Account
Information Form For Corporations and Partnerships
Tax
Form
BIR Form 1702 AIF - Account Information Form
(For Corporations and Partnerships)
NOTE: Pursuant to Revenue Memorandum Circular
No. 6 – 2001, corporations, companies or persons whose
gross quarterly sales, earnings, receipts or output exceed
P 150,000.00 may not accomplish this form. In lieu thereof,
they may file their annual income tax returns accompanied
by balance sheets, profit and loss statement, schedules
listing income-producing properties and the corresponding
income therefrom, and other relevant statements duly certified
by an independent CPA.
Documentary Requirements
None
Procedures
1. Accomplish BIR Form 1702 AIF in triplicate.
2. Attach the same to BIR Form 1702.
Deadline
Same deadline as BIR Form 1702 - On or before
the 15th day of the fourth month following the close of
the taxpayer’s taxable year
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of the page
Quarterly Income
Tax For Corporations and Partnerships
Tax Form
BIR Form 1702 Q - Quarterly Income
Tax Return (For Corporations and Partnerships)
Documentary Requirements
1. Certificate of Income Tax Withheld at
Source (BIR Form 2307), if applicable
2. Certificate of Income Payments not Subjected
to Withholding Tax (BIR Form 2304) if applicable
3. Duly approved Tax Debit Memo, if applicable
Procedures
1. Fill-up BIR Form 1702 Q in triplicate
copies.
2. If there is payment:
Proceed to the nearest Authorized Agents
Banks (AABs) of the Revenue District Office where you are
required to register and present the duly accomplished BIR
Form 1702 Q, together with the required attachments and
your payment.
In places where there are no AABs, proceed to the Revenue
Collection Officer or duly Authorized City or Municipal
Treasurer located within the Revenue District Office where
you are required to register and present the duly accomplished
BIR Form 1702 Q.
Receive your copy of the duly stamped and validated form
from the teller of the AABs/Revenue Collection Officer/duly
Authorized City or Municipal Treasurer.
3. For Refundable Returns and for those returns with second
installment:
Proceed to the Revenue District Office where
you are required to register and present the duly accomplished
BIR Form 1702 Q, together with the required attachments.
· Receive your copy of the duly stamped and validated
form from the RDO representative.
Deadline
Corporate Quarterly Declaration - On or before
the 60th days following the close of each of the quarters
of the taxable year
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Improperly
Accumulated Earnings Tax For Corporations
Tax Form
BIR Form 1704 - Improperly Accumulated Earnings
Tax Return (For Corporations)
Documentary Requirements
1. Photocopy of Annual Income Tax Return
(BIR Form 1702) and Audited Financial Statements or Account
Information Form of the taxable year covered duly received
by the BIR; and
2. Sworn declaration as to dividends declared
taken from the covered year earnings and the corresponding
tax withheld, if any
Procedures
1. Fill-up BIR Form 1704 in triplicate copies.
2. If there is payment:
· Proceed to the nearest Authorized
Agents Banks (AABs) of the Revenue District Office where
you are required to register and present the duly accomplished
BIR Form 1704, together with the required attachments and
your payment.
· In places where there are no AABs,
proceed to the Revenue Collection Officer or duly Authorized
City or Municipal Treasurer located within the Revenue District
Office where you are required to register and present the
duly accomplished BIR Form 1704
· Receive your copy of the duly stamped
and validated form from the teller of the AABs/Revenue Collection
Officer/duly Authorized City or Municipal Treasurer.
3. If there is no payment
· Proceed to the Revenue District
Office where you are required to register and present the
duly accomplished BIR Form 1704, together with the required
attachments.
· Receive your copy of the duly stamped
and validated form from the RDO representative
Deadline
Within fifteen (15) days after the close
of the year
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Annual
Income Information For Non Resident Citizens/OCWs and Seamen
(For Foreign-Sourced Income)
Tax Form
BIR Form 1703 - Annual Income Information
Return For Non Resident Citizens/OCWs and Seamen (For Foreign-Sourced
Income)
Note: Now optional based on Revenue Regulations
No. 5-2001.
