mcit-RGF

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MINIMUM CORPORATE INCOME TAX: A BANE OR A BOON?

By ROSALINO G. FONTANOSA, CPA, MBA

REVENUE REGULATIONS NO. 9-98 issued September 2, 1998prescribes the regulations to implement new Comprehensiive Tax

Reform program R! "o# 8$2$% relative to the imposition of the

&inimum Corporate 'ncome Tax &C'T% of 2( of the gross income on

domestic corporations and resident foreign corporations#

This refers to the gross income as of the end of the taxable )ear

beginning the $th taxable )ear immediatel) following the taxable

)ear in which such corporation commenced its business operations#

*or purposes of the &C'T, the taxable )ear in which business

operations commenced shall be the )ear upon registration with

+ureau of 'nternal Revenue#

*or purposes of the minimum corporate income tax,

1# “Gross I!o"#$ means gross sales less sales returns,discounts and

allowances and # cost of good sold#

2# Gross S%&#s$ shall include onl) sales contributor) to income

-## “Cos' o( Goo)s So&)$ shall include all business expensesdirectl) incurred

to produce the merchandise to bring them to their present location

and use#

$# *or a trading or merchandising concern, Cos' o( Coo)s So&)$-means the

invoice cost of goods sold, plus import duties, freight in transportingthe goods

to the place where the goods are actuall) sold, including insurancewhile the

goods are in transit#

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.# *or a manufacturing concern, “Cos' o( Goo)s M%*(%!'*r#)%) So&)$

means all costs of production of /nished goods, such as raw materials

used,

direct labor and manufacturing overhead, freight cost, insurancepremiums and

other costs incurred to bring the raw materials to the factor) orwarehouse#

0# 'n the case of sales of services, the term “Gross I!o"#$ meansgross

receipt less sales returns, allowances, discounts and cost of services#

# “Cos' o( S#r+!#s$ means all directs costs and expensesnecessaril)

incurred to provide the services reuired b) the customers andclients

including a% salaries and emplo)ee bene/ts of personnel,consultants and

specialists directl) rendering the service, and b% cost of facilitiesdirectl)

utili3ed in providing the service such as depreciation or rental of euipment

used and cost of supplies4

8# “Cos' o( S#r+!#s$ shall include interest expense except inthe case of

ban5s and other /nancial institutions#

9# The term “Gross R#!#'s$ as used herein means amountsactuall) or

constructivel) received during the taxable )ear6

17# The term “Gross R#!#'s$ shall mean amount earned asgross income#

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The &C'T will be imposed whenever such operation has 3ero or

negative taxable income or whenever the amount of &C'T is greater

than the normal income tax due from such operation# 'n the case of a

domestic corporation whose operations or activities are partl)covered b) the regular income tax s)stem and partl) covered under a

special income tax s)stem, the &C'T will appl) on operations covered

b) the regular income tax s)stem#

The term, “or"%& !o"# '%$ means the income tax rates whichare -$(

on anuar) 1, 19986 --( eective anuar) 1, 19996 and at -2(eective

anuar) 1, 2777 through :ctober 277. and -.( eective "ovember277. and

through ;ecember 2778##

/For '0# (*&& '#' o( RR 9-98, &#%s# r#(#r 'o '0# %''%!0"#'1.

The logic behind the &C'T is eas) to understand# *or so man) )ears,some

companies have been lording it over b) showing )ear<in and )ear<out,losses in

their business operations# =ith the help of their unscrupulous andver)

creative> accountants, a compan) can show annual lossesconsistentl) even

for successive ten )ears of operations# !nd )et the) still continueoperations# 'f

that is not glutton) for punishment, then ' do not 5now what is# =iththe

losses, no taxable income and therefore no tax mone) going to thecoers of

the government# :r if )ou are dealing with sa), group of companies

under

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same ownership, the pro/ts of the pro/table /rms can be tapered o b) the

losses of non<pro/table /rms# :r in other words, it is a good form of tax shield#

