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TAXATION OF

CORPORATION
S
CHAPTER 3

CLASSIFICATION OF INCOME
TAXPAYERS
(Other
than
individuals)
1.Corporations
a.Domestic. Those created or organized under
and by virtue of Philippine laws.
1.Domestic corporation, in general
2.Government-owned and -controlled
corporations
3.Taxable partnerships
4.Proprietary educational institutions
5.Non-profit hospitals
b.Foreign. Those organized in accordance with
laws of their respective countries.
1.Resident. Those engaged in trade or
business within the Philippines.
2.Non-resident. Those not engaged in trade
or business within the Philippines.
2.General Professional Partnership

CORPORATION
Corporation. It includes partnerships,
no matter how created or organized,
joint- stock companies, joint
accounts (cuentas en participacion),
associations, or insurance
companies, but 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

CORPORATION (contd)
Section 3 of Revenue Regulations 10-2012 states
that a joint venture or consortium formed for the
purpose of undertaking construction
projects not
taxable as corporation under Sec. 22 of the NIRC of
1997 as amended, should be:
1)for the undertaking of a corporation project; and
2)should involve joining or pooling of resources by
licensed local contracts; that is, licensed as
general contractor by the Philippine Contractors
Accreditation Board (PCAB) of the Department of
Trade and Industry (DTI);
3)these local contractors are engaged in
construction business; and

CLASSIFICATION OF
CORPORATE TAXPAYERS
1.Domestic. When applied to a
corporation, means created or
organized in the Philippines or
under its laws.
2.Foreign. When applied to a
corporation, means a corporation
which is not domestic.
3.Resident Foreign Corporation.
Applies to a foreign corporation
engaged in trade or business within
the Philippines.

SOURCES OF INCOME

Source of Income
Corporation Within the Without the
Philippines Philippines
1. Domestic

2. Foreign

CATEGORIES OF INCOME AND TAX


RATES
1.Business Income. Generally,
business income earned by a
corporation is taxed at the
following
27(A),
Year rates (Sections
Tax Rate
28(A)(1) and 28(B)(1)):
1997
35%
1998
34%
1999
33%
2000 Oct.
32%
2005
Nov. 2005
35%

Specific Tax Rates on Business Income of


Corporate Taxpayers (Domestic Corporation)
Description

Tax
Rate

Tax Base

DOMESTIC CORPORATION
1.
a. In General
b. Minimum Corporate
Income Tax
c. Improperly Accumulated
Earnings

30%
2%
10%

Taxable Income from All


Sources
Gross Income
Improperly Accum.
Taxable Income

2. Proprietary Educational
Institution

10%

Taxable Income from All


Sources

3. Non-Stock, Non-Profit
Hospital

10%

Taxable Income from All


Sources

4. GOCC, Agencies &


Instrumentalities

(see
1a-1b)

5. National Government & LGUs

(see
1a-1b)

6. Taxable Partnership

(see
1a-1b)

Specific Tax Rates on Business Income of


Corporate Taxpayers (Resident Foreign
Corporation)
Description

Tax
Rate

Tax Base

RESIDENT FOREIGN
CORPORATION
1.
a. In General
b. Minimum Corporate
Income Tax
c. Improperly Accumulated
Earnings
2. International Carriers
3. Regional Operating
Headquarters

30%
2%
10%

2.50%
10%

4. Corporation covered by
Special Laws
5. Offshore Banking Units
(OBUs)

Taxable Income from within


the Phils.
Gross Income
Improperly Accum. Taxable
Income
Gross Philippine Billings
Taxable Income
Rate specified under the
respective special laws

10%
30%

Gross Taxable Income on


Foreign Currency
Transaction
On Taxable Income Other

CATEGORIES OF INCOME AND TAX


RATES (contd)

2. Passive Income. Passive income is


subject to separate and final tax.
These are taxed at fixed rates
ranging from 5% to 20%. Passive
income is not to be included in the
gross income computation.

SOURCES OF PASSIVE INCOME


& THE FINAL TAX RATES
Domes
tic

Resident
Foreign

Interest from deposits and yield or any


other monetary
benefit from deposit
substitutes and from trust funds and
similar arrangements.

20%

20%

Interest income from a depository bank


under the expanded foreign currency
deposit system.