TAX
RATES
| For Individuals Earning
Purely Compensation Income and Individuals Engaged in
Business and Practice of Profession
|
|
Over
|
But Not Over
|
Rate
|
| |
P 10,000 |
5%
|
| P 10,000 |
30,000 |
P 500 + 10% of the Excess over P
10,000
|
| 30,000 |
70,000 |
P 2,500 + 15% of the Excess over
P 30,000
|
| 70,000 |
140,000 |
P 8,500 + 20% of the Excess over
P 70,000
|
| 140,000 |
250,000 |
P 22,500 + 25% of the Excess over
P 140,000
|
| 250,000 |
500,000 |
P 50,000 + 30% of the Excess
over P 250,000 |
| 500,000 |
|
P125,000 + 34%
of the Excess over P500,000 In 1998. |
| Note: Effective
January 1, 1999, the maximum rate shall be thirty-three
percent (33%) and thirty-two percent (32%) on January
1, 2000.
Note: When the tax due exceeds P 2,000.00, the taxpayer
may elect to pay in two equal installments, the first
installment to be paid at the time the return is filed
and the second installment on or before July 15 of
the same year at the Authorized Agent Bank (AAB) within
the jurisdiction of the Revenue District Office (RDO)
where the taxpayer is registered.
|
| |
Tax Rate
|
Taxable Base
|
| 1. Domestic
Corporations: |
|
|
|
a. In General
|
32%
|
Taxable income from all sources
|
|
b. Minimum Corporate Income Tax*
|
2%
|
Gross Income
|
|
c. Improperly Accumulated Earnings
|
10%
|
Improperly Accumulated Taxable Income
|
| 2. Proprietary
Educational Institution |
10%
|
Taxable income from all sources
|
| 3. Non-stock,
Non-profit Hospitals |
10%
|
Taxable income from all sources
|
| 4. GOCC, Agencies
& Instrumentalities |
|
|
| a. In General |
32%
|
Taxable income from all sources
|
| b. Minimum Corporate
Income Tax * |
2%
|
Gross Income
|
| c. Improperly
Accumulated Earnings |
10%
|
Improperly Accumulated Taxable Income
|
| 5. National
Gov’t & LGUs |
|
|
| a. In General
|
32%
|
Taxable income from all sources
|
| b. Minimum Corporate
Income Tax* |
2%
|
Gross Income
|
| c. Improperly
Accumulated Earnings |
10%
|
Improperly Accumulated
|
| 6. Taxable Partnerships |
|
|
| a. In General
|
32%
|
Taxable income from all sources
|
| b. Minimum Corporate
Income Tax* |
2%
|
Gross Income
|
| c. Improperly
Accumulated Earnings |
10%
|
Improperly Accumulated Taxable Income
|
| 7. Exempt Corporation |
|
|
| a. On Exempt
Activities |
0%
|
|
| b. On Taxable
Activities |
32%
|
Taxable income from all sources
|
| 8. General Professional
Partnerships |
0%
|
|
| 9. Corporation
covered by Special Laws |
Rate specified under the respective
special laws
|
|
| a. In General
|
32%
|
Taxable income from all sources
|
| b. Minimum
Corporate Income Tax* |
2%
|
Gross Income
|
| c. Improperly
Accumulated Earnings |
10%
|
Improperly Accumulated Taxable Income
|
| *Beginning on
the 4th year immediately following the year in which
such corporation commenced its business operations,
when the minimum corporate income tax is greater than
the tax computed using the normal income tax.
|
| 11. International
Carriers |
2.5%
|
Gross Philippine Billings
|
| 12. Regional
Operating Headquarters |
10%
|
Taxable Income
|
| 13. Offshore
Banking Units (OBUs) |
10%
|
Gross Taxable Income On Foreign
Currency Transaction
|
| |
32%
|
On Taxable Income other than Foreign
Currency Transaction
|
| 14. Foreign
Currency Deposit Units (FCDU) |
10%
|
Gross Taxable Income On Foreign
Currency Transaction
|
| |
32 %
|
On Taxable Income other than Foreign
Currency Transaction
|
A)
For Citizens and Resident Aliens (including OFWs)
In General
|
| Over |
But Not Over
|
|
| |
P 10,000
|
5%
|
|
P 10,000
|
30,000
|
P 500 + 10% of the Excess over P
10,000
|
|
30,000
|
70,000
|
P 2,500 + 15% of the Excess over
P 30,000
|
|
70,000
|
140,000
|
P 8,500 + 20% of the Excess over
P 70,000
|
|
140,000
|
250,000
|
P 22,500 + 25% of the Excess over
P 140,000
|
|
250,000
|
500,000
|
P 50,000 + 30% of the Excess over
P 250,000
|
|
500,000
|
|
P125,000 + 34%* of the Excess over
P 500,000 In 1998.
