CHAPTER 4

Cuporations

A. CORPORATION DEFINED

RA 11232, also known as the Revised Corporation Code (RCC) of the Philippines defined
Corporation as 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.

For taxation purposes, Corporation is defined under Section 22 of the Tax Code (RA 8424,)
as amended under RA 11534 or the Corporate Recovery and Tax Incentives for Enterprises
Act’ (CREATE) and RR 5-2021 as follows:

CORPORATION shall INCLUDE:

1) One Person Corporations (OPCs)
2) Partnerships, no matter how created cr organized
3) Joint stock companies -
4) Joint accounts (cuentas en participacion)
5) Associations
6) Insurance companies

A one-person corporation (OPC) is a corporation with a single stockholder; Provided, That

only a natural person, trust, or an estate may form a one person corporation.

BUT DOES NOT INCLUDE:

1) General professional partnerships; and
2) Joints ventures or consortiums formed for the purpose of undertaking/engaging
in:
a. ~ Construction projects; or ;
b. Engaging in petroleum, coal, geothermal and other energy operations
pursuant to an operating or consortium agreement under a service contract
with the government.

IN GENERAL, a joint venture or consortium is taxable as corporation unless it

refers to ime ventures described above.

JOINT VENTURE (JV) OR CONSORTIUM

Joint venture is a commercial undertaking by two or more persons, differing
from a partnership in that it relates to the disposition of a single lot of goods
or the completion of a single project.

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REQUIREMENTS FOR TAX EXEMPTION OF A JOINT VENTURE (JV) OR

CONSORTIUM ENGAGED IN CONSTRUCTION ACTIVITIES '
(RR 10-2012)
A joint venture or consortium formed for the purpose of undertaking
construction projects is not considered as corporation provided:

a) The joint venture was formed for the purpose of undertaking a

construction project; and

b) Should involve joining/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
(DTT)
c) The local contractors are engaged in construction business; and

d) The Joint Venture itself must likewise be duly licensed as such by the
* Philippine Contractors Accreditation Board (PCAB) of the Department of
Trade and Industry (DTI).

Absent any one of the aforesaid requirements, joint ventures or

consortiums engaged in construction activities shall be considered as taxable
corporations. In addition, the tax-exempt joint venture or consortium herein
defined shall not include those who are mere suppliers of goods, services or
capital to a construction project. Members to a joint venture or consortium
not taxable as corporation shall each be responsible in reporting and paying
appropriate income taxes on their respective share to the joint venture’s
profit. Moreover, all licensed local contractors are required to enroll to the
BIR’s Electronic Filing and Payment System (EFPS). The enrollment should
be done at the RDO where the local contractors are registered as taxpayers.

FOREIGN CONTRACTORS

Joint ventures involving foreign contractors may also be treated as a non-

taxable corporation provided:

«= ' The member foreign contractor is covered by a special license as

contractor by the PCAB of DTI.

« — The construction project is certified by the appropriate Tendering Agency

(goverment office) that the project is a foreign financed/
internationally-funded project and that international bidding is allowed
under the Bilateral Agreement entered into by and between the
Philippine Government and the foreign / international financing
institution pursuant to the implementing rules and regulations of
Republic Act No. 4566 otherwise known as Contractor's License Law.

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 Chapter 4 a legate ge

r
TAX TREATMENT OF SHARE IN THE NET INCOME OF A JOINT VENTURE

JOINT VENTURE (JV)

[by a co-venturer Corporation]

| Taxable IV | | Tax ExemptJV }

\

‘y ¥v

Taxable as a corporation ’ NOT Taxable as a 5

[25% or 20% (for MSME)) corporation (Exempt)

The share In income by The share in income by

the co-venturer the co-venturer
corporationistreated _ corporationis NOT
as inter-corporate. treated as inter-
Thus, exempt from corporate. Thus,
income tax subject to RCIT

ry Us Vanesa ita uals SAN Ce n

ele AaauNaslp
PARTNERSHIP
e
General Professional
General Partnership (GP) Partnership (GPP)

Vv v.

Taxable as a corporation NOT Taxable as a

[25% or 20% (for MSME)] corporation (Exempt)

The share In income by

\ The share in income by the partners Is NOT
the partners is treated treated as dividend
as dividend income. Income. Consequently,
Thus, generally subject the Individual partners
to 10% FWT (Refer also - are subject to basic
to Tax on Individuals) income tax (graduated
rate for individuals).

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 fos i e Chapter # - Otyporations

"JOINT STOCK COMPANIES

Joint stock companies are constituted when a group of individuals, acting jointly,
establish and operate business enterprise under an artificial name, with an Invested
capital divided into transferable shares, an elected board of directors, and other
corporate characteristics, but operating without formal government authority.

* JOINT ACCOUNT COMPANIES

. Joint account (cuentas en participacion) is constituted when one interests himself in

the business of another by contributing capital thereto, and sharing in the profits or
losses in the proportion agreed upon. They are not subject to any formality and may
be privately contracted orally or in writing.

“+ ASSOCIATIONS

‘The term “associations” includes all organizations which have substantially the salient
features of a corporation to be taxable as a “corporation.”

B. CLASSIFICATION OF CORPORATE TAXPAYERS

1) Domestic Corporation (DC)

© —Acorporation created or organized in the Philippines under its laws.

© ADC may also be classified as Micro Small and Medium Enterprise (MSME)

2) Resident Foreign Corporation (RFC)

© Acorporation created or organized in a foreign country under its laws and

engaged in business in the Philippines.

3) Nonresident Foreign Corporation (NRFC)

0 Acorporation created or organized in a foreign country under its laws and is NOT
engaged in business in the Philippines.

CORPORATIONS MAY BE CLASSIFIED FURTHER INTO:

1) Ordinary Corporations — corporations subject to regular corporate income tax (RCIT or

- CIT), also known as normal tax or basic income tax, at a rate of either 20% for
domestic corporations classified as MSMEs or 25%, for domestic corporations other
than MSMEs and foreign corporations. Under the TRAIN Law or prior to the effectivity
of the CREATE Law (From Jan. 1, 2018 to July 1, 2020), the RCIT rate was 30%.

2) Special corporations - corporations subject to income tax rate which is /ower than the
regular corporate income tax (RCIT) rate of 20% or 25%, as the case may be.

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 Chapter x Corporation
The Special Corporations under the Tax Code, as amended, are as follows:
SPECIAL CORPORATION TAX RATE

a. Domestic Corporations ’ CREATE LAW:

. Proprietary educational * 1%: July 1, 2020 to June 2023
institutions and Non-profit * 10%: Beg. July 1, 2023
Hospitals
- TRAIN LAW: Before July 1, 2020
. 10%:

b. Resident Foreign Corporations

» — International carriers ‘= In General, 2.5% of Gross
Philippine Billings (GPB).
However, it may be subject to a
lower rate or exempt under certain
conditions (Refer to PAGE 204).

» — Regional Operating » CREATE LAW:

Headquarters (ROHQs) © No. longer a_ special
corporation, thus, already
Treated as a special corporation subject to RCIT just like an
subject to 10% tax on net income ordinary RFC beginning Jan.
prior to Jan. 1, 2022. 1; 2022.

c. Nonresident Foreign Corporations

» _ Non-resident Cinematographic 25% of Gross Income
Film Owner, Lessor .or
Distributor
* Non-resident Owner or Lessor 4.5% of Gross Income -
of Vessels Chartered by
Philippine Nationals
* Non-resident Owner or Lessor 7.5% of Gross Income
of Aircraft, Machineries and
Other Equipment

C. EXEMPT CORPORATIONS
% The following organizations shall not be subject to income tax
[(Section 30, RA 8424); National Internal Revenue Code):

Labor, agricultural or horticultural organization not organized principally for profit;

B. Mutual savings bank not having a capital stock represented by shares, and cooperative
eee capital stock organized and operated for mutual purposes and without
profit,
C. A beneficiary society, order or association, operating for the exclusive benefit of the
members such as a 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 non-stock corporation or their dependents;
D. Cemetery company owned and operated exclusively for the benefit of its members;

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 Chapter 4 - Corborations

E. Non-stock corporation or association organized and operated exclusively for religious,

charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans,
~ no part of its net income or asset shall belong to or inure to the benefit of any member,
_ organizer, officer or any specific person;
F, .Business league, chamber of commerce, or board of trade, not organized for profit and
no part of the net income of which inure to the benefit of any private stockholder or
individual;
Civic league or organization not organized for profit but operated exclusively for the
So igs

promotion of social welfare;

A non-stock and nonprofit educational institution;
Government educational institution; .
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
K. 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 expenses on the basis of qiamty of
produce finished by them.

PROVIDED, that the income of whatever kind and character of the foregoing organizations from any
of their properties, real or personal, or from any of their activities conducted for profit regardless of
the disposition made of such income, shall be subject to income tax.

GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCs)

RR 5-2021, implementing the provisions of CREATE law, provides that GOCCs, agencies
and instrumentalities shall pay such raté of tax upon their taxable income as are imposed
upon corporations or associations engaged in a similar business, industry, or BEN,
EXCEPT:
1) Government Service and Insurance System (GSIS)
2) Social Security System (SSS)
3) Philippine Health Insurance Corporation (PHIC)
4) Local Water Districts (RA 10026) :
5) Home Development Mutual Fund (HDMF; also known as Pag-ibig)

NOTE:
«= —_HDMF or Pag-ibig is exempt from tax upon the effectivity of CREATE Law on April 11, 2021.
* —_PCSO and PAGCOR are taxable GOCCs.

D. INCOME TAXES OF CORPORATIONS

GENERAL PRINCIPLES

1. SOURCE OF INCOME SUBJECT TO TAX: : ,

a. DC-— Taxable on income derived from within
and without the Philippines
b. RFC and NRFC - Taxable on income derived from within the Philippines only

2.. BASIS OF INCOME SUBJECT TO TAX:

a. DC, RFC— Net Income
b. NRFC-— Gross Income

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3. APPLICABLE TAXES

TYPES OF INCOME AND APPLICABLE CORPORATE TAXES

= Operating income BASIC INCOME TAX

==> = Non-operating or other income > * DC: 25%; 20% RCIT
Ordinary
Income * — Passive incomes abroad ‘ * RFC: 25% RCIT
® Other incomes not subject to FWT and CGT * NRFC: 25% FWT
.

= Interest income
Pee SP = Dividend Income => aa
I EUR dai a | "= Royalty

CGT
Capital Gai « Sole of shares of domestic corporation ==) Shares of Stock ; 15%
me aN => « Saleof real properties in the Philippines hea

4, SUMMARY
Corporation Source of Basis TAX
Taxable Income

DC : Within and Without Net income 25% RCIT;. 20% if MSME

RFC Within only Net income 25% RCIT
NRFC Within only Gross income 25% FWT
2 DCs and RFCs may also be subjected to MCIT (refer to page ).

E. REGULAR CORPORATE INCOME TAX (RCIT or CIT)

ub ee i AA Adee
DC Other DCs;
(MSMEs**) RFCs NRFC
Gross Income RXXX PXXX Pxxx RXxx
Allowable Deductions (xxx) (xx) (Xxx) ‘NA
Taxable Income RXXx Rxxx ss RXXX PXXxx
Rate 30% 20% 25% 25%
RCIT/ FWT RxXX PXXX * RXXX PXXX

NOTE:
* — Effectivity of the RCIT rates under CREATE Law (RR 5-2021):
‘> For DC and RFC - Beginning July-1, 2020
> For NRFC - Beginning January 1, 2021.

CREATE law, which was published on March 27, 2021, took effect on April 11,
2021. Although CREATE law took effect only on April 11, 2021, there are certain
provisions in the law with specific effectivity dates which are earlier than April 11,
2021, such as the revised RCIT rates for DCs and RFCs as well as the revised
FWT rate for NRFCs. Prior to CREATE, the corporate income tax rate was 30%
under the TRAIN Law.

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= Micro Small and Medium Enterprise (MSME)

>. MSME refers toa domestic corporation with:

- Total assets of P100 million and below; and
- Netincome of P5 million and below

© The total assets excludes the land on which the particular business entity's
offic, plant, and equipment are situated during the taxable year for which
the tax is imposed. Thus, if the land is held primarily for sale or for investment
purposes, the value of this land is to be included in determining total assets,
regardless of whether the business of the company is the leasing of land.

© _ Incase there are areas in the company’s office building that are being leased
out, the percentage of the floor area devoted to the company’s office is to be
multiplied with the total value of the land in determining the value of land to
be excluded in the computation of total assets.

= All other “domestic” corporations are subject to RCIT rate of 25% beginning
July 1, 2020.
= The 20% RCIT rate for MSME is not applicable to foreign corporations.

F. MINIMUM CORPORATE INCOME TAX (MCIT)

Section 27(E)(1) and Section 28(2) Lfor: DCs and RFCs, respectively|, as amended,
under CREATE Law, provide:

A Minimum Corporate Income Tax MCIT of two percent (2%) of the gross
income as of the end of the taxable year is imposed upon any domesticcorporations
and resident foreign corporations beginning on the 4” taxable year immediately
following the taxable year in which such corporation commenced its business
operations, when the MCIT is greater than RCIT, Provided: That effective July 1, 2020
until June 30, 2023, the rate shall be one percent (1%).

THE MCIT SHALL BE IMPOSED WHENEVER:

* The corporation has zero taxable income; or
» The corporation has negative taxable income; or
* Whenever the amount of MCIT is greater than the regular corporate income
tax (RCIT) due from such corporation. Hence, MCIT is always computed and
compared to RCIT starting on the fourth year of operations.

MCIT RATES:
« . TRAIN Law (beginning Jan. 1, 2018) : 2%
= CREATE Law :
0 From July 1, 2020 to June 30, 2023 : 1%
© Beginning July 1, 2023 : 2%

MCIT is not applicable to NRFCs, Special Corporations, and corporations

subject to other types of income tax regime such as PEZA registered entities.

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Chapter eas Coperabiie :

RULES FOR DETERMINING THE PERIOD WHEN A CORPORATION BECOMES

SUBJECT TO MCIT (RR 2-98 as amended under RR 9-98 and RMC 62-2021)

® Question (as illustrated in Q10 of RMC 62-2021):

What is the reckoning date of determining the corporation's fourth year
of operation?

0 Answer (as illustrated in Q10 of RMC 62-2021):

The phrase "4th year of business operations" should be construed to
mean “fourth taxable year immediately following the year in which such
corporation commenced its business operatién" as indicated. under
Section 3 of RR No. 5-2021 on MCIT.

0 IMustration (as illustrated in Q10 of RMC 62-2021):

- ABC Corporation commenced its business operations in 2017

- MCIT shall be computed beginning 2021
- The MCIT shall be imposed beginning 2021 if it exceeds RCIT

CARRY FORWARD OF EXCESS MCIT (MCIT CARRY-OVER)

» Any excess of the MCIT over RCIT shall be carried forward and credited
-against the RCIT for the three (3) immediately succeeding taxable years.

GROSS INCOME FOR MCIT PURPOSES

1) - Seller of Goods
Gross Sales Rxx
Sales Discounts (xx)
Sales Returns and Allowances (xx)
Cost of Sales (xx)
Gross Income PXX
Add: Other Income subject to RCIT XX
Total Gross Income for MCIT purposes Pxx

Cost
of Goods Sold: :
a. Trader or Merchandiser
Invoice cost of goods sold. Rxx
Import duties XX
Freight , XX
Insurance XX
Total Rxx

b. Manufacturing Concern
Raw materials used Pxx
Direct Labor XX
Manufacturing overhead XX
Freight cost XX
Insurance premiums xx
Other cost of production XX
Total Pxx

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 Chapter 4. - By WAC ONS

2) Seller of Services
Gross Receipts Pxx
Sales Discounts and allowances (xx)
Cost of Services - __ (xx)
Gross Income Pxx
Add: Other Income subject to RCIT XX
Total Gross Income for MCIT purposes _PXx

COST OF SERVICES:
Salaries/Employee benefits of personnel, consultants and specialists directly rendering the © PXXX
service
Cost of facilities directly utilized in providing the service (e.g. rentals and cost of supplies) XXX
Other direct costs and expenses necessarily incurred to provide the services XXX
TOTAL PXXX
© _ Incase of banks, “cost of services” shall include interest expense.

RELIEF FROM THE MCIT

The Secretary of Finance is authorized to suspend the imposition of the Mar

on any corporation which suffers losses on’account of:
1) Prolonged labor dispute
2) Force majeure
3) Legitimate business reverses

CORPORATIONS EXEMPT FROM MCIT

1. Special Corporations such as:

a. Proprietary educational institutions and hospitals
b. International carrier ;
c. Regional Operating Headquarters (up to Dec. 31, 2021 only) :
2. Nonresident Foreign Corporations (NRFCs)
3. Corporations that are tax exempt under the law such as Regional or Area
. Headquarters
4, Firms that are taxed under special tax regime (e.g. Covered by PEZA law &
Bases Conversion Development Act)

NET OPERATING LOSS CARRY-OVER (NOLCO) -

“Net Operating Loss (NOL)” means the excess of allowable deduction over gross
income of the business in a taxable year.

The net operating loss of the business or enterprise for any taxable year shall be
Carried over as a deduction from gross income for the next three (3)
consecutive taxable years immediately following the year of such loss.
However, under RA 11494, also known as the Bayanihan Act II, the NOLCO of
the business or enterprise for taxable years 2020 and 2021 shall be carried over
as a deduction from gross income for the next five (5) consecutive taxable
years immediately following the year of loss. The.net operating loss for said
taxable years may be carried over as a deduction even after the expiration of RA
No. 11494, provided the same are claimed within the next five (5) consecutive
taxable years immediately following the year of such loss (RR 25-2020), .

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 Chapter & - Carporation
‘

GUIDE:

- Taxable Year NOL was incurred ‘Deductible as NOLCO within:

Prior to 2020 ve 3 consecutive years
2020and2021 =. +. . ~—_. Sconsecutive years
Beginning 2022 ‘ 3 consecutive years—

« — For corporations adopting Fiscal Year period, taxable year 2020 and 2021 shall include
all those corporations with fiscal years ending on or before June 30, 2021, and June 30,
2022, respectively (RR 25-2020).

REQUISITES FOR DEDUCTIBILITY

1, At the time of incurring net loss, the taxpayer must not be exempt from
income tax; and

2. There is no substantial change in the ownership of the business or

enterprise in that:

a) Not less than seventy-five (75%) in nominal value of outstanding

issued shares, if the business is in the name of a corporation, is held
by or on behalf of the same persons; or

b) Not less than seventy-five (75%) of the paid-up capital of the

corporation, if the business is in the name of.a corporation, is held
by or on behalf of the: same persons.

. Additional Requirements for NOLCO incurred in_2020 and 2021 under

a II and -2020:

Presentation of NOLCO in the Income Tax Return TTR) and Unused NOLCO
in the Income Statement:

1. The NOLCO shall be separately shown in the taxpayer's (also shown in

the Reconciliation Section of the Tax Return); d

2; The Unused NOLCO shall be presented in the Notes to Financial

Statements showing, in detail, the taxable year in which the net
‘operating loss was sustained or incurred, and any amount thereof
claimed as NOLCO deduction within five (5) consecutive years
immediately. following the year of such loss.

3. The NOLCO for taxable years 2020 and 2021 shall be presented in the
Notes to the Financial Statements separately from the NOLCO for other
taxable years.

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 Chapter 4 - Corporations

G. SUMMARY OF REVISED INCOME TAX RATES UNDER CREATE LAW (RR 5-2021)

The higher between the “Regular” or “Minimum Corporate Income Tay

(MCIT)" rates

TYPE OF CORPORATION | REGULAR . 1 MOTT

Rate Effectivity Rate |. Effectivity

DOMESTIC CORPORATION:
Domestic corporations, in 25% July 1, 2020 1% July 1, 2020 to
general ; ‘June 30, 2023

2% | July 1, 2023

For corporations with net taxable] 20% July 1, 2020 1% | July 1, 2020 to
income not exceeding Five June 30, 2023
Million Pesos (P5,000,000) AND
total assets not exceeding One
Hundred Million (P 2% | July 1,.2023
100,000,000), excluding the land
on which the particular business
| entity's office, plant and
“equipment are situated.

Proprietary Educational 1% July 1, 2020 to Not Applicable

Institutions and Hospitals ‘June 30, 2023

10% July 1, 2023

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 Chapter fe - eee

The higher between the “Regular” or “Minimum Corporate Income Tay

(MCIT)" rates

TYPE OF CORPORATION REGULAR MCcIT

Rate Effectiviy '| Rate Effectivity

[on taxable income(e,g., net or gross :

income, as applicable) derived from all sources within the Philippines}:

-Resident Foreign Corporation 25% July 1, 2020 1% | July 1, 2020 to

, : ‘June 30, 2023

2% | July 1, 2023

Offshore Banking Unit (OBUs) 25% Upon the 1% | Uponthe

(Note: OBUs shall now be ° effectivity of the effectivity of
taxed as resident foreign CREATE CREATE until June 30,
corporation upon : 2023 2
effectivity of the CREATE) .
2% July 1, 2023

Regional Operating 25% January 1, 2022; 1% | January 1, 2022 to June

Headquarters (ROHQ) 30, 2023

2% | July 1, 2023

Non-Resident Foreign _ 25% January 1, — Not applicable

Corporation 2021

H. FINAL WITHHOLDING TAX (FWT) ON “CERTAIN” PASSIVE INCOME derived

from Philippine sources

eats eed eA dene ke

DC RFC NREC
1) INTEREST INCOME/YIELD/Other monetary benefit
* Interest income in any currency bank deposit 20% 20% 25%"
* —— Yield or any monetary benefit from deposit substitute 20% 20%
* Yield or any monetary benefit from trust fund and other 20% 20%
similar arrangements
* Interest income derived from depository bank under 15% 15%" Exempt °
expanded foreign currency deposit unit/system
(FCDS / FCDU)

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 Chapter 4 - Coyporations

noone s ived by a deposit u

de; | EXEMPT
ianeaeans with nonresidents, OBUs inthe Philippines, ica
commercial bank including branches of foreign banks;

INTEREST INCOME from foreign currency loans granted bya 40% FWT
deposit ink under the expanded in currency deposi
system to residents.other than depository banks under the
expanded system; and

ANY INCOME of non-residents, whether individuals or EXEMPT

corporations, from transactions with depository banks under ah
the expanded system shall be exempt from income tax.
Basis: Sec. 27(D)(3) and Sec. 28(A)(6)(b) of the Tax Code.

+ NOTE:

= * Prior to CREATE Law, NRFCs are generally subject to 30% FWT except for incomes subject to CGTs.
* * Prior to CREATE Law, the FWT rate was 7.5%.
. FWT on interest income derived from FCDS/FCDU deposit is not applicable to nonresident taxpayers such as NRFCs
and nonresident individuals.
. Incomes subject to FWT are excluded in the computation of taxable income or retumable income (income subject to
basic tax or RCIT).

PASSIVE INCOME ; e a AC alld she

2) . ROYALTIES
® CREATE Law (beg. April 11, 2021) 20% 20% 25%

Generally, royalties are considered passive income subject to PWT.

However, under BIR Ruling No. DA 351- 2003 dated October 2003, ifthe
£0 was generated in the active pursuit and performance ofthe
‘corporation's primary purpose, the same is NOT passive income but
considered ordinary business income subject to basic tax. Further, as
provided under BIR Ruling No. 069-2016 dated February 29, 2016,
income derived or generated from activities that are in accordance with
the purposes provided inits Articles of Incorporation of the Company are
in the nature of ordinary business income, thus, subject to basic income
tax.

3) DIVIDENDS (RR 2-2021; RR 5-2021; RMC 62-2021)

o FROM DC Exempt Exempt 25% | 15%***
.
© FROM FOREIGN Corporation
_ IF SITUS of the Dividend is:
co Fromwithin the Philippines Exempt RCIT FWT
(Philippine-sourced dividend)

o Fromwithout the Philippines ;

(Foreign-sourced dividend) **** Exempt'*** —_ Non-taxable Non-taxable
Section 42(A)(2)(b) of the Tax Code, as amended, provides:
Dividend from a foreign corporation shall be treated as income derived
from sources WITHIN THE PHILIPPINES UNLESS less than 50% of the
gross income of the foreign corporation for the three year period ending
with the close of its taxable year preceding the declaration of such
dividends (or for such part of the period as the corporation has been in
existence) was derived from sources within the Philippines.

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» *** CREATE Law; RR 2-2021: Dividend income received by NRFC from DC:

® INGENERAL, it is subject to 25% FWT (without tax sparing). ‘However, a reduced

rate of fifteen percent (15%), subject to the condition that the country in which
the NRFC is domiciled:

Shall allow a credit against the tax due from the said NRFC which are
equivalent to taxes deemed to have been paid in the Philippines equal to ten
percent (10%) effective January 1, 2021, which represents the difference
between the regular income tax rate for NRFC under Sec. 28(B)(1) of the
NIRC, as amended, and the fifteen percent (15%) tax on dividends as herein
provided; OR

Does NOT impose any income tax on dividends iuesivell from a domestic
corporation.

QQ) NOTE:
> There is TAX SPARING if any of the conditions above is met. Consequently,
the FWT rate shall be reduced to 15%. .
> The FWT rate is 25% if there is no Tax Sparing or if any of the conditions
above is not met.

> Prior to the effectivity of the CREATE Law, the FWT rate, in the absence. of
tax sparing, was 30%.

. © ****STTUS OF DIVIDEND INCOME

0 Dividend FROM a domestic corporatior. The dividend income is considered

_ derived from within the Philippines.

Dividend FROM Foreign Corporation [RMC 62-2021; Section 42(A(2)(b)| :

The dividend income is considered derived either from within the Philippines
or abroad depending on the ratio of the foreign company’s gross income in
the Philippines and abroad, as provided below:

RATIO of© ]
GROSS INCOME SITUS OF DIVIDEND APPLICABLE TAX
Derived in the ; |
Philippines |

At least 50% The entire dividend is considered Exempt

derived . from within the
_ Philippines

Less than 50% The entire dividend is considered Exempt under certain
derived abroad (foreign-sourced . conditions****
dividend)****

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 | Chapter 4 Cor rations

REQUIREMENTS FOR EXEMPTION of foreign-sourced dividend

1) The dividends actually received or remitted into the Philippines are reinvested in
the business operations of the domestic corporation within the next taxable year
from the time the foreign-sourced dividends were received or remitted;

2) The dividends received shall only be used to fund the working capital
requirements, capital expenditures, dividend payments, investment in domestic
subsidiaries, and infrastructure project; and

3) The domestic corporation holds directly at least twenty percent (20%) in value of
the outstanding shares of the foreign corporation and has held the shareholdings
uninterruptedly for a minimum of two (2) years at the time of the dividends
distribution..In case the foreign corporation has been in existence for less than
two (2) years at the time of dividends distribution, then the domestic corporation
must have continuously held directly at least twenty percent (20%) in value of the
foreign corporation's outstanding shares: during the entire existence of the
corporation.

Absent any one of the above conditions, the foreign-sourced dividends shall ©
be considered as taxable income (subject to RCIT) of the domestic
corporation in the year of actual receipt or remittance, subject to surcharges, interest,
and penalties, as applicable (RR 5-2021; RMC 62-2021).

For this purpose, in order to avail of income tax exemption, RR 5-2023 provides that
the re corporation shall:

> Attach a.“Sworn Statement” following the template provided in Annex A of

this regulation, to the Annual Income Tax Return (AITR) pertaining to the
taxable year in which the foreign-sourced dividends were received; and:

> Attach to the AITR pertaining to the year immediately following the year of
receipt of the foreign-sourced dividends a “Sworn Declaration” using the
template provided in Annex B of this regulation.

Compliance with the above requirements is sufficient in order to avail of the income tax
exemption. However, in case of partial or non-utilization of the foreign-source
dividends, the domestic corporation shall pay the corresponding income tax
thereon, inclusive of surcharge, interest and penalties, by amending the AITR filed for
the particular period. In the event that the amendment is already prohibited due to
existence of audit, the income tax shall be paid using payment form (BIR Form 0605).

Further, no credit or deduction under Section 34 of the Tax Code, as amended, shall be
allowed for any taxes of foreign countries paid or incurred by the domestic corporation
in relation to the exempt foreign-sourced dividend. Finally, any taxes of foreign
countries paid or incurred by the domestic corporation in relation to the exempt foreign-
sourced dividend shall be disregarded in computing the limitations provided under
Section 34(C)(4) of the Tax Code, as amended.

The term used under Section 42(A)(2)(b) of the Tax Code was foreign: corporation,
without distinction as to whether the foreign corporation is resident or nonresident.
Hence, the rule in determining the situs of dividend income from foreign corporation
shall apply to both resident and nonresident foreign corporation.

NOTE: If the problem is silent as to the “situs” of a dividend income from a

Roreion COrPOrRth the author’s assumption is to treat the same as foreign-
- source

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 Chapter + ~ Corporations
I, CAPITAL GAINS TAX (CGT)

CORPORATION
Certain CAPITAL GAINS derived from Philippine Sources DC RFC NRFC

1.) ON SALE OF SHARES of a domestic corporation NOT traded

in the Local Stock Exchange
» Under CREATE Law (beginning April 11, 2021)
Based on Capital Gain, regardless of amount 15% 15% 15%

= Under the TRAIN Law (Jan. 1, 2018 to April 10, 2021)

On capital gain, regardless of amount 15%

On First P100,000 capital gain : - 5% 5%

On Capital Gain in excess of P100,000 10% 10%

2.) ON SALE OR EXCHANGE OR DISPOSITION OF LAND

OR/OR BUILDINGS
Based on Selling Price or FMV, whichever is higher 6%** NA NA |
The 6% CGT regardless of whether the sale resulted to a gain or loss is imposed to only to domestic
corporations and individual taxpayers. Moreover, the option available to individual taxpayers to subject the
sale to either 6% CGT or Basic Tax, if the buyer is the goverment, is not applicable to domestic
corporations.