7.50%

7.50%

ON PASSIVE INCOME
Interest

Income derived by a depository bank


under the expanded foreign currency
deposit system from foreign
currency
transactions with local commercial
banks,
including branches of foreign
banks that may be
authorized by the
Bangko Sentral ng Pilipinas (BSP),

SOURCES OF PASSIVE INCOME &


THE FINAL TAX RATES (contd)
ON PASSIVE INCOME
Dividends
Dividends receive by domestic/resident
foreign corporation from a domestic
corporation.
Capital Gains
On the net capital gain from sale,
exchange or other disposition of shares
of stock in a domestic corporation not
traded in the stock exchange
Not over P100,000
Amount in excess of P100,000
On the capital gain presumed to have
been realized on the sale, exchange or
disposition of lands and/or buildings
not actually used in the business and
treated as capital assets, the higher
value between

Domes
tic

Resident
Foreign

Exemp
t

Exempt

5%
10%

5%
10%

6%

DOMESTIC & RESIDENT


FOREIGN CORPORATIONS, IN
GENERAL
Pro-forma Computation of the
Normal Income Tax:
Gross Income
xxx
Less: Allowable
xxx
Deductions
Net Income
xxx
Multiply by: Tax Rate
30%
Tax Due
xxx

Fiscal-year Accounting Period


The corporate income tax rate of 35% became
effective beginning Nov. 1, 2005 (RA 9337). This
law presented a scenario where the months of
January to October 2005 are under the rate of 32%.
Regardless of the taxable year (calendar or fiscal)
followed, the formula for determining the total tax
due for the year shall be as follows (RMC 16-06,
Feb. 21, 2006):
Taxable Income x No. of months
x 32% =
P
covered by 32%
xx
12
Taxable Income x No. of months
x 35% =
xx
covered by 35%
12

Illustration: Warranty Corporations fiscal year


ended Mar. 31, 2006. It has a taxable income of
P600,000 for the fiscal year, its second year of
operations. The income tax payable for the Fiscal
year ended Mar. 31, 2006 is computed below:
April - Oct. 2005:
P600,000 x 7
mos.

= P350,000 x .32 P112,0


=
00

12
Nov. 2005 - Mar. 2006:
P600,000 x 5
mos.
12

= P250,000 x .35 87,500


=

Domestic Corporations, in Particular


1. Mutual Life Insurance Companies.
2. Recreational Clubs.
3. Real Estate Investment Trust (REIT)
Income-Generating Real Estate
Investor Securities
Overseas Filipino Investor
Principal Stockholder
Public Company
Distributable Income
A REITs Taxable Net Income

Real Estate Investment Trust (REIT)


(contd)
To qualify for the tax incentives under
Section 3 of RR 13- 2011, a REIT must:
a.be a public company and maintain its
status as a public company;
b.for the DST incentive on transfer of real
property provided for under Section 6 of
RR 13-2011, enlist with an Exchange
within 2 years from the date of initial
availment of DST incentive and maintain
the listed status of the investor
securities on the Exchange and the
registration of the investor securities by

Domestic Corporations, in Particular


(contd)
4. Government-Owned or Controlled
Corporations, Agencies or
Instrumentalities (GOCCs).
The following are exempt:
1.Government Service Insurance System
(GSIS),
2.Social Security System (SSS),
3.Philippine Health and Insurance
Corporation (PHIC),
4.Philippine Charity Sweepstakes Office
(PCSO),
5.Local Water Districts (LWD)
1

Proprietary Non-Profit1 Educational


Institutions and Hospitals. (contd)
Illustration 1: SGB University, a proprietary
educational institution, has a gross income for
the taxable year 2014 of P15 million. Of the total
gross income, P5 million was derived from
unrelated trade
or business. Total deductions
Gross
Income
P15,000,0
amount to
P3 million.
00
Less: Deductions

3,000,000

Net Income

P12,000,0
00

Multiply by: Tax Rate


10%
Tax
Due
P1,200,00
The 10%
tax
rate applies because
the gross
0 did
income from unrelated trade or business
not exceed the 50% limit of the total

gross

Proprietary Non-Profit1 Educational


Institutions and Hospitals. (contd)
Illustration 2: In the preceding illustration,
maintain all assumptions except that the
institutions gross income derived from unrelated
trade or business is P9 million. How much tax is
Gross Income
P15,000,000
due?
Less: Deductions
3,000,000
Net Income
P12,000,000
Multiply by: Tax Rate
(2009)

30%

Tax Due
P3,600,000
The gross income from unrelated trade or
business is more than 50% of the total gross
income. It is actually 60% (P9M/P15M). Hence,
the tax rate that applies is the tax rate

