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    ©Bessy Bonbon- photocopying of this material IS ILLEGAL. CLOSE TA?!  1 CORPORATION   TAX RATE TAX BASE BUSINESS INCOME   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 Accumulated Taxable Income 2.   Proprietary Educational Institution a.   In general 10% Taxable Income from all sources b.   Gross Income from unrelated trade/business/ other activity is more than 50%  of the total gross income from all sources 30% 3.   Non-stock, Non-profit Hospital 10% 4.   Non-stock Corporation/Association operated exclusively for   Charitable purposes  Tax exempt Income of whatever kind & character from any real/ personal property or any activity operated for profit 10% Taxable Income from all sources 5.   GOCC, Agencies & Instrumentalities -Government Service Insurance System (GSIS) -Social Security System (SSS) -Philippine Health and Insurance Corporation (PHIC) -Philippine Charity and Sweepstakes Office (PCSO) -Local Water Districts Tax Exempt 6.   Power Sector Assets and Liabilities Management Corporation a.   Sale of National Power Corporation generation assets & real properties to winning bidders   Tax Exempt b.   Rental income from generation assets & real properties before sale to winning bidders 30% Taxable Income from all sources c.   Income from operations 7.   National Government & LGUs Tax Exempt 8.   Mutual Life Insurance Companies 30% 9.   Homeowners’ Association   In general 30% Taxable Income from all sources Income and dues are used only for cleanliness, safety, security, & other basic services May be Tax Exempt if complied all the conditions 10.   Recreational Clubs 30% Taxable Income from all sources 11.   Taxable Partnership 12.   Exempt Corporation 13.   General Professional Partnership Tax Exempt 14.   Corporation covered by Special Laws Rate specified under the special law Resident Foreign Corporation   1.   a.   In General b.   Minimum Corporate Income Tax c.   Improperly Accumulated Earnings  30% 2% 10% Taxable Income from WITHIN the Philippines Gross Income Improperly Accumulated Taxable Income 2.   International Carriers 2.50% Gross Philippine Billings 3.   Regional Operating Headquarters (ROH) 10% Taxable Income 4.   Branch Remittances except those registered with PEZA   15% Total Profits Applied/Earmarked for remittance without deduction for tax component 5.   Corporation Covered by Special Laws Rate specified under the special law 6.   Offshore Banking Units (OBUs) a.   Foreign Currency Transactions 10%FT Gross Taxable Income b.   Other than foreign currency transaction 30% Taxable Income 7.   Foreign Currency Deposit Units (FCDU) a.   Foreign Currency Transactions 10% Gross Taxable Income b.   Other than foreign currency transaction 30% Taxable Income    ©Bessy Bonbon- photocopying of this material IS ILLEGAL. CLOSE TA?!  2 Non Resident Foreign Corporation 1.   In General 30% Gross Income 2.   Cinematographic Film Owner, Lessor, Distributor 25% 3.   Owner or Lessor of Vessels chartered by Philippine Nationals 4.50% Gross Rentals/Lease/Charter Fees/Other Fees 4.   Owner or Lessor of Aircraft, Machinery, & other Equipment 7.50% PASSIVE INCOME ( final tax on gross) Domestic/Resident Foreign Non-Resident Foreign 1.   Interest  from a.   Deposits and yield 20%FT b.   Any monetary benefit from deposit substitutes and trust funds c.   Depository bank under expanded Foreign Currency Deposit System (FCDS) 7.5%FT d.   Long-term deposit or Investment 30%FWT e.   Long-term deposit NOT issued by banks or Investment certificates NOT considered as deposit substitute 20%CWT -Part of Taxable Income and subject to 30% regular tax f.   Foreign Loans -In General -from US Corporation to domestic Corporation -from Korea -from Singapore -from Thailand -from Belgian Corporation 20%FT Tax exempt Tax exempt 15%FT 15%FT 10%FT 2.   Income derived by a depository bank  under the expanded Foreign Currency Deposit System (FCDS) a.   From Foreign Currency Transactions with Local Banks and branches of foreign banks 10%FT b.   Interest income from foreign currency loans  Derived by a bank from its FCDUs/EFCDUs or OBUs with respect to foreign currency transactions Tax exempt 3.   Royalties 20%FT Paid By PEZA-registered enterprise to non-resident Japanese Corporation subject to: a.   Payor-company is registered with Board of Investments (BOI) 10%FT b.   Payment for Cinematographic films, radio/television broadcasting 15%FT c.   All other cases 10%FT (2009) Paid by domestic corporation to non-resident corp: a.   UK 15%FT b.   US 10%FT c.   French Corporation 15%FT 4.   Dividends -received from: a.   