May 2017 INCOME TAX ON CORPORATIONS Atty. C. Llamado An Overview of Corporate Taxes ‘A corporation may be liable for at most seven (7) types of income taxes, namely: Net Income Tax (on Ordinary Income) Standard Income Tax 4 Final Withholding Tax (on Passive Income) Capital Gains Tax (on “Capital Gains”) Minimum Corporate Income Tax (“MCIT”) Penalty Income Tax Improperly Accumulated Earnings Tax (“IAET”) Gross Income Tax (“GIT”) Special Income Tax Profits Remittance Tax (“PRT”) Definition Under Section 22 (B) of the NIRC, the term “corporation” shall include a) partnerships, no matter how created or organized; 'b) joint stock companies; ~ ¢) joint accounts (cuentas enr _ipacion); / d) associations; or e) insurance companies. / However, the term does not includ 4) general professional partnerships ~ “General professional partnerships”, tree! AND b) joint venture or consortium formed for the purpose of undertaking construction_projects or engaging in energy operations pursuant to an operating or consortium agreement under a service contract with the Government,May 2017 | Classification of Corporations (1) Domestic corporations. (a) In general (b) GOCCSEXC: SSS, GSIS, PHIC, PCSO, LWDs, PDIC (c) Taxable partnerships (4) Proprietary educational institutions/Non-profit hospitals; (e) FCDUs of domestic banks (8) Service contractors/subcontractors engaged in petroleum operations {g) Ecozone enterprises (h) Exempt corporations (2) Resident Foreign corporations. (a) In general (b) Resident international carriers (©) OBUs (d) ROHQs/RHQs of MNCs (©) Service contractors/subcontractors engaged in petroleum operations {f) Ecozone enterprises (3) Non-resident foreign corporation (a) In general (b) Non-resident owners/lessors of vessels chartered by Philippine nationals; (© Non-resident owners/lessors of aircraft, machineries, and other equipment; Saar (d) Non-resident cinematographic film owner, lessor, or distributor; Types of Income Subject to Tax (a) Ordinary Income/Net Income — refer to “Ordinary Income” table (byPassive Income — refer to “Passive Income” and “Intercorporate o ividend” tables AY capi Gains”May 2017 | Ordinary Income Source of Corporate Taxable ‘Tax Base Tax Rates Taxpayer Income Within and f sis 1, Domestic without the Net Income 30% (beginning + pe oF % Jan. 1, 2009) Philippines t 2. Within the 30% (beginning RFC + Philippines only Net Income Jan. 1, 2009) 5 Gross Income Final 3. NRF + Within the enumerated by withholding tax aR os law 0f 30% PASSIVE INCOME DOMESTIC Passive Income and RFC NRFC Interest, on currency bank | 20% 30% deposit ve Yield or any other monetary benefit from: (1) Deposit substitutes 20% 30% (2) Trust funds, and 20% 30% similar arrangements Royalties 20% 30% Interest from a depositary __, 7.5% Exempt bank under the expanded foreigh currency deposit system ~ Intercorporate Dividend Payor Recipient Tax 1, Domestic corporation Domestic corporation Not taxable 2. Domestic corporation RFC Not taxable 3, Domestic corporation , NRFC 15% final WEMay 2017 Capital Gains Tax on Capital Gains 1. Sale, exchange, or other disposition of domestic shares of stock (Sec. 27 (D) (2); See. 28 (A) (7) (€); Sec. 28 (B) (5) (c), NIRC): (@) Not traded at the stock exchange: Net gain not over P100,000 5% Amount if excess of P100,000 10% (b) Shares listed and traded at the stock exchange (Sec. 127 (A), NIRC): Rate and base — One-half of one percent (1/2 of 1%) based on the grossselling price. Notes: s (1) Final tax on capital gains on the sale of shares of stock applies to all corporate taxpayers. (2) The exceptions for individual taxpayers also apply for corporate taxpayers. 2. Sale of Real Property Classified as Capital Asset — (@) Transaction subject — the sale, exchange, or other disposition of Jands and buildings which are not actually used in the business of the corporation and treated as “capital assets”. (b) Taxrateandbase- (1) Seller domestic corporation — Final tax of 6% based on the gross selling price or FMV, whichever is higher. The EMV is the higher between the Commissioner's value and the Assessor’s value (Sec. 27 (D) (5), NIRC). (2) Seller RFC ~ Gain on sale is retumable, and subject to normal tax rate (30% for 2009), (3) Seller NRFC ~ Final tax of 30% (beginning 2009) of the capital gain realized on the sale.May 2017 DOMESTIC COMPANIES SUBJECT,TO SPECIAL TAX RATES) (1) _ Proprietary educational institutions Proprietary educational institutions are subject to a special tax rate of 10% of taxable net income within and without the Philippines (2) Hospitals which are non-profit Hospitals which are non-profit are also subject to a s 10% of taxable net income within and without the Phili Provided the gross income from unrelated trade, business, or other activity does not exceed 50% of the total gross