**For purposes of computing the 6% CGT on real properties, the Fair Market Value (FMV) shall pertain to
the higher amount between the valuation provided by the Provincial or City assessors (also known as
“assessed value” or “valuation for real property tax purpeses) and the Zonal Value provided by the BIR.
The FMV determined by independent parties is not applicable for CGT purposes.

CGT is due within 30 days from date of sale.

CAPITAL GAINS TAX

¢ Capital Gains Tax on Sale of Land and/or Buildings

Requisites:
1) The land and/or building must be a capital asset; and
2) It must be located in the Philippines.
3) Regardless of whether the transaction resulted to a gain or loss

FORMULA:
Tax Base Pxxx
Rate 6%
CGT Pxxx
|

TAX BASE:
1. ‘Selling Price
=

2. Fair Market Value

3. Zonal Value

Capital Gains Tax on Sale of Shares of Stock of a Domestic Corporation

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 Chapter 4 - Corborations

Requisites:
1) The-shares of stock sold, bartered, exchanged or disposed must be from a
domestic corporation.
2) _ The transaction must be not through the local stock exchange.
3) The seller should not be a dealer in securities (held as capital asset or for
investment purposes only)
4) The transaction should result to a capital gain based on ébripitetion shown
below:
FORMULA:
Selling Price PRxx
Cost (xx)
Capital Gain Pxx
Rate 15%**
CGT Px

NOTE:
£9 = Sale of shares of a domestic corporation through the local stock exchange is not subject to income
tax but to a "business tax” of 6/10 of 1% (also known as Stock Transaction Tax) under esi 127 of
the Tax Code.

£) Sale of shares of stock by a dealer in securities such as brokerage firms, regardless of whether the
shares were sold directly to a buyer or through the local stock exchange is subject to basic income
tax and value added tax.

J. SPECIAL CORPORATIONS

Special Corporations are corporations subject to lower corporate income tax rate
compared to the regular tax rate of 25% (20% for MSME) under CREATE Law, on their
regular or ordinary income by.

There are a total of six (6) special corporations under the Tax Code as amended by the
CREATE Law, namely:

Domestic Corporation
1. Proprietary educational institutions .
2. Hospitals which are Non-Profit

Resident Foreign Corporation

3. International Carriers

Nonresident Foreign Corporation

4. Nonresident Cinematographic Film Owner, Lessor or Distributor
5. Nonresident Owner or Lessor of Vessels Chartered by Philippine Nationals
6. Nonresident Owner or Lessor of Aircraft, Machineries and Other Equipment

1. DOMESTIC CORPORATIONS (RMC 62-2021; RR 14-2021; RR 3-2022):

o Hospitals which are non-profit and Proprietary Educational Institutions (PEIs)

The rules applicable to ordinary corporations will also apply to hospitals which
are non-profit and proprietary educational institutions, except the folowing
tax rules:

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 ooo Chapter He Copporations

Cc 0
s the be, based on net taxable income as provided
under Section 27(B) of the Tax Code, as amended by RA 11534 or the
CREATE Law.

Section 27(B) of the Tax Code, as amended by RA 11635 provides.

Hospitals which are non-profit and Proprietary educational

institutions shall pay a tax of ten percent (10%) on their taxable
income: 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.

SUMMARY
(Provided, the unrelated income is not higher than related income):
@ TRAINLaw : 10% SCIT
@ CREATE Law:
o From July 1, 2020 to June 30, 2023 =: 1% SCIT
o — Beginning July 1, 2023 : 10% SCIT -

“Unrelated trade, business or other activity’ is an activity which is not substantially

related to the exercise or performance of the school or hospital's primary purpose
or function such as but not limited to rental income from available school spaces or
facilities.

- Examples of related income (RMC 4-2013)

» _ Income from tuition fees and miscellaneous school fees
* Income from hospital where medical graduates are trained for residency
» — Income from canteen situated within the school campus
» Income from bookstore situated within the school campus

‘Proprietary educational institution” refer any private schools maintained and

administered by private individuals or groups with an issued permit to operate from
the Department of Education, Culture and Sports (DECS), 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 (RR 5-2021 as amended by RR 14-2021 and RR 3-2022 dated April 7,
2022).

b) MCIT: They are not subject to MCIT.

‘CAPITAL EXPENDITURES (CAPEX): In the case of Proprietary

Educational Institutions (PEIs), they have the option to treat CAPEX for
expansion of school facilities either as an outright expense or
capitalizable cost and claim depreciation expense. This rule, however,
shall not apply, to a non-profit hospital.

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 Chapter - - Lees

APPLICABLE INCOME TAX OF EDUCATIONAL INSTITUTIONS IN THE

PHILIPPINES as illustrated under RR 3-2022 dated April 7, 2022

DEFINITION of Terms as provided under Section 2 of RR 3-2022

Proprietary Educational Institution refer to any private schools 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.

The most common organizational structure of educational institutions registered with Securities
and Exchange Commission (SEC) under Section 27(B) of the NIRC, as amended, are:

= — Stock Corporations - are those which have capital stock divided into shares and
are authorized to distribute. to the holders of such shares, dividends, or allotments
of the surplus profits on the basis of the shares held; characterized as organized for
profit to be enjoyed by stockholders; profits are declared and they are distributed to
stockholders; composed of stockholders (also called shareholders or share
owners); and govemed by a Board of Directors (BOD).

'*Non-stock Corporations - are those organized not as a stock corporation;

characterized generally, as organized for purposes other than profit; income earned -
are not so distributed but used to further its own purposes; composed of members;
and govemed by what is generally called a Board of Trustees (BOT).

Non-Stock, Non-Profit Educational Institutions are those institutions mentioned in the first
paragraph of Section 4(3), Article XIV of the 1987 Constitution and Section 30 (H) of the NIRC,
as amended, whose revenues and assets that are used actually, directly and exclusively for
educational purposes shall be exempt from taxes and duties.

Non-profit - as used in the definition of Proprietary Hospitals and Non-Stock, Non-Profit

Educational Institutions, means that no net income or asset accrues to or benefits any member
or specific person, with all the net income or assets devoted to the institution's purposes and
all its activities conducted not for profit.

The grant of per diems such as transportation allowance in attendance of meetings, compensation
and/or endowments for services rendered, or any other similar emoluments to the Board of Trustees,
officers, employees, or any members of the above-mentioned institutions shall not be prohibited and
shall not necessarily be considered a private inurement that would negate the status of the
institutions as non-profit; Provided, that such per diems, compensation or emoluments are subject
to proper liquidation or reimbursement procedures, and commensurate to the functions and services
rendered. In such a case, the same shall be considered as legitimate and reasonable expenses
incurred in furtherance of the duties and responsibilities of the trustees, officers, employees,
members, or any persons, and ultimately, the objectives of the organization. The reasonableness of
the expense shall be determined by the BIR on a case-to-case basis.

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 OY such educational
institutions or hospitals of its primary purpose or function.

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 Okepler p.- | sailed

COVERAGE OF THE PREFERENTIAL CORPORATE INCOME TAX RATE (1%; 10%)

Section 3 of RR'3-2022 dated April 7, 2022
The following institutions shall be covered by the preferential ten percent (10%) special
corporate income tax (SCIT) rate; Provided, that beginning July 1,2020 until June 30, 2023,
the rate of one percert (1%) shall apply, as imposed under Section 27 (B) of the NIRC, as
amended:
1) Proprietary Educational Institutions;
2) Hospitals which are non-profit; and
3) ‘Non-Stock, Non-Profit Educational Institutions: whose net income or assets ©
accrue/inure to or benefit any member or specific person.

After June 30,2023, the rate shall revert to the preferential corporate income tax rate of
10%.

The twenty-five percent (25%) regular corporate income tax rate prescribed under Section 27(A) of
the NIRC, as amended, shall be imposed on the entire taxable income of the institutions mentioned
in Section 3 of RR 3-2022 if their gross income from unrelated trade, business or other activity, as
defined herein, exceeds ercent (50%) of the total gross income they derived from all sources.
Moreover, a Non-Stock, Non-Profit Institution, not falling under Section 3 of these Regulations, shall
be subject to the rate of twenty-five (25%) regular corporate income taxon the portion of its revenues
or assets NOT USED actually, directly, and exclusively for educational purposes, as provided in
Section 27(A) of the NIRC, as amended.

TE TAX OF EDUCATIONAL INSTIT HONS

VASA RTE Ee eee eae
Proprietary Educational Institution
= ~ Related Income > unrelated income “1% based on taxable income

* Related Income < unrelated income 25% RCIT

Non-stock, Non-Profit Educational Institution

whose net income or assets accrue/inure to or benefit any
member or specific person.
= Related Income > unrelated income *1% based on taxable income

* Related Income < unrelated income . 25% RCIT

Non-stock, Non-Profit Educational Institution

NOT FALLING under Section 3 of RR 3-2022 (meaning NO PART
of its net income or asset shall belong fo or inure to the benefit of
any member, organizer, officer or any specific person)
= On the portion of its revenues or assets USED actually, Exempt from taxes and duties
directly, and exclusively for educational purposes. under Sec 4(3), Art. XIV of the
Constitution and Sec. 30(H) of the
Tax Code, as amended

* On the portion of ils revenues or assets NOT USED actually, 25% RCIT
directly, and exclusively for educational purposes.

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 Chapter 4 . aperaeas

z
Government Educational Institution (GEI)
NOT COVERED by the preferential corporate income tax rate

a Income from related activities Exempt under Sec. 30(I) of

the Tax Code or by its own
charter or law creating the
GE, if applicable

« —— Onincome not exempt by law such as income of whatever

kind and character of the foregoing organizations from any 25% RCIT
of their properties, real or personal, or from any of their
activities conducted for profit regardless of the disposition
made of such income, as provided under Sec. 30 of the Tax
Code.

NOTE:
Final withholding taxes on passive incomes and capital gains tax on shares of stock and real properties
shall be applicable to educational institutions unless exempt under the law.

INCOME TAX OF EDUCATIONAL INSTITUTIONS

[ Educational Institution
I
J
Proprietary Educational Institution (PEI) Government Educational institution |
Nonstock Non-
PEls (stock)
Profit PEIs
Related income

L> Unrelated

| 1% or 10%scr, [ act | | Generally Exempt under Sec. 30 of the Tax ]

Code and/or its Charter or Special Law.

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APPLICABLE INCOME TAX OF iLL A HOSPITALS as

RR 3-2022 dated April 7, 2022

'B) of the Tax Code sweated by RA 11635 provides.

Hospitals which are non-profit and Proprietary educational institutions shall pay a tax of fen
nt (10% eir taxable income: Provided, that beginning July 1, 2020until June 30, 2023,
ate herein im, 1 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.

SUMMARY
(Provided, the unrelated income is not higher than related income):
¢ TRAINLaw ‘10% SCIT
¢ CREATE Law:
o From July 1, 2020 to June 30,2023. :1% SCIT
o Beginning July1, 2023 : 10% SCIT

“Unrelated trade, business or other activity” is an activity which is not substantially related to the
exercise or performance of the school or hospital's primary purpose or function such as but, not
limited to rentaliincome from available school spaces or facilities.

Non-profit- as used in the definition of Proprietary Hospitals and Non-Stock, Non-Profit Educational
Institutions, means that no net income or asset accrues to or benefits any member or specific person,
with all the net income or assets devoted to the institution's purposes and all its activities conducted
not for profit.

The grant of per diems such as transportation allowance in attendance of meetings, compensation
and/or endowments for services rendered, or any other similar emoluments to the Board of Trustees,
officers, employees, or any.members of the above-mentioned institutions shall not be prohibited and
shall not necessarily be considered a private inurement that would negate the status of the
institutions as non-profit; Provided, that such per diems, compensation or emoluments are subject
to proper liquidation or reimbursement procedures, and commensurate to the functions and services
rendered. In such a case, the same shall be considered as legitimate and reasonable expenses
incurred in furtherance of the duties and responsibilities of the trustees, officers, employees,
members, or any persons, and ultimately, the objectives of the organization. The reasonableness of
the expense shall be determined by the BIR on a case-to-case basis.

INCOME TAX OF HOSPITALS

AS ILLUSTRATED in RR 3-2022 dated April’7, 2022.and in the:case of St. Luke's Medical Centervs. CIR

Non-profit Hospitals
* Related Income > unrelated income 1% based on taxable income

= — Related Income < unrelated income Beg. July 1, 2020: 25% RCIT; 20% if MSME

Hospitals organized FOR-PROFIT Beg. July 1, 2020: 25% RCIT; 20% if MSME

Priorto July 1, 2020: 30% RCIT

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(Q * **Non-profit hospitals may aio be exemptif all the following conditions for
exemption as provided in the case of St. Luke's Medical Center (SLMCI) vs.
CIR in the CTA Case No. 7857 dated June 3, 2011 are present:
= It is a non-stock corporation
= — It is operated exclusively for charitable purposes; and
* No part of its net income or asset shall belong to or inure to the
benefit of any member, organizer, officer or any specific person.
The court provides that a “private” hospital organized as nonstock-
nonprofit that is operated for charitable and social welfare purposes is
exempt from income tax under Section 30 of the Tax Code provided all the
requisites for exemption are satisfied.

INCOME TAX OF PROPRIETARY HOSPITALS

PROPRIETARY HOSPITALS — |

All the conditions for Not all the conditions

exemption were for exemption were
satisfied satisfied

Related income Related income

| . Exempt
> Unrelated <Unrelated

1% or 10% SCIT RCIT | ps

2. RESIDENT FOREIGN CORPORATIONS:

@ INTERNATIONAL CARRIERs

International Common Carrier refers to an International Air Carrier or

International Sea Carrier, as defined in Section 3 of RR 15-2013, as follows:.

International Air Carrier

Refers to a foreign airline corporation doing business in the Philippines

having been granted landing rights in any Philippine port to. perform
intemational air transportation services/activities or flight operations anywhere .
in the world. On-ine carriers refer to intemational air carriers having or
maintaining flight operations to and from the Philippines. Off-line carriers refer
to intemational air carriers having no flight Operetinns to and from the '
Philippines,

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 Chapter a Corporations

International Sea Carrier

Refers: to a forei n_shipping corporation doing business _in_the

Philippines, having: touched or intention of touching any Philippine port to
perform intemational sea transportation services/activities from the Philippines
to anywhere in the world and vice versa, in the case of online carrier, or having
maintained business establishment, agent or répresentative office in the
Philippines for the sale of owned tickets/passage documents or
tickets/passage documents of other shipping companies, which shipping
companies operate without touching any Philippine port, in the case of off-line
carmier.

INCOME TAX

An international carrier having fights or voyages originating from any

port or point in the Philippines, irrespective of the place where passage
documents are sold or issued, is subject to the Gross Philippine Billings Tax
of two and one-half percent (2 2 %) imposed under Section 28(A)(3)(a)
and (b) of the Tax Code, as amended, unless it is subject to a preferential
rate (lower rate) or exemption on the basis of an applicable tax treaty or
international agreement to which the Philippines is a signatory or on the basis
of “reciprocity” (Sec. 4, RR 15-2013).

FORMULA:
Gross Philippine Billings** Pxxx
Rate : 2,.5%"**
Income Tax Pxxx

***Intemational carriers may avail of a lower tax rate (preferential rate) or exemption under
RA10378 on the basis of:

a. Tax Treaty; or
b. _ International agreement; or
c. Reciprocity - An intemational carrier, whose home country grants income tax
exemption to Philippine carriers, shall likewise be exempt from income tax.

~ GROSS PHILIPPINE BILLINGS (GPB)

International Air Carrier
Refers to the amount of gross revenue derived from carriage 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 ticket or
passage of document.

International Shipping Carrier

Refers to the amount of 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.

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 Chapter 4 - Cea

NOTE (RR 15-2013; Gulf Air Co., Phil. Branch v. Commissioner of Internal Revenue, G.R. No. 182045, September
¥ 2012, 695 PHIL 493-505):
The gross revenue for passengers whose tickets are sold in the Philippines shall be the actual amount derived
for transportation services, for a first class, business class or economy class passage, as the case may be, on
its continuous and aioe lage from any port or point in the Philippines to its final destination ini any port
or point of a foreign country, t ittance area of the tax coupon fo gral part of the
plane ticket. For this purpose, the roe Philippine Billings shall be determined by computing the monthly average
net fare of all the tax coupons of plane tickets issued for the month per point of final destination, per class of
passage (i.e., first class, business class, or economy class) and per classification of passenger (i.¢., adult, child
or infant) and multiplied by the corresponding total number of passengers flown for the month as declared iin the
flight manifest.

« — For tickets sold outside the Philippines, the gross revenue for passengers for first class, business class or
economy class passage, as the case may be, on a continuous and uninterrupted flight from any port of point in
the Philippines to final destination in any port or point of a foreign country shall be determined Using the locally
available net fares applicable to such flight taking into consideration the seasonal fare rate established at the time
of the flight, the class of passage (whether first class, business class, economy class or non-revenue), the
classification of passenger (whether adult, child or infant), the date of embarkation, and the place of final
destination. Correspondingly, the Gross Philippine Billing for tickets sold outside the Philippines shall be
determined in the manner as provided in the preceding paragraph.

s Tickets revalidated, exchanged and/or indorsed to another international airline form part ofthe GPB if a passenger
boards a plane in a port or point in the Philippines.

» — Flight which originates from the Philippines, but transshipment of passenger takes place at any port outside the
- Philippines on another airline, only the aliquot portion of the cost of the ticket corresponding to the leg flown from
the Philippines to the point of transshipment shall form part of the GPB.

s The gross revenue on excess baggage which originated from any port or point in the Philippines and destined to
any part of a foreign country shall be computed based on the actual revenue derived as appearing on the official
receipt or any similar document for the said transaction.

» The gross revenue for freight or cargo and mail shall be determined based on the revenue realized from the
camiage thereof. The amount realized for freight or cargo shall be based on the amount appearing on the airway
bill after deducting therefrom the amount of discounts granted which 'shall be validated using the monthly cargo
sales reports generated by the IATA Cargo Accounts Settlement System (IATA CASS) for airway bills issued
through their cargo agents or the monthly reports prepared by the airline themselves or by their general sales
agents for direct issues made. The amount realized for mails shall, on the other hand, be determined based on
the amount as reflected in the cargo manifest of the carrier.

@ REGIONAL OPERATING HEADQUARTERS (ROHQs)

Beginning Jan. 1, 2022 « — Shall no longer be considered as special

corporation. Consequently, the rules
‘applicable to ordinary resident foreign
corporations shall already apply, such as:
o RCiTrate: 25% of net income derived
from Philippine sources only; and
o MCIT (on gross income in the
Philippines):

PRIOR to Jan, 1, 2022 = — Considered as special corporation subject

‘ to 10% income tax rate based on its net
income derived from sources within the
Philippines.
* _Not subject to MCIT betel

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 Some

Clase 4 - Conporations

NOTE: oe
¢ Regional or Area Headquarter (RHQ/AHQ) and Representative Office (RO)
are different from ROHQs.

@ Regional or Area Headquarters (RHQs/AHQs) and Representative Offices

(ROs) are tax-exempt and not included in the definition of corporation for
Income tax purposes. *

Sec, 22(DD) of the Tax Code, as amended:

The term ‘regional or area headquarters’ shall mean a branch established in the
Philippines by multinational companies and which headquarters do not eam 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.

Sec. 28(A)(6)(a) of the Tax Code, as amended:

Regional or Area ees as defined in Section 22(DD) shall not be subject to
income tax.

3. NON-RESIDENT FOREIGN CORPORATIONS:

3 TYPE _. TAXBASE RATE

Non-resident Cinematographic Film Owner, Lessor or Distributor Gross Income 25%

Non-resident Owner or Lessor of Vessels Chartered by Philippine Gross rentals, leaSe
Nationals or charter fees 4.5%
Non-resident Owner or Lessor of Aircraft, Machineries and Other Gross rentals,
Equipment charters/other fees 7.5%

K. BRANCH PROFIT REMITTANCES TAX (BPRT) OF RFCs

Sec. 28(A)(5) of the Tax Code, as amended, provides:

Any profit remitted by a branch to its head office shall be subject to a tax of fifteen percent (15%)
which shall be based on the total profits applied or earmarked for remittance without any deduction
for the tax component théreof (except those activities which are registered with the Philippine
Economic Zone Authority). The tax shall be collected and paid in the same manner as provided in
Sections of the Tax Code: Provided, That interests, dividends, rents, royalties, including
remuneration for technical services, salaries, wages, premiums, annuities, emoluments or other fixed
or determinable annual, periodic or,casual gains, profits, income and capital gains received by a
foreign corporation during each taxable year from all sources within the Philippines shall not be
treated as branch profits unless the same are effectively connected with the conduct of its trade or
business in the Philippines.

NOTE: This provision was not amended by CREA TE Law.

FORMULA:
Profit Remittance PXXX
Rate 15%
BPRT Pxxx

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PROFIT REMITTANCE

; : PROFIT REMITTED APPLICABLE TAX

Connected with the conduct of its trade or
business in the Philippines ‘ Subject to 15% BPRT
. : \

Others (i.e., passive income) : Not subject to BPRT et

EXEMPT ENTITIES

Activities registered with the following shall be exempt from BPRT:

1) Philippine Economic Zone Authority (PEZA)
2) Subic Bay Metropolitan Authority (SBMA)
3) Clark Development Authority (CDA).

BIR RULINGS 5° :
Branch Profit Remittance Tax, BIR Ruling No. 080-89, April 25, 1989
For purposes of the 15% profit remittance tax, “any form of remittance, direct or indirect, made to the
mother company abroad shall be presumed to have been made from the accumulated profits of
the branch.”

15% Branch Profit Remittance Tax, BIR Ruling No. 583-88, December 19, 1988
The 15% branch profit remittance tax is in addition to the requiar corporate income tax due from
resident foreign corporation.

Asiatic Petroleum Co., vs. Llanes, 49 Phil. 466). if ;

It is a cardinal rule in taxation that exemptions should be construed strictissimi juris because it is
highly disfavored in law; and he who claims an exemption must be able to justify his claim by the
clearest grant of organic or statute law. An exemption from the common burden cannot be
permitted to exist upon vague implications.

L. OFFSHORE BANKING UNITS (OBU)

Sec. 28(A)(4) of the Tax Code

An OBU is a branch, subsidiary or affiliate or a foreign banking corporation

located in a/an Offshore Financial Center (OFC) which is duly authorized by the BSP to
transact offshore banking business in the Philippines (PD1034; BSP Circular No. 1389).
OBUs are allowed to provide all traditional banking services to non-residents in any
currency other than Philippine national currency.

INCOME TAX OF OBUs

» Upon effectivity of the CREA TE Law
Under the CREATE Law, OBUs are now taxable just like an
‘ ordinary resident foreign corporations. Hence, OBUS are now subject
to the revised RCIT rate of 25% on their income derived from sources within
the Philippines.

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‘PRIOR
effectivity
to the of the CREATE Law
Income derived by. offshore banking units (OBUs) from foreign currency
_ tenperoe ae taxed as follows:

COUNTER PARTY RATE

Non-residents Exempt
Other OBU’s Exempt
Local Commercial Banks Exempt
Branches of foreign banks - Exempt
Other residents 10%

M. TAXATION OF POGO ENTITIES AND SERVICE PROVIDERS

RMC No. 107-2021, dated October 2021, was issued to circularize Republic Act (RA)
No. 11590 Entitled “An Act Taxing Philippine Offshore Gaming Operations, amending
for the Purpose Sections 22, 25, 27, 28, 106, 108, and adding New Sections 125-A
and 288 (G) of the National Internal Revenue Code of 1997, as Amended, and For
Other Purposes”.

The salient changes in the 1997 National Internal Revenue Code (NIRC or the Tax
Code), as amended by RA 11590 in relation to corporate taxpayers are as follows:

» The definition of “offshore gaming licensee” was added to Section 22 of the

Tax Code and shall be considered engaged in doing businiess in the
Philippines.

* The definition of “offshore gaming licensee-gaming agent” was added to

Section 22 of the Tax Code who acting as such, shall neither.be involved with
the business operations of the offshore gaming licensee nor derive income
therefrom.

DEFINITION OF TERMS (Based on RR 20-2021 dated November 26, 2021)

Philippine Offshore Gaming Operation (POGO)

> — Refers to the operation'by an Offshore Gaming Licensee (OGL) on online games of
chance or sporting events via the intemet using a network or software or program
exclusively for offshore customers/players who are non-Filipinos.
> The term POGO shall also refer OGLs and Accredited Service Providers

© Offshore Gaming Licensee (OGL)

> Refers to an offshore gaming operator, whether organized in the Philippines
(Philippine-based) or abroad (Offshore or Foreign-based), duly licensed or
authorized through a gaming license issued by a POGO Licensing Authority to
conduct offshore gaming operations wneuaing the acceptance of bets from offshore
customers.

> OGLs, also known as Interactive Gaming Licensees, shall be considered engaged
in ey, business in the Philippines.

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— Accredited Service Provider (ASP)

> — Refer to any natural person regardless of citizenship or residence, or juridical person
regardless of place or organization, which provides ancillary services to an OGL or
any other Offshore Gaming Operator with license acquired from other jurisdictions,
ou ancillary service may include but not limited to:
Customer and technical relations and support
- Information technology
- Gaming software
- Data provision
- Payment solutions
- _ Live studio and streaming services -

© POGO Licensing Authority

> Refers to Philippine Amusement and Gaming Corporation PAGCOR) or any other
special economic zone authority, tourism zone authority or freeport authority
authorized by their respective charters to issue gaming licenses and accreditation
to POGO entities.

© OGL-Gaming Agent
>
>
Refers to a representative in the Philippines of a foreign-based OGL who shall act
as a resident agent for the mere purpose of receiving summons, notices and other
legal processes for the OGL and to comply with the disclosure. requirements of the

TAX TREATMENT OF INCOME BY POGO ENTITIES (RR 20-2021)

A. OFFSHORE GAMING LICENSEES (OGLs) ~

1. INCOME FROM GAMING OPERATIONS

In LIEU of ALL other direct and indirect internal revenue taxes and local ‘xis
there shall be levied, assessed and collected from OGLs (whether Philippine-
based or Foreign-based) a GAMING TAX equivalent to ( whichever is higher):
o 5% of Gross Gaming Revenue (GGR); or
0 5% of the Agreed Pre-determined minimum monthly revenue
(APMMR) from gaming operations

The Gaming Tax shall be directly remitted to the BIR not later than the 20th
day following the end of each month.

FORMULA (RR 20-2021):

Gross wagers PXx
Less: Payouts : (xx)
Gross Gaming Revenue (GGR) ___Pxx

Vs. APMMR ' Pxx

Higher amount bet. GGR and APMMR Pxx

Gaming Tax rate 5%
GAMING TAX 2 PXx

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o _ Gross Wagers refer to the total amount of money that offshore gaming customers.

o ~ Payouts refer to the total amount paid out to offshore gaming customers for
~ winning.

0 Agreed Pre-determined Minimum Monthly Revenue from gaming operations refers

to the amount that is derived after dividing the minimum monthly fee or its
equivalent, as imposed by a Philippine Offshore Gaming Operation (POGO)
Licensing Authority, by the rate of prescribed regulatory fee.

o __ Income from Gaming Operations

» — Refers to income or eamings realized or derived from operating online
games of chance or sporting events via the intemet using a network and
software or program.

o _ Income from Non-Gaming Operations

= _ Refers to any other income or earnings realized or derived by OGLs-that
are not classified as income from gaming operations.

NATURE OF GAMING Mets UNAS SECTION 125-A OF THE

TAX:CODE-*

The 5% Gana seve sila fs) Aa esate io the Tax Gode as

amended: by RA; se) 5 ack ENA Tax ee also.to ere
sAKe) cist 81e18),65 ) ae

2. INCOME FROM NON-GAMING OPERATIONS of OGLs

> Philippine-based OGL

o Subject to 25% RCIT of taxable income derived from sources within
and without the Philippines.

© Foreign-based OGL
© Subject to 25% RCIT of taxable income derived from sources within
the Philippines only.

NOTE: The non-gaming revenues of operations of all OGLs shall be

subject value added tax (vat) or percentage tax, whichever is applicable.

SUMMARY:

OFFSHORE GAMING } Business Tax

LICENSESS (OGL) Income Tax _ (VAT or Percentage Tax)

Income From Non-Gaming 25% RCIT Vat or Percentage Tax

Operations

Income From Gaming and

5% GAMING TAX /n LIEU of all other direct
Operations indirect Internal Revenue Taxes and Local taxes.

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B. ACCREDITED SERVICE PROVIDERS (ASP)

0 ASP Organized in the Philippines

o Subject to 25% RCIT of taxable income derived from sources within
and without the Philippines, except as otherwise provided in the Tax
Code.

© ASP Organized outside the Philippines

© Subject to 25% RCIT of taxable income derived from sources within
the Philippines, except as otherwise provided in the Tax Code.

N. TAXATION OF PAGCOR (RMC 32-2022 dated March 30, 2022)

PD 1869, as amended, classified PAGCOR’s income into two, namely:
1. Income from gaming operations; and
2. Income from other related services

In the case of PAGCOR vs CIR, et al (G.R: No.-215427, Dec. 10, 2014), the Supreme
Court held that PAGCOR’s income from gaming operations shall be subject to the 5%
franchise tax while its income from related services shall be subject to the corporate
income tax provided in the Tax Code, as amended.