The +'R has gotten wise to this modus operandi# Thus the impositionof the

&C'T#

=ith the &C'T, even if the bottomline shows a negative /gure, thecompan)

has still to pa) tax, particularl), the &C'T#

=hile we can follow the mind frame of the +'R re4 unscrupulousaccountants in

the practice of creative> accounting, what the) failed to consider isthe natural

business c)cle of some industries# *or example, some industries arecapital

intensive<the utilit) industries li5e power, water, transport and

telecommunications#

These industries, being capital intensive, reuire huge investment interms

of capital euipment?expenditures# This means b) the nature of longrecover)

period, having losses for the /rst - )ears of operations could be anatural

expectation# The imposition of &C'T on these industries is not onl)repressive

but also counter productive# The impact of &C'T is to discourageinvestors

from going into long<recover) industries and encourage them to gointo

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industries that reuire moderate investment and give them fastrecover) on

their investment#

This is de/nitel) a case of one hand not 5nowing what the other handis doing#

=hile we encourage investors to go into utilit) industries since adeveloping

econom) li5e the @hilippines depend to a large extent in the growthof utilit)

industr), the &C'T eect is simpl) the opposite# The signi/cance of power,

water, transport and telecommunications in the progress of a nationcan not

be overemphasi3ed#

=hat ' recommend is to give tax holida)s to these industries, ratherthan in

one sweep include them in ordinar) domestic corporation subAect to&C'T after

- )ears from starting operations#

The same rule applies to resident foreign corporations who areli5ewise subAect

to &C'T# =hile the governmentBs pronounced polic) is to attractforeign

investors , the imposition of &C'T wor5s in reverse# *oreigninvestment brings

in so man) bene/ts to our people, the multiplier eect of Aobopportunities and

emplo)ment, development of the countr)side, etc# are pleasantrealities that go

with foreign investment#

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=hat ' suggest further is for the +'R together with other governmentagencies

li5e ";!?+:'?;T' to ma5e a stud) b) industr) and come out withreasonable

recover) period before the) can show pro/table operations%# =hilem)

example deals onl) with utilit) industries, there are de/nitel) someother

industries under similar situation#

+ased on the stud), ' further suggest that appl) a speci/c &C'T<free

)ears for each industr) as applicable#

'n conclusion, &C'T is a double<edge sword# 't hurts# The onl) trouble

is it can hurt the wrong part)# 'n a seminar ' attended on tax last

)ear, no less than the ;irector of Tax Research Council, ;r# ;ante S),

expressed apprehension on the logic?validit) of &C'T# ! legitimate,

honest<to<goodness businessman who invests in long<recover)

industries undul) suers from this tax# *or the cheating, unscrupulousbusinessman, he deserves the &C'T#

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!ugust 25,1998

REVENUE REGULATIONS NO. 9-98

SUBJECT: Implementing Republi At N!. 8"#"$ % An At Amen&ing t'e

N(ti!n(l Inte)n(l Re*enue C!&e$ (+ (men&e&, Rel(ti*e t! t'eImp!+iti!n ! t'e inimum C!)p!)(te In!me T(/ 0 CIT 1 !n

2!me+ti C!)p!)(ti!n+ (n& Re+i&ent 3!)eign C!)p!)(ti!n+

TO: All Inte)n(l Re*enue Oie)+ (n& Ot'e)+ C!ne)ne&

Pursuant to Section 244, in relation to Section 27(E) and Section 28(A)(2), these

Regulations are hereb !ro"ulgated to go#ern the i"!osition o$ the "ini"u"

cor!orate inco"e ta% on do"estic and resident $oreign cor!orations&

Se #.#40E1 INIU COR5ORATE INCOE TA6 0CIT1 ON

2OESTIC COR5ORATION-

071 Imp!+iti!n ! t'e T(/ A "ini"u" cor!orate inco"e ta% ('*) o$

t+o !ercent (2) o$ the gross inco"e as o$ the end o$ the ta%able ear (+hether

calendar or $iscal ear, de!ending on the accounting !eriod e"!loed) is hereb

i"!osed u!on an do"estic cor!oration beginning the $ourth (4th) ear

i""ediatel $ollo+ing the ta%able ear in +hich such cor!oration co""enced

its business o!erations& *he '* shall be i"!osed +hene#er such cor!oration

has -ero or negati#e ta%able inco"e or +hene#er the a"ount o$ "ini"u"

cor!orate inco"e ta% is greater than the nor"al inco"e ta% due $ro" such

cor!oration&

.or !ur!oses o$ these Regulations, the ter", %n!)m(l in!me t(/, "eans the

inco"e ta% rates !rescribed under Sec& 27(A) and Sec& 28(A)(1) o$ the ode at

/4 on 0anuar 1, 1998 // e$$ecti#e 0anuar 1, 1999 and at /2 e$$ecti#e

0anuar 1, 2 and therea$ter&

n the case o$ a do"estic cor!oration +hose o!erations or acti#ities are !artl

co#ered b the regular inco"e ta% sste" and !artl co#ered under a s!ecial

inco"e ta% sste", the '* shall a!!l on o!erations co#ered b the regular

inco"e ta% sste"& .or e%a"!le, i$ a 3registered enter!rise has a

6registered and an 6unregistered acti#it, the '* shall a!!l to theunregistered acti#it&

