TAXATION 1

SPECIAL TAXPAYERS SUBJECT

TO PREFERENTIAL TAX RATES

GROUP 4 MEMBERS: CERBO-LINDAYAG, MIDES MARI S.

MILITAR, NATASHA CZARINA A.
OPALIA, NISA S.
RANAY, ERNEYLOU V.
A) TAXPAYER/ TAX RATE / TAXABLE BASE
 
Tax Rate Taxable Base
1. Domestic Corporations:    
a. In General 30% (effective Net taxable income from all sources
Jan. 1, 2009)

b. Minimum Corporate Income Tax* 2% Gross Income

c. Improperly Accumulated Earnings 10% Improperly Accumulated Taxable Income
d. if the following conditions are met: 15% Gross Income
1. tax effort ratio of 20% of GNP
2. ratio of 40% of income tax collection
to total tax revenues
3. VAT tax effort of 4% of GNP; and
0.9% ratio of the Consolidated Public
Sector Financial Position (CPSFP) to
GNP (this last one has yet to be
implemented)
A) TAXPAYER/ TAX RATE / TAXABLE BASE
2. Proprietary Educational Institution 10% Net taxable income provided that the gross
  income from unrelated trade, business or other
  activity does not exceed 50% of the total gross
  income
   
30% on their entire taxable income if the gross income
from unrelated trade, business or other activity
exceeds 50% of the total gross income of the
institution

3. Non-stock, Non-profit Hospitals 10% Net taxable income provided that the gross
  income from unrelated trade, business or other
  activity does not exceed 50% of the total gross
  income
   
30% on their entire taxable income if the gross income
from unrelated trade, business or other activity
exceeds 50% of the total gross income of the
institution
A) TAXPAYER/ TAX RATE / TAXABLE BASE
4. GOCC, Agencies & Instrumentalities    
a. In General 30% Net taxable income from all sources
b. Minimum Corporate Income Tax* 2% Gross Income
c. Improperly Accumulated Earnings 10% Improperly Accumulated Taxable Income

5. National Gov't. & LGUs    

a. In General 30% Net taxable income from all sources
b. Minimum Corporate Income Tax* 2% Gross Income
c. Improperly Accumulated Earnings 10% Improperly Accumulated Taxable Income

6. Taxable Partnerships    
a. In General 30% Net taxable income from all sources
b. Minimum Corporate Income Tax* 2% Gross Income
c. Improperly Accumulated Earnings 10% Improperly Accumulated Taxable Income
A) TAXPAYER/ TAX RATE / TAXABLE BASE
7. Exempt Corporation    
a. On Exempt Activities 0%  
b. On Taxable Activities 30% Net taxable income from all sources
8. General Professional 0%  
Partnerships
9. Corporation covered by Special Rate specified under the respective  
Laws special laws
10. International Carriers 2.5% Gross Philippine Billings
11. Regional Operating Head 10% Taxable Income
12. Offshore Banking Units (OBUs) 10% Gross Taxable Income On Foreign
Currency Transaction
30% On Taxable Income other than
Foreign Currency Transaction
13. Foreign Currency Deposit  10% Gross Taxable Income On Foreign
Units (FCDU) Currency Transaction
30% On Taxable Income other than
Foreign Currency Transaction

*Beginning on the 4th year immediately following the year in which such corporation commenced its business operations, when the minimum corporate income tax is greater than the tax
computed using the normal income tax.
B) FOR NON-RESIDENT ALIENS ENGAGED
IN TRADE OR BUSINESS
1. Interest from currency deposits, trust funds and deposit substitutes 20%
2. Interest Income from long-term deposit or investment in the form of savings,
common or individual trust funds, deposit substitutes, investment management
accounts and other investments evidenced by certificates upon pretermination before
Exempt
the fifth year, there should be imposed on the entire income from the proceeds of the
long-term deposit based on the remaining maturity thereof: Holding Period:

-Four (4) years to less than five (5) years 5%

-Three (3) years to less than four (4) years 12%
-Less than three (3) years 20%
3. On capital gains presumed to have been realized from the sale, exchange or other
disposition of real property 6%

4. On capital gains for shares of stock not traded in the Stock Exchange  
- Not over P100,000 5%
- Any amount in excess of P100,000 10%
C) FOR NON-RESIDENT ALIENS NOT
ENGAGED IN TRADE OR BUSINESS
1. On the gross amount of income derived from all sources within the Philippines
25%

