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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
The Minimum Corporate Income Tax (MCIT) effective 1 July 2020 until 30 June 2023 is 1%. Starting 1 July 2023, the MCIT is 2% of the gross income of the corporation as of the end of the taxable year pursuant to the Corporate Recovery and Tax Incentives for Enterprises Act.
(CREATE Law in relation to BIR Revenue Regulation No. 5-2021)
The law says –
Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Law) provides that the minimum corporate income tax of 2% of the gross income as of the end of the taxable year is imposed on a corporation beginning on the fourth taxable year immediately following the year in which such corporation commenced its business operations, when the minimum income tax is greater than the tax computed under Subsection A of Sec. 6 for the taxable year. Provided that effective July 1, 2020 until June 30, 2023, the rate shall be one percent (1%).
The MCIT is imposed beginning on the fourth taxable year immediately following the year in which such corporation commenced its business operations, when it is greater than the regular income tax computed for the taxable year.
Domestic corporations shall account separately in their Annual Financial Statements (AFS) the cost of the land on which the particular business entity’s office, plan and equipment are situated, and shall not lump the same in one account title nor consolidate its cost with other fixed asset accounts.
In the case of proprietary educational institutions or hospitals, if the gross income from unrelated trade, business or other activity exceeds 50% of the total gross income derived by such educational institutions or hospitals from all sources, the tax prescribed for domestic corporations shall be imposed on the entire taxable income.
(Source: BIR Revenue Regulation No. 5-2021, Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Law)
Read also: Are Micro, Small and Medium Enterprise (MSME) exempt from payment of income tax?
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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