Corporations Flashcards by Paul Robert CPA

Non Resident Foreign Corporation (NRFC) are taxable within and without. True or False?

False
- Only DC
- RFC and NRFC → within

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Domestic Corporation
- rate = 25%
- basis = taxable income

True or False?

False
- rate = may be 20%
- basis = ✓

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Resident Foreign Corporation
- rate = 25%
- basis = taxable income

True or False?

True
- rate = ✓
- basis = ✓

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Non Resident Foreign Corporation
- rate = 25%
- basis = taxable income

True or False?

False
- rate = ✓
- basis = gross income

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20% rate is ONLY for DC. What are the requisites to avail of the 20% rate?

Net Taxable Income of ≤ 5M AND
Assets (exc. land) of ≤ 100M

both must be achieved

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Final Income Tax (RID)
- must be within PH
- no need to file ITR

Royalties
Interest
Dividend

Compared sa individual : walang PW ITR

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FWT Rate
- Royalties (General and LBM)

20% → General
20% → LBM (Literary, Books, Music)

Compared sa individual : 10% LBM

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Interest (CDEF)

Currency Bank Deposit
Deposit Substitute
Expanded Foreign Currency Deposit

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FWT Rate
- Currency Bank Deposit and Deposit Substitute (General and Long-Term)

20% → General
RCIT → Long-term Deposit

Compared sa individual : Exempt LTD

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FWT Rate
- Expanded Foreign Currency Deposit

15% → Residents
Exempt → Non Residents

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From DC to Another DC
- Exempt

True or False?

True (inter-corporate dividends)

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From DC to RFC
- Exempt

True or False?

True (inter-corporate dividends)

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From DC to NRFC
- Exempt

True or False?

False
- 25%
- may be 15% if tax sparing rule applies

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From RFC to DC
- Taxable

True or False?

Somewhat true (generally, taxable)
XPN : SHoRe

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Conditions to be Exempt (SHoRe)

How many years?

Significant Influence
Holding Period - shareholder for minimum of 2 years
Reinvestment - to business operations within the next taxable year

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From RFC to Another RFC
- Taxable

True or False?

May be true
- use Predominance Test

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From RFC to NRFC
- Taxable

True or False?

May be true
- use Predominance Test

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From NRFC to DC
- Taxable

True or False?

Somewhat true (generally, taxable)
XPN : SHoRe

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From NRFC to RFC
- Taxable

True or False?

May be true
- use Predominance Test

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From NRFC to Another NRFC
- Taxable

True or False?

May be true
- use Predominance Test

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Rules on Dividends for Corporations

refer to table

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For a corporation, the 6% CGT rate is from a sale of real property. True or False?

False
- ✘ real property → land & building only

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For a corporation, the sale of land or building, same as an individual, is subject to 6% CGT rate. True or False?

DC - true
RFC - X (RIT)
NRFC - X (25%)

As a corporation, I can avail the exceptions same to that of an individual (principal residence and sale to government). True or False?

False (those are only for individuals)

MCIT - rate - base

2% - 1% from July 1, 2020 to June 30, 2023 Base → Gross Income + Other Income subject to RCIT

MCIT - start - excess carry over (how many years)

- Start → 4th year following year of business operation - Excess Carry Over → 3 years (as tax credit ONLY IF RCIT) ONLY IF RCIT - if ever that year is MCIT, bawal mag tax credit ng MCIT (parang madodoble)

Exempt to MCIT (SNSD)

- Special Domestic Corporations - NRFC - Special Resident Foreign Corporations - Depositary Bank

Suspension of MCIT - Prolonged labor dispute - Force majeure - Legitimate business reverses

only by Secretary of Finance

Examples of Special Domestic Corporations (3)

1. Proprietary (Private) Educational Institution 2. Non Profit Hospitals 3. GOCC

Proprietary Educational Institution and Non Profit Hospitals are generally subject to the RCIT of 25%. True or False?

True (However, may be **10%** → Gross Income from Unrelated < 50% of Total - 1% from July 1, 2020 to June 30, 2023

PEI → can claim as deductions the following: - Capital outlays for expansion - Allowance for depreciation

ONLY PEI (X NPH)

GOCC is generally subject to the RCIT of 25%. True or False?

True - Exempt → GSIS, SSS, PhilHealth, HDMF, **Local Water Districts**

Examples of Special Resident Foreign Corporations - International Air Carriers - Offshore Banking Units and FCDUs - RAHQ - ROHQ - Branch Profit Remittance True or False?