income derived from all sources. However, if it exceéds 50%, the normal tax rate will be applied on the entire taxable income ({.e. 30%). (3) Final tax on income of a Foreign Currency Deposit Unit ("FCDU") of a local bank under the Expanded Foreign Currency Deposit System ("FCDS") 4 th a) Income from foreign currency loans granted toPhilippine residents, (other than OBUs or other depository banks) ~ 10% final tax b) Interest income from foreign currency interbank deposits ~ 10% final tax ©) Income from foreign currency transactions with non-residents, OBUs, local commercial inks, and branches of foreign banksauthorized to transact business under the FCDS - Exempt income from lending operations, including bank charges, ¢ Note: “Income from foreign currency transactions” shall include interest commissions, service fees, and net foreign exchange transaction gains. ] (4) Service Contractors/Subcontractors Engaged in Petroleum Operations - Liable to an eight percent (8%) final tax on gross income derived from such contract in petroleum operations Provided, however, that any income received from all other sources within and without the Philippines in the case of domestic contractors/subcontractors, shall be subject to the regular income tax under the Tax Code.May 2017 po ©) Ecozone Enterprises All business enterprises registered with the Philippine Economic Zone Authority (“PEZA”), SBMA, or CDA and operating within the Special Economic Zones (“ECOZONE") shall be taxed 5% of gross income on registered activities. Three percent (3%) shall be paid to the National Government; Two percent (2%) to the city or municipality where the enterprise is located, Notes: a) Except for RPTs, the 5% tax shall be in lieu of all taxes; ') Income realized by a registered enterprise that is not related to its registered activity or activities shall be subject to the regular taxes, such as the 20% FWT on interest from bank deposits, the 7.5% FWT ‘on income from foreign currency deposits, the 5%/10% CGT on sale of domestic shares, or the % of 1% stock transaction tax. Tourism Enterprises registered with the Tourism Infrastructure and Enterprise Zone Authority (“TIEZA") As an alternative to the Income Tax Holiday (“ITH”) a new Registered Tourism Enterprise within a Tourism Enterprise Zone may, in lieu of all national internal revenue taxes except real estate taxes and fees as may bbe imposed by the TIEZA, pay a tax of five percent (5%) on its gross income eamed from its registered activities. The 5% gross income tax shall be remitted as follows: (a) One-third to be proportionally allocated among affected cities or municipalities based on the area of the RTE; (b) One-third to the National Government; and (©) One-third to the TIEZA.a Le Ee EO May 2017 RESIDENT FOREIGN CORPORATIONS SUBJECT TO SPECIAL TAX RATES @) International carriers doing business in the Philippines shall pay a tax of two and one-half percent (2 % %) of Gross Philippine Billings("GPB") GPB -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; Rules: (J)Tickets revalidated, exchanged and/or indorsed to another international airline form part of the Gross Philippine Billings if the boards a plane in a port or point in the Philippines; | (2)Provided, that for a flight or voyage which originates from the Philippines, but transhipment of passenger takes place at any port | outside the Philippines on another carrier, only the aliquot portion of the cost of the ticket corresponding to the leg flown from the | Philippines to the point of transhipment shall form part of the Gross | Philippine Billings | (3)Where a passenger, his excess baggage, cargo, and/or mail originally | ‘commencing his flight or voyage from a foreign port alights or is 1 discharged in any Philippine port, and thereafter boards or is loaded on another airplane/vessel owned by the flight or voyage from the Philippines to any foreign port shall be considered “originating from the Philippines” if the time intervening between arrival to and departure from the Philippines exceeds forty- eight (48) hours, .¢ international carrier, the (a) If the failure to depart within 48 hours is due to reasons beyond the control of the passenger such as when the next available flight or voyage leaves beyond 48 hours, or such failure is due to force majeure, the flight or voyage from the Philippines shall not be considered “originating from the Philippines”; (b)If the second sireraftvessel belongs to a different international \ carrier, the flight'voyage from the Philippines shall be considered originating trom the Philippines regardless of the length of the intervening period between arrival to and departure from the Philippines. / Preferential Rates Under R.A. No. 10378, an international carrier or shipper is subject to the Gross