Domestic Corporations, in Particular


(contd)
6. Homeowners Association
Pursuant to Section 18 of R.A. 9904, association
dues and income derived from rentals of the
homeowners associations properties may be
exempted from income tax, VAT and percentage tax
subject to the following conditions:
7. The homeowners association must be a duly
constituted association as defined under
Section 3(b) of R.A. 9904;
8. The local government until having jurisdiction
over the homeowners association must issue a
certification identifying the basic services
being rendered by the homeowners association,
and stating in the said certification its lack of

Homeowners Association (contd)


3. Such services must fall within the purview of the
term basic community services and facilities,
which is defined under Section 3(b) of R.A. 9904
as referring to services and facilities that
redound to the benefit of all homeowners and
from which, by reason of practicality, no
homeowner may be excluded such as, but not
limited to: security, street and vicinity lights,
maintenance, repairs and cleaning of streets,
garbage collection and disposal, and
other
similar services and facilities; and
4. The homeowners association must present
proof (i.e., financial statements) that the
income and dues are used for the cleanliness,

Domestic Corporations, in Particular


(contd)
7. Power Sector Assets and Liabilities
Management Corporation (PSALM). RMC 112012 clarifies the income tax consequences of
transactions of the PSALM, they are as follows:
8.No income and WT are due from the sale of the
National Power Corporation (NPC) generation
assets and other real properties to winning
bidders.
9.The rental income of PSALM from the NPC
generation assets and other real properties,
prior to its sale to winning bidders, is subject
to income tax.
10.Any income to be derived by PSALM from the
operation of the generation facilities is subject
to income tax and withholding tax.
11.Other income or receipts from miscellaneous

Resident Foreign Corporation, in


Particular
1.International Carrier. Per Republic
Act 10378 and Revenue
Regulations 15-2013, an
international carrier doing business
in the Philippines shall pay a tax of
two and one-half percent (2.50%) on
its Gross Philippine Billings (GPB)
as follows:
1.International Air Carrier;
2.International Shipping
2.Offshore Banking Units (OBUs).

Resident Foreign Corporation, in


Particular
(contd)
5. Regional Operating
Headquarters (ROHQs) shall
mean a branch established in the Philippines
by multinational companies which
are
engaged in any of the following services:
General Administration and Planning;
Business Planning and Coordination;
Sourcing and Procurement of Raw Materials,
and Components;
Corporate Finance Advisory Services;
Marketing Control And Sales Promotion;
Training and Personnel Management;
Logistic Services;
Research and Development Services and
Product Development;
Technical Support and Maintenance;
Data Processing and Communication; and

NON-RESIDENT FOREIGN
CORPORATION,
IN GENERAL
Pro-forma Computation of the
Normal Income Tax:
Gross Income
Multiply by: Tax
Rate
Tax Due

xxx
30%
xxx

Non-Resident Foreign
Corporation, in Particular
Non-Resident Cinematographic Film Owner,
Lessor or Distributor is taxed at 25% of
gross income.
Non-Resident Owner or Lessor of Vessels
Chartered by Philippine Nationals is taxed
at four and one-half percent (4.50%) of
gross rentals, lease or charter fees from
leases
or charters to Filipino citizens or
corporations, as approved by the Maritime
Industry Authority.
Non-Resident Owner or Lessor of Aircraft,

Passive Income of NonResident Foreign Corporation


1. Interest on foreign loans contracted on or after Aug. 1
1986 are taxed at 20%.
2. Dividends received from a domestic corporation is subject
to a final withholding tax
at 15% on the condition that
the country in which the non-resident foreign
corporation is domiciled, shall allow a credit against the
tax due from the non- resident foreign corporation taxes
deemed to have been paid in the Philippines equivalent
to: 20% for 1997, 19% for1998, 18% for 1999, 17% for
2000 to Oct. 2005, 20% for Nov. 2005 to 2008 and 15% for
2009.
3. Capital Gains from sale of shares of stock not traded in
the stock exchange. A final tax at the rates prescribed
below is imposed upon the net capital gains realized
during the taxable year from the sale, barter, exchange or

Passive Income of NonResident Foreign Corporation


(contd)
4. Income derived by a bank from its FCDUs/EFCDUs or OBUs
with respect to foreign currency transactions with nonresidents, OBUs in the Philippines,
and local
commercial banks, including branches of foreign banks
authorized to transact business with FCDUs/EFCDUs, are
exempt from income taxes.
5. Royalty payments made by a PEZA-registered enterprise
to a non-resident Japanese corporation are subject to the
preferential tax rate on the gross amount of the
royalties under the RP-Japan Tax Treaty Under Article 10
of the RP-Japan
Tax Treaty, royalty income derived in
the Philippines by a corporation which
is a resident of
Japan shall be taxed at either one of the following
preferential rates:
a. 10% if the payor - company is an entity registered with
the Board of Investments (BOI);
b. 15% if the payments are with respect to the use or the
right to use cinematographic films and films or tapes

