Income Taxation for Corporations
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Questions and Answers

What is the corporate income tax rate for ordinary domestic corporations classified as MSMEs?

  • 30%
  • 25%
  • 10%
  • 20% (correct)

    • Which of the following is classified as a special corporation under the CREATE Law?

  • International Carriers (correct)
  • Tech Startups
  • Private Limited Companies
  • Franchised Restaurants

    • What tax rate applies to Proprietary Educational Institutions under the CREATE Law starting July 1, 2023?

  • 10% (correct)
  • 1%
  • 25%
  • 2.5%

    • What was the regular corporate income tax rate prior to the effectivity of the CREATE Law from January 1, 2018 to July 1, 2020?

    <p>30%</p> Signup and view all the answers

    What is the income tax rate for Resident Foreign Corporations classified as International Carriers?

    <p>2.5%</p> Signup and view all the answers

    After what date did Regional Operating Headquarters (ROHQs) cease to be treated as a special corporation?

    <p>January 1, 2022</p> Signup and view all the answers

    What income tax rate was applied to non-profit hospitals under the TRAIN Law before July 1, 2020?

    <p>10%</p> Signup and view all the answers

    Which of the following best describes the tax rate applicable to ordinary corporations other than MSMEs?

    <p>25%</p> Signup and view all the answers

    What percentage of corporate income tax is applicable to domestic corporations beginning July 1, 2020?

    <p>25%</p> Signup and view all the answers

    Which of the following corporations is not subject to the Minimum Corporate Income Tax (MCIT)?

    <p>Non-resident foreign corporations</p> Signup and view all the answers

    What is the MCIT rate imposed after the 4th taxable year starting July 1, 2020 until June 30, 2023?

    <p>1%</p> Signup and view all the answers

    When is the MCIT greater than the RCIT, necessitating its imposition?

    <p>When the corporation has zero taxable income</p> Signup and view all the answers

    For which kind of corporations is the 20% RCIT rate exclusively applicable?

    <p>Micro, Small, and Medium Enterprises (MSMEs)</p> Signup and view all the answers

    Which of the following factors is NOT a condition for imposing the MCIT?

    <p>Corporation reports a profit</p> Signup and view all the answers

    How is the value of land to be excluded from total assets determined for a leased area?

    <p>By multiplying the percentage of floor area used by the value of the total land</p> Signup and view all the answers

    Which section outlines the conditions for MCIT under the CREATE Law?

    <p>Section 27</p> Signup and view all the answers

    What is the total gross receipts from sales of tickets in the Philippines for the Manila to Jerusalem flight?

    <p>P8,000,000</p> Signup and view all the answers

    What is the total gross receipts for sales of tickets in Jordan for passengers actually flown from Manila?

    <p>P5,000,000</p> Signup and view all the answers

    How much is the gross income from rental income in the Philippines?

    <p>P1,500,000</p> Signup and view all the answers

    What amount represents the interest income from bank deposits in the Philippines?

    <p>P50,000</p> Signup and view all the answers

    What is the total amount of expenses connected to rental income in the Philippines?

    <p>P500,000</p> Signup and view all the answers

    How much are the payments for the first three quarters mentioned?

    <p>P150,000</p> Signup and view all the answers

    What is the gross income from air transport of goods on the flight from Manila to Jordan?

    <p>P3,000,000</p> Signup and view all the answers

    What is the total gross receipts for sales of tickets to passengers who were transshipped in Jordan to Paris?

    <p>P4,500,000</p> Signup and view all the answers

    What type of income is considered unrelated for proprietary educational institutions?

    <p>Income from campus canteen sales</p> Signup and view all the answers

    Which body issues permits for proprietary educational institutions to operate?

    <p>Department of Education, Culture and Sports</p> Signup and view all the answers

    How can proprietary educational institutions treat capital expenditures for expanding school facilities?

    <p>They can choose to capitalize or expense them.</p> Signup and view all the answers

    What is the corporate income tax rate imposed on proprietary educational institutions with gross unrelated trade income exceeding 50%?

