Rosylle Jade A.

Calub Tax (MW 2:30-4:00 pm) BIR Form 1700 - Annual Income Tax For Individuals Earning
Purely Compensation Income (Including Non-Business/Non-
Income Tax Description Profession Related Income)

Income Tax is a tax on a person's income, emoluments, Documentary Requirements

profits arising from property, practice of profession, conduct of
trade or business or on the pertinent items of gross income 1. Certificate of Income Tax Withheld on Compensation
specified in the Tax Code of 1997 (Tax Code), as amended, less (BIR Form 2316)
the deductions if any, authorized for such types of income, by the 2. Duly approved Tax Debit Memo, if applicable
Tax Code, as amended, or other special laws. 3. Proofs of Foreign Tax Credits, if applicable
4. Income Tax Return previously filed and proof of
Who are required to File Income Tax Returns? payment, if filing an amended return for the same
taxable year.
Individuals
Procedures
 Resident citizens receiving income from sources within or
outside the Philippines 1. For Electronic Filing and Payment System (eFPS) Filer
o Employees deriving purely compensation income from a. Fill-up applicable fields in the BIR Form No. 1700
two or more employers, concurrently or successively at b. Pay electronically by clicking the "Proceed to
any time during the taxable year Payment" button and fill-up the required fields in the
o Employees deriving purely compensation income "eFPS Payment Form" click "Submit" button.
regardless of the amount, whether from a single or several c. Receive payment confirmation from eFPS-AABs for
employers during the calendar year, the income tax of successful e-filing and e-payment.
which has not been withheld correctly (i.e. tax due is not 2. For Non-eFPS Filer
equal to the tax withheld) resulting to collectible or a. Fill-up applicable fields in the BIR Form No. 1700 in
refundable return the downloaded Electronic Bureau of Internal
o Self-employed individuals receiving income from the Revenue Form (eBIRForm) Package
b. Print the duly accomplished BIR Form No. 1700
conduct of trade or business and/or practice of profession
c. Proceed to the nearest Authorized Agent Bank (AAB)
o Individuals deriving mixed income, i.e., compensation
under the jurisdiction of the Revenue District Office
income and income from the conduct of trade or business
where you are registered and present the duly
and/or practice of profession
accomplished BIR Form 1700, together with the
o Individuals deriving other non-business, non-professional
required attachments and your payment.
related income in addition to compensation income not d. In places where there are no AABs, proceed to the
otherwise subject to a final tax Revenue Collection Officer or duly Authorized City
o Individuals receiving purely compensation income from a or Municipal Treasurer located within the Revenue
single employer, although the income of which has been District Office where you are registered and present
correctly withheld, but whose spouse is not entitled to the duly accomplished BIR Form 1700, together with
substituted filing the required attachments and your payment.
 Non-resident citizens receiving income from sources within e. Receive your copy of the duly stamped and validated
the Philippines form from the teller of the AABs/Revenue Collection
 Aliens, whether resident or not, receiving income from Officer/duly Authorized City or Municipal Treasurer.
sources within the Philippines 3. For Manual Filer
a. Fill-up the BIR Form No. 1700 in triplicate copies.
Non-Individuals b. Proceed to the Revenue District Office where you are
registered or to any Tax Filing Center established by
 Corporations including partnerships, no matter how the BIR and present the duly accomplished BIR Form
created or organized. 1700, together with the required attachments.
 Domestic corporations receiving income from sources c. Receive your copy of the duly stamped and validated
within and outside the Philippines form from the RDO/Tax Filing Center representative.
 Foreign corporations receiving income from sources
within the Philippines Deadline: On or before the 15th day of April of each year
 Estates and trusts engaged in trade or business covering taxable income for calendar year 2018 and thereafter