|
| Note: Effective
January 1, 1999, the maximum rate shall be thirty-three
percent (33%) and thirty-two percent (32%) on January
1, 2000. |
| Passive Income |
| 1) Interest on any peso
bank deposit |
20%
|
| 2) Royalties (except on
books as well as literary & musical composition-10%) |
20%
|
| 3) Prizes (except prizes
amounting to P 10,000 or less –5 %) |
20%
|
| 4) Winnings (except from
PCSO and lotto) |
20%
|
| 5) Interest Income on Foreign
Currency Deposit |
7.5%
|
6) Interest from long-term
deposit
|
| Holding Period |
|
| - Four (4) years to less
than five (5) years |
5%
|
| - Three (3) years to less
than four (4) years |
12%
|
| - Less than three (3) years
|
20%
|
| 7) Cash and/or Property
Dividends |
| Beginning January 1, 1998
|
6%
|
| Beginning January 1, 1999
|
8%
|
| Beginning January 1, 2000
& thereafter |
10%
|
| 8) On capital
gains presumed to have been realized from sale, exchange
or other disposition of real property (capital asset) |
6%
|
| 9) On capital
gains for shares of stock not traded in the stock exchange |
| - Not over P 100,000 |
5%
|
| - Any amount in excess of
P 100,000 |
10%
|
| |
|
|
B) For Non-Resident Aliens
Engaged in Trade or Business
|
| 1) On Certain Passive Income
|
20%
|
- Cash and/or
Property Dividends
- Share in the distributable net income of a partnership
- Interest on any bank deposits
- Royalties(except on books as well as literary works
and musical composition)
- Prizes (except prizes amounting to P 10,000 or less)
- Winnings
|
| 2) Interest Income from
long time deposits |
|
Holding Period
|
|
| - Four (4) years to less
than five (5) years |
5%
|
| - Three (3) years to less
than four (4) years |
12%
|
| - Less than three (3) years |
20%
|
| 3) On capital
gains presumed to have been realized from the sale,
exchange or other disposition of real property |
6%
|
| 4) On capital gains for
shares of stock not traded in the Stock Exchange |
| - Not over P 100,000 |
5%
|
| - Any amount in excess of
P 100,000 |
10%
|
| C)
For Non-Resident Aliens Not Engaged in Trade or Business |
1) On the gross
amount of income derived from all sources within the
Philippines
|
25%
|
| 2) On capital gains presumed
to have been realized from the exchange or other disposition
of real property located in the Phils. |
6%
|
| D)
Aliens Employed by Regional Headquarters (RHQ), Regional
Operating (ROH), Offshore Banking Units (OBU), Petroleum
Service Contractors and Subcontractors |
15%
|
| E)
General Professional Partnerships |
0%
|
| F)
Domestic Corporations |
| 1) a. In General |
32%
|
| b. Minimum Corporate Income
Tax |
2%
|
| c. Improperly Accumulated
Earnings |
10%
|
| |
| 2) Proprietary Educational
Institution |
10%
|
| |
| 3) Non-stock, Non-profit
Hospitals |
10%
|
| |
| 4) GOCC, Agencies &
Instrumentalities |
| a. In General |
32%
|
| b. Minimum Corporate Income
Tax |
2%
|
| c. Improperly Accumulated
Earnings |
10%
|
| |
| 5) National Gov’t &
LGUs |
| a. In General |
32%
|
| b. Minimum Corporate Income
Tax |
2%
|
| c. Improperly Accumulated
Earnings |
10%
|
| |
| 6) Taxable Partnerships |
| a. In General |
32%
|
| b. Minimum Corporate Income
Tax |
2%
|
| c. Improperly Accumulated
Earnings |
10%
|
| |
| 7) Exempt Corporation |
| a. On Exempt Activities
|
0%
|
| b. On Taxable Activities |
32%
|
| |
| 8) Corporation
covered by Special Laws |
Rate specified under the respective
special laws
|
| |
| G)
Resident Foreign Corporation |
| 1) a. In General |
32%
|
| b. Minimum Corporate Income
Tax |
2%
|
| c. Improperly Accumulated
Earnings |
10%
|
| |
| 2) International
Carriers |
25%
|
| |
