ILLUSTRATION

1. Given below are the incomes earned by ABC Corp., for taxable year 2024, its first year of operation
Sales in the Philippines 1,550,000.00
Sales in USA 1,650,000.00
Interest income from bank deposit (local currency) in
BPI, Bacolod Branch 10,000.00
Cash dividend from domestic corporation 5,000.00

Additional Information:
A. Cost of Sales in the Philippines 450,000.00
B. Cost of Sales in USA 520,000.00
C. Business expenses (itemized deduction) in the Phils. 45,500.00
D. Business expenses (itemized deduction) in USA 80,000.00

Compute for the income tax payabl assuming that the corporation is:
1. Domestic Corporation 2. Resident Foreign Corporation

2. The following information were taken from the books of DEF Corporation for taxable year ending
Dec. 31, 2024, its 3rd year of operation

1st Quarter 2nd quarter 3rd Quarter 4thQuarter

Sales 290,000.00 350,000.00 400,000.00 450,000.00
Cost of Sales 150,000.00 120,000.00 150,000.00 30,000.00
Interest income from A/R 3,000.00 5,000.00 10,000.00 8,000.00
Interest income from
local currency deposit 6,000.00 - - -
Business expenses 150,000.00 20,000.00 35,000.00 5,000.00
CWT -2307 5,800.00 7,000.00 8,000.00 9,000.00
Required: Compute for the following: A. Income tax payable (overpayment) for the
first 3 quarters and B.) Annual income tax payable (overpayment)

3. Given below are the incomes earned by XYZ Corp, for taxable year 2024, its 6th year of operation
Sales in the Philippines 1,550,000.00
Interest income from bank deposit (local currency) in
BPI, Bacolod Branch 10,000.00
Cash dividend from domestic corporation 5,000.00

Additional Information:
A. Cost of Sales in the Philippines 450,000.00
B. Business expenses (itemized deduction) in the Phils. 45,500.00

Compute for the income tax payable of XYZ Corporation

4. Given below are the incomes earned by XYZ Corp, for taxable year 2024, its 6th year of operation
Sales in the Philippines 4,550,000.00
Rent Income 500,000.00
Interest income from bank deposit (local currency) in
BPI, Bacolod Branch 10,000.00
Cash dividend from domestic corporation 5,000.00

Additional Information:
A. Cost of Sales in the Philippines 1,450,000.00
B. Business expenses (itemized deduction) in the Phils. 3,500,000.00
C. Creditable Withholding Tax per form 2307 25,000.00
Compute for the income tax payable of XYZ Corporation
5. The following information were taken from the books of DEF Corporation for taxable year ending
Dec. 31, 2024, its 8th year of operation

1st Quarter 2nd quarter 3rd Quarter 4thQuarter

Sales 290,000.00 350,000.00 400,000.00 450,000.00
Cost of Sales 150,000.00 120,000.00 150,000.00 30,000.00
Interest income from A/R 3,000.00 5,000.00 10,000.00 8,000.00
Interest income from
local currency deposit 6,000.00 - - -
Business expenses 125,000.00 340,000.00 35,000.00 5,000.00
CWT -2307 5,800.00 7,000.00 8,000.00 9,000.00
Additional Information:
Excess MCIT over RIT in 2022, P10,000
Required: Compute for the following: A. Income tax payable (overpayment) for the
first 3 quarters and B.) Annual income tax payable (overpayment)

6. Given below are the incomes earned by XYZ Corp, for taxable year 2024, its 10th year of operation
Sales in the Philippines 4,550,000.00
Rent Income 500,000.00
Interest income from bank deposit (local currency) in
BPI, Bacolod Branch 10,000.00
Cash dividend from domestic corporation 5,000.00

Additional Information:
A. Cost of Sales in the Philippines 1,450,000.00
B. Business expenses (itemized deduction) in the Phils. 3,500,000.00
C. Creditable Withholding Tax per form 2307 25,000.00
D. Excess MCIT over RIT in 2020 30,000.00
E. Excess MCIT over RIT in 2022 25,000.00
Compute for the income tax payable of XYZ Corporation