Annual Income Tax For Individuals Earning Purely Annual Income Tax For Individuals, Estates, and Trusts
Compensation Income (Including Non-Business/Non-
Profession Related Income) BIR Form 1701 - Annual Income Tax Return Individuals, Estates
and Trusts
 c. Receive your copy of the duly stamped and validated
form from the RDO/Tax Filing Center representative.
Documentary Requirements
Deadline: Final Adjustment Return or Annual Income Tax
1. Certificate of Income Tax Withheld on Compensation Return - On or before the 15th day of April of each year covering
(BIR Form 2316), if applicable income for calendar year 2018 and thereafter
2. Certificate of Income Payments Not Subjected to
Withholding Tax (BIR Form 2304), if applicable Account Information Form For Self-Employed Individuals,
3. Certificate of Creditable Tax Withheld at Source (BIR Estates And Trusts (Including Those With Mixed Income,
Form 2307), if applicable i.e., Compensation Income and Income from Business and/or
4. Duly approved Tax Debit Memo, if applicable Practice of Profession)
5. Proof of Foreign Tax Credits, if applicable
6. Income Tax Return previously filed and proof of BIR Form 1701 AIF - Account Information Form for Self-
payment, if filing an amended return for the same year Employed Individuals, Estates and Trusts (Including those with
7. Account Information Form (AIF) or the Certificate of Mixed Income, i.e., Compensation Income and Income from
the independent Certified Public Accountant Business and/or Practice of Profession) and Estates and Trusts
(CPA) with Audited Financial Statements if the gross (Engaged in Trade or Business)
annual sales, earnings, receipts or output exceed three
million pesos (P3,000,000.00)
NOTE: Pursuant to Sec. 71 of RA 10963, otherwise known as
8. Account Information Form or Financial Statements not
necessarily audited by an independent CPA if the gross Tax Reform Acceleration and Inclusion Act, amending Sec. 232
annual sales, earnings, receipts or output do not exceed of the Tax Code, as amended, in relation to Revenue
P3,000,000.00 and is subject to graduated income tax Memorandum Circular No. 6 – 2001, corporations, companies or
rates under Section 24(A)(2)(a) persons whose gross annual sales, earnings, receipts or output
9. Proof of prior year’s excess tax credits, if applicable exceed P3,000,000 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
Procedures
income-producing properties and the corresponding income
therefrom, and other relevant statements duly certified by an
1. For eFPS Filer independent CPA.
a. Fill-up applicable fields in the BIR Form No. 1701
b. Pay electronically by clicking the “Proceed to Payment”
Documentary Requirements: None
button and fill-up the required fields in the “eFPS
Payment Form” then click “Submit” button.
c. Receive payment confirmation from eFPS-AABs for Procedures
successful e-filing and e-payment.
2. For Non-eFPS Filer 1. Accomplish BIR Form 1701 AIF in triplicate.
a. Fill-up fields in the BIR Form No. 1701 in the 2. Attach the same to BIR Form 1701.
downloaded Electronic Bureau of Internal Revenue
Form (eBIRForm) Package Deadline:Same deadline as BIR Form 1701 - On or before the
b. Print the duly accomplished BIR Form No. 1701 15th day of April of each year covering taxable income for
c. Proceed to the nearest Authorized Agent Bank (AAB) calendar year 2018 and thereafter
under the jurisdiction of the Revenue District Office
where you are registered and present the duly Quarterly Income Tax For Individuals, Estates And Trusts
accomplished BIR Form 1701, together with the Including Those With Mixed Income, i.e., Compensation
required attachments and your payment. Income and Income from Business and/or Practice of
d. In places where there are no AABs, proceed to the
Profession
Revenue Collection Officer or duly Authorized City or
Municipal Treasurer located within the Revenue District
Office where you are registered and present the duly BIR Form 1701Q - Quarterly Income Tax Return For
accomplished BIR Form 1701, together with the Individuals, Estates and Trusts
required attachments and your payment.
e. Receive your copy of the duly stamped and validated Documentary Requirements
form from the teller of the AABs/Revenue Collection
Officer/duly Authorized City or Municipal Treasurer. 1. Certificate of Creditable Tax Withheld at Source (BIR
3. For Manual Filer Form 2307), if applicable
a. Fill-up the BIR Form No. 1701 in triplicate copies. 2. Duly approved Tax Debit Memo, if applicable
b. Proceed to the Revenue District Office where you are 3. Proof of other payment/s made, if applicable
registered or to any Tax Filing Center established by the 4. Summary Alphalist of Withholding Agents of Income
BIR and present the duly accomplished BIR Form 1701, Payments Subjected to Withholding Tax at Source
together with the required attachments. (SAWT), if applicable
Procedures Documentary Requirements