2. On capital gains presumed to have been realized from the exchange or other
disposition of real property located in the Phils.
6%

3. On capital gains for shares of stock not traded in the Stock Exchange
 

- Not  Over  P100,000
5%

- Any amount in excess of P100,000

10%
D) ON THE GROSS INCOME IN THE PHILIPPINES OF
ALIENS EMPLOYED BY REGIONAL HEADQUARTERS
(RHQ) OR AREA HEADQUARTERS AND REGIONAL
OPERATING HEADQUARTERS (ROH), OFFSHORE
BANKING UNITS (OBUS), PETROLEUM SERVICE
CONTRACTOR AND SUBCONTRACTOR
On the gross income in the Philippines of Aliens Employed by Regional 15%
Headquarters (RHQ) or Area Headquarters and Regional Operating
Headquarters (ROH), Offshore Banking Units (OBUs), Petroleum Service
Contractor and Subcontractor

E) GENERAL PROFESSIONAL PARTNERSHIPS

General Professional Partnerships 0%
F) DOMESTIC CORPORATIONS
1) a. In General – on net taxable income 30%

    b. Minimum Corporate Income Tax – on gross income 2%

  c. Improperly Accumulated Earnings – on improperly accumulated taxable income 10%

2) Proprietary Educational Institution and Non-profit Hospitals 10%

   - In general (on net taxable income) 10%

   - If the gross income from unrelated trade, business or other activity exceeds 50%
of the total gross income from all sources 30%

3) GOCC, Agencies & Instrumentalities  

   a. In General   - on net taxable income 30%

   b. Minimum Corporate Income Tax – on gross income 2%

 c. Improperly Accumulated Earnings – on improperly accumulated taxable income 10%

F) DOMESTIC CORPORATIONS
4) Taxable Partnerships
 

   a. In General – on net taxable income

30%

   b. Minimum Corporate Income Tax – on gross income

2%

   c. Improperly Accumulated Earnings – on improperly accumulated taxable

income 10%

5) Exempt Corporation
 

   a. On Exempt Activities
0%

   b. On Taxable Activities
30%

6) Corporation covered by Special Laws

Rate specified under
the respective special
laws
G) RESIDENT FOREIGN CORPORATION
1) a. In General – on net taxable income
30%

    b. Minimum Corporate Income Tax – on gross income

2%

  c. Improperly Accumulated Earnings – on improperly accumulated taxable

10%
income
2) International Carriers – on gross Philippine billings
2.50%

3) Regional Operating Headquarters on gross income

10%

4) Corporation Covered by Special Laws

Rate specified under
the respective special
laws

5) Offshore Banking Units (OBUs) on gross income

10%

6) Foreign Currency Deposit Units (FCDU)  on gross income

10%
PROPRIETARY EDUCATIONAL INSTITUTIONS
AND HOSPITALS

 Unrelated trade, business or other activity means

o Any trade, business or other activity
o The conduct of which is not substantially related to the exercise or performance by such its
institution of its primary purpose or function.
 For non-stock, non-profit educational institutions, all revenues use actually, directly and
exclusively for educational purposes are exempt.
o Their exemption refers only to revenues derived from assets used actually, directly and
exclusively for educational purposes.
o Income from cafeterias, canteens & bookstores are also exempt if they are owned & operated
by the educational institution and are located within the school premises.
o However, they shall be subject to internal revenue taxes on income from trade, business or
other activity, the conduct of which is not related to the exercise or performance by such
educational institutions of their educational purposes or functions, i. e. rental payment from
their building/premises. (RR 76-2003)
PROPRIETARY EDUCATIONAL INSTITUTIONS
AND HOSPITALS

 For non-stock, non-profit corporations who are exempt, they are still liable for taxes on:
o Income derived from any of their real properties (rental payment form their building premises)
o Any activity conducted from profit regardless of disposition thereof
o Interest income from any bank deposits or yield on deposit substitutes (final tax of 20%)
o If its foreign currency deposit, final tax of 7.5% (Dep Order 149-95, 1995)
o They shall also be withholding agents for their employee’s compensation income subject to
withholding tax (RR 76-2003)
 For private educational institutions, they are exempt from VAT, but they must be
accredited with either DECS or CHED.
o However, income derived from trade, business or other activity is still taxable.
o Their bank deposits and foreign currency deposits are exempt from withholding taxes but they
must show proof that such income is used to fund proposed projects for their institution’s
improvement.
o They shall also be the withholding agents for their employee’s compensation income subject to
withholding tax.
GOCCS