ALLOWABLE DEDUCTIONS
Allowable deductions are items or
amounts which the law allows to be
deducted from gross income in order
to arrive at the taxable income. A
domestic or resident foreign
corporation may deduct from its
business income, itemized
deductions under the Tax Code, or,
these corporations may elect a
standard deduction in an amount
not exceeding forty percent (40%) of

TAXABLE INCOME & TAX DUE


In case of corporations, taxable
income is the pertinent items of
gross income less the
deductions
authorized for such types of income.
Taxable income is the amount or
tax base upon which tax rate is
applied to arrive at the tax due.
Depending on the taxpayer involved
and for purposes of computing the
income tax liability of a corporation,
taxable income may refer to either

TAXABLE INCOME & TAX DUE


(contd)

1. Net Income. The income arrived at after


subtracting from the gross income the
deductions of the taxpayer. For domestic and
resident foreign corporations, in general; and
other corporations
from whose gross xxx
income
Sales/Revenues/Receipt/Fees
deductions
are allowed:
Less: Cost
of Sales/Services
xxx
Gross Income from Operation

xxx

Add: Non-Operating and Taxable


Other Income

xxx

Total Gross Income

xxx

Less: Deduction
Optional Standard Deduction
or
Itemized Deduction
Taxable Income

xxx
xxx

TAXABLE INCOME & TAX DUE


(contd)

2. Gross Income. The entire or gross


income from business without any
deductions for either optional
standard deduction or itemized
deduction.
For domestic and resident foreign
corporations subject to the MCIT;
and non- resident foreign
corporation
subject toxxx
the
Grossnot
Income
normalMultiply
income by:
tax Tax
rate (section
x%
28(B)(1)).
Rate

CORPORATIONS EXEMPT FROM


INCOME TAX (Section 30, NIRC)
1. Labor, agricultural or horticultural organization 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 nonstock corporation or their dependents;
4. Cemetery company owned and operate exclusively for the
benefit of its members;

CORPORATIONS EXEMPT FROM


INCOME TAX (Section 30, NIRC)
(contd)

Revenue Memorandum Circular 51-2014, issued June 6,


2014, clarifies the inurement prohibition on tax-exempt
non-stock and/or non-profit organizations
(NSNPs) under
Sec. 30 of the Tax Code:
Non-stock
Non-profit
They are also liable for the following final WT (RMC 762003, Nov. 14, 2003)
ON PASSIVE INCOME
Interest
Interest income from currency bank deposits and yield
or any other monetary benefit from deposit substitutes
instruments and from trust funds and similar
arrangements.

20%

Interest income from a depository bank under the


expanded foreign currency deposit system.

7.50
%

Royalties

20%

CORPORATIONS EXEMPT FROM


INCOME TAX (Section 30, NIRC)
(contd)

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 (Sec. 30 (G));
8. A non-stock and non-profit educational institution;
Subject to compliance requirements, their interest
income when used actually, directly, and exclusively in
ON
PASSIVEas
INCOME
pursuance of their
purposes
an educational institution
are exempt from final withholding taxes (FWT):
Interest
Interest income from currency bank deposits and
yield or any other monetary benefit from deposit
Exempt
substitutes instruments and from trust funds and
from
similar arrangements.
20% FWT
Interest income from a depository bank under the

Exempt

CORPORATIONS EXEMPT FROM


INCOME TAX (Section 30, NIRC)
(contd)
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
expenses; and
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

CORPORATIONS EXEMPT FROM


INCOME TAX (Section 30, NIRC)
(contd)
12.Per Sec. 5 of R.A. 10072, the Philippine
National Red Cross, to be known as the
Philippine Red Cross, shall be exempt from
payment of all direct and indirect taxes, all
provisions of law to the contrary
notwithstanding, including value-added tax,
fees and other charges of all kinds on all
income from its operation, including the use,
lease or sale of its real property, and provision
of services.
13.Per Rule 24 of the IRR of R.A. 10165, any childcaring or child- placing institution licensed and
accredited by the DSWD to implement the
Poster Care Program shall be exempt from
income tax on income derived by it as such
organization pursuant to Section 30 of the NIRC