    <p>25%</p> Signup and view all the answers

    To what portion of revenue is the 25% tax rate applicable for non-stock, non-profit institutions?

    <p>Portion not used for educational purposes</p> Signup and view all the answers

    Which of the following is a characteristic of proprietary educational institutions?

    <p>They are administered by private groups or individuals.</p> Signup and view all the answers

    What is the implication if the gross income from unrelated activities is more than 50% of total gross income?

    <p>They may face higher tax rates on unrelated income.</p> Signup and view all the answers

    Which type of educational institutions are not exempted from regular corporate income tax under specific regulations?

    <p>Non-stock, non-profit institutions</p> Signup and view all the answers

    What is the total gross income from sales in the Philippines for CY 2021?

    <p>P9,000,000</p> Signup and view all the answers

    What is the total cost of sales in the USA for CY 2021?

    <p>P2,000,000</p> Signup and view all the answers

    What is the total business expenses incurred in the Philippines for CY 2021?

    <p>P2,000,000</p> Signup and view all the answers

    How much royalties on Philippine copyrights was reported?

    <p>P500,000</p> Signup and view all the answers

    What is the total remittances of profit during the year, net of applicable tax?

    <p>P170,000</p> Signup and view all the answers

    What excess MCIT from a prior year is reported?

    <p>P30,000</p> Signup and view all the answers

    What is the total normal income tax computed for the fourth quarter?

    <p>P200,000</p> Signup and view all the answers

    Which of the following amounts represents the tax withheld for the third quarter?

    <p>P40,000</p> Signup and view all the answers

    What is the BPRT rate applicable to profit remitted connected with business conducted in the Philippines?

    <p>15%</p> Signup and view all the answers

    Which of the following entities is exempt from BPRT?

    <p>Philippine Economic Zone Authority (PEZA)</p> Signup and view all the answers

    Which type of income is now taxable for Offshore Banking Units (OBUs) under the CREATE Law?

    <p>Income derived from sources within the Philippines</p> Signup and view all the answers

    What kind of entities are classified as Offshore Banking Units (OBUs)?

    <p>Foreign banking corporations authorized by the BSP</p> Signup and view all the answers

    Which of the following statements about BPRT is false?

    <p>All profits are subject to BPRT regardless of the entity.</p> Signup and view all the answers

    Which activity would NOT be subject to BPRT?

    <p>Profit remitted from a business registered with PEZA</p> Signup and view all the answers

    What is the revised RCIT rate for Offshore Banking Units (OBUs) as stipulated by the CREATE Law?

    <p>25%</p> Signup and view all the answers

    To whom do Offshore Banking Units provide traditional banking services?

    <p>Non-residents in any currency except Philippine currency</p> Signup and view all the answers

    Study Notes

    Income Taxation for Corporations

    • Corporation Defined: An artificial being created by law, with rights of succession and powers explicitly defined by law. Defined under Section 22 of the Tax Code (RA8424), amended by RA11534 (CREATE) and RR5-2021
    • One Person Corporations (OPCs): Corporations with a single stockholder, only natural persons, trusts, or estates can form these.
    • General Professional Partnerships: Not included in the definition of a one-person corporation.
    • Joint Ventures/Consortiums: These are commercial undertakings by multiple parties, different from partnerships (relating to single projects or goods). If a joint venture falls outside the specific descriptions, it's treated as a corporation.
    • Joint Stock Companies: Businesses with individuals joining to operate a business, under a shared name, with transferable shares, an elected board, and operating without formal government authority.
    • Joint Accounts (Cuentas en Participacion): Interests in another's business, with capital contribution and profit/loss sharing. Not subject to formalities
    • Associations: Organizations with the defining hallmarks of corporations, taxable as corporations.
    • Corporations' Taxability:Corporations may be potentially liable for up to seven (7) income tax types.

    Classification of Corporate Taxpayers

    • Domestic Corporations (DCs): Created or organized under Philippine law. Can be classified as MSMEs.
    • Resident Foreign Corporations (RFCs): Created or organized in foreign countries but operating in the Philippines.
    • Non-resident Foreign Corporations (NRFCs): Created or organized in foreign countries but not operating in the Philippines.

