Q: Who are required to file a Corporate Tax Return?
A: GR: Every corporation subject to tax under the NIRC shall file a corporate tax return.
XPN: Foreign corporations not engaged in trade or business in the Philippines (Sec. 52, NIRC)
Q: What are the requirements for corporations in filing their returns?
A: Every corporation subject to the tax under the code, except foreign corporation not engaged in trade or business, shall render, induplicate, a true and accurate quarterly income tax return and final or adjustment return.
The returns shall be filed by the president, vice-president or other principal officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer. (Sec. 52, NIRC) Q: What shall be the accounting period that a corporation may employ as its basis for filing its annual income tax return?
A: A corporation may employ either a calendar year or fiscal year, provided, that the corporation may not change the accounting period employed without prior approval from the Commissioner in accordance with the provisions os Section 47 of the NIRC. (Sec. 52 [B])
Q: What is the rule on the declaration of quarterly corporate income tax?
A: Every corporation shall file in duplicate a quarterly summary declaration of its gross income and deductions on a cumulative basis for the preceding quarter or quarters upon which the income tax shall be levied, collected and paid. The tax so computed shall be decreased by the amount of tax previously paid or assessed during the preceding quarters and shall be paid not later than 60 days from the close of each of the 3 quarters of the taxable year, whether calendar or fiscal year. (Sec. 75, NIRC)
Q: What is the Final Adjustment Return?
A: It is a return that covers the total taxable income of a corporation for the preceding calendar or fiscal year. The quarterly tax payments are in the nature of advances or portions of the annual income tax due. They have to be adjusted at the end of the calendar or fiscal year through the Final Adjustment return.
Q: What is the rule as regards the declaration by a corporation of its income adopting a final adjustment return?
A: Every corporation liable to tax under Section 27 shall file a final adjustment return covering the taxable income for the preceding calendar or fiscal year.
Q: What are the options of the corporation if the sum of the quarterly tax payments made during the taxable year is not equal to the total tax due on the entire taxable year?
A:
1. Pay the balance of tax still due; or 2. Carry-over the excess credit;
3. Be credited or refunded with the excess amount paid, as the case may be. (Sec. 76, NIRC)
Note: In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes paid, the excess amount shown on its final adjustment return may be carried over and credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. (Sec. 76, NIRC)
Q: Is the option of carry- over exclusive?
A: Yes. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable quarters has been made, such option shall be considered irrevocable for the taxable period and no application for cash refund or issuance of tax credit certificate shall be allowed. (Sec. 76, NIRC)
Q: What is the importance of the Final Adjustment Return to the refund of erroneously paid taxes?
A: The two year period shall be computed from the time of filing the adjustment return or annual income tax return and final payment of income tax. (Atlas Consolidated v. CIR, June 8, 2007)
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Q: When does a corporation file the income tax return?
A: The corporate quarterly declaration shall be filed within sixty days (60) following the close of each of the first three quarters of the taxable year. (Sec. 77[B], NIRC)
The final adjustment return shall be filed on or before the 15th day of April, or on or before the 15th day of the fourth month following the close of the fiscal year, as the case may be. (Sec. 77[B], NIRC)
For return on capital gains realized from sale of shares of stocks not traded in the local stock exchange, the corporation shall file a return 30 days after each transaction and a final consolidated return of all transactions during the taxable year on or before the 15th day of the 4th month following the close of the taxable year. (Sec. 52[D], NIRC) Q: Where does a corporation file the tax returns?
A: The quarterly income tax return and final adjustment return shall be filed with the authorized agent banks or Revenue District Officer or Collection agent or duly authorized treasurer of the city or municipality having jurisdiction over the location of the principal office of the corporation filing the return or place where its main books of accounts and other data from which the return is prepared are kept. (Sec. 77[A], NIRC)
Q: Is an extension of time allowed in the filing of return?
A: Yes. The Commissioner, may, in meritorious cases, grant a reasonable extension of time for filing returns of income (or final and adjustment returns in case of corporations), subject to the provisions of Section 56 of the NIRC. (Sec.53, NIRC)
Q: What is required from a Corporation Contemplating Dissolution or Reorganization as regards the filing of return?
