NOLCO (Illustration) NOLCO CARRY-OVER (Illustration)

Sales/Revenue 1,000,000 2005

Cost of Sales/Service 500,000 Gross Income 100
Gross Income 500,000 Deductions (except losses) 160
Net Income/(Loss) (60)
Add: Other Income 100,000 NOLCO from:
Total Gross Income 600,000 2005 -
Less:Deductions 700,000 2007 -
NOLCO (100,000) Taxable Income(Loss) (60)

NOLCO
YEAR Credits
Beginning year 60
2005 60
2006 40
2007 60
2008 20
2009 0

*For 2009, the remaining net operating loss for 2015 was
 Optional Standard Deductions (OSD)
2006 2007 2008 2009
120 150 180 200 Gross Sales/Receipts
100 170 160 130 Less COS
20 (20) 20 70 Gross Income (Gross Profit)
Less OSD (40%)
20 - 20 - Net Income
- - - 20 Less Personal Exemption
- (20) - 50 Less Additional Exemption (3 dep)
Income subject to tax
NOLCO NOLCO NOLCO
Additions Used Expired Remarks Tax Due Ind (5% - 32%); Corp (30%)
*Aimee
0 0 0 No AFS is required: Gross quarterly does not exceed 150K
0 20 0 Withholding Tax: 720K or Less Annually - 10%
20 0 0 Withholding Tax: 720 or more Annually - 15%
0 20 20
0 20 0

erating loss for 2015 was not carried over.

 Monitoring of Excess MCIT
Individual Corportion 2015
1,000,000 1,000,000 Regular Corporate Income Tax (RCIT) 120
- 600,000 Minimum Corporate Income Tax 130
1,000,000 400,000 Income Tax Due (whichever is higher) 130
400,000 160,000 Less: Excess MCIT -
600,000 240,000 Income Tax Payable 130
50,000 -
75,000 - *Excess MCIT 10
475,000 240,000 *MCIT (higher)- RCIT = Excess MCIT

152,000 72,000

ly does not exceed 150K

nnually - 10%
nually - 15%
 Improperly Accumulated Earnings Tax
2016 2017 Rule: Total Asset = Total Liabilities and Earnings
100 300 Sample 1 Sample 2
120 120 Paid in Capital 2,000,000 2,000,000
120 300 Retained Earnings 1,000,000 3,000,000
- 30 Total Stockholder's Equity 3,000,000 5,000,000
120 270
Note No IAET since With IAET since
20 30 Retained Earnings Retained Earnings is
is lower than Paid higher than Paid in
in Capital Capital
RE < PIC RE > PIC

Correct Presentation - for FS purposes

Paid in Capital 20,000

Retained Earnings
Appropriated 10,000
Unappropriated 20,000 30,000
Total Stockholder's Equity 50,000
IAET Computation: Base and Rate
YEAR

2015 2016
Paid in Capital 80 80
Retained Earnings, beginning 70 100
Net Income 30 50
Retained Earnings, ending 100 150

Subject to IAET 20 70

Less: Income subject to IAET 0 20

Total 20 50
IAET (10%) 2 5
 REVENUE REGULATIONS NO. 10-98

TAXATION OF INCOME FROM FOREIGN CURRENCY DEPOSIT AND OFFSHORE BANKING S

Q: What is the tax imposed on interest income earned from foreign currency bank deposit?

A: A final withholding tax of seven and a half percent (7-1/2%) is imposed on interest income from a foreign currency bank depo
received by a resident. This tax would apply to foreign currency deposits accepted and held by an offshore banking unit (OBU)
(FCDU) in the regular course of business.

No tax is imposed on interest income arising from foreign currency bank deposits of non-residents.

Q: Who are residents?

A: The following are considered as residents:

A Filipino citizen living in the Philippines

An alien individual who is permanently residing in the Philippines;

A domestic corporation i.e., a corporation or other juridical person (associations, partnerships, trust, etc.) organized under the la

A resident foreign corporation, which refers to a branch, extension office or other unit of corporations or juridical persons organi
country

Q: What documents must be presented to prove non-residency?

A: For individuals, any of the following documents can be presented:

An immigration visa issued by the foreign government in the country where he is a resident of;

A certificate of residency which is issued by the Philippine Embassy or Consulate in the foreign country of his residence;

A certificate of the contract of employment of an overseas contract worker which is duly registered with the Philippine Overseas
Seamans Certificate, in the case of a Filipino seaman;

A certification from the Bureau of Immigration that a non-resident alien is not a resident of the Philippines;

A certification from the Department of Foreign Affairs (DFA) of the Philippines that the individual is a regular member of the diplo
and is entitled to income tax exemption under an international agreement to which the Philippines is a signatory.