Domestic Corporation    in General   Exempt 15%FT    paid to resident of Netherlands Rate not exceeding 10%    paid to Singaporean Company Rate not exceeding 15%    paid to German Company Rate not exceeding 10%    paid to Australian and Hong Kong Company 15%FWT    paid to Switzerland citizen Rate not exceeding 10%    paid to Swiss Foundation 15%FWT b.   Foreign Corporation Taxable as Income CAPITAL GAINS ( final tax on gross)   1)   Sale of shares of stock  not traded in stock exchange 5%FT- P100,000 (Selling Price-Cost) 10%FT- Excess of P100,000 2)   Sale of shares of stock  traded in stock exchange   0.50% (Stock Transaction Tax) 3)   Sale of real property 6%FT on Gross Selling Price/Current Fair Market Value (higher)    ©Bessy Bonbon- photocopying of this material IS ILLEGAL. CLOSE TA?!  3 TAXATION ON CORPORATIONS TERMS    Corporation - taxable partnerships -joint-stock companies -joint accounts -associations -insurance companies Except: (tax exempt) -general professional partnership -joint venture/consortium formed for: =Construction projects =engage in Petroleum, Coal, Geothermal  and other energy operations under a service contract  with the government Requisites for exemption:  1)   For construction project 2)   Involve in joining or pooling of resources by licensed local contracts -licensed as general contractor by PCAB 3)   Local contractors are engaged in construction business 4)   Joint Venture must be licensed by the Philippine Contractors Accreditation Board (PCAB) of Department of Trade and Industry (DTI) *Joint Venture involving Foreign Contractors  are non-taxable  if: 1)   foreign contractor is covered by a special license as contractor by PCAB 2)   Construction project is certified by the appropriate Tendering Agency (government office) 3)   Project is foreign-financed/internationally-funded and allowed under Bilateral agreement *Shall not include those who are mere suppliers of goods, services or capital to a construction project    Domestic Corporation-  created/organized in the Philippines    Foreign Corporation-  not domestic    Resident Foreign Corporation- engaged in trade or business in the Philippines “doing business”  -  soliciting orders, service contracts, opening offices, appointing representatives or distributors domiciled in the Philippines -stayed in the country for 180 days or more -more than 180 days (Japan) -more than 183 days (Thailand) - Does not include: -investment by foreign entity in domestic corporation -exercise of rights by the foreign investor -foreign entity having a nominee director or officer to represent its interest in domestic corporation -appointing a representative/distributor domiciled in the Philippines    Non-Resident Foreign Corporation-  not engaged in trade or business within the Philippines    Real Estate Investment Trust (REIT)-  considered as a taxpayer engaged in the real estate business    Cooperative-  refers to 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. IN GENERAL REIT Sales/Revenues/Receipts/Fees xx Sales/Revenues/Receipts/Fees xx Cost of Sales/Services (xx) Cost of Sales/Services (xx) GROSS INCOME xx GROSS INCOME xx Other taxable income xx Other taxable income xx TOTAL GROSS INCOME xx TOTAL GROSS INCOME xx Allowable Deductions: Allowable Deductions: OSD or Itemized (xx) OSD or Itemized (xx) Dividends Paid/Declared (xx) TAXABLE NET INCOME xx TAXABLE NET INCOME xx *To be deductible in REIT’s income, the dividends distributed should be at least 90%  of the distributable income for the taxable year. *Dividends should be paid to shareholders not later than the last day of the 5 th  month  from the close of the taxable year. CORPORATIONS EXEMPT FROM INCOME TAX: 1.   Labor, agricultural, horticultural organization 2.   Mutual Savings Bank and Cooperative Bank without capital stock organized & operated for mutual purposes and without profit 3.   Beneficiary Society/ Order/ Association operated EXCLUSIVELY for the benefit of its members 4.   Cemetery Company owned and operated EXCLUSIVELY for the benefit of its members 5.   Non-stock Corporation/Association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for rehabilitation of veterans 6.   Business league, chamber of commerce, or board of trade 7.   Civic league/organization 8.   Non-stock & non-profit educational institution 9.   Government educational institution 10.   Farmers’/other mutual typhoon/fire insurance company, mutual ditch/irrigation company, mutual/cooperative telephone company 11.   Farmers’, fruit growers’ operated as sales agent 12.   Philippine National Red Cross 13.   