chapter 4

Question 1

what is MCIT means?

Answer 1

Minimum Corporate Tax

Question 2

MCIT is imposed on gross income which is computed by?

Answer 2

deducting from gross sales the capital spent by a corporation in the sales of goods

Question 3

true or false:
the MCIT is being tax through the capital of the corporation

Answer 3

false, income only

Question 4

true or false:
the imposition of MCIT is constitutional

Answer 4

true

Question 5

the MCIT is imposed only on the ____ taxable year immediately following the year in which the corporation commenced its operations

Answer 5

4th taxable year

Question 6

a minimum corporate income tax (MCIT) set at how many percentage of the gross income?

Answer 6

2%

Question 7

the 2% of the gross income as of the end of the taxable year is imposed upon any domestic corporation beginning the____

Answer 7

4th taxable year whether calendar or fiscal year

Question 8

the MCIT shall be imposed whenever:

Answer 8

a. such corporation has zero or negative taxable income

b. the amount of MCIT tax is greater than the normal income tax due from such corporation. Provided, that effective July 1, 2020 until June 30, 2023, THE RATE SHALL BE 1%

Question 9

MCIT RATES:

Answer 9

Period/ MCIT RATE
• On or before June 30, 2020– 2%
• July 1, 2020 to June 30, 2023– 1%
• Starting July 1, 2023– 2%

Question 10

shall include only sales contributory to income taxable under section 27 (A) of the Code

Answer 10

gross sales

Question 11

shall include the purchase price or cost to produce the merchandise and all expenses directly incurred to bring them to their present location and use

Answer 11

cost of goods sold

Question 12

the cost composition of cost of goods sold includes only items which are ____ and _____ to the acquisition of the merchandise intended for resale

Answer 12

direct and incidental

Question 13

give examples of items that are not include in cost of goods sold

Answer 13

•expenses for gasolines, repairs, maintenance and depreciation of motor vehicles the salaries and commissions of the drivers, and sales people who canvass on an office to office or door to door selling, as well as cost of the delivery of the products sold by the trader company

Question 14

shall include all cost of production of finished goods, such as raw material used, direct labor and manufacturing overhead, freight cost, insurance premiums and other cost incurred to bring the raw materials to the factory or warehouse

Answer 14

cost of goods manufactured and sold

Question 15

are used herein means amounts actually are constructively received during the taxable year

Answer 15

gross receipts

Question 16

shawn ming amounts earned as gross income

Answer 16

gross receipts

Question 17

means all direct costs and expenses necessarily incurred to provide the services required by the customers and clients

Answer 17

cost of services

Question 18

cost of services means all direct cost and expenses necessarily incurred to provide the services required by the customers and clients including:

Answer 18

1. salaries and employee benefits of personnel, consultants and specialist directly rendering the service
2. cost of facilities directly utilize in providing the service such as depreciation or rental of equipment used and cost of supplies

Question 19

it clarified that direct cost and expenses are cost that are considered indispensable to the earning of the revenue such that without such cost, no revenue can be generated

Answer 19

revenue memorandum circular 24-2008

Question 20

true or false:
income exempt from income tax and passive income which has been subject to a final tax at source, shall form part of gross income for purposes of the MCIT

Answer 20

false, shall not

Question 21

it means losses arising from a strike staged by the employees which lasted for more than 6 months within a taxable period and which has caused the temporary shutdown of business operation

Answer 21

substantial losses from a prolonged labor dispute

Question 22

it means a cost due to an irresistible force as by “act of God” like lightning, earthquake, storm, flood and the like. This term shall also include armed conflicts like war or insurgency

Answer 22

force majeure

Question 23

it shall include substantial losses sustained due to fire, robbery, theft, or embezzlement, or for other economic reason as determined by the secretary of finance

Answer 23

legitimate business reverses