GOCCs are taxed on the same rate upon their taxable income upon
corporations or associations engaged in similar business, industry, or
activity.
o Exempt GOCCs:
 GSIS
 SSS
 PHIC
 PCSO
 As per RA 9337, PAGCOR was deleted from the list of exempt GOCCs.
SALE OF SHARES
Tax Rate on Income from Sale, Barter, Exchange or other Disposition  
of Shares of Stock (RR 6-2008)

If shares of stock are listed and traded through the local stock ½ of 1% (or .005%) of the gross
exchange selling price or gross value in
money of the shares of stock

If shares not traded through the local stock exchange  

o Capital gains not over P100,000 5% of the net capital gains
o Capital gains in excess of P100,000
10% of the net capital gains
FCDU
• Income of non-residents (individuals or corporations) from transactions with
depository bank under the expanded FCD system are exempt.

Intercorporate dividends
• Dividends received by a domestic corporation from another domestic
corporation shall not be subject to tax.
o Why? Law assumes that the dividends received will be injected to the capital,
which will eventually be taxed when the corporation gets income from the use of
the capital.
 Sale of realty
Final Tax Rate on Sales, Exchanges, or Transfers or Real Properties  
Classified as Capital Assets (RR 8-98)

Sale of real property in the Philippines 6% of the gross selling price,

or the current market value at
the time of sale, whichever is
higher
If sale was made to the government or to GOCCs Either 6% of the gross selling
price/current market value or
under the normal income tax
rate, taxpayer’s option
Sale of realty
Creditable Withholding Tax on Sales, Exchanges or Transfers of Real  
Properties classified as Ordinary Assets (RR 8-98)

1. If the seller is habitually engaged in the real estate business  

o Selling price is less than P500,000 1.5%
o Selling price is P500,000 to P2m
3%
o Selling price is above P2m
5% of gross selling
price/current market value,
whichever is higher

2. If the seller is not habitually engaged in the real estate business 7.5% of gross selling
price/current market value,
whichever is higher
3. If the seller is exempt from creditable withholding tax as per RR 2-98 Exempt

•If the mortgagor exercises his right of redemption within 1 year, no capital gains tax.
•In case of non-redemption, the capital gains will be due based on the bid price of the highest bidder. (RR 4-99)
J. INCOME TAX ON RESIDENT FOREIGN CORPORATIONS

Tax rate of Foreign Resident Corporations 30% of taxable income from all sources within the
Philippines, or
2% of gross income if MCIT applies, or
15% of gross income (again, the GIT has yet to be
implemented)

Branch Profit Remittance Tax

 Any profit remitted by a branch to its head office shall be subject to a tax of
15%, except those registered with PEZA (they have their own tax rules as
incentives)
Branch Profit Remittance Tax
• Passive income is not included in computing for the BPRT. It is subject to a final
tax. (Compania General de Tabacos v CIR)
o Except when it arises from business activity in which the corporation is engaged
or connected with the conduct of its business in the Philippines.
• Dividends from a local corporation to a non-resident foreign corporation is not
subject to BPRT but to final withholding tax. (Marubeni v CIR, 1990)

Regional or Area Headquarters and ROHQs

 Regional or Area Headquarters is a branch established in the Philippines by multi-
nationals and which headquarters:
o Do NOT earn or derive income from the Philippines, and
o Which act as supervisory, communications and coordinating center for their
affiliates, subsidiaries or branches in the Asia-Pacific Regions.
 They are EXEMPT from income tax.
Regional or Area Headquarters and ROHQs
 Regional Operating Headquarters is a branch established in the Philippines by multi-
nationals which are engaged in any of the following services:
o General admin and planning
o Business planning and coordination;
o Sourcing and procurement of raw materials and components;
o Corporate finance advisory services;
o Marketing control and sales promotion;
o Training and personnel management;
o Logistic services;
o Research and development services and product development;
o Technical support and maintenance;
o Data processing and communications; and
o Business development.
 They are taxed 10% on taxable income.
Income Tax on Non-resident Foreign Corporations
In general
 Non-resident foreign corporations are subject to 30% income tax on the gross income
derived during each taxable year from all sources within the Philippines only
o Special corporations (seen below) are subject to a different tax rate
 When the foreign corporation transacts business in the Philippines independently of its
branch in the country, the principal agent relationship is set aside. The transaction
becomes that of the foreign corporation, not of the branch, hence, the corporation is
considered a foreign non-resident corporation for that isolated and independent
transaction. (Marubeni v CIR)
 A casual activity in the Philippines by a foreign corporation does not amount to engaging
in trade or business in the Philippines for income tax purposes. In order that a foreign
corporation may be considered engaged in trade or business, its business transactions
must be continuous. (NV Reederij v CIR)
 Special non-resident foreign corporations
SPECIAL CORPORATIONS    

