Corporate Income Tax Regulations Quiz

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Questions and Answers

What is the minimum corporate income tax rate imposed on corporations starting from the fourth taxable year?

2% (correct)

What was the effective minimum corporate income tax rate between July 1, 2020 and June 30, 2023?

1% (correct)

Which entity is subject to a corporate income tax rate of twenty-five percent (25%) as of July 1, 2020?

Foreign corporations (correct)

Small businesses

Non-profit organizations

Local corporations

How is the taxable income calculated for corporations that adopt the fiscal-year accounting period?

By averaging monthly income over the fiscal year (B) Signup and view all the answers

What is the minimum corporate income tax imposed on resident foreign corporations?

Two percent (2%) of gross income (B) Signup and view all the answers

What provision applies specifically to regional or area headquarters of multinational companies regarding income tax?

Not subject to income tax (C) Signup and view all the answers

The corporate income tax rate applied to resident foreign corporations is related to what?

Taxable income derived in the preceding year (D) Signup and view all the answers

Which of the following conditions must be met for the minimum corporate income tax to apply to a corporation?

The corporation has been operating for at least four taxable years (B) Signup and view all the answers

What is the corporate income tax rate imposed on corporations with net taxable income exceeding P5,000,000?

25% (B) Signup and view all the answers

Which corporations are taxed at a reduced rate of 20%?

Corporations with net taxable income up to P5,000,000 (D) Signup and view all the answers

What tax rate must proprietary educational institutions and hospitals pay on their taxable income starting July 1, 2020, until June 30, 2023?

1% (D) Signup and view all the answers

How is taxable income computed for corporations adopting a fiscal-year accounting period?

Equally for each month of the fiscal year (C) Signup and view all the answers

What happens if the gross income from unrelated trade exceeds 50% for educational institutions or hospitals?

The tax imposed on all taxable income is 25% (B) Signup and view all the answers

What is the tax rate for proprietary educational institutions and hospitals that are nonprofit and do not exceed the income threshold for unrelated trade?

10% (A) Signup and view all the answers

How is the corporate income tax rate applied to the taxable income over the fiscal year?

On the amount computed based on the number of months covered (B) Signup and view all the answers

What is the asset limit for corporations to qualify for the reduced income tax rate of 20%?

P100,000,000 (C) Signup and view all the answers

What condition allows no gain or loss to be recognized when property is transferred to a corporation?

The transfer is made by not more than four persons who collectively maintain control. (B) Signup and view all the answers

Which of the following is NOT considered a type of reorganization?

Transfer of assets in exchange for cash. (C) Signup and view all the answers

In a merger or consolidation, what is required for the exchange to be classified as solely for stock?

The exchange must disregard any liabilities assumed. (D) Signup and view all the answers

What does recapitalization involve?

Readjusting stock and bonds as to amount, income, or priority. (C) Signup and view all the answers

How is the stock issued for services categorized in the context of property exchanges?

It is excluded from being considered as issued for property. (C) Signup and view all the answers

What must occur for a corporation to gain control of another corporation after an acquisition?

The acquiring corporation must have control immediately after acquisition. (C) Signup and view all the answers

When transferring property to a corporation, which situation qualifies for tax exemption?

The property is used in a business context. (D) Signup and view all the answers

Which party is involved in a reorganization through recapitalization?

The corporation's stockholders and creditors. (B) Signup and view all the answers

What is the tax rate imposed on regional operating headquarters on their taxable income as of January 1, 2022?

10% (B) Signup and view all the answers

What tax rate applies to interest income derived by a resident foreign corporation from a depository bank under the expanded foreign currency deposit system?

15% (D) Signup and view all the answers

What is the final tax rate on net capital gains from the sale of stocks not traded on the stock exchange?

15% (A) Signup and view all the answers

What is the tax rate imposed on a nonresident foreign corporation on gross income received from sources within the Philippines?

25% (B) Signup and view all the answers

Under the regulations, what type of income received by a resident foreign corporation is subject to a final tax at 20%?

Interest from currency bank deposits (B) Signup and view all the answers

What kinds of income are specifically excluded from the 25% tax on nonresident foreign corporations?

Capital gains not subject to tax under specific regulations (D) Signup and view all the answers

As of January 1, 2021, what applies to foreign corporations not engaged in trade or business in the Philippines?

They pay a tax of 25% on gross income. (A) Signup and view all the answers

What type of income is specifically identified as subject to a final tax under the regulations concerning nonresident foreign corporations?

Interest on foreign loans (D) Signup and view all the answers

Which residential properties are exempt from the value-added tax?

Residential lots valued at P2,500,000 and below (C) Signup and view all the answers

What is the frequency of adjustment for the residential property value thresholds starting January 1, 2024?

Every three years (A) Signup and view all the answers

Which materials are exempt from value-added tax as educational reading materials?

Books and materials covered by the UNESCO Agreement (D) Signup and view all the answers

When did the exemption for prescription drugs for diabetes and high cholesterol begin?

January 1, 2020 (C) Signup and view all the answers

What is required for the exemption of capital equipment and raw materials for COVID-19 prevention?

