Demystifying Corporate Taxes: Everything You Need to Know

🏢A corporation is an artificial being created by law, with rights, powers, and properties authorized by law or incident to its existence.

🌐Corporations can be classified as domestic corporations (formed using Philippine laws) or foreign corporations (formed outside of Philippine laws).

💼Domestic corporations are taxed at a rate of 30% on their taxable income from sources within and outside the Philippines.

🏛️Some corporations, like educational institutions and nonprofit hospitals, can qualify for preferential tax rates (e.g., 10% on taxable income).

📈Corporations may also earn passive income, which is subject to different tax rates depending on the type of income.

What is a corporation?

—A corporation is an artificial being created by law, with rights, powers, and properties authorized by law or incident to its existence.

What are the different types of corporations?

—There are various types of corporations, including joint stock companies, joint ventures, partnerships, insurance companies, and associations.

How are domestic and foreign corporations different?

—Domestic corporations are formed using Philippine laws, while foreign corporations are organized or existing under laws other than Philippine laws.

How are domestic corporations taxed?

—Domestic corporations are taxed at a rate of 30% on their taxable income from sources within and outside the Philippines. They may also be subject to the Minimum Corporate Income Tax (MCIT) of 2% on their gross income.

Are there any preferential tax rates for corporations?

—Yes, some corporations, such as educational institutions and nonprofit hospitals, can qualify for preferential tax rates, such as 10% on their taxable income.

00:00In this video, we explore the world of corporate taxes, covering the definition of a corporation and its types.

01:30We discuss the classifications of corporations, including domestic and foreign corporations.

03:45The taxability of domestic corporations is explained, including the applicable tax rates and the Minimum Corporate Income Tax (MCIT).

04:50We mention the preferential tax rates available for certain corporations, such as educational institutions and nonprofit hospitals.

06:10Lastly, we touch on the concept of passive income and its different tax rates.