A.
12) Farmers’, fruit growers’, or like association
organized and operated as a sales agent for the
purpose of marketing the products of its members
and turning back to them the proceeds of sales,
less the necessary selling expenses on the basis of
quantity of produce finished by them.
CORPORATION DEFINED
For tax purposes, a corporation is defined under Section
22 of RA 8424 as follows:
The
1)
2)
3)
4)
5)
term “corporation” shall INCLUDE:
Partnerships, no matter how created or organized;
Joint stock companies;
Joint accounts (cuentas en participacion)
Associations; or
Insurance companies
But does NOT INCLUDE:
1) General professional partnerships; and
2) A joint venture or consortium formed for the
purpose of undertaking:
a. Construction projects; or
b. Engaging in petroleum, coal, geothermal and
other energy operations pursuant to an
operating or consortium agreement under a
service contract with the government.
B.
CLASSIFICATION OF CORPORATE TAXPAYERS
1) Domestic Corporation (DC)
2) Resident Foreign Corporation (RFC)
3) Nonresident Foreign Corporation (NRFC)
HOWEVER, the income of whatever kind and character
of the foregoing organizations from any of their
properties, real or personal, or from any of their
activities conducted for profit regardless of the
disposition made of such income, shall be subject to
income tax.
D.
1.
2.
DOMESTIC CORPORATIONS
1.
ORDINARY CORPORATIONS
INCOME
The following taxes apply to ordinary corporations upon
generation of income:
a) Final Withholding Tax (FWT)
i.
FWT on certain passive income within the
Philippines
ii.
Capital Gains Tax on sale of land and/or
buildings in the Philippines
b) Capital Gains Tax on Sale of Shares of Stock
c) Basic Income Tax
i.
Regular Corporate Income Tax (RCIT); OR
ii.
Minimum Corporate Income Tax (MCIT)
EXEMPT ORGANIZATIONS
The following organizations shall not be subject to
income tax (Section 30, RA 8424):
1) Labor, agricultural or horticultural organization not
organized principally for profit;
2) Mutual savings bank not having a capital stock
represented by shares, and cooperative bank
without capital stock organized and operated for
mutual purposes and without profit;
3) A beneficiary society, order or association,
operating for the exclusive benefit of the members
such as a fraternal organization operating under
the lodge system, or a mutual aid association or a
non-stock corporation organized by employees
providing for the payment of life, sickness, accident,
or other benefits exclusively to the members of
such society, order, or association, or nonstock
corporation or their dependents;
4) Cemetery
company
owned
and
operated
exclusively for the benefit of its members;
5) Nonstock corporation or association organized and
operated exclusively for religious, charitable,
scientific, athletic, or cultural purposes, or for the
rehabilitation of veterans, no part of its net income
or asset shall belong to or inure to the benefit of
any member, organizer, officer or any specific
person;
6) Business league, chamber of commerce, or board
of trade, not organized for profit and no part of the
net income of which inures to
7) the benefit of any private stockholder or individual;
8) Civic league or organization not organized for profit
but operated exclusively for the promotion of social
welfare;
9) A nonstock and nonprofit educational institution;
10) Government educational institution;
11) Farmers’ or other mutual typhoon or fire insurance
company, mutual ditch or irrigation company,
mutual or cooperative telephone company, or like
organization of a purely local character, the income
of which consists solely of assessments, dues, and
fees collected from members for the sole purpose
of meeting its expenses; and
OF
DC – World
RFC and NRFC – Within the Phils. only
E.
DC, RFC and NRFC may be classified further into:
1) Ordinary Corporation
2) Special corporation
C.
GENERAL PRINCIPLES: SOURCES
SUBJECT TO INCOME TAX
❖
FINAL WITHHOLDING TAX ON CERTAIN PASSIVE
INCOME WITHIN THE PHILIPPINES
FORMULA:
Passive Income
Rate
Final Withholding Tax
1)
PXXX
XX%
PXXX
INTEREST
1) Interest on currency bank deposit
2) Yield or any monetary benefit from:
Deposit substitutes
Trust
funds
and
similar
arrangements
Interest income FROM a depositary bank
under the expanded foreign currency deposit
system (EFCDS)
Interest Income derived by a depository bank
under the expanded foreign currency deposit
system from foreign currency transaction
WITH:
1) Non-residents
2) Offshore
banking
units
in the
Philippines
3) Local commercial banks
4) Branches of foreign banks
5) Residents
2)
3)
ROYALTIES – 20%
DIVIDENDS FROM ANOTHER DC – 0%
20%
7.5%
0%
0%
0%
0%
10%
❖
CAPITAL GAINS TAX ON SALE OF LAND AND/OR
BUILDINGS
a.
Invoice Cost of the goods sold
Import Duties
Freight
Insurance
Total
REQUISITES:
1) The land and/or building must be a capital asset;
and
2) It must be located in the Philippines.
FORMULA:
b.
