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TAXATION > TAX ON NON-INDIVIDUALS > Flashcards

TAX ON NON-INDIVIDUALS Flashcards

1
Q

One-person corporations

A

a corporation with a single stockholder who can only be a natural person, trust or
estate

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2
Q

Ordinary partnerships (no matter how created or organized)

A

two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves

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3
Q

Joint stock companies

A

a business owned by investors, with each investor owning a share based on the amount
of stock purchased

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4
Q

Joint accounts (cuertas en participacion)

A

A partnership constituted in such a manner that its existence was only known to those who had an interest in the same, there being no mutual agreement between the partners, and without a corporate name indicating to the public in some way that there were other people besides the one who ostensibly managed and conducted the business

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5
Q

Joint accounts (cuertas en participacion)

A

is one that is held jointly by two or more natural persons, or by two or more juridical persons or entities. Under such setup, the depositors are joint owners or co-owners of the said account, and their share in the deposits shall be presumed equal, unless the contrary is proved

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6
Q

Associations

A

any organization or group of persons other than those mentioned

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7
Q

Exceptions to the definition of a corporation

A
  1. General Professional Partnership (GPP)
  2. Joint venture
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8
Q

Taxability of Co-ownership

A

can be taxable as a corporation (partnership) or exempted from taxation depending on the situation

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9
Q

Domestic Corporation

A

organized and established under the laws of the Philippines and is taxable on all income derived from sources within and outside the Philippines

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10
Q

Resident Foreign Corporation

A

corporation organized and established under the laws of a foreign country and is engaged in trade or business within the Philippines (taxable only on income derived from sources within the Philippines)

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11
Q

Non-Resident Foreign Corporation

A

corporation organized and established under the laws of a foreign country and is not engaged in trade or business within the Philippines (taxable only on income derived from
sources within the Philippines)

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12
Q

Domestic in General - OPC,
ordinary partnerships and
GOCC, Taxable JV

A

Taxable Income - 25%
(July 1, 2020)

Gross Income – 2%

Old RCIT rate: 30%
MCIT is 1% (7/1/20-6/30/23)

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13
Q

Other Domestic Corp.

A

Taxable Income - 20%

Gross Income – 2%

TNI – 5M; Asset-100M (1%MCIT)

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14
Q

Proprietary Educational
Institution

A

Taxable Income - 10%

MCIT Not applicable

Rate is 1% - 7/1/20-6/30/23

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15
Q

Non-Profit Hospital

A

Taxable Income - 10%

MCIT Not applicable

Rate is 1% - 7/1/20-6/30/23

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16
Q

Resident Foreign
Corporation

A

Taxable Income - 25%
(July 1, 2020)

Gross Income – 2%

Old RCIT rate: 30%

MCIT is 1% (7/1/20-6/30/23)

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17
Q

International Carrier:
Air and Shipping

A

Gross Philippine Billings
– 2 ½%

MCIT Not applicable

No change under CREATE Law

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18
Q

Philippine Branch by HOs

A

Profit remitted or
applied or earmarked –
15%

MCIT Not applicable

No change under CREATE Law

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19
Q

Regional Operating HQs

A

Taxable Income - 25%

Gross Income – 2%

Old RCIT rate: 10% and no MCIT
Regular rates: 1/1/22

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20
Q

Offshore Banking Units

A

Taxable Income - 25%

Gross Income – 2%

Old RCIT rate: 10% and no MCIT
Regular rates: 4/11/21

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21
Q

Regional Area HQs

A

Exempt
MCIT Not applicable
No change under CREATE Law

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22
Q

GPP

A

Exempt
MCIT Not applicable
Pass thru entity

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23
Q

Non-stock, non-profit

A

G.R. Exempt
Exception: Taxable

Subject to requirements
(inurement benefit); profit
activity

23
Q

Exempt Joint Venture

A

Exempt
MCIT Not applicable
Pass thru entity

24
Q

NRFC in General

A

Gross Income – 25%
MCIT Not applicable

New rate: 1/1/21
Old rate: 30%

25
Q

Non-Resident Cinematographic Film Owner, Lessor or
Distributor

A

Film Rentals and other
items of gross income – 25%

MCIT Not applicable
No change under CREATE Law

26
Q

Non-Resident Owner or Lessor of Vessels Chartered by Philippine Nationals

A

Gross Rentals and other
chartered fees – 4½%

MCIT Not applicable
No change under CREATE Law

27
Q

Non-Resident Owner or Lessor of aircraft, machineries and other equipment

A

Gross Rentals – 7½%

MCIT Not applicable
No change under CREATE Law

28
Q

MINIMUM CORPORATE INCOME TAX (MCIT)
* Tax Base

A

Gross income

29
Q

Gross Income for purposes of MCIT shall be

A

for sale of goods – gross sales less sales returns, allowances, discounts and cost of goods sold

