acttax2 corporations book

In taxation, the term corporation shall include one person corporations.

f

The term "domestic", when applied to a corporation, means corporations created or organized under the laws of the Philippines.

t

A corporation which is not domestic may be a resident (engaged in business in the Philippines) or nonresident corporation (not engaged in business in the Philippines).

t

Resident foreign corporations are subject to income tax based on net income from sources within the Philippines only.

t

Associations and mutual fund companies, for income tax purposes, are excluded in the definition of corporations.

f

A minimum corporate income tax (MCIT) based on gross income is imposed upon any domestic and resident corporation beginning on the 4th taxable year immediately following the taxable year in which such corporation commenced its business operations.

t

MCIT shall be imposed whenever such corporation has zero or negative taxable income, or when the amount of MCIT is greater than normal income tax due from such corporation.

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The computation and the payment of MCIT shall likewise apply at the time of filing the quarterly corporate income tax.

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Minimum corporate income tax is not applicable to nonresident foreign corporation, special corporations and other types of corporations subject to other tax regime.

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Temporary labor dispute is a valid ground for the suspension of MCIT.

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Corporations exempt from income tax are not subject to income tax on incomes received which are incidental or necessarily connected with the purposes for which they were organized and operating.

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Corporations exempt from income tax are subject to income tax on income of whatever kind and character from any of their properties (real or personal) or from any other activity conducted for profit, regardless of the disposition of such income.

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Joint ventures, regardless of the purpose by which they were created, are generally exempt from corporate income tax.

f

The share of a co-venturer corporation in the net income of tax-exempt joint venture or consortium is subject to corporate income tax.

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The share of a co-venturer corporation in the net income of a taxable joint venture or consortium is subject to corporate income tax.

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Nonresident owners of vessels are treated as special corporations only from charters or leases of the vessels to Filipino citizens or corporations approved by the Maritime Industry Authority.

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Proprietary educational institutions are subject to income tax based on net income at the tax rate of 1% from July 1, 2020 to June 30, 2023 and 10% beginning July 1, 2023.

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The CREATE Act provides that up to December 31, 2021, Regional Operating Headquarters (ROHQs) are subject to 10% income tax on their net income derived from the Philippines sources.

t

International air carriers may be exempt from income tax.

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The 25% regular corporate income tax on domestic and resident foreign corporations shall be applied upon the effectivity of CREATE Act on April 11, 2021.

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The 25% final withholding tax (FWT) on the gross income of nonresident foreign corporations derived from Philippine sources shall be applied beginning July 1, 2020.

f

The 20% regular corporate income tax under the CREATE Act shall also apply to resident foreign corporations.

f

Any profit remitted by a branch office of a foreign corporation to its head office is subject to 15% tax rate. The computation shall be based on profits applied or earmarked for remittance without deduction for the tax component.

t

Remittance of a branch of a foreign corporation in the Philippines of passive income earned in the Philippines to its head office, is exempt from branch remittance tax.

t

The 20% reduced income tax rate for DCs and RFCs under EDR shall be treated as separate and distinct from the 20% income tax rate of domestic corporations classified as MSMEs.

t

The term "Corporation" shall include:

I. One person corporations

II. Partnerships, no matter how created or organized

III. Joint stock companies

IV. Joint accounts (ceuntas en participacion)

V. Associations

VI. Insurance companies

VII. Mutual fund companies

VIII. Regional headquarters of multinational corporations

a. I and II only

b. I, II and III only

c. I, II, III, IV and V only

d. All of the above

d

"Joint Stock Companies" are constituted when a group of individuals, acting jointly, establish and operate business enterprise

I. Under an artificial name.

II. With an invested capital divided into transferable shares.

III. An elected board of directors, and other corporate characteristics.

IV. Operating with formal government authority.

a. I and II only

b. I, II and III only

c. I, II, III and IV

d. None of the above

b

A "Joint Account" is constituted when one interests himself in the business of another by/and

I. Contributing capital thereto.

II. Sharing in the profits or losses in the proportion agreed upon.

III. They are not subject to any formality.

IV. It may be privately contracted orally or in writing.

a. I and II only

b. I, II and III only

c. I, II, III and IV

d. None of the above

c

Interest income received from a depository bank under expanded foreign currency deposit system shall be subject to:

Option	DC	RFC	NRFC
a.	15%	7.5%	Exempt
b.	15%	15%	Exempt
c.	Exempt	Exempt	15%
d.	15%	15%	15%

b

An international air carrier doing business in the Philippines shall be subject to:

a. Percentage tax of 3% under Section 118 on gross receipts from cargo operations originating in the Philippines only.

b. 2 1/2% income tax on Gross Philippine billings only.

c. Both 3% percentage tax under Section 118 on their gross receipts from cargo operations originating in the Philippines and 2 1/2% income tax on Gross Philippine billings.

d. Neither the 3% Percentage tax under Section 118 on gross receipts from cargo operations originating in the Philippines nor the 2 1/2% income tax on Gross Philippine billings.

c

Which of the following is included in the Gross Philippine Billings for income tax purposes of international carriers?

