TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY

2ND SEMESTER ACADEMIC YEAR 2021-2022

TAX 3 – SPECIAL TAXATION

CORPORATE INCOME TAXATION

CORPORATION DEFINED CLASSIFICATION OF CORPORATE TAXPAYERS

RA 11232, also known as the Revised Corporation Code (RCC) of the Philippines defined A. Domestic Corporation (DC)
Corporation as an artificial being created by operation of law, having the right of - a corporation created or organized in the Philippines or under its laws.
succession and the powers, attributes, and properties expressly authorized by law or
B. Resident Foreign Corporation (RFC
incidental to its existence.
- a corporation created or organized in a foreign country or under the laws of a foreign
For taxation purposes, Corporation is defined under Section 22 of the Tax Code (RA 8424,) country and engaged in business in the Philippines.
as amended under RA 11534 or the Corporate Recovery and Tax Incentives for Enterprises
C. Non-resident Foreign Corporation (NRFC)
Act' (CREATE) and RR 5-2021 as follows:
- a corporation created or organized in a foreign country or under the laws of a foreign
Corporation shall include: country and is not engaged in business in the Philippines.
1. One Person Corporations (OPCS);
2. Partnerships, no matter how created or organized; Further classified into:
3. Joint stock companies;
A. Regular / Ordinary Corporations - corporations subject to normal tax or basic tax or the
4. Joint accounts (cuentas en participacion); regular corporate income tax (RCIT) rate of 30% under TRAIN Law and either 25% or
5. Associations; or 20% under CREATE Law.
6. Insurance companies
B. Special Corporations - corporations subject to income tax rate which are lower than the
A one-person corporation is a corporation with a single stockholder; Provided, that regular corporate income tax (RCIT) rate of 30%, 25% or 20%, as the case may be.
only a natural person, trust, or an estate may form a one-person corporation.
But does not include: The Special Corporations under the Tax Code, as amended, are as follows:
1. General professional partnerships; and
SPECIAL CORPORATION TAX RATE
2. A joint ventures or consortiums for the purpose of undertaking:
a. Domestic Corporations
a. Construction projects; or
• Proprietary educational TRAIN Law: 10%
b. Engaging in petroleum, coal, geothermal and other energy operations
institutions and Hospitals CREATE:
pursuant to an operating or consortium agreement under a service
July 1, 2020 to June 2023: 1%
contract with the government.
Beg. July 1, 2023: 10%
Co-Venturer
Corporation Individual b. Resident Foreign Corporations Generally, 2.5% of Gross Philippine Billings
Taxable Joint Venture Exempt (inter-corporate dividend) FWT • International carriers (GPB) but it may be subject to a lower rate
Non-Taxable JV RCIT (30% TRAIN; 20% or 25% CREATE) Basic Tax or exempt under certain conditions
1 of 3

SOURCES: INCOME TAXATION, BANGGAWAN, INCOME TAXATION, BALLADA; CPA REVIEWER IN TAXATION, AMPONGAN, NIRC, Special Laws and RRs
 TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY
2ND SEMESTER ACADEMIC YEAR 2021-2022
TAX 3 – SPECIAL TAXATION

• Regional Operating Headquarters TRAIN Law: 10% of net income. member, organizer, officer or any specific person;
ROHQS are no longer considered CREATE: f. Business league, chamber of commerce, or board of trade, not organized for profit and
special corporations beginning Until Dec. 31, 2021: 10% no part of the net income of which inure to the benefit of any private stockholder or
January 1, 2022. Beg. Jan. 1, 2022: Subj. to individual;
25% RCIT; Taxable as RFC. g. Civic league or organization not organized for profit but operated exclusively for the
promotion of social welfare;
c. Non-resident Foreign Corporations h. A non-stock and nonprofit educational institution;
• Non-resident Cinematographic 25% of Gross Income i. Government educational institution;
Film Owner, Lessor or Distributor j. Farmers' or other mutual typhoon or fire insurance company, mutual ditch or irrigation
• Non-resident Owner or Lessor of 4.5% of Gross Income company, mutual or cooperative telephone company, or like organization of a purely
Vessels Chartered by Philippine local character, the income of which consists solely of assessments, dues, and fees
Nationals collected from members for the sole purpose of meeting its expenses; and
k. Farmers', fruit growers', or like association organized and operated as a sales agent for
• Non-resident Owner or Lessor of 7.5% of Gross Income the purpose of marketing the products of its members and turning back to them the
Aircraft, Machineries and Other proceeds of sales, less the necessary selling expenses on the basis of quantity or
Equipment produce finished by them.
PROVIDED, that the income of whatever kind and character of the foregoing organizations
EXEMPT CORPORATIONS from any of their properties, real or personal, or from any of their activities conducted for
profit regardless of the disposition made of such income, shall be subject to income tax.
a. Labor, agricultural or horticultural organization not organized principally for profit;
b. Mutual savings bank not having a capital stock represented by shares, and cooperative GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCS)
bank without capital stock organized and operated for mutual purposes and without
profit; RR 5-2021, implementing the provisions of CREATE law provides that GOCCS, agencies and
c. A beneficiary society, order or association, operating for the exclusive benefit of the instrumentalities shall pay such rate of tax upon their taxable income as are imposed upon
members such as a fraternal organization operating under the lodge system, or a corporations or associations engaged in a similar business, industry, or activity,
mutual aid association or a non-stock corporation organized by employees providing EXCEPT:
for the payment of life, sickness, accident, or other benefits exclusively to the a. Government Service and Insurance System (GSIS)\
members of such society, order, or association, or non-stock corporation or their b. Social Security System (SSS)
dependents; c. Home Development Mutual Fund (HDMF; also known as Pag-ibig)
d. Cemetery company owned and operated exclusively for the benefit of its members; d. Philippine Health Insurance Corporation (PHIC)
e. Non-stock corporation or association organized and operated exclusively for religious, e. Local Water Districts (RA 10026)
charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, NOTE: PCSO is taxable beg. Jan. 1, 2018 or upon effectivity of the TRAIN Law.
no part of its net income or asset shall belong to or inure to the benefit of any HDMF or Pag-ibig is exempt only upon the effectivity of CREATE Law (April 11, 2021).
2 of 3

