PHILIPPINES Law and Practice Contributed by: Carina Laforteza, Joanna Marie Joson, Kristina Paola Frias and Joanna Marie Reyes, SyCip Salazar Hernandez & Gatmaitan
SyCip Salazar Hernandez & Gatmaitan SyCipLaw Center 105 Paseo de Roxas Makati City 1229 Metro Manila Philippines
Tel: +632 8982 3500 Fax: +632 8848 2030 Email: sshg@syciplaw.com Web: www.syciplaw.com
1. Corporate Structures, Residence and Tax Treatment 1.1 Corporate Forms and Their Tax Treatment Business organisations in the Philippines are gener - ally formed as incorporated entities or corporations, although business firms may also be organised as partnerships or sole proprietorships. Corporations Corporations are either formed under the Revised Corporation Code of the Philippines (RCC) or created under special law. Corporations formed or organised under the RCC may be stock or non-stock corporations. Stock corpora - tions are those with capital stock divided into shares and authorised to distribute to the shareholders divi- dends on the basis of the shares held. All other cor - porations are non-stock corporations. Under the RCC, corporations may be organised with a sole sharehold - er (a “one-person corporation”). Corporations have the powers provided under the RCC and may exercise such other powers as may be essential or necessary to carry out the business purposes stated in their articles of incorporation. Cor - porations may exist perpetually. Corporations are taxed as separate legal entities. For income tax purposes, entities that are not corpora - tions as defined under the RCC – such as joint stock companies, joint accounts, associations, insurance companies or partnerships – are treated as corpo -
rations. However, general professional partnerships (GPPs) and joint ventures or consortiums formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or con - sortium agreement under a service contract with the Philippine government are not taxed as separate cor - porations, and the income tax is imposed on the part - ners and/or consortium members. The corporate income tax rate is 25% while the mini - mum corporate income tax (MCIT) is 2%. A lower cor - porate income tax of 20% is provided for: • domestic corporations with net taxable income not exceeding PHP5 million and with total assets not exceeding PHP100 million, excluding land on which the corporation’s office, plant and equipment are situated during the taxable year for which the tax is imposed; and • domestic corporations and resident foreign cor - porations that are registered business enterprises (RBEs) under the enhanced deductions regime (EDR) based on taxable income derived from their registered activities. When corporations declare dividends to their share - holders, or profits to their partners in the case of partnerships that are considered corporations, these dividends and profits are again taxed at the share - holder – or partner – level. Individual shareholders and partners are generally subject to a 10% final tax on dividends. Dividends declared by a domestic corpora -
457 CHAMBERS.COM
Powered by FlippingBook