CORPORATION INCOME TAXES
• Under the Philippine's National Internal Revenue Code of 1997 (the "Tax Code"), the term
"corporation includes partnerships, no matter how created or organized, joint-stock
companies, joint accounts (cuentas en participation), associations, or insurance companies,
but excluding 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 or consortium agreement under a
service contract with the Government.
• A corporation is an artificial being created by operation of law, having the right of succession
and the powers, attributes, and properties expressly authorized by law or incidental to its
existence. (REPUBLIC ACT No. 11232: "Revised Corporation Code of the Philippines".)
• Under the Tax Code, there are THREE (3) TYPES OF TAXABLE CORPORATIONS –
➢ a domestic corporation,
➢ a resident foreign corporation and
➢ a non-resident foreign corporation.
DOMESTIC CORPORATION
• A domestic corporation is a corporation created or organized under Philippine law. A domestic
corporation is taxable on all income derived from sources WITHIN AND WITHOUT THE
PHILIPPINES.
FOREIGN CORPORATION
• A foreign corporation is corporation organized, authorized, or existing under the laws of any
foreign country. A foreign corporation is either a resident - a corporation engaged in trade or
business in the Philippines, or a non-resident - a corporation not engaged in trade or business in
the Philippines. Note, however, that a foreign corporation who wishes to engage in trade or
business in the Philippines should first secure a license from the Philippine Securities and
Exchange Commission.
• A foreign corporation, whether resident or non-resident, is taxed only on income derived from
sources WITHIN THE PHILIPPINES.
, INCOME TAX AMENDMENTS IN CREATE LAW
• Section 22-Inclusion of "One Person Corporations" (OPC) introduced by R.A. 11232 otherwise
known as the Revised Corporation Code of the Philippines as a "Corporation" for taxation
purposes.
• Note: If individuals set up an OPC, they would be subject to Corporate Income Tax of 20%-25%
plus tax on dividend of 10% upon distribution of dividends, as compared to their tax as a sole
proprietor (graduated income tax rates of 0%-35%)
• The classification of OPCs as a Corporation would also allow individuals to take better
advantage of the Optional Standard Deduction (OSD) equivalent to 40% of their gross income,
where they are allowed to deduct direct costs as an OPC as opposed to being a sole proprietor.
OVERVIEW OF CORPORATE TAXES
• STANDARD INCOME TAX
➢ Net income tax (on ordinary Income) – BASIC INCOME TAX/NORMAL TAX/REGULAR TAX
➢ Final W/tax on Passive Income
➢ Capital Gains tax on Capital Gains
• PENALTY TAX
➢ MCIT – MINIMUM CORPORATE INCOME TAX
➢ IAET (Improperly Accumulated Earnings tax)-repealed by CREATE LAW (wala na)
• SPECIAL INCOME TAX
➢ Gross income tax- Omitted (Not expressly repealed by CREATE LAW)
• Under the Philippine's National Internal Revenue Code of 1997 (the "Tax Code"), the term
"corporation includes partnerships, no matter how created or organized, joint-stock
companies, joint accounts (cuentas en participation), associations, or insurance companies,
but excluding 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 or consortium agreement under a
service contract with the Government.
• A corporation is an artificial being created by operation of law, having the right of succession
and the powers, attributes, and properties expressly authorized by law or incidental to its
existence. (REPUBLIC ACT No. 11232: "Revised Corporation Code of the Philippines".)
• Under the Tax Code, there are THREE (3) TYPES OF TAXABLE CORPORATIONS –
➢ a domestic corporation,
➢ a resident foreign corporation and
➢ a non-resident foreign corporation.
DOMESTIC CORPORATION
• A domestic corporation is a corporation created or organized under Philippine law. A domestic
corporation is taxable on all income derived from sources WITHIN AND WITHOUT THE
PHILIPPINES.
FOREIGN CORPORATION
• A foreign corporation is corporation organized, authorized, or existing under the laws of any
foreign country. A foreign corporation is either a resident - a corporation engaged in trade or
business in the Philippines, or a non-resident - a corporation not engaged in trade or business in
the Philippines. Note, however, that a foreign corporation who wishes to engage in trade or
business in the Philippines should first secure a license from the Philippine Securities and
Exchange Commission.
• A foreign corporation, whether resident or non-resident, is taxed only on income derived from
sources WITHIN THE PHILIPPINES.
, INCOME TAX AMENDMENTS IN CREATE LAW
• Section 22-Inclusion of "One Person Corporations" (OPC) introduced by R.A. 11232 otherwise
known as the Revised Corporation Code of the Philippines as a "Corporation" for taxation
purposes.
• Note: If individuals set up an OPC, they would be subject to Corporate Income Tax of 20%-25%
plus tax on dividend of 10% upon distribution of dividends, as compared to their tax as a sole
proprietor (graduated income tax rates of 0%-35%)
• The classification of OPCs as a Corporation would also allow individuals to take better
advantage of the Optional Standard Deduction (OSD) equivalent to 40% of their gross income,
where they are allowed to deduct direct costs as an OPC as opposed to being a sole proprietor.
OVERVIEW OF CORPORATE TAXES
• STANDARD INCOME TAX
➢ Net income tax (on ordinary Income) – BASIC INCOME TAX/NORMAL TAX/REGULAR TAX
➢ Final W/tax on Passive Income
➢ Capital Gains tax on Capital Gains
• PENALTY TAX
➢ MCIT – MINIMUM CORPORATE INCOME TAX
➢ IAET (Improperly Accumulated Earnings tax)-repealed by CREATE LAW (wala na)
• SPECIAL INCOME TAX
➢ Gross income tax- Omitted (Not expressly repealed by CREATE LAW)