» INCOME OF PAGCOR FROM GAMING OPERATIONS includes, among others:

© Income from its casino operations;
® Income from dollar pit operations;
Income from bingo operations, including all variations thereof; and
© Income from mobile bingo operations operated by it, with agents on commission
basis. Provided, however, that the agent’s commission income shall be subject to
regular income tax, and consequently, to withholding tax under existing
regulations.

Accordingly, PAGCOR’s income from its operations and licensing of gambling casinos,
gaming clubs and other similar recreation or amusement places, gaming pools are, IN
LIEU OF ALL TAXES, subject to 5% Franchise Tax pursuant to PD 1869.

It is noteworthy
to mention that Section 13(2)(a) of PD 1869, as amended, clearly gives
PAGCOR a -blanket exemption to taxes on its income. from its operations under its
Franchise (also known as income from gaming operations) with no distinction on
whether the taxes are direct or indirect, like value added tax (VAT).

PAGCOR’s income from “other related operations/services” shall be subject to corporate

income tax (RCIT), vat and other applicable taxes under the Tax Code, as amended.

INCOME OF PAGCOR FROM OTHER RELATED OPERATIONS/SERVICES such as:

0 Regulatory license fees
© Regulatory/license fees from licensed private casinos
© Regulatory/license fees from licensed private bingo operations, including all
variations thereof
% Regulatory/license fees from private internet casino gaming, internet sports
‘ bettingand private mobile gaming operations;
© Regulatory/license fees from private poker operations

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Chapter 4 panne

Regulatory/license fees from private junket operations

oso
Regulatory/license fees from SM demo units
© Regulatory/license fees from all other electronic derivatives of brick and mortar
_ games regulated by PAGCOR
© Income from other necessary and related services, shows and entertainment

PAGCOR's other income that are not connected with the ‘foregoing
operations are likewise subject to corporate income tax, VAT and other applicable
taxes under the NIRC, asamended.
PAGCOR is constituted as a. withholding agent for the government as
regards the compensation given. to its employees subject to withholding tax on
compensation, and for payments made to individuals or corporations subject to the
withholding taxes at Source as required under Chapter XIII and Section 57 of the
NIRC, as amended.
“PAGCOR must also collect a qualifying fee from players and remit the same
in accordance with Executive Order No. 48, s. 1993, Revenue Regulations (RR) No.
06-93 and Revenue Memorandum Order (RMO) No. 14-93. Particularly, pursuant to
Section 6 of RR No. 06-93, PAGCOR shall issue a check, payable to the Bureau of
Treasury and to the creditof the account of the BIR, equivalent to the amount of
collections for a particular week. Thischeck, together with the necessary supporting
documents prescribed by the BIR, shall be issued to the Bureau of Treasury not later
than Tuesday following each week. The Bureau ofTreasury shall then prepare
monthly the corresponding Journal voucher and any other necessary document in
favor of the BIR for the latter to record the amount of collections in its book of
accounts.

SUMMARY:

INCOME ie. TAX etl

From Gaming Operations 0 5% Franchi Tax
In LIEU of ALL other Taxes sili | |
as income tax and vat. |
From Other Related Services © . RCIT and other taxes imposed|
and other income ‘ under the Tax Code such as vat. |

O. TAXATION OF PAGCOR CONTRACTEES AND LICENSEES

(RMC 32-2022 dated March 30, 2022) -

3. INCOME OF PAGCOR CONTRACTEES AND LICENSEES FROM GAMING

OPERATIONS ii

P.D. No, 1869, as amended, expressly. provides that the payment of the five
percent(5%) franchise tax of PAGCOR inures to the benefit of its Contractees
and Licensees (Bloomberry Resorts and Hotels, Inc. v. BIR, G.R. 212530 dated
Aug. 10, 2016). Hence, following the ruling in B/oomberry, like PAGCOR, its
Contractees and Licensees shall be exempt from the payment of corporate income
tax realized from the operation of casinos upon payment of the five (5%) franchise
tax since the law is clear that said exemption inures and extends to their benefit.

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PD 1869 provides:

~ "SEC 13. - Exemptions:

(2) Income and other taxes -

Etanchise and to those receiving compensation or other remuneration

from the Corporation or operator as a result of essential facilities
fumished and/or technical services rendered to the Corporation or
operator.

The. fee or remuneration of foreign entertainers contracted by the Corporation

or operator in pursuance of this provision shall be free of anytax."

NOTE: The 5% Franchise Tax is IN LIEU OF ALL TAXES whether the taxes are
‘direct or indirect, like value added tax (VAT). The 5% franchise tax shall be
payable directly to the BIR, specifically to the concerned Revenue District Office
(RDO) where the licensee is registered. This franchise tax is different and distinct
from the license/regulatory fees paid by licensees to PAGCOR. —

“4, INCOME FROM OTHER RELATED SERVICES/OPERATIONS

The income realized by PAGCOR's Licensees from “other related

services/operations" shall be subject to the regular corporate income tax, VAT
and other applicable taxes under the NIRC, as amended.

5. TAXABILITY OF E-SABONG OPERATORS (RMC 25-2022 dated March 11,

2022) . .
\ 0 E-SABONG OPERATOR'S INCOME

Just like other PAGCOR licensees as illustrated in the preceding

pages, the gaming income of e-sabong operator is subject to 5%
Franchise Tax which shall be in lieu of all internal revenue taxes except
vat or percentage tax, depending on the threshold.

Income from e-sabong operation (gaming income) refers to the

gaming income and/or service income generated from activities
authorized under the e-sabong license issued by PAGCOR, including but
‘ not limited to those derived from the plasada.

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Chapter 4 a Corborations

0. SERVICE and OTHER INCOME

Service income and all other income or earnings realized by e-Sabong
operator from all other activities whose authorization does not derived
from the e-sabong licensed issued by PAGCOR shall be subject to regular
income tax, value added tax or percentage tax depending on the
threshold, withholding taxes and other taxes, as may be deemed
appropriate.

P. FILING OF TAX RETURNS

1. Regular Corporate Income Tax (RCIT) or Basic Income Tax

a) Quarterly - on or before the 60" day following the end of the quarter

b) Annual (Final Quarter) — on or before April 15 of the succeeding year.

2. Final Withholding Tax on passive income

MANUAL FILING
January to November 10" day of the. month following the month the
withholding was made
December January 15 of the succeeding year

3. Capital Gains Tax

a) Shares of stock
i. Ordinary Return - 30 days after each transaction
ii. Final Consolidated Return - on or before April 15 of the following year ~

b) Real Property — 30 days following each sale or other disposition

Q. ELECTRONIC FILING AND PAYMENT SYSTEM (EFPS)

RR 9-2001 defines EFPS as the system developed and maintained by the BIR for
electronically filing tax returns, including attachments, if any, and paying taxes due
thereon, specifically through the internet

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s

TAXPAYERS REQUIRED TO FILE AND PAY UNDER eFPS

(RR p20) RR 9-2016; RR 4-2023)

a) Large Taxpayers duly notified by the BIR, as amended A

b) Top 20,000 Private Corporations Taxpayers duly notified by the BIR, as amended
c) Top 5,000 Individual Taxpayers duly notified by the BIR (RR 6-2009)
d). Corporations with Paid-Up Capital Stock of P10 Million and above (RR No. 10--2007)
e) Procuring Government Agencies with respect to withholding of Vat and Percentage
Taxes (RR 3-2005)
f) Taxpayer Account Management Program (TAMP) Taxpayers (RR No. 10-2014)
g) Accredited Importer and Prospective Importer required:to secure the BIR-ICC & BIR-
BCC (RR No. 10-2014)
h) National Government Agencies (NGAs) (RR 1-2013)
i) | Insurance companies and Stock brokers (RMC No. 71-2004)
j) All Licensed Local Contractors (RR No. 10-2012)

k) Enterprises Enjoying Fiscal Incentives (PEZA, BOI, Various Zone Authorities, Etc.) (RR
No. 1-2010)
Philippine Economic Zone Authority (PEZA)
oooocooso

Board of Investments (BOI)

Various zone authorities
Cagayan Special Economic Zone Authority
Export Development Council
Tourism Infrastructure and Enterprise Zone Authority; and
PHIVIDEC Industrial Authority. ,

TAXPAYERS REQUIRED TO FILE RETURNS THROUGH ELECTRONIC BUREAU OF

. INTERNAL REVENUE FORMS (eBIRForms)
(RR 5-2016; RR 9-2016; RR 4-2023)

a) Accredited Tax Agents/Practitioners and all its client-taxpayers

b) Accredited Printers of Principal and Supplementary Receipts/Invoices
c) One-Time Transaction (ONETT) taxpayers who are classified as. real estate
dealers/developers; those who are considered as habitually engaged in the sale of real
property and regular taxpayers already covered by eBIR Forms. Thus, taxpayers who
filing BIR Form 1706, 1707, 1800, 1801, and 2000-OT (For BIR Form 1706 only) are
excluded in the mandatory coverage from using the eBIR Forms. $
d) Those who shall fille a “No-Payment Return
e) Government-Owned-or-Controlled Corporations (GOCC)
f) Local Government Units (LGUs), including Barangays; and ;
g) Cooperatives registered with the National Electrification Administration (NEA) and Local
Water Utilities Administration (LWUA)

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 Che it ey 4 “ ce aa

| QUIZZER
\

Choose the letter of the correct answer.

Corporate Taxpayers/Principles

4. RA 10963, otherwise known as the Tax Reform for Acceleration and Inclusion Act (TRAIN
» Law) took effect on
a. December 13, 2017 c: December19, 2017
b. December 14, 2017 d. January
1, 2018

' % “Answer: D

2. RA11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises
(CREATE Law) took effect on
. a. July 1, 2020 c. March 27, 2021
b. March 26, 2021 d. April 11, 2021
“> Answer: D
© The CREATE Law took effect on April 11, 2021, however, some of its provisions were
specifically provided under the law to take effect at an earlier date, such as the effectivity
of the revised RCIT rate of 20% and 25.and the reduced Percentage Tax rate under
Section 116 of the Tax Code, as amended.

3. The term “Corporation” shall include:

|. One Person Corporation
ll. Partnerships, no matter how created or organized
ll. Joint stock companies
IV. Joint accounts (ceuntas en participacion)
V. — Associations
Vi. Insurance companies
Vil. Mutual fund companies
Vill. Regional operating headquarters of multinational corporations
a. land Il only c. |, Il, Ill, IV and V only
b. |, land Ill only . d. Allof the above
** Answer: D

4, are constituted when a group of individuals, acting jointly, establish and

operate business enterprise under an artificial name, with an invested capital divided into
transferable shares, an elected board of directors, and other corporate characteristics, but
operating without formal government authority.
a. Joint stock companies c. Associations
b. Joint account companies d. None of the above

“+ Answer: A

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5, __.____.__ is constituted when one interests himself in the business of another by

- contributing capital thereto, and sharing in the profits or losses in the proportion agreed
upon. They are not subject to any formality and may be privately contracted orally or in
writing.-
a. Joint stock companies ’ _¢. Associations
b. Joint account d. None of the above

“+ Answer: B

6. _—————_itincludes all organizations which have substantially the salient features

of a corporation to be taxable as a “corporation.”
a. Joint stock companies c. Associations
b. Joint account d. None of the above

“¢ Answer: C

7. Which of the following is not treated as corporation?

a. General professional partnership— '
b A joint venture or consortium formed for the purpose of nde.
construction projects:
A joint or consortium for engaging in petroleum, coal, geothermal and other
9

energy operations pursuant to an operating consortium agreement under a

service contract with the govemment.
d. ~All of the above

“* Answer: D
© Generally, a Joint Venture is taxable as a corporation, except for letters C and D.

8. Statement 1: Partnerships, no matter how created or organized, are taxable as

corporations for income tax purposes.
Statement 2: Associations and mutual fund companies, for income tax purposes, are
excluded in the definition of corporations. :
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct >
d. Both statements are incorrect

“¢ Answer: A
0 “Nomatter how created” simply refer to how the partnership was established, either
orally or in writing, registered or unregistered.

9. Which of the following is not a taxable corporation?

a. Ana, Lorna and Fe agreed to contribute their money into a common fund to engage
in the business of buying and selling consumer goods. Their total investment
amounted to P300,000 and they did not bother to register their business with the DTI
and the SEC.

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| Chapter 4 - diparadline

b. Pedro, Juan and Luna, all certified public accountants, agreed to contribute their
money; property and industry to a common fund with the sole intention of jointly
exercising their common profession. They have registered with the SEC.
c. Victorious Bus Company and California Bus Company owns separate franchises to
operate a public utility covering the area of Norther Luzon. To achieve maximum
efficiency of utilizing their assets.and to avoid the negative effects of competition, the
two companies agreed to pool their resources together and operate as a single
company. 7.
d. -Rody and Allan, lawyer and certified public accountants, respectively, agreed to
contribute their money, property and industry to a common fund to render service of
business process outsourcing.

“Answer: B
© Pedro, Juan and Luna formed a GPP, one of the exclusions in the definition of
Corporation for Taxation purposes.

10. Which is nota characteristic of corporate income tax:

a. Progressive tax -c. General tax
b. Direct tax d. National tax

“+ Answer: A
© Corporate tax is NOT a progressive tax, but a proportional tax. A progressive
tax is a tax where the rate increases as the tax base increases. Examples of a
progressive tax under the NIRC are; income tax on individuals, donor's tax (prior
to TRAIN Law), estate tax (prior to TRAIN Law). On the other hand, proportional
tax is tax in proportion to the amount subject to taxation. The tax rate is fixed,
regardless of whether the tax base increases or decreases. Examples are; income
tax on corporations, value added tax, percentage taxes, donor's tax and estate tax
(upon effectivity of the TRAIN Law).

© _ Direct tax is a type of tax where the incidence and impact of taxation fall on the
same person. The burden of paying the tax can't be shifted by the taxpayer to
someone else. '

® General tax refers to a general levy by a government that offers no special benefit
to the taxpayer, but only a support to govemmental programs that benefit all. It is
a source of public revenue.

© National tax is a tax imposed by the National government.

11. Which of the following is subject to income tax?

a. SSS andGSIS
b. Philippine Health Insurance Corporation (PHIC)
c. Local Water Districts
d. Philippine Amusement and Gaming Corporation (PAGCOR)

“* Answer: D
0 PCSOis taxable upon the effectivity of the TRAIN Law or beginning January 1, 2018.
0 HDMF or Pag-ibig is tax-exempt upon the effectivity of CREATE Law. .

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)

12. One of the following is exempt from income tax

Proprietary educational institutions
Private cemeteries
aoo® Govemment educational institutions
Mutual savings bank not having a capital stock represented by shares

“+ Answer: C (Section 30 of the Tax Code, as amended)

AS. Statement 1: Corporations exempt from income tax are not subject to. income tax on
incomes received which are incidental or necessarily connected with the purposes for
which they were organized and operating.

Statement 2: Corporations exempt from income tax are subject to income tax on income
_of whatever kind and character from any of their properties (real or personal) or from any
other activity conducted for profit, regardless of the disposition of such income.
a. Only statement / is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

+ - Answer: C

_ 14. Which of the following statements is incorrect? “Joint Stock Companies” are constituted
when a group of individuals, acting jointly, establish and operate business enterprise
a. Under an artificial name.
b. With an invested capital divided into transferable shares.
c. Anelected board of directors, and other corporate characteristics.
d Operating with formal government authority.

«* Answer: D

15. A “Joint Account” is constituted when one interests himself in the business of another
by/and
1. Contributing capital thereto.
ll. Sharing in the profits or losses in the proportion agreed upon.
ll. They are not subject to any formality.
lV. It may be privately contracted orally or in writing.
a. landilonly - c. |, Il, Illand IV
b. |, ll and Ill only d. None of the above

“*
¢,
Answer: C

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46. Statement 1: Joint ventures, regardless of the purpose by they were created, are generally
exempt from corporate income tax,
Statement 2: The share of a co-venturer corporation in the net income of fax exempt joint
venture or consortium is Subject to corporate income tax.»
a. Only statement 1 is correct .
b, Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

% Answer:B ,

DC, RFC and NRFC

17. Itis important to know the sources of income for tax purposes, i.e., from within and without
the Philippines, because:
a. Some individual and corporate taxpayers are taxed on their worldwide income while
others are taxable only from sources within the Philippines.
b. The Philippines imposes income tax only on income from sources within.
c. Some individual taxpayers are citizens while other are aliens.
d. Export sales are not subject to income tax.

“ Answer: A

18. Which of the following statements is correct?

|. The term “domestic”, when applied to a corporation, means created or organized in
the Philippines or under the laws of a foreign country as long as it maintains a
Philippine branch.
ll. Accorporation which is not domestic may be a resident (engaged in business in the
Philippines) or nonresident corporation (not engaged in business in the Philippines).
lll. Resident foreign corporations are subject to income tax based’on net income from
sources within the Philippines.
a. | only c. ll and Il only
b. Il only d. |, Il and Ill

“> Answer: C

19. Statement 1: Non-resident foreign corporation applies to a foreign corporation engaged in

trade or business within the Philippines,
Statement 2: Resident foreign corporation applies to a eet corporation not engaged
in trade or business in the Philippines.
: a. Statements 1 and 2 are false
‘b. Statement 4 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true

“+ Answer: A

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20. Which of the following is taxable based on income from all sources, within and without?
a. Domestic Corporations
b. Resident Foreign Corporations
C. Non-resident Foreign Corporations
d. All of the choices
2,
*
Answer: A

21. The term applies to a foreign corporation engaged in trade or business in the Philippines.
a. Resident foreign corporation
b. Nonresident foreign corporation
c. Multinational corporation
d. Petroleum contractor

“+ Answer: A

22. Which of the following does not have the benefit of claiming deductions in computing
income tax?
a. Domestic Corporations
b. Resident Foreign Corporations
c. Non-fesident Foreign Corporations
d. All ofthe choices

“+ Answer: C

23. Which of the following corporations shall pay a tax equal to twenty five percent en of
gross from all sources within the Philippines?
a. Domestic corporation
b. Resident foreign corporation
Cc. Nonresident foreign corporation
d None of the choices

2,
Xd Answer: C

24. Aside from the regular corporate income tax, what other tax(es) may be imposed on
corporations under the Philippine income tax laws?
a. Minimum corporate income tax c. Capital gains tax
b. Final tax on passive income d. All of the above

Answer: D
°,
“~

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COMPUTATION OF REGULAR CORPORATE INCOME TAX (RCIT

25. CREATE Corporation, a domestic corporation and a retailer of goods has gross sales of
P1,400,000,000.00 with a cost of sales of P560,000,000.00 and allowable deductions of
150,000,000.00 for the calendar year 2022. Its total assets of P180,000,000.00 as of
December 31, 2021 per Audited Financial Statements includes the land costing
P50,000,000.00 and the building of P25,000,000.00 in which the business entity is
situated, with an aggregate amount of P75,000,000.00 as Fixed Assets.

How much is the income tax due in 2022?

a. P125,000,000 © c. P172,500,000
b. P138,000,000 d. P207,000,0000

“+ Answer: C

Solution:
Gross sales P1,400,000,000
Cost of sales (560,000,000)
Operating expenses (150,000,000)
Taxable Net Income P690,000,000
RCIT rate 25%
Income Tax Due P172,500,000

& The Company is NOT classified as MSME, hence, subject to the revised RCIT rate of
25% under CREATE Law. The company’s assets, excluding the land, is more than
the P100M threshold for MSME. Moreover, the company's net income also exceeded
the threshold of P5M for MSME.

& The 20% RCIT rate for domestic corporations under Section 27 of the Tax Code as
amended by CREATE Law shall ONLY apply if the domestic corporation is classified
as MSME with the following requisites:
{The Corporation's net taxable income should not be more than R5M; AND
‘ 2) The assets of the Corporation should not be more than R100M.

26. Maasahan Corporation, a domestic corporation and a retailer of goods has gross sales of
P 14,000,000 with a cost of sales of P7,600,000 and allowable deductions of 2,500,000 for
the calendar year 2022. Its total assets of P150,000,000 as of December 31, 2022 per
Audited Financial Statements includes the land costing P50,000,000 and the building of
P25,000,000 in which the business entity is situated, with an aggregate amount of
P75,000,000 as Fixed Assets.

How much is the income tax due in 2022?

a. P60,000,000 c. P975,000
b, P780,000 d, P1,170,0000

“* Answer: B

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ees - Gross sales P14,000,000 °

Cost of sales (7,600,000)
Operating expenses ‘ (2,500,000)
Taxable Net Income P3,900,000
RCIT rate for MSMEs 20%
Income Tax Due “7 -P780,000

The Company is classified as MSME, hence, subject to the revised RCIT rate of 20%
under CREATE Law. Although the total assets of the corporation amounted to P150M,
the cost of the land amounting to P50M shall be deducted from the .total assets for
purposes of determining whether the company is classified as MSME. Under the
CREATE Law, the RCIT rate of 20% is applicable to domestic corporations if:
> The net income is not more than P5M; AND
> The amount of its assets is not more than P100M, excluding land on which the
particular business entity's office, plant, and equipment are situated during the
taxable year for which the tax is imposed.

27. Forever Corporation, a resident corporation and a retailer of goods has gross sales of
P14,000,000 with a cost of sales of P7,600,000 and allowable deductions of 2,500,000 for
the calendar year 2022. Its total assets of P150,000,000 as of December 31, 2022 per
Audited Financial Statements includes the land costing P50,000,000 and the building of
P25,000,000 in which the business entity is situated, with an aggregate amount of
P75,000,000 as Fixed Assets.

How much is the income tax due in 2022?

a. P60,000,000 c. P975,000
b. P780,000 d. P1,170,0000

“+ Answer: C

Solution:
Gross sales P14,000,000
Cost of sales (7,600,000)
Operating expenses (2,500,000)
Taxable Net Income P3,900,000
RCIT rate 25%
Income Tax Due ___ P975,000°

0 NOTE: The 20% RCIT rate for MSME isas applicable to foreign corporations.

28. Matatag Corporation, a domestic corporation and aretailer of goods has gross sales of
P14,000,000 with a cost of sales of P7,600,000 and allowable deductions of 2,500,000 for
the calendar year 2022. Its total assets of P150, 000,000 as of December 31, 2022 per
Audited Financial Statements includes the land costing P40,000,000 and the building of
P30,000,000 in which the business entity is situated, with an aggregate amount of
P70,000,000 as Fixed Assets. -

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Olapte a = apres

How much is the income tax due in 2022?

a. P60,000,000 c. P975,000
b. P780,000 d. P1,170,0000

“Answer: C
Solution:
Grosssales_ P14,000,000
Cost of sales (7,600,000)
Operating expenses (2,500,000)
Taxable Net Income P3,900,000
RCIT rate 25%
Income Tax Due P975,000

® — Although the net income of the company is not more than PSM, the company's assets
exceeded the threshold of P100M, thus, itis NOT classified as MSME.
Assets excluding land = P150M ~ P40M = P110M.

COMPUTATION OF RCIT BASED ON TRAIN LAW and CREATE LAW

(including transition period)

Use the following data for the next six (6) questions:
A domestic corporation has the following income and expenses for the year:
Phils. Abroad
Gross sales P100,000,000 P50,000,000
Cost of sales — P40,000,000 20,000,000
Operating expenses 30,000,000 ~ - 12,000,000

29. How much is the income tax due assuming the taxable year is 2019?
a. P12,000,000 c. P14,400,000
b. P13,200,000 d. P18,000,000

« Answer: C
Gross sales P150,000,000
Cost of sales (60,000,000)
Operating expenses (42,000,000)
Taxable Net Income P48,000,000
RCIT rate (TRAIN Law) 30%
Income Tax Due P14,400,000
~_
© — Domestic corporations are taxable on their income derived from all sources within and
- without the Philippines.

30. How much is the income tax due assuming the taxable year was 2020?
a. P12,000,000 c. P14,400,000
b. P13,200,000 d. P18,000,000

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“+ Answer: B

Solution:
TRAINLaw CREATE Law
Gross sales 5 P150, 000,000
Cost of sales (60,000,000)
Operating expenses (42,000,000)
Taxable Net Income P48,000,000
RCIT (CREATE Law):
Jan. to June (TRAIN):
x 30%
P48Mx G/12 | . 7,200,000
July to Dec. (CREATE):
P48M x 6/12 x 25% 6,000,000
Income Tax Due AE P13,200,000 a

NOTE:
© The income tax due during the transition period may also be computed as —
@ Income Tax Due= P48M x 27.5%**= P13,200,000
RCIT rate (transition period)= (30% + 25%) / 2 = 27.5%**

In the computation of the taxable income during the transition period, there
should be no regard to the dates of the transactions within the calendar year. The
" income and expenses for the year shall be considered eamed and spent equally
for each month or period (CREATE; RR 5-2021). In the case of corporations adopting .
the fiscal-year accounting period, the taxable income shall be computed without regard
to the specific date when specific sales, purchases and other transactions occur. Their
income and expenses for the fiscal year shall be deemed to have been eamed and
spent equally for each month of the period. The corporate income fax rate shall be
applied on the amount computed by multiplying the number of months covered by the
new rate within the fiscal year by the taxable income of the corporation for the period,
divided by twelve.

© The RCIT rate for domestic corporations under the CREATE law was reduced from 30%
to 25% beginning July 1, 2020. Moreover, if the domestic corporation is classified as
Micro Small and Medium Enterprises (MSME), a lower rate of 20% should be applied.

& The 20% RCIT rate for MSMEs under Section 27 of the Tax Code, as amended, shall
apply ONLY IF the domestic corporation is classified as MSME. A domestic corporation
is classified as MSME under the CREATE law if the following conditions are present:
£2) The corporation's net taxable income should not be more than R5,M; AND
£1) The assets of the corporation should not be more than R100M excluding
land on which the particular business entity's office, plant, and equipment
are situated during the taxable year for which the tax is imposed.

‘0 Inthe given problem, the nettaxable income of the Company was more than R5M, thus,
25% RCIT rate shall be used for the periods covered by CREATE law.

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314. How much is the income tax due assuming the taxable year is 2021?
a. P12,000,000_ . c. P14,400,000
b. P13,;200,000 d, P18,000,000
“ Answer: A :
Gross sales P150,000,000
Cost of sales (60,000,000)
Operating expenses ~ (42,000,000)
Taxable Net Income P48,000,000
RCIT rate (CREATE Law) an i 25%
Income Tax Due P12,000,000

32. How much is the income tax due assuming the taxable year is 2021 and the Company's
total assets amounted to P80 million only?
a. P9,600,000 - — ¢. P14,400,000
b. P12,000,000 d. P18,000,000

“ Answer: B
Gross sales P150,000,000
_ Cost of sales (60,000,000)
. Operating expenses (42,000,000)
Taxable Net Income P48,000,000
RCIT rate (CREATE Law) 25%
Income Tax Due ~~ P 12,000,000
© The revised RCIT rate of 25% for domestic corporations under CREATE Law shall be
applied since the Company's Net Income during the year amounted to P48M. The
domestic corporation is not classified as MSME.

33. How much is the income tax due assuming?

= The taxable year is 2021; and
. ‘The Corporation is a resident foreign corporation

a. P7,500,000 c. P14,400,000
b. P13,200,000 d. P18,000,000

“+ Answer: A
Philippines
Gross sales P100,000,000
Cost of sales (40,000,000)
Operating expenses (30,000,000)
Taxable Net Income P30,000,000
RCIT rate (CREATE Law) 25%
Income Tax Due P7,500,000
© Foreign corporations are taxable only net
on income derived from Philippine sources.
0 The 20% RCIT rate under CREATE Law for MSME is NOT applicable to foreign
corporations.

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34. How much is the income tax due assuming?

= The taxable year is 2021; .
= — The Corporation is a nonresident foreign corporation

a. P7,500,000 c. P14,4400,000
b. P13,200,000 d. P15,000,000

“> Answer:D ~
Gross sales — Phls. * : P100,000,000
-Costofsales—Phis. — . (40,000,000)
Operating expenses ~ Phls: not allowed
GROSS INCOME ~~60,000,000
RCIT rate (CREATE Law) . 25%
INCOME TAX DUE; FWT P15,000,000 —

© Beginning January 1, 2021, NRFCs are subject to Final Withholding Tax (FWT) of 25%
on their gross income derived from Philippine sources only.
’ § The 20% RCIT rate under CREATE Law for MSMEs is NOT ae to foreign
corporations (resident or nonresident).

35. CREATIVE Corporation, a domestic corporation, has the following |income and expenses
for 2022 taxable year:
1st Quarter ‘nd Quarter 3 Quarter 4th Quarter
Gross sales P1,000,000 P1,500,000 P2,500,000 , P5,000,000
Cost of sales P600,000 800,000 1,400,000 . 2,200,000
Operating expenses. - 200,000 500,000 600,000 700,000

Additional data:
» The company's assets amounted to P25,000,000.

How much is the income tax due?

a. P300,000 c. P600,000
b. P450,000 d. P825,000

“> Answer: C
Solution:
Gross sales - P10,000,000
Cost of sales (5,000,000)
Operating expenses (2,000,000)
Taxable Net Income P3,000,000
: RCIT rate 20%
Income Tax Due P600,000°

The 20% RCIT rate shall apply because the domestic corporation is classified as MSME
(net income is was not more than P5M and the company’s assets are not more than
-P100M).

