SECTION  1.  Scope -  Pursuant to the  provisions of  Sections  244,  27(E), and 28(A)(2) of the 1997 National Internal Revenue Code (Tax Code), as amended, in relation to Section   245 thereof  which requires that the   rules  and regulations  of the Bureau of  Internal Revenue shall stipulate the manner in which internal revenue taxes  shall be paid,  these Regulations  are hereby promulgated  to  amend Revenue Regulations No. 9-98,  in order  to align  the time of  payment  of  minimum  corporate income tax (MCIT) imposed on domestic corporations and resident foreign corporations with the mandatory quarterly filing of normal corporate income tax returns pursuant to Sec. 75 and Sec. 77 of the same Tax Code.

SEC. 2. Amendatory Provision - Pertinent portions of Sec. 2.27(E) of Revenue Regulations No.  9-98  are  hereby  amended  to read as follows:

œSec. 2.27(E) MINIMUM CORPORATE INCOME TAX (MCIT) ON DOMESTIC CORPORATIONS -

œ(1)    Imposition of the Tax. - A minimum corporate income tax (MCIT) of two percent (2%) of the gross income as of the end of the taxable year (whether calendar or fiscal year, depending on the accounting period employed) is hereby imposed upon any domestic corporation beginning on the fourth (4^th ) taxable year immediately following the taxable year in which such corporation commenced its business operations. The MCIT shall be imposed whenever such corporation has  zero or negative taxable income or whenever  the amount of minimum corporate  income tax is greater than the normal income tax due from such  corporation.

Notwithstanding the above provision, however, the computation  and the payment  of  MCIT, shall likewise apply  at  the  time of  filing  the quarterly corporate income tax as prescribed under Section 75 and Section 77  of the   Tax Code, as  amended.

Thus, in the  computation of the  tax due  for the taxable quarter,  if   the  computed quarterly  MCIT  is  higher  than the  quarterly  normal  income  tax, the tax due to be paid for such taxable quarter at the time of filing   the quarterly  corporate  income tax return  shall be the MCIT which  is two  percent  (2%)  of the  gross  income 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.

Example :  Panday Corporation ™s computed normal income tax and MCIT,  and creditable  income  taxes  withheld   from  1^st  to 4^th quarters  including excess MCIT and excess withholding taxes from prior year/s  are  as follows:

 

Quarter	Normal Income Tax	MCIT	Taxes Withheld	Excess MCIT Taxes Prior Year	Excess W/Tax Prior Year
1st	100,000	80,000	20,000	P30,000	10,000
2nd	120,000	250,000	30,000
3rd	250,000	100,000	40,000
4th	200,000	100,000	3 5,000
For the 1st quarter, the quarterly income tax payable by Panday Corporation shall be computed as follows:
	Quarterly corporate income tax due (higher amount between normal
	income tax and MCIT) - normal income tax				P100,000
	Less : Taxes Withheld - Prior Year			10,000
	Taxes Withheld - 1st qtr			20,000
	Excess MCIT prior year			30,000	60,000
	Net Income Tax Due , 1st quarter -
	normal income tax				P 40,000 =======

For the 2nd quarter, the quarterly income tax payable by Panday Corporation shall be computed as follows:
Quarter	Normal Income Tax	MCIT	Taxes Withheld	Excess MCIT Taxes Prior Year	Excess W/Tax Prior   Year
1st	100,000	80,000	20,000	P30,000	10,000
2nd	120,000	250,000	30,000
Total	220,000 =======	330,000 =======	50,000 =======
	Quarterly corporate income tax due (higher amount between normal
	income tax and MCIT) - MCIT				P330,000
	Less : Taxes Withheld - Prior Year			10,000
	Less : Taxes Withheld - 1st qtr			20,000
	Taxes Withheld - 2nd qtr			30,000
	Net income tax payment - 1st qtr			P 40,000	100,000
	Net Income Tax Due 2nd quarter -MCIT				230,000 =======

