INCOME TAX

COMPUTATION FOR
CORPORATE TAXPAYERS
Prepared by:
Lilybeth A. Ganer
Revenue Officer

What is a corporation?
Corporation is an artificial being created by law,
having the rights of succession and the powers,
attributes and properties authorized by law or
incident to its existence.
For taxation purposes, corporation shall
include

Partnerships
Joint-stock companies
Joint accounts
Associations
Insurance companies
2

A corporation does not include

General Professional Partnership

Joint venture or consortium formed
for the purpose of
undertaking construction projects
or engaging in petroleum, coal,
geothermal and other energy
operations pursuant to an operating
or consortium agreement under a
service contract with the government
3

Classification of Corporation
1.) Domestic corporation
- is one created or organized in the
Philippines or under its laws. (Sec.22
(C),NIRC)
2.) Foreign corporation
- Those that were formed, organized
orexisting under any law other than
those of the Phils. irrespective of
the nationality of its stockholders.
4

Foreign Corporation

Foreign corporations are either

A.

Resident foreign

- Foreign corporation engaged in

trade or business within the Phil.
Generally, it establishes branch or an
office for the purpose of doing business
or trade.

 B. Non-resident foreign
- Foreign corporation not engaged in
trade or business within the Phil.

Corporations may be subjected to the

following taxes:
1.
2.

3.
4.

5.

Normal Corporate Income Tax (NCIT)

Minimum Corporate Income Tax
(MCIT)
Gross Income Tax (GIT)
Capital Gains Tax on sale of real
property or on sale of shares of stock
(CGT)
Final Tax on Passive income (FT)

Evolution of Corporate Income Tax Rate

Tax Rate

Effectivity

Basis

34%

Jan 1, 1998

RA 8424

33%

Jan 1, 1999

RA 8424

32%

Jan 1, 2000

RA 8424

35%

Nov 1, 2005

RA 9337

30%

Jan 1, 2009

RA 9337
8

Taxability of Corporations (RA 9337)

Income In General
All income derived from
sources within or outside the
Phils.

Domestic

Minimum Corporate Income

Tax
(MCIT)

Non-Res.
Foreign

--

--

30%
(Net
Taxable
Income)

30%

30%
(Net
Taxable
Income)

All income derived from

sources within the Phils.
Optional Corporate Tax Rate

Resident
Foreign

15%

15%

(Gross
Income)

(Gross
Income)

2%
2%
(Gross (Gross
Income) Income
)

(Gross
Income)

---9

The Normal Corporate Income

Tax
BIR Form 1702 (General Format for Income tax computation on
business income)
Sales/ Revenues/ Fees from within and without
P xxx
Less:

Sales returns, allow., and disc. (if any)

Cost of Sales

Gross Income from operation

Add:

Non-operating and other income not

subjected to final tax or capital gains tax

P xxx
xxx

xxx
P

xxx
xxx

Gross Income

xxx

Less: Allowable itemized business deductions

xxx

Net Taxable Income

xxx

Multiply by Normal Corporate Income Tax Rate

30%

Normal Corporate Income Tax

xxx
===

Sample Problem:

Mara Clara Inc. is a

domestic corporation engaged
in
the
retail
of
various
household merchandise.
For
TY 2010, the company had the
following account balances:

Cost of Sales
P
400,000.00
Sales Returns allowance and disc.
50,000.00
Administrative Expense
230,000.00
Depreciation Expense
20,000.00
Rental Expense
100,000.00
Light and Water Expense
50,000.00
Rental Income
100,000.00
Sales
1,050,000.00
Compute for the Normal Income Tax Due:

Solution:
Sales/ Revenues
Less: Sales Rets., Allow. &
Disc.
Cost of Sales
Gross Income from operation
Add: Non-operating and other
income not subjected
to Final
tax or capital gains tax

Gross Income
Less: Itemized business
deductions

P1,050,000.
00
50,000.00
400,000.00

450,000.00
600,000.00

100,000.00

700,000.00

400,000.00

How much is the Normal Corporate

Income Tax if Mara Clara, Inc. is:
1. A Resident Foreign Corporation?
2. A Non-Resident Foreign Corporation?