7. Given below are the income earned by XYZ Corp, for taxable year 2024, its 10th year of operation
Sales in the Philippines 4,550,000.00
Rent Income 500,000.00
Interest income from bank deposit (local currency) in
BPI, Bacolod Branch 10,000.00
Cash dividend from domestic corporation 5,000.00

Additional Information:
A. Cost of Sales in the Philippines 1,450,000.00
B. Business expenses (itemized deduction) in the Phils. 2,500,000.00
C. Creditable Withholding Tax per form 2307 25,000.00
D. Excess MCIT over RIT in 2020 30,000.00
E. Excess MCIT over RIT in 2022 25,000.00
Compute for the income tax payable of XYZ Corporation
 Domestic Resident
Corporation Foreign Corp.

Sales in the Philippines 1,550,000.00 1,550,000.00

Sales in USA 1,650,000.00 -
Total 3,200,000.00 1,550,000.00
Less: Cost of Sales Phils. 450,000.00 450,000.00
Cost of Sales USA 520,000.00 -
Gross income from operations 2,230,000.00 1,100,000.00
Add: Other income not subject to FWT - -
Gross business income 2,230,000.00 1,100,000.00
Less: Itemized Deductions
Bus. Expenses (Phils.) 45,500.00 45,500.00
Bus. Expenses (USA) 80,000.00 -
Taxable Income 2,104,500.00 1,054,500.00
Multiply: Tax Rate 20% 20%
Income Tax Due 420,900.00 210,900.00
Less: CWT 2307 - -
Quarterly income tax paid - -
Income Tax Payable 420,900.00 210,900.00

2. 1st Quarter 2nd Quarter 3rd Quarter

Sales 290,000.00 350,000.00 400,000.00
Less: Cost of Sales 150,000.00 120,000.00 150,000.00
Gross Income from Operation 140,000.00 230,000.00 250,000.00
Add: Other Income Not Subject to FWT
Interest income on A/R 3,000.00 5,000.00 10,000.00
Gross Business Income 143,000.00 235,000.00 260,000.00
Less: Bus. Expenses 150,000.00 20,000.00 35,000.00
Taxable Income (this quarter) -7,000.00 215,000.00 225,000.00
Add: Taxable income previous quarter - -7,000.00 208,000.00
Taxable income to date -7,000.00 208,000.00 433,000.00
Multiply: Tax Rate 20% 20% 20%
Income Tax Due - 41,600.00 86,600.00
Less: CWT 2307 (this quarter) 5,800.00 7,000.00 8,000.00
CWT 2307 (previous quarter) - 5,800.00 12,800.00
Quarterly income tax paid - - 28,800.00
Income tax Payable (overpayment) (5,800.00) 28,800.00 37,000.00

Annual
Sales 1,490,000.00 (1st qtr + 2nd qtr + 3rd qtr + 4th qtr.)
Less: Cost of Sales 450,000.00 (1st qtr + 2nd qtr + 3rd qtr + 4th qtr.)
Gross income from Operation 1,040,000.00
Add: Other Income Not Subject to FWT
Interest income on A/R 26,000.00 (1st qtr + 2nd qtr + 3rd qtr + 4th qtr.)
Gross Business Income 1,066,000.00
Less: Business Expenses 210,000.00 (1st qtr + 2nd qtr + 3rd qtr + 4th qtr.)
Taxable Income 856,000.00
Multiply: Tax Rate 20%
Income Tax Due 171,200.00
Less: CWT 2307 (4th qtr.) 9,000.00
CWT 2307 (previous qtr.) 20,800.00 (5,800 + 7,000+ 8,000)
Quarterly Income Tax Paid 65,800.00 (0 +28,800 + 37,000)
Income Tax Payable 75,600.00

Note: The corporation is not subject to MCIT. The income tax due is equal to RIT

3. TY 2024
Sales 1,550,000.00
Less: Cost of Sales 450,000.00
Gross Profit from operations 1,100,000.00
Add: Other Income Not Subject to FWT -
Gross business Income 1,100,000.00
Less: Business Expenses 450,000.00
Taxable Income 650,000.00
Multiply: Tax Rate 20%
Regular Income Tax 130,000.00

