TAX - Corporate income tax computations and gross income problems PDF

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1 Persons and service establishments inside an ECOZONE are subject to the regular tax TRUE A minimum corporate income tax (MCIT) of 2% gross income as of the end of the taxable year is imposed upon any domestic corporation beginning the 4th taxable year immediately following the taxable year in whic...

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1 Persons and service establishments inside an ECOZONE are subject to the regular tax TRUE 2. A minimum corporate income tax (MCIT) of 2% gross income as of the end of the taxable year is imposed upon any domestic corporation beginning the 4th taxable year immediately following the taxable year in which such corporation commenced its business operations. TRUE 3. Exempt corporations are subject to MCIT with respect to their income subject to regular corporate income tax. TRUE 4. For accrual basis taxpayers, the cost of services shall include unpaid expenses directly incurred in the provision of services. TRUE 5. MCIT excess can be deducted only against the excess of RCIT over the MCIT in any of the succeeding three years. TRUE 6. A non-resident owner or lessor of aircraft, machineries, and other equipment is subject to tax at 4.5% of gross rental. FALSE 7. MCIT is applied on a quarterly, but not on an annual basis. FALSE 8. To be exempt, all of the income or assets of a non-profit corporation or association must be devoted to its purposes, and no part of its net income or asset accrues to benefit any member or a specific person. TRUE 9. The cost of services of banks includes interest expense. TRUE 10. A partnership organized under Philippine law is a domestic corporation for purposes of taxation. TRUE 11. A non-profit hospital is an exempt corporation taxable only on income from unrelated activities. TRUE 12. The gross income tax cannot be applied if the gross profit rate falls below 45%. TRUE 13. Domestic corporations are subject to either gross income tax or regular income tax. TRUE 14. Exempt corporations and special corporations are mandated to use the itemized deductions. TRUE 15. Local water districts are exempt from income tax. TRUE 16. Whenever MCIT is payable, there is a Net Operating Loss Carry-Over. FALSE 17. When the income from related activities constitutes at least 50% of total income, private schools are subject to tax at 10% of taxable income form related and unrelated activities. FALSE 18. An unused excess MCIT will expire on the fourth year of operation. FALSE 19. Special domestic corporations and special resident foreign corporations are exempt from MCIT. TRUE 20. The expenses of exempt corporations from exempt operations are deductible to its income from unrelated operations. FALSE 21. The excess MCIT of previous years can be deducted against RCIT on any quarter of the year if RCIT is greater than MCIT. FALSE

22. Both the regular corporate income tax and gross income tax are subject to the minimum corporate income tax. FALSE 23. Exempt corporations who filed late are not subject to penalties because they have no tax due. FALSE 24. The MCIT applies only when income is zero or when there is an operating loss. TRUE 25. MCIT can be suspended for a taxpayer suffering from prolonged labor dispute, force majeure, or legitimate business reserves. TRUE 26. A corporation that is owned by a publicly listed corporation is a public corporation. TRUE 27. MCIT is computed at 2% of gross income from operations. FALSE 28. The gross income tax applies only to corporations subject to regular income tax. FALSE 29. Exempt corporations are never subjected to corporate income tax. FALSE 30. Partnership, no matter how created or organized are taxable as corporations for income tax purposes. TRUE 31. The gross Philippine Billings of international carrier includes receipts from outgoing voyage or flights which must be billed in the Philippines. FALSE 32. Non-resident owners of vessel are treated as special corporations only from charters or leases of the vessels to Filipino citizens or corporations approved by the Maritime Industry Authority. TRUE 34. When the income from unrelated activities exceeds 50% of total income, only the income from unrelated activities of private schools and non-profit hospitals is subject to 30% tax. FALSE 35. Special corporations can claim optional standard deduction. False 36. Corporations includes joint ventures, associations, and partnerships. TRUE 37. Minimum corporate income tax is not applicable to special corporations. TRUE 38. The gross receipts from transient passengers are excluded from Gross Philippine Billings if they depart from the Philippines through the same carrier within 48 hours from their arrival. TRUE 39. The dominance test is applied to non-profit schools and private hospitals. FALSE 40. Incomes of non-resident individuals and non-resident corporations from transactions with OBU are tax exempt. False 41. Corporations exempt from income are not subject to income tax on incomes received which are incidental or necessarily connected with the purposes for which they were organized and operating. TRUE 42. Government-owned and controlled corporations are subject to corporate income tax. TRUE

43. The MCIT gross income includes only those arising from operation while the OSD gross income covers all items of gross income subject to regular income tax. FALSE 44. Refundable tickets and tickets of non-revenue passengers are excluded in the Gross Philippine Billings. TRUE 45. The MCIT rules are applied on the cumulative balances of the RCIT and MCIT during the quarters of the taxable year. TRUE 46. The computation and the payment of MCIT shall likewise apply at the time of filing the quarterly corporate income tax. TRUE 47. A corporation which is not domestic may be a resident (engaged in business in the Philippines) or non-resident corporation (not engaged in business in the Philippines). TRUE 48. A regional area headquarters is exempt form tax because it does not derive income. TRUE 49. The exemption of non-stock and non-profit corporation or associations shall commence when they secure their exemption ruling. TRUE 50. The term “domestic”, when applied to a corporation, means created or organized in the Philippines or under the laws of a foreign country as long as it maintains a Philippine branch. FALSE