Answer: 1. ___________________
2. ____________________

Minimum Corporate
Income Tax
(MCIT)
(RR No. 9-98 as amended by
RR No. 12-07)

15

Sec. 27(E) and 28 (A)(2) of the NIRC:

Imposed on:

Domestic & Res. Foreign

2 % on Gross Inc.

if: - in the 4th year of operation

- net loss/zero taxable inc./
MCIT is greater than NCIT

 For sale of goods :

Gross sales
1,000,000.00
Less: Sales Ret., Disc & Allow.
25,000.00
Cost of Goods Sold
500,000.00
Gross Income from operation
475,000.00
Add: Other Income not subject to
Final Tax or Capital Gains Tax 100,000.00
Total Gross Income subject to MCIT 575,000.00
========

17

Gross income
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.
Gross sales
shall include only sales contributory to
income taxable under Sec. 27(A) of the Code.
Cost of goods sold
shall include all business expenses directly
incurred to produce the merchandise to bring
them to their present location and use
18

For sale of services

Gross Revenue
P 5,000,000.00
Less: Cost of services
950,000.00
Gross Income
4,050,000.00
Add: Other Income not subject
to Final Tax or Cap.Gains Tax
___ --____
Total Gross Income

4,050,000.00
=========
19

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.

20

Illustration:
Bungga-Bungga Corporation has been operating
since January 1, 2006. Data pertinent to its
operations covering 2008 to 2010 are as follows:
2008

2009

3,080,00
0

4,100,00
0
100,000

Gross Sales

Sales Ret., Disc. &

Allow.
Cost of Sales

2010
5,200,000

200,000

80,000
1,500,00 2,000,00 2,500,000
0
0
Determine the appropriate income tax of BunggaOperating Expenses
1,450,00 1,900,00 2,100,000
Bungga Corporation.
0
0

1. Computation of Normal Corporate Income

Tax(NCIT):
Gross Sales

2008
2009
2010
3,080,000 4,100,000 5,200,000

Sales Ret., Disc. &

Allow.
Net Sales

3,000,000 4,000,000 5,000,000

Cost of Sales

1,500,000 2,000,000 2,500,000

Gross Income

1,500,000 2,000,000 2,500,000

Operating Expenses

1,450,000 1,900,000 2,100,000

Net Taxable Income

80,000

100,000

200,000

50,000

100,000

400,000

X Normal Corp. Tax rate

35%

30%

30%

Normal Corp. Income Tax

17,500

30,000

120,000

2. Computation of Minimum Corporate

Income Tax (MCIT)
Gross Income
X MCIT rate
MCIT
Note:

2009
2,000,000
2%

2010
2,500,000
2%

40,000

50,000

The MCIT for TY 2008 is not applicable

because the company has not yet reached its
fourth year

3. Determination of Income tax due and

payable:
2008
2009
2010
NCIT

17,500

30,000

120,000

MCIT

Not
Applicable

40,000

50,000

2008
NCIT or MCIT, w/ever is
higher
Less: Excess of MCIT over
NCIT
Income Tax Due and
Payable

2009

2010

17,500 40,000 120,000

10,000
17,500 40,000 110,000

Carry forward of Excess MCIT

Excess of MCIT over normal income tax shall be
carried forward on an annual basis and credited against
the normal income tax for the 3 immediately succeeding
taxable years
Excess MCIT can only be credited against the
income tax due if the normal income tax is higher than
the MCIT

25

Carry forward of Excess MCIT

Excess MCIT which has not or cannot be so

credited against the normal income tax due for
the 3-year period shall lose its credibility
Excess MCIT cannot be claimed as a credit
against the MCIT itself or against any other
losses

26

Carry forward of Excess MCIT (cont.)

The final comparison between the normal income
tax payable and the MCIT shall be made at the end of
the taxable year
The payable or excess payment in the Annual
Income Tax Return shall be computed taking into
consideration income tax payment made at the time of
filing of quarterly income tax returns whether this be
MCIT or normal income tax

27

Rules on crediting of tax payments & taxes withheld

Annual Computation
Normal Income Tax (NIT)
is higher than MCIT

MCIT
is higher than Normal Income Tax

Excess MCIT from prior year can

be deducted from the NIT due

Excess MCIT from prior years

cannot be deducted from the
MCIT due

Excess withholding tax from prior

year can be deducted from the NIT
due

Excess withholding tax from prior

year can be deducted from the
MCIT due

28

Rules on crediting of tax payments & taxes withheld

Annual Computation
Normal Income Tax (NIT)
is higher than MCIT

MCIT
is higher than Normal Income Tax

Quarterly taxes withheld can be

credited from the NIT due

Quarterly taxes withheld can be

credited from the MCIT due

Quarterly income tax payments

whether Normal Income Tax or
MCIT can be deducted from the
NIT due

Quarterly income tax payments

whether MCIT or Normal
Income Tax can be deducted
from the MCIT due

Note: The final comparison between the NIT and MCIT shall be made at
the end of the taxable year
29

Rules on crediting of tax payments & taxes withheld (cont.)

Quarterly computation
Normal Income Tax (NIT)
is higher than MCIT

Excess MCIT from prior year

can be deducted from the
quarterly NIT due

MCIT
is higher than Normal Income Tax

Excess MCIT from prior year

cannot be deducted from the
quarterly MCIT due

Excess withholding tax from

Excess withholding tax from
prior year can be deducted from prior year can be deducted from
the quarterly NIT due
the quarterly MCIT due

30

Rules on crediting of tax payments & taxes withheld (cont.)