Certification from the DTI that local materials are insufficient (D) Signup and view all the answers

Which of these drugs became exempt from tax starting January 1, 2021?

Drugs specifically used for COVID-19 treatment (B) Signup and view all the answers

What must the DTI certify regarding the claimed exemption for COVID-19 related importation?

That local materials are not available or are insufficient (D) Signup and view all the answers

How often must the DOH provide a list of prescription drugs and medical devices for COVID-19?

Every three months (B) Signup and view all the answers

For what duration is the exemption for specific drugs for COVID-19 valid?

Until December 31, 2023 (B) Signup and view all the answers

Which of the following is NOT listed as a condition for the exemption of prescription drugs?

Must be inexpensive (D) Signup and view all the answers

Who constitutes the Congressional Oversight Committee as per section 290?

Chairpersons of the Committee on Ways and Means and four additional designated members (D) Signup and view all the answers

What is the primary function of the Congressional Oversight Committee according to the provided content?

To review the performance of the Fiscal Incentives Review Board (B) Signup and view all the answers

Which entities retain their respective mandates, powers, and functions under the new Title XIII on tax incentives?

The Department of Finance, Bureau of Internal Revenue, and Bureau of Customs (A) Signup and view all the answers

Under the new Title XIII, who has the authority to grant tax incentives?

The Fiscal Incentives Review Board and Investment Promotion Agencies under delegated authority (C) Signup and view all the answers

What does SEC. 291 clarify regarding the scope and coverage of tax incentives?

It covers all existing Investment Promotion Agencies unless specifically exempted. (B) Signup and view all the answers

What does the term 'Strategic Investment Priority Plan' relate to in Title XIII?

The basis for granting tax incentives to registered business enterprises (C) Signup and view all the answers

Which statement about the powers of Investment Promotion Agencies is true according to the amendments?

They maintain their functions and powers as per their governing special laws except when modified. (B) Signup and view all the answers

What is indicated by the term 'Fiscal Incentives Review Board' within the context of the amendments?

An entity responsible for granting tax incentives (C) Signup and view all the answers

Study Notes

Republic Act No. 11534 (CREATE Act)

Purpose: This act reforms the corporate income tax and incentives system, amends sections of the National Internal Revenue Code of 1997, and establishes Title XIII on incentives.
Short title: The act is known as the "Corporate Recovery and Tax Incentives for Enterprises Act" (CREATE)
Policy declaration: The act aims to develop a globally competitive national economy through tax policies that attract investment and boost productivity, while maintaining fiscal stability and inclusivity.
Key improvements:
- Equity and efficiency of the corporate tax system are improved through rate lowering, widening of the tax base, and reduction in tax distortions.
- Development of a responsive, performance-based, time-bound, and transparent tax incentive regime.
- Support for businesses during unforeseen events (like pandemics).
- Creation of a more equitable tax incentive system promoting inclusive growth and job opportunities in all regions.

Key Sections and Amendments

Section 1: Defines the short title of the act.
Section 2: States the policy of the act.
Section 3: Amends Section 20 of the National Internal Revenue Code (NIRC) of 1997, adding a requirement for the Commissioner to submit a report to the Oversight Committee every six months.
Section 4: Amends Section 22 of the NIRC of 1997, providing definitions including "corporation" in various formats.
Section 5: Details specific corporate income tax rates.
Section 6: Specifies income tax rates for domestic corporations, including preferential rates for small corporations, and certain special cases relating to hospitals and educational organizations.
Section 7: Outlines income tax rates for foreign corporations.
Section 8–10: Specific provisions amending sections of the NIRC of 1997, covering various deductions and exchanges of property.

Additional Provisions

Section 11-15: Continues specifying amendments/details of the NIRC of 1997, dealing with specific taxing conditions, and the establishment of a Congressional Oversight Committee.
Section 16: Introduces a new Title XIII (tax incentives) in the NIRC.
Section 109: Outlines exemptions from tax on specific transactions such as sales of real estate for low-cost housing, sales of books, and sales of prescription drugs.
Section 116: Taxes for persons exempt from VAT.
Section 204: Powers of the commissioner to compromise, abate and refund or credit taxes
Section 290: Creates a Congressional Oversight Committee to oversee the tax incentives regime.
Additional provisions detailed across sections cover aspects of tax incentives (such as income tax holiday and enhanced deductions), conditions of their application, regulatory procedures, and penalties for non-compliance.

Strategic Investment Priority Plan

The Strategic Investment Priority Plan (SIP) is mentioned as a document outlining specific projects and activities to receive incentives.
The SIP's purpose is to guide policies focusing on attracting investment to achieve goals of economic development and diversification.
Various provisions deal specifically with the criteria for determining sectorial and specific area priorities for investment, and the terms of tax incentives programs.

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Description

Test your knowledge on corporate income tax regulations, including rates and calculations applicable to various corporations. This quiz covers the minimum corporate income tax rates, taxable income calculations, and specific provisions for multinational companies. Perfect for accounting students or professionals seeking to reinforce their understanding of corporate taxation.