Tax Base
Rate
CGT
❖
PXXX
6%
PXXX
2)
CAPITAL GAINS TAX ON SALE OF SHARES OF STOCK
PXXX
PXXX
(XXX)
(XXX)
XX%
PXXX
RATE:
1. First 100T of the gain = 5%
2. In excess of 100T = 10%
❖
REGULAR CORPORATE INCOME TAX (RCIT)
FORMULA:
Gross Income
Allowable Deductions
Taxable Income
Rate
RCIT
PXXX
PXXX
XXX
30%
PXXX
1)
2)
PXXX
Seller of Services
PXXX
(XXX)
(XXX)
PXXX
XXX
Other
direct
costs
and
expenses
necessarily incurred to provide the
services
Total
XXX
RCIT
MCIT
Higher
DOMESTIC CORPORATIONS EXEMPT FROM MCIT:
1) Proprietary educational institutions and hospitals
which are non-profit
2) Depository banks under expanded foreign currency
deposit system
2.
SPECIAL CORPORATIONS
PROPRIETARY
NON-PROFIT
INSTITUTIONS AND HOSPITALS
PXXX
(XXX)
(XXX)
PXXX
XXX
PXXX
PXXX
The Secretary of Finance is authorized to suspend the
imposition of the MCIT on any corporation which suffers
losses on account of:
1) Prolonged labor dispute
2) Force majeure
3) Legitimate business reverses
PXXX
2%
PXXX
Seller of Goods
Gross Sales
Sales Discounts
Sales Returns and Allowances (XXX)
Cost of Goods Sold
Gross Income
Add: Other Income subject to RCIT
Total Gross Income
Cost of facilities directly utilized in
providing the service (e.g. rentals and cost
of supplies)
RELIEF FROM THE MCIT
FORMULA:
GROSS INCOME DEFINED:
PXXX
Any excess of the MCIT over RCIT shall be carried
forward and credited against the RCIT for the three (3)
immediately succeeding taxable years.
TIME OF IMPOSITION – It is imposed beginning on the
fourth taxable year immediately following the year
in which such corporation commenced its business
operations, when the MCIT is GREATER THAN RCIT.
Gross Income
Rate
MCIT
Salaries
and
Employee
benefits
of
personnel, consultants and specialists
directly rendering the service
CARRY FORWARD OF EXCESS MCIT (MCIT CARRY-OVER)
MINIMUM CORPORATE INCOME TAX (MCIT)
Cost of Goods Sold:
XXX
AMOUNT PAYABLE TO BIR:
ALLOWABLE DEDUCTIONS:
1) Business Expenses & Losses (Itemized Deductions);
or
2) Optional Standard Deduction
1)
XXX
XXX
NOTE: In case of banks, “cost of services” shall
include interest expense.
GROSS INCOME – includes all income not subject to
final withholding tax, capital gains tax and not
considered exempt under the law.
❖
XXX
Cost of Services:
FORMULA:
Selling Price
Cost
Selling Expense
Net Gain
Rate
CGT
PXXX
XXX
Gross Receipts
Sales Discounts
Sales Returns and Allowances (XXX)
Cost of Services
Gross Income
REQUISITES:
1) The shares of stock sold, bartered, exchanged or
disposed must be in a domestic corporation; and
2) The transaction must be not through the stock
exchange.
PXXX
XXX
XXX
XXX
PXXX
Manufacturing Concern
Raw materials used
Direct Labor
Manufacturing overhead
Freight Cost
Insurance Premiums
Other costs of production
Total
Highest
TAX BASE:
1. Selling Price
2. Fair Market Value
3. Zonal Value
Trader or Merchandiser
EDUCATIONAL
The rules applicable to ordinary corporations will also
apply to proprietary educational institutions and
hospitals which are nonprofit except the following:
1) In computing basic income tax, the rate is 10%.
NOTE: If income not related to its primary purpose
or function is more than 50% of its total gross
income, the rate applicable is 30%.
2)
3)
It is not subject to MCIT
Expenditures for expansion of school facilities may
not be capitalized but instead claimed as outright
expense.
GOVERNMENT-OWNED
CORPORATIONS
OR
d) Income excluded from gross
income
Less:
a) Income Tax Paid
b) Dividends declared/paid
Total
Add: Retained Earnings, beg.
Less: Amount that may be
retained (100% of Paid-Up
Capital, end)
Improperly Accumulated Taxable
Income
Rate
Improperly
Accumulated
Earnings Tax
CONTROLLED
All corporations, agencies or instrumentalities owned or
controlled by the Government shall be taxable like
“ordinary corporations”.
However, the following shall be exempt:
1) Government Service and Insurance System (GSIS)
2) Social Security System (SSS)
3) Philippine Health Insurance Corporation (PHIC)
4) Philippine Charity Sweepstakes Office (PCSO)
5) Local Water Districts (RA 10026)
3.