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0#1 C()) !)()& ! e/e++ minimum !)p!)(te in!me t(/- An e%cess

o$ the "ini"u" cor!orate inco"e ta% ('*) o#er the nor"al inco"e

ta% as co"!uted under Sec& 27(A) o$ the ode shall be carried $or+ard

on an annual basis and credited against the nor"al inco"e ta% $or the

three (/) i""ediatel succeeding ta%able ears&

Illu+t)(ti!n !n '! t! ()) !)()& e/e++ minimum !)p!)(te

in!me t(/

E/e++ ! CIT

;e() N!)m(l In!me O*e) t'e N!)m(l

T(/ CIT In!me T(/

1998 P5, P75, P25,

1998 a"ount o$ ta% !aable P75,1999 P, P1, P4,

1999 a"ount o$ ta% !aable P1,

2 P1, P,

o"!utation o$ et A"ount o$ *a% Paable in 2:

A"ount o$ ta% !aable P1,

;ess:

1998 e%cess '* (25,)

1999 e%cess '* (4,) P5,

et a"ount o$ ta% !aable P/5,

*he ta%!aer shall !a the '* +hene#er it is greater than the regular or

nor"al cor!orate inco"e ta% +hich is i"!osed under Sec& 27 (A) o$ the ode& *he

co"!arison bet+een the nor"al inco"e ta% !aable b the cor!oration and the '*

shall be "ade at the end o$ the ta%able ear& *hus, under the e%a"!le, the ta%!aer +ill

!a the '* o$ P75, since this a"ount is greater than the nor"al inco"e ta% o$

P5, in 1998&

n 1999, the $ir" +ill also !a the '* since the '* o$ P1,& is

greater than the nor"al inco"e ta% P,&

n the ear 2, +here the nor"al or regular cor!orate inco"e ta% o$

P1,& is greater than the '* o$ P,&, the $ir" +ill !a the nor"al

inco"e ta%&

*he cor!oration can credit the e%cess o$ its '* o#er the nor"al inco"e ta%

$or 1998(i&e& P25,) and 1999 (i&e& P4,), or a total a"ount o$ P5, $ro" the

a"ount o$ nor"al inco"e ta% +hich is !aable b the $ir" in the ear 2& *hus, the

a"ount o$ inco"e ta% !aable b the $ir" is P/5, a$ter deducting P5, $ro"

P1,&

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*he e%cess '* is creditable against the nor"al inco"e ta% +ithin the ne%t

three (/) ears $ro" !a"ent thereo$& *hus, in the illustration abo#e +here the

cor!oration had an e%cess '* o$ P25, o#er its nor"al inco"e ta% in 1998, the

and onl +hen the nor"al inco"e ta% is greater than the '*& *he e%cess '*

cannot be clai"ed as a credit against the '* itsel$ or against an other losses&

0<1 Relie )!m t'e inimum C!)p!)(te In!me T(/ un&e) Ce)t(in

C!n&iti!n+ *he Secretar o$ .inance, u!on reco""endation o$ the o""issioner,

"a sus!end i"!osition o$ the '* u!on sub"ission o$ !roo$ b the a!!licant

cor!oration, dul #eri$ied b the o""issioner<s authori-ed re!resentati#e, that the

cor!oration sustained substantial losses on account o$ a !rolonged labor dis!ute or

because o$ 6$orce "a=eure or because o$ legiti"ate business re#erses&

0"1 2einiti!n ! Te)m+

(a) %G)!++ In!me, &eine& .or !ur!oses o$ the "ini"u"

cor!orate inco"e ta% !rescribed under this Subsection, the ter" %g)!++ in!me, "eansgross sales less sales returns, discounts and allo+ances and cost o$ good sold& 6G)!++

+(le+, shall include onl sales contributor to inco"e ta%able under Sec& 27(A) o$ the

ode& %C!+t ! g!!&+ +!l&, shall include all business e%!enses directl incurred to

!roduce the "erchandise to bring the" to their !resent location and use&

Passi#e inco"es +hich ha#e been sub=ect to a $inal ta% at source shall not $or"

