MCIT

The minimum corporate income tax (MCIT) was created to prevent tax evasion. BIR will impose a tax of 2% on the gross income of the corporation if the regular corporate income tax is less than that 2%. It takes effect on the fourth (4th) taxable year after the year the corporation started doing business (five years after business started, in other words.) Excesses of the MCIT over the regular income tax are credited to the regular income tax for the next three (3) taxable years.

It is suspended for the following reasons:

1.) A labor dispute lasting longer than six (6) months

2.) Force majeure (war, natural calamities, etc.)

3.) Legitimate business losses caused by fire, robbery, theft, or other economic reasons determined by the Secretary of Finance.

The following domestic corporations are exempt from MCIT

1.) Proprietary educational institutions (educational institutions that aren't non-stock, non-profit)

2.) Non-profit hospitals

3.) Banks under the foreign currency deposit system

4.) Corporations enjoying tax benefits under the Bases Conversion Development Act (RA 7227) and the PEZA Law (RA 7916)

The following resident foreign corporations are exempt:

1.) International air and shipping companies

2.) Offshore Banking Units

3.) Regional operating offices of resident foreign corporations

4.) Resident foreign corporations enjoying tax benefits under RA 7227 and RA 7916

The MCIT won't apply to non-resident foreign corporations