Philippine Billings Tax of 2 /4 %, unless it is subject to a preferential rate or exemption on the basis of an applicable tax treaty or Intemational agreement to which the Philippines is a signatory or on the basis of reciprocity.rs a SoS tomer repra, a May 2017 @) Offshore Banking Units An “offshore banking unit (“OBU”) shall mean a branch, subsidiary, or affiliate of a foreign banking corporation which is duly authorized by the Bee transact offshore banking business in the Philippines (Rev. Regs. lo. 10-1998), a) Income from forei; ign currency loans granted to Philippine residents, (other than OBUs or other depository banks) - 10% final tax ) Interest income from foreign currency interbank deposits ~ 10% final tax ©) Income from foreign currency transactions with non-residents, BUs, local commercial and branches of foreign banks authorized to transact business under the FCDS - Exempt (3) Regional or Area Headquarters, and Regional Operating Headquarters of Multinationals (@) Regional or area headquarters (“RHQ”) of multinationals shall not be subject to income tax, (b) Regional operating headquarters (“ROHQ”) shall pay a tax of ten Percent (10%) of theirtaxable income (Sec. 28 (A) (6) (b)). Note: Any income derived from Philippine sources by a ROHQ when remitted to the parent company shall be subject to the tax on branch profit remittances, : (4) Service Contractors/Subcontractors Engaged in Petroleum Operations - Liable to an eight percent (8%) final tax on gross income derived from such contract in petroleum operations Note: Any income received from all other sources within the Philippines in the case of foreign subcontractors shall be subject to the regular income tax under the Tax Code. (5) Ecozone Enterprises and TIEZA-registered enterprises - Also taxed at 5% of gross income (see page 6).May 2017 nak, RESIDENT FOREIGN CORPORATIONS SUBJECT TO SPECIAL TAX In general, a non-resident foreign corporation is subject to a final withholding {ax of 30% (beginning in 2009) based on enumerated gross income from all Sources within the Philippines, except — abl ay worssestdent cinematographic film owner, lessor, or distributor “@)Non-resident owner or lessor of 4 “ vessels chartered by Philippine nationals 4S Non-resident owner ot lessor of (4) Interest on foreign loans contracted “7 on or after August 1, 1986 (5) Income from transactions with _7 depository banks under the expanded Foreign Currency Deposit System : \ Rate and Base 25% of its gross income from all sources within the Philippines (Sec. 28 (B) (2), NIRC) 4 ‘4% of gross rentals or charter fees from leases or charters to Filipinos or corporations, as approyed by the Maritime Industry Authority (Sec. 28 (B) (3), NIRC) 7% of gross rentals or fees (Sec. 28 (B) (4), NIRC) 20% of the amount of interest (See, 28 (B) (5) (a) Exempt ~ (See. 27 (D) (3); and Sec. 28 (A) (7) (b), NIRC) Note:Royalty is subject to the rate of 30% as it is not one of the items of income subject to a special rate.May 2017 EXEMPT CORPORATIONS ‘The following organizations shall not be subject to income tax in respect to income received by them as such: (A) Labor, agricultural, or horticultural organizations not organized principally for profit; (B) Mutual savings bank not having a capital stock represented by shares; and cooperative banks without capital stock organized and operated for mutual purposes and without profit; (C) A beneficiary society, order, or association, operating for the exclusive benefit of the members such as a fratemal organization operating under the lodge system, or a mutual aid association or a non-stock corporation organized by employees providing for the payment of life, sickness, accident, or other benefits exclusively to the members of such society, order, o association, or non-stock corporation or their dependents; (D) Cemetery company owned and operated exclusively for the benefit of its members; (B) Non-stock corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income ‘or asset shall belong to or inure to the benefit of any member, organizer, officer, or any specific person; (F) Business league, chamber of commerce, or board of trade, not organized for profit and no part of the net income of which inures to the benefit of any private stockholder or individual; (G) Civie league or organization not organized for profit but operated exclusively for the promotion of social welfare; (H) A nnon-stock and non-profit educational institution; (D Government educational institutions; (9) Farmers’ or other mutual typhoon or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone company, ‘or like organization of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses; and (K) Farmers’, fruit growers’, or like association organized and operated as a sales agent for the purpose of marketing the products of its members and turing back to them the proceeds of sales, less the necessary selling expenses on the basis of the quantity of produce finished by them (Sec. 30, NIRC). 