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| 36. Using the same data in the immediately preceding number and assuming further that the
company is a resident foreign corporation, how much is the correct income tax due?
a. P300,000 c. P750,000
b. P450,000 d. P825,000

“+ Answer: C :
Gross sales P10,000,000
Cost of sales _ (5,000,000) »
Operating expenses (2,000,000)
~ Taxable Net Income P3,000,000
RCIT rate 25%
Income Tax Due ~~ P750,000-
® NOTE: The 20% RCIT rate shall apply only to a domestic corporations classified as
~. MSME. It is not applicable to foreign corporations (RFCs and NRFCs).

37. Adomestic corporation has the following income and expenses for 2022 taxable year:
Gross sales P20,000,000.
Cost of sales 10,000,000
_Operating expenses 3,800,000
Assets 48,0000,000

How much is the income tax due? .

a. P1,240,000 c. P1,860,000
b. P1,550,000 d. P3,000,000

“+ Answer: B
Solution:
Gross sales’ P20,000,000
Cost of sales (10,000,000)
Operating expenses (3,800,000)
Taxable Net Income P6,200,000
RCIT rate 25%
Income Tax Due P1,550,000

_ The applicable RCIT rate is 25% because although the assets of the company are not
, more than P100M, its net income exceeded the P5M threshold to be considered as
MSME.

38. ABC Corporation, a domestic corporation has the following income and expenses for 2022
taxable year: :
Gross sales P20,000,000
Cost of sales 10,000,000
Operating expenses * 6,500,000

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How much is the income tax due?

a. P600,000 c . P800,000
b. P700,000 d . P875,000

“+ Answer: D
Gross sales P20,000,000
Cost of sales (10,000,000)
Operating expenses (6,500,000)
Taxable Net Income P3,500,000
RCIT rate 25%
Income Tax Due P875,000

© Ifthe problem is silent as to whether the domestic corporation is MSME, it is the author's
humble opinion to use 25% RCIT rate. It must be emphasized that the 20% RCIT rate
shall be applied ONLY IF:
> The problem specifically provides that the corporation is classified as MSME; or
> Ifitis clear in the given problem that the domestic corporation's net income is not
= more than PSM AND the amount of its assets are not more than P100M, excluding
land on which the particular business entity's office, plant; and equipment are
situated during the taxable year for which the tax is imposed.

39. Hananiah Corporation, a corporation engaged in business in the Philippines and abroad
has the following data for 2022 taxable year:
Gross Income, Philippines P975,000
Expenses, Philippines 750,000
Gross Income, Malaysia 770,000
Expenses, Malaysia 630,000
Interest on bank deposit 25,000
Assets 15,000,000

Determine the income tax due assuming the corporation is:

Domestic Res. Foreign Corp. Non-resident Foreign Corp.
a. P116,800 P72,000 P320,000
b. P109,500 P67,500 P300,000
c. P73,000 P56,250 P250,000
d. P91,250 P56,250 P250,000

“+ Answer:C :
Domestic RFC NRFEC
Gross Income, Philippines P975,000 P975,000, P975,000
Expenses, Philippines (750,000) (750,000) -
Gross Income, Malaysia 770,000 - -
Expenses, Malaysia (630,000) - :
_ Interest on bank deposit - : 25,000
- Taxable income 365,000 225,000 P1,000,000
Tax Rate | 20% 25% 25%
Tax Due : P73,000 _ P56,250 P250,000_

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The domestic corporation is classified as MSME. Consequently, the applicable RCIT

rate under CREATE law shall be 20%.

© 20% RCIT rate for MSMEs is not applicable to foreign corporations.

© Ordinary and passive incomes received by NRFCs are subject to FWT, unless exempt
under the law, such as interest income derived from FCDS deposits.

© The interest income on bank deposit is subject to 20% FWT if received by a DC or RFC
and shall not be included in the computation of RCIT.

© — NRFCs are subject to 25% FWT on their income derived from all sources within the
Philippines including passive income such as interest income on bank deposit.

TOR CeO ore :

40. Which of the following statements is correct?
|. | Aminimum corporate income tax (MCIT) of 1% of gross income from July 1, 2020 to
June 30, 2023 and 2% beginning July 1, 2023 is imposed upon any domestic
corporation and resident foreign corporation beginning on the 4* taxable year
immediately following the taxable year in which such eaxporation: commenced its
business operations.
ll. MCIT shall_be imposed whenever such corporation has zero or negative taxable
income, or when the amount of MCIT is greater than normal income tax due from
such corporation.
ll. | The computation and the payment of MCIT, shall likewise apply at the time of filing
the quarterly corporate income tax.
a. | and Il only c. |, ll and Ill
b. ll and Ill only d. None of the above

“* Answer: C
CREATE LAW:
Under the CREATE Law, the MCIT rate was reduced to 1% from July 1, 2020 to June 30, 2023.
The usual MCIT rate of 2% shall be applied again beginning July 1, 2023.

Summary of MCIT Rates:

Period MCIT Rate
On or before June 30, 2020 : 2%
July 1, 2020 to June 30, 2023 : 1%
Beginning July 1, 2023 2%

41. A domestic corporation was registered with the BIR in 2018. What year would the first
MCIT will be imposed on such corporation?
a. 2020 . c. 2022
b. 2021 ; d. 2023

“+ Answer: C
0 Basis: RMC 62-2022

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42. MCIT shall apply to which of the following resident foreign corporations during 2022 taxable
year:
|. Intemational carrier
Il. | Regional operating headquarters
lll. Nonresident cinematographic film owners

a. | only c. |, Il, and Ill

b. Il and Ill only d. none of the above

“+ Answer: D
MCIT is NOT applicable to:
© Special Corporations
co Tax exempt corporations
© Corporations subject to special or other income tax regime like BOI and PEZA
registered entities
o — Nonresident foreign corporations.

MCIT is applicable to domestic corporations and resident foreign corporations

including:
o ROHQs. Under CREATE law, ROHQs are no longer classified as. special
corporations. They are now subject to 25% RCIT beginning January 1, 2022.
Consequently, they are also subject to MCIT beginning January 1, 2022.

SIMPLE GUIDE: If the taxpayer is not subject to RCIT on its ordinary income (25% or
20%, as the case may be under the CREATE Law), MCIT iis not applicable because
MCIT is in lieu of RCIT.

43. The minimum corporate income tax is imposed on:

a. Proprietary educational institutions
~b. General professional partnerships
c. Business partnerships
d. All of the above

“+ Answer: C
Proprietary educational institutions are generally classified as special corporation subject
to income tax rates lower.than the RCIT (provided that unrelated income is not higher
than related income), hence, not subject to MCIT.
0 GPPs are exempt from income tax. Consequently, MCIT is not applicable.

44. Jose, Aquino and Ongpin are classmates during their college days. After five (5) years
from their admission to the accountancy profession, they have decided to form a
partnership whose sole purpose is the joint exercise of their.common profession. Five (5)
. years into the partnership, they have decided to offer CPA review classes to aspiring CPAs
and they did so via JAO CPA Review Incorporated, a corporation whose shares are owned
by them divided equally. Which of the following conclusions is correct?
a. The professional fees earned by the firm shall be exempt from income tax to the
partnership. However, the respective share of each partner in the net distributable
income shall be subjected to 10% final tax on dividend |income,

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b. JAO CPA Review Incorporated will be subjected to income tax on its taxable income
whereby the applicable income tax rate shall be 10%.
c. The Firm and the individual partners shall be exempt from income tax.
d, Assuming JAO CPA Review Incorporated is already in its fourth year of operation, it
may be subjected to the minimum corporate income tax (MCIT).

«+ Answer: D
© “A’is incorrect. The partnership described in letter “a” is a GPP. A GPP is not taxable
as a corporation. Share in income from such partnership is not treated as dividend
income. Thus, not subject to 10% FWT. The applicable tax shall be CWT of either 10%
or 15%. ©
0 “B" is incorrect. CPA Review Schools are not classified as proprietary educational
institutions. The applicable tax rate shall be either 25% or 20%, as the case may be,
under CREATE law.
© “Cis incorrect. The Firm (GPP) is tax exempt but not the partners.
© “D” is correct. Since the review school is treated as an ordinary corporation subject to
RCIT. Thus, it shall also be subject to MCIT.

45, The minimum corporate income tax (MCIT) does not apply to a corporation, if
a. Imposition was suspended by the Secretary of Finance due to a corporation's heavy
losses arising from prolonged labor. dispute
b. Corporation is in its initial year of operation
c. Corporation is exempt from income tax by virtue of tax holidays granted to it by
Investment Promotion Agency (IPA)
d. All ofthe above

** Answer: D

46. One of the following is not accepted basis for relief from the MCIT:
a. Prolonged labor dispute
b. “Force majeure problems
c. Legitimate business reverses
d. Law suits filed by the company
2,
“+ Answer: D

47. A domestic corporation is generally liable for Minimum Corporate Income Tax. However,
the Secretary of Finance may suspend the imposition of MCIT on any corporation which
suffers losses on account of any of the following, except:
a. prolonged labor disputes
’ Db. mismanagement
¢. force majeure
d. legitimate business reverses
o,
“+ Answer: B

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“48. Substantial losses from a “prolonged labor dispute’ mean

a. Losses arising from a strike staged by the employees which lasted for more than six
(6) months within a taxable period.
b. The strike resulted to temporary shutdown of business operations.
Both of the above
a9

None of the above

“- Answer: C

49.~ “Force majeure” includes

a. Acause due to irresistible force as by “Act of God”.
b. Lighting, earthquake, storm, flood and the like.
c. Armed conflicts like war or insurgency.
d. Allofthe above.

“> Answer: D

‘50. If the taxpayer is a seller of services, which of the following shall not form part of its cost of
services?
a. Salaries and supplies
b. Employee benefits
c. Depreciation and rental expenses
d. Interest expense

“* Answer: D
> “D"shall form part of cost of services if the taxpayer is a bank and/or financial institution.

51. The following information were taken from the records of ABC Inc. (domestic corporation)
in 2023, its 4% year of operations following the commencement of the company’s
operations:
Gross profit from sales ° P31,000,000
Capital gain on sale directly to buyer of shares in a domestic corporation 1,000,000
Dividend received from:
Domestic corporation 200,000
Resident foreign corporation (the ratio of gross income in the Philippines 100,000
over gross income from all sources for the past 3 years is 80%)
Interest on: | 200,000
Bank deposit
Trade receivable 500,000
Business expenses 21,000,000.
Income tax withheld 1,150,000
Quarterly income tax payments . 600,000
Excess income tax payment - 2022 100,000
Assets 125,000,000
How much is the income tax payable in 2023?
a. P330,000 c. P800,000
b. P775,000 d. P3,180,000

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- Answer: B

Gross profit from sales P31,000,000

Dividend income from a DC exempt
Dividend income from RFC ys exempt
Interest income on trade receivable 500,000
Total Gross Income . P31,500,000
Less: Business expenses (21,000,000)
Taxable Net Income P10,500,000
RCIT= P10,500,000 x 25% P2,625,000
MCIT = P31,500,000 x P472,500
Income Tax Due (higher) P2,625,000
Less:
Quarterly tax payments (600,000)
Income tax withheld (1,150,000)
Excess payments in 202 (100,000)
Income Tax Payable P775,000

Dividend income received by DC from RFC (RMC 62-2021)

© The tax treatment of dividends received by a domestic corporation from RFC will depend on the
sources of income of the RFC. Under Section 42(A)(2)(b) of the Tax Code, as amended, dividend
from a foreign corporation shall be treated as income derived from sources WITHIN THE
PHILIPPINES UNLESS less than 50% of the gross income of the foreign corporation for the three
year period ending with the close of its taxable year preceding the declaration of such dividends (or
for such part of the period as the corporation has been in existence) was derived from sources within
the Philippines.

o The ratio of gross income in the Philippines over gross income from all sources for the past 3 years, as provided
in the problem was 80%. Consequently, the entire dividend received from the RFC shall be considered income
derived from Philippine sources as explained by RMC 62-2021 issued on May 17, 2021:

MCIT RATE DURING THE TRANSITION PERIOD:

MCIT RATES:

From July 1, 20201o June 30, 2023: 1%

Beginning July 1, 2023 2%
Average rate for 2023 = [(1% + 2%) /2] 1.5%

In the computation of the taxable income during the transition period, there should be no regard
to the dates of the transactions within the calendar year. The income and expenses for the year shall
be considered eamed and spent equally for each month or period (CREATE; RR 5-2021). In the
case of corporations adopting the fiscal-year accounting period, the taxable income shall be computed
without regard to the specific date when specific sales, purchases and other transactions occur. Their
income and expenses for the fiscal year shall be deemed to have been eamed and spent equally for each
month of the period. The corporate income tax rate shall be applied on the amount computed by multiplying
the number of months covered by the new rale within the fiscal year by the taxable income of the
corporation for the period, divided by twelve.

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 Chapter A= Onipirating
Use thefollowin data for the next two (2) questions:
ABC Inc., a domestic corporation registered with BIR since 2010, has the following data for
’ 2023 taxable year:
Gross receipts P11,500,000
Discounts and allowances 2,500,000
Salaries of personnel directly involved in rendering service 3,000,000
Salaries of administrative personnel 1,000,000
Fees of consultants directly involved in rendering service _ 500,000
Rental of equipment used in rendering service 700,000
Rental of office space for use of administrative personnel 500,000 ,
Other operating expenses 4,200,000
Assets 35,000,000

52. How much was the income tax due and payable in 2023?
a. PO c. P72,000
b. P48,000 d. P96,000

*- Answer: C
Gross receipts P11,500,000
Discounts and allowances s (2,500,000)
Salaries of personnel directly involved in rendering service (3,000,000)
Fees of consultants directly involved in rendering service (500,000)
Rental of equipment used in rendering service 00,000) _
Gross Income P4,800,000
Operating expenses (4,200,000)
Salaries of administrative personnel (1,000,000)
Rental expenses (500,000)_-
Taxable Net Income (loss) (P900,000)

INCOME TAX:
RCIT PO
MCIT 2023 (P4,800,000 x 1.5%) ~ P72,000
Income Tax Due / Payable - 2023 P72,000

53. Continuing the preceding number, the Company provided the following data in 2024:
Gross receipts P120,000,000
Salaries of personnel directly involved in rendering service 38,000,000
Salaries of administrative personnel 12,000,000
Fees of consultants directly involved in rendering service 16,000,000
Rental of equipment used in rendering service 15,000,000
Rental of office space for use of administrative personnel 5,000,000
Other operating expenses 23,000,000

How much was the income tax due and payable in 2024?
a, P48,000 c. P2,525,000
b. P2,453,000 d. P2,750,000

** Answer: B

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Solution: *
Gross receipts P120,000,000
Salaries of personnel directly involved in rendering service (38,000,000)
Fees of consultants directly involved in rendering service (16,000,000)
Rental of equipment used in rendering service (15,000,000)
Gross Income 2024 P51,000,000
Other operating expenses (23,000,000)
Salaries of administrative personnel (12,000,000)
Rental of office space (5,000,000)
NOLCO-2023° (900,000)
Taxable Net Income (loss) 2024 Ht P10,100,000

INCOME TAX:
RCIT (P 10,100,000 x 25%) - P2,525,000
MCIT 2024 (P51,000,000 x 2%) P1,020,000
Income Tax Due (Higher) - P2,525,000
Less: Excess MCIT carry over from 2023 (72,000)
income Tax Payable - 2024 P2,453,000

; > Use 25% RCIT rate because although the assets of the Company as provided in
* the immediately preceding number is not more than P100M, the net income for the
year exceeded the PSM threshold for MSMEs.

au aN ea eas (tte) Rese) >

The net operating loss of a business or enterprise for any taxable year shall be carried
over as a deduction from gross income for the next three (3) consecutive taxable years
immediately following the year of such loss. However, under RA 11494, also known as
Bayanihan Act Il, the NOLCO of a business or enterprise for taxable years 2020 and
2021 shall be carried over as a deduction’ from gross income for the next five (5)
consecutive taxable years immediately following the year of loss.

GUIDE: = . :
Taxable Year NOLCO was incurred Deductible within |
Prior to 2020 3 consecutive years |
2020 and 2021 5 consecutive years |
Beginning 2022 3 consecutive years |

» Excess MCIT camy over. Any excess of the MCIT over RCIT shall be carried forward
and credited against the RCIT for the three (3) immediately succeeding taxable years.

54. A domestic corporation in its 8 year of operations as of January 1, 2024, classified as

MSME under CREATE law, has the following data:
2024 2025
Sales 17,000,000 23,000,000
Cost of Sales 10,500,000 14,250,000
Operating Expenses 6,750,000 4,800,000

How much is the income tax payable for 2024?

a. 65,000 c. P350,000
b. P430,000 d, nil

“+ Answer: B

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55. The income tax payable in 2025 was:

a. P87,500 - c. P740,000
b. P610,000 d. P1,110,000

“> Answer: B
2024 2025
‘Sales P17,000,000 23,000,000
Cost of Sales
Gross Income
_ (10,500,000)
P6,500,000
(14,250,000)
P8,750,000
Operating expenses (6,750,000) (4,800,000)
NOLCO - 2024 - (250,000)
Taxable Net Income (Loss)N 2025 (P250,000) _P.3,700,000
RCIT:
2024: - nil- ; loss E> PO
2025: P3,700,000 x 20% P740,000

MCIT
2024: P6,500,000 x 2% P130,000
2025: P8,750,000 x 2% P175,000

Income Tax Due (Higher) P130,000 P740,000.

Less: Excess MCIT cary-over. - (130,000)
Income Tax Payable P130,000 P610,000

56. A domestic corporation registered in 1998, provided the following data:

2021 2022 2023 2024

Gross Sales P25,000,000 32,000,000 29,000,000 35,000,000
Cost of goods sold 18,000,000 20,000,000 19,000,000 18,000,000
Business expenses 7,200,000 11,900,000 10,250,000 9,000,000

Additional information:

Remaining Net Operating Loss (NOL) from 2018: P50,000

NOL incurred in 2020: P180,000
Excess MCIT over RCIT in 2018: 200,000 .
Excess MCIT over RCIT in 2020: 80,000
Assets: P125,000,000

The income tax payable in 2024 should be: -

a. P150,000 c. P617,500
b. 277,500 d. P1,527,500

“+ Answer: D

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Chapter += Ow. Or ALLONS

Solution:
2021 2022 2023 2024
Gross Sales P25,000,000 . P32,000,000 P29,000,000 35,000,000
Cost of goods sold (18,000,000) (20,000,000) (19,000,000) - (18,000,000)
Gross Income P7,000,000 P12,000,000 P10,000,000 17,000,000
Business expenses ( ee (11,900,000) (10,250,000) (9,000,000)
NOLCO 2018
NOLCO 2020 NA (100,000) - ___ (80,000)**
NOLCO 2021 - - (200,000)**
NOLCO 2023 (250,000)
Net Income (Loss) (P200,000) PO _(P250,000) _P7,470,000
\

RCIT@ 25% PO PO PO 1,867,500

MCIT 2021 and 2022

= 1% of Gl P70,000 P120,000

MCIT 2023
«1.5% ofG 150,000

MCIT 2024
= 2% of Gl 340,000

Income Tax Due P70,000 P120,000 ***P150,000 1,867,500

(higher amount) «
Less: Excess MCIT CO
2018 prescribed
. - - prescribed
2020
2021 r - (70,000)
2022 - (120,000)
2023 ; (150,000)
Income Tax Payable P70,000 P120,000 P15,000 _—P1,527,500

NOLCO

The NOL from 2018 already prescribed in 2022. NOL incurred prior to 2020
and 2021 are deductible from gross income for the next three consecutive
years only. As of 2021, the remaining NOL of P50,000 from 2018 is still within
the 3-year period to claim NOL as NOLCO. However, NOLCO is deductible
only from the gross income of the current taxable year provided the operations
during the year resulted to income. Since the Company incurred loss in 2021,
the remaining NOL from 2018 and the NOL from the immediately preceding
year (2020) should not be allowed as deduction in 2021.

® Under the Bayanihan Act ll, NOL from 2020 and 2021 may becartied over
for the next five (5) consecutive years.

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hapter eh = rages

RR 25-2020

SECTION 4. Five (5) Year Period of Entitlement to Deduct Net Operating Loss
- incurred for Taxable Years 2020 and 2021. - Unless otherwise disqualified
from claiming the deduction, the business or enterprise which incurred net
operating loss for taxable years 2020 and 2021 shall be allowed to carry over
_ the same as a deduction from its gross income for the next five (5) consecutive
taxable years immediately following the year of such loss. The net operating
loss for said taxable years may be carried over as a deduction even after the
expiration of RA No. 11494 (also known as Bayanihan Act Il) provided the
same are claimed within the next five (5) consecutive taxable years
immediately following the year of such loss.

NOLCO incurred beginning 2022 may be carried over for the next three (3)
consecutive years.

NOLCO shall be availed on a first in first out basis (RR 14-2001).

GUIDE:

Taxable Year NOL was incurred Deductible as NOLCO within

Prior to 2020 3 consecutive years
2020 and 2021 5 consecutive years
Beginning 2022 3 consecutive years ‘

**1_5 MCIT rate for 2023 - Transition Period

0 The 1% MCIT rate is applicable only from July 1, 2020 up to June 30, 2023 in
consideration of the COVID-19 pandemic. The usual MCIT rate of 2% shall
be applied again beginning July 1, 2023. Under the CREATE Law, assume
that the income during the transition period (2023) were realized evenly during
the year. Hence, the MCIT rate to be used in 2023 shall be the average rate
of 1.5%.

Summary of MCIT.Rates:

Period MCIT Rate

On or before June 30, 2020 2%
July 1, 2020 to June 30, 2023 i 1%
Beginning July 1, 2023 2%
Average MCIT rate during transition period: 1.5%
2020 and 2023 taxable years)

Excess MCIT

0 Any excess of the MCIT over RCIT shall be carried forward and credited against
the RCIT for the three (3) immediately succeeding taxable years.
0 Carry over of Excess MCIT is applicable only if RCIT is higher than MCIT. Thus,
the remaining excess MCIT over RCIT in 2018 shall not be carried over in 2021.
> The excess MCIT over RCIT in 2018 already prescribed in 2022

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 f Chapter 4 ee Cor Oratlous

eae ALLL
The Next five (5) questions are based on the following:

Le Bron Corporation has the following information for 2024 taxable year:

QUARTER = RCIT MCIT CWT

First 200,000 160,000" 40,000
Second 240,000 500,000 60,000
Third 500,000 150,000 80,000
Fourth 300,000 200,000 70,000

Additional Information:
» — Excess MCIT from 2023: £60,000:
» — Excess tax credits from 2023: P20,000.

57. How much was the income tax payable for the first quarter?
a. 200,000" c. P120,000
b. 160,000 d. P80,000

“+ Answer: D

58. How much was the income tax payable for the second quarter? .
‘a. 660,000 c. P200,000
b. 460,00 d. P160,000

“ Answer: B

59. How much was the income tax payable for the third quarter?
a. 860,000 c. P600,000
b. 120,000 d. P140,000

“Answer: D

60. How much was the annual income tax payable?

a. 1,260,000 c. P230,000
b. 390,000 d, P930,000

“ Answer: C

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 Olepter 4 ~ Corborations

Solution:

Qi Q2 Q3 Annual
RCIT (cumulative) P200,000 P440,000 940,000 1,240,000
MCIT (cumulative) P160,000 P660,000 810,000 1,010,000

Income Tax Due (higher) P200,000 660,000 940,000 P1,240,000

CWT (cumulative) _ (40,000) (100,000) (180,000) (250,000)
Excess tax credits 2023 (20,000) (20,000) (20,000) (20,000)
Excess MCIT 2023 (60,000) - (60,000) —. (60,000)
2024 Quarterly Payments (cumulative) - (80,000) (540,000) (680,000)
Income Tax Payable 2024 P80,000 P460,000 P140,000 P230,000

NOTE:
© Excess MCIT carry-over from prior period is allowed only if RCIT is higher than MCIT.
Carry-over of excess MCIT from prior quarter of the current year is not allowed.

61. Using the same data in the preceding problem except that the MCIT during the 4" Quarter
was P500,000. How much was the annual income tax payable?
a. P330,000 c. P380,000
b. 1,310,000 d. P360,000

“> Answer: D
Annual
RCIT (cumulative) P1,240,000
MCIT (cumulative) P1,310,000

: Income Tax Due (higher-MCIT) P1,310,000

CWT (cumulative) (250,000)
Excess tax credits 2023 (20,000)
Excess MCIT 2023. -
2024 Quarterly Payments (cumulative) _(680,000)
Income Tax Payable ___P360,000

© NOTE: Excess MCIT carry-over from prior period is allowed only if RCIT is higher than MCIT.

62. Delta Corporation is a resident foreign corporation operating in the Philippines since
2010. The Company's income and expenses in 2024 are shown below:
Philippines Hongkong
Gross income P20,000;000 P30,000,000
Business expenses 19,500,000 21,000,000
Interest income from dollar deposit, 500,000
Yield on money market placement 1,000,000

How much is the income tax payable in 2024?

a.. P125,000 c. P400,000
b. 200,000 d. P450,000

Answer: C

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Solution:

Gross income (Phils.) P20,000,000

Business expenses (Phils.) (19,600,000)
Taxable Net Income P500,000

INCOME TAX DUE:

RCIT (P500,000 x 25%) P125,000
MCIT in 2024 (P20M x 2%) 400,000
Income Tax Payable (higher-MCIT) P400,000

NOTE:
© The interest income derived from FCDS deposit is subject to FWT.
MCIT is also applicable to RFCs. ;
© MCIT rate of 2% shall be applicable beginning July 1, 2023.
-RCIT rate of 20% for MSME is NOT applicable to foreign corporations.

INCOME TAX DUE OF JOINT VENTURES , :

Use the following data for the next three (3) questions:
ABC Corporation and DEF Incorporated formed MATATAG Joint Venture with total assets of
P50,000,000. They agreed to share profit or loss in the ratio of 70% and 30%, respectively.
ABC and DEF'’s assets are P120M and P50M, respectively. The results of operations of the
joint venture as well as the co-venturers in 2024 were as follows:

Joint Venture © ABC Co. DEF Co.

Gross Income P50,000,000 30,000,000 20,000,000
OPEX . 30,000,000 20,000,000 - 15,000,000 —
63. How much is the income tax due/payable of Matatag JOINT VENTURE in 2024?
a. P1,500,000 c. P5,500,000
b. P5,000,000 d. P6,000,000

“+ Answer: B
Joint Venture ABC Co. DEF Co.
Gross Income P50,000,000 30,000,000 20,000,000
OPEX (30,000,000) (20,000,000) (15,000,000)_
Taxable Net Income P20,000,000 10,000,000 — P5,000,000
RCIT rate 25% 25%
RCIT rate for MSME 20%
Income Tax Due - 2022 P5,000,000 P2,500,000 _P1,000,000

64. How much is the total income tax due/payable of ABC Co. in 2024?
a. P1,500,000 * ¢, P3,000,000
b. P2,500,000 d. P6,000,000

“ Answer: B

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65. Assume the joint venture is tax exempt, how much is the income tax due/payable of ABC
Co. in 2024?
a. PO c. P6,000,000
b. P2,750,000 d.. P7,200,000

' *¢ Answer: C
Joint Venture ABC Co. DEF Co,
Gross Income P50,000,000 —P30,000,000 — P20,000,000
OPEX (30,000,000) (20,000,000) (15,000,000)
Add: Share in the NI of the JV _
= P20M**x 70% 14,000,000
= ~ P20M** x 30% : 6,000,000
TAXABLE NET INCOME * P20,000,000°* P24,000,000. P11,000,000

RCIT rate Exempt 25% 25%

Income Tax Due for 2020 PO P6,000,000 2,750,000
© ABC's share in the income of a tax exempt joint venture is treated as ordinary
income, thus, subject to RCIT. The RCIT rate is 25% because its taxable income
exceeded the P5M threshold for MSME.
© MCITisnot yet applicable for the joint venture in 2024.

PASSIVE INCOMES SUBJECT TO FWTs.

66. Statement 1: Passive incomes are subject to separate and final tax rates.
Statement 2: Passive incomes are included in the computation of taxable net income
from business operations of a corporation. ;
A. B. C. D.
Statement 1 True False. True False
Statement 2 True False False — True

“* Answer: C ,
Statement 2 is False. The liability of the taxpayer for passive incomes subjected to final
withholding taxes is already RO because the taxes withheld already constitute final and full
payment of the applicable tax. Therefore, such income shall not be included anymore in the
determination of ‘taxable income” subject to regular corporate income tax. Consequently, such
income shall be excluded in the ITR of the corporation.

67. The following passive income received by a domestic corporation shall be subject to 20%
final withholding tax, except:
a. _ Interest income from peso bank deposit
b. Yield from deposit substitutes
c. Dividend income from another domestic corporation
d. Royalties

* Answer: C
o

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 ae
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: . ed Olapter 4 - Corborations

GUIDE: DIVIDEND INCOME

DIVIDENDS INCOME
® FROMDC Exempt Exempt Without tax sparing: 25%
With tax sparing. 15%*
0 FROM FOREIGN Corporation a
IF SITUS of the Dividend is:
= From within the Philippines Exempt RCIT FWT
(Philippine-sourced dividend) '
* From without the Philippines Maybe Non-taxable Non-taxable
(Foreign-sourced dividend) **** _ Exempt
NOTE: coe .
* All other dividends received but not illustrated in the table above shall be subject to RCIT if
received by a DC or RFC.