TAXATION FOR COOPERATIVES


Cooperative refers to an autonomous and duly
registered association of persons, with a
common bond of interest, who have
voluntarily joined together to achieve their
social, economic, and cultural needs and
aspirations by
making equitable
contributions to the capital required,
patronizing their products and services and
accepting a fair share of the risks and
benefits, of the undertaking in accordance
with universally accepted cooperative
principles. The following discussion came
from the Joint Rules and
Regulations
implementing Articles 60, 61 and 144 of

TERMS
1.Accumulated Reserves
2.Business Transaction
3.Capital Assets
4.Certificate of Good Standing
5.Certificate of Tax Exemption/Ruling
6.Cooperative Development Authority (CDA)
7.Interest on Share Capital
8.Patronage Refund
9.Registration
10.Related Operation/Transactions
11.Transaction with Members
12.Transaction with Non-Members
13.Undivided Net Surplus/Undivided Net

Classification of Cooperatives
According to the Extent of the Tax
Exemptions Granted

1.Tax Exemptions of Duly Registered


Cooperatives which Transact
Business with Members Only

a.
b.
c.
d.

Duly registered cooperative dealing/transacting


business with members
only shall be exempt
from paying any taxes and fees, including but
not limited to:
Income Tax imposed by Title II of the NIRC, as
amended;
Value-Added Tax (VAT) imposed under Title IV of
the NIRC, as amended;
Percentage Tax imposed under Title V of the
NIRC, as amended;
Donors Tax imposed under Title III of the NIRC,

1. Tax Exemptions of Duly Registered


Cooperatives which Transact
Business with Members Only
(contd)
f. Documentary Stamp
Tax imposed under Title VII
of the NIRC, as amended, provided, however,
that the other party to the taxable
document/transaction who is not exempt shall
be the one directly liable for the tax;
g. Annual Registration Fee of P500 under Sec.
236(B) of the NIRC, as amended;
h. All taxes on transactions with insurance
companies and banks, including but not
limited to 20% final tax on interest deposits and
7.5% final income tax on interest income
derived from a depository bank under the
expanded foreign currency deposit system;
and
i. Electric cooperatives duly registered with the

Classification of Cooperatives
According to the Extent of the Tax
Exemptions Granted (contd)
2. Taxability/Exemption of Duly
Registered Cooperatives which
Transact Business with Members
and Non-Members

. Cooperatives with accumulated reserves and


undivided net savings of not more than P10
million Exempt from all national internal
revenue taxes for which these cooperatives are
liable as enumerated in the previous section.
. Cooperatives with accumulated reserves and
undivided net savings of more than P10 million

1)Business transactions with members

2. Taxability/Exemption of Duly
Registered Cooperatives which
Transact Business with Members and
Non-Members (contd)
2) Business transacts with non-members
a) Pay the following taxes at the full rate:
i. Income Tax
ii. Value Added Tax (VAT)
iii. Percentage Tax
iv. All other Internal Revenue Taxes unless
otherwise provided by the law; and

b) Be entitled to limited or full deductibility of


donations to duly accredited charitable, research
and educational institutions and reinvestment to
socio-economic projects within the area of
operation of such cooperative.
c) Pursuant to Article 61(3) be entitled to an
exemption on taxes on transactions with
insurance companies and banks, including but
not limited to 20% final taxes on interest

TAXATION FOR COOPERATIVES


(contd)
Taxability of Unrelated Income of
Cooperative
Taxability of Cooperatives to Other
Internal Revenue Taxes
Taxability of Members/Share
Holders of Cooperatives

PAL AND OTHER FRANCHISE


GRANTEES SIMILARLY SITUATED
The franchise of the Philippine Airline
(PAL) provides that it shall pay
government the lower of the basic
corporate income tax or franchise
tax in lieu of all other taxes, duties,
royalties, registration, license, and
other fees and charges, except only
real property tax. The in lieu of all
other taxes clause includes the MCIT
(Commissioner of Internal Revenue
vs. Philippine airline, Inc., Supreme

ENTERPRISES REGISTERED UNDER THE


BASES CONVERSION & DEVELOPMENT
ACT OF 1992 & THE SPECIAL
ECONOMIC ZONE ACT OF 1995 R.A.
7916)
Enterprises that are registered with
the Subic Bay Metropolitan
Authority (SBMA), the Clark
Development Authority (CDA) or the
Philippine Economic Zone Authority
(PEZA) engage in registered as well
as unregistered activities.