False (starting January 1, 2022 → ROHQ and OBU are not special anymore) - subject to 25% RCIT

International Air Carriers - rate and basis

Rate = 2.5% Basis = Gross PH Billings

For international air carriers - Carrying anything

whether passenger, cargo, or goods

For international air carriers - Originating from PH - Continuous and uninterrupted flight What if nagoriginate sa Macau then ang destination talaga is Australia, however, need muna dumaan and nagstay sa PH for 3 days? Saan siya nag originate?

Kahit pa originating from Macau talaga, considered as originating from PH na siya since lagpas 48 hours nasa PH (3 days = 72 hours) ## Footnote If the reason of the 3-day stay in PH is due to fortuitous event = not originating from PH (originating from Macau)

For international air carriers - Originating from PH - Continuous and uninterrupted flight What if nagoriginate sa Macau then ang destination talaga is Australia, however, need muna dumaan sa PH and lumipat sa ibang eroplano which is the same airline (from CebuPac to CebuPac)? Saan siya nag originate?

Originating from Macau considered as originating from PH na siya since lagpas 48 hours nasa PH (3 days = 72 hours) ## Footnote However, if lumipat sa ibang eroplano but different airlines (from CebuPac to PAL) = Originating from PH

Regional Area HQ (RAHQ) are taxable special RFC. True or False?

False - for supervision only (exempt)

Branch Profit Remittance - rate and basis

Rate = 15% Basis = Total profits applied (w/o deductions for tax) ## Footnote Kahit earmarked pa lang yung remittance

Examples of Special NRFC - Cinematographic Film Owners - AIRCRAFt, MACHINEs - SHIPs - chartered by filipino nationals What are their rates?

- 25% - 7.5% - 4.5%

EXEMPT CORPORATIONS General Principle : Not for profit, exclusively for its members

YES

PEI, GEI, NSNPEI (Educational Institution) - what is the rule in case of income

- PEI = Predominance Test (50% related or unrelated) - GEI = Exempt (For Profit → RCIT) - NSNPEI = Exempt if ADE (Others → RCIT) ## Footnote refer to table

PEI, GEI, NSNPEI (Educational Institution) - what is the test

- PEI = test of source - GEI = test of source - NSNPEI = test of use (ADE) ## Footnote refer to table

PEI, GEI, NSNPEI (Educational Institution) - subject to Property Tax?

- PEI = X - GEI = X - NSNPEI = X *Constitutional Limitation ## Footnote refer to table

PEI, GEI, NSNPEI (Educational Institution) - subject to Income Tax?

- PEI = 25% / 10% / 1% - GEI = X - NSNPEI = X ## Footnote refer to table

An ordinary partnership is subject to RCIT, FWT, and CGT. True or False? A GPP is subject to RCIT, FWT, and CGT. True or False?

True False (exempt to RCIT, but yes to FWT and CGT)

Ordinary partnerships are taxable as corporations. What will be the treatment for their share of net income? - to RC - to RA - to NRAETB - to NRANETB

Treat as dividends (FWT) - to RC = 10% - to RA = 10% - to NRAETB = 20% - to NRANETB = 25%

GPP are treated as pass-through entities. What will be the treatment for their share of net income? - to RC - to RA - to NRAETB - to NRANETB

Treat as part of Gross Income - to RC = RIT - to RA = RIT - to NRAETB = RIT - to NRANETB = 25% ## Footnote Since this is part of gross income, it is subject to CWT

In case of GPP, the GPP and the partners themselves can avail of Itemized Deductions or OSD.

Yes

In case of GPP, the partners can avail of the 8% option. True or False?

False (refer to individual)

Joint Venture are, like a GPP, exempt from tax. True or False?

False Joint Venture = like Ordinary Partnership (taxable) Exempt Joint Venture = like GPP (exempt)

Exempt Joint Venture (C CPOG)

- Construction projects - Coal - Petroleum - Other energy operations - Geothermal ## Footnote NOTE : pursuant to an agreement under a service contract with the government.

Construction projects are exempt (as stated above). However, it is subject to some requirements. - the **parties** involved are **licensed** by PCAB - the **JV itself** are **licensed** by PCAB - the local contractors are engaged in construction business

YES

Join Venture are taxable as corporations. What will be the treatment for their share of net income? - to RC - to NRAETB - to DC - NRFC

Treat as dividends (FWT) - to RC = 10% - to NRAETB = 20% - to DC = Exempt - NRFC = 15% or 25%

Ordinary Partnership is taxed as corporations. (XPN : GPP) Joint venture is taxed as corporations. (XPN : C CPOG) Co-ownership is taxed as corporations. True or False?

False (eto yung naiibang general rule which is exempt siya)

TAXABLE CO-OWNERSHIP - Making investments - With the intention of profit - Remained undivided for 10 years - Beyond mere preservation

Yes