In this case, ABC Corporation shall not be allowed to carry forward and creditthe 1998 excessMCITagainst the income tax liability for 1999 since the 1999MCITis greater than the normal income tax for said year. However, for year 2000, wherethe normalincome tax is greater than the computedMCIT, ABC Corporation shall beallowed to apply the excessMCITof 1998 and 1999 amounting to P95,000 (P75,000plus P20,000) against the normal income tax liability of P200,000.The excess MCIT for the year 2001 (P300,000) may only be credited againstnormal income tax liabilities for the succeeding three years from 2002 to 2004.However, since the normal income tax liabilities for these succeeding years are lesserthan the respective MCITs, the excess MCIT for the year 2001 of P300,000 loses its
Copyright 2016 CD Technologies Asia, Inc. and Accesslaw, Inc.Philippine Taxation Encyclopedia First Release 20167creditability by the year 2005 hence, must be removed and deducted from "Deferredcharges-MCIT" account and charged to "Retained Earnings" account.cdllIllustrative accounting entries to record excess MCIT—(a)For taxable year 1998 when MCIT is greater than the normal income taxliability of the company1998(1)Debit: Provision for income taxP25,000Credit: Income tax payableP25,000To record income tax liability using the normal income tax rate(2)Debit: Deferred Charges-MCITP75,000Credit: Income Tax PayableP75,000To record excessMCIT(P100,000 - P25,000)(3)Debit: Income Tax PayableP100,000Credit: Cash in bankP100,000To record payment of income tax due for 1998(b)For taxable year 2000 when excess MCIT (1998 and 1999) is appliedagainst normal income tax liability2000(1)Debit: Provision for income taxP200,000Credit: Income Tax PayableP200,000To record income tax liability using the normal income tax rate(2)Debit: Income tax payableP95,000Credit: Deferred Charges-MCIT(P75,000 plus P20,000)P95,000To record application of excess MCIT against normal income tax liability for taxableyear 2000(3)Debit: Income Tax PayableP105,000Credit: Cash in BankP105,000To record payment of income tax due (P200,000 less P95,000)(c)For taxable year 2005 when the expired portion of excess MCIT(P300,000) for taxable year 2001 is closed to the retained earnings account due to its
Copyright 2016 CD Technologies Asia, Inc. and Accesslaw, Inc.Philippine Taxation Encyclopedia First Release 20168non-application.2005Debit: Retained EarningsP300,000Credit: Deferred Charges-MCITP300,000To record the expired portion of Deferred Charges-MCIT(8)Exceptions— The minimum corporate income tax (MCIT) shall applyonly to domestic corporations subject to the normal corporate income tax prescribedunder these Regulations. Accordingly, the minimum corporate income tax shall not beimposed upon any ofthe following:(a)Domestic corporations operating as proprietary educationalinstitutions subject to tax at ten percent (10%) on their taxableincome; or(b)Domestic corporations engaged in hospital operations which arenonprofit subject to tax at ten percent (10%) on their taxableincome; and(c)Domestic corporations engaged in business as depository banksunder the expanded foreign currency deposit system, otherwise
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