!art o$ gross inco"e $or !ur!oses o$ the "ini"u" cor!orate inco"e ta%&

.or a trading or "erchandising concern, 6!+t ! g!!&+ +!l&, "eans the in#oice

cost o$ goods sold, !lus i"!ort duties, $reight in trans!orting the goods to the !lace

+here the goods are actuall sold, including insurance +hile the goods are in transit&

.or a "anu$acturing concern, %!+t ! g!!&+ m(nu(tu)e& (n& +!l&, "eans

all costs o$ !roduction o$ $inished goods, such as ra+ "aterials used, direct labor and

"anu$acturing o#erhead, $reight cost, insurance !re"iu"s and other costs incurred to

bring the ra+ "aterials to the $actor or +arehouse&

n the case o$ sales o$ ser#ices, the ter" %g)!++ in!me, "eans gross recei!t

less sales returns, allo+ances, discounts and cost o$ ser#ices& %C!+t ! +e)*ie+, "eans

all directs costs and e%!enses necessaril incurred to !ro#ide the ser#ices re>uired b

the custo"ers and clients including (a) salaries and e"!loee bene$its o$ !ersonnel,consultants and s!ecialists directl rendering the ser#ice, and (b) cost o$ $acilities

directl utili-ed in !ro#iding the ser#ice such as de!reciation or rental o$ e>ui!"ent

used and cost o$ su!!lies: Pro#ided, ho+e#er, that %!+t ! +e)*ie+, shall include

interest e%!ense e%ce!t in the case o$ ban?s and other $inancial institutions& *he ter"

%g)!++ )eeipt+, as used herein "eans a"ounts actuall or constructi#el recei#ed

during the ta%able ear Pro#ided, that $or ta%!aers e"!loing the accrual basis o$

accounting, the ter" %g)!++ )eeipt+, shall "ean a"ount earned as gross inco"e&

(b) *he ter" %+ub+t(nti(l l!++e+ )!m ( p)!l!nge& l(b!)

&i+pute, "eans losses arising $ro" a stri?e staged b the e"!loees +hich lasted $or

"ore than si% () "onths +ithin a ta%able !eriod and +hich has caused the te"!orarshutdo+n o$ business o!erations&

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(c) *he ter" %!)e m(=eu)e, "eans a cause due to an irresistible $orce as

b 6Act o$ @od li?e lightning, earth>ua?e, stor", $lood and the li?e& *his ter" shall

also include ar"ed con$licts li?e +ar or insurgenc&

(d) *he ter" %legitim(te bu+ine++ )e*e)+e+, shall include substantial lossessustained due to $ire, robber, the$t or e"be--le"ent, or $or other econo"ic reason as

deter"ined b the Secretar o$ .inance&

0>1 Speii Rule+ !) &ete)mining t'e 5e)i!& ?'en ( C!)p!)(ti!n Be!me+

Sub=et t! t'e CIT -

.or !ur!oses o$ the '*, the ta%able ear in +hich business o!erations

co""enced shall be the ear in +hich the do"estic cor!oration registered +ith the

3ureau o$ nternal Re#enue (3R)&

.ir"s +hich +ere registered +ith 3R in 1994 and earlier ears shall be co#ered b the '* beginning 0anuar 1, 1998&

.ir"s +hich +ere registered +ith 3R in an "onths in 1998 shall be co#ered

b the '* three calendar ears therea$ter (i&e& a$ter the la!se o$ three calendar ears

$ro" 1998)& .or e%a"!le, a $ir" +hich +as registered in 'a 1998 shall be co#ered

b the '* in 22&

*he rec?oning !oint $or $ir"s using the $iscal ear shall also 1998& .or e%a"!le,

a $ir" +hich registered +ith the 3R on 0ul 1, 1998 shall be sub=ect to an '* on his

gross inco"e earned $or the entire $iscal ear ending in the ear 22&

T)(n+it!) Rule !) &ete)mining t'e CIT !) 7998 !n i)m+ 'i' ()e

t(/(ble !n ( i+(l e() b(+i+. .or $ir"s using the $iscal ear basis and +hose $irst

ta%able !eriod under the "ini"u" cor!orate inco"e ta% co#ers "onth"onths in 1997

shall be co"!uted using an a!!ortion"ent $or"ula& *he ratio to be a!!lied is the

nu"ber o$ "onths in 1998 to t+el#e (12) "onths (i&e& the total nu"ber o$ "onths in a