  Tax Rate Tax Base

Non-resident owner of lessor of vessel 4.5% Gross rentals, lease and charter fees
from the Phil

Non-resident cinematographic film owner, 25% Gross income from the Phil
lessor, or distributor

Non-resident lessor of aircraft, machinery 7.5% Gross rentals, charges and other
and other equipment fees from Phil sources

Proprietary educational institution and 10% Taxable income from all sources
non-profit hospital

Resident international carrier 2.5% Gross Philippine billings

Regional operating headquarters or 10% Philippine Taxable income
multinational corporation

•There’s no MCIT for special corporations

Tax rate on certain incomes of non-resident foreign
corporations
Tax Rate on Passive Income of Foreign Non-Resident Corporations Final Tax

1. Interest on foreign loans 20%

Non-resident lends to a domestic corporation

2. Dividend from domestic corporations (inter-corporate dividend) 15%

 This is subject to the condition that the country in which the non-resident
foreign corporation is domiciled allows a credit against the tax due from
the non-resident foreign corp taxes deemed to have been paid in the
Philippines equivalent to 15%. If they don’t, the dividends will be taxed at
30%.
Tax rate on certain incomes of non-resident foreign
corporations
Tax Rate on Capital Gains (same as foreign resident corporations)  

1. On sale of shares of stock of a domestic corporation NOT listed  

and NOT traded thru a local stock exchange held as a capital
5% of the net capital gains
asset,
o Capital gains not over P100,000 10% of the net capital gains
o Capital gains in excess of P100,000

2. On sale of real property in the Philippines No provision for capital gains

for sale of realty.
Apply it to the normal corporate
tax of 30%
Income covered by tax treaties
 In negotiating tax treaties, the underlying rationale for reducing the tax rate is that the
Philippines will give up a part of the tax in the expectation that the tax given up for this
particular investment is not taxed by the other country. There would be some
incentives on the part of the foreigners to invest in the Philippines because the rates of
tax are lowered and at the same time, they are credited against the domestic tax
abroad a figure higher than what was collected in the Philippines.
o If the state of residence does not grant some form of tax relief to the investor (the foreign
non-resident corp), no benefit would redound to the Philippines. (CIR v SC Johnson and Son,
wherein the issue was with the payment of taxes on royalties. SC Johnson wanted tax credit
based on the US-RP tax treaty which had a “most favored nation clause.” The Germany-RP
treaty was more beneficial because it allowed a 10% rate on royalties. However, the
Germany-RP treaty also allowed for 20% matching credit for royalties. The US-RP tax
treaty did NOT have this 20% matching credit. So the SC said that since the RP-US Tax Treaty
does not give a matching tax credit of 20 percent for the taxes paid to the Philippines on
royalties as allowed under the RP- Germany Tax Treaty, SC Johnson cannot be deemed
entitled to the 10 percent rate granted under the latter treaty for the reason that there is no
payment of taxes on royalties under similar circumstances.)
Income covered by tax treaties
• Based on RMC 46-2002 (affirmed by Golden Arches v CIR, CTA Case 6862, 2007),
the 10% rate of withholding tax on royalties remitted to residents of the US may now
be availed of because of the RP-China tax treaty which has the basically the same
provisions of the RP-US tax treaty. So, the MFN of the RP-US tax treaty can refer to the
RP-China tax treaty (as compared to the RP-Germany treaty which were essentially
not the same).
L. Improperly Accumulated Earnings Tax (IAET)

 An improperly accumulated earnings tax of 10% of improperly

accumulated taxable income is imposed on corporations which permit
earnings and profits to accumulate instead of being divided or distributed.
 Who are covered?
o All domestic corporations which are classified as closely held corporations?
o A closely-held corporation are those at least 50% in value of the outstanding
capital stock or at least 50% of the total combined voting power of all classes of
stock is owned directly or indirectly by not more than 20 individuals. (RR 2-01)
 How do you determine if a corporation is a closely-held one? Look at stock-ownership!
 If stock not owned by individuals, it will be considered to be owned proportionately by its
shareholders.
 If it’s a family & partnership ownership, an individual shall be considered to own the stock for his
family members or partners.
 If there’s an option to acquire stocks, it shall be considered as being owned by the person with
the option. (BIR Ruling 25-02)
L. Improperly Accumulated Earnings Tax (IAET)

 Who are not covered?

