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

6. A minimum corporate income tax (MCIT) of 2% of gross income as of the end of the taxable year is imposed upon any domestic corporation beginning the 4th taxable year immediately following the taxable year in which such corporation commenced its business operations.

7. 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.

8. the amount of MCIT is greater than normal income tax due from such corporation. T The computation and the payment of MCIT, shall likewise apply at the time of filing the quarterly corporate income tax.

9. Minimum corporate income tax is not applicable to special corporations.

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

11. 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.

12. 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.

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

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

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

16. “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.

17.Private educational corporations are subject to income tax based on the net income from sources within the Philippines at the tax rate of 10%.

18. Regional Headquarters” are subject to 10% income tax on its net come derived from the Philippines.

19. International air carrier may be exempt from income tax.

20. Incomes of nonresident individuals and nonresident corporations from transactions with OBUs are tax exempt.

21. Optional corporate income tax is a tax imposed in the nature of a penalty to the corporation to prevent the scheme of accumulating income rather than distribute the same to the stockholders for the purpose of avoiding tax on dividends.

22. For gross income tax purposes, a manufacturing concern's cost of goods manufactured and sold shall include all costs of production of finished goods, such as raw materials, direct labor and manufacturing overhead, freight cost, insurance premiums, and other costs incurred to bring the new materials to the factory or warehouse.

23. Improperly accumulated earnings tax is applicable only to listed entities.

24. Interest expense, for 15% gross income tax purposes, shall form part of “cost of services” if the taxpayer is a seller of services.

25. The fact that any corporation is a mere holding company or investment company shall be prima facie evidence of a purpose to avoid that tax upon its shareholders or members.

26. The fact that the earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the tax upon its shareholders or members unless the corporation, by the clear preponderance of evidence, shall prove the contrary.

27. Improperly accumulated earnings tax shall not apply to banks and other non-bank financial intermediaries.

28. Immediacy test is a test used in determining the reasonable needs of a business to justify the accumulation of earnings which will exempt the corporation from paying improperly accumulated earnings tax.

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

30. 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.

1.The term “Corporation ” shall include:

I. Partnerships, no matter how created or organized

II. Joint stock companies

III. Joint accounts (ceuntas en participation)

IV. Associations

V. Insurance companies

VI. Mutual fund companies

VII. Regional headquarters of multinational corporations

3. 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

uthority

4. Hananiah Corporation, a corporation engaged in business in the Philippines and abroad has the following data for the current year:

Gross Income, Philippines — P975,00

Expenses, Philippines — P750,000

Gross Income, Malaysia — P770,000

Expenses, Malaysia — P630,000

Interest on bank deposit — P25,000

Determine the income tax due if the corporation is

Domestic — Res. Foreign — Non-resident Foreign

Use the following data for the next three questions:

A domestic corporation provided the following data for the current year:

Gross profit sales — P3, 000,000

Business expenses — 1,800,000

Dividend from domestic corp. — 100,000

Dividend income from a resident corp. — 50,000

Dividend income from a non-resident corp. — 40,000

Capital gain on sale of land in the Philippines (SP-P2M; FMV-2.8M; Cost-P1.5M)

500,000

Capital gain on sale of land in China (SP-P1.5M; FMV-1.8M; Cost-P1. 3M)

200,000

Capital gain on shares of domestic corp. (direct sale to buyer)

120,000

Gain on sale of shares of a domestic corporation thru a local stock exchange

(SP-P200, 000; Cost P150, 000). — 50,000

Interest income from:

Notes receivable — 20,000 Bank deposits (peso accounts) — 30,000 Bank deposits (foreign currencies) — 25,000 Treasury bills — 10,000

5. The income tax due for the year is

6. The total capital gains taxes for the year is

7. The total final taxes on passive income for the year is

8. During the current year, a domestic corporation declared and paid dividends to its shareholder as follows:

To Louie, a resident citizen — P100,000

To Floyd, a nonresident citizen — 100,000

To Zeus, a resident alien — 100,000

To JJ, a nonresident alien engaged in trade in the Philippines — 100,000

To Francis, a nonresident alien not engaged in the Philippines — 100,000

To Chen, a domestic corp. — 100,000

To a resident foreign corp. — 100,000

To a nonresident foreign corp. (with tax sparing) — 100,000

How much final tax shall be withheld by the corporation?

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

RFC — NRFC — NRA-NETB

10.A depository bank under Foreign Currency Deposit System has the following income from foreign currency transactions (Exchange Rate $1=P45).

From Nonresident — $5,000

From Residents — $3,000

From Philippine National Bank — $2,000

How much is the final withholding tax applicable on the above income?

11. Bank of Manila a domestic corporation has the following data for the taxable year:

Regular Banking Unit:

Interest Income from loans P10,000,000

Interest Income from peso deposit Bank of Phil. Islands P1,000,000

Dividend Income from various domestic corporations P1,500,000

Foreign Currency Deposit Unit: ($1 = P40)

Interest Income from loans to residents $50,000

Interest Income from loans to nonresidents $12,500

Additional Information: The bank has total operating expenses of P12,000,000. How much is the normal income tax for the year?

Additional Information: The bank has total operating expenses of P12,000,000. How much is the normal income tax for the year?

P600,000 b. P400,000 c. P500,000 d. P0

JOINT VENTURES

ABC Company and DEF Company formed a joint venture. They agreed to share profit or loss in the ratio of 70% and 30% respectively. The results of operations of the joint venture as well as the co-ventures are as follows:

Joint Venture ABC Co. DEF Co.

Gross Income P5,000,000 3,000,000 2,000,000

OPEX P3,000.000 2,000,000 1,500,000

12. The Income tax payable of the joint venture is

13. The total income tax expense of DEF Co. is:

14. Assume the joint venture is tax exempt, the total income tax expense of ABC Co. is:

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

16. Which of the following is included in the Gross Philippine Billings for income tax purposes of an international air carrier:

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

17. 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

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

19. Statement 1: International air carriers and international shipping carriers shall not be subject 12% value added tax but 3% common carrier’s tax based on gross receipts derived from their transport of passengers and goods from the 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 taz exempt based on reciprocity or treaty) the common carrier’s tax under section 118 of the NIRC , as amended shall still apply.

Pacific Airlines, an international aire carrier showed the following gross receipts for the current year:

Point of Origin Destination Gross Receipts

Philippines U.S.A P8,000,000

U.S.A U.K P4,000,000

U.S.A Philippines P3,750,000

U.K Philippines P2,100,000

Additional information:

Forty percent (40%) of the shipments from the Philippines to the United States were later shipped to the United Kingdom 25% of all its revenue were from transport of cargoes and goods.

20. The Income tax payable for the year is