For corporate depositors, the original or certified copy of all of the following must be presented:

1. Certificate of registration of the corporation abroad; and

2. Certification from the Securities and Exchange Commission that the non-resident corporation is not licensed to do business i
Q: Are there other requirements?

A: To be entitled to an exemption from the tax on interest income on foreign currency deposit, the Foreign Currency Bank Acco
resident individual or non-resident corporation. Otherwise, the interest income shall be considered as subject to the 7.5% final t

In addition, the depositor is required to execute a written permission allowing its depository bank to inform the BIR that, as a no
Without this written permission, which constitutes a limited waiver of the confidentiality of foreign currency deposits, the deposit
privilege.

Q: How would interest income from a foreign currency bank deposit be taxed if the bank account belongs to an overse
authorized representative to make withdrwals from such account is staying in the Philippines?

A: If the account is jointly in the name of a non-resident such as an overseas contract worker, or a Filipino seaman, and an indi
living in the Philippines, fifty percent (50%) of the interest income from such bank deposit will be treated as exempt while the oth
subject to a final withholding tax of seven and one-half percent (7.5%).

Q: How will the tax due on such interest income be paid?

A: The depository bank shall withhold and remit the 7.5% tax due from the interest income derived by a resident from foreign cu
depositor presents documentary evidence that he is not a resident of the Philippines, the bank shall automatically withhold such

The depository bank is required to submit a list of all persons and corporations who were given exemption from the tax on intere
deposits. The list will be filed at the same time that the quarterly withholding taxes on such deposits are remitted to the BIR.

Q: What are FCDUs and OBUs?

A: FCDU, or Foreign Currency Deposit Unit, refers to that unit of a thrift bank or commercial bank organized under Philippines l
bank doing business in the Philippines which have been authorized by the Bangko Sentral ng Pilipinas (BSP) to engage in fore
transactions.

OBU, or Offshore Banking Unit, refers to a branch, subsidiary or affiliate of a foreign banking corporation which is duly authorize
banking business in the Philippines.

Q: How are FCDUs or OBUs taxed?

A: A final withholding tax of ten percent (10%) will be imposed on income derived by an FCDU or OBU from foreign currency tra
Philippines, including local commercial banks, local branches of foreign banks, and other depository banks under the foreign cu
interest income from lending operations, bank charges, commissions, service fees, and net foreign exchange transaction gains

Income of FCDUs or OBUs from foreign currency transactions with non-residents of the Philippines are not subject to income ta
Income derived by FCDUs or OBUs from activities other than foreign currency transactions will be subject to the regular tax imp
by a domestic corporation or resident foreign corporation, as the case maybe. To illustrate, income derived by an FCDU from co
be taxed based on net income at the regular corporate tax rate. On the other hand, capital gains from the sale or exchange of s
the local exchange shall be taxed at 5% on the first P100,000 and 10% in excess thereof.

Q: How will the 10% final withholding tax be paid?

A: The person making the income payment is required to withhold and remit the tax withheld. Thus, in the case of interest paym
currency loan from an OBU or FCDU, the resident borrower will act as withholding agent of such tax.

Q: Are FCDUs or OBUs required to file a return?

A: Yes, FCDU or OBU must file the corporation income tax return with respect to its income subject to the regular corporate inc
return all other income derived during the year which are subject to final withholding taxes, the fact that such final withholding ta
the following information:

Name of withholding agent;

His/Its address

His/Its Taxpayer Identification Number (TIN)

Period covered

Gross income

Rate of final withholding tax applies; and

Amount of final withholding tax withheld.

There is no need, however, to submit such information with respect to its interest income derived from bank deposits.

Q: When will these rules be applicable?

A: The regulation shall apply on taxable income derived beginning January 1, 1998. For deposits which were made in 1997, on
actually or constructively received by a depositor starting January 1, 1998 is taxable.

No penalty will be imposed for late payment of the taxes prescribed in the regulation for the first three quarters of calendar year
for the said taxable quarters and pays the taxes due on or before October 25, 1998.

(Implementing Secs . 24, 25, 27 and 28 of the 1997 Tax Code, as amended by RA No. 8424; Date of Issue: August 25, 1998; E