IMPROPERLY ACCUMULATED EARNINGS TAX (IAET)
PERSONS LIABLE
The test used in determining the reasonable needs of
the business is the so called “Immediacy Test”. It
provides that “reasonable needs” of the business is
equivalent to:
Immediate Needs
Reasonably anticipated needs
Reasonable Needs
PXXX
XXX
PXXX
The following constitute accumulation of earnings for
the reasonable needs of the business:
1) Earnings reserved for definite corporate expansion
projects or programs requiring considerable capital
expenditure as approved by the Board of Directors
or equivalent body;
2) Earnings reserved for building, plants or equipment
acquisition as approved by the Board of Directors
or equivalent body;
3) Earnings reserved for compliance with any loan
covenant or pre-existing obligation established
under a legitimate business agreement;
4) Earnings required by law or applicable regulations
to be retained by the corporation or in respect of
which there is legal prohibition against its
distribution;
5) In the case of subsidiaries of foreign corporations in
the Philippines, all undistributed earnings intended
or reserved for investments within the Philippines
as can be proven by corporate records and/or
relevant documentary evidence.
FORMULA
Taxable Income
Add:
a) Income subjected to final tax
b) NOLCO
c) Income exempt from tax
PXXX
PXXX
XXX
XXX
XXX
PXXX
XXX
XXX
10%
XXX
1)
ORDINARY CORPORATIONS
The income taxes applicable to ordinary domestic
corporations upon generation of income are the same
with resident foreign corporations, except:
a) The general principles as to source of taxable
income must be considered; and
b) Sale of land and/ or buildings is not subject to
capital gains tax BUT basic income tax.
c) RESIDENT FOREIGN CORPORATIONS EXEMPT
FROM MCIT:
i.
International carrier
ii. Offshore banking units
iii. Regional or area headquarters
iv. Regional operating headquarters
v. Firms that are taxed under special tax regime
(e.g. Covered by PEZA law & Bases Conversion
Development Act)
TAXABLE EVENT
REASONABLE NEEDS OF THE BUSINESS
XXX
PXXX
XXX
RESIDENT FOREIGN CORPORATIONS
following shall be exempt:
Banks and other non-bank financial intermediaries;
Insurance companies;
Publicly-held corporations;
Taxable partnerships;
General professional partnerships;
Non-taxable joint ventures; and
Enterprises duly registered with the:
i.
PEZA
ii. Pursuant
to
Bases
Conversion
and
Development Act of 1992
iii. Special Economic Zones
The taxable event in IAET is the accumulation of
earnings BEYOND the reasonable needs of the
business.
PXXX
XXX
F.
This tax is only applicable to domestic corporations
which are classified as closely-held corporations.
The
a)
b)
c)
d)
e)
f)
g)
XXX
2)
SPECIAL CORPORATIONS
❖
INTERNATIONAL CARRIER
FORMULA:
Gross Philippine Billings
Rate
Income Tax
PXXX
2.5%
PXXX
GROSS PHILIPPINE BILLINGS (GPB):
a. International Air Carrier – refers to the amount
of gross revenue derived from carriage of
persons, excess baggage, cargo and mail:
Originating from the Philippines;
In a continuous and uninterrupted flight;
Irrespective of the place of sale or issue
and the place of payment of the ticket or
passage of document.
NOTE:
1) Tickets revalidated, exchanged and/or
indorsed to another international airline
form part of the GPB if a passenger boards
a plane in a port or point in the Philippines.
2) Flight which originates from the Philippines,
but transshipment of passenger takes
place at any port outside the Philippines
on another airline, only the aliquot portion
of the cost of the ticket corresponding to
the leg flown from the Philippines to the
point of transshipment shall form part of
the GPB.
b.
International Shipping – means gross revenue
whether for passenger, cargo or mail
originating from the Philippines up to final
destination, regardless of the place of sale or
payments of the passage or freight documents.
USE OF PREFERENTIAL
(inserted by RA 10378)
RATE
OR
EXEMPTION
International carriers may avail of preferential rate
or exemptions on basis of:
a. Tax Treaty
b. International agreement
c. Reciprocity - An international carrier, whose
home country grants income tax exemption
to Philippine carriers, shall likewise be exempt
from income tax.
❖
G.
NONRESIDENT FOREIGN CORPORATIONS
1)
ORDINARY CORPORATIONS
Gross income from all sources within the Philippines
shall be subject to 30% final withholding tax, except
the following:
OFFSHORE BANKING UNITS
Income derived by offshore banking units (OBU’s)
from foreign currency transactions shall be taxed
as follows:
COUNTERPARTY
RATE
Non-residents
Other OBU’s
Local Commercial Banks
Branches of foreign banks
Other residents
0%
0%
0%
0%
10%
2)
REGIONAL OR AREA HEADQUARTERS
Regional or area headquarters shall not be subject
to income tax.
❖
REGIONAL OPERATING HEADQUARTERS
The rules applicable to ordinary corporations will also
apply to Regional Operating Headquarters except the
following:
1) In computing basic income tax, the rate is 10%.
2) It is not subject to MCIT.