At year end, the computation of the annual income tax payable by Panday Corporation shall be computed as follows
Quarter	Normal Income Tax	MCIT	Taxes Withheld	Excess MCIT Taxes Prior Year	Excess W/Tax Prior  Year
1st	100,000	80,000	20,000	P30,000	10,000
2nd	120,000	250,000	30,000
3rd	250,000	100,000	40,000
4th	200,000	100,000	35,000
Total	670,000      ======	530,000        ======	125,000 ======
	Annual corporate income tax due (higher amount between normal
	income tax and MCIT) - Normal Income Tax				P670,000
	Less : Taxes Withheld - Prior Year			10,000
	Less : Taxes Withheld - 1st qtr			20,000
	Taxes Withheld - 2nd qtr			30,000
	Taxes Withheld - 3rd qtr			40,000
	Taxes Witheld - 4th qtr			35,000
	Net income tax payment - 1st qtr			40,000
	Net income tax payment - 3rd quarter			70,000
	MCIT paid in the 2nd quarter			230,000
	Excess MCIT in prior year			30,000	505,000
	Annual Net Income Tax Due - MCIT				P 165,000
					=======

As can be seen from the above illustrative computation, quarterly MCIT paid  on the Quarterly Income Tax Return  shall be credited  against the normal income tax at year end if  in the preparation and  filing of the annual income tax return and in the final computation of the annual income tax due,  it appears that the normal income tax due is higher than the computed annual MCIT. Moreover, in addition  to the  quarterly  MCIT paid and quarterly normal income  tax payments in the taxable quarters of the same taxable year, excess MCIT in the prior year/s (subject to the prescriptive period allowed for its creditability), expanded withholding taxes in the current year and excess expanded withholding taxes in the  prior year   shall be allowed to be  credited  against the annual income tax computed under the normal income tax rules.

However, if  in the computation of the annual income tax due, the computed annual MCIT due appears to be higher than the annual normal income tax due,  what may be credited  against the annual MCIT due shall only be the quarterly  MCIT  payments of the current taxable quarters, the  quarterly normal income tax  payments  in the quarters of the current taxable year, the expanded withholding taxes in the current year and excess expanded withholding taxes in the  prior  year.  Excess MCIT from the previous taxable year/s shall not be allowed to be credited therefrom as the same can only be applied against normal income tax.

Thus, in the above illustration, suppose the MCIT at year end is higher than the  normal  income tax,  then  computation  of the  income tax liability  of Panday Corporation shall be as follows:

At year end, the computation of the annual income tax payable by Panday Corporation shall be computed as follows             Quarter Normal
Income Tax MCIT Taxes
Withheld Excess
MCIT Taxes
Prior Year

Excess
W/Tax
Prior  Year

            1^st 100,000 80,000 20,000 P30,000 10,000 2^nd 120,000 250,000 30,000

3^rd 250,000 100,000 40,000

4^th 50,000 120,000 35,000     Total 520,000
      ====== 550,000
       ====== 125,000
=====

              Annual corporate income tax due (higher amount between normal   income tax and MCIT) - Normal Income Tax

P550,000

  Less : Taxes Withheld - Prior Year

10,000

  Less : Taxes Withheld - 1^st qtr

20,000

  Taxes Withheld - 2^nd qtr

30,000

 

  Taxes Withheld - 3^rd qtr

40,000

  Taxes Witheld - 4^th qtr

35,000

    Net income tax payment - 1^st qtr 

40,000

  Net income tax payment - 3^rd quarter

70,000

  MCIT paid in the 2^nd quarter

230,000

475,000

  Annual Net Income Tax Due - MCIT

75,000

     

=======
    

œFor purposes of these Regulations, the term, œnormal income tax  means the income tax rates prescribed under Sec. 27 (A) and Sec. 28(A)(1) of the Code at 34% on January 1, 1998; 33% effective January 1, 1999; at 32% effective January 1, 2000 and 35% effective November 1, 2005 and thereafter. Provided, however, that effective January 1, 2009 the rate of income tax shall be thirty percent (30%),  pursuant to RA No. 9337.

œ In the case of a domestic corporation  xxx xxx xxx

œ(2)  Carry forward of excess minimum corporate income tax - xxx xxx xxx

œIllustration on how to carry forward excess minimum corporate income tax  presented on annualized basis -

	"Year	"Normal Income Tax	MCIT	Excess of MCIT Over the Normal Income Tax
œ1998		P50,000	P 75,000	P25,000
œ1998	amount of tax payable		P 75,000
œ1999		P60,000	P100,000	P40,000
œ1999	amount of tax payable		P100,000
œ2000		P100,000	P60,000
	Computation of Net Amount of Tax Payable in 2000:
	"Amount of tax payable			P100,000
	"Less
	"1998 excess MCIT		(25,000)
	"1999 excess MCIT		(40,000)	P65,000
	Net amount of tax payable			P35,000

œThe taxpayer shall pay the MCIT whenever it is greater than the regular or normal corporate income tax which is imposed under Sec. 27(A) and Sec. 28(A) (1) of the Code. The  final comparison between the normal income tax payable by the corporation and the MCIT shall be made at the end of the taxable year and the payable or excess payment in the Annual Income Tax Return shall be computed taking into consideration corporate income tax payment made at the time of filing of quarterly corporate income tax returns whether this be MCIT or normal income tax  Thus, under the example, the taxpayer should have paid the MCIT of P75,000.00 since this amount is greater than the normal income tax of P50,000.00 in 1998.