MCIT (2%x1,100,000) 22,000.00

MCIT = 2% x Gross Business Income

Income Tax Due 130,000.00 rit

Less: CWT 2307 -
Quarterly Income Tax Paid -
Income Tax Payable 130,000.00

Note: RIT is greater than MCIT hence, RIT is the income tax due

4. TY 2024
Sales 4,550,000.00
Less: Cost of Sales 1,450,000.00
Gross Profit from operations 3,100,000.00
Add: Other Income Not Subject to FWT (Re 500,000.00
Gross business Income 3,600,000.00
Less: Business Expenses 3,500,000.00
Taxable Income 100,000.00
Multiply: Tax Rate 20%
Regular Income Tax 20,000.00

MCIT (2%x3,600,000) 72,000.00

MCIT = 1% x Gross Business Income
Income Tax Due 72,000.00
Less: CWT 2307 25,000.00
Quarterly Income Tax Paid -
Income Tax Payable 47,000.00

Note: MCIT is greater than RIT hence, MCIT is the income

tax due

5. 1st Quarter 2nd Quarter 3rd Quarter

Sales 290,000.00 350,000.00 400,000.00
Less: Cost of Sales 150,000.00 120,000.00 150,000.00
Gross Income from Operation 140,000.00 230,000.00 250,000.00
Add: Other Income Not Subject to FWT
Interest income on A/R 3,000.00 5,000.00 10,000.00
Gross Business Income 143,000.00 235,000.00 260,000.00
Less: Bus. Expenses 125,000.00 340,000.00 35,000.00
Taxable Income (this quarter) 18,000.00 -105,000.00 225,000.00
Add: Taxable income previous quarter - 18,000.00 -87,000.00
Taxable income to date 18,000.00 -87,000.00 138,000.00
Multiply: Tax Rate 20% 20% 20%
Regular Income Tax 3,600.00 - 27,600.00
MCIT (2% x gross business income) 2,860.00 7,560.00 12,760.00
Computation of MCIT 143,000 x 2% (143,000+235,000) X 2% (143,000+235,000+260,000) X 2%
Income Tax Due 3,600.00 7,560.00 47,600.00
Less: CWT 2307 (this quarter) 5,800.00 7,000.00 8,000.00
CWT 2307 (previous quarter) - 5,800.00 12,800.00
Quarterly income tax paid - - -12,200.00
Excess MCIT over RIT (2022) 10,000.00 - 10,000.00
Income tax Payable (overpayment) (12,200.00) 5,240.00 29,000.00
RIT is greater than MCIT RIT is greater than MCIT RIT is greater MCIT
Annual
Sales 1,490,000.00 (1st qtr + 2nd qtr + 3rd qtr + 4th qtr)
Less: Cost of Sales 450,000.00 (1st qtr + 2nd qtr + 3rd qtr + 4th qtr)
Gross income from Operation 1,040,000.00
Add: Other Income Not Subject to FWT
Interest income on A/R 26,000.00 (1st qtr + 2nd qtr + 3rd qtr + 4th qtr)
Gross Business Income 1,066,000.00
Less: Business Expenses 505,000.00 (1st qtr + 2nd qtr + 3rd qtr + 4th qtr)
Taxable Income 561,000.00
Multiply: Tax Rate 20%
Regular Income Tax 112,200.00
MCIT (2% x gross business income) 21,320.00 (P1,066,000 x 2%)