1. Publicly-held corporations
2. Banks and other financial institutions
3. Insurance companies
4. Taxable partnerships
5. General professional partnerships
6. Non-taxable joint ventures
7. Enterprises registered with PEZA or with the BCDA or with other special
economic zones (the last four are based on RR 2-01)
Tax-exempt Corporations
 
 
 The following organizations are tax-exempt, providing they are not organized for profit:
1. Labor, agricultural and horticultural organizations
2. Mutual savings bank without capital stock represented by shares & cooperative banks
without capital stock
3. A beneficiary society, order or association operating for the exclusive benefit of the
members (like a frat operating under the lodge system, a mutual aid association, a non-
stock corporation organized by employees providing for the payment of life, sickness, or
other benefits exclusive to its members)
4. Cemetery company owned & operated exclusively for the benefit of its members
5. Non-stock corporations or associations organized and operated exclusively for religious,
charitable, scientific, athletic or cultural purposes or for the rehab of veterans, no part of its
net income or asset shall belong to or inures to the benefit of any member or specific
person
6. Business league chamber of commerce or board of trade, no part of its income inures to
any individual
Tax-exempt Corporations
 
 
6. Business league chamber of commerce or board of trade, no part of its income
inures to any individual
7. Civic league or organization operated exclusively for the promotion of social welfare
8. A non-stock and non-profit educational institution
9. Government educational institution
10. Farmers’ or other mutual typhoon or fire insurance company, mutual ditch or
irrigation company, mutual or cooperative telephone company, or like organizations or a
purely local character, the income of which consists solely of dues, assessments & fees
collected from members for the sole purpose of meeting its expenses
11. Farmers’, fruit growers’ or like associations organized and operated as sales agent
for the purpose of marketing the products of its members & turning back to them the
proceeds less expenses
Tax-exempt Corporations

  They are not subject to income tax on income received by them

from undertakings which are essential to or necessarily connected
with the purposes for which they were organized and operated.
o But they are subject to income tax on income of whatever kind
and character from any of their properties (real or personal), or
from any of their activities (unrelated) conducted for profit,
regardless of the disposition made of such income.

 
Tax-exempt Corporations

 From the Omnibus Investment Code of 1987 (Art 39, EO 226 - Incentives to
Registered Enterprises under the Investment Priorities Plan) – these are
activity-driven incentives:
o Income Tax Holiday
 For pioneer firms – 6 years from commercial operation
 For non-pioneer firms – 4 years from commercial operation
 For newly registered firms – fully exempt from income taxes
 Extension of tax exemption for more than 1 year:
 If the project meets the prescribed ratio of capital equipment to number of works set by the Board
 If the utilization of indigenous raw materials are at rates set by the Board
 If the net foreign exchange savings or earnings amount to at least $5m annually during the first 3 years
of operation
o But no registered firm may avail of this incentive for a period exceeding 8 years
Tax-exempt Corporations

 Exemption for registered expanding firms:

 For a period of 3 years form commercial operation, registered expanding
firms are entitled to tax-exemption proportionate to their expansion, but
if it availed of this incentive during this period, it is NOT entitled to
additional deduction for incremental labor expense
 This incentive cannot be extended beyond 3 years
o Additional deduction for labor expense
 For the first 5 years from registration, a registered enterprise is allowed an
additional deduction of 50% of the wages corresponding to the increment in
the number of DIRECT labor for skilled and unskilled labors if the project
meets the prescribed ratio of capital equipment to number of workers set by
the Board
 This exemption shall be doubled if the activity is located in less developed
areas
Tax-exempt Corporations

o Tax & Duty exemption on imported capital equipment

 Within 5 years from the effectivity of this code (until 1992), importations of
machinery and equipment and spare parts of registered enterprises shall be
100% exempt of customs duties and revenue tax, but the importation must
comply with the following conditions:
 They are not manufactured domestically in sufficient quantity of
comparable quality and at reasonable prices
 They are reasonably needed and will be used exclusively by the
registered enterprise in the manufacture of its products
 The approval of the Board was obtained for such importation
Tax-exempt Corporations

o Tax credit for domestic capital equipment

 A tax credit of 100% of the value of the revenue tax and customs duties that
would have been waived on the machinery and equipment had these been
imported is given to registered enterprises which purchase them from a
domestic manufacturer
o Exemption from contractor’s tax
 The registered enterprise is exempt from contractor’s tax
Tax-exempt Corporations