3)
APPLICABLE TAX
Interest income on foreign loans
Intercorporate Dividends:
1) With tax sparing
2) Without tax sparing
Net Capital Gains from sale of
shares of stock not traded in the
local stock exchange
1) First 100T
2) In excess
20% FWT
SPECIAL CORPORATIONS
TYPE
H.
Gross Income
25%
Non-resident Owner or
Lessor
of
Vessels
Chartered by Philippine
Nationals
Gross rentals,
lease or charter
fees
4.5%
Non-resident Owner or
Lessor
of
Aircraft,
Machineries and Other
Equipment
Gross rentals,
charters and
other fees
7.5%
MANUAL FILING
January to November
10th day of the month
following the month the
withholding was made
December
January
15
of
the
succeeding year
PXXX
15%
PXXX
PROFIT REMITTED
APPLICABLE TAX
Connected
with
the
conduct of its trade or
business in the Philippines
Subject to 15% BPRT
Others
Exempt
EXEMPT ENTITIES
Activities registered with the following shall be exempt
from BPRT:
1) Philippine Economic Zone Authority (PEZA)
2) Subic Bay Management Authority (SBMA)
3) Clark Development Authority (CDA)
Film
or
DEADLINE FOR FILING OF RETURNS
1. Final Withholding Tax on passive income
FORMULA:
PROFIT REMITTANCE
5%
10%
RATE
BRANCH PROFIT REMITTANCES TAX (BPRT)
Profit Remittance
Rate
BPRT
15% FWT
30% FWT
TAX BASE
Non-resident
Cinematographic
Owner,
Lessor
Distributor
NOTE:
If OBU’s earn income other than from foreign
currency transactions, it will be subject to basic
income tax (RCIT vs. MCIT, whichever is higher)
❖
INCOME
2.
Capital Gains Tax
a) Shares of stock
i. Ordinary Return - 30 days after each
transaction
ii. Final Consolidated Return - on or before
April 15 of the following year
b) Real Property – 30 days following each sale or
other disposition
3.
Fringe Benefits Tax – 10th day of the month
following the end of the calendar quarter in which
the fringe benefits were granted to the recipient.
4.
Basic Income Tax
a) Quarterly – on or before the 60th day following
the end of the quarter
b)
Annual (Final Quarter) – April 15 of the
succeeding year.
1.
MULTIPLE CHOICE EXERCISES
Which is not a characteristic of corporate income tax:
a. Progressive tax c. General tax
b. Direct tax
d. National tax
2.
For
a.
b.
c.
d.
3.
Which of the following is subject to income tax?
a. SSS and GSIS
b. Philippine Health Insurance Corporation (PHIC)
c. Local Water Districts
d. Philippine Amusement and Gaming Corporation (PAGCOR)
4.
Which of the following is taxable based on income from all sources, within and without?
a. Domestic Corporations
b. Resident Foreign Corporations
c. Non-resident Foreign Corporations
d. All of the choices
5.
The
a.
b.
c.
d.
6.
Which of the following does not have the benefit of claiming deductions in computing income tax?
a. Domestic Corporations
b. Resident Foreign Corporations
c. Non-resident Foreign Corporations
d. All of the choices
7.
One of the following is exempt from income tax
a. Proprietary educational institutions
b. Private cemeteries
c. Government educational institutions
d. Mutual savings bank
8.
The
a.
b.
c.
d.
9.
The share of a domestic corporation in the net income after tax of a joint venture or consortium taxable as a corporation
of which it is a co-venturer is subject to:
a. Creditable withholding tax of 10%.
b. Final withholding tax of 10%.
c. Capital gains tax.
d. Exempt
purposes of income taxation, which of the following is not considered as corporation?
General partnership in trade
General professional partnership
Mutual fund company
Regional operating headquarters of multinational company
term applies to a foreign corporation engaged in trade or business in the Philippines.
Resident foreign corporation
Nonresident foreign corporation
Multinational corporation
Petroleum contractor
following passive income received by a domestic corporation shall be subject to 20% final withholding tax, except:
Interest income from peso bank deposit
Yield from deposit substitutes
Dividend income from another domestic corporation
Royalties
10. A depository bank under Foreign Currency Deposit System has the following income from foreign currency transactions
(Exchange Rate $1=P45):
From Nonresidents
From residents
From Philippine National
Bank
$5,000
$3,000
$2,000
How much is the final withholding tax applicable on the above income?
a. P22,500
c. P9,000
b. P13,500
d. P45,000
11. As a rule, there is no income tax if there is no income. Which is of the following is the exception?
a.
b.
c.
d.