Income Tax Due 112,200.00

Less: CWT 2307 (4th qtr.) 9,000.00
CWT 2307 (previous qtr.) 20,800.00 (P5,800 + P7,000 + P8,000)
Quarterly Income Tax Paid 29,000.00 (0 + 0 + P29,000)
Excess MCIT over RIT (2022) 10,000.00
Income Tax Payable 43,400.00
RIT is greater than MCIT
6. TY 2024
Sales 4,550,000.00
Less: Cost of Sales 1,450,000.00
Gross income from Operation 3,100,000.00
Add: Other Income Not Subject to FWT
Rent Income 500,000.00
Gross Business Income 3,600,000.00
Less: Business Expenses 3,500,000.00
Taxable Income 100,000.00
Multiply: Tax Rate 20%
Regular Income Tax 20,000.00
MCIT (2% x gross business income) 72,000.00 (P3,600,000 x 2%)
Income Tax Due 72,000.00
Less: CWT 2307 25,000.00
Quarterly Income Tax Paid -
Excess MCIT over RIT -
Income Tax Payable 47,000.00
Notes: MCIT is greater than RIT, hence, the income tax due is equal to MCIT
Excess MCIT over RIT in 2020 is not deductible because it has lost its creditability in 2024.
Excess MCIT over RIT in 2022 is not deductible because MCIT is greater than RIT

7.
Sales 4,550,000.00
Less: Cost of Sales 1,450,000.00
Gross income from Operation 3,100,000.00
Add: Other Income Not Subject to FWT
Rent Income 500,000.00
Gross Business Income 3,600,000.00
Less: Business Expenses 2,500,000.00
Taxable Income 1,100,000.00
Multiply: Tax Rate 20%
Regular Income Tax 220,000.00
MCIT (2% x gross business income) 36,000.00 (P3,600,000 x 2%)

Income Tax Due 220,000.00 RIT

Less: CWT 2307 25,000.00
Quarterly Income Tax Paid -
Excess MCIT over RIT (2022) 25,000.00
Income Tax Payable 170,000.00
Notes: RIT is greater than MCIT, hence, the income tax due is equal to RIT
Excess MCIT over RIT( 2020) is not deductible because it has lost its creditability in 2024.
Excess MCIT over RIT( 2022) can be deducted from the income tax due because it is within the 3 year reglamentary within which
deferred charges - MCIT can be deducted and that RIT is greater MCIT.
(5,800 + 7,000)
(0 + 28,800)
+235,000+260,000) X 2%

(P5,800 + P7,000)
(P7,800 + 0)
he 3 year reglamentary within which
ACTIVITY 2
1. The following information were taken from the 2021 books of XYZ Corporation, its 9th year
of operation
1st Quarter 2nd quarter 3rd Quarter 4thQuarter
Sales 600,000.00 700,000.00 800,000.00 900,000.00
Cost of Sales 150,000.00 120,000.00 500,000.00 30,000.00
Rent Income 50,000.00 75,000.00 100,000.00 120,000.00
Interest income from
local currency deposit 6,000.00 - - -
Business expenses 210,000.00 25,000.00 450,000.00 5,000.00
CWT -2307 2,500.00 3,750.00 5,000.00 6,000.00
Excess MCIT over RIT in 2019, P15,000
Required: A. Compute for the quarterly income tax payable
B. Compute for the annual income tax payable

2. Given below are the income earned by JJJ Corp. for taxable year 2021, 6th year of operation:
Sales in the Philippines 8,000,000.00
Sales in USA 3,000,000.00
Interest income from bank deposit (local currency) in
BPI, Bacolod Branch 10,000.00
Rent Income 250,000.00
Royalty income from books published in the Philippines 2,000,000.00

Additional Information:
A. Cost of Sales in the Philippines 4,500,000.00
B. Cost of Sales in USA 2,200,000.00
C. Business expenses (itemized deduction) in the Phils. 1,500,000.00
D. Business expenses (itemized deduction) in USA 300,000.00
E. Excess MCIT over RIT in 2020 25,000.00
F. Creditable withholding tax per form 2307 12,500.00
G. Quarterly income tax paid 100,000.00
Compute for the income tax payable of JJJ Corporation for 2021
3. Given below are the income earned by JJJ Corp. for taxable year 2021, 6th year of operation:
Sales in the Philippines 8,000,000.00
Interest income from bank deposit (local currency) in
BPI, Bacolod Branch 10,000.00
Rent Income 250,000.00
Royalty income from books published in the Philippines 2,000,000.00
Additional Information:
A. Cost of Sales in the Philippines 4,500,000.00
C. Business expenses (itemized deduction) in the Phils. 5,000,000.00
E. Excess MCIT over RIT in 2020 25,000.00
F. Creditable withholding tax per form 2307 12,500.00
G. Quarterly income tax paid 100,000.00
Compute for the income tax payable of JJJ Corporation for 2021

