Taxation on Corporations: Understanding the Basics

💼There are three classes of corporations: domestic corporations, resident foreign corporations, and non-resident foreign corporations.

💸The tax rates for domestic and resident foreign corporations are either 25% or 20%, depending on their net taxable income and total assets.

📝Allowable deductions for corporations include actual expenses and the optional standard deduction, which is computed as 40% of gross income.

🌍Gross income for corporations includes sales of goods or services, minus returns, allowances, discounts, and cost of sales.

🔒Income subject to final withholding tax and capital gains tax is excluded from gross income.

What are the different types of corporations for taxation purposes?

—The three types of corporations for taxation purposes are domestic corporations, resident foreign corporations, and non-resident foreign corporations.

How are tax rates determined for corporations?

—Tax rates for corporations depend on their classification and net taxable income. Domestic and resident foreign corporations have tax rates of either 25% or 20%, while non-resident foreign corporations have a tax rate of 25%.

What are the allowable deductions for corporations?

—Corporations can deduct actual expenses incurred in their operations, as well as choose to use the optional standard deduction, which is 40% of their gross income.

What is included in a corporation's gross income?

—A corporation's gross income includes sales of goods or services, minus returns, allowances, discounts, and cost of sales. Income subject to final withholding tax and capital gains tax is not included in gross income.

How are final withholding tax and capital gains tax treated in corporate taxation?

—Income subject to final withholding tax and capital gains tax is excluded from a corporation's gross income.

00:00This video provides an overview of taxation on corporations.

03:00There are three classes of corporations: domestic corporations, resident foreign corporations, and non-resident foreign corporations.

08:00Tax rates for corporations depend on their classification and net taxable income.

13:00Corporations can deduct actual expenses incurred in their operations, as well as choose to use the optional standard deduction.

17:00A corporation's gross income includes sales of goods or services, minus returns, allowances, discounts, and cost of sales.

19:00Income subject to final withholding tax and capital gains tax is excluded from a corporation's gross income.