Capital Gains Tax on sale of land and/or building
Capital Gains Tax on sale of share of stock outside the local stock exchange
Tax on passive income
Regular Corporate Income Tax
12. KABA LESS Inc. sold its vacant lot to URO REALTY INC. for P10,000,000 which it acquired at a cost of P5,000,000. The
fair market value of the said property per tax declaration is P12,000,000, while its zonal value is P15,000,000. How much
is the income tax applicable on the transaction?
a. P900,000
c. P600,000
b. P720,000
d. P1,500,000
Taxation Review
Corporate Income Tax
By: Prof. Davey C. Medidas, CPA, MBA
Page 1
13. Based on the preceding number, if the buyer of the property is the Philippine Government or one of its owned or
controlled corporations, what type of income tax will apply on the transaction?
a. Basic income tax
b. Capital gains tax
c. Either “a” or “b” at the option of the seller
d. Either “a” or “b” at the option of the buyer
14. In 2013, East Star Inc. sold shares of stock for P250,000. The shares, acquired in 2010 at a cost of P100,000, were held
as investment, and were sold directly to a buyer.
How much was the capital gains tax due?
a. P15,000
c. P7,500
b. P10,000
d. P45,000
15. Unan Inc., a domestic corporation, had the following data on income and expenses during the year 2013:
Gross income, Philippines
Business expenses, Philippines
Gross income, China
Business expenses, China
Interest
income,
Metrobank,
Philippines
Interest income, Shanghai Banking
Corporation, China
Rent
income,
net
of
5%
withholding tax
P10,000,000
2,000,000
5,000,000
1,500,000
300,000
100,000
190,000
How much was the income tax payable?
a. P3,540,000
c. P3,440,000
b. P3,530,000
d. P2,480,000
16. PHL Corporation, a domestic corporation has the following records of income and expenses during the year:
Gross income, net of 1% withholding tax
Expenses
Rent income, net of 5% withholding tax
Dividend from domestic corporation
Royalty, gross of tax
Interest from bank deposit with PNB, net
of tax
The income tax payable is a. P241,020
b. P219,320
P1,435,500
790,600
136,800
25,000
80,000
12,000
c. P260,020
d. P238,320
17. The total final taxes is a.
b.
P19,000
P21,500
c. P33,250
d. P3,000
18. A domestic corporation was registered with the BIR on November 1, 2008.
What year would the first MCIT will be
imposed on such corporation?
a. 2009
c. 2011
b. 2010
d. 2012
19. If the taxpayer is a seller of services, which of the following shall not form part of its cost of services?
a.
b.
c.
d.
Salaries and supplies
Employee benefits
Depreciation and rental expenses
Interest expense
20. The following information were taken from the records of Adobong Mani Inc., a domestic corporation already in its fifth
year of operation:
Gross profit from sales
Capital gain on sale directly to buyer of
shares in a domestic corporation
Dividend from:
Domestic corporation
Resident foreign corporation
Interest on:
Bank deposit
Trade receivable
Business expenses
Income tax withheld
Quarterly income tax payments
Income tax payable prior year
P3,100,000
100,000
20,000
10,000
20,000
50,000
2,100,000
115,000
160,000
(10,000)
The income tax due at the end of the year:
a. P318,000
c. P43,000
b. P63,200
d. P33,000
Taxation Review
Corporate Income Tax
By: Prof. Davey C. Medidas, CPA, MBA
Page 2
21. Short Time Services Inc., registered with BIR in 2007, has the following data for the year 2013:
Gross receipts
Discounts
Returns and allowances
Salaries of personnel directly involved in
rendering service
Salaries of administrative personnel
Fees of consultants directly involved in
rendering service
Rental of equipment used in rendering
service
Rental of office space for use of
administrative personnel
Other operating expenses
P1,150,000
100,000
150,000
300,000
100,000
50,000
70,000
50,000
420,000
How much was the income tax due and payable?
a. P27,000
c. P9,600
b. P6,600
d. Zero
22. Lughey Lahgey Corporation, already on its 5th year of operation as of 2012, has the following data:
Sales
Cost of Sales
Operating Expenses
2012
1,700,000
1,050,000
675,000
2013
2,300,000
1,425,000
480,000
The income tax payable in 2012 was –
a. P13,000
c. P35,000
b. P10,500
d. nil
23. The income tax payable in 2013 was –
a.
b.
P111,000
P17,500
d. nil
c. P98,000
Next five (5) questions are based on the following: Jolly Jeep Corporation has the following information for the
taxable year 2013:
QUARTER
RCIT
MCIT
Creditable
Withholding
Tax
First
200,000
160,000
40,000
Second
240,000
500,000
60,000
Third
500,000
150,000
80,000
Fourth
300,000
200,000
70,000
Additional Information:
a) MCIT carry-over amounts to P60,000;
b) Excess tax credits from prior year amounts to P20,000.
24. How much was the income tax payable for the first quarter?
a.
b.
P200,000
P160,000
c. P120,000
d. P80,000
25. How much was the income tax payable for the second quarter?
a.
b.
