Taxation of Corporation

CLASSIFATION OF INCOME TAXPAYERS (other than Individuals)

Definition of Terms
1. Corporations. It includes partnerships, no matter how created or organized, jointstock companies, joint accounts ( cuentas en participation), associations, or
insurance or consortium formed for the purpose of undertaking 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.
a. Domestic. Those created or organized under and by virtue of the Phil. Laws.
- When applied to a corporation, means created or organized in the Phil.
Or under its laws.
1. Domestic corporation, in general
2. Government-owned and controlled corporations
3. Taxable partnerships
4. Proprietary educational institutions
5. Non-profit hospitals
b. Foreign. Those organized in accordance with laws of their respective countries.
- When applied to a corporation, means a corporation which is not
domestic.
a. Resident. Those engaged in trade or business within the Phil.
- Applies to a foreign corporation engaged in trade or business within
the Phil.
b. Non-resident. Those not engaged in trade or business within the Phil.
- Applies to a foreign corporation not engage in trade or business within
the Phil.
SOURCE OF INCOME
1. Domestic corporations. Are taxable on income from sources within and without the
Phil.
2. Foreign corporations. Whether resident or non-resident, are taxable only on
income from the Phil. Sources.
MONTENEGRO
Domestic and Resident Foreign Corporations, in General
Generally, the pro-forma computation of the normal income tax of domestic and resident
foreign corporations follows:
Gross Income

xxx

Less: Allowable Deductions

xxx

Net Income

xxx

Multiply by: Tax rate (2000)

Tax Due

32%
xxx

Domestic and resident corporations adopting the fiscal-year accounting period,

Taxable

no. of months covered

x
Income
tax payable

by new tax rates

x Net tax rates = Income

Domestic Corporations, In Particular

Proprietary Educational Institutions and Non-Profit Hospitals. The 10% tax on the
taxable income is subject to limitation.
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 are4 imposed by the Code upon corporations or associations
engaged in a similar business, industry or activity. The foll. Are exempt:
1.
2.
3.
4.
5.

Government Service Insurance System (GSIS)

Social Security System (SSS)
Philippine Health and Insurance Corporation (PHIC)
Philippine Charity Sweepstakes Office (PCSO)
Philippine Amusement and Gaming Corporation (PAGCOR).

Mutual Life Insurance Companies. These companies are now subject to the regular
corporate income tax rates.
MARLYN
Internal Shipping. Gross Phil. Billings in the case of international shipping Phil. Up to final
destination regardless of the place of sale or payments of the passage or freight documents.
Offshore Banking Units. Income derived by offshore banking units authorized by the BSP,
from foreign currency transactions with local commercial banks, including branches of
foreign banks that may be authorized by the BSP To transact business with offshore banking
units, including any interest income derived 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 remittance without deduction for the tax component thereof9 except those
activities which are registered with the Phil. Economic Zone Authority).
Regional Operating Headquarters. Shall mean a branch established in the Phil. By
multinational companies which are engaged in any of the foll. Services: general

administration and planning; business planning and coordination; sourcing and procurement
of raw materials, and components; corporate finance advisory services; etc.
Regional or area headquarters. Shall mean a branch established in the Phil. By
multinational companies and which headquarters do not earn or derive income from the Phil.
And which act as supervisory, communications and coordinating center for their affiliates,
subsidiaries, or branches in the Asia-Pacific Region and other foreign market.
Multinational Company means a foreign firm or entity engaged in international trade with
affiliates or subsidiaries or branch offices in the Asia-Pacific Region and other foreign
markets.
Non-resident Foreign Corporation, In General
The basic of tax for non-resident foreign corporation is gross income from sources within the
Phil., such as interests, dividends, rent, royalties, salaries, premium(except reinsurance
premium), annuities, emoluments or other fixed or determinable annual, periodic or casual
gains, profits and income, and capital gains.
Non-resident Foreign Corporation, In Particular
Non-resident CINEMATOGRAPHIC Film Owner, Lessor or Distributor is taxed at 25%
of gross income.
Non-resident Owned or Lessor of Vessels Chartered by Phil. Nationals- is taxed at
four and one-half percent of gross rentals, lease or charter fees from leases or charter to
Filipino citizen or corporations, as approved by the Maritime Industry.
Non-resident Owner or Lessor of Aircraft, Machinery and Other Equipment is
taxed at seven and one-half percent of gross rentals, charters and other fees.