As a rule, domestic corporations are subject to income tax in the Philippines at the rate of 30% based on their taxable net income after allowable deductions from gross income. Income tax liability is then determined after considering the effect of tax credits such as creditable withholding taxes (BIR Form No. 2307), minimum corporate income taxes paid, and other allowable tax credits.
Under Section 30 of the Tax Code of the Philippines, as amended, the following corporations or organizations shall be exempt from income tax in the Philippines in respect to income received by them as such:
However, the income of whatever kind and character of the above corporations or organizations from any of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code.
The Bureau of Internal Revenue (BIR or Tax Authority) is now strict in seeing to it that only corporations or organization listed above shall be entitled to the income tax exemptions in the Philippines, and that, only their income as such corporations are covered by the income tax exemption in the Philippines. Based on the latest issuance of the BIR, the following are not covered by the above:
As such, it would be prudent for those corporations and organizations claiming income tax exemptions in the Philippines to review their corporate entities and determine if indeed, they fall under corporations exempt from income tax in the Philippines as listed above.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at firstname.lastname@example.org.
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