| 3) Regional Operating Headquarters
|
10%
|
| |
| 4) Corporation
Covered by Special Laws |
Rate specified under the respective
special laws
|
| |
| 5) Offshore Banking Units
(OBUs) |
10%
|
| |
|
| 6) Foreign Currency Deposit
Units (FCDU) |
10%
|
top of the page
RELATED
REVENUE ISSUANCES
RR No. 4-95, RR No. 4-96, RR No. 5-97,
RR No. 1-98
top of the page
CODAL
REFERENCE
Sections 23-59, 67-73 and 74-77 of
the National Internal Revenue Code
top
of the page
FREQUENTLY
ASKED QUESTIONS
1) What is income?
Income means all wealth, which flows into
the taxpayer other than as a mere return of capital.
2) What is Taxable Income?
Taxable income means the pertinent items
of gross income specified in the Tax Code less the deductions
and/or personal and additional exemptions, if any, authorized
for such types of income, by the Tax Code or other special
laws.
3) What is Gross Income?
Gross income means all income derived from
whatever source.
4) What comprises gross income?
Gross income includes, but is not limited
to the following:
· Compensation for services, in whatever
form paid, including but not limited to fees, salaries,
wages, commissions and similar item
· Gross income derived from the conduct
of trade or business or the exercise of profession
· Gains derived from dealings in property
· Interest
· Rents
· Royalties
· Dividends
· Annuities
· Prizes and winnings
· Pensions
· Partner's distributive share from
the net income of the general professional partnerships
5) What are some of the exclusions from gross
income?
· Life insurance
· Amount received by insured as return
of premium
· Gifts, bequests and devises
· Compensation for injuries or sickness
· Income exempt under treaty
· Retirement benefits, pensions, gratuities,
etc.
· Miscellaneous items
- income derived by foreign government
- income derived by the government or its
political subdivision
- prizes and awards in sport competition
- prizes and awards which met the conditions
set in the Tax Code
- 13th month pay and other benefits
- GSIS, SSS, Medicare and other contributions
- gain from the sale of bonds, debentures
or other certificate of indebtedness
- gain from redemption of shares in mutual
fund
6) What are the allowable deductions from
gross income?
Except for taxpayers earning compensation
income arising from personal services rendered under an
employer-employee relationships where the only deduction
up to a maximum limit of P 2,400 per year per family is
the premium payment on health and/or hospitalization insurance,
a taxpayer may opt to avail any of the following allowable
deductions from gross income:
· Optional Standard Deduction - an
amount not exceeding 10% of the gross income; or
· Itemized Deductions which include
the following:
- Expenses
- Interest
- Taxes
- Losses
- Bad Debts
- Depreciation
- Depletion of Oil and Gas Wells and Mines
- Charitable Contributions and Other Contributions
- Research and Development
- Pension Trusts
In addition, individuals who are either earning
compensation income, engaged in business or deriving income
from the practice of profession are entitled to personal
and additional exemptions as follows:
Personal Exemptions:
For single individual or married individual
judicially decreed as legally separated with no qualified
dependents…………………………………………...P
20,000.00
For head of family………………………………….....P
25,000.00
For each married individual *……………………...
.P 32,000.00
Note: In case of married individuals where
only one of the spouses is deriving gross income, only such
spouse will be allowed to claim the personal exemption.