51. The gross receipts of services providers include advances from clients or customers TRUE 52. When there are several excess MCIT in prior years, the crediting of MCIT is made on a first-in-first-out basis TRUE 54.MCIT shall be imposed whenever such corporation has zero or negative taxable income or when the amount of MCIT is greater than normal income tax due from such corporation TRUE 55. The certificate of exemption ruling is valid for one year and renewable every year thereafter FALSE 56. The 48-hour rule does not apply when another carrier continued the fight or voyage of transient passengers TRUE 57. Non-resident owners of vessels are treated as special corporations only from charters or leases of the vessels to Filipino citizen or corporations approved by the Maritime Industry Authority TRUE 58. Domestic corporations under the gross income tax, including REIT’s, are exempt from MCIT TRUE 59. The 48-hour rule may be extended by force majeure. TRUE 60. BOI-register enterprises enjoy income tax holiday for 20 years FALSE

61. Private educational corporations are subject to income tax based on the net income from sources within the Philippines at the tax rate of 10% FALSE 62. Cooperative that transacts business with non-members are taxable on income allocated to interest on members’ capital when their accumulated reserve exceeds P10,000,000 TRUE A Farmer's or fruit growers’ association is exempt from income tax TRUE

52. The fact that any corporation is a mere holding company or investment company shall be prima facie evidence of a purpose to avoid the tax upon its shareholders or members TRUE

53. A domestic carrier is subject to 30% tax on Philippines taxable income FALSE

54. A non-resident cinematographic film owner, lessor or distributor is subject to 25% tax on taxable income FALSE

55. Exempt corporations filing BIR form 1702-EX will not pay tax as a rule. FALSE

56. The income of OBU from foreign sources is exempt from income tax TRUE

58. The MCIT gross income include only those who arising from operation while the OSD gross income covers all items of gross income subject to regular income tax FALSE

59. The unrelated income of non-profit corporations is exempt from income tax if the same is diverted to its non-profit purpose TRUE

60. Exempt corporations and special corporations are are mandated to use the itemized deductions

TRUE

61. Resident foreign corporations are subject either to gross income tax or regular income tax TRUE

63. Partnership, no matter how created or organized are taxable.as corporations for income tax purposes TRUE

64. Resident foreign corporations are subject to income tax based on net income from sources within the Philippines TRUE

65. A non-resident owner or lessor of aircraft, machineries and other equipment is subject to tax at 4.5% of gross rental FALSE

66. FCDU and OBU are divisions of foreign bank FALSE 69. A non-stock, non-profit institution must be organized for religious, charitable, scientific, athletic, cultural, or for the rehabilitation of veterans TRUE A non-resident foreign corporations are subject to minimum corporate income tax FALSE PEZA-registered enterprises are exempt from tax FALSE International carriers are subject to a tax of 2.5% on taxable income FALSE Corporations subject to a rate of below 30% are referred to as special corporation TRUE A non-stock, non-profit entity subject to tax on income from unrelated activities TRUE Exempt corporations are subject to income tax on their income from unrelated activities TRUE Corporations with income subject to special tax are mandatorily required to use itemized deductions

TRUE MCIT does not apply to foreign corporations FALSE A non-resident owner or lessor of vessel is subject to tax at 7.5% of the gross rental FALSE Domestic film owners, lessors, or distributor shall be subject to 25% tax on gross income from all sources within FALSE Corporations exempt from income tax are subject to income tax on incomes of whatever kind and character from any of their properties(real or personal) or from any other activity conducted for profit, regardless of the disposition of such income TRUE Cooperatives, regardless of their classification, are taxable on income from their unrelated activities TRUE a government school is exempt from income tax TRUE The FCDUs, OBUs, and EFCUs are never subject to regular income tax FALSE All cooperatives, regardless of classification, are subject to income tax on their income from unrelated activities TRUE Expenses of an exempt corporation not directly traceable to either related or unrelated operations are allocated based on the ratio of gross income TRUE A regional operating headquarter of a multinational company is subject to 10% on world income False Exempt corporations are not required to file income tax returns because they do not pay tax False International air carrier may be exempt from income tax

TRUE Resident foreign corporations are subject to either gross income tax or regular corporate income tax. False Regional headquarters are subject to 10% income tax on its net income derived from the Philippines FALSE For purposes of MCIT, cost of services includes all direct costs expenses incurred in acquiring or manufacturing goods

FALSE MCIT does not apply for foreign corporations FALSE The FCDUs, OBUs and EFCUs are never subject to regular income tax FALSE Immediacy test is a test used in determining the reasonable needs of business to justify the accumulation of earnings which will exempt the corporation from paying improperly accumulated earning tax TRUE Corporations exempt from income tax are subject to income tax on incomes of whatever kind and character from any of their properties (real or personal) or from any other activity conducted for profit, regardless of the disposition of such income TRUE Cooperatives that transact business only with members will, in no case, be subject to income tax FALSE Cooperatives that transacts business with non-members are taxable on income allocated to interest on members’ capital when their accumulated reserve exceeds P10,000,000 TRUE For purposes of the MCIT, cost of services includes all direct costs expenses incurred in acquiring or manufacturing the goods FALSE

1. F 1. T

Temporary dispute is a valid ground for the suspension of MCIT As a rule corporations always pay tax even if there is a loss effective from the fourth year of their operations

1. F

FEZA-registered enterprises are exempt from tax

1. T

The income of government-owned and controlled is an item gross income

F

Items of passive income subject to final tax and capital gains are included in the basis of the MCIT 1. T

The MCIT rules applied on the cumulative balances of the RCIT and MCIT during the quarters of the taxable year

1. F

If an entity started operations on June 2011, MCIT shall commence on June 2015

1. F

The gross Philippines Billings of international carrier includes receipts from outgoing voyage or flights which must be billed in the Philippines

1. F

Special corporation can claim optional standard deduction

1. T

Corporations exempt from income tax are not subject to income tax on incomes received which are incidental or necessarily connected with the purposes for which they were organized and operating

1. F

The classification rule is applied to private schools and non-profit hospitals...