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Questions and Answers
What is the general income tax rate imposed on the gross income of non-resident foreign corporations from Philippine sources?
What is the general income tax rate imposed on the gross income of non-resident foreign corporations from Philippine sources?
- 15%
- 20%
- 25% (correct)
- 30%
What is the standard Value Added Tax (VAT) rate in the Philippines?
What is the standard Value Added Tax (VAT) rate in the Philippines?
- 12% (correct)
- 10%
- 15%
- 8%
On what basis are domestic corporations taxed by the Philippines?
On what basis are domestic corporations taxed by the Philippines?
- Worldwide income (correct)
- Income earned only within the Philippines
- Based on the location of their headquarters
- Income earned outside of the Philippines only
What is the income tax rate on interest on foreign loans extended by a non-resident foreign corporation?
What is the income tax rate on interest on foreign loans extended by a non-resident foreign corporation?
Who withholds and remits income tax and VAT payments on behalf of non-resident recipients?
Who withholds and remits income tax and VAT payments on behalf of non-resident recipients?
What types of taxes do local governments in the Philippines impose?
What types of taxes do local governments in the Philippines impose?
What governs the maximum taxes that local government units (LGUs) in the Philippines can impose?
What governs the maximum taxes that local government units (LGUs) in the Philippines can impose?
What condition must be met for the dividend tax rate to be reduced to 15% for non-resident foreign corporations?
What condition must be met for the dividend tax rate to be reduced to 15% for non-resident foreign corporations?
What is the tax rate for dividends from a domestic corporation to a non-resident foreign corporation, if the conditions for a reduced rate are not met?
What is the tax rate for dividends from a domestic corporation to a non-resident foreign corporation, if the conditions for a reduced rate are not met?
What kind of entities are subject to Philippine income tax only on their Philippine sourced income?
What kind of entities are subject to Philippine income tax only on their Philippine sourced income?
What legal heritage significantly influences the Philippine legal system?
What legal heritage significantly influences the Philippine legal system?
What type of document enshrines the fundamental rights of citizens in the Philippines?
What type of document enshrines the fundamental rights of citizens in the Philippines?
Which branch of the Philippine government is responsible for enacting laws?
Which branch of the Philippine government is responsible for enacting laws?
What is the role of jurisprudence in the Philippine legal system?
What is the role of jurisprudence in the Philippine legal system?
What serves as precedents when courts interpret and apply written laws?
What serves as precedents when courts interpret and apply written laws?
Who possesses local legislative powers within their jurisdictions?
Who possesses local legislative powers within their jurisdictions?
What type of legal instrument can LGUs enact?
What type of legal instrument can LGUs enact?
What supplements statutes in the Philippine legal system?
What supplements statutes in the Philippine legal system?
For cases not covered by written laws, how do Philippine courts render decisions?
For cases not covered by written laws, how do Philippine courts render decisions?
In addition to national laws, what other form of legislation exists in the Philippines?
In addition to national laws, what other form of legislation exists in the Philippines?
What is the primary responsibility of the Bureau of Internal Revenue (BIR)?
What is the primary responsibility of the Bureau of Internal Revenue (BIR)?
Who has the power to interpret the provisions of the NIRC and other tax laws?
Who has the power to interpret the provisions of the NIRC and other tax laws?
Which court has exclusive appellate jurisdiction over decisions of the CIR?
Which court has exclusive appellate jurisdiction over decisions of the CIR?
Which of the following is NOT a type of tax imposed and collected by LGUs?
Which of the following is NOT a type of tax imposed and collected by LGUs?
What is the smallest political unit in the Philippines that has the authority to impose and collect local taxes?
What is the smallest political unit in the Philippines that has the authority to impose and collect local taxes?
What body reviews the CIR's interpretation of the National Internal Revenue Code (NIRC)?
What body reviews the CIR's interpretation of the National Internal Revenue Code (NIRC)?
Which of the following taxes falls under the jurisdiction of the Bureau of Internal Revenue (BIR)?
Which of the following taxes falls under the jurisdiction of the Bureau of Internal Revenue (BIR)?
Who administers and collects local taxes within a province?
Who administers and collects local taxes within a province?
What is the term for the national tax code in the Philippines?
What is the term for the national tax code in the Philippines?
What limits the discretion of LGUs in imposing local taxes?
What limits the discretion of LGUs in imposing local taxes?
What document is initially filed with the SEC to start the process of incorporating a corporation in the Philippines?
What document is initially filed with the SEC to start the process of incorporating a corporation in the Philippines?
