RR September 30 2017.docx - REVENUE REGULATIONS NO 09-98 Implementing Republic Act No 8424\"An Act Amending the National Internal Revenue Code as Amended

RR September 30 2017.docx - REVENUE REGULATIONS NO 09-98...

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REVENUE REGULATIONS NO. 09-98 : Implementing Republic Act No. 8424, "An Act Amending the National Internal Revenue Code, as Amended" Relative to the Imposition of the Minimum Corporate Income Tax (MCIT) on Domestic Corporations and Resident Foreign Corporations TO : All Internal Revenue Officers and Others Concerned Pursuant to Section 244, in relation to Section 27(E) and Section 28(A)(2), these Regulations are hereby promulgated to govern the imposition of the minimum corporate income tax on domestic and resident foreign corporations. Sec. 2.27(E) MINIMUM CORPORATE INCOME TAX (MCIT) ON DOMESTIC CORPORATIONS — (1) Imposition of the Tax — A minimum corporate income tax (MCIT) of two percent (2%) of the gross income as of the end of the taxable year (whether calendar or fiscal year, depending on the accounting period employed) is hereby imposed upon any domestic corporation beginning the fourth (4th) taxable year immediately following the taxable year in which such corporation commenced its business operations. The MCIT shall be imposed whenever such corporation has zero or negative taxable income or whenever the amount of minimum-corporate income tax is greater than the normal income tax due from such corporation. For purposes of these Regulations, the term, "normal income tax" means the income tax rates prescribed under Sec. 27(A) and Sec. 28(A)(1) of the Code at 34% on January 1, 1998; 33% effective January 1, 1999; and at 32% effective January 1, 2000 and thereafter. In the case of a domestic corporation whose operations or activities are partly covered by the regular income tax system and partly covered under a special income tax system, the MCIT shall apply on operations covered by the regular income tax system. For example, if a BOI-registered enterprise has a "registered" and an "unregistered" activity, the MCIT shall apply to the unregistered activity. (2) Carry forward of excess minimum corporate income tax — Any excess of the minimum corporate income tax (MCIT) over the normal income tax as computed under Sec. 27(A) of the Code shall be carried forward on an annual basis and credited against the normal income tax for the three (3) immediately succeeding taxable years. Illustration on how to carry forward excess minimum corporate income tax — Excess of MCIT Normal Income Over the Normal Year Tax MCIT Income Tax 1998 P50,000 P75,000 P25,000 1998 amount of tax payable P75,000 1999 P60,000 P100,000 P40,000 1999 amount of tax payable P100,000 2000 P100,000 P60,000 Computation of Net Amount of Tax Payable in 2000: Amount of tax payable P100,000 Less: 1998 excess MCIT (25,000) 1999 excess MCIT (40,000) P65,000 Net amount of tax payable P35,000 The taxpayer shall pay the MCIT whenever it is greater than the regular or normal corporate income tax which is imposed under Sec. 27(A) of the Code. The comparison between the normal income tax payable by the corporation and the MCIT shall be made at the end of the taxable year. Thus, under the example, the taxpayer will pay the MCIT of P75,000.00 since this amount is greater than the normal income tax of P50,000.00 in 1998.
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