68. Upon effectivity of CREATE law, which of the following dividend is subject to RCIT rate of
25%?
a. Dividend income received by a domestic corporation from another domestic
corporation
b. Dividend income received by a domestic corporation. from resident foreign
corporation
c. Dividend income received by a resident foreign corporation from another resident
foreign corporation
d. Allofthe above

“> Answer: C

69. Upon effectivity of CREATE law, which of the following dividend may be exempt from
income tax? .
a. Dividend income received by a resident foreign corporation from another resident
foreign corporation. :
b. Dividend income received by a domestic corporation from nonresident foreign
corporation
c. Dividend income received by a nonresident foreign corporation from resident foreign
corporation -
d. Allof the above

“+ Answer: B

70. Dividend income received by a domestic corporation from a nonresident foreign

corporation may be exempt from income tax, provided:
a. Thedividends actually received or remitted into the Philippines are reinvested in the
business operations of the domestic corporation within the next taxable year from
the time the foreign-source dividends were received or remitted;
b. The dividends received shall only be used to fund the working capital requirements,
capital expenditures, dividend payments, investment in domestic subsidiaries, and
infrastructure project; and

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c. The domestic corporation holds directly at least twenty percent (20%) in value of the
outstanding shares of the foreign corporation and has held the shareholdings
uninterruptedly for a minimum of two (2) years at the time of the dividends
distribution. In case the foreign corporation has been in existence for less than two
(2) years at the time of dividends distribution, then the domestic corporation must
have continuously held directly at least twenty percent (20%) in-value of the foreign
corporation's outstanding shares during the entire existence of the corporation.
d. Allof the above

“- Answer: D
© Absent any one of the above conditions, the foreign-sourced dividends shall be
considered as taxable income of the domestic corporation in the year of actual receipt or
remittance, subject to surcharges, interest, and penalties, as applicable. This rule shall
likewise apply to dividends received by a domestic corporation from RFC if the situs of
such dividend is considered foreign-sourced (RMC 62-2021 issued on May 17, 2021).

71. Interest income on bank deposit or investment with maturity period of more than five (5)
years received by a corporation in 2023 taxable yearis subject to:
Domestic Res. Foreign Corp. _ Non-resident Foreign Corp.
a. 20% 25% 25%
b. Exempt _ Exempt Exempt
C 20% 20% Exempt
d. 20% Exempt Exempt

“Answer: A
© The exemption of interest income from long-term bank deposit or investment in the case of
individual taxpayers is not applicable to corporate taxpayers and NRA-NETB.

72. On January 1, 2020, Ms. D. Nagkulang invested P1,000,000 to BDO's 5-year, tax-free time
deposit. The long-term deposit pays 10% annual interest every January 1. In need of cash,
she pre-terminated her investment on July 1, 2023. How much is the final tax due in 2023?
a. P6,000 c. P17,500
b. P12,000 d. P42,000

“ Answer: D
fQ ~FWT=P1Mx 10% x 3.5 years x 12% tax rate on pre-termination = P42,000

In case of pre-termination of long-term bank

deposit or investment by an individual taxpayer,
the tax rate depending on the holding period shall
be:
= — 5 years or more Exempt Exempt 25%
= — 4years to less than 5 years 5% 5% 25%
s 3 years to less than 4 years 12% 12% 25%
* Less than 3 years 20% 20% 25%

73. Assuming the same information in the preceding number, except that the investment was
made by a,domestic corporation, how much final tax is withheld in the year of pre-
termination?

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 Chapter 4+ - Cur OrULLOUS

a. P2,500 ¢c. P10,000

b, P6000 d. P12,000

“+ . Answer: C
fQ ~FWI=P1Mx 10% x 6/12 x 20% = 210,000.
2 The FWT will be computed on a yearly basis, not cumulative.
(The investment is not under the name of an individual taxpayer, hence, not subject to rules on
pre-termination.

74, Interest income received by corporations from their deposit under the expanded foreign
currency deposit system (FCDS) prior to the effectivity of CREATE law is subject to FWT.
rate of:
DC RFC NRFC
a. 20% 20% 20%
b 7Th% Th% Exempt
Cc. 15% 15% Exempt
d. 15% 7TA% Exempt

“ Answer: D
0 Under the TRAIN Law, the FWT rate for RFCs on their interest income from FCDS deposit
was not amended. The old rate of 7.5% was retained under the TRAIN Law.
© FWTon interest income eamed from FCDS deposit is not applicable fo nonresident
taxpayers like NRFC. por

75. Interest income received by corporations from their deposit under the expanded foreign
currency deposit system (FCDS) upon the effectivity of CREATE law is subject to FWT
rate of:
DC . RFC NRFC
a. 20% 20% 20%
b. 7% 7% Exempt
Cc. 15% 15% Exempt
d. 15% TA Exempt

“¢ Answer: C
— Under CREATE Law, a uniform FWT rate of 15% is applicable to interest income derived by
resident taxpayers from their FCDS deposits.

76. Royalty income received by a corporation prior to the effectivity of CREATE is subject to
FWT of:
DC RFC NRFC
a. 20% 20% 30%
b. Th% 7% Exempt
C, 15% 15% Exempt
d. 15% 7%% Exempt

“+ Answer: A
% — Royalty income, if silent, is assumed to be a passive income subject to FWT if derived from
- Philippine sources. However, if the royalty income was derived in the active pursuit and

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\ : performance of the corporation's primary purpose, such income shall be treated as ordinary
or regular income subject to RCIT or basic tax (BIR Ruling DA-351-2003).
© Allincome derived by NRFCs in the Philippines, unless exempt or subject to capital gains tax,
‘Shall be Subject to FWT rate of 30% prior to the effectivity of CREATE.

77. Royalty income received by a corporation upon the effectivity of CREATE is subject to:
DC REC NRFC
a. 20% 20% 30%
b. TA% 7T%% Exempt
C. 20% 20% 25%
d. 15% TA% Exempt

“+ Answer: C
® —Royalty income, if silent, is assumed to be ‘a passive income subject to FWT if derived
from Philippine sources.. However, if the royalty income was derived in the active pursuit
and performance of the corporation's primary purpose, such income shall be treated as
ordinary or regular income subject to RCIT or basic tax (BIR Ruling DA-351-2003).
0 _ Allincome derived by NRFCs in the Philippines, unless exempt or subject to capital gains
tax, shall be subject to FWT rate of 25% beginning January 1, 2021.

78. Royalty income from books received by a eopOTEN prior to the effectivity of CREATE is
subject to FWT rate of:
DC RFC NRFC
a 10% 10% ~ 30%
b. 20% 20% 30%
C. 15% 15% . Exempt
d 15% 72% Exempt

“+ Answer: B
The ten percent (10%) tax rate on royalty from books and literary works for individual
taxpayers is not applicable to corporations.

79. Royalty income from books received by a corporation upon the effectivity of CREATE
law is subject to FWT rate of:
DC RFC NRFC
a. 10% 10% 30%
*b. 20% 20% 30%
C. 20% 20% 25%
d. 15% 74% Exempt

“+ Answer: C

80. During 2023, a domestic corporation derived the following items of revenues:
Gross receipts from a trading business, P500,000
MmOOD>

Interests from money placements in the banks, P30,000

Dividends from its stock investments in domestic corporations, P20,000
Gains from stock transactions through the Philippine Stock Exchange, P50,000
Proceeds under an insurance policy oni the lost of goods, P100,000

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How much should the corporation report as taxable income?

a, P500,000 c. P600,000
b. P550,000 d. P650,000

“> Answer: A

“Taxable income” generally means income not subject to FWT on passive income nor CGT.
© © Item Bis a passive income subject to 20% FWT |
%_ Item Cisa dividend income received from another DC, hence, tax-exempt (inter-corporate
dividend).
© — Item Disnot subject to income tax, but to Percentage Tax of 6/10 of 1% (TRAIN Law) of
gross selling price under Section 127(A) of the tax code, as amended.
© — Item Dis a compensation for lost of goods. It is a return of investment or capital, thus, not
subject to income tax. ,

81. RLI Corporation, a domestic corporation, owns twenty percent (20%) of the outstanding
shares of USA Corporation, a non-resident foreign corporation (NRFC) since August 1,
2016. On June 30, 2022 it received dividends amounting to P1,000,000 from the said
NRFC. The said dividend has not been used until January 13, 2024. The dividend income
should be:
a. Exempt from income tax
b. Subject to final withholding tax of 20%
C. Declared as taxable income for calendar year 2022, subject to surcharge, interest,
and penalty, since it was not utilized within the next aiid year, which is in 2023.
d. None of the above

oo Answer: C; Basis: Illustrations from RR 5-2021

82. RSDV Corporation, a domestic corporation, owns twenty percent (20%) of the outstanding
shares of UK Corporation, a non-resident foreign corporation (NRFC), since August 1,
2016. On May 1, 2022, it received dividends amounting to P1,000,000 from the said NRFC.
On September 1, 2023, RSDV Corporation utilized P800,000 for its dividend payments.
On January 1, 2024, it utilized the remaining P200,000 for its working capital requirements.
Which of the following is the correct treatment of the dividend income
i received?
a. P800,000 shall be treated as tax-exempt since this was properly utilized within 2023
while the P200,000 shall be declared as taxable income for the taxable year 2022,
subject to surcharge, interest, and penalty, since the utilization is not within the
following taxable year, which is in 20223
P200,000 shall be treated as tax-exempt while the P800,000 shall be declared as
taxable income for the taxable year 2022, subject to surcharge, interest, and penalty,
since the utilization is not within the following taxable year, which is in 2023.
The P1,000,000 dividend shall be exempt from tax
None of the above

«* Answer: A; — Basis: Illustrations from RR 5-2021

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83. BKTD Corporation, a domestic corporation, holds 20% of the stocks of EU Corporation, a
non-resident foreign corporation. BKTD is a wholly-owned subsidiary of GKCM
Corporation, a non-resident foreign corporation. BKTD's holding in EU Corporation started
in 2018, and the holding period is uninterrupted, On July 1, 2021, BKTD Corporation
received dividends from EU Corporation amounting to P2,000,000 and subsequently paid
out dividends on December 31, 2022, in the amount of P1,500,000. The remaining amount
of P500,000 has not been used in any qualified activity for exempt foreign-sourced
dividends. Which of the following statements is correct?
a. Thé P500,000 dividend shall be exempt from tax
b. The P2,000,000 dividend shall be exempt from tax
c. The P2,000,000.dividend shall be subject to income tax in the taxable period 2021,
subject to surcharge, interest, and penalty.
d. The unused amount of P500,000 shall be subject to income tax in the taxable period
2021, subject to surcharge, interest, and penalty.

«+ Answer: D; Basis: Illustrations from RR 5-2021

84. ACB Corporation, a domestic corporation, has earned the following income during 2023:
Dividend income from: ;
IBM Corporation, a non-resident corporation P180,000
Fox Technologies, Inc., a resident foreign corporation 325,000
Isabela Corp., a domestic corporation 200,000
Interest income from:
Current account, BPI 150,000
Savings deposit, United Overseas Bank, Singapore. 410,000
US $ deposit (FCDU) - Metrobank Makati 100,000
Royalty income from various domestic corporations 500,000

Additional information

= Fox Technologies Inc.:

> The ratio of its gross income derived in the Philippines over its total income
is45%. |
> ABC Corporation holds 30% equity in Fox Technologies since 2020.
> The dividend received by ABC was immediately reinvested in 2024

» — IBM Corporation
» The dividend received from IBM was rot immediately reinvested by ABC
Corporation

How much is the final tax of ABC Corporation on its passive income during the year?
a. P145,000 c. P200,000
b. P172,000 d. P372,000

a Answer: A

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Solution (CREATE Law):

FWT on Passive Income: °

Dividend income — IBM (NRFC) ; RCIT
Dividend income - Fox Tech (RFC) - Exempt
Dividend income — Isabela (DC) Exempt
Interest income - BP! @ 20%; P150,000 x 20% 30,000
Interest income — United Overseas Bank, Singapore RCIT:
US $ deposit (FCDU) - Metrobank @ 15% 15,000
Royalty income @ 20% -_ 100,000
Total Final Taxes on passive income P145,000

0 The dividend from Fox Tech (RFC) is classified as foreign-sourced dividend

since the ratio of gross income Philippines over world income is less than 50%.

© —RR5-2021 provides that FOREIGN-SOURCED DIVIDEND MAY BE EXEMPT

FROM INCOME TAX under the CREATE Law subject to the following conditions:
1) Reinvestment of the dividend received in the domestic corporation within the
next taxable year; ;
2) _ Ownership of 20% or more; and
3) Holding period of at least 2 years

Absent any one of the above conditions, the foreign-sourced dividends shall be
considered as taxable income of the domestic corporation in the year of actual receipt or
remittance, subject to surcharges, interest, and penalties, as applicable.

) The dividend from IBM (NRFC) is classified as foreign-sourced dividend and not
exempt from tax because the conditions for exemption as provided in RR 5-2021
_were not satisfied.

85. In 2023, a domestic corporation declared and paid dividends to its shareholders as follows:
To Apol, a resident citizen P100,000
To Alex, a nonresident citizen ‘ 100,000
To George, a resident alien 100,000
To Ld, a nonresident alien engaged in trade in the Philippines 100,000
To Francis, a nonresident alien not engaged in trade in the Philippines 100,000
To Chen, a domestic corporation 100,000
To a resident foreign corporation 100,000
To a nonresident foreign corporation ©. 100,000

Additional information: Assume that the country in which the NRFC is domiciled
allows a credit against the tax due from the said NRFC which are equivalent to taxes
deemed to have been paid in the Philippines equal to ten percent (10%). How much
final tax shall be withheld by the corporation?
a. P80,000 c. P85,000
b. P90,000 d. P95,000

“* Answer: B

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Solution:
To Apol (P100,000 x 10%) P10,000
_ To Alex (P100,000x 10%) 10,000
To George (P100,000x 10%) 10,000°
x 20%)
To LJ (P 100,000 20,000
To Francis (P100,000x 25%) 25,000
To Chen, domestic corporation (exempt)
To a resident foreign corporation (exempt) :
To NRFC, P100,000 x 15% (with tax sparing) —. 15,000
Total ~P90,000_
86. The share of a co-venturer corporation in the rit income after tax of a joint venture or
consortium taxable as a corporation is
a. Subject to final withholding tax of 20%
b. Subject to regular corporate income tax of 30% .
c. Subject to capital gains tax
d. Exempt from income tax
{
“+ Answer: D
2 = Share in income of a Taxable Joint Venture (Taxable as corporation) is treated as
dividend income received from a domestic corporation. It is an inter-corporate
dividend not subject to tax under the TRAIN Law and CREATE.

SIMPLE GUIDE:
Share in income received from:
» Taxable JV = Tax exempt; treated as inter-corporate dividend
» Tax Exempt JV = Subject to RCIT

87. The share of a co-venturer corporation in the net income of a tax-exempt joint venture or
consortium is:
a. Subject to final withholding tax
b. Subject to regular corporate income tax
c. Subject to capital gains tax
d. Exempt from income tax

“* Answer: B | .

= As discussed in the preceding number, share in income of a Tax-exempt JV is NOT

a dividend income. Thus, it is treated as ordinary income subject to regular
corporate income fax,

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IRC GRE :
88. As a rule, there is no income tax if there is no income. Which of the following is the
exception?
Capital Gains Tax on sale of land and/or building
Capital Gains Tax on sale of share of stock outside the local stock exchange
aoop

Tax on passive income

Regular Corporate Income Tax

Answer: A
~~
2,

® The basis of CGT on sale of a real property is not the gain, but the higher amount,
_ between FMV and SP.
0 FMV, for CGT purposes, shall be the higher between the valuation provided by the
City or Provincial assessors (also known as assessed value or FMV for real estate tax
purposes) and the Zonal Value provided by the BIR.
0 FMVs provided by independent appraisers are not considered for purposes of
computing CGT.

Use the following data for the next three (3) questions
Kris Incorporated sold its vacant lot to Moca Corporation for P10,000,000 which it acquired at a
cost of P5,000,000. The fair market value of the said property per tax declaration was
P12,000,000 while its zonal value was P-15,000,000.

89. How much is the income tax applicable on the transaction?

a. P600,000 c. P900,000
b. P720,000 d. P1,500,000

“> ~Answer:C. CGT=P15Mx 6% = P900,000

90. Based on the preceding number, if the buyer of the property is the Philippine Government
or a government owned and/or controlled corporation (GOCC), what type of income tax
will apply on the transaction?
a. Basic income tax
b. — Capital gains tax
c. Either “a” or “b” at the option of the seller .
d. Ezther “a” or “b” at the option of the buyer

“> Answer: B
0 The option to subject the sale to either 6% CGT or basic tax is applicable only to
* individual taxpayers.

91. If the property is located abroad, what type of income tax will apply on the transaction?
a. Basic income tax
b. Capital gains tax
c. Either “a” or “b” at the option of the seller
d. Either “a” or “b” at the option of the buyer

Answer: A
‘2
“~

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92. A foreign corporation sold a condominium unit to Pedro for P10,000,000 which it acquired
at a cost of P5,000,000. The fair market value of the said property per tax declaration was
P12,000,000 while its zonal value was P-15,000,000. How muchi is the capital gains tax?
a. P600,000 c. P900,000
b. P720,000 d. nil

** Answer: D
© CGT on real property is applicable only to individuals and domestic corporations.
® The applicable tax in this particular transaction shall be basic incomeeta or RCIT.

GUIDE:
CAPITAL GAINS derived from Philippine Sources
CORPORATION
DC RFC NRFC

CAPITAL GAINS TAX on sale or exchange or disposition ofLand 6% NA NA

orfor buildings (Basis: Selling Price or Fair market value,
whichever is higher)

_ 93. Statement 1: Gain on sale of all kinds of capital assets are subject to the final tax on capital
gains.
Statement 2: Gain from sale of real property classified as capital asset and located in
Miami, Florida, USA is not subject to the final tax on capital gain.
Both statements are correct -
&wD :

Both statements are not correct

Only the first statement is correct
Only the second statement is correct
9

Answer: D
4, ?

© GAIN ON SALE OF CAPITAL ASSET MAY BE SUBJECT TO:

© CGT (onshares or real properties)
°o Basic tax (i-e., gain on sale of CA other than shares of closely held Dc and real
properties situated abroad)
° Exempt from income tax but subject to a business tax [i.e, stock transaction tax of 6/10
of 1% of GSP under Section 127 of the Tax Code, as amended under the TRAIN Law,
of shares of publicly listed DC]

Use the following data for the next five (5) questions
East Star, a domestic corporation, sold shares of stock of a domestic corporation for P250,000
in 2023. The shares were acquired in 2015 for investment pupeses at a cost of P100,000 and
were sold directly to a buyer.
94. How much was the capital gains tax due?
a. P10,000 c. P22,500
b. P15,000 d. P45,000

% . Answer:C
" Capital gain = P250,000 - P100,000 = P150,000
% CGT 2023 = P150,000 x 15% = P22,500

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95. How much is the capital gains tax assuming the shares sold were shares of a foreign
corporation and the sale was made during the effectivity of CREATE law?
a. P10,000 ~ 6, P22,500
b. P15,000 d. nil

“+ Answer: D .
To be subjected to CGT, the shares sold should be from a closely held domestic
corporation. The gain on sale of shares of a foreign corporation shall be subject to RCIT.

Assume the shares sold were from a domestic corporation but were not held for investment
purposes. Assume further that the seller is a dealer in securities. How much is the capital
gains tax? -
a. P10,000 c. P22,500
b. P15,000 3 d. nil

“- Answer: D
Ifthe seller is a dealer in securities, the shares sold shall be classified as ordinary
asset, hence subject to RCIT, NOT CGT.

97. South West Corporation, a resident foreign corporation, sold shares of stock of a domestic
corporation for P500,000 in 2023. The shares were acquired three (3) years ago for
investment purposes at a cost of P300,000. The shares were sold outside of the local
stock exchange. How much is the capital gains tax?
a. P10,000 c. P22,500
b. P15,000 d. P30,000

¢ Answer: D
© — Capital gain = P500,000 - P300,000 = P200,000
CGT 2023 (CREATE) =P200,000 x 15% = P30,000

98. In 2023, Mabuhay Corporation, a domestic corporation, sold shares of stock of another
domestic corporation for 2250,000 through the local stock exchange (LSE). The shares
were acquired in 2018 at a cost of 2100,000 and were held for investment purposes. How
much was the applicable tax due?
a. P1,250- c. P10,000
b. P1,500 d. P15,000

“+ Answer: B
© ° Sale of shares of stock of a domestic corporation held for investment purposes and sold
through the local stock exchange is NOT subject to income tax but to a business tax
called “Stock Transaction Tax (STT)’ of 6/10 of 1% of gross selling price beginning
January 1, 2018 under Sec. 127 of the Tax Code as amended.
0 STT=P250,000 x .006 = P1,500
0 — STTrate on sale of shares of stock though LSE was NOT amended under CREATE Law.

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99. Assume the shares sold wére not held for investment purposes and the seller Is a dealer *
in securities, how much is the stock transaction tax (STT)?
a. P1,250 c. P10,000
b. P1,500 d. nil

«+ Answer: D sy
The sale shall be subject to basic income tax or RCIT plus value added tax, if
applicable. It is not subject to stock transaction tax.

100. In 2023, Mabuhay, Inc., a Philippine corporation, sold through the local stock exchange
10,000 PLDT shares that it bought 2 years ago. Mabuhay sold the shares for R2 million
and realized a net gain of R200,000. How shall it pay tax on the transaction?
a. It shall declare a P2 million gross income in its income tax return, deducting its
cost of acquisition as an expense.
b. It shall report the P200,000 in its corporate income tax retum adjusted by the
holding period.
c. It shall pay a tax of % of 1% of the P2 million gross sales.
_ d._ It shall pay a tax of 6/10 of 1% of the P2 million gross sales.

¢- Answer: D

101. Manila Corporation (dealer in securities) sold unlisted shares of stocks of a domestic
corporation in 2023 and derived a gain of P500,000 therefrom. The gain is’
a. Subject to regular corporate income tax of either 20% or 25% based on the
gain derived from the sale.
b. Subject to 30% regular corporate income tax based on the gain derived from
the sale. .
c. Subject to 15% capital gains tax based on net capital gain
d. Subject to stock transaction tax of 6/10 of 1% based on the gross selling price
or fair market value, whichever is higher c

“+ Answer: A

102. Pacific Rim Corporation, a resident corporation, has the following data for 2023 taxable
year:
Gross income, Philippines P9,500,000
Gross income, USA - 5,000,000
Expenses, Phil. 7,000,000
Expenses, USA 2,000,000
Other income: ws
Dividend from San Miguel Corp., a domestic corp. 700,000
Dividend income from Omega corporation, a resident 250,000
foreign corporation
Gain on sale of shares of a domestic corporation sold 150,000
directly to buyers *
Royalty income, Philippines . §00,000
Interest income on peso bank deposit 800,000
‘

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Chapter & ~ Corborations

interest income on FCDS deposit 300,000

Interest from receivables in the Philippines — 600,000

The Company also sold a real property classified as capital asset for 220,000,000. The
cost of the Condominium is 218,800,000 while its Zonal Value is P30,000,000. The
- Company's total assets excluding the condominium sold and the land on which the
business office building is situated amounted to P68,000,000.

How much is the company's fotal taxes on all its income in 2023?

a. 22,500 c. 1,137,500
b. 305,500 d. P1,465,000

¢* Answer: D

Solution:

RCIT:
Gross income -, 9,500,000
Expenses (7,000,000)
Dividend income from Omega (RFC) 250,000
Interest from receivables in the Philippines 600,000
Gain on sale of real property (P20M - 18.8M) 1,200,000
Taxable net income P4,550,000
x RCIT Rate 25%
Income Tax Due P1,137,500

FWT:
Royalty income @ 20% P100,000
Interest income on bank deposit @ 20% 160,000
Interest income on FCDS deposit @ 15% ___45,000_ 305,000

CGT on shares of stock:

Gain on sale of shares of DC
(P150,000x 15%) 22,500
TOTAL TAXES ON ALL INCOME P1,465,000

— Resident foreign corporations are taxable only on their income derived from
Philippine sources. The RCIT rate of 20% for MSME is not applicable to foreign
corporations.

,% The dividend income from a domestic corporation is tax exempt.

© CGT on a real property is applicable only to individual taxpayers and domestic

corporations. Foreign corporations (RFCs and NRFCs) are not subject to CGT on
real properties. For income taxation purposes, such income if any, shall be subject
to RCIT in case of RFCs and FWT in the case of NRFCs.

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COMPREHENSIVE ILLUSTRATIONS

Use the following data for the next three (3) questions:
The following data were taken from the financial statement of Chen Corporation in 2023:

Philippines Abroad
Gross sales P10,000,000 P5,000,000
Sales retums 200,000
Cost of goods sold 3,500,000 2,250,000
Operating expenses 2,800,000 1,100,000
Interest income from trade receivable 100,000 50,000
Interest income from BPI deposits-Phils. 100,000 -
Interest income from BPI deposits-USA = 80,000
Interest income- FCDU ‘ 150,000 :
Income from money market placement 200,000 100,000
Dividend income from domestic corporation 75,000 -
Dividend income from Alpha Corporation 45,000 -
Dividend income from Omega Corporation z 30,000
Royalty income — in general 30,000 25,000
Royalty income - books 20,000 . -
Gain on sale of shares of stock of domestic corp. 120,000
held as capital asset thru local stock exchange;
Selling Price-P500,000
Gain on sale of shares of stock of domestic corp. 150,000
held as capital asset directly to a buyer Selling
Price-P650,000
Gain on sale of real property in the Philippines 5,000,000
classified as capital asset. Cost = P4M; ZV = P8M

Additional information:

= Total assets were valued at P80,900,000.

= The shares of stock in Alpha and Omega were acquired on January of the current
taxable year.

103. How much is the income tax due and payable assuming the corporation is:

po RFC
a. P1,674,00 P2,038,500
b. P2,038,500 P1,093,500
c. P1,383,750 P2,161,250
d. P1,395,000 P2,161,250

“* Answer: C

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thter 4a - Copporations :

p-- SOLUTION:
Domestic Corporation:
Philippines Abroad Total
Gross sales P10,000,000 R5,000,000 215,000,000
Sales retums (200,000)
Cost of goods sold (200,000)
(3,500,000) (2,250,000) ° (5,750,000)
Operating expenses (2,800,000) (1,100,000) (3,900,000)
Interest income from trade receivable 100,000 50,000 150,000
Interest income from BPI deposits-USA 80,000. 80,000
Interest income from money market 100,000 100,000
placement
Dividend income-RFC exempt - exempt
Dividend income-NRFC 30,000 30,000
Royalty income abroad 25,000 25,000
Taxable income P95,535,000
RCIT rate 25%
Regular Corporate Income Tax Due ?1,383,750
NOTE:
© The 20% RCIT rate for MSME is not applicable because the net income exceeded the R5M.
© — Under CREATE law, as clarified under RMC 62-2021, dividend income received by DC from
RFC (Alpha Corporation) is tax exempt if the situs of the income is from within the Philippines.
© Thesitus of the dividend income from NRFC (Omega Corporalion), as provided in the problem,
is from without the Philippines (foreign-sourced dividend). RR 5-2021 provides that foreign-
sourced dividends received by a DC are may be tax-exempt, provided:
o Thedividends are reinvested in the Philippines within the next taxable year and shall be
limited to funding the working capital requirements, capital expenditures, dividend
payments, investment in domestic subsidiaries, and infrastructure project;
o The domestic corporation holds directly at least 20% of the outstanding shares of the
foreign corporation; and_
o . The domestic corporation has held the shareholdings for a minimum of two (2) years at
the time of dividend income distribution.

Since the shares of stock were acquired only during the year, the dividend income from NRFC
shall not be exempt from tax but subject fo RCIT. However, this rule is not applicable to the
dividend income received from Alpha Corporation (RFC) because the income, as descnbed in
the given information, is considered derived from within the Philippines. Thus, exempt from
income tax.

Resident Foreign Corporation:

Philippines
Gross sales P10,000,000
Sales retums” (200,000)
Cost of goods sold (3,500,000)
Operating expenses (2,800,000)
Interest income from trade receivable 100,000
Dividend income-resident foreign corp 45,000
Gain in sale of real property"* 5,000,000
Taxable income P8,645,000
RCIT rate 25%
Regular Corporate Income Tax Due P 2,161,250
© "Foreign corporations are not subject to CGT on real properties. They are generally not
allowed to own real properties in the Philippines. However, for in come taxation purposes, such .
income if any, shall be subject to 25% RCIT for RFCs and 25% FWTs for NRFCs

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104. How much is the final withholding tax on passive income assuming the corporation is:

pe ks REC
a. -P81,250 P81,250
b. P90,500 P90,500
C. P92,500 . P81,250
d. P92,500 . P92,500
2,
< Answer: D

FWT— DC and RFC:

DC RFC
Interest income from BPI deposits-Phils. @ 20% 20,000 P20,000
Interest income from FCDU; P150,000 x 15% 22,500 22,500
Income from money market placement @ 20% 40,000 40,000
Royalty income @ 20% » 10,000 10,000
Final tax on passive income P92,500 P92,500

© Royalty income derived by DCs and RFCs from Philippine sources, regardless of
classification (from books, literary or otherwise) is subject to 20% FWT.

105. How much is the total capital gains tax assuming the corporation is:
: DC RFC NRFC.
a. — P22,500 P22,500 P22,500
b. P550,000 P10,000 P22,500
c. — P562,500 P22,500 P22,500
d. P562,500 P10,000 P10,000

“ Answer: C

CGT
- DC:
Gain on sale of shares sold directly to'a buyer = [(150,000x 15%) P22,500
Sale of real property in the Philippines = (SP of P9M** x 6%) 540,000
Total Capital Gains Tax P562,500
**SP = Cost+ Gain = P4M+ 5M=P9M; SP is higher than FMV

CGT-—RFC and NRFC:

CGT on shares of DC= P150,000 x 15% = P22,500

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SPECIAL CORPORATIONS ?

