1. The document discusses taxation of corporations in the Philippines, defining terms like domestic corporation, foreign corporation, and sources of income.
2. It outlines tax rates for business income, passive income, and special rates for proprietary schools, mutual life insurers, and resident/non-resident foreign corporations.
3. Allowable deductions are discussed, including the option for domestic/resident foreign corporations to claim a standard deduction of up to 40% of gross income.
Taxation 101 basic rules and principles in philippine taxation by jr lopez go...JR Lopez Gonzales
This was the informative speech on the basic taxation principles in the Philippines. It was a thirty-minute speech on the basics of the Philippine Tax system presented to the students of the Mindanao State University - Iligan Institute of Technology on 8 August 2011 for the Political Science 2 Lecture Series. The document was uploaded by JR Lopez Gonzales of www.politikalon.blogspot.com.
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Over the past years “Profit and Gains Ltd.” has been having a great performance. This company based in Portugal since 2009 has been expanding its business into international markets, taking advantage from the growth of some emerging markets through means of local partnerships. The international dimension is part of its DNA, since its four founding partners are of different nationalities. João is Portuguese, Carlos is Angolan, Alfonso is from Spain and Walter from Belgium. Each one of them hold 25% of the company’s capital.
For the first time, and due to the company’s good results, the four members are considering to start distributing dividends. However, their doubts about how much taxes they will pay are preventing them to go ahead with the decision. In addition to their different nationalities, João and Walter’s share of the “Profit and Gains Ltd.” capital is done through other companies they have created, so that they could invest in other companies.
In order to help these four investors and to clarify all their doubts about taxation of dividends, we will begin by analysing the overall framework of this issue, so that we can then apply the rules to the actual case.
- Learn more at http://bit.ly/1w3QYF8
Impact of taxation on cross border investment Isha Joshi
Consequent to the implemented economic liberalisation in India during the 1990s, substantial international investment activity began within the Indian capital markets and through corporate vehicles with an increasingly vibrant fervour. In fact, today, Foreign Institutional Investors (FIIs) play a crucial role in the liquidity, growth and vitality seen in Indian capital markets. Simultaneously, along with increasing FII activity, as a result of the favourable economic and political climate, India also witnessed an increasing quantum of Foreign Domestic Investment (FDI).
The regulation of these investment channels and instruments was at the front and centre of economic policy debate, a part of which revolves around taxation. There is undoubtedly a proximate and intelligible nexus between taxation and the employment of these investment tools. A taxation regime that is favourable can work in effectively attracting more international investment which in turn would enhance market liquidity, activity, and growth.1 While FIIs and FDIs may appear to be similar investment channels, for the most part, they serve entirely different objectives, and operate in substantially different manners and are subject to different regulatory regimes in terms of exchange, economic and taxation policy.
In the coming sections of this paper, the authors have attempted to analyse several aspects of FII and FDI taxation in India. The first section delineates the differences in FIIs and FDIs, their market strategy, modus operandi, and objectives, while ascertaining what exactly these investment channels imply and the various investment vehicles that may be employed by foreign actors.
The subsequent section of the paper outlines the tax regime applicable to such FDIs and FIIs, depending on the organisational scheme and objective of the business vehicle so employed for the investment.
Given that FIIs and FDIs essentially involve a foreign element, the question of double taxation is one which necessarily requires to be addressed. To that end, in the third section of this paper, the authors have looked at Double Taxation Avoidance Agreements (DTAAs) (Tax Treaties) in the context of FIIs and FDIs.
ESAS CONSULTING provides a short overview of the main taxes arising from business activities in Lithuania. The overview touches taxes of corporate income, dividends, royalties, interests and social security contributions in Lithuania.
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The map views are useful for providing a geographical representation of data. They allow users to visualize and analyze the data in a more intuitive manner.
We all have good and bad thoughts from time to time and situation to situation. We are bombarded daily with spiraling thoughts(both negative and positive) creating all-consuming feel , making us difficult to manage with associated suffering. Good thoughts are like our Mob Signal (Positive thought) amidst noise(negative thought) in the atmosphere. Negative thoughts like noise outweigh positive thoughts. These thoughts often create unwanted confusion, trouble, stress and frustration in our mind as well as chaos in our physical world. Negative thoughts are also known as “distorted thinking”.
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Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
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What is the purpose of the Sabbath Law in the Torah. It is interesting to compare how the context of the law shifts from Exodus to Deuteronomy. Who gets to rest, and why?
Operation “Blue Star” is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
2. DEFINITION OF TERMS
CORPORATION – it includes partnerships, no matter how created or organized, joint-
stock companies, joint accounts (cuentas en participacion), associations, or
insurance companies, but does not include general professional partneships and
a joint venture or consortium formed for the purpose of undetaking construction
projects or engaging in petroleum, coal, geothermal and other energy operations
pursuant to an operating or consortium agreement under a service contract with
the Government.