 From the Bases Conversion and Development Act of 1992 and Special Economic
Zone Act of 1995 (RA 7916, Sec 23-25) – these are activity- and location-driven
incentives.
o Fiscal Incentives
 Businesses operating within the ECOZONES shall be entitled to fiscal incentives as per PD 66
(EPZA) or with EO 226.
 Exporters using local materials as inputs shall get tax credits same as those provided in the
Export Development Act of 1994
o Exemption from Taxes under the NIRC
 No taxes (local & national) shall be imposed on businesses operating within the ECOZONEs
 In lieu of taxes, 5% of the gross income shall be remitted to the national government
Tax-exempt Corporations

o Applicable national taxes

 All income derived by persons and all services establishments in the
ECOZONE are subject to taxes under the Tax Code
 Income derived from inside the zones should not be more than 30% of
its total income. (RR 2-2005)
o Note: RA 9400 has restored tax privileges to Clark Air Base, Camp John Hay,
Poro Point and Morong Special Eco Zone
 In John Hay v Lim, the SC said that Camp John Hay was not afforded tax
privilegs. But RA 9400 has restored it.
Tax-exempt Corporations

 From the Jewelry Industry Development Act of 1998 (RA 8502) and RR 1-99
o Qualified jewelry enterprises:
 Exempted from excise tax of manufactured and produced jewelries, if shown
to have been purchased from a qualified jewelry enterprise; and
 Have additional deduction of 50% for training expenses incurred by qualified jewelry enterprises.
 Jewelry enterprises availing of incentives shall still be eligible to incentives provided by other
special laws such as Republic Act No. 7844 (Export Development Act of 1994), Republic Act No.
7916 (Special Economic Zone Act of 1995), Executive Order 226 (BOI Omnibus Investments
Code), among others: Provided, That the activity is export-oriented and that there is no double
availment of the same incentives.
Tax-exempt Corporations
 From the Cooperative Code of the Philippines (RA 6983) and RR 20-2001
o Cooperatives which transact only with its members are exempt from:
 Income tax
 Value-Added Tax (VAT) under Section 109 pars. (r), (s), (t) and (u)
 3% Percentage Tax
 Donor’s tax to accredited exempt
 Excise tax
 DST
 But the other party not exempt has to pay the DST
 Annual registration fee of P500 under Sec 236 (B)
o If it deals with members and outsiders, see footnote.
o Note: All income of the cooperative not related to its main/principal business/es shall be
subject to all the appropriate taxes under the Tax Code of 1997. This is applicable to all
types of cooperatives, whether dealing purely with members or both members and non-
members.
Tax-exempt Corporations
o Cooperatives are NOT exempt from
 final taxes on deposits, interest income and capital gains tax,
 DST if dealing with nonmembers and cooperative exceeding P10m,
 VAT billed on certain purchases
o The exemption of the cooperatives does not extend to their individual members. Thus,
members of cooperatives are liable to pay all the necessary internal revenue taxes under
the National Internal Revenue Code, including the tax on earnings derived from their
capital contribution.
 Provided, however, that interests received by members of a cooperative with accumulated
reserves and undivided net savings greater than Ten Million Pesos (P10,000,000.00), after the
lapse of the ten-year exemption, shall no longer be taxable in the hands of such members.
Tax-exempt Corporations

 From the Barangay Micro Business Enterprises (BMBEs) (RA 9178 and Dept
Order 17-04)
o BMBEs are exempt from income tax.
 But not from final taxes on deposits, interest income, capital gains tax, royalties, etc
 From the Tourism Act of 2009 (RA 9593 and its IRR)
o Income tax holiday
 New enterprises in Greenfield and Brownfield Tourism Zones – 6 years from start of business
operations
 Existing enterprises in Brownfield Tourism Zones – 6 years from time of completion of expansion
or upgrade
 The income tax holiday can be extended but note more than 6 years provided the facilities are
upgraded to at least 50% of the original investment
 Special NOLCO rule: carried over for the next 6 consecutive years from year of loss, provided
loss has not been previously offset as a deduction
o Gross income taxation: 5% gross income tax, in lieu of all national internal revenue taxes
and local taxes, impost, assessments, fees and licenses