ENTERPRISES REGISTERED UNDER THE BASES


CONVERSION & DEVELOPMENT ACT OF 1992 & THE
SPECIAL ECONOMIC ZONE ACT OF 1995 R.A. 7916)
(contd)
Registered Activities
Income derived by such enterprises from registered
activities shall be subject to such tax treatment as
may be specified in the terms of registration, i.e:
5% preferential tax rate
income tax holiday (ITH)
regular income tax rate
Except for real property taxes on land owned by
developers, no taxes, local and national, shall be
imposed on business establishments operating
within the ecozone. In lieu thereof, five percent (5%)
of the gross income earned (GIE) by all business
enterprises within the ecozone shall be paid and
remitted as follows:
a. Three percent (3%) to the National
Government;

ENTERPRISES REGISTERED UNDER THE BASES


CONVERSION & DEVELOPMENT ACT OF 1992 & THE
SPECIAL ECONOMIC ZONE ACT OF 1995 R.A. 7916)
(contd)

Unregistered Activities
Revenue Regulations 20-2002 clarified
the tax treatment of income earned
from unregistered activities by
enterprises registered under the
Bases Conversion and Development
Act of 1992 and the Philippine
Economic Zone Act of 1995. Income
derived from unregistered activities
shall be subject to the regular

Interest
Interest income from
Philippine currency bank
deposits, yield or any other
monetary benefit from
deposit
substitutes, from
trust funds and
similar
arrangements
Interest income from foreign
currency deposits
Sale of Shares of Stock
Not traded in the stock
exchange
On the net capital gain from
sale,
exchange or other
disposition of shares of
stock in a domestic
corporation

20% Final Income


Tax
7.50
%
Final Income
Tax

5%
10% Capital Gain

DECLARATION OF QUARTERLY
CORPORATE INCOME TAX
Every corporation shall file in duplicate a
quarterly summary declaration of its gross
income and deductions on a cumulative
basis for the preceding quarter or quarters
upon which the income tax shall be
levied, collected and paid. The income tax
computed decreased by the amount of tax
previously paid or assessed during the
preceding quarters shall be paid and the
return filed not later than sixty (60) days
from the close of each of the first three (3)
quarters of the taxable year, whether
calendar or fiscal .A return showing the

DECLARATION OF QUARTERLY
CORPORATE INCOME TAX (contd)
Every taxable corporation is likewise
required to file a final adjustment return
covering the total taxable income of the
corporation for the preceding calendar or
fiscal year, which is required to be filed
and paid on or before April 15, or on or
before the 15th day of the 4th month
following the close of the fiscal year, as the
case may be. If the sum of the quarterly
tax payments made during the said
taxable year is not equal to the total tax
due on the entire taxable income of that
year, the corporation shall either:

Illustration: The result of operations of


corporation for 2014 whose taxable year
is on a calendar year basis, is as follows:
Gross
Income
1st quarter
(Jan. 1 to March
31)

Deducti
on

Net
Income

P300,00 P200,00
P500,000
0
0

2nd quarter
(April 1 to June
1)

600,000 350,000 250,000

3rd quarter
(July 1 to Sept.
30)

700,000 400,000 300,000

Tax
credit for overpaid income tax for the
4th quarter
(Oct. 1 to year
Dec. is P50,000.
preceding

The return to be filed for the 1st


quarter follows:
Gross Income this quarter P500,000
Less: Deductions
300,000
Taxable Income
P200,000
Income Tax Due
(P200,000 x 30%)
Less: Tax Credit
Balance of Tax to be paid
this quarter

P60,000
50,000
P10,000

The return for the 2nd quarter to be filed


follows:

Gross Income this quarter

P600,0
00

Add: Gross Income for 1st


quarter

500,00
0

Gross Income for 1st and 2nd


quarters
Less: Deductions
1st quarter
2nd quarter
Taxable Income
Income Tax Due

P1,100,0
00
P300,0
00
350,00
0

650,000
P450,000

The return to be filed for the 3st quarter is


Gross
Income
this quarter
P700,0
shown
follows:
00

Add: Gross Income for


previous quarters:
1st quarter

P500,0
00

2nd quarter

600,00
0

1,100,
000

Gross Income for 1st, 2nd and


3rd quarters

P1,800,
000

Less: Deductions
1st quarter

P300,0
00

2nd quarter

350,00
0

3rd quarter

400,00
0

1,050,0
00

The final adjustment return shall be filed and the tax due thereon
paid on or before April 15 of the following year. Computation
Gross Income, 4th quarter
P800,0
follows:
00

