Prepared by Francheska Ricci Parreno

Special
Corporations
ACC311 - Income Taxation
 Special
Corporations
corporations subject to lower RCIT rates as
compared to the 20% or 25% on their regular or
ordinary income
SPECIAL CORPORATIONS
I. Domestic Corporation
• Propriety educational institutions
• Hospitals which are non-profit

II. Resident Foreign Corporation

• International Carriers
III. Nonresident Foreign Corporation
• Nonresident cinematographic film owner, lessor or distributor

• Nonresident owner or lessor of vessels chartered by Philippine

Nationals
• Nonresident owner or lessor of aircraft, machineries and other
equipment
 SPECIAL CORPORATIONS
I. Domestic Corporation
• rules applicable to ordinary corporations also apply to nonprofit hospitals and
propriety educational institution, EXCEPT:
a) subject to special income tax rate as provided under Section 27(B) of the Tax Code
as amended by RA 11534 -- CREATE LAW
• 10% on taxable income (beginning July 1, 2023)
• 1% from July 1, 2020 to June 30, 2023
b) it is not subject to MCIT
c) Capital Expenditures for expansion of school facilities may not be capitalized
but instead claimed as outright expense; this rule does not apply to a non-profit
hospitals
SPECIAL CORPORATIONS
II. Resident Foreign Corporation
• International Carriers having flights or voyages originating from
any point or points in the Philippines, irrespective of the place
where passage documents are sold or issued, is subject to Gross
Philippine Billings Tax of 2.5%

Gross Philippine Billings xx

Rate 2.5%
Income Tax xx
SPECIAL CORPORATIONS
II. Resident Foreign Corporation
• International Carriers may avail of a lower tax rate (preferential
rate) or exemption under RA10378 on the basis of:

⚬ Tax Treaty
⚬ International Agreement
⚬ Reciprocity
￭ an international carrier, whose home country grants income
tax exemption to Philippine carriers shall likewise be
exempt from income tax
 SPECIAL CORPORATIONS
III. Non-resident Foreign Corporations

TYPE TAX BASE RATE

NR Cinematographic Film Owner, Lessor of Distributor Gross Income 25%

Gross rentals,
NR Owner or Lessor of Vessels Chartered by Philippine
lease or charter 4.5%
Nationals
fees

Gross rentals,
NR Owner or Lessor of Aircraft, machineries and Other
charters/other 7.5%
Equipment
fees
SPECIAL CORPORATIONS
IV. Regional Operating Headquarters
• (beginning Jan. 1, 2022) shall no longer be considered a special
corporation.
• rules applicable to ordinary resident foreign corporations shall apply:
⚬ RCIT rate: 25% of net income derived from PH sources only
⚬ MCIT on Gross income in the Philippines

• PRIOR to Jan. 1, 2022: considered special corporation subject to 10%

income tax rate based on its net income derived from sources within PH;
not subject to MCIT
 SPECIAL CORPORATIONS
V. Branch Profit Remittances Tax (BPRT)
• any profit remitted by a branch to its head office shall be subject to a
tax of 15% which shall be based on the total profits applied or
earmarked for remittance without any deduction for the tax
component thereof

Profit Remittance xxx

Rate 15%
BPRT xxx
 SPECIAL CORPORATIONS
V. Branch Profit Remittances Tax (BPRT)
PROFIT REMITTANCE

PROFIT REMITTED APPLICABLE TAX

Connected with the conduct of its trade or business in the

Subject to 15% BPRT
Philippines

Others (i.e passive income) Not subject to BPRT

EXEMPT ENTITIES: (activities registered with the ff.)

• Philippine Economic Zone Authority (PEZA)
• Subic Bay Metropolitan Authority (SBMA)
• Clark Development Authority (CDA)
 SPECIAL CORPORATIONS
VI. Offshore Banking Units (OBU)
• a branch, subsidiary, or affiliate or a foreign banking corporation
located in an Offshore Financial Center (OFC) which is duly
authorized by the BSP to transact offshore banking business in the
Philippines
• allowed to provide all traditional banking services to non-residents in
any currency other than PH national currency
INCOME TAX OF OBUs:
• Upon effectivity of CREATE Law
⚬ now taxable like ordinary resident foreign corporations
⚬ subject to revised RCIT rate of 25% on their income derived from
sources within the Philippines
 SPECIAL CORPORATIONS
VI. Offshore Banking Units (OBU)
Prior to effectivity of CREATE Law:

COUNTER PARTY RATE

Non-residents Exempt

Other OBUs Exempt

Local Commercial Banks Exempt

Branches of foreign banks Exempt

Other residents 10%

 SPECIAL CORPORATIONS
VII. Tax Treatment of POGO Entities
• INCOME FROM GAMING OPERATIONS
⚬ in lieu of all other direct and indirect international revenue and
local taxes, there shall be levied, assessed and collected from
OGLs (whether PH-based or foreign-based) a GAMING TAX
equivalent to whichever is higher:
￭ 5% of Gross Gaming Revenue (GGR)
￭ 5% of the Agreed Pre-determined minimum monthly
revenue (APMMR) from gaming operations
 SPECIAL CORPORATIONS
VII. Tax Treatment of POGO Entities
• INCOME FROM GAMING OPERATIONS
⚬ FORMULA:
Gross wagers xxx
Less: Payouts (xxx)
Gross Gaming Revenue (GGR) xxx