TEST II: COMPUTE FOR THE FINAL WITHHOLDING TAX OF THE CORPORATION
1. Interest income on bank deposit earned by a resident foreign corporation, P20,000.
2. Intterest income earned from a bank deposit under expanded foreign currency deposit
system earned by a domestic corporation, P35,000.
3. Cash dividend received by a domestic corporation from a domestic corporation, P15,000.
4. Prize from raffle won by a domestic corporation, P50,000.
5. Interest income earned by foreign currency deposit unit and a non-resident foreign corporation,
P150,000.

TEST III: TRUE OR FALSE.

1. Corporations subject to a rate below 30% are referred to as special corporations.
2. The income of OBU from foreign sources is exempt from Philippine income tax.
3. International air carriers are subject to 30% tax on Philippine taxable income.
4. Local Water District is subject to 30% income tax rate based on its taxable income
5. A regional area headquarter is exempt from income tax because it does not derive income.
6. A non-cinematographic film owner, lessor or distributor is subject to 25% tax on taxable
 income.
7. A government schools is exempt from income tax.
8. When the income from unrelated activities exceeds 50% of total income, only income from
unrelated activities of private schools and non-profit hospital is subject to 30% tax.
9. A farmers' or fruit growers association is exempt from income tax.
10. The gross Philippine billings of international air carriers include receipts from outgoing voyage
or flights which must be billed in the Philippines.
11. Gross Philippine Billings 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 document.
12. Certificate of tax exemption availed of exempt corporations is valid for 2 years.
13. Non-resident foreign corporations are subject to MCIT.
14. MCIT is 2% of the gross income from operations.
15. IAET is a penalty tax; hence, earnings subjected to IAET will still be subject to a dividend
tax when subsequently declared.
16. Proprietary non-profit educational institutions are subject to MCIT.
17. Insurance companies are subject to IAET.
18. MCIT excess can be deducted only against the excess of RCIT/NIT over the MCIT in any
of the succeeding three years.
19. As a rule, corporations always pay tax even if there is a loss effective from the fourth year
of their operations.

TEST IV: MULTIPLE CHOICE

1. The minimum corporate income tax is
A. 15% of gross income C. 2% of gross business income
B. 2% of taxable income D. 15% of taxable income

2. The optional gross income tax is

A. 2% of gross income C. 30% of gross income
B. 15% of gross income D. 10% of gross income
3. The maximum cost ratio for corporations to avail of the gross income tax is
A. 60% C. 55%
B. 40% D. 45%

4. Which of the following is subject to MCIT?

A. Private schools taxed at 10% of taxable income C. OBUs
B. GOCCs D. International carriers

5. Which is not exempt from IAET

A. Publicly held corporations C. Banks
B. Insurance companies D. Dealers in securities

6. The quarterly income tax return is due on or before

A. 60 days following the end of the quarter D. 15th day of the 4th month following the
B. 30 days following the end of the quarter end of the quarter
C. 45 days following the end of the quarter

7. The branch profit remittance tax is 15% of the total profits

A. of the current year
B. of the current year earmarked for remittance, including investment income
C. earmarked for remittance without deducting the tax
D. actually remitted to the home office abroad, net of the tax

8. Which of the following is not a deduction in the computation of the income tax payable or
overpayment?
A. Creditable withholding tax on gross income
B. Excess MCIT prior years
C. Final witthholding tax on passive income
D. Estimated quarterly income tax payment