What is the general minimum paid-in capital requirement for corporations with more than 40% foreign equity catering to the domestic market?
What is the general minimum paid-in capital requirement for corporations with more than 40% foreign equity catering to the domestic market?
What is the minimum number of directors a corporation (excluding One Person Corporations) should have?
What is the minimum number of directors a corporation (excluding One Person Corporations) should have?
Which corporate officer MUST be a resident of the Philippines?
Which corporate officer MUST be a resident of the Philippines?
What is the citizenship requirement for the secretary of a corporation in the Philippines?
What is the citizenship requirement for the secretary of a corporation in the Philippines?
Which of the following is generally treated as a corporation for Philippine income tax purposes?
Which of the following is generally treated as a corporation for Philippine income tax purposes?
For income tax purposes, which entity is taxed in the case of a general professional partnership?
For income tax purposes, which entity is taxed in the case of a general professional partnership?
What is generally required of a foreign corporation before it can conduct business in the Philippines?
What is generally required of a foreign corporation before it can conduct business in the Philippines?
What is the consequence of a foreign corporation operating in the Philippines without the required license?
What is the consequence of a foreign corporation operating in the Philippines without the required license?
On what income is a foreign corporation taxed in the Philippines?
On what income is a foreign corporation taxed in the Philippines?
What is one of the main activities of a representative office of a foreign corporation in the Philippines?
What is one of the main activities of a representative office of a foreign corporation in the Philippines?
Which type of office established by a multinational company in the Philippines can engage in corporate finance advisory services?
Which type of office established by a multinational company in the Philippines can engage in corporate finance advisory services?
What is the primary function of a regional or area headquarters (RHQ) in the Philippines?
What is the primary function of a regional or area headquarters (RHQ) in the Philippines?
What financial ratio must a regular branch office of a foreign corporation meet to register with the SEC?
What financial ratio must a regular branch office of a foreign corporation meet to register with the SEC?
What is the maximum number of directors allowed in a Philippine corporation, aside from One Person Corporations?
What is the maximum number of directors allowed in a Philippine corporation, aside from One Person Corporations?
What condition allows a foreign national to be elected as a director in a Philippine corporation?
What condition allows a foreign national to be elected as a director in a Philippine corporation?
What is the minimum percentage of independent directors required for corporations vested with public interest?
What is the minimum percentage of independent directors required for corporations vested with public interest?
Who must own at least one share of stock to qualify as a director of a Philippine corporation?
Who must own at least one share of stock to qualify as a director of a Philippine corporation?
What document governs the regulations of corporations in the Philippines?
What document governs the regulations of corporations in the Philippines?
What is the effect of a corporation being considered a juridical person?
What is the effect of a corporation being considered a juridical person?
In the context of foreign corporations, what does 'doing business' NOT include?
In the context of foreign corporations, what does 'doing business' NOT include?
If a corporation is at least 60% owned by citizens of the Philippines, what is it considered?
If a corporation is at least 60% owned by citizens of the Philippines, what is it considered?
What happens to the corporate juridical personality once a Certificate of Incorporation is issued by the SEC?
What happens to the corporate juridical personality once a Certificate of Incorporation is issued by the SEC?
What is the exception to the general rule that a partnership is treated as a corporation for Philippine Income Tax purposes?
What is the exception to the general rule that a partnership is treated as a corporation for Philippine Income Tax purposes?
In a limited partnership, what is the liability of a limited partner?
In a limited partnership, what is the liability of a limited partner?
Flashcards
Philippine Income Tax
Philippine Income Tax
Tax imposed on worldwide income for resident citizens and domestic corporations, and Philippine-sourced income for others.
Income tax for non-resident foreign corp
Income tax for non-resident foreign corp
Rate of income tax generally applied to gross income of non-resident foreign corporations from Philippine sources.
Dividends to Non-resident Foreign Corp
Dividends to Non-resident Foreign Corp
The income tax rate applied on dividends from a domestic corporation to a non-resident foreign corporation, subject to conditions.