10May 2017 (L) Child-caring or child-placing instiutions licensed and accredited by the Department of Social Welfare and Development (“DSWD") to implement the Foster Care Program under R.A. No. 10165, otherwise known as the “Foster Care Act of 2012.” (M) Duly registered cooperative on income from transactions with members and non-members as long as the income is related to its main business of purpose. Provided, those with accumulated reserves and undivided net savings exceeding P10 Million shall be exempt only income from transactions with members (N) Philippine Red Cross is exempt from all taxes, direct or indirect. Income of Exempt Organizations Subject to Tax The following income, of whatever kind and character, of the foregoing organizations shall be subject to income tax: 1, From any of their properties, real or personal; or 2. From any of their activities conducted for profit. ‘The said income shall be taxable regardless of the disposition made of such income (Sec. 30, NIRC),May 2017 PENALTY TAXES IMPOSED ON CORPORATIONS 1. Minimum Corporate Income Tax (“MCIT’) 1. Who are subject? (@) Domestic corporations, and (b)_ Resident foreign corporations. Rate and Base ~ Two percent (2%) of gross income. The taxpayer shall ay whichever is higher between the MCIT and the regular corporate income tax (“RCIT"), Effectivity — The fourth (4*) taxable year immediately following the year in which such corporation commenced its business. 4. Carry forward of excess minimum tax ~ Any excess of the MCIT over the regular corporate income tax (“RCIT”)in_a particular year shall be carried forward and credited against the regular income tax for the three ) immediately succeeding taxable years. 5. Gross income (sale of goods) ~ The term “gross income” shall mean gross sales less sales returns, discounts and allowances, and cost of goods sold. “Cost of goods sold” shall include all business expenses directly incurred to produce the merchandise to bring them to their present location and use, 6 Gross income (sale of services) ~ In the case of taxpayers engaged in the sale of services, “gross income” means gross receipts less sales returns, allowances, discounts, and cost of services. “Cost of services” shall mean all direct costs and expenses necessarily in curred to provide the services Tequired by the customers and clients, including — @) Salaries and employee benefits of personnel, consultants, and specialists directly rendering the service, and () Cost of facilities directly utilized in providing the service such as depreciation or rental of equipment used and cost of supplies, Provided, that in the case of banks, “cost of services” shall include interest expense (Sec, 27 (E) (4), NIRC). Note: The term “gross income” will also include all items of gross income enumerated under Section 32, whether or not derived from the taxpayer's core business, except; (a) Income exempt from income tax; and (b) Income'subject to final withholding tax (Rev. Regs, No. 12-2007), 2May 2017 7 Domestic Corporations Not Subjeet to MCIT The minimum corporate income tax (*MCIT”) shall apply only to domestic to the corporate income tax. 1S. Accordingly, the following shall not be subject to MCIT — (@) Domestic corporations operating as proprietary non-profit educational institutions subject to tax atten percent (10%) on their taxable income; (b) Domestic corporations engaged in hospital operations which are non- Profit subject to tax at ten percent (10%) on their taxable income; (©) Domestic corporations engaged in business as depository banks under the expanded foreign currency deposit system, otherwise known as Foreign Currency Deposit Units (“FCDUs”) on their — (1) Income from foreign currency transactions with non-residents, offshore banking units in the Philippines, local commercial banks, including branches of foreign banks, and other depository banks, (2) Interest income from foreign currency loans granted to residents of the Philippines under the expanded foreign currency deposit system, subject to final tax at ten percent (10%) of such income. (d) Firms that are taxed under special income tax regimes such as those in accordance with the PEZA law (RA 7916), and the Bases Conversion Development Act (RA 7227). ‘W (c) REITs — Real Estate Investment Trusts are not subject to MCIT. 8. Resident Foreign Corporations Not Subject to MCIT The minimum corporate income tax shall apply only to resident foreign, gorporations which are subject to the regular income _tax. Accordingly, the MCIT shall not apply to the following — (a) Resident foreign corporations