$iscal ear)&

Illu+t)(ti!n. .ir" A registered +ith the 3R in 0ul 1994& t beco"es sub=ect to

the '* in 1998& Since it is using a $iscal ear as basis o$ its ta%able !eriod, a !art o$

the ta% base $or the '* +as earned b the cor!oration in 1997 !rior to the i"!ositiono$ the '* (i&e& gross inco"e $ro" 0ul to Bece"ber 1997)& *he '* +hich is due

$ro" the $ir" is co"!uted using the gross inco"e o$ the $or" $or 1998 (0anuar to

0une) +hich is co"!uted on an a!!ortion"ent basis as $ollo+s:

@ross inco"e o$ the $ir" $or the entire $iscal ear

'ulti!l: &5 (i&e& ratio o$ "onths in 1998 to 12 "onths co#ering .C 9798)

E>uals: *a% base o$ the '* $or 1998

'ulti!l 2 (i&e& '* ta% rate)

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E>uals: '* $or 1998&

0@1 (nne) ! iling (n& p(ment *he "ini"u" cor!orate inco"e ta%

('*) shall be !aid on a ta%able ear basis& t shall be co#ered b a ta% return

designed $or the !ur!ose +hich +ill be sub"itted together +ith the cor!oration<s annual

$inal ad=ust"ent inco"e ta% return& Bo"estic cor!orations shall not be re>uired to !athe "ini"u" cor!orate inco"e ta% on a >uarterl basis, the !ro#isions o$ Sec& 75 o$ the

ode not+ithstanding&

041 A!unting t)e(tment ! t'e e/e++ minimum !)p!)(te in!me t(/

p(i& An a"ount !aid as e%cess "ini"u" cor!orate inco"e ta% shall be recorded in

the cor!oration<s boo?s as an asset under account title 6de$erred charges"ini"u"

cor!orate inco"e ta%& *his asset account shall be carried $or+ard and "a be credited

against the succeeding the ta%able ears in +hich the sa"e has been !aid& An a"ount

o$ the e%cess "ini"u" cor!orate inco"e ta% +hich has not or cannot be so credited

against the nor"al inco"e ta%es due $or the /ear regle"entar !eriod shall lose its

creditabilit& Such a"ount shall be re"o#ed $ro" 6de$erred charges"ini"u"

cor!orate inco"e ta% account b a debit entr to 6retained earnings account and acredit entr to 6de$erred charges"ini"u" cor!orate inco"e ta% account since this ta%

is not allo+able as deduction $ro" gross inco"e it being an inco"e ta%&

Illu+t)(ti!n !n t'e (!unting t)e(tment ! t'e e/e++ minimum !)p!)(te

in!me t(/ p(i& Assu"e that A3 or!oration co""enced business o!erations in

calendar ear 1991& t is alread "ore than $our (4) ears in o!eration as o$ calendar

ear 1998 hence, sub=ect to the "ini"u" cor!orate inco"e ta% beginning ta%able ear

1998& Assu"e, $urther, that its inco"e ta%es during the ears $ro" 1998 to ear 25

are as $ollo+s:

E6CESS O3

CIT OVER

NORAL INCOE NORAL

;EAR TA6 CIT INCOE TA6

1998 P 25, P1, P75,

1999 1/, 15, 2,

2 2, 19,

21 /, /,

22 1, 5, 4,

2/ 15, , 45,

24 8, 4, /2,25 1, 5, 49,

n this case, A3 or!oration shall not be allo+ed to carr $or+ard and credit

the 1998 e%cess '* against the inco"e ta% liabilit $or 1999 since the 1999 '* is

greater than the nor"al inco"e ta% $or said ear& Do+e#er, $or ear 2, +here the

nor"al inco"e ta% is greater than the co"!uted '*, A3 or!oration shall be

allo+ed to a!!l the e%cess '* o$ 1998 and 1999 a"ounting to P95, (P75,

!lus P2,) against the nor"al inco"e ta% liabilit o$ P2,&

*he e%cess '* $or the ear 21 (P/,) "a onl be credited against

nor"al inco"e ta% liabilities $or the succeeding three ears $ro" 22 to 24&

Do+e#er, since the nor"al inco"e ta% liabilities $or these succeeding ears are lessthan the res!ecti#e '*s, the e%cess '* $or the ear 21 o$ P/, loses its

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under these Regulations& Accordingl, the "ini"u" cor!orate inco"e ta% shall not be

i"!osed u!on an o$ the $ollo+ing:

(a) Bo"estic cor!orations o!erating as !ro!rietar educational institutions

sub=ect to ta% at ten !ercent (1) on their ta%able inco"e or

(b) Bo"estic cor!orations engaged in hos!ital o!erations +hich are

non!ro$it sub=ect to ta% at ten !ercent (1) on their ta%able inco"e and

(c) Bo"estic cor!orations engaged in business as de!ositor ban?s under

the e%!anded $oreign currenc de!osit sste", other+ise ?no+n as .oreign urrenc

Be!osit Fnits (.BFs), on their inco"e $ro" $oreign currenc transactions +ith local

co""ercial ban?s, including branches o$ $oreign ban?s, authori-ed b the 3ang?o

Sentral ng Pili!inas (3SP) to transact business +ith $oreign currenc de!osit sste"

units and other de!ositor ban?s under the $oreign currenc de!osit sste", including

their interest inco"e $ro" $oreign currenc loans granted to residents o$ the Phili!!ines

under the e%!anded $oreign currenc de!osit sste", sub=ect to $inal inco"e ta% at ten !ercent (1) o$ such inco"e&

(d) .ir"s that are ta%ed under a s!ecial inco"e ta% regi"e such as those in

accordance +ith RA 791 and 7227 (the PEGA la+ and the 3ases on#ersion

Be#elo!"ent Act, res!ecti#el)&

Se. #$#80A10#1 INIU COR5ORATE INCOE TA6 0CIT1 ON

RESI2ENT 3OREIGN COR5ORATION A "ini"u" cor!orate inco"e ta% o$ t+o

!ercent (2) o$ the gross inco"e $ro" sources +ithin the Phili!!ines is hereb

i"!osed u!on an resident $oreign cor!oration, beginning on the $ourth (4 th) ta%able

ear (+hether $ollo+ing the ta%able ear in +hich the cor!oration co""enced its

business o!erations, +hene#er the a"ount o$ the "ini"u" cor!orate inco"e ta% is

greater than the nor"al inco"e ta% due $or such ear&

n co"!uting $or the "ini"u" cor!orate inco"e ta% due $ro" a resident $oreign

cor!oration, the rules !rescribed under Sec& 2&27(E) o$ these Regulations shall a!!l:

Pro#ided, ho+e#er, that onl the gross inco"e $ro" sources +ithin the Phili!!ines shall

be considered $or such !ur!oses&

E/epti!n+ *he "ini"u" cor!orate inco"e ta% shall onl a!!l to resident

$oreign cor!orations +hich are sub=ect to nor"al inco"e ta%& Accordingl, the"ini"u" cor!orate inco"e ta% shall not a!!l to the $ollo+ing resident $oreign

cor!orations:

(a) Resident $oreign cor!orations engaged in business as 6international

carrier sub=ect to ta% at t+o and onehal$ !ercent (2 H) o$ their 6@ross Phili!!ine

3illings

(b) Resident $oreign cor!orations engaged in business as $$shore 3an?ing

Fnits (3Fs) on their inco"e $ro" $oreign currenc transactions +ith local

co""ercial ban?s, including branches o$ $oreign ban?, authori-ed b the 3ang?o

Sentral ng Pili!inas (3SP) to transact business +ith $$shore 3an?ing Fnits (3F<s),

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including interest inco"e $ro" $oreign currenc loans granted to residents o$ the

Phili!!ines, sub=ect to a $inal inco"e ta% at ten !ercent (1) o$ such inco"e and

(c) Resident $oreign cor!orations engaged in business as regional o!erating

head>uarters sub=ect to ta% at ten !ercent (1) o$ their ta%able inco"e&

(d) .ir"s that are ta%ed under a s!ecial inco"e ta% regi"e such as those in

accordance +ith RA 791 and 7227 (the PEGA la+ and the 3ases on#ersion

Be#elo!"ent Act, res!ecti#el)&

E33ECTIVEL; CLAUSE. *hese Regulations shall a!!l to do"estic and

resident $oreign cor!orations on their a$ore"entioned ta%able inco"e deri#ed beginning

0anuar 1, 1998 !ursuant to the !ertinent !ro#isions o$ RA 8424, !ro#ided, ho+e#er,

that cor!orations using the $iscal ear accounting !eriod and +hich are sub=ect to '*

on inco"e deri#ed !ertaining to an "onth or "onths o$ the ear 1998 shall not be

i"!osed +ith !enalties $or late !a"ent o$ the ta%&

Edgardo 3& Es!iritu

Secretar o$ .inance

Reco""ending A!!ro#al:

3eetho#en ;& Rualo

o""issioner o$ nternal Re#enue

(

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