    Exempt Corporations

    • Specific Organizations: Certain organizations are exempt from income tax, such as labor, agricultural, horticultural organizations not primarily for profit. Cooperative banks, beneficiary societies, cemetery companies, nonprofit educational institutions, civic leagues/organizations, and others.
    • Tax Exemptions: Labor, agricultural, or horticultural organizations that are not intended to profit; mutual savings banks without stock, cooperative banks without shares, beneficiary societies (with the purpose of exclusive benefit to members, such as fraternal or aid associations); cemetery companies; non-stock/non-profit religious, charitable, scientific, athletic, or cultural institutions, not giving benefits to any private members, organizers, or officers; business leagues, chambers of commerce or trade not for profit; civic organizations not intended for profit, or educational institutions

    Types of Income and Applicable Corporate Taxes

    • Ordinary Income: Income from normal business operations.
    • Passive Income: Income from investments or other sources not directly related to business operations (within Philippines).
    • Capital Gains: Income from the sale of assets such as stocks or real estate. (within Philippines).
    • Domestic Corporations considered as Micro Small and Medium Enterprise (MSME): Have certain conditions on assets and revenue, for determining their classifications, determining the total assets will exclude land owned.
    • Regular Corporate Income Tax (RCIT/CIT): A standard rate for regular corporations.
    • Special Corporations: These corporations have lower tax rates. Examples: Proprietary educational institutions, Non-profit hospitals, and International Carriers.
    • Minimum Corporate Income Tax (MCIT): A minimum tax computed on corporations with zero to negative taxable income, if MCIT>RCIT.
    • Carryforward of Excess MCIT: If MCIT is higher than RCIT, the excess can be carried forward to reduce future RCIT payments.
    • Net Operating Loss Carry Over (NOLCO): Excess of allowable deductions over gross income, for up to 5 years.

    International Carriers

    • International Air Carriers: Foreign airlines operating flights to/from the Philippines.
    • International Sea Carriers: Foreign shipping corporations that touch or intend to touch Philippine ports.
    • Gross Philippine Billings (GPB): The basis of income tax for international carriers (air).
    • Tax Treaties / Agreements: Lower rates or exemptions under such agreements.

    Regional Operating Headquarters (ROHQs)

    • Taxation: Not considered special corporations as of January 1, 2022. Rules of ordinary resident foreign corporations apply.
    • Tax Rate: 25% of net income, derived from Philippine sources. MCIT (on gross income in the Philippines).

    Offshore Banking Units (OBUs)

    • Taxation: Taxable like ordinary resident foreign corporations (25% RCIT rate).
    • Foreign Currency Transactions: Income from foreign currency transactions is initially exempt.

    Taxation of POGO Entities (Philippine Offshore Gaming Operations)

    • POGO Entities: Businesses offering online gaming services to non-Filipinos.
    • Gaming Tax: A 5% gaming tax on gross gaming revenue and/or or a pre-determined monthly revenue is levied in lieu of other taxes.
    • Accredited Service Providers (ASPs): Providers of support services for these businesses are also subject to 25% of RCIT on gross income.

    Taxation of PAGCOR (Philippine Amusement and Gaming Corporation)

    • Franchise Tax: PAGCOR's gaming income is subject to a 5% franchise tax.
    • Other Related Services: Income from other services is subject to corporate income tax.

    Filing of Tax Returns

    • Form 1702RT: Annual income tax return (regular income tax rate).
    • Form 1702MX: Annual income tax return (mixed income tax rates).
    • Form 1702EX: Annual income tax return (exempt corporations).
    • Form 1702Q: Quarterly income tax return.

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    TOPIC-5-Income-Taxation-for-Corporations PDF

    Description

    Explore the intricacies of income taxation as it relates to corporations. This quiz covers definitions of corporations, the structure of One Person Corporations (OPCs), and distinctions between partnerships and joint ventures. Test your understanding of the relevant laws and regulations governing corporate taxation.

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