Child-caring/child-placing institution licensed and accredited by DSWD *all shall be not organized for profit & no part of the net income of which inures to the benefit of any private stockholder or individual TAXATION ON COOPERATIVES Duly registered cooperatives which transact business: 1.   With members only- exempt  from paying taxes and fees 2.   With both members and non-members a.   Cooperatives with accumulated reserves and undivided net savings of not more than P10M   -EXEMPT from paying taxes and fees  b.   Cooperatives with accumulated reserves and undivided net savings of   more than P10M      Business transactions w/members- tax exempt      Business transactions w/non-members- liable for: i.   Income tax ii.   Value Added Tax iii.   Percentage Tax - except sales by agricultural cooperatives Entitled to: i.   Limited/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    ©Bessy Bonbon- photocopying of this material IS ILLEGAL. CLOSE TA?!  4 ii.   Tax exempt on transactions with insurance companies and banks Unrelated Income of Cooperatives Subject to: 1.   Capital Gains Tax 2.   Documentary Stamp Tax- except transactions with banks and insurance companies 3.   VAT-except on importation by agricultural cooperatives 4.   Withholding Tax on Compensation/Wages 5.   Other taxes that cooperatives are directly liable Members/Shareholders of Cooperative -liable to pay all internal revenue taxes except: 1.   Any tax and fee on member’s deposits or fixed deposits (share capital) with cooperatives 2.   Documentary tax on transactions of members with the cooperative 3.   Patronage Refund- all refunds, returns, rebates of net savings generated from the operation of the cooperative PAL AND OTHER FRANCHISE GRANTEES Liable for the lower  amount between:    Basic Corporate Income Tax    2% Franchise Tax Gross revenue:    Passenger revenue    Cargo revenue    Other transport Revenue Cost of Services:    Salaries    Wages    Other employee benefits directly engaged in transport of passenger, cargo, or mail    Commissions paid to sales agents    Fuel and oil used in transport    Insurance expense    Traffic, aircraft, passenger servicing expenses    Depreciation of and rental charges for aircraft, flight & ground equipment    Maintenance and repairs  MCIT, IAET, GIT –  Chapter 4 MINIMUM CORPORATE INCOME TAX - 2% of the GROSS INCOME as of the end of the taxable year. - Conceived to address the non-declaration & under-declaration of corporate income & revenues. Who may apply: Domestic Corporation & Resident Foreign Corporation Rules in application of MCIT: 1.   MCIT vs. Normal Income Tax. The income liability/due is equal to whichever is higher. 2.   Begins at the 4 th  taxable year whether fiscal/calendar year. 3.   Applied on operations covered by the regular income tax system (unregistered activity) and not the special income system (registered activity). 4.   Income exempt from income tax and passive income subject to FT shall not form part of gross income. 5.   Even if the operations result in a net loss, it will still be subject to MCIT. ENTERPRISES REGISTERED UNDER SUBIC BAY METROPOLITAN AUTHORITY (SBMA), CLARK DEVELOPMENT AUTHORITY (CDA), PHILIPPINE ECONOMIC ZONE (PEZA) Registered Activities Subject to as specified in the terms of registration: 1.   5% preferential tax rate 2.   Income tax holiday (ITH) 3.   Regular income tax rate *no taxes shall be imposed on business establishment operating within the ecozone except for real property taxes on land *shall be subject to a tax of 5% on gross income earned (GIE): 3%-  paid to National Government 2%-   paid to treasurer’s office of the municipality/city  Gross Sales/Revenue xx Sales Discount (xx) Sales Return and Allowances (xx) NET SALES xx Cost of Sales or Direct Costs: Direct salaries, wages xx Production Supervision salaries xx Raw materials used in manufacture of products xx Decrease in goods in process account xx Decrease in finished goods account xx Supplies and fuels used in production xx Depreciation of machinery , equipment, building used in production xx Financing Charges xx Rent and utility expense xx (xx) GROSS INCOME EARNED (GIE) xx Unregistered Activities -subject to the regular internal revenue taxes Exceptions: The Secretary of Finance may suspend the imposition of MCIT upon submission of proof by the applicant-corporation that sustained       Substantial losses on account of a prolonged labor dispute    –  arises from a strike staged by the employees w/c lasted for more than 6 months w/c caused a temporary shutdown.    Force majeure  –   due to an irresistible force as by “Act of God”    Legitimate business reverses  –   Fire, robbery, theft/embezzlement, or for other economic reason.
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