engaged in business as “international cartier” subject to tax at two and one-half percent (2.5%) of their “Gross Philippine Billings”; (b) Resident foreign corporations engaged in business as Offshore Banking Units (“OBUs”) on their — (1) Income from foreign currency transactions with non-residents, other offshore banking units, local commercial banks, including branches of foreign banks, and (2) Interest income from foreign currency loans granted to residents of the Philippines, subject to final tax at ten percent (10%) of such ittotaling headquarters subject to tax atten percent (10%) of their taxable income; (© Firms that are taxed under special income tax regimes such as those ‘in accordance with the PEZA law (RA 7916) and the Bases Conversion Development Act (RA 7227), 9. Relief From the Minimum Corporate Income Tax The Secretary of Finance, upon the Commissioner, may suspend impo roof that the corporation sustain recommendation of the sition of the MCIT upon submission of ied substantial losses on account of - | (2) A prolonged labor dispute; | (b) Because of “force majeure”; (€) Because of legitimate business reverses, Rules in Computation of MCIT 1) Excess MCIT, if any, for the year is computed annually, that is, in the 4" quarterly (annual) return, 2) The quarterly tax shall be the higher of the RCIT or the MCIT. 3) In the payment of said quarterly MCIT, excess MCIT from previous taxable year(s) shall not be allowed to be credited. However, (1) creditable withholding taxes, and (2) quarterly income tax payments paid in the previous quarter(s) are allowed as credits against the quarterly MCIT due. 4) Tthe quarterly tax due is the RCIT, the (1) excess MCIT from previous taxable year(s), @2)ereditable taxes withheld, and (3) quarterly income tax Payments paid in previous quarter(s), are allowed as credits against the quarterly RCIT due. I, IMPROPERLY ACCUMULATED EARNINGS TAX Concept of the Tax In order to compel corporations to distribute or pay dividends to stockholders, the retention or accumulation of earnings or profits beyond the reasonable needs of the business is made subject to tax, The IAET is imposed upon corporations which are formed or availed of for the purpose of avoiding the income tax with respect to its stockholders or the 14May 2017 stockhold i ocliulas | pale other corporation by permitting earnings and profits to of being divided or distributed (Sec. 29 (B) (1), NIRC). The IAET is an additi rporat posed 1 tional tax to the regular corporate income tax imposed on Corporations under Title I ofthe Tax Code (Sec. 29 (A), NIRC). Corporations Subject to IAET eee is imposed on improperly accumulated taxable income eared ing January 1, 1998 by domestic corporations (as defined under the Tax Code) which are classified as closely-held corporations oe sified as elosely-held corporations (Sec. 4, Rev. Regs. Closely-held Corporations Defined. These are corporations where at least fifty percent (50%) in value of the outstanding capital stock or at least fifty percent (50%) of the total combined Voting power of all classes of stock entitled to vote is owned directly or indirectly by or for not more than twenty (20) indiyjduals (Sec. 4, Rev. Regs. No. 22001). * Corporations Not Subject to IAET Improperly Accumulated Earnings Tax shall not apply to the following corporations: (a) Banks and other non-bank financial intermediaries; (b) Insurance companies (©) Publicly-held corporations; (@) Taxable partnerships; (e) General professional partnerships; (®) Non-taxable joint ventures; and (g) Enterprises duly registered with the Philippine Economic Zone ‘Authority under R.A. 7916, and enterprises registered pursuant to the Bases Conversion and Development Act of 1992 under R.A. 7227, as well as other enterprises duly registered under special economic zones declared by law which enjoy payment of special tax rates on their registered operations or activities in lieu of other taxes, national or local (Sec. 4, Rev. Reg. 2-201). Note: A branch of a foreign corporation is not liable for the IAET the same being a resident foreign corporation, Circumstances Indicative of Purpose to Avoid the Tax (1)Dealings between the corporation and its shareholders, such as withdrawals by the shareholders as personal loans; 15(6) Investment in bonds and other long-term securities; am ulation of earnin; Aisumulaion of earings in excess of 100% of paid-up capital not nx ‘therwise intended forthe reasonable needs ofthe business le needs of the business. Proper Accumulation of Profits sy The following constitute accumulation of eamings for the reasonable needs of the business: @) Ifetained for working capital needed by the business; (b) Allowance for the increase in the accumulation of earnings up to 100% of the paid-up capital of the