1. For eFPS Filer 1. Certificate of Income Payments Not Subjected to

a. Fill-up applicable fields in the BIR Form No. 1701Q Withholding Tax (BIR Form 2304), if applicable
b. Pay electronically by clicking the “Proceed to 2. Certificate of Creditable Tax Withheld at Source (BIR
Payment” button and fill-up the required fields in the Form 2307), if applicable
“eFPS Payment Form” then click “Submit” button. 3. Duly approved Tax Debit Memo, if applicable
c. Receive payment confirmation from eFPS-AABs for 4. Proof of Foreign Tax Credits, if applicable
successful e-filing and e-payment. 5. Income tax return previously filed and proof of
2. For Non-eFPS Filer payment, if amended return is filed for the same taxable
a. Fill-up applicable fields in the BIR Form No. year
1701Q in the downloaded Electronic Bureau of 6. Account Information Form (AIF) or the Certificate of
Internal Revenue Form (eBIRForm) Package the independent CPA with Audited Financial
b. Print the duly accomplished BIR Form No. 1701Q Statements, if the gross annual sales, earnings, receipts
c. Proceed to the nearest Authorized Agent Bank or output exceed P3,000,000.
(AAB) under the jurisdiction of the Revenue District 7. Proof of prior year’s excess tax credits, if applicable
Office where you are registered and present the duly
accomplished BIR Form 1701Q, together with the Procedures
required attachments and your payment.
d. In places where there are no AABs, proceed to the
1. For eFPS Filer
Revenue Collection Officer or duly Authorized City
a. Fill-up applicable fields in the BIR Form No. 1702
or Municipal Treasurer located within the Revenue
b. Pay electronically by clicking the “Proceed to
District Office where you are registered and present
Payment” button and fill-up the required fields in the
the duly accomplished BIR Form 1701Q, together
“eFPS Payment Form” then click “Submit” button.
with the required attachments and your payment.
c. Receive payment confirmation from eFPS-AABs for
e. Receive your copy of the duly stamped and
successful e-filing and e-payment.
validated tax return and BIR prescribed deposit slip
2. For Non-eFPS Filer
from the teller of the AABs or Electronic Revenue
a. Fill-up fields in the BIR Form No. 1702 in the
Official Receipt (eROR) from the Revenue
downloaded Electronic Bureau of Internal Revenue
Collection Officer/duly Authorized City or
Form (eBIRForm) Package
Municipal Treasurer.
b. Print the duly accomplished BIR Form No. 1702
3. For Manual Filer
c. Proceed to the nearest Authorized Agent Bank
a. Fill-up the BIR Form No. 1701Q in triplicate copies
(AAB) under the jurisdiction of the Revenue District
(Compensation Income need not be reported in the
Office where you are registered and present the duly
Quarterly Income Tax Return and is to be declared
accomplished BIR Form 1702, together with the
only on the Annual Income Tax Return).
required attachments and your payment.
b. Proceed to the Revenue District Office where you
d. In places where there are no AABs, proceed to the
are registered or to any Tax Filing Center
Revenue Collection Officer or duly Authorized City
established by the BIR and present the duly
or Municipal Treasurer located within the Revenue
accomplished BIR Form 1701Q, together with the
District Office where you are registered and present
required attachments.
the duly accomplished BIR Form 1702, together