SOURCES: INCOME TAXATION, BANGGAWAN, INCOME TAXATION, BALLADA; CPA REVIEWER IN TAXATION, AMPONGAN, NIRC, Special Laws and RRs
 TARLAC STATE UNIVERSITY - COLLEGE OF BUSINESS AND ACCOUNTANCY
2ND SEMESTER ACADEMIC YEAR 2021-2022
TAX 3 – SPECIAL TAXATION

MINIMUM CORPORATE INCOME TAX (MCIT)

REGULAR CORPORATE INCOME TAX (RCIT)
Section 27(E)(1) and Section 28(2) [for DCS and RFCS, respectively), as amended
TRAIN CREATE
under CREATE Law, provide:
DC Other DCS;
(MSMES**) RFCS NRFC A Minimum Corporate Income Tax (MCIT) of two percent (2%) of the gross income as of
the end if the taxable year is imposed upon any domestic corporations or resident foreign
Gross Income Pxxx Pxxx Pxxx Pxxx
corporations beginning on the 4th taxable year immediately following the taxable year in
Allowable Deductions (ххх) (ххх) (ххх) -
which said corporation commenced its business operations, when the MCIT is greater than
Taxable Income Pxxx Pxxx Pxxx Pxxx
RCIT, provided: That effective July 1, 2020 until June 30, 2023, the rate shall be one
Rate 30% 20% 25% 25%*** percent (1%).
RCIT/FWT Pxxx Pxxx Pxxx Pxxx
The MCIT shall be imposed whenever:
NOTE: a. The corporation has zero taxable income; or
• Effectivity of the RCIT rates under CREATE; RR 5-2021: b. The corporation has negative taxable income; or
o For DC and RFC - Beginning July 1, 2020 c. Whenever the amount of MCIT is greater than the regular corporate income tax
o For NRFC - Beginning January 1, 2021. (RCIT) due from such corporation. Hence, MCIT is always computed and
compared to RCIT starting on the fourth year of operations.
• CREATE law, which was published on March 27, 2021, took effect on April 11,
2021. Although CREATE law took effect only on April 11, 2021, there are certain NOTE:
provisions in the law with specific effectivity dates which are earlier than April 11, • Meaning of ".... in the 4th taxable year immediately following the taxable year in
2021, such as the revised RCIT rates for DCs and RFCS as well as the revised FWT which such corporation commenced its business operations" In determining the
rate for NRFCS. 4th taxable year, the year the Corporation was registered shall be disregarded
• ** Beginning July 1, 2020, the applicable RCIT rate of domestic corporations with • Under RR 12-2007, MCIT shall be computed not only on a yearly basis but also in
total assets of P100 million and below AND net taxable income of P5 million and the computation of quarterly income tax due.
below [also known as Micro Small and Medium Enterprises (MSMES)] was
reduced to 20%. Total assets excludes the land on which the particular business CARRY FORWARD OF ECESS MCIT (MCIT CARRY-OVER)
entity's office, plant, and equipment are situated during the taxable year for
Any excess of the MCIT over RCIT shall be carried forward and credited against the RCIT for
which the tax is imposed.
the three (3) immediately succeeding taxable years.
• All other "domestic" corporations are subject to RCIT rate of 25% beginning July 1,
2020. NET OPERATING LOSS CARRY-OVER (NOLCO)
Excess of allowable deduction over gross income of a business in a taxable year shall be
• RFCS are subject to the revised RCIT rate of 25% beginning July 1, 2020.
carried over as deduction for 3 years (TRAIN) or 5 years (Bayanihan Act II for 2020 and
• ***Revised FWT rate 25% for NRFCs shall take effect beginning January 1, 2021. 2021) for net operating loss incurred.
3 of 3

SOURCES: INCOME TAXATION, BANGGAWAN, INCOME TAXATION, BALLADA; CPA REVIEWER IN TAXATION, AMPONGAN, NIRC, Special Laws and RRs