I. Tickets sold outside the Philippines for passengers originating from outside the Philippines.

II. Tickets sold in the Philippines for passengers originating from the Philippines but are not actually flown.

III. Passage documents sold outside the Philippines for excess baggage originating from the Philippines.

IV. Passage documents sold in the Philippines for cargoes originating from outside the Philippines.

a. II only

b. III only

c. II and IV only

d. I, II, III and IV

b

Philippine Air, a domestic corporation engaged in local and international operations, has the following data for the current year: Gross income and expenses from international operations, P10,000,000 and P4,000,000, respectively. The income tax due of the corporation is

a. P1,200,000

b. P1,500,000

c. P1,800,000

d. P3,000,000

b

Philippine Air, a domestic corporation engaged in local and international operations, has the following data for the current year: Gross income and expenses from international operations, P10,000,000 and P4,000,000, respectively. The income tax due of the corporation is

Assume the carrier is an international carrier (a resident foreign corporation), the income tax due is

a. P150,000

b. P250,000

c. P1,800,000

d. P3,000,000

b

Statement 1: International air carriers and international shipping carriers shall not be subject to 12% value added tax but to 3% common carrier's tax under Section 118 of the Tax Code based on gross receipts derived from their transport of passengers and goods from Philippines to other countries.

Statement 2: In cases when the Gross Philippines Billings Tax of 2.5% for International carriers is not applicable (i.e., tax exempt based on reciprocity or treaty), the 3% common carrier's tax under Section 118 of the Tax Code, as amended, shall still apply.

Option	Statement 1	Statement 2
A.	True	True
B.	False	False
C.	False	True
D.	True	False

b

A branch, subsidiary or affiliate of a foreign banking corporation which is duly authorized by the Bangko Sentral ng Pilipinas (BSP) to transact offshore banking business in the Philippines in accordance with the provisions of P.D. No. 1034 as implemented by CB (now BSP) Circular No. 1389, as amended.

a. Offshore banking unit

b. Multinational company

c. Petroleum Service Contractor and Subcontractor

d. None of the choices

a

Prior to the effectivity of the CREATE Act, Offshore Banking Units (OBUs) are tax exempt on income derived from

I. Foreign currency transactions with local commercial banks.

II. Foreign currency transactions with branches of foreign banks authorized by BSP.

III. Interest income derived from foreign currency loans granted to residents.

a. I only

b. II only

c. I and II only

d. II and III only

c

Which of the following incomes derived by Offshore Banking Units (OBUs) shall be subject to twenty five percent (25%) regular corporate income tax upon effectivity of the CREATE Act?

I. Foreign currency transactions with local commercial banks.

II. Foreign currency transactions with branches of foreign banks authorized by BSP.

III. Interest income derived from foreign currency loans granted to residents.

a. I only

b. II only

c. I and II only

d. All of the above

d

Which of the following income is not from a related trade, business or activity of a non-profit proprietary educational institution?

a. Income from the hospital where medical graduates are trained for residency

b. Income from the canteen situated within the school campus

c. Income from bookstore situated within the school campus

d. Rental income

d

A domestic non-profit proprietary educational institution improved its library facilities by adding a new wing to its old library building. The capital outlay on library improvement, for income tax purposes, may be:

a. Deducted at full at the time of completion of the improvement.

b. Capitalized or expensed outright at the option of the school.

c. Capitalized and depreciated over the estimated life of the improvement.

d. Capitalized or expensed outright at the option of the Government.

b

The minimum corporate income tax (MCIT) does not apply if:

I. The corporation is exempt from income tax by virtue of tax holidays granted to it by appropriate Investment Promotion Agencies (IPAs) such as PEZA and BOI.

II. The taxpayer is a commercial partnership.

a. I only

b. II only

c. Both I and II

d. Neither I nor II

a

The minimum corporate income tax (MCIT) does not apply to a corporation, if

a. Imposition was suspended by the Secretary of Finance due to a corporation's heavy losses arising from prolonged labor dispute;

b. Corporation is in its initial year of operation;

c. Corporation is exempt from income tax by virtue of tax holidays granted to it by the Board of Investment;

d. All of the above

d

Substantial losses from a "prolonged labor dispute" means

a. Losses arising from a strike staged by the employees which lasted for more than six (6) months within a taxable period.

b. The strike resulted to temporary shutdown of business operations.

c. Both "a" and "b"

d. None of the above

c

 "Force majeure" includes

a. Irresistible force such as Acts of God

b. Lighting, earthquake, storm and flood

c. Armed conflicts like war or insurgency

d. All of the above.

d

Legitimate "business reverses" shall include substantial losses sustained

a. Due to fire, robbery, theft or embezzlement.

b. For other economic reasons as determined by the Secretary of Finance.

c. Both of the above.

d. None of the above.

c

The 25% regular corporate income tax on domestic and resident foreign corporations shall be applied upon the effectivity of CREATE Act on April
11, 2021.

f