c. Receive your copy of the duly stamped and
with the required attachments and your payment.
validated form from the RDO.
e. Receive your copy of the duly stamped and
validated form from the teller of the AABs/Revenue
Deadlines Collection Officer/duly Authorized City or
Municipal Treasurer.
 May 15 of the current taxable year– for the first quarter 3. For Manual Filer
 August 15 of the current taxable year – for the second a. Fill-up the BIR Form No. 1702 in triplicate copies.
quarter b. Proceed to the Revenue District Office where you
 November 15 of the current taxable year – for the third are registered or to any Tax Filing Center
quarter established by the BIR and present the duly
accomplished BIR Form 1702, together with the
Annual Income Tax For Corporations And Partnerships required attachments.
c. Receive your copy of the duly stamped and
validated form from the RDO/Tax Filing Center
BIR Form 1702 - Annual Income Tax Return (For Corporations
representative.
and Partnerships)
Deadline: Final Adjustment Return or Annual Income Tax a.
Fill-up applicable fields in the BIR Form No.
Return - On or before the 15th day of the fourth month following 1702Q in the downloaded Electronic Bureau of
the close of the taxpayer’s taxable year Internal Revenue Form (eBIRForm) Package
b. Print the duly accomplished BIR Form No. 1702Q
Account Information Form For Corporations And c. Proceed to the nearest Authorized Agent Bank
Partnerships (AAB) under the jurisdiction of the Revenue District
Office where you are registered and present the duly
accomplished BIR Form 1702Q, together with the
BIR Form 1702 AIF - Account Information Form (For
required attachments and your payment.
Corporations and Partnerships)
d. In places where there are no AABs, proceed to the
Revenue Collection Officer or duly Authorized City
NOTE: Pursuant to Sec. 71 of RA 10963, otherwise known as or Municipal Treasurer located within the Revenue
Tax Reform Acceleration and Inclusion Act, amending Sec. 232 District Office where you are registered and present
of the Tax Code, as amended, in relation toRevenue the duly accomplished BIR Form 1702Q, together
Memorandum Circular No. 6 – 2001, corporations, companies or with the required attachments and your payment.
persons whose gross annual sales, earnings, receipts or output e. Receive your copy of the duly stamped and
exceed P3,000,000 may not accomplish this form. In lieu thereof, validated tax return and BIR prescribed deposit slip
they may file their annual income tax returns accompanied by from the teller of the AABs or Electronic Revenue
balance sheets, profit and loss statement, schedules listing Official Receipt (eROR) from the Revenue
income-producing properties and the corresponding income Collection Officer/duly Authorized City or
therefrom, and other relevant statements duly certified by an Municipal Treasurer.
independent CPA. 3. For Manual Filer
a. Fill-up the BIR Form No. 1702Q in triplicate copies.
Documentary Requirements: None b. Proceed to the Revenue District Office where you
are registered or to any Tax Filing Center
Procedures established by the BIR and present the duly
accomplished BIR Form 1702Q, together with the
required attachments.
1. Accomplish BIR Form 1702 AIF in triplicate.
c. Receive your copy of the duly stamped and
2. Attach the same to BIR Form 1702.
validated form from the RDO.