Vs. APMMR xxx

Higher amount between GGR & APMMR xxx

Gaming Tax rate 5%
GAMING TAX xxx
 SPECIAL CORPORATIONS
VII. Tax Treatment of POGO Entities
• INCOME FROM NON-GAMING OPERATIONS
⚬ Philippine-based OGL
￭ 25% RCIT of taxable income derived from sources within
and without the Philippines
⚬ Foreign-based OGL
￭ 25% RCIT of taxable income derived from sources within
the Philippines only
 SPECIAL CORPORATIONS
VIII. Taxation of PAGCOR
• PD 1869, as amended , classified PAGCOR’s Income into
two:
⚬ Income from gaming operations
￭ subject to the 5% franchise tax

⚬ Income from other related services

￭ subject to corporate income tax provided in the Tax
Code
 SPECIAL CORPORATIONS
VIII. Taxation of PAGCOR
INCOME OF PAGCOR FROM GAMING OPERATIONS INCLUDES:
⚬ Income from its casino operations
⚬ Income from dollar pit operations
⚬ Income from bingo operations, including all variations thereof
⚬ Income from mobile bingo operations. Provided, however, that the agent’s
commission income shall be subject to regular income tax, and
consequently, to withholding ttax under existing regulations
 SPECIAL CORPORATIONS
VIII. Taxation of PAGCOR
INCOME OF PAGCOR FROM OTHER RELATED OPERATIONS/SERVICES:
⚬ Regulatory license fees
⚬ Regulatory/license fees from licensed private casinos
⚬ Regulatory/license fees from licensed private bingo operations, including all
variations thereof
⚬ Regulatory/license fees from private casino gaming, internet sports betting and
private mobile gaming operations
⚬ Regulatory/license fees from private poker operations
⚬ Regulatory/license fees from private junket operations
⚬ Regulatory/license fees from SM demo units
⚬ Regulatory/license fees from all other electronic derivatives of brick and
mortar games regulated by PAGCOR
⚬ Income from other necessary and related services, shows, and entertainment
 SPECIAL CORPORATIONS
VIII. Taxation of PAGCOR
SUMMARY:

INCOME TAX

5% Franchise Tax, in lieu of

from Gaming Operations all other taxes such as
income tax and VAT

RCIT and other taxes

from Other related services and
imposed under the Tax
other income
Code such as VAT
 FILING OF TAX RETURNS
i. Regular Corporate Income Tax
• Quarterly - on or before the 60th day following the end of the quarter
• Accrual (Final Quarter) - on or before Apr. 15 of the succeeding year

ii. Final Withholding Tax on passive income

MANUAL FILING

JAN. to NOV. 10th day of the month following the month the withholding was made

DECEMBER January 15 of the succeeding year

 FILING OF TAX RETURNS
iii. Capital Gains Tax
• Shares of stock
⚬ Ordinary Return - 30 days after each transaction
⚬ Final Consolidated Return - on or before Apr. 15 of the following year
• Real Property - 30 days following each sale or other disposition
 Summary of Corporate Tax Rates
DOMESTIC CORPORATIONS:
THE HIGHER BETWEEN “REGULAR” and MCIT Rates

TYPE OF CORPORATION REGULAR MCIT

Rate Effectivity Rate Effectivity

1% Jul. 1, 2020 to June 30, 2023

Domestic Corporations, in
25% Jul. 1, 2020
general
2% Jul. 1, 2023

DC with total assets not 1% Jul. 1, 2020 to June 30, 2023

exceeding P100M and total
20% Jul. 1, 2020
net taxable income not
exceeding P5M 2% Jul. 1, 2023
 Summary of Corporate Tax Rates
DOMESTIC CORPORATIONS:

THE HIGHER BETWEEN “REGULAR” and MCIT Rates

TYPE OF CORPORATION REGULAR MCIT

Rate Effectivity Rate Effectivity

Jul. 1, 2020 to June 30,

Proprietary Educational 1%
2023
Institutions and NOT APPLICABLE
Hospitals
10% Jul. 1, 2023
 Summary of Corporate Tax Rates
FOREIGN CORPORATIONS
THE HIGHER BETWEEN “REGULAR” and MCIT Rates

TYPE OF CORPORATION REGULAR MCIT

Rate Effectivity Rate Effectivity

1% Jul. 1, 2020 to June 30, 2023

Resident Foreign
25% Jul. 1, 2020
Corporations
2% Jul. 1, 2023

Upon effectivity of CREATE

1%
OBUs (Note: now taxed as Law until June 30, 2023
RFC upon effectivity of 25% Jan. 1, 2022
CREATe)
2% Jul. 1, 2023
 Summary of Corporate Tax Rates
FOREIGN CORPORATIONS

THE HIGHER BETWEEN “REGULAR” and MCIT Rates

TYPE OF REGULAR MCIT

CORPORATION

Rate Effectivity Rate Effectivity

Non-resident foreign
25% Jan. 1, 2021 NOT APPLICABLE
corporations