for sale of service - gross receipts less sales returns, allowances discounts and cost of services sold

30
Q

Cost of services

A

all direct costs and expenses incurred to provide the services required by the customers and clients and including salaries and employee benefits of personnel, consultants and
specialists directly rendering the services and cost of facilities used directly in providing the service such as depreciation, rental of property and cost of supplies.

31
Q

Cost of services of banks

A

interest expense

32
Q

Public service licenses or rights

A

intangible assets representing legal or contractual rights granted by the government and are often capitalized and amortized, hence are considered administrative costs (therefore not part of cost of service)

33
Q

MCIT RATE for 2020 and 2023 (pro-rate of gross income)

A

1.5%

34
Q

WHEN IS MCIT IMPOSED

A

beginning on the fourth taxable year immediately following the year in which such corporation commenced its business operations

35
Q

WHEN TO USE MCIT?

A

When the minimum corporate income tax is higher than the regular corporate income tax during the period, the minimum corporate income tax shall be payable

36
Q

TREATMENT OF EXCESS MCIT

A

carried over and credited to the regular income tax for the next three immediately succeeding taxable years

37
Q

SUSPENSION OF MCIT

A

The imposition of minimum corporate income tax may be suspended due to:
a. prolonged labor disputes
b. force majeure
c. legitimate business reverses

38
Q

IMPROPERLY ACCUMULATED EARNINGS TAX (IAET)

A
  • Basis of assessment - improper accumulation of profits
  • Tax Base - improperly accumulated earnings
  • Tax Rate – 10%
  • Imposed on the 15th day following the close of the taxable year
  • Nature of IAET – penalty. It is a form of deterrent to avoid payment of final tax on dividend declarations by qualified corporations
39
Q

IAET: EXPRESS REPEAL UNDER CREATE LAW

A

The improperly accumulated earnings tax shall no longer be imposed on corporations upon the effectivity of the CREATE onwards. This shall apply to the entire taxable year for all fiscal years/taxable years ending after the effectivity of CREATE.

40
Q

Proprietary Educational Institutions

A

refer to any private schools, maintained and administered by private individuals or groups, with an issued permit to operate as the case may be, under existing laws and regulations from(DepEd) or (CHED) or (TESDA)

Note: This is NOT the non-stock, non-profit educational institution which is exempt from income taxation

41
Q

Non-Profit Hospitals / Proprietary Hospital

A

any private hospitals, which are non-profit, maintained and administered by private individuals or groups

42
Q

Non-profit

A

means that no net income or asset accrues to or benefits any member or specific person, with
all the net income or assets devoted to the institution’s purposes and all its activities conducted not for profit.

43
Q

Unrelated Trade, Business or Other Activity of Proprietary Educational Institutions and Hospitals

A

any trade, business, or other activity, the conduct of which is not substantially related to the exercise or performance by such educational institution or hospital of its primary purpose or function

44
Q

If the gross income from “unrelated trade, business
or other activity” exceeds fifty percent (50%) of the total gross income derived by proprietary educational institutions or hospitals

A

the tax prescribed for domestic corporations shall be imposed on the entire taxable income

45
Q

TAXABILITY OF Government-Owned or Controlled Corporations (GOCCs)

A

General Rule: All corporations, agencies, or instrumentalities owned or controlled by the Government are subject to 20% or 25% RCIT on their taxable income

46
Q

EXEMPTIONS TO TAXABILITY OF GOCCs

A

Exceptions:
* Exempted by virtue of existing special or general law
* Specific Corporations or Instrumentalities under the Tax Code and TRAIN Law:
a. GSIS
b. SSS
c. Philippine Health and Insurance Corporation (PHIC)
d. Local water utilities

