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Questions and Answers
What happens to the excess amount paid by the corporation?
What happens to the excess amount paid by the corporation?
- It is used to offset other tax liabilities
- It is forfeited
- It is refunded or credited to the corporation (correct)
- It is carried over to the next taxable year
What is the purpose of the Electronic Filing and Payment System (EFPS)?
What is the purpose of the Electronic Filing and Payment System (EFPS)?
- To penalize late filers
- To provide an efficient way of filing tax returns and payment of tax dues (correct)
- To collect more taxes
- To provide a manual way of filing tax returns
What is issued by the EFPS upon filing of tax returns?
What is issued by the EFPS upon filing of tax returns?
- A tax refund
- A certificate of payment
- A notification of audit
- A filing reference number (correct)
What happens when a corporation chooses the carryover option?
What happens when a corporation chooses the carryover option?
Who issues an 'acknowledgment number' after payment of tax due?
Who issues an 'acknowledgment number' after payment of tax due?
What is the purpose of the 'acknowledgment number'?
What is the purpose of the 'acknowledgment number'?
What is the benefit of using the Electronic Filing and Payment System (EFPS)?
What is the benefit of using the Electronic Filing and Payment System (EFPS)?
What happens to the excess credit of a corporation?
What happens to the excess credit of a corporation?
What is the effect of carrying over excess credit?
What is the effect of carrying over excess credit?
What is the system developed and maintained by the BIR for electronically filing tax returns and paying taxes due?
What is the system developed and maintained by the BIR for electronically filing tax returns and paying taxes due?
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Study Notes
Foreign Corporations
- A foreign corporation is a corporation organized or incorporated by foreign law.
- A foreign corporation may be a resident (engaged in business in the Philippines) or non-resident (not engaged in business in the Philippines).
Classification of Corporations
- Domestic and foreign corporations may be further classified as ordinary or special corporations.
Income Types and Taxes
- There are three types of income subject to income tax:
- Ordinary or regular income
- Passive incomes (subject to Final Withholding Taxes)
- Capital gains
Ordinary Income
- Ordinary income is derived from the regular conduct of a trade or business, including incidental income other than income subject to final taxes and capital gains tax.
- Regular or ordinary income is generally subject to the Regular Corporate Income Tax (RCIT).
Tax Rates for Ordinary Income
- Domestic Corporations (DC):
- Micro, Small, and Medium Enterprise (MSME): 20% of taxable income
- Non-MSME: 25% of taxable income
- Resident Foreign Corporations (RFC): 25% of taxable income
- Non-Resident Foreign Corporations (NRFC): 25% of gross income
Passive Incomes
- Passive incomes are certain types of income derived from sources within the Philippines that are subject to Final Withholding Taxes (FWT).
- For corporate taxpayers, passive incomes include interest income, royalties, and dividends.
- These incomes are excluded in determining taxable income and preparing income tax returns (ITR).
Capital Gains
- Capital gains are incomes derived from the sale of capital assets.
- Types of capital gains subject to capital gains tax include:
- Capital gains from the sale of shares of stocks of a domestic corporation not traded in the local stock exchange
- Capital gains from the sale of real property in the Philippines
- Capital gains not subject to CGT are generally subject to basic tax.
Filing of Tax Returns
- The President, Vice President, or other principal officers on behalf of the company shall make the filing of an income tax return.
- The return shall be sworn to by the above officer and by the Treasurer or Assistant Treasurer.
- Declaration of quarterly corporate income tax on a cumulative basis is required manually through Electronic Filing and Payment System (EFPS) or electronic BIR forms.
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