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CORPORATION
The term “normal income tax” shall mean the income tax
rates prescribed under Sections 27(A) and 28 (A) (1) of the Code
at 35% effective Jan. 1, 1997; 34% effective Jan. 1, 1998; 33%
effective Jan. 1, 1999; and 32% effective Jan. 1, 2000, and
thereafter. Last May 24, 2005, the president signed into law R.A
9337 or the Expanded Value-Added Tax Act of 2005. Under this
law, beginning Nov. 1, 2005, the corporate income tax rate shall
be 35%. This rate shall be reduced to 30% effective Jan 1, 2009.
WHAT IS CORPORATION?
Domestic Corporations
A domestic corporation is a corporation that is organized
in accordance with Philippines laws.
2009 30%
The table below shows the specific tax rates on business income of corporate taxpayers
(domestic and resident foreign):
Description Tax Rate Tax Base
DOMESTIC CORPORATION
1.
a. In General 30% Taxable Income from all sources
b. Minimum Corporate Income tax 2% Gross income
c. Improperly Accumulated Earnings 10% Improperly Accumulated, Taxable Income
2.Proprietary Educational Institution 10% Taxable Income from all sources
7.Exempt Corporation
a. on exempt activities 0% Taxable Income
b.om taxable activities (see 1a)
8. General Professional Partnerships Exempt
9. Corporation covered by Special Laws Rate specified under the respective special
laws
Description Tax Rate Tax Base
1.
a. In General 30% Taxable Income from within the Philippines
b. Minimum Corporate Income tax 2% Gross income
c. Improperly Accumulated Earnings 10% Improperly Accumulated. Taxable Income
4.Corporation covered by special Laws Rate specified under the respective special
laws
5.Offshore Banking Units (OBUs) 10% Gross Taxable Income on Foreign Currency
Transaction
30% On Taxable Income Other than Foreign
Currency Transaction
6.Foreign Currency Deposit Units (FCDU) 10% Gross Taxable Income on Foreign Currency
Transaction
30% On Taxable Income Other than Foreign
Currency Transaction
Passive income. Passive income is subject to a separate final tax. These are taxed at
fixed rates ranging from 5% to 20%. Passive income is not included in gross income
computation.
ON PASSIVE INCOME DOMEST RESIDENT FOREIGN
IC
Interests 20% 20%
Interest from deposits and yield or any other
monetary benefit from deposit substitutes and from
trust funds and similar arrangements.
Republic act 10026 granted income tax exemption to local water districts. The law mandates that the amount
saved due to the exemption shall be used by the local water districts for capital equipment expenditure that will
result to an expanded water services coverage and improved water equality in the provinces, cities and
municipalities.
Power Sector and Assets and Liabilities Management Corporation(PSALM). RMC 11-2012 clarifies the
income tax consequences of transactions of the PSALM, they are as follow:
1. No income and WT are due from the sale of the National Power Corporation (NPC) generations assets and
other real properties to winning bidders.
2. 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.
3. Any income to be derived by PSALM by the operation of the generation facilities is subject to income tax
and withholding tax.
4. Other income or receipt from the miscellaneous activities such as forfeiture or performance bonds, interest
income from persons other than the winning bidders and from other activities not related to PSALM’s
mandate are subject to all applicable taxes under the tax code.
• Mutual Life Insurance Companies. These companies are now
subject to the regular corporate tax rates.
• Homeowners’ Association. Association or condominium dues,
membership fees and other assessment or charges, which are held in
trust by the condominium corporation to be used solely for
administrative expenses, are excluded from the condominium
corporation’s gross income, hence, not subject to income and
withholding tax.
• Recreational Clubs. RMC 35-2012 clarifies the taxability of clubs
organized and operated exclusively for pleasure, recreation, and other
non-profit purposes. Income from whatever source, including but not
limited to membership fees, assessment dues, rental income and
service fees, of clubs organized and operated exclusively for pleasure
and recreation and other non-profit purposes, are subject to income
tax.
RESIDENT FOREIGN CORPORATIONS, IN
PARTICULAR
International Carrier. Per Republic Act 10378 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
(GDB) as follows
1. International Air Carrier – Gross Philippine Billing refers to
the amount of gross revenue derived from passage of persons,
excess baggage, cargo and mail, originating from the
Philippines in a continuous and uninterrupted flight,
irrespective of the place of sale or issue and the place of
payment of the passage documents.
2. International Shipping – Gross Philippines Billings means
gross revenue whether for passenger, cargo or mail originating
from the Philippines up to final destination, regardless of the
place of sale or payments of the passage or freight documents.
Offshore Banking Units (OBUs) – income derived by offshore banking units authorized
by the BSP, from foreign currency transactions with local commercial banks, including
branches of foreign banks that may be authorized by the BSP to transact business with
offshore banking units including any interest income derived from foreign currency loans
granted to residents, shall be subject to a final income tax at ten percent (10%) of such
income.
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 and
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 business development. Regional operating headquarters shall pay a tax ten percent
(10%) of their taxable income.
Regional or Area Headquarters (RHQs) shall mean a branch established in the
Philippines by multinational companies which headquarters do not earn or derive income
from the Philippines and which act as supervisory, communications and coordinating
center for their affiliates, subsidiaries, or branches in the Asia Pacific Region and other
foreign markets. Regional or area headquarters as such shall not be subject to income tax.
NON- RESIDENT FOREIGN CORPORATION,
IN GENERAL
3. Capital gain from the sale of shares of stocks not traded in the stock exchange. A
final tax at the rates prescribed below imposed upon the net capital gains realized
during taxable year from the sale, barter, exchange or other disposition of share of
stock in a domestic corporation, except shares sold, or disposed of through the stock
exchange;
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 corporation from whose
gross income deductions are allowed.
2. Gross Income. The entire or gross income from business without any
deduction for either optional standard deduction or itemized
deduction.