Add: Gross Income for previous


quarters:
1st quarter

P500,0
00

2nd quarter

600,00
0

3rd quarter

700,00
0

1,800,
000

Gross Income for the year

P2,600,
000

Less: Deductions
1st quarter

P300,0
00

2nd quarter

350,00
0

3rd quarter

400,00
0

4th quarter

450,00 1,500,00
0
0

1st
Quarte
r

2nd
Quarter

3rd
Quarter

4th
Quarter

Total

Gross Income
this quarter

500,00
0 600,000 700,000 800,000

previous
quarter/s
Total Gross
Income

2,600,
000

500,000

1,100,0
00

1,800,0
00

1,100,0
00

1,800,0
00

2,600,0
00

2,600,
000

300,00
0 350,000 400,000 450,000

1,500,
000

500,00
0

Less:
Deductions
this quarter
previous
quarter/s
Total
Deductions

300,000 650,000
300,00
0 650,000

1,050,0
00

1,050,0
00
1,500,0
00

1,500,
000

Problems
Taxable Income and Tax Due
Dynasty Corporation just completed its third year
of operations. It has the following financial
information for the taxable year 2015, its third
year:
Philippines
China
Gross Income
Deductions

P1,250,000
945,000

P800,000
540,000

1.Assuming that the taxpayer is a domestic


corporation, what is the taxable income?
2.What is the tax due?
Gross Income
Philippines
China
Total Gross
Income
Less:
Deductions
Philippines
China
Total

P1,250,
000
800,000
P2,050,
000

P945,00
0
540,000
1,485,0

3.Assuming that the taxpayer is a resident foreign


corporation, what is the taxable income?
4.What is the tax due?
Gross Income
Philippines
Less:
Deductions
Philippines
Taxable
Income
Multiply by:
Tax Rate
Tax Due

P1,250,
000

945,000
P305,00
0
30%
P91,500

5. Assume that the taxpayer is a non-resident


foreign corporation, what is the taxable income?
6. What is the tax due?

Gross Income
Philippines
Taxable
Income
Multiply by:
Tax Rate
Tax Due

P1,250,
000
P1,250,
000
30%
P375,00
0

Empire Corporation started its operations in 2013


and has the following financial data for the three
consecutive years ending Dec. 31, 2015:
2013

2014

2015

Gross Income,
Philippines

720,0 635,0 810,0


00
00
00

Gross Income,
Hong Kong

990,0 610,0 820,0


00
00
00

Gross Income,
Thailand

810,0 890,0 620,0


00
00
00

Deductions,
Philippines

555,0 495,0 675,0


00
00
00

Deductions, Hong
Kong

770,0 485,0 635,0


00
00
00

7.Assume that the taxpayer is a domestic


corporation, what is the 2013 taxable income?
8.What is the tax Due?
Gross Income
Philippines
P720,0
00
Hong Kong
990,00
0
Thailand
810,00
0
Total Gross
P2,520,
Income
000
Less:
Deductions
Philippines
P555,0
00
Hong Kong
770,00

9. Assume that the taxpayer is a proprietary educational institution


whose gross income and expenses are the 2014 gross income and
expenses from all sources in the illustration. Assume further that
2014 gross income and expenses in the Philippines are the gross
income and expenses of the institution from unrelated trade or
business. What is the taxable income for 2014?
10.What is the
tax due?
Gross
Income

Philippines

P635,00
0

Hong Kong

610,000

Thailand

890,000

Total Gross
Income

P2,135,00
0

Less: Deductions
Philippines

P495,00
0

Hong Kong

485,000

Thailand

707,000

Total Deductions

1,687,000

11.Assuming that the taxpayer is a resident foreign


corporation, what is the taxable income for
2015?
12.What is the tax due?
Gross Income
Philippines

P810,0
00

Less:
Deductions
Philippines
Taxable
Income
Multiply by:
Tax Rate

675,00
0
P135,0
00
30%

13.Assume that the taxpayer is an international


carrier whose 2013 gross Philippine billings and
expenses are the 2013 gross income and
expenses from Hong Kong and Thailand in the
illustration combined. What is the taxable income
for 2013?
14.What is the tax due?
Gross Income
Hong Kong
P990,00
0
Thailand
810,000
Total Gross Income P1,800,0
00
Multiply by: Tax
Rate
Tax Due

2.50%
P45,000

15.Assume a non-resident foreign corporation,


what is the taxable income for 2015?
16.What is the tax due?