Double-Tax Treaties
Double-Tax Treaties
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Value Added Tax (VAT)
Value Added Tax (VAT)
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Local Government Units (LGUs)
Local Government Units (LGUs)
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National Internal Revenue Code (NIRC)
National Internal Revenue Code (NIRC)
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Local Government Code (LGC)
Local Government Code (LGC)
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Philippine Legal System
Philippine Legal System
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Philippine Constitution
Philippine Constitution
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Philippine Congress
Philippine Congress
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Precedents
Precedents
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Bureau of Internal Revenue (BIR)
Bureau of Internal Revenue (BIR)
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Commissioner of Internal Revenue (CIR)
Commissioner of Internal Revenue (CIR)
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Local Taxes
Local Taxes
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Corporation
Corporation
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Articles of Incorporation (AOI)
Articles of Incorporation (AOI)
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By-laws
By-laws
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Minimum Paid-in Capital
Minimum Paid-in Capital
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Board of Directors
Board of Directors
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Independent Directors
Independent Directors
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Corporate Officers
Corporate Officers
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Partnership
Partnership
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Limited Partners
Limited Partners
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Joint Venture (JV)
Joint Venture (JV)
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"Doing Business"
"Doing Business"
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Cease-and-Desist Order
Cease-and-Desist Order
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Branch Office
Branch Office
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Representative Office
Representative Office
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Regional Operating Headquarters (ROHQ)
Regional Operating Headquarters (ROHQ)
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Regional Headquarters (RHQ)
Regional Headquarters (RHQ)
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Study Notes
- Foreign entities can establish business vehicles in the Philippines as corporations, partnerships, joint ventures, branches, representative offices, regional headquarters, or regional operating headquarters.
Corporations
- Philippine corporations are juridical entities with a separate legal personality from stockholders, who aren't liable for corporate acts.
- Corporate juridical personality begins with the SEC's issuance of a Certificate of Incorporation.
- This can exist perpetually unless a limited corporate term is specified.
- Application for incorporation starts with filing articles of incorporation (AOI) and by-laws with the SEC.
- Corporations are governed by the Revised Corporation Code (RCC).
- Any person, partnership, association, or corporation, singly or jointly (up to 15), can organize a corporation for any lawful purpose.
- Each incorporator of a stock corporation must own or subscribe to at least one share of stock.
- Generally, there is no minimum capital stock required upon incorporation.
- Corporations with over 40% foreign equity catering to the domestic market require a minimum paid-in capital of US$200,000.
- The US$200,000 minimum paid in capital is reduced to US$100,000 if the activity involves advanced technology certified by the Department of Science and Technology, or if it employs at least 50 direct employees, as certified by the Department of Labor and Employment.
- Some activities require higher paid-in capital or Filipino ownership percentages.
- Corporations, except one-person corporations (OPCs), must have 2-15 directors.
- Only shareholders owning at least one share are qualified to be elected director.
- Foreigners can be directors in proportion to their equity.
- Corporations vested with public interest need independent directors constituting at least 20% of the board.
- Mandatory corporate officers include a president (who must be a director), a resident treasurer, and a resident/citizen secretary.
- The president cannot be both secretary and treasurer.
- A corporation with at least 60% Filipino ownership of voting stock is considered a Philippine national, and all officers must be Philippine citizens.
Partnerships and Joint Ventures
- Like corporations, partnerships have a separate legal personality from partners, but partners may be liable for the partnership's debts.
- Limited partnerships allow limited partners' liability to be capped at their contributions, but require at least one general partner with personal liability.
- Partnerships are generally treated as corporations for income tax purposes, apart from general professional partnerships and joint ventures (JVs) for construction projects, or energy operations under a service contract with the government.
- For partnerships or JVs not treated as corporations, the partners themselves are subject to income tax.
Foreign Corporations
- Foreign corporations doing business in the Philippines need a license from the SEC.
- "Doing business" includes: soliciting orders, service contracts, opening offices, appointing representatives/distributors staying in the country for 180+ days, managing/supervising a domestic entity, and other acts implying continuous commercial dealings.
- "Doing business" does not include: mere investment as a shareholder, exercising investor rights, or having a nominee director or officer.
- Operating without a license prevents a foreign corporation from suing in Philippine courts but does not protect them from being sued.
- The SEC can issue cease-and-desist orders to non-registered foreign corporations.
- Foreign corporations are taxable only on income from Philippine sources.
- Those from countries with double-tax treaties may be eligible for preferential tax rates or exemptions.
- A foreign corporation can register a regular branch office, representative office, regional operating headquarters (ROHQ), or regional headquarters (RHQ).
- A branch office can conduct registered business activities and derive income.
- A representative or liaison office deals with the parent company's clients but doesn't earn income and is subsidized by the head office while undertaking information dissemination and promotion of company’s products as well as quality control of products.
- A regional operating headquarters (ROHQ) provides services like general administration, business planning, sourcing, finance, marketing, training, logistics, research/development, tech support, data processing, and business development.
- A regional or area headquarters (RHQ) acts as a supervisory, communications, and coordinating center, without earning income from the Philippines.
- To register a branch office, the foreign corporation must meet the financial ratio set by the SEC
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