9. In the quarterly income tax return, excess MCIT prior year is deductible only when
A. the MCIT exceeds the RCIT for that quarter
 B. the RCIT exceeds the MCIT for that quarter
C. the cumulative MCIT exceeds the cumulative RCIT as of the end of that quarter
D. the cumulative RCIT exceeds the cumulative MCIT as of the end of that quarter

10. Excess MCIT is valid as a tax credit over

A. 5 years B. 4 years C. 3 years D. 2 years

11. The BBB Corporation started its operation on Jan. 1, 2014. The following historical MCIT
and RIT data:
2017 2018 2019 2020
MCIT 120,000.00 200,000.00 190,000.00 170,000.00
RIT 110,000.00 220,000.00 - 180,000.00
Basing solely on the information provided, what is the tax due and payable in 2017 and 2018,
respectively?
A. P120,000; P220,000 C. P120,000: P210,000
B. P120,000; P100,000 D. P110,000;P220,000

12. In the immediately preceding problem, what is the income tax payable in 2019 and 2020?
A. P190,000; 0 C. P0; P0
B. P190,000; P180,000 D. P170,000; P0

13. The following are the composition of the total gross income of a domestic corporation which
is on its 8th year of operation:
Sales, net of discounts 4,000,000.00
Cost of Sales 2,400,000.00
Dividend Income 100,000.00
Royalty Income 250,000.00
What is the minimum corporate income tax?
A. P42,000 B. P40,000 C. P35,000 D, 32,000

14. In the immediately preceding problem, what is the regular corporate income tax if the corporation
 has a total allowable deductions of P1,700,000
A. P0 B. P15,000 C. P90,000 D. P120,000

15. In connection with #13 and #14, what is the income tax payable if the corporation has deferred
charges - MCIT of 3,000 paid 1 year prior to the current taxable year and that during the taxable
year the corporation has paid quarterly income tax of P5,500.
A. P32,000 C. P0
B. P26,500 D. None of the above

16. The quarterly MCIT and RIT and creditable withholding tax of Taraka Corporation is shown
below:
MCIT RIT CWT
First Quarter 800,000.00 700,000.00 250,000.00
Second Quarter 600,000.00 900,000.00 220,000.00
Third Quarter 1,000,000.00 600,000.00 340,000.00
Fourth Quarter 500,000.00 800,000.00 260,000.00
Taraka Corporation also had P120,000 excess creditable withholding tax and P180,000 excess
MCIT still outstanding from the prior year.
What is the income tax payable in the second quarter?
A. P400,000 C. P470,000 E. None of the above
B. P430,000 D. P520,000

18. A regional operating headquarter of a multinational company reported a net operating loss on its 5th
year of operations:
Gross receipts 4,000,000.00
Cost of service 2,800,000.00
Business expenses 1,500,000.00
What is the tax due?
A. P0 B. P24,000 C. P100,000 D. P120,000
CORPORATION DEFINED
Corporation shall include partnerships, no matter how created or organized, joint-stock
companies, joint accounts, associations, or insurance companies. It does not include general
professional partnerships and a joint venture or consortium formed for the purpose of undertaking
construction projects or engaging in petroleum, coal, geothermal, and other energy operations
pursuant to an operating consortium agreement under a service contract with the government

GENERAL CLASSIFICATION OF CORPORATIONS

1. Domestic corporation - one which is organized under Philippine law.
2. Foreign Corporation - one which is organized under a law other than Philippine law
A. Resident Foreign Corporation - a foreign corporation doing business in the Philippines.
B. Non-resident Foreign Corporation - a foreign corporation not doing business in the Phils.