œ xxx    xxx   xxx
œ xxx   xxx   xxx
œ xxx    xxx xxx
œ xxx   xxx  xxx

œ(3) Relief from the Minimum Corporate Income Tax under Certain Conditions - xxx xxx xxx

œ xxx   xxx   xxx

œ (4)   Definition of   Terms

œ(a)       œGross income  defined - For purposes of the minimum corporate income tax prescribed under this Subsection, the term œgross income  means gross sales less sales returns, discounts, and allowances and cost of goods sold, in case of sale of goods, or gross revenue less sales returns, discounts, allowances and cost of services/direct cost, in case of sale of services. This rule, notwithstanding, if apart from deriving income from these core business activities there are other items of gross income realized or earned by the taxpayer during the taxable period which are subject to the normal corporate income tax, the same items must be included as part of the taxpayer ™s gross income for computing MCIT. This means that the term œgross income  will also include all items of gross income enumerated under Section 32(A) of the Tax Code, as amended, except income exempt from income tax and income subject to final withholding tax described in the succeeding subparagraph.

œGross sales    shall   include only sales   contributory  to  income taxable under Sec. 27(A)  of the Code.   œCost of goods sold  shall include all business expenses directly incurred to produce the merchandise to bring them to their present location and use. Gross Revenue shall include income from sale of services, likewise, taxable under Sec. 27(A). Cost of Services or Direct Cost of Services shall include business expenses directly incurred or related to the gross revenue from rendition of services.

œPassive incomes which are subject to final tax at source shall not form part of gross income for purposes of minimum corporate income tax.

œ  xxx  xxx xxx
œ xxx   xxx   xxx

œ(5) Specific Rules for Determining the Period When a Corporation Becomes Subject to the MCIT-

œ xxx   xxx   xxx

œ(6)      Manner of filing and payment - The minimum corporate income tax (MCIT) shall be paid  in the  same manner prescribed  for  the payment  of the normal corporate income tax which is on a quarterly  and on a  yearly basis. It shall be covered by a tax return designed for the purpose which will be submitted together with the corporation ™s annual final adjustment income tax return. Domestic corporations shall be required to pay the minimum corporate income tax on a quarterly basis,  pursuant to  the provisions of Sec. 75 and Sec. 77 of the Code   in relation to  Section  245 of the same Code, as amended.

œ xxx   xxx   xxx 

SEC.3. Transitory Provisions - In  the filing of the quarterly income tax return for the taxable quarter which is due for filing after the effectivity of these Regulations, the  computation  of the MCIT  shall be done  on  cumulative  basis  covering not only the  current  taxable  quarter  but  also  the  previous taxable quarters of the same tax- able year. Such computed MCIT shall be compared with the cumulative normal income tax, whereupon the higher amount between the two shall be the basis of the quarterly income tax payment to be made for said taxable quarter.

Thus, for those using calendar year basis accounting period, in the filing of the quarterly income tax return for the third quarter ended September 2007 which is due for filing  on or before November 29, 2007,   the gross income  for  the 1st and 2nd  quarters shall be added to the gross income for the quarter ended  September 2007, the total of which  shall be the basis of the  2% MCIT which  shall then  be compared with  the computed cumulative  normal  income tax. The cumulative MCIT for the three (3) said quarters shall be paid in case the same appears to be higher than the normal income tax computed for the same period. Excess normal income tax carried over from previous taxable year and payments made for the previous quarters of the same taxable year, including withholding tax credits claimed for said previous quarters of same taxable year shall be credited against the computed tax due in the cumulative quarterly tax return.

SEC. 4. Repealing Clause - The provisions of Revenue Regulations No. 9-98 and all other internal revenue issuances inconsistent herewith are hereby repealed, modified or amended  accordingly.

SEC. 5. Effectivity Clause - These Regulations shall take effect after fifteen (15) days  following publication in a newspaper of general  circulation

Adopted: 10 Oct. 2007