MINIMUM

CORPORATE
INCOME TAX
INTRODUCTION
What is MCIT?
- It imposed whenever such corporation has zero or negative taxable income
or whenever the amount of the MCIT is greater than the regular corporate
income tax due from such corporation.
- It is a devised as a relatively simple and effective revenue-sharing
instrument to ensure that corporate taxpayers will make minimum
contribution to support and finance the cost needed by the government.
Why is there an MCIT?
To address the perennial problem of non-
declaration and under-declaration of
revenues by corporations, the
Comprehensive Tax Reform Program
(CTRP) provides for the imposition of a
minimum corporate income tax (MCIT- Sec.
27 (E)).

It is not a new tax imposition as it merely

approximates the amount of the income
tax which is payable by a corporation. The
MCIT is a means to ensure that businesses
earning positive returns do not avoid
Who are COVERED by MCIT?
It covers domestic and resident
foreign corporations which are
subject to regular income tax.
For a corporation covered by
MCIT and preferential rates,
MCIT shall only apply on the
part having regular income
tax.
Who are NOT COVERED by MCIT?
Foreign Currency Deposit Units (FCDU) (10%)
firms that are taxed under a special income tax
regime such as PEZA Law and the Bases
Conversion Development Act.
"international carrier
Offshore Banking Units (OBUs)
Regional operating headquarters
When is MCIT reported and paid?

It is paid on a quarterly and annual

basis. (R.R. No. 12-2007)
How is MCIT computed?
MCIT is 2% of the gross income of the corporation at
the end of the year.
In the computation of the tax due for the taxable
quarter, if the computed quarterly MCIT is higher
than that quarterly normal income tax, the tax due to
be paid for such taxable quarter at the time of filing
the quarterly income tax return shall be the MCIT 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.
How is MCIT computed?
What is the carry forward provision under
the MCIT?
Any excess of the MCIT over the normal income
tax may be carried forward on an annual basis
and be credited against the normal income tax
for 3 immediately succeeding taxable years.
When does a corporation start to
be covered by MCIT?
A corporation starts to be covered by the MCIT
on the 4th year of its business operations.

Example, a new corporation registered with the

Bureau of Internal Revenue (BIR) last 2009 will
become liable on 2012 (2009, 2010, 2011, and
2012 is the fourth year) as the year beginning the
fourth year of its operations
When does a corporation
relieved from MCIT?
The Secretary of Finance, upon
recommendation of the CIR may
suspend the imposition upon
submission of proof that the
corporation sustained substantial
losses on account of:
prolonged labor dispute,
force majeure", or
legitimate business reverses.
How would the MCIT be recorded for
accounting purposes?

Any amount paid as excess minimum

corporate income tax should be recorded in
the corporations books as an asset under
account title Deferred charges-MCIT