Corporate Income Tax Regulations Quiz

A tax rate of 25% imposed on the taxable income of corporations in the Philippines.

Corporations with net taxable income not exceeding ₱5,000,000 and total assets not exceeding ₱100,000,000 (excluding land for operations) are subject to a reduced income tax rate.

The corporate income tax rate is applied proportionally based on the duration of the new rate within the corporation's fiscal year.

Non-profit educational institutions and hospitals are subject to a reduced income tax rate of 10% on their taxable income.

The term "unrelated trade, business or other activity" refers to any trade, business, or activity that is not directly related to the primary purpose of an educational institution or hospital.

If the gross income from unrelated activities exceeds 50% of the total gross income of a non-profit educational institution or hospital, the regular corporate income tax rate applies.

The tax rate for non-profit educational institutions and hospitals was reduced to 1% from July 1, 2020, until June 30, 2023.

Non-profit educational institutions and hospitals are not subject to the regular corporate income tax rate if they meet certain conditions.

A tax imposed on corporations doing business in the Philippines, calculated at 25% of their taxable income derived within the Philippines.

The income a corporation receives from all its sources within the Philippines during a given tax year.

A minimum tax imposed on foreign corporations operating in the Philippines, calculated as 2% of their gross income. Applies when it exceeds regular income tax.

A period of time during which a specific tax rate is applied. Here, the tax rate is reduced for a specific duration.

The accounting method used by a corporation to track its financial performance. It can be based on a calendar year or a fiscal year.

A fiscal year is a 12-month period used for accounting purposes. It doesn't necessarily align with the calendar year.

Regional headquarters of multinational companies, as defined in Section 22(DD), are not subject to income tax.

Income earned by a foreign corporation from business operations outside the Philippines.

Regional operating headquarters, as defined in Section 22(EE), are subject to a 10% tax on their taxable income. However, starting January 1, 2022, they are subject to the regular corporate income tax.

Interest from deposits, yields from deposit substitutes, trust funds, and royalties earned within the Philippines are taxed at a final rate of 20%. However, interest income earned by a resident foreign corporation from a depository bank under the expanded foreign currency deposit system is taxed at 15%.

A final tax of 15% is imposed on net capital gains realized from the sale, barter, exchange, or other disposition of shares in a domestic corporation, except those sold through a stock exchange.

Foreign corporations not engaged in trade or business in the Philippines, effective January 1, 2021, are taxed at 25% on their gross income from sources within the Philippines. This includes interests, dividends, rents, royalties, salaries, premiums, annuities, emoluments, and capital gains, except those subject to specific tax rates under subparagraph 5(c).

This tax applies to interest earned on foreign loans by non-resident foreign corporations.

A special tax rate applies to intercorporate dividends, a type of income generated within corporations.

A business combination where one corporation acquires all or a substantial portion of another corporation's assets or stock in exchange solely for its own voting stock.

A restructuring of a corporation's capital structure, involving changes to the amounts, income, or priority of its stocks and bonds.

The creation of a new corporation with the same assets, stockholders, and business operations as a previous corporation, but under a new charter.

The transfer of property to a newly formed corporation in exchange for its stock, resulting in the transferors controlling the new corporation.

The acquiring corporation's assumption of liabilities of the other corporation is disregarded when determining if the exchange is solely for stocks.

Stocks issued for services rendered are not considered to be issued in exchange for property for reorganization purposes.

Sales or exchanges of business property for stocks under reorganization rules are exempt from value-added tax.

Prior tax rulings from the Bureau of Internal Revenue are not needed to claim tax exemption for reorganization transactions.

The sale of real estate properties that are not primarily intended for resale to customers or for leasing as part of a regular business operation is exempt from value-added tax (VAT). This includes real estate utilized for low-cost and socialized housing, as defined by the Urban Development and Housing Act of 1992. Additionally, residential lots valued at P2,500,000 or less, and houses and lots or other residential dwellings valued at P4,200,000 or less, are also exempt. These value thresholds are subject to adjustment every three years based on the Consumer Price Index, as published by the Philippine Statistics Authority.

The sale, importation, printing, or publication of books, newspapers, magazines, journals, reviews, bulletins, and educational materials covered by the UNESCO Agreement is exempt from VAT. This exemption also applies to digital or electronic formats of such materials. However, the exemption does not apply if the primary purpose of the publication is to carry paid advertisements.

The sale or importation of prescription drugs and medicines specifically for diabetes, high cholesterol, and hypertension is exempt from VAT starting January 1, 2020. This exemption was extended to include cancer, mental illness, tuberculosis, and kidney disease medications starting January 1, 2021. The Department of Health (DOH) publishes a list of approved drugs and medicines that qualify for this exemption.

The sale or importation of capital equipment, spare parts, and raw materials necessary for the production of personal protective equipment (PPE) components is exempt from VAT from January 1, 2021, to December 31, 2023. The Department of Trade and Industry (DTI) must certify that the imported items are not readily available or insufficient locally, or do not meet the required quality or specifications. This exemption also includes all drugs, vaccines, and medical devices specifically prescribed for COVID-19 treatment, as well as drugs approved for clinical trials, including their raw materials. The DOH publishes a list of prescription drugs and medical devices covered by this exemption.

The Fiscal Incentives Review Board (FIRB) is a government body with the authority to grant tax incentives to registered businesses, but only for their approved projects under the Strategic Investment Priority Plan (SIPP).

The FIRB directly grants tax incentives, but they can also delegate this authority to Investment Promotion Agencies (IPAs). Each IPA specializes in attracting investment in specific sectors.

The FIRB and IPAs can only grant tax incentives to businesses that are formally registered and whose projects align with the SIPP. This encourages investment in strategic areas that promote economic growth.

The SIPP acts as a roadmap for investors. It outlines priority industries and projects that the government considers crucial for economic growth.

This law establishes the Congressional Oversight Committee (COC) which has a responsibility to oversee the processes and decisions made by the FIRB.

The COC is made up of influential individuals in the government, with the chairpersons of the House and Senate committees on ways and means, and additional members from each House.

The COC can review the performance of the FIRB to ensure that it's operating effectively and fairly in granting tax incentives.

This Title specifically addresses the granting of tax incentives to registered business enterprises, giving guidance on the process and the extent of incentive granted.