106. Which of the following statements is incorrect?

a. Resident foreign corporations are subject to income tax based on net income from
sources within the Philippines.
b. Domestic corporations are subject to income tax based on net income from all
sources.
c. Nonresident foreign corporations are subject to income tax based on gross income
from sources within the Philippines. '
d. Private educational institutions are subject to income tax based on the het income
from sources within the Philippines.

+ Answer: D
0 Private educational institutions are “domestic corporations”, taxable on income derived ~
from within and without the Philippines.

407. Which-of the following shall be considered related income of proprietary educational -
institutions?
|. . Income from tuition fees and miscellaneous school fees
ll. Income from hospital where medical graduates are trained for residency
iI. Income from canteen situated within the school campus
IV. Income from bookstore situated within the school campus

a. lonly c. |, lland IV only

b. | and Il only d. 1, Il, Ill and lV

Og Answer: D
0 Basis:
RMC 4-2013

408. A domestic proprietary educational institution improved its library facilities by adding a new
wing to its old library building. The capital oMtiay on library improvement, for income tax
purposes, may be:
a. Deducted at full at the time of completion of the improvement
b. Capitalized or expensed outright at the option of the school owners
c. Capitalized and depreciated over the estimated life of the improvement
d. Capitalized or expensed outright at the option of the Government

“- Answer: B

109, refer to any private schools 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.

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Chapter 4 -~ Cwhorations

Proprietary educational institution

aeo fp
Govemment educational institution
Unrelated trade, business or other activity
Predominance test

> Answer: A

110. Which of the following institutions shall be covered by the preferential tax rate of 1%
~ beginning July 1,2020 until June 30, 2023 and 10% beginning July 1, 2023 as imposed
under Section 27(B) of the NIRC, as amended and RR 3-2022?
a. Proprietary Educational Institutions
b. Hospitals which are non-profit
C. Non-Stock, Non-Profit Educational Institutions isos net income or assets accrue
or inure to or benefit any member or specific person
All of the above

“ Answer: D

111. The regular corporate income tax rate to be imposed on the entire taxable income of the .
institutions mentioned in Section 3 of RR 3-2022 if their gross income from unrelated trade,
business or other activity, exceeds fifty percent (50%) of the total gross income they
derived from all sources shall be:
a. 1% , c. 20%
b. 10% d. 25%

“+ Answer: D

412. A Non-Stock, Non-Profit Educational Institution, not falling under Section 3 of RR 3-2022, -
shall be subject to tax on the portion of its revenues or assets NOT USED actually, directly,
and exclusively for educational purposes, at a rate of:
a. 1% c. 20%
b. 10% d. 25%

“* Answer: D

113. Which of the following statements is correct?

a. The grant of per diems such as transportation allowance in attendance of meetings,
compensation and/or endowments for services rendered, or any other similar
emoluments to the Board of Trustees, officers, employees, or any members of the
institutions mentioned in Section 3 of RR 3-2022 shall not be prohibited and shall not
necessarily be considered a private inurement that would negate the status of the
institutions as non-profit; Provided, that such per diems, compensation or
emoluments ‘are subject to proper liquidation or reimbursement procedures, and
commensurate to the functions and services rendered.

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b. The per diems/expenses in the preceding statement shall be considered as legitimate

and reasonable expenses incurred in furtherance of the duties and responsibilities of
the trustees, officers, employees, members, or any persons, and ultimately, the
objectives of the organization.
c. The reasonableness of the per diems/expenses in the preceding statements shall be
determined by the BIR on a case-to-case basis.
d. Allofthe above

“ Answer: D

114. (Based on RR 5-2021 and RR 3-2022): CREATIVE School University (CSU) is a private
educational institution with an issued permit to operate from the Commission on Higher
Education (CHED). It is registered with the Securities and Exchange Commission as a
private domestic corporation.

CSU uses a fiscal year accounting ending July 31 of each year. On July 31, 2022, it
recorded total gross receipts amounting to P18,000,000.00, of which P10,000,000 came
from education-related activities, while P8,000,000 from other unrelated business
activities. Also, CSU recorded cost of service and operating expenses from related
activities amounting to P2,000,000 and P1,000,000, respectively, and from unrelated
business activities amounting to P 3,000,000.00 and P2,000,000.00, respectively.

How much is the income tax payable for the fiscal year ending July 31, 2022?
a. P100,000 c. P1,000,000
b. P150,000 d. P2,500,000

“> Answer: A
Related Unrelated Total
Gross receipts P10,000,000 P8,000,000 P18,000,000
Cost of Services (2,000,000) (3,000,000) (5,000,000)
Gross Income P8,000,000 P5,000,000 P13,000,000
Operating expenses (1,000,000) (2,000,000) (3,000,000)
Net Taxable income P7,000,000 P3,000,000 P10,000,000
RCIT rate 1%
Regular Corporate Income Tax Due P100,000

NOTE:
CSU is subject to income tax at the rate of 1% since its gross income from unrelated
activities did not exceed 50% of the total gross income.

115. Pioneer College, a proprietary educational institution, has presented the following data for
the fiscal year ending July 31, 2023:
Gross income, related activities P5,000,000
Gross income, unrelated activities 5,000,000
(other than rental income)
Rental income (gross of 5% WT) 2,000,000

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Expenses, related activities 2,000,000

Expenses, unrelated activities 3,000,000
Dividend income from a domestic corporation 100,000
Quarterly income tax paid for the first 3 quarters 500,000

How much is the income tax payable for the fiscal year ending July 31, 2023?
|

a. P700,000 c. P1,750,000 a
b. P1,150,000 d. P1,500,000

“ Answer: B.

Solution: Lies
Gross income, relatedactivities P5,000,000
Unrelated Income: j
Gross income, unrelated activities (except rental) 5,000,000
Rental income (gross of 5% WT) 2,000,000 12,000,000

Expenses, related activities : ; 2,000,000

Expenses, unrelated activities 3,000,000 __(5,000,000)
Taxable income P7,000,000
Tax rate (unrelated iionestewtid income) 25%
_- Tax due - P1,750,000
Less: Quarterly tax payments P500,000
Withholding tax on rental income 100,000 (600,000)
Income Tax payable P1,150,000

NOTE: RR 3-2022 provides that if the unrelated income of the proprietary educational
institution (PEI) is more than 50% of its total gross income, the applicable income tax _
rate shall be 25%.

116. Advance Leaming Institute, a proprietary educational institution with assets of not more
than P100,000,000 provided the following data for 2023 taxable year:

Income from tuition fees P5,000,000

School miscellaneous fees ; 1,500,000
Dividend income: bass
= Domestic corporation i 2,000,000
= — Resident foreign corporation (ratio of income 2,000,000
derived in the Philipines was P60%)
Rent income (net of 5% withholding tax) 475,000
Operating expenses 4,000,000

The income tax payable of the school in 2023 should be:

a. P1,750 c. P25,000
b. P5,000 d, P30,000

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Chapter 4 - Cor bps

Expenses, related activities 2,000,000

Expenses, unrelated activities 3,000,000
Dividend income from a domestic corporation 100,000
Quarterly income tax paid for the first 3 quarters - 500,000
How much is the income tax payable for the fiscal year ending July 31, 2023?
|
a. P700,000 c. P1,750,000
b. P1,150,000 _ d. P1,500,000

“+ Answer: B .-

Solution:
Gross income, related activities P5,000,000
Unrelated Income:
Gross income, unrelated activities (except rental) 5,000,000
Rental income (gross of 5% WT) __2,000,000 12,000,000
Expenses, related activities 2,000,000
Expenses, unrelated activities _ 3,000,000 __(5,000,000)
Taxable income . P7,000,000
Tax rate (unrelated income>related income) 25%
Tax due P1,750,000
Less: Quarterly tax payments P500,000 f
Withholding tax on rental income 100,000 600,000
Income Tax payable —P4,450,000_
NOTE: RR 3-2022 provides that if the unrelated income of the proprietary educational
institution (PEI) is more than 50% of its total gross income, the applicable income tax _
rate shall be 25%.

116. Advance Leaming Institute, a proprietary educational institution with assets of not more
than P100,000,000 provided the following data for 2023 taxable year:

Income from tuition fees P5,000,000

School miscellaneous fees 1,500,000
Dividend income:
» Domestic corporation 2,000,000
= Resident foreign corporation (ratio of income 2,000,000
derived in the Philipines was P60%).
Rent income (net of 5% withholding tax) 475,000
Operating expenses ~ 4,000,000

The income tax payable of the school in 2023 should be:

a. P1,750 c, P25,000
b. P5,000 d, P30,000
e¢ MCQNos. 116 to 118 (Chapter 4 - Corporations)
— Please use 2022 taxable year instead of 2023.
St —_eh I, —-
Ebb
a
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Answer: B

Solution:

RELATED INCOME:
Income from tuition fees P5,000,000
Miscellaneous school fees 1,500,000 P6,500,000
UNRELATED INCOME
Dividend from RFC exempt
Rental income (gross of 5% WT) 500,000 500,000
TOTAL GROSS INCOME P7,000,000
OPEX (4,000,000)
Taxable net income P3,000,000
RCIT rate (related income>unrelated income) 1%
Tax due | P30,000
Less: | CWT on rental income (P500,000 x 5%) i 25,000
Income Tax payable P5,000

Use the following data for the next two (2) questions:

Norte De University is a proprietary educational institution. It has the following selected

information for the taxable year 2023:

Tuition fees P12,800,000

Miscellaneous fees 1,800,000
Interest on bank deposits 12,300
Rent income 350,000
Salaries and bonuses, all personnel 7,500,000
Other operating expenses 3,500,000
Additional information:
. Anew school building was built and finished on April 1, 2023 at a cost of P2,000,000 with
a depreciable life of 50 years,

117. Assuming the University opted as an outright expense,

to claim the cost of construction
the income tax payable should be:

a. P19,500 c. P344,000
b. P147,000 d. P487,500

“> Answer:A

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orborattons

« Answer: B

Solution:

RELATED INCOME:
Income from tuition fees P5,000,000
Miscellaneous school fees 1,500,000 P6,500,000
UNRELATED INCOME
Dividend from RFC exempt
Rental income (gross of 5% WT) 500,000 500,000
TOTAL GROSS INCOME P7,000,000
OPEX (4,000,000)
Taxable net income P3,000,000
RCIT rate (related income>unrelated income) 1%
Tax due P30,000
Less: CWT on rental income (P500,000 x 5%) (25,000)
Income Tax payable P5,000

Use the following data for the next two (2) questions:

Norte De University is a proprietary educational institution. It has the’ following selected

information for the taxable year 2023:

Tuition fees P12,800,000

Miscellaneous fees 1,800,000
Interest on bank deposits 12,300
Rent income 350,000
Salaries and bonuses, all personnel 7,500,000
Other operating expenses 3,500,000
Additional information: .
. Anew school building was built and finished on April 1, 2023 at a cost of P2,000,000 with
a depreciable life of 50 years.

117. Assuming the University opted to claim the cost of construction

as an outright expense,
the income tax payable should be:

a. P19,500 c. P344,000
b. P147,000 d. P487,500
“+ Answer: A

fits
* MCQNos. 116 to 118 (Chapter 4 - Corporations)
— Please use 2022 taxable year instead of 2023.

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Solution:

Related Income:
Tuition fees P12,800,000
Miscellaneous fees 1,800,000 P14,600,000

Unrelated Income:
Rent income 350,000
Less: Operating expenses
Salaries and bonuses, all personnel 7,500,000
Other operating expenses 3,500,000
Cost of new building 2,000,000 (13,000,000)
Taxable Net Income ?1,950,000
x Income tax rate 1%
Income Tax Due/Payable R19,500
NOTE:
© CAPITAL EXPENDITURES for expansion of school facilities may not be capitalized but
instead claimed as outright expense, at the option of the proprietary school.

118. Assuming the University opted to capitalized the cost of building construction, the income
tax payable should be:
¢ a. PO c. P392,000
b. P39,200 d. P980,000

“* Answer: B
Related Income:
Tuition fees "12,800,000
Miscellaneous fees 1,800,000 14,600,000
Unrelated Income:
" Rent income 350,000
Less: Operating expenses
Salaries and bonuses, all personnel 7,500,000
Other operating expenses 3,500,000
Dep’n-new building (P2M/50x9/12) 30,000 (11,030,000)
Taxable Net Income P3,920,000
Taxable Net Income P3,920,000
x Income tax rate 1%
Income Tax Due/Payable P39,200
119. Accelerate College, a domestic corporation duly registered as proprietary educational
institution, provided the following data during its 1st year of operation in 2023:
Income from tuition fees P3,200,000
Miscellaneous school fees 380,000
Income from canteen operations 150,000
Dividend income from:
Domestic corporation 100,000
Resident foreign corporation 125,000
Rent income (net of 5% CWT) 1,710,000
Operating expenses 530,000
Quarterly income tax payments 75,000
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Solution:

Related Income:
Tuition fees P12,800,000
Miscellaneous fees 1,800,000 R14,600,000

Unrelated Income: ;
Rent income 350,000
Less: Operating expenses
Salaries and bonuses, all personnel 7,500,000
Other operating expenses 3,500,000
Cost of new building 2,000,000 _(13,000,000)
Taxable Net Income P1,950,000
x Income tax rate 1%
Income Tax Due/Payable P19,500
NOTE:
© CAPITAL EXPENDITURES for expansion of school facililies may not be capitalized but
instead claimed as outright expense, at the option of the proprietary school.

118. Assuming the University opted to capitalized the cost of building construction, the income
tax payable should be: ;
‘ a. PO c. P392,000
b. P39,200 d. P980,000 ° MCQ Nos. 116 to 118 (Chapter 4 - Corporations)
~ Please use 2022 taxable year instead of 2023.

“¢ Answer: B
2

Related Income: sug

Tuition fees , 12,800,000
Miscellaneous fees 1,800,000 14,600,000
Unrelated Income:
"Rent income 350,000
Less: Operating expenses
Salaries and bonuses, all personnel 7,500,000
Other operating expenses 3,500,000
Dep’n-new building (P2M/50x9/12) 30,000 (11,030,000)
Taxable Net Income : £3,920,000

Taxable Net Income P3,920,000

x Income tax rate 1%
Income Tax Due/Payable P39, 200

119. Accelerate College, a domestic corporation duly registered as proprietary educational

institution, provided the following data during its 1st year of operation in 2023:
Income from tuition fees P3,200,000
Miscellaneous school fees 380,000
Income from canteen operations 150,000
Dividend income from:
Domestic corporation 100,000
Resident foreign corporation 125,000
Rent income (net of 5% CWT) 1,710,000
Operating expenses 530,000
Quarterly income tax payments 75,000

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Additional information:
0 The assets of the school are hot more than P100,000,000.
The dividend income from the foreign corporation is considered foreign-
sourced dividend and the school holds directly five percent (5%) in value
of the outstanding shares of the foreign corporation.

How much is the income tax payable of Accelerate in 2023?

a. P75,000 c. P1,116,250
b. P90,000 d. P1,281,250

“ Answer: C
Solution:
RELATED INCOME:
Tuition fees P3,200,000
Miscellaneous fees 380,000
Income from canteen operations 150,000 3,730,000
UNRELATED INCOME:
_ Dividend income - DC exempt
Dividend income from RFC 125,000
~ Rent income (P1,710,000/95%)) 1,800,000 1,925,000
Total Gross Income 5,655,000
OPEX (530,000)
Taxable Net Income P5,125,000
x RCIT rate (RR 3-2022) 25%
(unrelated income > related income)
Income Tax Due 1,281,250
Quarterly income tax payments (75,000)
CWTx on rent (P1,800,000 x 5%) 90,000
Income Tax Payable - 2023 P1,116,250

NOTE:
© The tax rate as provided under RR 3-2022 is 25%
© The dividend income from domestic corporation is exempt.
0 The dividend income from the foreign corporation is subject to RCIT since the conditions for
exemption of foreign-sourced dividends were not met. The PEI in this particular problem only
holds only 5% in value of the outstanding shares of the foreign corporation.

Use the following data for the next two (2) questions:
Timpuyog Educational Foundation (TEF) is a non-stock, non-profit educational institution whose
net income or assets do not accrue/inure to or benefit any member or specific person. It has the
following selected information for the taxable year 2023:
Tuition fees P15,000,000
Miscellaneous school fees 2,500,000
Operating expenses 7,500,000
Interest on bank deposits 125,000
Rent income, net of 5% CWT 332,500
Rental related expenses 75,000

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Additional Information:
* — Tuition and miscellaneous school fees areactually, directly and exclusively used
for educational purposes.
= A new school building was built and finished on April 1, 2023 at a cost of
_ P2,000,000 with a depreciable life of 40 years.
= TEF's assets amounted to P250M. |

120. The income tax payable for the year should be:
a. P17,500 c. P65,000
b. P51,250 d. P68,750

“* Answer: B
Solution:
TAXABLE INCOME pa
Rent income P350,000
Renial related expenses . : (75,000)
Taxable Net Income y Koay P275,000
x RCIT rate under CREATE Law-: 25%
Income Tax Due. 2 _ P68,750
Less: Income Tax Withheld on rent... ei
(P332,500/95%) x 5% (17,500)
Income Tax Payable - 2023 P51,250
NOTE:
© The tuition fees and miscellaneous school fees are tax-exempt. RR 3-2022 dated April
7, 2022 provides that a non-stock non-profit educational institution whose net income or
assets do not accrue/inure fo or benefit any member or specific person is generally
exempt from income tax under Article XIV of the Philippine Constitution; provided, the
revenues are actually, directly and exclusively used for educational purposes.

Non-stock non-profit educational institutions are likewise exempt under Section 30 (H)
of the Tax Code, However, income not related to its exempt activities (ie., rental
income) shall be subject to applicable regular corporate income tax.. Moreover, Section
4 of RR 3-2022 provides that Non-Stock, Non-Profit Institution, not falling under Section
3 of RR 3-2022, shall be subject to the rate of twenty-five (25%) regular corporate
income tax on the portion of its revenues or asséts NOT USED actually, directly, and
exclusively for educational purposes, as provided in Section 27(A) of the NIRC, as
amended.

121. Assuming the school is a government educational institution and it opted to expense
outright the cost of building construction. The income tax payable should be:
a. P17,500 c. P65,000
b. P51,250 d. P68,750

“¢ Answer: B
® Solution: the same with the immediately preceding number.
© The preferential tax rate for proprietary educational institutions should not be applied to
Government Educational Institutions (GEls). GEls are exempt under Section 30(|) of the
Tax Code. However, income not related to its exempt activities shall be subject to
regular corporate income tax. Likewise, the option to expense outright the cost of the
_ school building is not applicable to GEls.

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 Chapter 4 - Ornporations

questions:
Use the following data for the next four three (3)

A non-profit hospital has the following data during the year 2023:
‘Gross income from hospital operation P2,000,000
Operating expenses (excluding depreciation for the new hospital 500,000
building)
Rent income of commercial space, hospital ground floor, net of 5% 190,000
withholding taxes
Interest on bank deposit, net of 20% withholding tax 40,000
Dividend income from a domestic corporation 100,000

Additional information:
» Additional hospital building was built and finished on June 30, 2023 at a cost of
P4 000,000 with a depreciable life of 25 years.
» — The company's assets amounted to 150M.

“422. The income tax still due and payable in 2023 should be:
a. P6,200 c. P476,000
b. P162,000 - d. P486,000

“> Answer: A
Gross income from hospital operation P2,000,000
Rent income (P190,000/95%) : 200,000
Operating expenses ~ (500,000)
Depreciation expense (80,000)
(P4M/25 x 6/12) : '
Taxable Net Income P1,620,000
x Taxrate - CREATE ‘ 1%
Income Tax Due P16,200
Less: CWT on rent (10,000)
Income Tax Payable P6,200

123. Assume the non-profit hospital opted to expense outright the cost of the newly constructed
hospital. The income tax still due and payable in 2023 is.
a. P6,200 c. P162,000
b. P152,000 d. P486,000

“> Answer: A
% — Solution= same with the immediately preceding number
© The option fo either capitalize or expense outright its capital expenditures is mepkcabhy
only to proprietary educations! institutions

124. Assume the hospital was organized forprofit, the i income tax still due and payable in 2023
should be:
a. P280,000 —_—c, P395,000
b. P300,000 d. P405,000
“* Answer: C

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Solution:
Gross income from hospital operation R2,000,000
Rent income (P190,000/95%) 200,000
Operating expenses (500,000)
Depreciation expense 80,000,
Taxable Net Income P1,620,000
x Tax rate 25%
Income Tax Due P405,000
Less: CWT on rent (10,000). .
Income Tax Payable P395,000_°

NOTE:
¢ ° © The preferential income tax rate is not applicable to hospitals organized for profit
activities (refer also to Section 3 of RR 3-2022 dated Apnil 7, 2022).
© Since the assets of the hospital exceeded the P100M threshold for MSMEs, the
sppoalte RCIT rate shall be 25%.

Ries. (Based on illustration from RR 5-2021). Maalaga Hospital, a private non- roft hospital,
has gross receipts of P15,000,000 with a cost and allowable deductions of P6,000,000 and
P3,250,000 from related activities, while for its unrelated activities, it incurred P5,000,000
and P2,000,000 as cost of sales and allowable deductions, een with gross sales
of P18,000,000 during 2023 taxable year.

How much is the income tax due in 2023?

a. P167,500 c. P335,000
b. P251,250 d. P4,187,500

“¢ Answer: D
Solution:
Related Unrelated Total
Gross sales P15,000,000 P18,000,000 P33,000,000
Cost of sales (6,000,000) (5,000,000) (11,000,000)
Gross Income P9,000,000 P13,000,C00 P22,000,000
OPEX ___ (3,250,000) (2,000,000) (5,250,000)
Taxable Net Income P5,750,000 P11,000,000 P16,750,000
x Tax rate 25%
Income Tax Due P4,187,500
0. The hospital is subject to 25% RCIT since its gross income from unrelated activities is
more than 50% of its total gross income.

126. The Royale Air Corporation is an international carrier doing business in the Philippines, Its
taxable base for income tax purposes is -
a. Gross Philippine Billings
b. Gross Philippine Billings minus deductible expenses
c. Regular rate of 30% of its net taxable income
d. Allocation of income from sources within and without the Philippines, as well as
expenses.

“+ Answer: A

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427. The following are excluded in the "Gross Philippine Billings” for income tax purposes of an _
intemational ait carrier, except:
a. Tickets sold outside the Philippines for passengers originating from outside the
Philippines
b, Passage documents sold outside the Philippines for excess baggage originating
from the Philippines
C. Tickets sold in the Philippines for passengers originating from the Philippines but
are not actually flown
Passage documents sold in the Philippines for cargoes originating from outside
the Philippines
2,
~~" Answer: B

428. In order for an intemational carrier to qualify for exemption on the basis of reciprocity, what
: type of tax shall be exempted as well by the its home country?
a. Income tax
b. Business Tax
C. Transfer tax
d. Any of the choices

Answer: A
*,
~%

Use the following data for the next four (4) questions:

Pacific Airlines, an intemational air carrier showed the following gross receipts during the year:

Point of Origin Destination Gross receipts

Philippines USA P8,000,000
USA. U.K 4,000,000
U.S.A Philippines 3,750,000
U.K Philippines 2,100,000
Additional information:
=» — Forty percent (40%) of the shipments from the Philippines to the United States were
later shipped to the United Kingdom.
» — 25% of all its revenues were from transport of cargoes and goods.

129. The Income tax payable should be:

a. P127,500 c, P170,000
b. P150,000 d. P200,000
*
¢,
Answer:D; (Income Tax Payable = P8M x 2.5%)

130. The total fax expense of Pacific Airlines

in the Philippines should be:
a. P187,500 c, P230,000
b. P210,000 d. P260,000

“* Answer: D

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Solution:
0 Income Tax Payable = (P8M x 2.5%) + (P8M x 3%) = P260, 000
Total taxes= Income tax + Business tax.
The applicable “business tax‘ of International Carriers is 3% common carriers tax
under Section 118 of the Tax Code, as amended.

431. How much is the Income tax payable assuming Philippine carriers in USA are subject only
to 1% income tax?
a. PO’ 6. P160,000 .
b. P80,000 d. P200,000

“- Answer: B
© — Income Tax Payable=P8Mx1% ,

132. How much is the Income tax payable assuming Philippine carriers in USA are exempt from
-payment of income tax?
a. PO c. P160,000
b. P80,000 d. P200,000 ©

“ Answer: A

133. China Airlines Inc., a resident foreign corp. has the following data for the taxable year 2023:
Passengers airfare from China to Philippines ~ P4,800,000
Passengers airfare from Philippines to China 1,500,000
Airfare for cargoes from China to Philippines ~ 700,000
Airfare for cargoes from Philippines to China 1,300,000

How much was the income tax payable?

a. P39,000 ~ ¢. P70,000
b. P60,000 ~ d. P84,000

“+ Answer: C

Solution:

% Passengers airfare from Philippines to China P1,500,000

: Airfare for cargoes from Philippines to China 1,300,000
Total a P2,800,000
x Tax Rate 2.5%
Income Tax Due and Payable 70,000

134. Based on the preceding number, how much was the common carrier's tax for the year?
a, P39,000 c. P70,000
b. P60,000 d. P84,000
2°,
“> Answer: A

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Solution: ’

Airfare for cargoes from Philippines to China P1,300,000

x Business tax rate (common carrier's tax) 3%
Income Tax Due and Payable P39,000

& Common carrier's tax (CCT) for international carriers (RFCs) is a business tax
under Section 118 of the Tax Code, as amended. CTT is based on gross receipts
on their transport of “goods, cargoes or mails” originating in the Philippines.

TTT UN eae Oe
135. Which of the following shall pay a tax of ten percent (10%) of their taxable income prior
to
January 1, 2022?
| - Regional or area headquarters
||- Regional operating headquarters

a. | only — ¢. Both! and Il

b. Il only d. Neither| nor Il

“ Answer: B
o Prior to January 1, 2022, ROHQs are classified as special corporations subject to 10%i income
tax based on their net income derived from sources within the Philippines.

136. Which of the following shall pay a tax of ten percent (10%) of their taxable income
beginning January 1, 2022?
| - Regional or area headquarters
|| - Regional operating headquarters

a. | only c. Both
| and Il
‘b. Ilonly . d. Neither| nor II
t

¢* Answer: D

Beginning January 1, 2022, ROHQs are no longer classified as special corporations. Consequently,
the rules applicable to ordinary resident foreign corporations shall already apply, such as:
0 RCIT rate: 25% of net income derived from Philippine sources only; and
o MCIT (on gross income in the Philippines):

137, (Based on RR 5-2021 illustration) XYZ Corporation is registered as a Regional Operating

Head Quarter (ROHQ) since 2015. For taxable years 2020 to 2023, its operation showed
the financial results:

2020 2021 2022 2023

Gross receipts 75M 120M 130M 75M
Cost of services 41.25M 66M 71.5M 41.25M
Allowable deductions 33.625M 41.2M 42.55M 35.125M

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How much is the income tax due in 2023?

a. PO c. P506,250
b. P337,500 d. P675,000

+ Answer: C
Solution:
2020 2021 2022 2023
Gross receipts 75,000,000 120,000,000 130,000,000 , 75,000,000
Cost of services (41,250,000) (66,000,000) — (71,500,000) (41,250,000)
Gross Income P33,750,000 P54,000,000 58,500,000 P33,750,000
Allowable deductions (33,625,000) (41,200,000) (42,550,000) (35,125,000)
Net Taxable Income P125,000 P12,800,0000 P15,950,000 (P1,375,000)

Income Tax Rate 10% 10% 25%

Income Tax P12,500 P1,280,000 P3,987,500 PO
MCIT: sae :
2022: @ 1% 585,000
2023:@ 1.5% , 506,250
INCOME TAX DUE P12,500,000 P1,280,000 P3,987,500 P506,250
NOTE:
© — The regular rate of 25% shall be effective on January 1, 2022 for ROHQs. It will also be
subjected to MCIT beginning on the said date.
© — MCITrate of 1.5% shall be used during the transition period/year in 2023 since the applicable
MCIT rates are 1% for January to June and 2% for July to December. Thus, the average MCIT
rate for 2023 taxable year is 1.5%.