corporation as of the balance sheer date, inclusive of accumulations taken from other years, requiring considerable capital Directors or equivalent body; (@) Eamings reserved for building, plants, or equipment acquisition as approved by the Board of Directors or equivalent body; (6) Eamings reserved for compliance with any loan covenant or pre-existing obligation established under a legitimate business agreement, (©) Earnings required by law or applicable 1 corporation or in respect of which there distribution; regulations to be retained by the is a legal prohibition against its (A) In the case of subsidiaries of foreign corporations in the Philippines, all paisttibuted earnings intended or reserved for investments within’ the by corporate records and/or relevant documentary evidence (Sec. 3, Rev. Reg. No. 2-2001), 16May 2017 Tax Base or Basis of the Tax The rate of the IAET is 10%. It is based upon the improperly accumulated taxable income for each taxable year. Formula— Current Year's Taxable Income Plus: 1) Income exempt from tax; 2) Income excluded from gross income; 3) Income subject to final tax; 4) Amount of NOLCO deducted. Less: 1) Dividends actually or constructively paid from applicable year's taxable income; 2) Income tax paid or payable for the taxable year; and 3) Amounts reserved for the reasonable needs of the business from the applicable year’s taxable income Equals: JAET Notes: 1) Once the profit has been subjected to IAET, the same shall no longer be subjected to [AET in later years even if not declared as dividend. 2) Notwithstanding the imposition of IAET, profits which have been subjected to IAET, when finally declared as dividends, shall nevertheless be subject to tax on dividends imposed under the Tax Code except in ‘those instances where the recipient is not subject thereto. Period For Payment of Dividend/Payment of IAET ‘The dividends must be declared and paid or issued not later than one (1) year following the close of the taxable year. Otherwise, the IAET, if any, should be paid within fifteen (15) days thereafter (Sec. 6, Rev. Reg. 2- 2001). 7Fe ee pee rts eee Ce RIES Lappe a ME Die May 2017 SPECIAL INCOME TAXES The Tax Code presently has two types of special income taxes, namely the branch profits remittance tax, and the gross income tax. 1. BRANCH PROFITS REMITTANCE TAX ("BPRT’) (@) Transaction subject - Any profit remitted by a branch of a foreign ‘corporation to its head office (Sec. 28 (A) (5), NIRC). This includes any income derived from Philippines sources by a Regional Operating Headquarters of a multinational corporation ‘when remitted to the parent company (R.A. No. 8756). (©) Rate and Base ~ Fifteen percent (15%) of the total profits applied or earmarked for remittance (gross of the BPRT), except those activities which are registered with the — (1) Philippine Economic Zone Authority (“PEZA"); (2) Subic Bay Metropolitan Authority (“SBMA”); 3) Clark Development Authority (“CDA”); and (4) Tourism Infrastructure and Enterprise Zone Authority (*TIEZA”) (©) Income not treated as branch profits - Income which are not connected with the trade or business in the Philippines shall not be treated as “branch profits.” Ex. Dividends ftom marketable securities (@) Tax treaties. The 15% rate may be reduced by intemational treaties to which the Philippines isa signatory. IL GROSS INCOME TAX ("GIT") Under Section 27 (A) of the NIRC, the President, upon recommendation of the Secretary of Finance, may allow corporations the option to be taxed at teen percent (15%) of ince defined in the Tax Code instead of the 30% net income tax. (@ Corporations given the option — The option is available to domestic and resident foreign corporations (Secs. 27 (A) and 28 (A) (1), NIRC). (®) Requisite conditions — The option is available after the following conditions have been satisfied: 1) A tax ratio effort of twenty percent (20%) of Gross National Product (“GNP”); 18i May 2017 © @ © 2) A taio of forty percent (40%) of income tax collection toto tax revenues; 3) A VAT tax effort of four percent (4%) of GNP; and 4) A 09 percent (0.9%) ratio of the Consolidated Public Sector Financial Position (*CPSFP”) to GNP. Additional requisite - The option shall be available only to firms whose ratio of cost of sales to gross sales or receipts from all sources does not exceed fifty-five percent (55%) Period of irrevocability - The election of the gross income tax option by the corporation shall be irrevocable for three (3) Consecutive taxable years during which the corporation is qualified under the scheme. Rate and base — Fifteen percent (15%) of gross income where gross income shall be equivalent to gross sales less sales returns, discounts, and allowances, and cost of goods sold. 19SCHEDULE OF EXPANDED WITHHOLDING TAX RATES