47
Q

Exempt Corporations (Section 30 of the Tax Code)

A
  1. Labor, agricultural, or horticultural organization not for profit.
  2. Mutual savings bank without capital stock, and cooperative bank without capital stock, for mutual purposes and without profit.
  3. Beneficiary society or association, for the exclusive benefit of members, providing life, sickness, accident, or other benefits.
  4. Cemetery company for the exclusive benefit of its members.
  5. Nonstock corporation or association for religious, charitable, scientific, athletic, cultural purposes, or veterans’ rehabilitation, with no income benefiting any member or officer.
  6. Business league, chamber of commerce, or board of trade, not for profit and no income benefiting any private individual.
  7. Civic league or organization, not for profit, promoting social welfare.
  8. Nonstock and nonprofit educational institutions.
  9. Government educational institution.
  10. Farmers’ or mutual typhoon/fire insurance company, mutual ditch/irrigation company, mutual/cooperative telephone company, purely local, funded by member fees for expenses.
  11. Farmers’ or fruit growers’ association, operating as a sales agent, returning sales proceeds to members minus necessary expenses.
48
Q

Treatment of Income of Asset and Income from Profit Activity

A

General Rule: Income from whatever kind and character of the above organizations from any of their properties, real or personal, or from activities conducted for profit regardless of the disposition made of such income, shall be subject to income tax.

49
Q

Taxability of PEZA-registered Enterprises

A

PIONEER: ITH 6 years

NONPIONEER ITH 4 years

AFTER ITH 5% GIT

  1. ITH Exemption and 5% applies only on registered activities
  2. Income from unregistered activities is subject to regular taxes
  3. Expanding firms may be given ITH of three years
  4. ITH may be extended but not to exceed eight (8) years
  5. The 5% Gross Income Tax is distributed as follows: National – 3%; Local – 2%
  6. If the registrant availed the 5% GIT, no national or local taxes may be imposed anymore
50
Q

R.A. 11534 – CREATE Law on PEZA and BOI

A
  1. With Income Tax Holidays (ITH) only – allowed to continue with the availment of the ITH for the remaining period of the ITH as specified in the terms and conditions of registration.
    Note: if RBE was granted ITH but have not yet availed of the incentive upon the effectivity of the CREATE Law, they may use the ITH for the period specified in the terms and conditions of registration.
  2. With ITH and entitled to 5% GIT after the ITH – allowed to avail of the 5% tax on gross income for ten (10) years from the effectivity of the CREATE Law or until April 11, 2031.
  3. With 5% GIT – allowed to continue availing the said tax incentive at the rate of 5% for ten (10) years reckoned from the effectivity of the CREATE or until April 11, 2031.
51
Q

TAXATION OF GENERAL PROFESSIONAL PARTNERSHIPS

A

General Rule: GPPs are exempt from taxation.

Exception: GPPs are taxable like corporation if they have ordinary income other than the income from practice of profession

Exception to Exception: GPPs are exempted even if they have other income provided the income are:
1. Subject to final tax
2. Exempt from tax
3. Exclusion from gross income

52
Q

TAX LIABILITY OF GENERAL PROFESSIONAL PARTNERSHIPS

A

Persons engaging in business as partners in a general professional partnership shall be liable for income tax only in their separate and individual capacities.

Net income of the partnership shall be computed in the same manner as a corporation.

Each partner shall report as gross income his distributive share, actually or constructively received, in the net income of the partnership.

Distribution to partners is subject to withholding tax of 10% or 15% (based on P720,000 gross income)

53
Q

FINAL ADJUSTMENT RETURN (AITR FOR NON-INDIVIDUALS)

A

Every corporation liable to tax shall filed a final adjustment return covering the taxable income for the preceding calendar or fiscal year. If the sum of the total payments made during the 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 the tax stIll due; or
2. Carry over the excess credit
3. Refund or application of tax credit certificate of the excess credit or overpayment

54
Q

TREATMENT OF OVERPAYMENT (TAX CREDITS EXCEED TAX DUE)

A
  1. If option is carry-over, and application has been made, the option is irrevocable (i.e. overpayment can no longer be refunded unless during cessation)
  2. If option is refund or application of TCC, the option can be revoked (i.e. carry-over is allowed after notification to the Commissioner)

TAXATION (3 decks)

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