P660,000
P460,00
c. P200,000
d. P160,000
26. How much was the income tax payable for the third quarter?
a. P860,000
c. P600,000
b. P120,000
d. P140,000
27. How much was the annual income tax payable?
a. P1,260,000
c. P230,000
b. P390,000
d. P930,000
28. Using the same data in the preceding problem except that the MCIT on the 4 th Quarter is P500,000, how much was the
annual income tax payable?
a. P330,000
b. P1,310,000
c. P380,000
d. P360,000
29. A domestic corporation, already in its 5th year of operation as of 2010, provided the following data:
Gross Sales
Sales returns
Cost of goods sold
Business
expenses
2010
P2,040,000
40,000
1,000,000
950,000
2011
P2,800,000
100,000
700,000
2,100,000
2012
P3,000,000
1,500,000
1,200,000
The income tax payable for taxable year 2012 was:
a. P15,000
c. P60,000
b. P20,000
d. P55,000
Taxation Review
Corporate Income Tax
By: Prof. Davey C. Medidas, CPA, MBA
Page 3
30. Windang Corporation, a domestic corporation, had the following selected data:
YEAR
2008
2009
2010
2011
2012
GROSS INCOME
P1,000,000
2,000,000
3,000,000
1,000,000
980,000
EXPENSES
P1,200,000
1,900,000
2,950,000
1,100,000
500,000
The taxable income in 2012 was:
a. P380,000
c. P100,000
b. P0
d. P50,000
31. One of the following is not accepted basic relief from the MCIT:
a.
b.
c.
d.
Prolonged labor dispute
Force majeure problems
Legitimate business reverse
Law suits filed by the company
32. (Phil. CPA) Which of the following statements is incorrect?
a.
b.
c.
d.
Resident foreign corporations are subject to income tax based on net income from sources within the Philippines.
Domestic corporations are subject to income tax based on net income from all sources.
Nonresident foreign corporations are subject to income tax based on gross income from sources within the
Philippines.
Private educational corporations 'are subject to income tax based on the net income from sources within the
Philippines at the tax rate of 10%.
33. SCHOOL BUKOL University is a proprietary educational institution. It has the following selected information for the
taxable year 2013:
Tuition fees
P12,800,000
Miscellaneous fees
1,800,000
Interest on bank deposits
12,300
Rent income
350,000
Salaries and bonuses, all personnel
7,500,000
Other operating expenses
3,500,000
Quarterly income tax payments
48,000
Additional School Building was built and finished on April 1, 2013 at a cost of P2,000,000 with a depreciable life of 50
years.Assuming the University opted to claim the cost of construction as an outright expense, the income tax payable
was:
a. P344,000
c. P576,000
b. P147,000
d. P160,000
34. Based on the preceding number, but assuming the University opted to capitalize the cost of building construction, the
income tax payable was:
a. P344,000
b. P147,000
c. P576,000
d. P160,000
35. Pera Pera College, an educational institution provided the following data for the current year:
Income from tuition fees
School miscellaneous fees
Income from school canteen
Income from school dormitory
Dividend income:
Domestic corporation
Foreign corporation
Rent income (net of 5% withholding tax)
Operating expenses
P3,500,000
500,000
500,000
500,000
2,000,000
2,000,000
1,900,000
4,000,000
The income tax payable of the school is:
a. P1,600,000
c. P1,500,000
b. P1,500,000
d. P1,400,000
36. Bank of Recto, a domestic corporation has the following data for the taxable year 2013:
Regular Banking Unit:
Interest Income from loans
Interest Income from peso deposit with
Bank of Philippine Islands
Dividend
Income
from
various
domestic corporations
P10,000,000
1,000,000
Foreign
Currency
Deposit
Unit:
(Exchange Rate $1=P40)
Interest
Income
from
loans
to
residents
Interest
Income
from
loans
to
nonresidents
1,500,000
$50,000
$12,500
Additional Information: The bank has total operating expenses of P12,000,000.
How much was the normal income tax for the year?
a. P600,000
c. P500,000
b. P400,000
d. nil
Taxation Review
Corporate Income Tax
By: Prof. Davey C. Medidas, CPA, MBA
Page 4
37. A tax imposed in the nature of a penalty to the corporation to prevent the scheme of accumulating income rather than
distribute the same to the stockholders for the purpose of avoiding tax on dividends.
a. Minimum corporate income tax
b. Optional corporate income tax
c. Improperly accumulated earnings tax
d. Capital gains tax
38. The Improperly Accumulated Earnings Tax shall not apply to the following, except?
a.
b.
c.
d.
Banks and other non-bank financial intermediaries
Insurance companies
Publicly-held corporation
Closely-held corporation
39. It is a test used in determining the reasonable needs of a business to justify the accumulation of earnings which will
exempt the corporation from paying Improperly accumulated earnings tax:
a. Urgency test
c. Immediacy test
b. Reasonable needs test
d. Control test
40. JCU Corporation, a domestic corporation had the following data for taxable year 2013:
Sales
Cost of goods sold
General selling and administrative
expenses
Interest income from Philippine bank
deposit
Rental income (net of 5% withholding tax)
Dividend Income:
From domestic corporation
From foreign corporation
Capital gains from sale of domestic shares
of stocks sold Directly to buyer
P5,000,000
2,000,000
500,000
100,000
190,000
60,000
50,000
75,000
Dividend declared and paid during the
year
Retained earnings, 12/31/2012
Par Value of outstanding shares,
12/31/2013
Appropriation for future plant expansion
500,000
1,000,000
500,000
800,000
The income tax payable was:
a. P825,000
c. P899,200
b. P815,000
d. P819,200
41. Based on the foregoing problem, the Improperly accumulated earnings tax was:
a.
b.