A: Every corporation shall, within 30 days after the adoption by the corporation of a resolution or plan for its dissolution; or for the liquidation of the whole or any part of its capital stock, including a corporation which has been notified of possible involuntary dissolution by the SEC; or for its reorganization, shall render a correct return to the Commissioner, verified under oath, setting forth the terms of such resolution or plan and such other information as the Secretary of Finance, upon recommendation of the Commissioner, shall by rules and regulations, prescribe.
(Sec. 52[C], NIRC)
Note: The dissolving or reorganizing corporation, shall prior to the issuance by the SEC of the certificate of dissolution or Reorganization, secure a certificate of tax clearance from the BIR which shall be submitted to the SEC. (Sec. 52[C], NIRC)
Q: What is the rule on returns of receivers, trustees in bankruptcy or assignees?
A: In cases wherein receivers, trustees or assignees are operating the property or business of a corporation, they
shall make returns of net income as and for such corporation, in the same manner and form as such organization is hereinbefore required to make returns. Any tax due on the income as returned by receivers, trustees or assignees shall be assessed and collected in the same manner as if assessed directly against the organizations of whose businesses or properties they have custody or control. (Sec. 54, NIRC)
Q: What is the rule on the returns of General Professional Partnership?
A: Every general professional partnership shall file, in duplicate, a return of its income, except income exempt under Section 32 B, setting forth the items of gross income and of deductions allowed by this title, and the names, TIN, addresses and shares of each of the partners. (Sec. 55, NIRC)
Note: A GPP is not subject to income tax, but it is required to file a return of its income for the purpose of furnishing information as to the share in the gains or profits which each partner shall include in his individual return. The individual partner is taxable on his distributive share of the net income of the partnership, whether distributed or not, and are required to include such distributive shares in their individual returns (Sec. 22, Regs. No. 2 as amended).
Q: What are the rules governing Fiduciary Returns?
A: Guardians, trustees, executors, administrators, receivers, conservators and all persons or corporations, acting in any fiduciary capacity, shall render, in duplicate, a return of the income of the person, trust or estate for whom or which they act, in case such person, trust, estate has a gross income of 20,000 pesos or over during the taxable year.
Such fiduciary or person filing the return for him or it, shall take oath that he has sufficient knowledge of the affairs of such person, trust or estate to enable him to make such return and that the same is, to the best of his knowledge and belief, true and correct, and subject to the provisions applicable to individual taxpayers under Title II of the NIRC.
Note: The return made by or for one or two or more joint fiduciaries filed in the province where such fiduciaries reside, shall be a sufficient compliance with the requirements of Sec. 65, NIRC.
Furthermore, trustees, executors, administrators and other fiduciaries are indemnified against the claims or demands of every beneficiary for all payments of taxes which they shall be required to pay, and they shall have credit for the amount of such payments against the beneficiary or principal in any accounting which they make as such trustees or other fiduciaries. (Sec. 66, NIRC) In the Philippines any share, obligation, bond or right by way of gift inter vivos or mortis causa, legacy or inheritance, unless a certification from the Commissioner that the taxes fixed in this Title and due thereon have been paid is shown. (Sec. 97, NIRC)
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U N I V E R S I T Y O F S A N T O T O M A SFA C U L T Y O F CI V I L LA W EXEMPTIONS FROM TAX ON CORPORATIONS
Q: What corporations are exempted from income tax under the NIRC?
A:
1. Labor, agricultural or horticultural organization not organized principally for profit;
a. Provincial fairs and like associations of a quasi-public character designed to encourage development of better agricultural and horticultural products through a system of awards, prizes and premiums, and whose income derived from gate receipts, entry fees, donations, etc. is used exclusively to meet necessary expenses of upkeep and operation are thus taxable.
b. On the other hand, the holding of periodical race meets by associations, the profits from which inure to the benefit of their stockholder are not tax exempt.