Deadline: Same deadline as BIR Form 1702 - On or before the

Deadline: Corporate Quarterly Declaration or Quarterly Income
15th day of the fourth month following the close of the
Tax Return - On or before the 60th day following the close of
taxpayer’s taxable year
each of the quarters of the taxable year

Quarterly Income Tax For Corporations And Partnerships

Improperly Accumulated Earnings Tax For Corporations

BIR Form 1702Q - Quarterly Income Tax Return (For

BIR Form 1704 - Improperly Accumulated Earnings Tax Return
Corporations and Partnerships)
(For Corporations)

Documentary Requirements
Documentary Requirements

1. Certificate of Creditable Tax Withheld at Source (BIR

1. Photocopy of Annual Income Tax Return (BIR Form
Form 2307), if applicable
1702) with Audited Financial Statements and/or
2. Duly approved Tax Debit Memo, if applicable
Account Information Form of the covered taxable year
3. Previously filed return, if an amended return is filed for
duly received by the BIR; and
the same quarter
2. Sworn declaration as to dividends declared taken from
the covered year's earnings and the corresponding tax
Procedures withheld, if any.

1. For eFPS Filer Procedures

a. Fill-up applicable fields in the BIR Form No. 1702Q
b. Pay electronically by clicking the “Proceed to
1. Fill-up BIR Form 1704 in triplicate.
Payment” button and fill-up the required fields in the
2. If there is payment:
“eFPS Payment Form” then click “Submit” button.
o Proceed to the nearest Authorized Agent Bank (AAB)
c. Receive payment confirmation from eFPS-AABs for
of the Revenue District Office where you are
successful e-filing and e-payment.
registered and present the duly accomplished BIR
2. For Non-eFPS Filer
Form 1704, together with the required attachments
and your payment.
 o In places where there are no AABs, proceed to the 2. Income Tax Based on the Graduated Income Tax
Revenue Collection Officer or duly Authorized City Rates
or Municipal Treasurer located within the Revenue
District Office where you are registered and present C. For Individuals Earning Both Compensation Income and
the duly accomplished BIR Form 1704. Income from Business and/or Practice of Profession, their
o Receive your copy of the duly stamped and validated income taxes shall be:
form from the teller of the AABs/Revenue Collection
Officer/duly Authorized City or Municipal Treasurer. 1. For Income from Compensation: Based on
3. If there is no payment: Graduated Income Tax Rates; and
o Proceed to the Revenue District Office where you are
registered and present the duly accomplished BIR 2. For Income from Business and/or Practice of
Form 1704, together with the required attachments. Profession:
o Receive your copy of the duly stamped and validated
form from the RDO representative
a. If the total Gross Sales/Receipts Do Not
Exceed VAT Threshold of P3,000,000, the
Deadline: Within fifteen (15) days after the close of the taxable Individual Taxpayer May Opt to Avail:
year
i. 8% Income Tax on Gross Sales/Receipts and
Annual Income Information Form for General Professional Other Non-Operating Income in Lieu of the
Partnerships Graduated Income Tax Rates and the
Percentage Tax; Or
Sec. 55. Returns of General Professional Partnership (Tax Code
of 1997, as amended) ii. Income Tax Based on Graduated Income Tax
Rates
Every general professional partnership shall file, in duplicate, a
return of its income, except income exempt under Section 32 (B) b. If the total Gross Sales/Receipts Exceed VAT
of this Title, setting forth the items of gross income and of Threshold of P3,000,000
deductions allowed by this Title, and the names, Taxpayer
Identification Numbers (TIN), addresses and shares of each of i. Income Tax Based on Graduated Income Tax
the partners. Rates

Income Tax Rates D. On Certain Passive Income of Individual Citizens and

Resident Aliens
I. For Individual Citizens and Resident Aliens Earning
Purely Compensation Income and Individuals Engaged in
Business and Practice of Profession

A. Graduated Income Tax Rates under Section 24(A)

(2) of the Tax Code of 1997, as amended by
Republic Act No. 10963

B. For Purely Self-Employed Individuals and/or Professionals

Whose Gross Sales/Receipts and Other Non-Operating
Income Do Not Exceed the VAT Threshold of P3,000,000,
the tax shall be, at the taxpayer’s option:

1. 8% Income Tax on Gross Sales or Gross Receipts in

Excess of P250,000 in Lieu of the Graduated Income II. For Non-Resident Aliens Not Engaged in Trade or Business
Tax Rates and the Percentage Tax; Or
 VII.For Resident Foreign Corporation

Related Revenue Issuances

RMO No. 23-2018, RR No. 8-2018, RA No. 10963, RR No. 12-

III.For Non-resident Aliens Not Engaged in Trade or Business 2007, RR No. 14-2002, RA No. 9337, RR No. 9-98, RR No. 1-
98, RR No. 5-97, RR No. 4-96

Frequently Asked Questions

1) What is income?

IV.For Alien Individuals Employed by Regional Headquarters Income means all wealth which flows into the taxpayer other
(RHQ) or Area Headquarters and Regional Operating than as a mere return of capital.
Headquarters (ROH) of Multinational Companies, Offshore
Banking Units (OBUs), Petroleum Service Contractor and 2) What is Taxable Income?
Subcontractor
Taxable income means the pertinent items of gross income
specified in the Tax Code as amended, less the deductions, if
any, authorized for such types of income, by the Tax Code or
other special laws.

V.For General Professional Partnerships 3) What is Gross Income?

Gross income means all income derived from whatever source.

