facility

Manner of Filing

1. File three copies AABs and/or BIR

2. Stamped received by the AAB and or BIR the AITR
3. Stamped received also is the AFS