P208,125
P108,125
c. P213,625
d. P105,125
42. Peshcov Corporation, an entity organized under the laws of Russia, is engage in business in the Philippines for 10 years
already. During the year 2013, its income and expenses are shown below:
Gross income
Business expenses
Interest income from
dollar deposit,
Yield
on
money
market placement
Philippines
P20,000,000
18,500,000
500,000
Russia
P30,000,000
21,000,000
1,000,000
How much is the income tax payable upon filing its annual income tax return?
a. P3,000,000
c. P1,000,000
b. P400,000
d. P300,000
43. The TY Corporation is an international carrier doing business in the Philippines. Its taxable base for income tax purposes
is –
a.
b.
c.
d.
Gross Philippine Billings
Gross Philippine Billings minus deductible expenses
Regular rate of 30% of its net taxable income
Allocation of income from sources within and without the Philippines, as well as expenses.
44. The following are excluded in the "Gross Philippine Billings" for income tax purposes of an international air carrier,
except:
a. Tickets sold outside the Philippines for passengers originating from outside the Philippines
b. Passage documents sold outside the Philippines for excess baggage originating from the Philippines
c. Tickets sold in the Philippines for passengers originating from the Philippines but are not actually flown
d. Passage documents sold in the Philippines for cargoes originating from outside the Philippines
45. In order for an international carrier to qualify for exemption on the basis of reciprocity, what type of tax shall be
exempted as well by the its home country?
a. Income tax
c. Transfer tax
b. Business Tax
d. Any of the choices
Taxation Review
Corporate Income Tax
By: Prof. Davey C. Medidas, CPA, MBA
Page 5
46. China Northern Airlines Inc., a resident foreign corp. has the following data for the taxable year 2013:
Passengers airfare
Passengers airfare
Airfare for cargoes
Airfare for cargoes
from
from
from
from
China to Philippines
Philippines to China
China to Philippines
Philippines to China
P1,800,000
1,500,000
700,000
1,300,000
How much was the income tax payable?
a. P60,000
c. P84,000
b. P39,000
d. P70,000
47. Based on the preceding number, how much was the common carrier’s tax for the year?
a.
b.
P60,000
P39,000
c. P84,000
d. P70,000
48. An offshore banking unit, already in its 7th year in the Philippines, has the following data in its income and expenses for
the year 2014:
a.
b.
Foreign currency transactions with:
Non-residents
Local banks
Branches of foreign banks
Another OBU
Other residents (Interest Income)
1,800,000
1,200,000
1,000,000
500,000
800,000
Other income:
Rent income
Miscellaneous income
1,000,000
500,000
Operating Expenses
2,380,000
How much is the total income tax for the year?
P80,000
c. P372,500
P292,500
d. P0
49. Which of the following shall pay a tax of ten percent (10%) of their taxable income?
I - Regional or area headquarters
II - Regional operating headquarters
a. Both I and II
b. Neither I nor II
c. I only
d. II only
50. If a branch of a foreign corp. in the Philippines remits passive income earned in the Philippines to the head office, what is
the
a.
b.
c.
d.
applicable tax on the said transaction?
Subject to 30% final withholding tax
Subject to 12% creditable withholding VAT
Subject to 15% branch profit remittances tax
Exempt from branch profit remittances tax
51. Which of the following corporations shall pay a tax equal to thirty percent (30%) of the gross income received during
each taxable year from all sources within the Philippines?
a. Domestic corporation
b. Resident foreign corporation
c. Nonresident foreign corporation
d. None of the choices
52. Teri Yaki Corp., a Japanese Corp. having no business in the Philippines, is engage in ship building. It leases some of its
newly constructed ships to Super Fairy Inc., a Philippine Carrier. What income tax rate will apply to the rental payments
to the lessor?
a. 30% Basic Income Tax
b. 25% Final Withholding Tax
c. 7.5% Final Withholding Tax
d. 4.5% Final Withholding Tax
53. Rentals, charters and other fees derived by a non-resident lessor of aircraft, machineries and other equipment in the
Philippines shall be subject to a tax of:
a. Twenty-five percent (25%)
b. Seven and one-half percent (7 ½%)
c. Four and one-half percent (4 ½%) of gross rentals or fees
d. Two and one-half percent (2 ½%) of gross income
54. A cinematographic film owner, lessor or distributor shall pay a tax, based on its gross income from all sources within the
Philippines, of:
a. Twenty-five percent (25%)
b. Seven and one-half percent (7 ½%)
c. Four and one-half percent (4 ½%) of gross rentals or fees
d. Two and one-half percent (2 ½%) of gross income
Taxation Review
Corporate Income Tax
By: Prof. Davey C. Medidas, CPA, MBA
Page 6
Next seven (7) questions are based on the following:
Global Corporation, a corporation engaged in business in the Philippines and abroad which is on its 3rd year of operation, has
the following data in 2013:
Gross Income, Philippines
Expenses, Philippines
Gross Income, China
Expenses, China
Interest on peso bank deposit
Interest from foreign currency
bank deposit
Royalties from books
Dividend income from another
Domestic Corp.