138. Teri Yaki Corp., a Japanese Corp. having no business in the Philippines, is engage in ship
building. It leases some of its newly constructed ships to Super Fairy Inc., a Philippine
Caner. What income tax rate will apply to the rental payments to the lessor?
a. 30% Basic Income Tax
b. 25% Final Withholding Tax
c. 7.5% Final Withholding Tax
d. 4.5% Final Withholding Tax

** Answer: D

139. Rentals, charters and other fees derived by a non-resident lessor of aircraft, machineries
_and other equipment in the Philippines shall be subject to a tax of:
a. Twenty-five percent (25%)
b. Seven and one-half percent (7 2%)
c. Four and one-half percent (4 4%) of gross rentals or fees
d. Two and one-half percent (2 4%) of gross income

“+ Answer: B

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140.A cinematographic film owner, lessor or distributor shall pay'a tax, based on its gross
income from all sources within the Philippines, of:
a. Twenty-five percent (25%)
b. Seven and one-half percent (7 4%)
c. Four and one-half percent (4 12%) of gross rentals or fees
d. Twoand one-half percent (2 4%) of gross income

> Answer: A

OFFSHORE BANKING UNITS (OBUs | |

141. Abranch, subsidiary or affiliate of a foreign banking corporation which is duly authorized
by the Bangko Sentral ng Pilipinas (BSP) to transact offshore banking business in the
Philippines in accordance with the provisions of P.D. No. 1034 as implemented by CB (now
. BSP) Circular No. 1389, as amended.
Offshore banking unit
7m

Multinational company
Petroleum Service Contractor and Ss Besiaces
20°

None of the choices

“> Answer: A

142. Prior to CREATE Law, Offshore Banking Units (OBUs) are tax exempt on their income
derived from:
|. _ Foreign currency transactions with local commercial banks.
ll. Foreign currency transactions with branches of foreign banks authorized by
BSP.
lll. Interest income derived from foreign currency loans granted to residents.

a. | only c. | and II only

b. Il only d. Il and III only

“+ Answer: C
© OBUs are not classified as special corporations. However, prior to the effectivity of the
CREATE Law, the income of OBUs derived from foreign currency transactions shall be
taxed as follows :

COUNTERPARTY TRAIN Law

Non-residents Exempt
Other OBU’s Exempt
Local Commercial Banks Exempt
Branches of foreign banks Exempt
Otherresidents 10% FWT

© Since Sec. 28(A)(4) of the Tax Code was deleted or repealed under CREATE. Thus, the
regular income tax rate of 25% imposed to resident foreign corporations shall be applied
% — OBUs shall also be subject to other taxes imposed under the Tax Code

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_ © Prior to amendment under CREATE Law, if an OBU eam income other than from foreign
currency transactions, it will be subject to basic income tax (30% RCIT vs. 2% MCI T, whichever
is higher). Under CREATE Law, OBUs shall be subject to 25% RCIT on its ordinary income

143. Upon effectivity of the CREATE Law, Offshore Banking Units (OBUs) are tax exempt on
their income derived from:
|. Foreign currency transactions with local commercial banks.
Il. Foreign currency transactions with branches of foreign banks authorized by
BSP. :
Ill. Interest income derived from foreign currency loans granted to residents.

a. | only c. All of the above )

b. land Ilonly - d. None of the above

Answer: D
2°,
“ef

® OBUs are not classified as special corporations

© — OBUs under the CREATE Law are now taxable as ordinary resident foreign corporations.

INCOME TAX CREDIT |

The next twelve (12) questions are based on the following data:
Hananiah Corporation, a domestic corporation with assets of not more than P100M, provided
the following data for calendar year ending December 31, 2023: ( $1-50):
Philippines ' Abroad
Gross Income P4,000,000 $40,000
Deductions ~ P2.500,000 $15,000
Income tax paid $ 3,000

144, Hananiah’s income tax payable should be:

a. P400,000 c. P750,000
b. P550,000 d. P825,000

“> Answer: A

Solution:
Philippines Abroad Total
Gross Income P4,000,000 22,000,000 P6,000,000
Deductions (2,500,000) (750,000) 3,250,000
Taxable net income 21,500,000 21,250,000 22,750,000
x Tax Rate for MSME 20%
Income Tax Due P550,000
Less: INCOME TAX CREDIT
Actual payment abroad; P150,000
_ ($3,000 x P50)
Limit = 1,250/P2,750 x R550,000 , . : 250,000
Allowed (lower) 150,000,
Income Tax Payable 00,000

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) WHOCANCLAIM TAX CREDIT?

Resident citizens and Domestic Depeenans ony

® AMOUNT DEDUCTIBLE:
The LOWER between the Actual income tax nai abroad and the ses

0 UMTT:
It Depends on how many foreign country is involved.
» IF Only one foreign country is involved
Net income, foreign x Philippine income tax
Net income, world ,

= IF More than one foreign countries are involvéd. The limit is the lower between Limit 1 and
Limit 2 computed as follows:

LIMIT 1 (Per Foreign Country where there was eslate tax paid):
Net income, per foreign country Philippine income tax
Net income, world , x

LIMIT 2 or B (Total of ALL foreign countries involved):

_ Netincome, all foreign countries x __ Philippine income tax
Net income, world

145. Based on the preceding number, except that the domestic corporation opted to claim the
income tax paid abroad as deductions from its gross income, the income tax payable
should be:
a. P520,000 c. P880,000
b. P650,000 d. P910,000
“+ Answer: A
Philippines Abroad Total
Gross Income £4000,000 2000000 6,000,000
Deductions * (2,500,000) _(900,000)** 3,400,000
Taxable net income P1,500,000 1,100,000 22,600,000
x Tax Rate 20%
Income Tax Due 520,000
£2 Total OPEX abroad = P750,000 + 150,000 = P900,000**
£2 Income tax payments abroad may be deducted from the income tax due or from the
gross income (treated as OPEX), at the option of the taxpayer.
(Income Tax credit is applicable only to RCs and DCs
2 = Ifsilent, treat the income tax payment abroad as a tax credit

146. If the corporation is a resident corporation, how much is its income. tax payable?
a. P250,000 c. P375,000
b. P300,000 d. P525,000

“ Answer: C
Philippines
Gross Income ’ 4,000,000
Deductions * __ (2,500,000)
Taxable net income ?1,500,000
x Tax Rate 25%
Income Tax Due/Payable £375,000
£1) . Only RCs and DCs are entitled to income tax credit on income tax payments abroad
(2 The 20% RCIT rate for MSMEs is not applicable to foreign corporations.

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147. If the corporation is a non-resident foreign corporation, its income tax payable should be:
a. P1,000,000 c. P880,000
b, P1,280,000 d. P1,400,000

“> Answer: A
Philippines
Gross Income P4,000,000
x Tax Rate 25%
Income Tax Due/Payable P1,000,000

| 148. How much is the income tax payable assuming the corporation is an international carrier?
a. P100,000 c. P37,000
b..P10,000 d. P125,000

“+ Answer: A
Philippines |
Gross Income P4,000,000
x Tax Rate 2.5%
Income Tax Due/Payable P100,000

149. How much is the income tax payable assuming the corporation is a non-resident
cinematographic film owner/lessor?
a.P1,000,000 - c. P300,000
b. P100,000 d. P128,000

“* Answer: A
Philippines
Gross Income : P4,000,000
x Tax Rate 25%
Income Tax Due/Payable P1,000,000

150. How much is the income tax payable assuming the corporation is non-resident lessor of
vessel?
a. P100,000 c. P300,000
b. P180,000 d, P128,000

“+ Answer: B
Philippines
Gross Income P4,000,000
x Tax Rate 45%
Income Tax Due/Payable P180,000_ —.

151. How much is the income tax payable assuming the corporation is a non-resident lessor of
aircrafts, machineries and equipment?
a, P100,000 c. P300,000
b. P180,000 d, P128,000

“+ Answer: C

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Chapter & - Cw; OVAMLONS

Solution:
: Philippines
Gross Income P4,000,000
x Tax Rate 7.5%
Income Tax Due/Payable P300,000

152. How much is the income tax payable assuming the corporation is a proprietary educational
institution? =
a. P12,500 c. P18,000
b. P15,000 d. P27,500

“Answer: B
Solution:
: J Philippines Abroad Total
Gross Income _ P4,000,000 P2,000,000 P6,000,000
Deductions (2,500,000) (750,000) 3,250,000
Taxable net income P7,500,000 —P1,250,000 + _—_—~&P2,750,000

Taxable net income 7 , P2,750,000

x Tax Rate 1%
Income TaxDue P27,500
Less: INCOME TAX CREDIT >
Actual payment abroad P150,000
Limit = 1,250/2,750 x P27,500 12,500
Allowed (lower) (12,500)
Income Tax Payable P15,000

153. How much is the income tax payable assuming the corporation is a non-stock non-profit
educational institution whose revenues and assets are actually, directly and exclusively for
educational purposes?.
a. PO c. P120,000
« fh P730,000 d. P64,000

“ Answer: A

154.How much is the income tax payable assuming the corporatiori is a government
educational institution?
a. PO c. P120,000
b. P730,000 d, P64,000

* Answer: A

155. How much is the income tax payable assuming the corporation is a non-profit hospital?
a, P12,500 , c. P18,000
b. P15,000 d, P27,500

Answer: B; same treatment with a proprietary educational institution in MCQ #152.

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Rea LOla ied 8Ol

a UI LV UN Le] Yala

156. Which of the following statements is correct?

a. Any profit remitted by a branch office of a multinational corporation to its head office
is subject to 15% final tax based on total profits applied or earmarked for remittance
without deduction for the tax component.
Branch profit for purposes of branch remittance tax shall include interests, dividends,
rents, royalties, including remuneration for technical services, salaries, wages,
premiums, annuities, emoluments or other fixed or determinable annual, periodic or
casual gains, profits, income and capital gains received during each taxable year from
all sources within the Philippines.
For purposes of branch profit remittance, income items which are not effectively
connected with the conduct of its trade or business in the Philippines are. not
considered branch profits. ;
All of the above -

¢- Answer: D

157. 1f a branch of a foreign corp. in the Philippines remits passive income earned in the
Philippines to the head office, what is.the applicable tax on the said LaBAO
a. Subject to 30% final withholding tax
‘b. Subject to 12% creditable withholding VAT
c. Subject to 15% branch profit remittances tax
d. Exempt from branch profit remittances tax

Answer: D ;
= For purposes of branch profit remittance, income items which are not effectively connected
with the conduct of its trade or business in the Philippines are not considered branch profits.

in
158. Which of the following remittances of income made by a branch of a foreign corporation
the Philippines to its head office abroad is subject to 15% branch remittance tax?
Ordinary Interest income Capital gains Dividend income from
income from bank a domestic °
deposits — corporation
a “Yes Yes ~ No Yes a
b. . Yes . Yes Yes \
G: No No Yes No
d Yes No No No

“+ Answer: D

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TEASER
Benes Olas ter & - ey

TAXATION OF POGO ENTITIES, PAGCOR AND ITS LICENSEES

eta]

f 459. It refers to the operation by an Offshore Gaming Licensee on online games of chance or
sporting events via the intemet using a network or software or program exclusively for
offshore customers/players who are non-Filipinos.
a. Philippine Offshore Gaming Operation
b. Offshore Gaming Licensee
c. Accredited Service Provider
d. POGO Licensing Authority

“ Answer: A

460. Which of the following may grant a license to a POGO entity?

a. Philippine Amusement and Gaming Corporation (PAGCOR) —
b. Special Economic Zone Authority
c. Tourism or Freeport Zone Authority
d. Allofthe above

Answer: D

461. Income from gaming operations of a POGO entity is:

a. Exempt from income tax
b. Subject to 25% RCIT
c. Subject to 5% Franchise tax
d. None of the above -

“ Answer: C

162. The 5% Franchise Tax of a POGO entity is based on:

a. Gross wagers
b. Gross gaming revenue
c. Agreed Pre-determined minimum monthly revenue (APMMR) from gaming
operations
d. Whichever is higher of gross gaming revenue and agreed pre-determined
minimum monthly revenue from gaming operations

“+ Answer: D

163. Which of the following statements is correct?

a. Gross Wagers refer to the total amount of money that offshore gaming
customers.
b. Payouts refer to the total amount paid out to offshore gaming customers for
winning.
c. Agreed Pre-determined Minimum Monthly Revenue from gaming operations
refers to the amount that is derived after dividing the minimum monthly fee or

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its equivalent, as imposed by a Philippine Offshore Gaming Operation (POGO)

Licensing Authority, by the rate of prescribed regulatory fee.
d. Allofthe above.

+ Answer: D

164. Statement 1: Income from Gaming Operation refers to income or earnings realized of
derived from operating online games of chance or sporting events via the intemet using a
network and software or program.

Statement 2: Income from non-gaming operation refers to any other income or earings
realized or derived by OGLs that are not classified as income from gaming SpeTeONS,
a. Only statement / is correct
7 b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

- % Answer: C

165. Income from non-gaming operations of a Philippine-based Offshore Gaming Licensee

(OGL) is: .
a. Exempt from income tax
b. Subject to 5% Franchise tax’
c. Subject to 25% RCIT of taxable income derived from sources within the
Philippines
d. Subject to 25% RCIT of taxable income derived from sources within and
without the Philippines

¢ Answer: D

466. Income from non-gaming operations of a foreign-based Offshore Gaming Licensee (OGL)
is: ng
Exempt from income tax
os

Subject to 5% Franchise tax

c. Subject to 25% RCIT of taxable income derived from sources within the
Philippines
d. Subject to 25% RCIT of taxable income derived from sources within and
without the Philippines

“+ Answer: C

167. Income derived by a POGO Accredited Service Provider organized in the Philippines is:
a. Exempt from income tax
b. Subject to 5% Franchise tax
c. Subject to 25% RCIT of taxable income derived from sources within the
Philippines

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d. Subject to 25% RCIT of taxable income derived from sources within and
without the Philippines

fe Answer: D

168. Income derived by a POGO Accredited Service Provider organized abroad is:
a. Exempt from income tax
"D. Subject to 5% Franchise tax
C. Subject to 25% RCIT of taxable income derived from sources within the
Philippines
d. Subject to 25% RCIT of taxable income derived from sources within and
without the Philippines ‘

“+ Answer: C

169. Income from gaming operations of PAGCOR i is:

a.” Exempt from income tax
b. Subject to 5% Franchise tax
C. Subject to RCIT
d Subject to 20% FWT

“
,
Answer: B

170. Income from other related operations/services of PAGCOR is:

a. Exempt from income tax
b. ~ Subject to 5% Franchise tax
c. Subject to RCIT
d Subject to 20% FWT

Answer: C
¢,
“~

171. Income from gaming operation of a PAGCOR contractee or licensee is:

a. Exempt from income tax :
b. Subject to 5% Franchise tax
C. Subject to RCIT
d. Subject to 20% FWT
2,
~
Answer: B ss
P.D. No. 1869, as amended, expressly provides that the payment of the five percent(5%)
franchise tax of PAGCOR inures to the benefit of its Contractees and Licensees
(Bloomberry Resorts and Hotels, Inc. v. BIR, G.R. 212530 dated Aug. 10, 2016). Hence,
following the ruling in Bloomberry, like PAGCOR, its Contractees and Licensees shall be
exempt from the payment of corporate income tax realized from the operation of casinos upon
payment of the five (5%) franchise tax since the law is clear that said exemption inures and
extends to their benefit.

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 Chu stop + Caphinettona

172. Income from other related operations/services ofa PAGCOR contractee or licensee is:
a, Exempt from income tax”
b. Subject to 5% Franchise tax
-¢. Subject to RCIT
d Subject to 20% FWT

°
Answer: C

173. Which of the following is not classified as income from gaming operation of PAGCOR?
a. Income from its casino operations
b. Income from dollar pit operations
C. Income from bingo operations, including all variations thereof, income from
mobile bingo operations operated by it, with agents on commission basis.
‘d. None of the above

Answer: D
2,
~~

174. Which of the following is classified as income from other related operations/services of
PAGCOR?
a. Regulatory license fees : :
b. Regulatory/license fees from private internet casino arniiigs internet sports
bettingand private mobile gaming operations
G. Regulatory/license fees from private poker operations ~
d. All of the above

PREPARATION OF INCOME TAX RETURN (ITR)/: CORPORATIONS

Use the following data for the next three (3) questions:
Mega Construction Corporation, a domestic corporation, has the following data for 2023 taxable year:
Gross income, Phil. . P100,000,000
Gross income, USA _ 50,000,000
Gross income, Japan 50,000,000
Expenses, Phil: 30,000,000
Expenses, USA 20,000,000
Expenses, Japan 10,000,000
Other income:
Dividend from San Miguel Corp., a domestic corp. 7,000,000
Dividend from Ford Motors (RFC; income within) 12,000,000
Gain on sale of shares of a domestic corporation sold _. 15,000,000-
directly to buyers ~
Royalty income, Philippines 5,000,000
Royalty income; USA. 10,000,000
Interest income on peso bank deposit 8,000,000,
Interest income on FCDS deposit 3,000, 000.
Interest from receivables in the Philippines 6,000,000

284

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Rent Income, land in USA _ 25,000,000
t
Rent income, Building in the Philippines 10,000,000

The Company also sold a condominium classified as capital asset for 220,000,000. The
cost of the Condominium is P100,000,000 while its Zonal Value is P300,000,000. The
Company's total assets excluding the condominium sold and the land on which the business
office building is situated amounted to P680,000,000. *

Determine the following and fill-out the applicable Income Tax Return.

175. How much is the income tax due in 2023?

a. P47,750,000 c. P52,500,600
b. P50,750,0000 d. P60,900,000

«Answer: A
; Phils. * Abroad . Total
Gross income, Phil ?100,000,000 ; £100,000,000
- Gross income, USA 50,000,000. 50,000,000
Gross income, Japan 50,000,000 50,000,000
Expenses, Phil. ‘ (30,000,000) - (30,000,000)
Expenses, USA - (20,000,000) * (20,000,000)
Expenses, Japan - (40,000,000) (10,000,000)
Dividend from Ford Motors, RFC : exempt
Royalties, USA 10,000,000 10,000,000 -
Interest from receivables — Phls. 6,000,000 6,000,000
Rent Income, land in USA 25,000,000 25,000,000
Rent income, Phils 5 10,000,000 - 10,000,000
Total P86,000,000 P417,000,000 P191,000,000
x RCIT rate 25%
Income Tax Due ’ P47,750,000_

476. How much is the final withholding tax.on passive income in 2023?
a. P1,600,000 c. P3,050,000
b. P2,850,0000 d. P60,900,000

“Answer: C
-Royalty income, Phils.; P5M x 20% P1,000,000
Interest income on peso bank deposit; P8M x 20% 1,600,000
Interest income on FCDS deposit; P3M x 15% 450,000_
Total Final Tax on Passive Income ~__P3,050,000_

177. How much is the total capital gains tax in 2021?

a. P2,250,000 c. P19,875,000
b. 18,250,0000 d. P20,250,000

_% Answer: D :
CGT on shares of stock = P15M x 15% ~_ P2,250,000
CGT on real property = P300M x 6% ____ 18,000,000 _
Total Final Tax on Passive Income , 20,250,000_

285

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 Che ler & - Corborations

@® i ese ofthe teaieee:

BIR cst artment of Finance
iS Only ost Bureau of Internal Revenue
[SiR Ferm No Annual Income Tax Return
1 702-RT Corporation, Partnership and Other Non-individual Taxpayer aa
Jervery 2018 (ENCS) Subjegt Only to REGULAR Income Tax Rate
Enter af required information m CAPITAL LETTERS. Mark appicable
boxes with an “X",
7 tl |
Pagel
Two
copies
MUST be filed with the BIR end one held by tre taxpayer. ©
Tax Cote (ar
3 Amended Return? | 4 Short Pernod Retun?} 5 Alphanumeric
1 For ; [X] Calencar[_]
2 Year Ended (20799
Fist L -EXeS Ix] Note]iYee(xiNosj
2a
Peas SSS? es
[113 120.2 3 |
Parti- round information 2 5

6 Taxpayer Identiication Number (T/N) 2, 5)6|-| 7,315 -10,5}4] = [0,000 ,0|7 200 cose |) Sy0
8 Regstered Name (Enter only | lelle per box using CAPITAL LETTERS)
MByGiAy pCyOmNpSiTIR UCT TION) pCHOWRiPORJA;TiTOIN) § pi pyri y
pal fp a fh pe pit af at
et gpg ly Spe Pa Sy Seg ee ae de Se eden ts Seep
! eh py 2
9
| Registered Acdress (indcsie complete address Vite registered axkirsss & Piovent irom tre currect actives. go b Bre RDO bo updae registered ackiess b yusing BR Form No, 1909)

3,)R)D, )F,L)Ry-y- sAJN/ TON) IA, ;ByLDiG.) ;ByRyGyYi-y sHiTNiDiT) 1

MyAPHjAWNIAIP)1 yey OMA Ki AST Ty pCuTyTi¥Y) py pp pp \ Lit
cleat iy Pritts ABR 226
io EGE mi
acpi Ge Yo ,4 1412, 0.1; 2] 4 Contact Nurs 049 }14 910 64744434143
42 Exell Address mye aye omis);.;e:djtjQqma iy y a om charterer deogh
roll
et td
13 Wethod of Deductions _|_ itemized Deductions
[Section 34 (AJ), NIRC] |jechon
_ 3a )NIRC asamenied) goes eos
' Part Il — Total Tax Payable (DONOT enter Conteres, Carica 1 ax drpden We poerares|
44 Tax Due (From Partivttem43) : 3 ; :
Pie | 4,7,7,5,0,0,0,0
pyr ye yyy
15 Less Total Tax Credits/Payments (From Part Ii ftem 55) jhe eee ee ae 0

16 Net Tax Payable / (Overpayment) item 14 Less tem 15) (From Part IV Item 56) ‘Lo yp yg 1417474540 ,0,0,0
Add: Penalties — sea
17 Surcharge ype
18 Interest : i pe ye ee ey
19 Compromise a Lppepy 10
20 Total Penaltes (Sum of ftems 17 fo 12) jog 1144 47,0

21 TOTAL AMOUNT PAYABLE / (Overpayment) (Sumef Items 18 and 29 yop 14.747 )5;9,0,0,0
if over; int, mark one (1) box only. (Once the choreis made, the same is #revocable) ’ ;
| To be retunded |] To be issued a Tax Credit Certificate
(TCC) | | To be carried over as tax credit for next year/quarter
We declare under
the penabes of penury
that this retum, and 2i its attachments. have been made in good fait', venfed
by us, andfo the heal of our knowledge and bebe! are tue and
somect pursvard fo the provaione of the Metonal Lileme! Revere Code. a3 amended, and the reguiadons wsued wider authority thersof. (if 25%. by un Auimarzed Represietatve guste Tent
F9t aL ees het)

Jennifer D. Di Magiba oe
(President) cam
Signature Ove Pinied Name o PraadentP imc pal Officer Autnorces Represertaine | Signaiure
over Printed Name of Trewsurer/ Assisianl Treasurer
Title of Signetory TIN Tate of Signatory | | TIN
__Part iil — Details
of Payment
Particulars ‘Orawoo BankiA Number Date wiMnn/YYYY) Amount

$e ras Baeh Dee 2) es ep i et

et hee RE she pape Pee ea gh ea ge Fa Peg ap
‘ax DebitDebi Memo
25 Tax ft tect atte giahesta ala ffs by ypPY
26 Others (specify below) :
fof Pee ff ef feat POS [trie ead Sek pan aes [ee apes va Seta GI
Machine Valdation/Revenus Official Receipt Detai's [7 not Med with an Auinorized Agent Bank (AAB)) | Stamp of Receiving OMce/AAB and Dale of
Receypl (RO's Signative/Bank Teter's Inivad

286

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 is ri

Ob Ler 4. “ Cor rations

\
BR FomNo. ¥ ‘
4702-RT Annual Income Tax Return
Corporation, Partnership and Other Non-Individual Taxpayer. e t, TBS,
Jaruny 2018 ENTS) Subject Only to REGULAR Income Tax Rate tal by!
Page 2 1702-RT O1BENCS P.
Identification Number (TIN | Registered Name
2,5,6,7)3,5,0,5,4,0,0,0,0,0) MEGA, CONSTRUCTION, jCjO)R Py.
" Part IV - Computation
of Tax eter Simeon ales Doerr
27 SulewReceiptsRevenvesFees : : 1 /p210;0,0;0;0,0,9,0
ii ei iM ,0
BS Less: Sales Retums, Allowances and Dscourts " i

29 Net Sales Receipts Revenues ees (fem 27 Less item 26) L 1 y21010,0,0,0,0,0,0

30 Less: Cost of Sales/Serices ; LLELLLLELul Oo

31 Gross Income from Operation (hem 29 Less Nem X) ~ | gp 72 19,0,9,;9,0,0,9,0

$2 Aga Other Taxabie Income Not Subjected to Final Tax j tid 45)140)0,0,0,0,0

33 Total Taxable Income (Sun d hems M and 32) t ia p21 5)1,0)0,;0;0);0,0

Less. Deductions Allowable under Existing Law

34 Ordinary Allowabie Itemized Deductons (From Part Vi Schedule | Rom 19 poate 16; 0,0,0,0,0,0,0
35 Specia Allowable Remized Deductions (Fran Part Vi Scheauia It fam 3 PE ee eS
as mendes
wade Gee 27 ANG), Se. BAN TPARSID) ihe Tas Corda.
Ty Piceiatsban
senoico & Scena Eire 8
37 Total Deductons (Sum of ems 3 t0 36) ppg 0)0
4610401040401
OR /in case taxable
under Sec 27(A)& 24 4)(4))
38 Optional Standard Deduction (OSD) (40% of Renn 359) Lbhpttpeprer.1 12
2 Net Taxable Income/(Loss) (Cteawzad tem % Less fem 37, LSD Rem 32 ess Rem SH) Lb phy 92001979190)
4 Applicable income Tax Rate \ {2 ' 5|%

4M Income Tax Due other than Minimum Corporate Income Tax (MCIT) (hem a0 x Rev 40) [ie Oe dd
4,71,7,;5;0;0,0,0
42 MCIT Dua (2% of fem 39 Pop ap 1295424040)
0)0
43 Tax Due pecma! roame Tax Due n ten 41 CR the MCIT Die mt fom 42 wtychevert layne) (Fo Fait N tem +4) op pe 141747 45)9,0);9)0
Less: Tax Credits/Payments (attach proof) -
44 Pnor Year's Excess Credits other than MCIT Poe Ek pea yO
45 income Tax Payment under MCIT from Previous Quarter!s p Lip_titipuryyy 19
46 income Tax Payment under Reguiar/Normal Rate from Previous Quarters Lbhetipyuypy 40

47 Excess MCIT Applied this Currert Taxable Year (From Part Vi Schedule V hem 4) 5 Libiiypypyyy )0

48 Creditabie Tax Withheld from Previous Quarters per BR Form No, 2307 Libtiipperprpt 1?
49 Credtable Tax Withheld per BIR Form No. 2307 for the 4th Quater Libtitprpeprs?
i 50 Foreign Tax Credits, applicable * : ; ; LiLitipreppert?
51 Tax Paid in Retum Previously Filed, if this is an Amended Retum LrELieprrel
52 Special Tex Credits (ToPat Viten53) Lbprtpriprprpstr 12
Other Tax Credits/P: nts 2

es of ee ee pe op Py
ap ye py
Oe ey Ee REE ee Ee et 4 Lptirirpry yt 19
5B Tota Tax Credits ayments (Sumol hors 44 10 58) (To Pan Hi fein 15) Libitprprt 19
7 % Net Tax Payable / (Overpayment) (nan 43 Less ham S) (To Pat it item 16) bbb 1417775107910 ,0
Part V - Tax Relief Availment
ST Special Alowabie temized Deductions (tein 35 of Part IV x Appkcable Income Tax Rate) a ee ee
5B AG Special Tax Credts (Fran Pat WV hon 52) ; (oe ee
| 50 Total Tax Relief Availm ent (Sum of toms 57 ano'59 (oP Re by 0

F 287

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 Okapler 4. = Cor; OACLONs

y ; \
BIR F om No. .
41702-RT Annual Income Tax Return ‘ i
Corporation, Partnership and Other Non-Iindividual Taxpayer i
er Subject Onty to REGULAR Income Tax Rate 1702. RT OVA RENCS

5 ,6,7,3,5,0,5,4,0,0 0,0 ,0|miz C)O INSTRUC

yTyt CO IR Py.

oloflofololoJolololojojofolojo]
1 Amottizatons
283d Debts
3 Chentate
snd Other Contnbutons
4 Depiction

§ Depreciation

6 Entetammert, Amusement and Recreation

7 Fringe Benefits

Sirterest

9 Losses

Pension Trusts ry

1 Renta!

Reseach and Development

Saisnes, Wages and Allowances 0,0,0,0,0,0

SSS. GSS, Phiihsatth. HDMF end Other Contibubons 8,0,0,0,0,0
Taxes and Licenses t 2,0,;0,0,0,0
Transportation snd Travel

@ | Jerfonal and Messengerial Serces

b | Professional Fees 2,;070,0;0,0,0

c | Secunty Services

9
h

Total Ordinary Allowable Itemized Deductions (Sumd tems 1 to 17) (To Pan IV em 4) 6 10;01;0;0,0,0),0

Total Special Allowable itemized Deductions (Sumof fers 1 10 4) (To Pan IV ham 39
4

288

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CamScanner
 Chapter + - Corporations’

BIR For No. ;

Annual Income Tax Return
702-RT Corporation, Partnership and Other Non-Individual Taxpayer ) be
aren Subject Only to REGULAR Income Tax Rate
| MyTO2RT OIA 8E NCS
{

7 0,0,0,0,0 STRUCT

4 Gross Income fromPat WV tom 39 me

ait
Vi Schectde | ham 19
2 Less: Ordinary Allowable Itemized Deductons (FmamP
: + 14010 0,0,0
3 Net Operating Loss (Rem Less Rem 2) {70 Scheckse iia, lem 7A)

B)NOLCO Applied Previous Year/s

C)NOLCO Expired > © "5° .O)NOLCO Applied Current Year

4
5
6
7
B Tota! NOLCO fun
of tens 4D ib 1D) (To Pat IV, Neen

0 0)
D) Excess MCIT Applies E) Expired Portion of F) Excess MCIT Applied this es Tar Cred lx Suxcuading
Usedin Previous Yeas Excess MCIT Current Taxable Year ’ . +E+
1
2
3 0
4 Total Excess MOT Applied (Sun
of tore 1F 10.39) (To Pat
W hem

1 Net incomefLess) per Books

4 Total (Sumal
tens {ta 3)”

7
8

9 Taal (Sumcttemssi0@ |
Net Tecable Incomei{Loss)
(liom 4 Loss ten 9

289
‘
5
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 Chapter 4 - Oogporations