VI.For Domestic Corporations
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 items
 Gross income derived from the conduct of trade or
business or the exercise of profession
 Gains derived from dealings in property
*Beginning on the 4th year immediately following the year in which
such corporation commenced its business operations, when the  Interest
minimum corporate income tax is greater than the tax computed using  Rents
the normal income tax.  Royalties
  Dividends b. An individual whose income tax has been withheld correctly
 Annuities by his employer, provided that such individual has only one
 Prizes and winnings employer for the taxable year
 Pensions
 Partner's distributive share from the net income of the c. An individual whose sole income has been subjected to final
general professional partnerships withholding tax or who is exempt from income tax pursuant to
the Tax Code and other special laws.
5) What are some of the exclusions from gross income?
d. An individual who is a minimum wage earner
o Life insurance
o Amount received by insured as return of premium e. Those who are qualified under “substituted filing”. However,
o Gifts, bequests and devises substituted filing applies only if all of the following requirements
o Compensation for injuries or sickness are present:
o Income exempt under treaty
o Retirement benefits, pensions, gratuities, etc. - the employee received purely compensation income
o Miscellaneous items (regardless of amount) during the taxable year;
 Income derived by foreign government - the employee received the income from only one employer
 Income derived by the government or its political in the Philippines during the taxable year;
subdivision - the amount of tax due from the employee at the end of the
 Prizes and awards in sport competition year equals the amount of tax withheld by the employer;
 Prizes and awards which met the conditions set in the - the employee’s spouse also complies with all 3 conditions
Tax Code stated above;
 13th month pay and other benefits not exceeding - the employer files the annual information return (BIR
P90,000 Form No. 1604-CF); and
 GSIS, SSS, Medicare and other contributions - the employer issues BIR Form No. 2316 (Oct 2002 ENCS
 Gains from the sale of bonds, debentures or other version) to each employee.
certificate of indebtedness with a maturity of more than
five (5) years 8.) Who are exempt from Income Tax?
 Gains from redemption of shares in mutual fund
a. Income from abroad of a non-resident citizen who is:
6) What are the allowable deductions from gross income?
i. A citizen of the Philippines who establishes to the satisfaction
a) *Optional Standard Deduction - an amount not exceeding of the Commissioner the fact of his physical presence abroad
40% of the gross sales/receipts for individuals and gross income with a definite intention to reside therein
for corporations; or
ii. A citizen of the Philippines who leaves the Philippines during
b) Itemized Deductions which include the following: the taxable year to reside abroad, either as an immigrant or for
employment on a permanent basis
- Expenses
- Interest iii. A citizen of the Philippines who works and derives income
- Taxes
from abroad and whose employment thereat requires him to be
- Losses
- Bad Debts physically present abroad most of the time during the taxable
- Depreciation year
- Depletion of Oil and Gas Wells and Mines
- Charitable Contributions and Other Contributions- Research and iv. A citizen who has been previously considered as a non-
Development resident citizen and who arrives in the Philippines at any time
- Pension Trusts during the year to reside permanently in the Philippines will
likewise be treated as a non-resident citizen during the taxable
* Not allowed to non-resident alien individual year in which he arrives in the Philippines, with respect to his
* A General Professional Partnership (GPP) may avail of the income derived from sources abroad until the date of his arrival
OSD only once, either by the GPP or the partners comprising in the Philippines.
the partnership
b. Overseas Filipino Worker, including overseas seaman
7) Who are not required to file Income Tax returns?
An individual citizen of the Philippines who is working and
a. An individual earning purely compensation income whose deriving income from abroad as an overseas Filipino worker is
taxable income does not exceed P250,000.00 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 Filipino 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.

c. General Professional Partnership

d. Government Service Insurance System (GSIS)

e. Social Security System (SSS)

f. Philippine Health Insurance Corporation (PHIC)

g. Local Water Districts (LWD)

9) What are the procedures in filing Income Tax returns (ITRs)?