Income Tax Paid in China
P 1,000,000
700,000
500,000
350,000
50,000
80,000
75,000
100,000
60,000
Additional Information:
a) The Corporation sold its stocks in a domestic corporation directly to the buyer for P240,000. The cost of such shares is
P80,000.
b) It sold a vacant lot, booked as investment property held for capital appreciation, for P2,800,000. Fair Market Value per
Tax Declaration is P3,000,000 while zonal value is P3,300,000. The lot was acquired for P1,500,000.
55. How much was the income tax payable if the Corporation is domestic?
a.
b.
P90,000
P166,000
c. P117,000
d. P375,000
56. Based on the preceding number, how much was the income tax expense?
a. P84,375
c. P117,000
b. P166,000
d. P375,000
57. Assuming further that the Corp. opted to claim as part of allowable deduction the income tax paid abroad, how much was
the income tax payable?
a. P84,375
c. P117,000
b. P166,000
d. P375,000
58. How much was the income tax payable if the Corporation is a resident foreign (disregard sale of vacant lot)?
a.
b.
P480,000
P511,000
c. P90,000
d. P505,000
59. Based on the preceding number, how much was the total income tax on all income?
a.
b.
P480,000
P132,000
c. P90,000
d. P505,000
60. Assuming that the taxpayer is a nonresident foreign (disregard sale of vacant lot) and there is tax sparing, how much
was the income tax on all income?
a. P727,500
c. P363,500
b. P352,500
d. P757,500
61. Based on the preceding number, but assuming there was no tax sparing, how much was the total income tax on all
income?
a. P727,500
b. P352,500
c. P742,500
d. P378,500
62. The following data were taken from the financial statement of RLS Corporation, a domestic corporation, for the current
year:
Gross sales
Sales returns
Cost of goods sold
Interest income from trade
receivables
Interest income from bank
deposits
Dividend income from
domestic corporation
Royalty income
Operating expenses
Income from deposit
substitutes
Sale of Building in the Phil.
not used in
business, cost P4,000,000
Philippines
P950,000
25,000
425,000
Japan
P2,000,000
10,000
50,000
300,000
20,000
15,000
20,000
250,000
300,000
35,000
100,000
5,000,000
The Fair Market Value of the Building sold was P8,000,000 at the time of the sale.
Its income tax payable is:
a. P640,000
b. P600,000
c. P680,000
d. P543,000
63. Its final tax on passive income is:
a.
b.
P15,000
P8,000
Taxation Review
Corporate Income Tax
By: Prof. Davey C. Medidas, CPA, MBA
c. P4,000
d. P11,000
Page 7
64. Its capital gains tax is:
a.
b.
P480,000
P495,000
c. P300,000
d. P60,000
65. Based on the above problem, its total income tax on all income if it is a resident foreign corporation (disregard sale of
building):
a. P435,200
b. P168,000
c. P166,000
d. P403,000
66. Using the same information above, except that the entity is a regional operating headquarter of a multi-national
company, how much is its total income tax on all income (disregard sale of vacant lot)?
a. P435,200
c. P66,000
b. P468,000
d. P403,000
67. A corporation has the following data for the current year:
Gross income, Phil.
Gross income, USA
Gross income, Japan
Expenses, Phil.
Expenses, USA
Expenses, Japan
Other income:
Dividend from San Miguel Corp.
Dividend from Ford Motors, USA
P1,000,000
500,000
500,000
300,000
200,000
100,000
70,000
120,000
Gain on sale of San Miguel shares
directly to buyers
Royalties, Phils.
Royalties, USA
Interest from receivables in the
Philippines
Rent Income, land in USA
Rent income, Building in the
Philippines
150,000
50,000
100,000
60,000
250,000
100,000
The Company also sold a condominium classified as capital asset for P2,000,000. The cost of the Condominium is
P1,000,000 while its Zonal Value is P3,000,000.
Its income tax on all income as a domestic corporation is:
a. P578,000
c. P963,600
b. P683,500
d. P809,000
68. Based on the above problem, its income tax on all income if it is a resident foreign corporation (disregard sale of
condominium):
a. P278,000
b. P683,500
c. P963,600
d. P809,000
69. And if it is a non-resident foreign corporation and there is tax sparing, its income tax on all income is (disregard sale of
condominium):
a. P578,000
a. P383,500
Taxation Review
Corporate Income Tax
By: Prof. Davey C. Medidas, CPA, MBA
c. P963,600
d. P809,000
Page 8