MINIMUM CORPORATE INCOME TAX

1. MINIMUM CORPORATE INCOME TAX

2. What is MCIT? The MCIT is imposed whenever such corporation has zero or negative taxable income or whenever the amount of the MCIT is greater than the regular corporate income tax due from such corporation.

3. Why is there an MCIT? To address the perennial problem of non-declaration and under-declaration of revenues by corporations, the Comprehensive Tax Reform Program (CTRP) provides for the imposition of a minimum corporate income tax (MCIT- Sec. 27 (E)). It is not a new tax imposition as it merely approximates the amount of the income tax which is payable by a corporation. The MCIT is a means to ensure that businesses earning positive returns do not avoid paying the income tax.

4. When is MCIT reported and paid? It is paid on a quarterly and annual basis. (R.R. No. 12-2007)

5. Who are covered by MCIT? It covers domestic and resident foreign corporations which are subject to regular income tax. For a corporation covered by MCIT and preferential rates, MCIT shall only apply on the part having regular income tax.

6. Who are NOT covered by MCIT? • PHEI • Foreign Currency Deposit Units (FCDU) (10%) • firms that are taxed under a special income tax regime such as PEZA Law and the Bases Conversion Development Act. • "international carrier” • Offshore Banking Units (OBUs) • Regional operating headquarters

7. When is MCIT reported and paid? It is paid on a quarterly and annual basis. (R.R. No. 12-2007)

8. How is MCIT computed? MCIT is 2% of the gross income of the corporation at the end of the year. In the computation of the tax due for the taxable quarter, if the computed quarterly MCIT is higher than that quarterly normal income tax, the tax due to be paid for such taxable quarter at the time of filing the quarterly income tax return shall be the MCIT as of the end of the taxable quarter. In the payment of said quarterly MCIT, excess MCIT from the previous taxable year/s shall not be allowed to be credited.  Expanded withholding tax, quarterly corporate income tax payments under the normal income tax, and the MCIT paid in the previous taxable quarter/s are allowed to be applied against the quarterly MCIT due.

9. What is the carry forward provision under the MCIT? Any excess of the MCIT over the normal income tax may be carried forward on an annual basis and be credited against the normal income tax for 3 immediately succeeding taxable years.

10. When does a corporation start to be covered by MCIT? A corporation starts to be covered by the MCIT on the 4th year of its business operations.

11. When does a corporation relieved from MCIT? The Secretary of Finance, upon recommendation of the CIR may suspend the imposition upon submission of proof that the corporation sustained substantial losses on account of: • prolonged labor dispute, • force majeure", or • legitimate business reverses.

12. How would the MCIT be recorded for accounting purposes? Any amount paid as excess minimum corporate income tax should be recorded in the corporation’s books as an asset under account title “Deferred charges-MCIT”