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deducted against the tax computed on the second quarter to get the tax payable for the second quarter oJust like in individuals, income must be reported gross of any creditable withholding tax oCorporations may adopt a fiscal or calendar year as their accounting period, which is why the annual return is filed ‘on the 15thday of the 4thmonth following the close of the tax year’and not on April 15 just like in most cases PENALTY TAXES: MINIMUM CORPORATE INCOME TAX The minimum corporate income tax (MCIT) –2% of gross income –is applied to all corporations subject to 30% tax rate
12(domestic, resident foreign), which commences on the 5thyear of the corporation’s existence. Gross income shall include income from unrelated from the entity’s main line of business (e.g., rent income if the corporation is a manufacturer) and excludes income subject to final tax As seen in the formula above, the tax due for the corporation shall be the higher between the regular income tax and minimum corporate income tax In cases when MCIT is greater than regular income tax, the excess between the two can be deducted against regular income tax within three years the MCIT was paid. The excess MCIT can only be deducted if regular income tax was higher than MCIT in that year. The excess is recorded as a deferred charge (debit normal balance) If the excess MCIT is still not emptied out after three years, the remaining amount can no longer be credited against regular income PENALTY TAXES: IMPROPERLY ACCUMULATED EARNINGS TAX This penalty tax is a measure for corporations to declare dividends for their shareholders –10% of the accumulated earnings beyond the needs of the corporation, computed as follows: Taxable net income xx ADD: Exempt, excluded and income subject to final tax xx ADD: Net operating loss carry-over xx Accounting income xx DEDUCT: All taxes paid, including final taxes xx DEDUCT: Amount reserved for corporate needs xx DEDUCT: Dividend declared xx Base for IAET xx
13IAET shall be paid 15 days after one year preceding the tax year for which the dividend must’ve been declared, i.e., a year and 15 days after the current tax year for which dividends must be declared Income subjected to IAET will no longer be included in computing IAET again, even if it’s still not declared as dividends