TAXATION ON CORPORATE INCOME as amended by RA 10963 [TRAIN] & RA 11534 [CREATE]

DOMESTIC RESIDENT FOREIGN NON-RESIDENT FOREIGN

CLASSIFICATIONS
CORPORATIONS CORPORATIONS CORPORATIONS
SOURCES OF Within and without the Within the Within the
TAXABLE INCOME Philippines Philippines Philippines
TAXABLE INCOME TAXABLE INCOME TAXABLE INCOME
Normal Tax Rate
Normal Tax Rate Normal Tax Rate
INCOME IN GENERAL 25 % effective
JULY 1, 2020 25% effective 25% effective
( with MCIT application ) JULY 1, 2020 January 1, 2021
ALL OTHER INCOME NOT SUBJECT
TO PREFERENTIAL/SPECIAL RATE (with MCIT
Corporations with NTI not
AND INCOME WITHOUT OF DOMESTIC exceeding P5M & TA not application )
CORPS. exceeding P100M
excluding land – rate is
20%

CAPITAL GAIN WITHIN

1. Capital gains on sale of shares of
stocks not traded at the stock
exchange. 15% 15% 15%
Net capital gains:

2. Percentage tax on sale of shares of

stock traded in the local stock
6/10 of 1%* 6/10 of 1%* 6/10 of 1%*
exchange. Based on selling price.
(Sec. 127 NIRC)
3. Capital gains on sale or exchange 6% of Selling Price or Same as domestic 25% final tax
or disposition of lands and or FMV, whichever is 6% SP or FMV
buildings located in the Philippines higher
4. Net capital gains on sales or
exchange or disposition of lands and Normal tax rate
Not taxable Not taxable
/ or buildings located outside the (25%/20%)
Philippines
5. International Carriers; except Intl - 2 1/2% on gross -
carriers with an exemption thru a Phil. Billings
treaty/agreement where Phils. is a
signatory-exempted
6. Offshore Banking Units (OBU) - 25% Net taxable -
Income
7. Branch Profit Remittances - 15% of profits applied -
for remittance
8. Regional Operating Headquarters - 10% of taxable -
income; effective Jan.
1, 2022 rate is RCIT-
25%
9. Regional or area Headquarters - Exempted -

10. Philippine-based Offshore Gaming 25% on taxable income

Licensees - on their non-gaming from all sources within
revenues of Phil-based offshore and without the Phils.
gaming licensees which are licensed by [Gaming Income – 5%,
PAGCOR or SEZA, TZA, or FPA in lieu of all other
taxes, national and
local (Sec. 125-A)]

11. Accredited Service Providers to Taxable under Sec.

Offshore Gaming Licensees 27(A)
[25% on taxable
income; or 20% if
qualified]
[Not subject to Gaming
Tax]
10. Foreign Offshore Gaming Licensees
- on their non-gaming revenues 25% on taxable
derived within the Phils. of foreign income
based offshore gaming licensees which [Gaming Income –
are licensed by PAGCOR or SEZA, TZA, 5%, in lieu of all other
or FPA taxes, national and
local (Sec. 125-A)]
 PASSIVE INCOME WITHIN DOMESTIC CORP. RESIDENT FOR. CORP. NON-
RFC
1. Interest from depository bank 15% 15% Tax exempt
under the [Sec. 27 D(1) Sec. 27 D(3)
expanded foreign currency deposit Sec. 28 A(6)(a) Sec. 28 (6) (b)
system.
2. Interest from deposits and yield or Normal
anu other monetary benefit from Corporate
deposit substitutes and from trust Income
funds and similar arrangements and
Royalties 20% 20%
Tax at 25%

3. Interest on currency bank deposit 20% 20% Normal

Corporate
Income
Tax at 25%
0%
(Inter-corporate 0%
4. Cash/Property Dividends
dividends); (inter-corporate div.) 25% if not or
Foreign source 15% if
entitled to a
dividends with tax sparing
exemption option credit
under certain
conditions
(SEC. 27 D(4)

PASSIVE INCOME DOMESTIC CORP. RES. FOREIGN CORP. NON-RES. FOR.