3. DEFINITION OF TERMS
DOMESTIC CORPORATION – means created or organized in the Philippines or under
its laws.
FOREIGN CORPORATION – means a coporation which is not domestic.
RESIDENT FOREIGN CORPORATION – applies to a foreign corporation engaged in
trade or business within the Philippines.
NON-RESIDENT FOREIGN CORPORATION – applies to a foreign corporation not
engaged in trade or business within the Philippines.
4. SOURCES OF INCOME
Corporation Sources of Income
Within the Phils. Without the Phils.
1. Domestic √ √
2. Foreign √
5. CATEGORIES OF INCOME AND TAX RATES
1. Business Income – generally, business income earned by a corporation is taxd at
the following rates (Sections 27(A), 28(A)(1) and 28(B)(1)):
Year Tax Rate
1997 35%
1998 34%
1999 33%
2000-Oct. 2005 32%
Nov. 2005-2008 35%
2009 30%
2. Passive Income – passive income is subject to separate and final tax. These are
taxed at fixed rates ranging from 5% to 20%. Passive income is not to be
included in the gross income computation.
6. DOMESTIC AND RESIDENT FOREIGN
CORPORATIONS
PRO-FORMA COMPUTATION OF NORMAL INCOME TAX:
Gross Income P xxx
Less: Allowable Deductions xxx
Net income P xxx
Multiply by tax rate (2009) 30%
Tax Due P xxx
7. DOMESTIC CORPORATION,
IN PARTICULAR
PROPRIETARY EDUCATIONAL INSTITUTIONS AND NON-PROFIT HOSPITALS - The
10% tax on the taxable income is subject to limitation. If the gross income from
unrelated trade, business or other activity exceeds fifty percent (50%) of the
total gross income derived from all sources, the tax prescribed under Section
27(A) shall be imposed on the entire taxable income.
Unrelated trade, business or other activity – means any activity which are not
subtantially related to the exercise or performance by such educational
institution or hosital of its primary purpose or function.
8. ILLUSTRATIONS 1:
SGB University, a proprietary educational institution, has a gross income for the
taxable year 2009 of P15M. Of the gross income, P5 million was derived from
unrelated trade or business. Total deductions amount to P3million.
Gross Income 15,000,000
Less: Deductions 3,000,000
Net Income 12,000,000
Multiply by tax rate 10%
Tax Due 1,200,000
9. ILLUSTRATIONS 2:
SGB University, a proprietary educational institution, has a gross income for the
taxable year 2009 of P15M. Of the gross income, P9 million was derived from
unrelated trade or business. Total deductions amount to P3million.
Gross Income 15,000,000
Less: Deductions 3,000,000
Net Income 12,000,000
Multiply by tax rate 30%
Tax Due 3,600,000
10. GOVERNMENT-OWNED OR –CONTROLLED CORPORATIONS, AGENCIES OR
INSTRUMENTALITIES
Subject to the provisions of existing special laws or general laws, all
corporations, agencies, or instrumentalities owned or controlled by the
Government shall pay such rate of tax upon their taxable income as are imposed
by the Code upon corporations or associations engaged in a similar
business, industry or activity. The following are exempted:
1. GSIS
2. SSS
3. PHIC
4. LWD
5. PCSO
11. MUTUAL LIFE INSURANCE COMPANIES
These Companies are now subject to the regular corporate income tax rates.
12. RESIDENT FOREIGN CORPORATIONS, IN PARTICULAR
INTERNATIONAL SHIPPING -
Gross Philippine Billings – 2.50%
OBUs – income authorized by BSP from foreign currency transactions rest income
derived from with local commercial banks, including branches of foreign banks
that may may be authorized by BSP, including any interest from foreign currency
loans granted to residents, shall be subject to a final income tax at ten percent
(10%) of such income.
BRANCH PROFITS REMITTANCES – any profit remitted by a branch to its head office
shall be subject to a tax of fifteen percent (15%) which shall be based on the
total profits applied or earmarked for remittances without deduction for the tax
component thereof (except those activities which are registered with PEZA).
13. RESIDENT FOREIGN CORPORATIONS, IN PARTICULAR
REGIONAL OPERATING HEADQUARTERS –
shall mean a branch established in the Philippines by multinational comanies
which are engaged in various services.
TEN PERCENT (10%) OF TAXABLE INCOME
REGIONAL OR AREA HEADQUARTERS –
shall mean a branch established in the Philippines by multinational companies
and which headquarters do not earn or derive income from the Philippines and
which act as supervisory, communications and coordinating center for their
affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign
markets. EXEMPT FROM INCOME TAX
14. RESIDENT FOREIGN CORPORATIONS, IN PARTICULAR
INTERNATIONAL AIR CARRIER
refer to a foreign airline corporation doing business in the Philippines having
been granted landing rights in any Philippine port to perform international air
transportation services/ activities or flight operations anywhere in the world.