Additional Exemptions
· For each qualified dependent, an
P 8,000 additional exemption can be claimed but only up
to 4 qualified dependents
· The additional exemption can be
claimed by the following:
- The husband who is deemed the head of the
family unless he explicitly waives his right in favor of
his wife
- The spouse who has custody of the child
or children in case of legally separated spouses. Provided,
that the total amount of additional exemptions that may
be claimed by both shall not exceed the maximum additional
exemptions allowed by the Tax Code.
- The individuals considered as Head of the
Family supporting a qualified dependent
The maximum amount of P 2,400 premium payments
on health and/or hospitalization insurance can be claimed
if:
· Family gross income yearly should
not be more than P 250,000
· For married individuals, the spouse
claiming the additional exemptions for the qualified dependents
shall be entitled to this deduction
7) Who are required to file the Income Tax
returns?
Ø Individuals
· resident citizens receiving income
from sources within or outside the Philippines
- individuals deriving compensation income
from 2 or more employers, concurrently or successively at
anytime during the taxable year
- employees deriving compensation income
regardless of the amount, whether from a single or several
employers during the calendar year, the income tax of which
has not been withheld correctly (i.e. tax due is not equal
to the tax withheld) resulting to collectible or refundable
return
- employees whose monthly gross compensation
income does not exceed P5,000 or the statutory minimum wage,
whichever is higher, and opted for non-withholding of tax
on said income
- individuals deriving pother non-business,
non-professional related income in addition to compensation
income not otherwise subject to a final tax
- individuals receiving purely compensation
income from a single employer, although the income of which
has been correctly withheld, but whose spouse is not entitled
to substituted filing
· non-resident citizens receiving
income from sources within the Philippines
· citizens working abroad receiving
income from sources within the Philippines
· aliens, whether resident or not,
receiving income from sources within the Philippines
Ø Corporations no matter how created
or organized including general professional partnerships
· domestic corporations receiving
income from sources within and outside the Philippines
· foreign corporations receiving income
from sources within the Philippines
Ø Estates and trusts engaged in trade
or business
8) Who are not required to file Income Tax
returns?
· An individual whose gross income
does not exceed his total personal and additional exemptions
· An individual whose compensation
income derived from one employer does not exceed P 60,000
and the income tax on which has been correctly withheld
· An individual whose income has been
subjected to final withholding tax (alien employee as well
as Filipino employee occupying the same position as that
of the alien employee of regional headquarters and regional
operating headquarters of multinational companies, petroleum
service contractors and sub-contractors and offshore-banking
units, non-resident aliens not engaged in trade or business)
· Those who are qualified under “substituted
filing”. However, substituted filing applies only if
all of the following requirements are present
- the employee received purely compensation
income (regardless of amount) during the taxable year
- the employee received the income from only
one employer in the Philippines during the taxable year
- the amount of tax due from the employee
at the end of the year equals the amount of tax withheld
by the employer
- the employee’s spouse also complies
with all 3 conditions stated above
- the employer files the annual information
return (BIR Form No. 1604-CF)
- the employer issues BIR Form No. 2316 (Oct
2002 ENCS version ) to each employee.
9) Who are exempt from Income Tax?
Ø Non-resident citizen who is:
a) A citizen of the Philippines who establishes
to the satisfaction of the Commissioner the fact of his
physical presence abroad with a definite intention to reside
therein
b) A citizen of the Philippines who leaves
the Philippines during the taxable year to reside abroad,
either as an immigrant or for employment on a permanent
basis
c) A citizen of the Philippines who works
and derives income from abroad and whose employment thereat
requires him to be physically present abroad most of the
time during the taxable year
d) A citizen who has been previously considered
as a non-resident citizen and who arrives in the Philippines
at any time during the year to reside permanently in the
Philippines will likewise be treated as a non-resident citizen
during the taxable year in which he arrives in the Philippines,
with respect to his income derived from sources abroad until
the date of his arrival in the Philippines.
Ø Overseas Contract Worker, including
overseas seaman
An individual citizen of the Philippines
who is working and deriving income from abroad as an overseas
contract worker is taxable only on income from sources within
the Philippines; Provided, that a seaman who is a citizen
of the Philippines and who receives compensation for services
rendered abroad as a member of the complement of a vessel
engaged exclusively in international trade will be treated
as an overseas contract worker.