LIST OF PASSIVE INCOME SUBJECT TO FINAL WITHHOLDING TAX

Resident Non-Resident
Domestic Foreign Foreign Corp.
1. Interest income from local
currency bank deposit and yield
from deposit substitute, trust fund
and similar arrangement
Short-term 20% 20% 25% (Jan. 1, 2021)
Long-term
Pre-terminated
Less than 3 years 20% 20% 25% Jan. 1, 2021
3 to less than 4 years 12% 12% 25% Jan. 1, 2021
4 to less than 5 years 5% 5% 25% Jan. 1, 2021
5 years or more exempt exempt exempt

2. Interest income from foreign

currency bank deposit from
Foreign Currency Deposit Unit/
Offshore Banking Units Depository
Banks 15% 15% exempt

3. Cash/property dividend from

domestic corporation exempt exempt 15%

4. Passive Royalties 20% 20% 25% Jan. 1, 2021

RULES:
1. Income subject to final withholding tax shall not be subjected to regular income tax rate. Income subject to FWT
shall be included in the computation of gross income
2. Tax rate is fixed at 20%/25% CREATE LAW (Corporate Recovery and Tax Incentives for Enterprises Law - 20% or
or 25% starting July 1, 2020.
20% - Taxable income in a year does not exceed P5,000,000 and the total assets (except land in
which the business is located) does not exceed P100,000,000.
3. Except for non-resident foreign corporation, corporate taxpayer shall file quarterly income
tax return (Form 1702Q) for the first three quarters of the taxable year.
4. Unlike individual taxpayers who observe calendar year, corporate taxpayers may use fiscal
or calendar year at its option.
DC RFC NRFC
Income subjected to Philippine Income TaWithin & Within the Within the
Outside of Philippines onlyPhilippines only
the Philippines
Business expenses to be deducted from grWithin & Within the no deduction is
income Outside of Philippines onlyallowed
the Philippines
Deadline for the filing of Income tax return
Quarterly income tax (1702Q) 60 days after the close of the taxable quarter
Annual income tax returns (1702RT, 15th day of the 4th month following the close of the
1702MX, 1702EX) taxable year.

MINIMUM CORPORATE INCOME TAX (MCIT) - least amount of income tax a corporation should pa
MCIT will be imposed starting the 4th taxable year immediately following the taxable year in which the
corporation has started its operation.

STEPS:
1. Compute for the Regular Income Tax Rate (30% of taxable income); 20% or 25% of the taxable inco
2. Compute for the MCIT (2% of gross business income) CREATE LAW: 1% of the gross business incom
3. Compare MCIT and RIT . Whichever is higher between MCIT and RIT is the income tax due.

Excess MCIT over RIT shall be deducted from the income tax due of the corporation within 3 taxable years
immediately following the taxable year in which MCIT has been paid provided, that RIT is greater than MCIT. If
used within the 3-year reglamentary period, the same shall lose its creditability.

Is there a relief from MCIT?

The Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, may suspend
the imposition of MCIT upon submission of proof that the corporation has sustained substantial losses on
account of:
A. Prolonged labor dispute
B. Force majeure
C. Legitimate Business Reverses

Entities Exempted from MCIT

1. Real Estate Investment Trusts or REITS under RA 9856
2. Domestic Corporations which opted to be taxed under 15% corporate income tax (gross income taxation)
3. Domestic Corporations or resident foreign corporations subject to special tax rates
A. Proprietary educational institutions, and non-profit hospitals
B. Foreign Currency Deposit Units and Offshore Banking Units.
C. Regional Operating Heaquarters of Multinational Corporations
D. International Air Carrier
E. Firms subject to special income tax such as PEZA and BCDA locators.
4. All Non-residents foreign corporations

SPECIAL CORPORATIONS - corporations subject to special tax rates

Domestic Corporations
A. Private educational institutions - 10% of taxable income (CREATE Law tax rate is 1% starting July 1, 2020 up t
B. Non-profit hospitals -10% of taxable income (CREATE Law tax rate is 1% starting July 1, 2020 up to June 30, 2
Note: Income from unrelated trade or business does not exceed 50% of the total income.
If income from unrelated trade or business exceeds 50% of the total income, private educational
institutions and non-profit hospitals are subject to 20% or 25% income tax rate.