Generally, subject to GROSS PHILIPPINE BILLING TAX of 2.50% unless subject to a
different tax rate under the applicable treaty to which the Philippines is a
signatory.
15. DETERMINATION OF GROSS PHILIPPINE BILLINGS
In computing for gross Philippine billings, the following should be included:
a. Gross revenue deerived from passage of persons
b. Excess baggage
c. Cargo and/or 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 passage
documents.
16. NON-RESIDENT FOREIGN CORPORATION, IN GENERAL
The basis of tax for non-resident foreign corporations is gross income from sources
within the Philippines, such as interests, dividends, rents, royalties, salaries,
premiums (except reinsurance premiums), annuities, emoluments or othe fixed
or determinable annual, periodic or casual gains, profits and income, and capital
gains.
Gross Income P xxx
Multiply by tax rate 2009 30%
Tax Due P xxx
17. NON-RESIDENT FOREIGN CORPORATION, IN PARTICULAR
CINEMATOGRAPHIC FILM OWNER, LESSOR OR DISTRIBUTOR – 25% of GROSS
INCOME
OWNER OR LESSOR OF VESSELS CHARTERED BY PHILIPPINE NATIONS - 4.5% of
GOSS RENTALS, LEASE OR CHARTER FEES FROM LEASES OR CHARTERS TO
FILIPINO CITIZENS OR CORPORATIONS, AS APPROVED BY THE MARTIME
INDUSTRY AUTHORITY.
OWNER OR LESSOR OF AIRCRAFT, MACHINERY AND OTHER EQUIPMENT – 7.5% OF
GROSS RENTALS, CHARTERS AND OTHER FEES.
18. PASSIVE INCOME OF NON-RESIDENT FOREIGN
CORPORATIONS
1. Interest on foreign loans contracted on or after August 1, 1986 are taxed at 20%.
2. Income derived by a depository bank under the exanded foreign currency
deposit system from foreign currency transaction with local commercial
banks, including branches of foreign that may be authorized by the BSP, incuding
interest income from foreign currency loans are EXEMPT.
3. Dividends received from a domestic corporation – final withholding tax at 15%
on the condition that the country in which the non-resident foreign corporation
is domiciled, shall allow a credit against the tax due from the non-resident
foreign corporation taxes deemded to have been paid in the Philippines
equivalent to:
2009 – 15%
19. PASSIVE INCOME OF NON-RESIDENT FOREIGN
CORPORATIONS
4. CAPITAL GAINS from sale of shares of stock not traded in the stock exchange. A
final taxt at the rates prescribed below is imposed upon the net caita gains
realized during the taxable year from the sale, barter, exchange or other
disposition of shares of stock in a domestic corporation, except shares sold, or
disposed of through the stock exchange:
Not over P100,000 5%
On any amount in excess of P100,00 10%
20. ALLOWABLE DEDUCTIONS
Allowable deductions are items or amounts which the law allows to be deducted
from gross income in order to arrive at the taxable income. A domestic or
resident foreign corporation may dduct from its business income, itemized
deductions under the Tax Code, or, these corporations may elect a standard
deduction in an amount not exceeding forty percent (40%) of its gross income
(RA 9504). Non-resident foreign corporations are not allowed deductions from
gross income.
21. TAXABLE INCOME AND TAX DUE
In case of corporations, TAXABLE INCOME is th pertinent items of gross income less
the deductions authorized for such types of income. Taxable income is the
amount or tax base uon which tax rate is applied to arrive at the tax due.
Depending on the taxpayer involved and for purposes of computing the income
tax liability of a cororation, taxable income may refer to either one of the
following:
1. NET INCOME – the income arrived at after subtracting from the gross income the
deductions of the taxayer. For domestic and resident foreign corporations, in
genera; and other corporations from whose gross income deductions are
allowed:
22. PRO-FORMA COMPUTATION
Sales/Revenues/Receipts/Fees xxx
Less: Cost of Sales/services xxx
Gross Income from Operation xxx
Add: Non-Operating and Taxable Other Income xxx
Total Gross Income xxx
Less: Deductions
Optional Standard Deduction or
Itemized Deduction xxx
Taxable Income xxx
Multiply by: Tax Rate %
Tax Due xxx
23. TAXABLE INCOME AND TAX DUE
2. GROSS INCOME – the entire or gross income from business without any
deductions for either optional standard deduction or itemized deduction.