NOTE: A Filipino employed as Philippine Embassy/Consulate
service personnel of the Philippine Embassy/consulate is
not treated as a non-resident citizen, hence his income
is taxable.
10) What are the procedures in filing Income
Tax returns (ITRs)?
Ø For “with payment” ITRs
(BIR Form Nos. 1700 / 1701 / 1701Q / 1702 / 1702Q / 1704)
File the return in triplicate (two copies
for the BIR and one copy for the taxpayer) with the Authorized
Agent Bank (AAB) of the place where taxpayer is registered
or required to be registered. In places where there are
no AABs, the return will be filed directly with the Revenue
Collection Officer or duly Authorized Treasurer of the city
or municipality in which such person has his legal residence
or principal place of business in the Philippines, or if
there is none, filing of the return will be at the Office
of the Commissioner.
Ø For “no payment” ITRs
-- refundable, breakeven, exempt and no operation/transaction,
including returns to be paid on 2nd installment, withholding
tax returns (WTRs) covered by Tax Remittance Advice (TRA)
and returns paid through a Tax Debit Memo(TDM)/Credit Memo
(CM)
File the return with the concerned Revenue
District Office (RDO) where the taxpayer is registered.
However, no payment returns filed late shall not be accepted
by the RDO but instead shall be filed with an Authorized
Agent Bank (AAB) or Collection Officer/Deputized Municipal
Treasurer (in places where there are no AABs), for payment
of necessary penalties.
11) How is Income Tax computed?
Gross Income
P ___________
Less: Allowable Deductions
___________
Net Income
P ___________
Less: Personal & Additional Exemptions
___________
Taxable Income
P ___________
Multiply by Tax Rate (5 to 32%)
Income Tax Due
P ___________
12) How is Income Tax paid?
Ø Through withholding
· Generally 10%
· 20% - Fees paid to directors who
are not employees
Ø Pay the balance as you file the
tax return, computed as follows:
Income Tax Due
P ___________
Less: 20% or 10% Withholding Tax
___________
Net Income Tax Due
P ___________
13) Is the Minimum Corporate Income Tax (MCIT)
an addition to the regular or normal income tax?
No, the MCIT is not an additional tax. An
MCIT of 2% of the gross income at the end of taxable year
(whether calendar or fiscal year, depending on the accounting
period employed) is hereby imposed upon any domestic corporation
beginning the 4th taxable year immediately following the
taxable year in which such corporation commenced its business
operations. The MCIT is compared with the regular income
tax, which is due from a corporation. If the regular income
is higher than the MCIT, then the corporation does not pay
the MCIT.
14) Who are covered by MCIT?
The MCIT covers domestic and resident foreign
corporations which are subject to the regular income tax.
The term “regular income tax” refers to the regular
income tax rates under the Tax Code. Thus, corporations
which are subject to a special corporate tax system do not
fall within the coverage of the MCIT.
· Schools, hospitals and income of
Offshore Banking Units (OBUs), and Foreign Currency Deposit
Unit (FCDU) from foreign currency transactions
· Regional Operating Headquarters
The incomes of these corporations are subject
to ten percent (10%) preferential tax rate.
· Firms under special income tax regime
such as those under the PEZA law and the Bases Conversion
Development Act
· International carriers subject to
tax at 2 ½% of their gross Philippine billings
For corporations whose operations or activities
are partly covered by the regular income tax and partly
covered under special income tax system, the MCIT shall
apply on operations by the regular income tax system.
Newly established corporations or firms which
are on their first 3 years of operations are not covered
by the MCIT.
15) When does a corporation start to be covered
by the MCIT?
A corporation starts to be covered by the
MCIT on the 4th year of its business operations. The period
of reckoning which is the start of its business operations
is the year when the corporation was registered with the
BIR. This rule will apply regardless of whether the corporation
is using the calendar year or fiscal year as its taxable
year.
· Firms that were registered in 1994
and earlier years are covered by the MCIT beginning January
1, 1998
· Firms which were registered with
the BIR in any month in 1998 will be covered by the MCIT
after the lapse of 3 calendar years, i.e. 2002
16) When is the MCIT reported and paid? Is
it quarterly?