Similarly, corporations engaged in growing agricultural or horticultural products or raising livestock or similar products for profits are subject to tax. (Sec. 25, R.R.
No.2)
2. Mutual savings banks and cooperative banks Requisites for exemption:
a. No capital represented by shares;
b. Earnings less only the expenses of operating are distributable wholly among the depositors;
c. Operated for mutual purposes and without profit.
Note: Exemption applies to both foreign and domestic banks. If the deposits are made compulsory under contract between the bank and the depositors and is operated for speculation rather for savings, the bank is not qualified as a mutual savings bank.
3. Fraternal Beneficiary Society, Order or Association Requisites for exemption:
a. It must be operated under lodge system or for exclusive benefit of the members of society, with parent and local organizations which are active;
b. There must be an established system of payment to its members or their dependents of life, sick, accident or other benefits,
c. No part of the net income inures to the benefit of the stockholders/members.
4. Cemetery Companies Requisites for exemption:
a. Owned and operated exclusively for the benefit of its owners
b. Not operated for profit
5. Religious, Charitable, Scientific, Athletic or Cultural Corporations
Requisites for exemption:
a. Organized and operated for one or more specified purposes
b. No part of the net income inures to the benefit of the private stockholders or individuals
6. Business, Chamber of Commerce, or Board of Trade
Requisites for exemption:
a. Association of persons having some common business interest
b. Limited its activities to work for such common interests c. Not engaged in a regular business for profit
d. No part of the net income inures to the benefit of any private stockholder or individual
7. Civic league
Requisites for exemption:
a. Not organized for profit but operated exclusively for purposes beneficial to the community as a whole. In general, organizations engaged in promoting the welfare of mankind.
b. Sworn affidavit with the BIR showing the following:
i. Character of the league or organization ii. Purpose for which it was organized iii. Actual activities
iv. Sources of income and disposition thereof, and v. All facts relating to the operation of the
organization which affects it right to exemption.
vi. The copy of articles of incorporation, by laws and financial statements should be attached to the sworn affidavit
8. Non-stock, Non-Profit Educational Institutions;
9. Government Educational Institution;
10. Mutual Fire Insurance Companies and Like Organizations
Requisites for exemption:
a. Income is derived solely from assessments, dues, fees collected from members
b. Fees collected from members are for the sole purpose of meeting its expenses
11. Farmers, Fruit Growers or Like Association Requisites for exemption:
a. Formed and organized as sales agent for the purpose of marketing the product of its members
b. No net income to the members
c. Proceeds of the sale shall be turned over to them less necessary selling expenses on the basis of the quantity of goods produced by them
Note: The income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under the NIRC.
Q: What are their common requisites for exemption?
A: PrInSE
1. Not organized and operated principally for Profit;
2. No part of the net income Inures to the benefit of any member or individual;
3. No capital is represented by Shares of stock; and 4. Educational or instructive in character.
Q: Explain Sec. 30 of the NIRC which provides that
“Notwithstanding the provision in the preceding paragraphs, the income of whatever kind and character of
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the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code.”
A: GR: Those corporations mentioned under Sec. 30 of the NIRC are tax-exempt.
XPN: The moment they invest their income or receive income from their properties, real or personal conducted for profit the income derived from those properties is subject to tax.
i.e.: If religious, charitable or social welfare corporations derive income from their properties or any of their activities conducted for profit, income tax shall be imposed on said items of income irrespective of their disposition. (CIR v, YMCA, GR 124043, Oct. 14, 1998) XPN to the XPN: In case of non-stock, non-profit educational institution as long as the income is actually, directly and exclusively used for educational purpose, such income is exempt as provided for in Art. XIV, Sec. 3 of the 1987 Constitution.
Q: What other corporations are exempted from income tax under special laws?
A:
1. Cooperatives under R.A. 6938, the Cooperative Code of the Philippines
2. Foundations created for scientific purposes under Sec.
24 of R.A. 2067, an Act to Integrate, Coordinate, and Intensify Scientific and Technological Research and Development and to Foster Invention
TAXATION OF PARTNERSHIPS