|Items under RR 5-2021
|“Total Asset” in case of 20% tax rate
- Total Assets is net of:
- Depreciation and
- Allowance for bad debts
- Excluded: Land where the business entity’s office, plant and equipment are situated; amount to be excluded: Cost/fair market value, depending on what is reflected in the financial statements
- Land held primarily for sale to customers or land held for investment purposes;
- Land being used as banana plantation
- Land being leased
- Portion is used in business; rest is on lease = prorate the amount of land based on the area.
|Private Educational Institutions distributing dividends to stockholders
- Rate is either 25% or 20%
- 1% is applicable to non-profit schools*
|Section 5: Conditions for exemption from income tax of foreign-sourced dividends received by domestic corporation:
- If the Certification shall state non-utilization of the dividends received, the unutilized dividends shall be declared as taxable income, and the corresponding tax due shall be subject to interest, surcharges and penalties
|Dividends received by a domestic corporation from a resident foreign corporation (RFC)
- Tax treatment depends on the source of income of the RFC
- Treated as derived from sources within PH (Exempt from income taxes)
- Less than fifty percent (50%) of the gross income of the foreign corporation for the three-year period ending with the close of its taxable year preceding the declaration of such dividends (or for such part of the period as the corporation has been in existence) was derived from sources within the Philippines – (Considered sourced without and must comply with Section 5 to avail of income tax exemption)
|4th Year of Business Operation for purposes of MCIT
- Means fourth taxable year immediately following the year in which such corporation commenced its business operation
- Thus, if the corporation commenced its business operations in 2017, MCIT may be imposed beginning the year 2021, if it exceeds the regular income tax. The taxable year in which business operations commenced shall be the year in which the corporation is registered with the BIR
|Additional allowable deduction of 1/2 of actual training expenses
- No distinction as to which type of industry can claim the deduction, subject to requirements:
- The labor training expenses shall not be more than ten percent (10%) of the Direct Labor Wage;
- The labor training expenses are incurred for skills development of enterprise-based trainees;
- The enterprise-based trainees are enrolled in public senior high school, public higher education institutions, or public technical and vocational institutions for the taxable year in which the labor training expenses are claimed; The training is covered by an apprenticeship agreement under Presidential Decree (PD) No. 442 or the Labor Code of the Philippines; and:
- The Company claiming the additional deduction is granted an authority to offer training programs for skills development as certified by the Department of Education (DepED), Technical Education and Skills Development Authority (TESDA) or Commission on Higher Education (CHED), as applicable.
- Training expenses which pertain to training/s of employees under supervisory, managerial, administrative and support functions should not be included in ‘the computation
- The resulting amount then shall be subject to a cap of not more than ten percent (10%) of the Direct Labor Wage. The “direct labor” is that portion of salaries and wages which can be identified with and charged directly to a product or to a project or service on a consistent basis.
|*we do not agree.