The MCIT is paid on an annual basis. It is
not computed nor paid on a quarterly basis. It is reported
under BIR Form No. 1702
17) How is MCIT computed?
The MCIT is 2% of the gross income of the
corporation at the end of the year.
“Gross income” means gross sales
less sales returns, discounts and cost of goods sold. Passive
income, which have been subject to a final tax at source
do not form part of gross income for purposes of the MCIT.
Cost of goods sold includes all business
expenses directly incurred to produce the merchandise to
bring them to their present location and use.
For trading or merchandising concern, cost
of goods sold means the invoice cost of goods sold, plus
import duties, freight in transporting the goods to the
place where the goods are actually sold, including insurance
while the goods are in transit.
For a manufacturing concern, cost of goods
manufactured and sold means all costs of production of finished
goods such as raw materials used, direct labor and manufacturing
overhead, freight cost, insurance premiums and other costs
incurred to bring the raw materials to the factory or warehouse.
For sale of services, gross income means
gross receipts less sales returns, allowances, discounts
and cost of services which cover all direct costs and expenses
necessarily incurred to provide the services required by
the customers and clients including:
· Salaries and employees benefits
of personnel, consultants and specialists directly rendering
the service;
· Cost of facilities directly utilized
in providing the service such as depreciation or rental
of equipment used;
· Cost of supplies
Interest Expense is not included as part
of cost of service, except in the case of banks and other
financial institutions.
“Gross Receipts” means amounts
actually or constructively received during the taxable year.
However, for taxpayers employing the accrual basis of accounting,
it means amounts earned as gross income.
18) What is the carry forward provision under
the MCIT?
Any excess of the MCIT over the normal income
tax may be carried forward on an annual basis and be credited
against the normal income tax for 3 immediately succeeding
taxable years.
19) How would the MCIT be recorded for accounting
purposes?
Any amount paid as excess minimum corporate
income tax should be recorded in the corporation’s
books as an asset under account title “Deferred charges-MCIT”
20) How long can we amend our income tax
return?
There is no prescription period for amending
the return. Only when the taxpayer is being audited that
he can no longer amend the return.
21) Can a benefactor of a senior citizen
claim him/her as additional dependent in addition to his/her
3 qualified dependent children at P 8,000 each?
No. According to Revenue Regulations 2-94,
the benefactor of a senior citizen cannot claim the P 8,000
additional exemption. The P 8,000 additional exemption is
for only the dependent child.
22) What are tax treaties?
Tax treaties are defined primarily by their
purpose. They are entered into by the Philippines with other
foreign governments in order to spur national stability
and development mainly by encouraging investors to invest
in the Philippines and for the purpose of increasing flow
of trade and investment between the Philippines and other
countries.
In this regard, among the objectives of tax
treaties are the following: 1) to eliminate double taxation
caused by multiple jurisdiction asserting tax authority
over the same income; 2) to assist tax administrators in
the fight against tax evasion and avoidance through Exchange
of Information and Mutual Agreement Procedure; and 3) the
reciprocal reduction of tax impediments to cross-border
investment and trade to promote international trade and
investment.
23) What are the effective Philippine tax
treaties?
The Philippines has thirty-one (31) effective
tax treaties. The following tax treaties are in effect as
of January 01, 2002:
EFFECTIVITY
1. Australia 1 January 1980
2. Austria 1 January 1983
3. Belgium 1 January 1981
4. Brazil 1 January 1992
5. Canada 1 January 1977
6. China 1 January 2002
7. Denmark (Re-negotiated) 1 January 1998
8. Finland 1 January 1982
9. France 1 January 1978
10. Germany 1 January 1985
11. Hungary 8 April 1998 (for taxes withheld
at source)
1 January 1998 (for other taxes)
12. India 1 January 1995
13. Indonesia 1 January 1983
14. Israel 1 January 1997 (for taxes withheld
at source)
25 July 1990 (for other taxes)
15. Italy 1 January 1990
16. Japan 1 January 1981
17. Korea 1 January 1987
18. Malaysia 1 January 1985
19. Netherlands 1 January 1992
20. New Zealand 1 January 1981
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