For domestic and resident foreign corporations subject to the MCIT; and non-
resident foreign corporation not subject to the normal income tax rate (section
28(B)(1)).
Gross Income xxx
Multiply by: Tax Rate x%
Tax Due xxx
24. CORPORATIONS EXEMPT FROM INCOME TAX (Sec. 30, NIRC)
GENERALLY , CORPORATIONS ESTABLISHED NOT FOR PROFIT ARE EXEMPTED FROM
INCOME TAX. PLEASE REFER TO PAGE 3-14 – 3-17
25. TAXATION FOR COOPERATIVES
Cooperatives with accumulated reserves and undivided net savings of not more than
TEN MILLION PESOS (P10M) – EXEMPT FROM ALL NATIONAL INTERNAL REVENUE
TAXES FOR HICH THESE COOPRATIVES ARE LIABLE.
Cooperatives with accumulated reserves and undivided net savings of more than
TEN MILLION PESOS (P10M) – please refer to page 3-19-20
26. DECLARATION OF QUARTERLY INCOME TAX
Every corporation shall file in duplicate a quarterly summary declaration of its gross
income and deductions on a cumulative basis for the preceding quarter or
quarters upon which the income tax shall be levied, collected and paid. The
income tax computed decreased by the amount of tax previously paid or
assessed during the preceding quarters shall be paid and the return filed not
later than sixty (60) days from the close of each of the first three (3) quarters of
the taxable year, whether calendar or fiscal .
A return showing the cumulative income and deductions shall still be filed even if
the operations for the quarter and the preceding quarters yielded no tax due.
27. DECLARATION OF QUARTERLY INCOME TAX (cont’d)
Every taxable corporation is likewise required to file a final adjustment return
covering the total taxable income of the corporation for the preceding calendar
or fiscal year, which is required to be filed and paid on or before April 15, or on
or before the 15th day of the 4th month following the close of the fiscal year, as
the case may be. If the sum of the quarterly tax payments made during the said
taxable year is not equal to the total tax due on the entire taxable income of that
year, the corporation shall either:
1. Pay the balance of tax still due; or
2. Carry over the excess credit; or
3. Be credited or refunded with the excess amount paid.
28. ILLUSTRATION
The result of operations of a corporation for 2010 whose taxable year in on a calendar basis is as
follows:
Gross Income Deductions Net Income
1st Quarter (Jan-March) 500,000.00 300,000.00 200,000.00
2nd Quarter (April-June) 600,000.00 350,000.00 250,000.00
3rd Quarter (July-Sept.) 700,000.00 400,000.00 300,000.00
4th Quarter (Oct.-Dec.) 800,000.00 450,000.00 350,000.00
2,600,000.00 1,500,000.00 1,100,000.00
Tax credit for overpaid income tax for the preceding year is P50,000.
29. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter TOTAL
Gross Income
this quarter 500,000.00 600,000.00 700,000.00 800,000.00 2,600,000.00
previous quarter/s 500,000.00 1,100,000.00 1,800,000.00
Total Gross Income 500,000.00 1,100,000.00 1,800,000.00 2,600,000.00 2,600,000.00
Less: Deductions
this quarter 300,000.00 350,000.00 400,000.00 450,000.00
previous quarter/s 300,000.00 650,000.00 1,050,000.00
Total Deductions 300,000.00 650,000.00 1,050,000.00 1,500,000.00 1,500,000.00
Taxable Income 200,000.00 450,000.00 750,000.00 1,100,000.00 1,100,000.00
Tax Rate 30% 30% 30% 30% 30%
Tax Due 60,000.00 135,000.00 225,000.00 330,000.00 330,000.00
Less: Previous Tax Payments/Credits 50,000.00 60,000.00 135,000.00 225,000.00 225,000.00
Tax Still Due 10,000.00 75,000.00 90,000.00 105,000.00 105,000.00
30. CHAPTER IV – MINIMUM CORPORATE INCOME
TAX, IAET AND GIT
MINIMUM CORPORATE INCOME TAX (MCIT)
Two percent (2%) of the gross income as of the end of the taxable year is imposed upon any domestic
corporation beginning the fourth (4th) taxable year (whether calendar or fiscal yea, depending on the
accounting periodemployed) immediately following the taxable year in which such corporation
commenced its business operations. The MCIT shall be imposed whenever:
a. Such corporation has zero or negative taxable income; or
b. The amount of minimum corporateincome taxis greater than the normal income tax due from such
corporation.
Relief from MCIT under Certain Conditions
The Secretary of Finance, upon recommendation of the Commissioner,may suspend the imposition of MCIT
upon submission of proof by the applicant-corporation, duly verified by the Commissioner’s authorized
representative, that the corporation sustained substantial losses on account of a prolonged labor
dispute or because of “force majeure” or because of legitimate business reverses.