a. 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) 12) Is the Minimum Corporate Income Tax (MCIT) an addition
of the place where taxpayer is registered or required to be to the regular or normal income tax?
registered. In places where there are no AABs, file the return
directly with the Revenue Collection Officer or duly Authorized No, the MCIT is not an additional tax. An MCIT of 2% of the
Treasurer of the city or municipality in which such person has gross income as of the end of taxable year (whether calendar or
his legal residence or principal place of business in the fiscal year, depending on the accounting period employed)
Philippines, or if there is none, filing of the return will be at the is imposed on a corporation taxable under Title II of the Tax
Office of the Commissioner. Code, as amended, beginning on the 4th taxable year
immediately following the taxable year in which such
b. For “no payment” ITRs -- refundable, break-even, exempt and corporation commenced its business operations when the MCIT
no operation/transaction, including returns to be paid on 2nd is greater than the regular income tax. The MCIT is compared
installment and returns paid through a Tax Debit Memo(TDM) 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 but the amount of the regular income tax.
- 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, 13) Who are covered by MCIT?
they shall be filed with an Authorized Agent Bank (AAB) or
Collection Officer/Deputized Municipal Treasurer (in places The MCIT covers domestic and resident foreign corporations
where there are no AABs), for collection of necessary penalties. 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 or to preferential rates under special laws do not fall within
the coverage of the MCIT.

For corporations whose operations or activities are partly

covered by the regular income tax and partly covered by the
preferential rate under special law, the MCIT shall apply the
regular income tax rate on its operations not covered by the tax
incentives. Newly established corporations or firms which are on
their first 3 years of operations are not covered by the MCIT.

14) When does a corporation start to be covered by the MCIT?

A corporation starts to be covered by the MCIT on the 4th year

following the year of the commencement of its business
operations. The period of reckoning which is the start of its
business operations is the year when the corporation was Interest Expense is not included as part of cost of service, except
registered with the BIR. This rule will apply regardless of in the case of banks and other financial institutions.
whether the corporation is using the calendar year or fiscal year
as its taxable year. “Gross Receipts” means amounts actually or constructively
received during the taxable year. However, for taxpayers
15) When is the MCIT reported and paid? Is it quarterly? employing the accrual basis of accounting, it means amounts
earned as gross income.
The MCIT is paid on an annual basis and quarterly basis. The
rules are governed by Revenue Regulations No. 12-2007. 17) What is the carry forward provision under the MCIT?

16) How is MCIT computed? Any excess of the MCIT over the normal income tax may be
carried forward and credited against the normal income tax for
The MCIT is 2% of the gross income of the corporation at the the three (3) immediately succeeding taxable years.
end of the taxable year.
18) How would the MCIT be recorded for accounting purposes?
The computation and the payment of MCIT, shall likewise apply
at the time of filing the quarterly corporate income tax as Any amount paid as excess minimum corporate income tax
prescribed under Section 75 and Section 77 of the Tax Code, as should be recorded in the corporation’s books as an asset under
amended. Thus, in the computation of the tax due for the taxable account title “Deferred charges-MCIT”
quarter, if the computed quarterly MCIT is higher than the
quarterly normal income tax, the tax due to be paid for such 19) How long can we amend our income tax return?
taxable quarter at the time of filing the quarterly income tax
return shall be the MCIT which is two percent (2%) of the gross There is no prescription period for amending the return. When
income as of the end of the taxable quarter. the taxpayer has been issued a Letter of Authority, he can no
longer amend the return.
“Gross income” means gross sales less sales returns, discounts
and cost of goods sold. Passive income, which have been subject 20) Can a benefactor of a senior citizen claim him/her as
to a final tax at source do not form part of gross income for additional dependent in addition to his/her 3 qualified dependent
purposes of computing the MCIT. children at Php25,000 each?

Cost of goods sold includes all business expenses directly No, pursuant to Revenue Regulations 2-94, the benefactor of a
incurred to produce the merchandise to bring them to their senior citizen cannot claim the additional exemption. Further,
present location and use. additional exemptions of individual taxpayers are removed under
RA 10963 (Tax Reform for Acceleration and Inclusion).
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

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:

o Salaries and employees benefits of personnel,

consultants and specialists directly rendering
the service;
o Cost of facilities directly utilized in providing
the service such as depreciation or rental of
equipment used;
o Cost of supplies