Republic of the Philippines t

for BIR BCS Department
of Finance
ise Only item Bureau of Interna Revenue

es Quarterly Remittance Return

1 60 1 -F Q of Fea licsine Taxes Withheld
2020 (ENCS) Emer ot required Iformaton in CAPITAL LETTERS BLACK ink Mart af appicable boxes

2,0) 2)3

EGA, ,C,O)N)S,T,
RU, CT, 1,0,N I

; B GY). 1H
A T
Agent =»
9) 0) 6,7, 4434113). | 14 Category et Withholding
104941)
Email Address. ajc ‘Sy. t ayij;ly.
Yes [X] No. [13Alfyes, specty

es Withheld
tor the Quarter Based
on Regular Rates (Sun
cf tem pgp ior ateae
; Quarter Bésed
on Tax Trealy Rates irom Pam W-Scnedue 1) !
Taxes Withheld for the (Sum of ems 29 and 21} - z
Less. Remitances Made. 1% Month of the Quarter
Tse ; . 2" Month of the Quarter__
Tax Remmed in Return Previcusly Filed, it this s an amended return

Total Remitiances Made 1Sum of Rems 2310 25) fi

Still Duei(Over-remitiance) hem 22 Less fern 26)

Add: Penalties 28 Surcharge

29 Interest
30 Compromise -
34 Total Fenatties (Suen of tems 23 10 30)
STILL DUE"Over-temimance) (Sumof ems 27 end 31)
Furth,

Jennifer 5. Di Maglba
e rc

(RO's SignatureBank Teller's Intiad

290

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 Dé ter & ~ Corborations

&R Form No,

1601-FQ Quarterly Remittance Return

2020 (ENC) of Final Income Taxes Withheld

$)6)7,3,5,0,5)4, 0,9 M,E\G TT

C,O,N)S,T,R,U)C) 1,0,N

Treaty CoderCourty | ATC) |<" aetrto Sites

~

. Particulars -

wmcome on currency pa lo Foreign

Cash dwidend payment by domestc corporation to citzens and resident alens#IRFCs”

' Propeny dwidend payment by domestic corporation to cibzens and resident aliensNRFCS
$ counties

payment counties lex

engage in Trade or

n net ncome a
which he 1s a pamtner, or share in the net income afer tax of an association, joint account oF a pint Venture taxable as

to caizens,

c
engage in

i 291

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 pues | Phx ter & - Corborations

: % Republic of the Philippinas

BR (BCS (Ce ant of Finance
ise Only - fem: Bureau of intemal Revenue

BIR Form No. “Quarterly Remittance Return. Wilke

4 602Q of Final Taxes Withheld on Interest Paid on Deposits \
and Yield on Deposit Substitutes/Trusts/Etc. {
January 2019 (ENCS) 16020 OF/ISENCS P}
Noe A al required infoomation in CAPITAL LETTERS using BLACK hk Mark of apotcabie boxos with
Enter
an" Tho copies MUST
he filed wth the BIR and one heldhy the Tay
+ Forthe Year = | 2 Guater 3 Amended Retum? Any Taxes Withheld? | 5 No. of Sheet/s Attached
21023] Cel hel el ie [_] Yes [X] No | Cl ves No lool.
Part | — Background Information

Taxpayer Gentiic
e8 Withnold:
:
Number TM)
aton [24516 J] 713= 151 101
[A]o {010,00
FAST
514
7ROOCade
RS
-|0 5,7 0 aa F 7)

ents Name ered Mame of

ME, GA, ; CONS, TRV CyT TON, T TOWN

(CORPORA | | jy it iyi |
Tiaveata Syne te ad race AVI AR MEME Titik OP, HPO ARS SEG ISI Pe aret gn Oo tof ROD b Ld Ie eI otr ad ofa by SR Forniio 1
9 Regsiered Ac
3,R,D, FL Ry.) JAN TON TA, BUDS) BRGY pHiTND Ty
MA HA NIAPy, MIA KAT I CLT YY) pp | SAZIPCode [112 12.16
10 Contact Number 19 ,9 19 0161714131113) | 11, Category of Withholding Agent [KX] Private - [7] Government
erat Address |meTiaCpoymys: pepAtySgpmpayi iy. poyoyms | Vi pp prea
of tax rebel unde : i
borplapiadcen ebony EL[oves: (Cy Ne Spee SOR py
Part Il - Computation of Tax — ~
Use LLL 124015 4040)010 ¥ lo
14 Taxes Withhe’d tor the Quarter Based cn Reguiat Rates (trom Part IV - Schedule 1),
a EL ec ,0 0,0
15 Taxes Wahheld fr the Qua-ter Based on Tax Treaty Rates (fam Part IV- Schodute 2)"
1 ek pe Te ey 0 fo 0
16 Taxes Witthe'd for the Quarter Based or Preterential Rates (trom Part IV - Schedule 3)
‘ 2,0,5,0,0,0 ,0}210 0
47 Total Taxes Withheld for the Quarter ;Sum of Items 1410 16)- jb ev ie 1 s
Made: tance
18 Less’ Remit s
1% Month of the Quarter Ppeieie e eicl 0 FAI0 0
24 Month ofthe Quarter, ; Lett mi tt ofc 0
19 5
peop pope pe et 0 lo 0
20 Tax Remitted in Return Previously Filed, if this is an amended return
eae ee 4 10 E10 0
24 Ovet-remittance from Previous Quarter of the same taxable year

22 Total Remittances Made (Sur of liems 18 to 21) ; Peer iy 10fep

23 Tax Still Duei(Over-remtance) jtem 17 Less ter 22 1p 1. 2)0;5)0,0,0,0 Pato0
Seen Se reeree Lc Le pi
pis y 1 sOf40 0
sb cette Le pet iy 1 a10 pefO (0
2
2a romise \
pe rp
gp iy yy 10 BegO 0
27 Total Penalties (Sum of tems 24 to 28) ! tapos ft pe 40 0

28 TOTAL AMOUNT STILL DUE/(Quver-remitance) (Sum of tems 23 anc 27) 1 4p 1240)5,0)0,0,0 =\0 0
To ne cariind aver to the next fac
quarter withen the sens
Gaeeod
Mf over-temitence, mark one (1) box only [_Jrobe retunded [Jte be Issued Tax Credit Certificate Gidecdr loan (rok sprleca ie
We ceca under be penates O papiy that Ove remmlarce plum and ed its actacriments, have been msde in good tain, verteed by ua ee a eee
pursue tb the proauons d the Natonnl intend Reveme Code, 03 arnenced, snd the regulstions issued under ouhorty thereot,Further, we give consent to the proces>ing of our information es contemplated
unter the Dats Privacy Act f 12 RA No i0t73) for legtmate and inl purposes (i Auth x 70% Recon ilat va starch authoreatcn Jotor)

Tennifter D. bi Kaginvbs
{Preeident)
Signature over Printed Name of PresidertVice Presicen/
Authorzed Officer or Representatie/Tax Agent (indicate Tila/Desenation and TIN)
a ert eee | - Date of Issue | Date of Expiry
astcmeys Rol No. agokcetin YANO =. uaa een
Part lll — Detalis of Payment ;
Parculars » Jorewee BonulAgency] Number Date (aumovyryy) Armount
ao Commoners a
90 Check ey | | Jeepers
eg tne (py ey
31
— TaxDebtiemo é pets Lt ul l L 1 Jef et {| JI 4 ] 4 Lt 1

Ah Aged ee dene Ln [ea oP RS ofc atiea: patterns

Machine Vslidation/Revenue Officiel Receipt Detolls (if nat tied wth an Aithonized Agent Bank) Stamp of Receiving Cffice/AAB and Date of Receipl
i (RO’s Signate/Bank Tellers intial

“NOTE. Please read ine EIR Dale Privacy Pacy found line BIR website (www bi.gov ph)
=

> . \

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 Chapter 4 - Corborations

4602Q Quarterly Remittance Return Mt

of Final Taxes Withheld on Interest Paid on Deposits
January 2019 (ENCS) and Yield on Deposit Suaines Tusts/Etc. 16020 OINENCS F2
\

245469743 1590,5 44,0 050 0

Tolal interes Yield Paid/Accrueg/Amount

20%
2%

20%
D%

E ; M% |.
0%

20%
2%

M% |i

5%
2% | °°

15%
15% Sy 5,0,0,0,0}210,90
Womrd
of tama 4 0 14)(To Fart&, Rem 14) 5 ‘
Total Texes Wehheld Based on Regular Rates (Sumo

Total inlerest * Taxes Withheld

4 f

2 s 0.00
3 0, 0} 0.00
4 Tota Taxes Wehteld Based on Tax Treaty Rates (Sum
of tems 9 to 3) (To Part | Ramm 15)

Agency (PA)Code | ATC Total Interest” : Aste “Taxes winnelg

oF

0 0.00
3 i 0, 0} 0.
4 Total Taxes Withheld on TPs Enjoying Preferertial Rates (Sum of Rems 4 10 2)(To Fartil om 16)

Pences.. 2 i, Regular Barking Urit

Bees : 293
me iceeant

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 Chapter 4 - Conparitions

1602Q
January 2019 (ENCS)
Quarterly Remittance Return
of Final Taxes Withheld on Interest Paid on Deposits
and Yield on Deposit Substitutes/Trusts/Etc.
UI GIR 1
|
vw I
|

oO

Towsm Intiastiucue and

Zamboanga Cily Special

ZCSEZA | Economic
Zone Authority

Guidelines and Instructions for BIR Form No. 1602Q (January 2019)
Quarterly Remittance Return of Final Taxes Withheld "
on Interest Paid on Deposits and Yield on Deposit Substitutes/TrustyEtc.
Whe Shall Fle
‘This retamn phull be filed an trpbcateby all banks, rom ark fimancial intermedianes, ad Fadare to pay/meut Oe deficierey ax within the tine pmscrted 7 ib
fares comparation, ueertmert and tart compares and other ietiubors reqaind to withhold payrrert/wmutterce in the notice
of # hess ment
fiw) weorre tas on uitewer! pad /ecerued ondegosit and eld oF any other monetary benefit fron 2 A suscharge of fity pexent (DY) of the tax of of the deficmency
tax, or case any
depord pb rtiates and Gom tart flud and sirale atares wert payrert/snsttience ha been made bem the discovery of te falsity or fied, for
The me tian shall be Giled by the Pre dent, View Presidentcx other prirespal officer exhoftee Silene wohton
& WAlfal meglect to file the retarm withen the penod praicrbed
by the Code or by
‘When and Where tr ¥ fie and Pay (Ramis vales and regulators,
or
The quartedy within Marg tax rerrutiorce
return hall be Bled ard the tux paid /mmitied rot DA Dive co Sesdubrt etre b wilfully made
Deter (han the Lut dey
of Ge month flowingGe dove of de quate during whch willie 3 tntesst at de rateof double te legal usteest ram Or loam oF Hrbearure of any
ve
money or the absence of an axpmss sbpalaton a set by the Bangko Sertral mg
Provided, however, thel w uth verpect f non-Lege and luge taxpayer who thall file Paligenas Gom the date prescrbed for paymert/renuttarce until the ammount ob fully
Bucugh the Dlectronic Filing and Payment Sys term (oF PS), the deadline Gy electone
aly fle pelfemated ‘That, in ro case shall the deficiency and the debngue ny
the retimn and payurg/remathng the tomer die themon shallbe in accordance with the prowwacmm wheres! prescribed unde Sechon2¢9 Subsector (B) ard (C) of the Natorul litera)
ofexs tug applcad
le even wruerces Revere Code, 2s amendel be erpored sumltarecus ly
‘The retin shall be Gled anf the tax paid remeted with the Acthoroed Aged Bad 4 Comgromase penaltyas paovaded usder applrab le rales and regilatices
(AAB) of Uw Revere Dis tact Office (RDO) having jarodictmun over tw withhclicg acest
place ofbw uwsslofiice In places where tinm ave ro Audomaed Agert Barks, the reton shall Vindation
of Withhobting Tax Provisions
be Filed and the tax paod he rretted with the Revere Collection Officer RCO) ofthe PDO having Azy percm required to withhold account for, and pay/renat any tar urposed by te
yore deton over the WA's place of busumssloGice, who will ise an Elctrome Ravers Manors) Interval Rewer Code (NIRC), as arrended, or who w Wlfilly fis to withbold seh
Offic ul Recespt(sROR) terefir tax, of acount Ba and payfmemet pach tux on aid or abet in any musmer to ¢ veke any och ue
When the eetim i filed with am AAD, taxpayer mut accomplohk and rb eut BIR ct ty payment) mmctcre themot shall un additon to otler pemltes provided Srunle@ te
perctbed deport skp, whch Ge bank ter shall maechow valdse w evderre tut Law, be buble upom cammetion to a penalty egoalto the total amourof Bw tax rotwilhheld o
payment/reretiance war reocrved by the AAB The AAB recenmg te tax burn shall rue rot axcounted Shr and part remeted
mack the word “Receiwed” on Oe metim and abo muchos veldate the return a proofof Bling Any enon myared wavder the NIE C, w arenied, orby rules ard regulators promulgated
end payment mutiance of the tax by the tecpayer The machine valdason shall reflect the dete thereunder t) paylrecrst any tax, rukee orhon, keep ay moord, or upply comct and accerae
of paymentenatisnes, amount pastiremeteed and tare action: cole, the nae of the bank, uformeton, who willfidly fuls to paytymut vuch tix, make much mtun, keep eich meoxt, or
bch code, teller’s code and teller’s wuttal Bank debt remo mmberand dats shoald be sayylp ruch correct ard socurate uf rration on withhold or pa were foes wilhield on mficnd
ueteceted in the mtont br taxpey w paywrg'remel tg under the bank debit pyrite ween axe wehbeld on compensation ot the tir or tires requued by Lew or rules and
Payrnerty/R eonttance may also be made thes the epayrnent chaveb of AABy thro either mequlebore shall on addiser to tw other penalties proved by lew, upon convicton themol by
thaw orlus facility, creditide hitipm pad casks, ard mob de payment poreshed by «fie of ma bev) than tea thowand pesos (P 1000 OD) and softer imgrvormnent of
The em barge mt tobe ured shall be the Daily Bango Cental ag Palins (ESP) mot fey thast cum (1) yeas but wot mom than ten 10) years ,
Gusbg Rate on the date of payrent/e ratture Every officer co erployne of Ue Gowrerant of the Repubie of du Philppues or any of
Thewe paywes availing of tax relefuander on Indermatonal Tax Treaty of Specul Lew ats agencaes and ise oe Lines, ve political pub wm well a go d ov
phall uvdcate under hat class iicabon they bebng [f they we erulsgonder Special Law, Oey conbe Led corpo mhor, urlidung te BangkoSertral ng Pibpenas, who, under the peovwiom of
phall spec fy whuch Special Law & applicable to them Ge NING, # amended, cr agulnom proemtigated the wunder, u chagedwath the dutytodeduct
A laxpayer may file 6 separate mtu fox the bead office and Breach branch or place of aed withhold any inhimal revemne tax ard to pay/erut Oe sane m accordance with de
Ww ess/cllice co a comcbd ated stim for the heal office ant all the barcheodke bite prowbaom of the MIRC, a amerded, and other hows and who © fund culty of any offerse
care oflarge texpayes only cee comoleated whan y requind bere below ppecified shall upoe commcton ol each act or ous ion, be fined in as nim pot
Lang Terme Deponit ox Lewes tonnt Yess than five Ghasand pesos (F 5.000) but not more than Bfty thousand pesos (P $0,000) of
The term “beng rm deposi o¢ iwvertment ceréfrat” shall weir bb codikean of unpre ceed Bra term of net loys than sx (6) worthy and ore day but wot mom tun teo(]
thm depont of uvestoert in the um of savings, common or indivedsal test finds, deposit yaar, caboth
yobs tala, umes Gren! management eccoand ant other wew tre nt witha mabintypenod of not 4 Those who fallor case the Gdoe to deduct and withbol! any o@erval revere tax under
Seve than fivw (5) years, he Srmofwlhech shall be prescribed bythe Pangko Sental ne Plpow arty of the withbo Ming tax lews and ung lenwntig regulator,
(BSP) and wvued by banks caly(notb yronbark finance) etermediace? and finance comparaes) © Those w be fail of came the Giuhore to pay/memul tones deducted ant withheld within Oe
trem preicrited by Low, and inpbers ching mgulators , and
to osbesdsab un dercoraneucey of Ten thaivard pece (B 10,000) anf other denomiubery a
may be pascrted by the BOP ¢ Those ve bo Gon canse the fico to file a se tumor statement within the tire prescabed,
Intemst weome dered fiom borg bam deposst ot uews tment nthe Han of sarang, ox vender o7 fanwh « fabe ce fraodulert metirn of statement required under the
wethbobding tax laws and regalatoes
common or udiedoal tat find, depositrubsttuts, ueerteernt management acon
and other mw toerd evsderced bycemtufcater in mach fim prevctted bythe ESP which If Ge withholing agent» the Goverrnert or any of rb agencus, pelitral subdivy mee oF
was pee terntenaiedd ythe holder bate the fitth(
Sth) year shullbe subject
to a fwlw thioling vF orag da ed ton be empkye tend
tax al the rates bereut paseribed © be deducted ard withheld fom the extue more /proceeds re pormble hr the wtboing and payre rt/rerattiance of tax shall be pew omully hable for te
themofh wed on be lergthof tim tha the invtument wa bel! by the taxpayer addons to the tax pre cubed by Be NIRC, ws amended
Mebling Period Rate Note: All bec bqxo und information mwtbe propery flied out .
Fas (4) yeas © les Gun five (3) pas ” = The lat Sdigih ofthe 14digd TIN mes wm de brarchcode
‘Thee (3) yous to bos than four(4) years Ls + All minus filed by un accandited
tax agunt one half of a taxpayer sball bear be
Lass than theve (3) gears am foloway ufounaxn
A Fox irdstual (CPAs, menbew of GPP, and otten)
Then im shallbe
shall! urpcred ant collected as partof the tax 41 Taspayes Hdermficaton Namber(TIN), ad
1 A sachage of Wwerty Gre pement(2 24) for the Glowing molahow 42 BIR Accraditeton Nunber, Date of b sae, and Date of Expity
& Fallow ® file oy ato ond payrems) the amount of tax oF installment due on or 5 Formentes of the Phippos Be (Leryn)
teen b 1 Taxpayer [demnécaton Hunter 1s),
b a mhimw ths pemonoroftice other tun tose with whom Hu reqiued b t? none Foll Hunter,
be fled, unless otherwae euthorced by the Comms acd ory Contunung Legal Educ CLE
norer, a"
© Fem © pa ytresat the full or part of te amount of tax shownca te mim, or the
corphuce Rumbe: ir, _ =
Su grown of ax dun foe which ro mar 4 BIR Accenditaton Number, Date of
b me, ard Dam of Expiry
8 wequred
i be Ged on or befcee
the

294

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 | . — Chapter & - Cortorations
’ } : !

Fe ney ! Repubile of the Philippines

Department of Finance
‘Use Only » fem Bureay of Internal Revenue
"BR Fam No 1
1707 | Capital Gains Tax Return
the Local Stock Exchange) |
(For Oncrous Transfer of Shares of Stock Nod Traded Through
Jaruary DONBYERCS) Enter all required ieformation in CAPITAL LETTERS usitg BLACK nk Sine sepiealie
‘ aves wih an °X" Two copies MUST be fied wath the BIR and one hefd by the Taxpayer ae
1707 G1/IBENCS Pt
4 Date of Transaction 2 Amended Return’? of Shestis
4 Number
(MWODIYYYY) - pated
foistoj2layojaia] | Urs Yes No
00/2},
> Part | - Backg) fe

sRooCceaSeler : 10,5,0} . ;
fs Name
oer ri
a Rome Fee frame, MoS bres i i aoSellersz Registered Address ; : Selie’s Nene ike
Ls > AIG Tho) = Dre OX by; ROE Fors No 1000) imber
ba | MEGA CONSTRUCTION CORPORATION SRO FLR. ANTONIA BLDG. BRGY. HINDI MAKANAP, MAKATI CITY 256-735-054-000
pe—4
a
7 Bayor's Name yim! sem, Fisthene Media sare | ee $ Registered Address. Buyers Taxpayer
Baars anne Death Fosse) n lisentficalion Mumtier (7M)
STE re fee one wane roe eemeenmrert
a pre sore Fore,

bs | BUMILI, ANTHONY, JONES 1890 MAPAYAPA ST. BRGY. PINAGSAMA, MANILA CITY 134-693-234-000
| pe
k G
' 8 Ree TEC ee aa oe k]No Jaa yes,specty |

9 Desenzion of Transaction [KX] Cash Sales [_Jinstatiment Sate [__]Forectosure Sete Liew a
(ea ng Sat WS POLO")

| Part i- Comp of Tax

LLL Iustololoraioro G al
j 40 Taxavle Bese — For Cash Sale / Foreclosure Sale (From Pat !v Schade 2

; 44 Less: Cost and Other Allowable Expenses FromPet W Schesue3) a4 a 8 10he| 010
Lb 11)5y010)040)0)0}% 040
42 Net Capital Gain/(Loss) (term 10 Less item 11)
itn 12 12 ‘5 10401010 3 010
43 Tax Due 01 the Entre Transaction Cash SahFormclosire Seb] tm S2.Mulich ty Arplcabe Tex Rede)
@ Tax Due tor bis 1 fm 77
FayerentPeriod (From Pat f¥ Schedite D
! Ia x pasate sae bec ob od of corperaton =e] Litt} [OPs1O10

45 Less: Tax Paid in Return Previously Filed, if this is ar Amended Return LERELLELELLt 10f] 010
i tt | flee 0 a 0);0
46 Tax Payable / (Ovetpayment) (item 13 of 14 fess Nem 15)

47 Add. Penaties 147A Surcharge LEELIELILLLI 1O}«1 O10

ue Kes fe ee)
Ue Congones Le
17D Tctal Penahes (Suma fers 174 b 179 LLELELity t pobe} 010},
48 Total Amount Payable!(Overpayment) (Sir of flems 16 ered 17D) itd Beene 10 0}.|0,0
in cose of overpayrnert_ apply for tax refund
using SIR Form No. 1914 (Applicaton
for Tax Credits/ Refunds)
ol Bs acteres tune rate
Wile Geckre Ure fe pentiesof peq.ay Parte nt
anna vs end tm a vor ney ed Foes nee mga ome et py ef promt ey
pas teh
Saray het BAZ A Neo 40% Pern Acthoezed Racrmsmivtve. atch Specin'Pawarof
Semana ’ Fer Now-Inciv cual
Jennifer D. Di Magiba
} '
' (President)
ee Tigran over Primed Hare lax Agort
& Tvesmieruice PrendertAaperues OA! 0° Reciese-taive
| eae eee
ak At rodtation Nos r 0 Dale of
secre fick No Magpicaie) aunnyreyi
pore Tere

: Part ill = Oetalls of Payment :

Particulars pameswaisgrn] _» Number Date (vAvDOVYYY) Amount
19 CovsBark Dep: ya
—— et eee ee) ed
—— bite teh Eee pe
ax Debit Memo is
2 Cras icy bao ST ce WT: pitty pt | Fst)
itpetiperi

Pitts tpi it ti Tid pp rege

; NT
' wwe Vekdation ' Aank Tater's intad

f NOTE: Ine BIR Data Privacy Polcy

is mie BR websie
(waw bit gov phy)

* 295

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 Ohapte 4 - CORA

BIR Form No.

| 4707 | Capital Gains Tax Return a

(For Onerous Transfer of Shares of Stock Not Traded Through
bee 1 the Local Stock Exchange) : 1707 O1/48ENCS Pat

mo : Taxpayer's Name
24516171 31540)5)4,0)0;0)0;0] [ME /GiA) (C0 ,N) 87 ]R WC) 7) 1/0) [CjO;RIPy yy
Part iv - Schedules
Schedule 1— Installment Sale i 5 s
1 Sellirg Price or : Pept
yep fp (OR
( 2 Cos: and Expenses : 3 BE: f (oes pap ere 103] 040

3 Morgage Assumed : Lig (iy (Of s| 040

4 No. of Instaliments .
5 Amount of Installment for this Payment Period Sp 0 Bf 0,0
, 6 Applicable Rate f : ai 00
7 Tax due for the period (em 5 Muitply by tem 6)(To Part Il, item 14) : Wop aficw yey It ofio,0

8 Date of Col'ection of Instaliment for this Payment Period (wMODDYYYY) aie ly ; 0,0
§ Tota! Collecton (Downpayment and Installments)
dunng the Year of Sale | jeep Tp peel eae 10 iG 0.0

Schedule 2— Description of Shares of Stocks (sifach additional sheets # necessary)

Name of Corporate Stock

AY ySphyayryeysy
joyts pSytioycyky | PPE Pett tT ttt tT tT
SP aa Pe ob Peis esi ait eis eee a een ey
Bg PtP] gS cy Pes a Dep YAR Pape Fp a Spe TEP a set]
o> MIB Ka Sa a OO WA Fs ne Wed Wee en Et TES cas ck HW DR Lt fl es) :
No. of Shares - Stock Certificate No Taxable Base Selling Price 2

AV pf p2y5 jj
10 jy} ppp ti ds i915] 1 4 F 1115101010101010} $1010
Se pet ee a oro
Ne Pe pe eee pp py pe fe Litiitiitt 10f}o0
ey fe Pp ea eg p eeNO MOG
Sela ep Pes eet L_[_g 114540)04040)0)0}.40)0
S ule
3 — Schedule of Cost and Other Allowable Exp fatiach additional
sheets, if necessary}
Paruculars Wass? Amount

: LLELitii dy) sofejoio

= Lidl ditts 1Ofs100
Ligiiirid i 10f6{ a0
Ae

£
2 Ligt iris
ys | 1Ofsfoo
Total (To Part! tem 17) PILLLELLLL 10 10,0

Taxpayer Cl. ei Tax Rate

1. Forinewidual ; 15%°
2. Fer Corporation

2.4 Domestic . ; ; 15%

2.2 Foreign 4
2.2.1 Not over P100,000 Sethe SM
2.2.2 On any amount in excess of P100 000 ' 10% =

'

296

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 | Chabter 4 ~ Corborations

Republic of the Philippines

FaBR? ‘fEC! D epartnjant of Finance

ans Capital Gains Tax Return WP }

(For Onerous Transfer of Real Property i '
1706 Classified es Capital Asset-both Taxable and Exempt)
2018 an Enter af requred inkvmnitin b CAPTAL LETTERS Using BLACK ink Mark apckcote hoses with an"
A Two cones MGT te Bas wth the Bik and.one het by tre Foparer 1706 01/18 ENCS PI

1 Jo 5]0;2]2,0, 2,
:
a2 SATC. 4 Number
of

5 RDO Code of Location of > 3 0,5, 0

N&ME (tat Aveo, Are Meee, Miche Nowe i ‘a Seller's Taxpayer
~ dae Inbeiaale OF Restore Aw @ fe Nome eual)
«| Identiication Number
sk ol Oy [SRD FLR. ANTONIA BLDG. BROY, HINDI MAHAMAD, MAKATI CITY 256 735 954 000

fre Kane, Fest awe, Macie Nowe z va . «Buyer's Taxpayer

dase ter teomindraisb) ares Idenbfication Number
080 456 698 000

-C)Y¥es No . Yes [X]No | tyes, specty:

Part Il = of Tax
Taxable Base (Frm Pat fv, Schedute 4 item 2) ;
Applicable Tax Rate
Tax Due (nem 12 Mutipydy tem 19)
Less Tax paid in previously flied retum, if this is an amended return
Tax PayadieX Overpayment) (item
44 Less kam 1

TTA Surcharge

7B interest
17C Compromise
47D Total Penathes (Sum of tems 174 to 17C)
TOTAL AMOUNT PAYABLEMOver remittance) (Sura
of item 18 and 170)

aidte nobticrs sessed unde aboty tered Futter,

Jennifer D. Di Magiba
Presidente
of

Pattioulars Date paanovyyy ”

CasvEark Debt Memo : ,

Te Debt Memo

j OTE The BAR Onta Pew acy Potcy nin the BIR wate (wow bir gov
sh)

297
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 3 : Chas stor & - Corboratlons

ioe, | RST 1706 DINSENCS P2

Fair Market Vatue (FMV). | FMV per BIR (Zonal Value

asa) paTD (avon) PE Gdemn2) | See
Meere
haar eomen
XXXX t -00 900

[%] CashSde (] Insaiment Sale 1 Selling Price

(J &=mp Foredosure Sale 2 Cost
and Expenses
((). Others ; : 3 Mortgage Assuin ed
4
5
g Ne. 7 Otte of hetetrent

Perertage (%) of NowUbEzation

a
Sctredisle
¢. Beam

A Gross Selling Price/ Bid Price F of Foreclosure Sale

B Tota FMV of Lad andlmprovemert (foe Scrdise 1)

C On the Unutitzed Portion of Sales Proceeds grow sade 3)

D instalment Collected gortestmesets
ote Exitos letres) From Sctwckte 2 live $)
(eer)
(forcadVioredo
act sah tem A OfB whiche vers higher: For unuatzed portion of
mks proreds
of Fandy tha tha C Forinstalin ect aks ea DoF. For otter transaction tem EF,
3 ( 0 OF,
"RRResi tenia Regd ar CR-Condoninue Re CL-CemeteryLa Gl-Govermmentlot A-Agitulturd XInstitunonal
RC-Residerha Contomimum CC-Coma cia Datatice PS-Pahng At’ GP-Genera Purpose flndustia APD -Acea for Party Bevelope
ent

298

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