Non-stock, non-profit educational institutions are exempted from income tax

Government schools are exempted from income tax

Resident foreign corporation

1. International Carrier - 2.5% of Gross Philippine Billings
Note: Gross Philippine Billings refer to amount of gross revenue derived from carriage of persons,
excess baggage, cargo and mails originating from the Philippines in a continuous and uninterrupted flight.
2. Offshore banking units from transactions with OBUs, local commercial banks and branches of foreign
banks - 25% of taxable income
3. Offshore banking units from transactions with residents except those enumerated in #2 - 25% of taxable inco
4. Regional Operating Headquarters of Multinational Corporation - 25% of taxable income
5. Regional or Area Headquarters of Multinational Coporation - Exempt (not profit centers)
6. Branch profit remittance of resident foreign corporations except those registered with PEZA - 15% of
of income earmarked for remittance.

Non-resident foreign corporations

1. Cinematographic film owner, distributor - 25% of income from the Philippines.
2. Lessor of vessels chartered by Philippine Nationals - 4.5% of income from the Philippines.
3. Owner, Lessor of aircraft, machineries and other equipment - 7.5% of income from the Philippines.

Corporations Exempt from Income Tax

1. Labor, agricultural or horticultural organization and 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
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 non-stock corporation or their dependents.
4. Cemetery company owned and operated exclusively for the benefit of its members.
5. Non-stock 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 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 the benefit of any private stockholder or individual.
7. Civic league or organization not orgnaized for profit but operated exlcusively for the promotion of social
welfare.
8. A non-stock, non-profit educational institution
9. Government educational institution
10. 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
expenditures

11. 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 the quantity of produce finished by them.
Note: If the above-mentioned organizations, conducts business activity for profit, they shall be
subjected to income tax. Income from disposal of their properties, whether real or personal shall likewise
be subjected to income tax.
12. Social Security System (SSS), Philippine Health Insurance Corp. (PHIC), Government Service
Insurance Corp. (GSIS), Local Water Districts (LWD).
Quarter ending Deadline for the filing of 1702Q
3/31/2022 May 30, 2022
6/30/2022 Aug. 29, 2022
9/30/2022 Nov. 29, 2022
Taxable year ending Deadline for the filing of form 1702RT, 1702EX, 1702MX
Dec. 31, 2022 Apr. 15, 2023
June 30, 2022 Oct. 15, 2022
### July 15, 2022
 Start of the operation Start of the imposition of MCIT
1/1/2014 ty 2018
1/1/2008 ty 2012
1/1/2000 ty 2004
1/1/1995 ty 1999
1/1/1990 ty 1998 MCIT was incorporated in the
e year in which the NIRC in 1998.

25% of the taxable income (July 1, 2020)

he gross business income - July 1, 2020 to June 30, 2023
ncome tax due.

hin 3 taxable years 2021 2022 2023

is greater than MCIT. If the deferred charges - MCIT is not MCIT 1000 1500 1800
RIT 1200 1300 1700

Income
evenue, may suspend tax due 1200 1500 1800
bstantial losses on income tax payable 1800
deferred charges-mc 200 100
2021: Accounting entry
Income Tax Expense 1200
income tax payable
2021 income tax due

2022: Accounting entry

oss income taxation) Income tax expense 1300
Deferrred charges - MCIT 200
income tax payable
2021 income tax due

Adjusting entry: (in 2026)

Retained earnings 200
Deferred charges - mcit
to close the expired deferred
charges - MCIT in 2022.

starting July 1, 2020 up to June 30, 2023)

1, 2020 up to June 30, 2023)

e, private educational

ge of persons,
 interrupted flight.
anches of foreign

#2 - 25% of taxable income

th PEZA - 15% of

he Philippines.

ve bank without

members such as
a non-stock corporation
enefits exclusively to
ependents.

s, charitable,
ts net income or asset

nd no part of the net

promotion of social

tion company, mutual

income of which
pose of meeting its

or the purpose of
less the necessary

ey shall be
sonal shall likewise
ated in the

2024 2025 2026

2000 1300 1000
1300 1000 1400

2000 1300 1400

2000 1300 300 (1,400-100-700-300)
700 300

1200

can be deducted from income tax due in 2023, 2024, 2025

1500

income tax expense 1400

200 deferred charges - mcit 1,100 (100+700+300)
income tax payable 300
2021 income tax expense
and income tax payable