Complex Problem: Kamatis Co. provided the ff. information for the current year: The year before, the company had excess MCIT of P45,000 and excess withholding tax of P15,000. P60,000* = MCIT P45,000 + excess WT P15,000 P15,000** excess MCIT will not be included in case MCIT will be used. Quarter NCIT MCIT Taxes Withheld 1 st P150,000 P120,000 P30,000 2 nd 180,000 375,000 45,000 3 rd 375,000 150,000 60,000 4 th 300,000 150,000 52,500 Q NCIT MCIT Tax Credit TW-current Taxes Paid Tax Due 1 P150,000 P120,000 P60,000* P30,000 P0 P60,000 2 330,000 495,000 15,000** 75,000 60,000 345,000 3 705,000 645,000 60,000* 135,000 405,000 105,000 4 1,005,000 795,000 60,000* 187,500 510,000 247,500
What is the carry forward provision under the MCIT? Any excess of the MCIT over the normal income tax may be carried forward on an annual basis and be credited against the normal income tax for 3 immediately succeeding taxable years.
When does a corporation start to be covered by MCIT? A corporation starts to be covered by the MCIT on the 4th year of its business operations.
When does a business commence operation? Upon Issuance of BIR Certificate of Registration.
When does a corporation relieved from MCIT? The Secretary of Finance, upon recommendation of the CIR may suspend the imposition upon submission of proof that the corporation sustained substantial losses on account of: prolonged labor dispute, force majeure", or legitimate business reverses.
How would the MCIT be recorded for accounting purposes? Any amount paid as excess minimum corporate income tax should be recorded in the corporation’s books as an asset under account title “Deferred charges-MCIT”
To record provision for income tax (NCIT higher). Income tax expense xxx Income tax payable xxx To record provision for income tax (MCIT higher). Income tax expense xxx Deferred charges – MCIT xxx Income tax payable xxx To record application of excess (NCIT higher in succeeding year) Income tax expense xxx Deferred charges – MCIT xxx Income tax payable xxx To record excess not credited to NCIT after 3 years. Retained Earnings xxx Deferred charges – MCIT xxx
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- Spring '16
- Ma'am Villegas
- Taxation in the United States