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Taxation of Resident Corporations in PH

This document summarizes taxation for resident corporations in the Philippines under the TRAIN law. Resident corporations are foreign corporations authorized to do business in the Philippines. They are taxed differently than domestic corporations. Resident corporations pay a 25% normal tax on taxable income from all sources within and outside the Philippines. Beginning in the fourth year of operations, they also pay the higher of a 25% normal tax or a 2% minimum corporate income tax on gross income. Additionally, resident corporations pay a 15% profit remittance tax on any profits remitted abroad, unlike domestic corporations which are exempt from this tax. An example is provided where a resident corporation paid P75,000 in profit remittance tax on a P500,

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14 views7 pages

Taxation of Resident Corporations in PH

This document summarizes taxation for resident corporations in the Philippines under the TRAIN law. Resident corporations are foreign corporations authorized to do business in the Philippines. They are taxed differently than domestic corporations. Resident corporations pay a 25% normal tax on taxable income from all sources within and outside the Philippines. Beginning in the fourth year of operations, they also pay the higher of a 25% normal tax or a 2% minimum corporate income tax on gross income. Additionally, resident corporations pay a 15% profit remittance tax on any profits remitted abroad, unlike domestic corporations which are exempt from this tax. An example is provided where a resident corporation paid P75,000 in profit remittance tax on a P500,

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INCOME

TAXATION
UNDER THE TRAIN
LAW

Jesrelle Vhon G. Habana, CPA, MBA


1
CHAPTER 3
Tax On Resident Corporations

2
RESIDENT CORPORATION
- is a corporation organized
under foreign laws authorized by
Philippine regulatory agencies to
do business in the Philippines

One who looks around shall find


many foreign-named corporations -
foreign corporations - and find them
doing lucrative manufacturing
business or doing wholesale and retail
business.

How are resident corporations taxed? 3


(a) On sale of shares of stock of a domestic corporation not
listed and traded thru a local stock exchange, held as capital
assets Final tax of 15%
On the capital gain

(b) From sources within the Philippines, on passive income of:


Interest under the expanded foreign currency
deposit system Final tax of 15%

(c) From sources within the Philippines, on passive income of:


Interest on any currency bank deposit, yield or
other monetary benefit from deposit substitute, Final tax of 20%
trust fund and similar arrangement, royalty

(d) Dividend from domestic corporation (intercompany Exempt


dividend)

(e) Taxable income (NET) from all sources within and outside the
Philippines-
NORMAL TAX (NT, or RCIT) 25%

But, beginning with the fourth year from start of


operations, whichever is higher of:
NORMAL TAX on taxable income (net) and 25%
MINIMUM CORPORATE INCOME TAX (MCIT), on
MCIT gross Income 2% 4
THE PROFIT REMITTANCE TAX
Any profit remitted by a branch to its head
office shall be subject to a final tax at fifteen
percent (15%) which shall based on the total profit
applied or earmarked for remittance, without any
deduction for the tax component thereof, except
those activities which are registered with the
Philippine Economic Zone Authority (PEZA).

NOTE:
Resident Corporation have
15% Profit Remittance Tax
unlike Domestic
Corporation.
5
ILLUSTRATION
A branch office of a resident
corporation applied thru the Philippine
banking system for a remittance to its
mother company abroad of P500,000
from its profits from Philippine
operations. The profit remittance tax
should have been P500,000 multiplied
by 15%, or P75,000, and the net
remittance would have been
P425,000. 6
THANK
YOU!
From the book of
Virgilio Reyes

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