Gross Income
Philippines
Taxable
Income
Multiply by:
Tax Rate
Tax Due

P810,0
00
P810,0
00
30%
P243,0
00

17.Assume that the taxpayer is a non-resident


owner of aircrafts whose year 2015 gross rentals
and expenses are the year 2015 gross income
and expenses from Thailand in the illustration.
What is the taxable income for the year 2015?
18.What is the tax due?
Gross Income
Thailand
P620,0
00
Taxable
Income
Multiply by:
Tax Rate
Tax Due

P620,0
00
7.50%
P46,50
0

Problem
Quarterly Taxes on Domestic
Corporations
Regime Inc., is a trading company created
under Philippine laws. For the quarter
ending June 30, 2015, it has the following
results of operations:
Gross Sales for the Quarter
P980,0
00
Cost of Sales for the Quarter
492,80
0
Total Deductions Claimed for
315,00
the Quarter
0
Gross Sales for the 1st Quarter
630,00
0
Cost of Sales for the 1st Quarter 318,15

The company fails to file its 2nd quarter


income tax return on the due date, Aug.
29, 2015. It files its return on Sept. 6,
2015. Compromise penalty is P10,500.

1.Gross income this quarter:


2.Taxable income this quarter:
3.Gross income 1st quarter:
4.Total taxable income to date:
5.Tax due:
6.Tax payable:
7.Penalties:
8.Total amount payable:

Gross Sales for the quarter


Less: Cost of Sales for the
quarter
1 Gross Income this quarter
.
Less: Total Deductions
Claimed for the
quarter
2 Taxable Income this quarter
.
Add: Taxable Income 1st
quarter
Gross Sales for the 1st
quarter
Less: Cost of Sales for

P980,0
00
492,80
0
P487,2
00
315,00
0
P172,2
00

P630,0
00
318,15

5 Tax due (P268,118 x 30%)


.
Less: Creditable Tax
Withheld
Tax Payment for the 1st
quarter
6 Tax Payable
.
Add: Penalties
Surcharge (25%)
Interest (P33,810 x
20% x 8/360)
7
Compromise penalty
.

P80,4
35
P17,8
50
28,77 46,62
5
5
P33,8
10
P8,45
3
150
10,50 19,10
0
3

Problem
Quarterly Taxes on Domestic
Corporations
Empire Inc., a domestic corporation, started its
operation in 2014. Its records show the following
cumulative balances for 2014.
1st
2nd
3rd
Quarter Quarter Quarter

Year

Gross Income

1,920,0
00

3,840,0 5,760,0
00
00

7,440,
000

Business
Expenses

1,440,0
00

2,880,0 4,080,0
00
00

5,040,
000

Income Tax
Withheld

36,000

84,000

156,00 276,00
0
0

1.Taxable income for the 1st quarter:


Gross Income

P1,920,
000

Less: Business Expenses

1,440,0
00

Taxable Income

Income Tax Due


(P480,000 x 30%)

P480,00
0

P144,00
0
Less: Income Tax Withheld
36,000
Balance of Tax to be paid
P108,00
this quarter
0

2.Income tax for the 2nd quarter:


Gross Income this quarter P3,840,
000
Add: Gross Income for 1st
1,920,0
quarter
00
Gross Income for 1st and
2nd quarters
Less: Business Expenses
1st quarter
2nd quarter
Taxable Income

Income Tax Due


(P1,440,000 x 30%)
Less: Tax Due for previous

P2,880,
000
1,440,0
00

P5,760,
000

4,320,0
00
P1,440,
000
P432,00
0

3.Income tax for the 3rd quarter:


Gross Income for this quarter
Add: Gross Income for
previous quarters:
1st quarter
2nd quarter
Gross Income for 1st, 2nd, and
3rd quarters
Less: Business Expenses
1st quarter
2nd quarter
3rd quarter

Taxable Income
Income Tax Due
(P3,120,000 x 30%)
Less: Income Tax Due for

P5,760,0
00
P1,920,
000
3,840,0 5,760,00
00
0
P11,520,
000
P1,440,
000
2,880,0
00
4,080,0 8,400,00
00
0
P3,120,0
00
P936,00
0

4. Income tax due (or refundable) at the end of the year:


Gross Income for this quarter
P7,440,0
00
Add: Gross Income for previous
quarters:
1st quarter
2nd quarter
3rd quarter

P1,920,0
00
3,840,00
0
5,760,00
0

Gross Income for 1st, 2nd, 3rd,


and 4th quarters
Less: Business Expenses
1st quarter
2nd quarter
3rd quarter
4th quarter

11,520,0
00
P18,960,
000

P1,440,0
00
2,880,00
0
4,080,00
0
5,040,00
0

13,440,0
00

Taxable Income

P5,520,0
00

Income Tax Due


(P5,520,000 x 30%)

P1,656,0
00