CORP.
1. Interest from depository 15% 15% Tax exempt
bank under the Sec. 27D(1); Sec. 27 D(3)
expanded foreign currency Sec. 28 A(6)(a)
deposit system.
2. Interest from deposits and Normal Corporate
yield or anu other monetary Income
benefit from deposit Tax at 25%
substitutes and from trust
funds and similar
arrangements and Royalties
20% 20%

3. Interest on currency bank 20% 20% Normal Corporate

deposit Income
Tax at 25%
4. Cash/Property Dividends 0% 0% 25% if not or 15% if
entitled
(inter-corporate (inter-corporate to a tax sparing
div.); foreign div.) credit
source dividends-
with exemption
option under
certain conditions
 SEC. 26. Tax Liability of Members of General Professional Partnerships.
- A general professional partnership as such shall not be subject to the income tax
imposed under this Chapter. Persons engaging in business as partners in a general
professional partnership shall be liable for income tax only in their separate and
individual capacities.
For purposes of computing the distributive share of the partners, the net
income of the partnership shall be computed in the same manner as a corporation.
Each partner shall report as gross income his distributive share, actually or
constructively received, in the net income of the partnership.

TAXABILITY OF PROPRIETARY EDUCATIONAL INSTITUTIONS & NON-PROFIT

HOSPITALS: SEC. 27(B):
(B) Proprietary Educational Institutions and Hospitals. – [as amended by
RA 11635]. Hospitals which are nonprofit and proprietary educational institutions
shall pay a tax of ten percent (10%) on their taxable income except those covered
by Subsection (D) hereof: Provided, That beginning July 1, 2020 until June 30,
2023, the tax rate herein imposed shall be one percent (1%): Provided, further,
That if the gross income from 'unrelated trade, business or other activity'
exceeds fifty percent (50%) of the total gross income derived by such
educational institutions or hospitals from all sources, the tax prescribed in
Subsection (A) hereof shall be imposed on the entire taxable income. For purposes
of this Subsection, the term 'unrelated trade, business or other activity' means any
trade, business or other activity, the conduct of which is not substantially related to
the exercise or performance by such educational institution or hospital of its primary
purpose or function. 'Proprietary educational institution' means any private school
maintained and administered by private individuals or groups with an issued permit
to operate from the Department of Education (DepEd), or the Commission on
Higher Education (CHED), or the Technical Education and Skills Development
Authority (TESDA), as the case may be, in accordance with existing laws and
regulations.
(C) Government-owned or –Controlled Corporations, Agencies or
Instrumentalities. - The provisions of existing special or general laws to the
contrary notwithstanding, all corporations, agencies, or instrumentalities owned or
controlled by the Government, except the Government Service Insurance System
(GSIS), the Social Security System (SSS), the Home Development Mutual Fund
(HDMF), the Philippine Health Insurance Corporation (PHIC), and the local
water districts shall pay such rate of tax upon their taxable income as are imposed
by this Section upon corporations or associations engaged in a similar business,
industry, or activity.

(E) Minimum Corporate Income Tax on Domestic Corporations. –

(1) Imposition of Tax. - A minimum corporate income tax of two percent
(2%) of the gross income as of the end of the taxable year, as defined herein, is
hereby imposed on a corporation taxable under this Title, beginning on the fourth
taxable year immediately following the year in which such corporation commenced
its business operations, when the minimum income tax is greater than the tax
computed under Subsection (A) of this Section for the taxable year: Provided, That
effective July 1, 2020 until June 30, 2023, the rate shall be one percent (1%).

(2) Carry Froward of Excess Minimum Tax. - Any excess of the minimum
corporate income tax over the normal income tax as computed under Subsection (A)
of this Section shall be carried forward and credited against the normal income tax
for the three (3) immediately succeeding taxable years.

(3) Relief from the Minimum Corporate Income Tax Under Certain
Conditions. - The Secretary of Finance is hereby authorized to suspend the
imposition of the minimum corporate income tax on any corporation which suffers
losses on account of prolonged labor dispute, or because of force majeure, or
because of legitimate business reverses.