SPECIAL CORPORATIONS

What are Special Corporations?

They refer to corporations not subject
to the normal income tax rate.
 Classification of Special Corporations:
Domestic Special Foreign Special
Corporations Corporation
Proprietary educational International carrier
institutions Regional Operating HQ
Offshore banking units
Proprietary hospitals Branch remittances
Owner/lessor/distributor of
cinematographic film
NR Owner/lessor of
machinery/equipment/aircraf
NR Owner/lessor of vessels
chartered by Philippine
nationals
 What are Proprietary Educational
Institutions?
Any private school maintained & administered
by private individuals or groups with an
issued permit to operate from DepEd, or
CHED or TESDA.
 What is the Predominance Test on
PHEI?
If the GI from unrelated trade/business/other
activity > 50% of the total GI from all sources,
ENTIRE taxable income shall be subject to the
REGULAR corporate tax rate
Special Types of Domestic Corporation:
Domestic Corporation Tax Rate Tax Base
PHEI 10% GI on related
trade/business/activity
, subject to
Predominance Test.

GOCC, Govt. Agencies/LGUs 30% GI on related

trade/business/activity
GSIS/SSS/PHIC/PCSO Exempt
Depositary Banks 10% Interest Income from
FC transactions
 What is Gross Philippine Billings?
Refers to gross revenue derived from carriage of
persons, excess baggage, cargo, and mail
originating from the Philippines in a continuous
and uninterrupted flight, irrespective of the
place of sale or issue and the place of payment
of the ticket or passage document.
 Special Types of Foreign Corporation:
Foreign Corporation Tax Rate Tax Base
International Air Carrier/Shipping 2.5% Gross Philippine Billings
Owner /lessors of vessel charted 4.5% Gross Income
by Philippine nationals
Owner/lessors of aircraf, 7.5% Gross Income
machineries and other equipment
OBUs 10% Interest Income on FC
transactions granted to
Residents only.
Regional Operating HQ 10% Taxable Income
Cinematographic film owner, lessor 25% Gross Income
or distributor
 Distinction between ROH and RAH:
Regional Operating HQ Regional Area HQ
Are branches established by multi-national Are branches established by
co. which are engaged in any of the ff.: multi-national co. and which do
general administration and planning;
business planning and coordination; not earn income from the
sourcing and procurement of RM and Philippines and which act as
components; corporate finance advisory supervisory, communications,
services; marketing control and sales and coordinating center for their
promotion; training and personnel mgt.; affiliates, subsidiaries or
logistic services; R/D services and product
devt.; technical support and maintenance; branches.
data processing and communications; and,
business devt.

Subject to 15% tax Tax-exempt

What is Branch Profit Remittance Tax?
BPRT of 15% shall be imposed on any
profit remitted by a branch to its head
office.
The Branch will first be subjected to
ordinary corporate tax as a resident
foreign corporation (30%). Aferwards,
the profits for remittance shall then be
subject to 15% BPRT.
What is Optional Gross Income Taxation?
Effective Jan. 1, 2000: the President (upon recommendation
of the Sec of Finance) may allow corporation an option to
be taxed at 15% of gross income afer the ff. conditions
are satisfied:
Tax effort ratio 20% of GNP
Ratio of IT collection to total tax revenue 40%
VAT tax effort 4% of GNP
Ratio of Consolidated Public Sector Financial 0.9%
Position
(CPSFP) to GNP
Ratio of Cost of Sales to Gross Sales from all sources Not exceeding 55%

The election of the option shall be irrevocable for 3

consecutive taxable years during which the corp. is qualified
under the scheme.
- End -