Quarterly computation
Normal Income Tax (NIT)
is higher than MCIT

MCIT
is higher than Normal Income Tax

Quarterly taxes withheld can be Quarterly taxes withheld can be

credited from the quarterly NIT credited from the quarterly
due
MCIT due
Payment from previous quarters
of the taxable year can be
deducted from the cumulative
tax due (whether NIT or MCIT)

Payment from previous quarters

of the taxable year can be
deducted from the cumulative
tax due (whether NIT or MCIT)

Note: Quarterly comparison to determine whichever is higher between the NIT and MCIT
shall be done on a cumulative basis
31

Illustration 1 - Normal income tax at year end is higher

than MCIT
Panday Corporations computed normal income tax and
MCIT, and creditable income taxes withheld from 1st to 4th
quarters including excess MCIT and excess withholding taxes
from prior year/s are as follows:
Excess
Excess
Normal
Taxes
MCIT
W/tax
Qtr. Inc. Tax
MCIT
Withheld Prior Years Prior Years
1st
100,000
80,000
20,000
2nd
120,000
250,000
30,000
3rd
250,000
100,000
40,000
4th 200,000
100,000
35,000

30,000

10,000

32

Computation
1st Quarter
Quarterly corporate income tax due
(higher amount between normal income
and MCIT) normal income tax
Less : Taxes Withheld Prior Year
Taxes Withheld 1st qtr
Excess MCIT prior year
Net Income Tax Due , 1st quarter
normal income tax
=======

tax
P100,000
10,000
20,000
30,000

60,000

P 40,000

33

Computation (cont.)

2nd Quarter
Excess
Excess
Normal
Qtr.
Inc. Tax

MCIT

Taxes
Withheld

1st
100,000
80,000
20,000
2nd
120,000 250,000 30,000
Total 220,000
330,000 50,000
======
======
=====

MCIT
W/tax
Prior Years Prior Years
30,000

10,000

34

Computation (cont.)

Quarterly corporate income tax due

(higher amount between normal
income tax and MCIT) MCIT
Less : Taxes Withheld Prior Year
Taxes Withheld 1st qtr
Taxes Withheld 2nd qtr
Net income tax payment 1st qtr

P330,000
10,000
20,000
30,000
40,000
100,000

Net Income Tax Due , 2nd quarter MCIT

=======

P230,000

35

Computation (cont.)
3rd Quarter
Excess
Excess
Normal
Qtr. Inc. Tax

MCIT

1st 100,000
80,000
2nd
120,000
250,000
3rd 250,000
100,000
Total 470,000 430,000
======
======

Taxes
Withheld

MCIT
Prior Years

20,000 30,000
30,000
40,000
90,000
======

W/tax
Prior Years

10,000

36

Computation (cont.)
Quarterly corporate income tax due
(higher amount between normal income tax
and MCIT) Normal Income Tax
Less : Taxes Withheld Prior Year
Taxes Withheld 1st qtr
Taxes Withheld 2nd qtr
Taxes Withheld 3rd qtr
Net income tax payment 1st qtr
MCIT paid in the 2nd quarter
Excess MCIT in prior year
Net Income Tax Due , 3rd quarter
Normal Income Tax
=======

P470,000
10,000
20,000
30,000
40,000
40,000
230,000
30,000

400,000
P 70,000

37

Computation (cont.)
Annual Income Tax (NIT)

Qtr.

Normal
Inc.Tax

MCIT

Taxes
W/held

1st
100,000
80,000
20,000
2nd
120,000 250,000
30,000
3rd
250,000 100,000
40,000
4th
200,000 100,000
35,000
670,000 530,000
125,000
====== ====== ======

Excess
MCIT
Prior Years
P30,000

Excess
W/tax
Prior Years
10,000
Total

38

Computation (cont.)
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
Taxes Withheld 1st qtr
20,000
Taxes Withheld 2nd qtr
30,000
Taxes Withheld 3rd qtr
40,000
Taxes Withheld 4th qtr
35,000
Net income tax payment 1st qtr
40,000
Net income tax payment 3rd qtr
70,000
MCIT paid in the 2nd quarter
230,000
Excess MCIT in prior year
30,000
505,000
Annual Net Income Tax Due NCIT

P 165,000
=======

39

Illustration 2 - MCIT at year end is higher than the

normal income tax
Excess
Qtr.

Excess
Normal
Inc. Tax
MCIT

Taxes
Withheld

MCIT
W/tax
Prior Years Prior Years

1st 100,000
80,000
20,000
30,000
2nd
120,000
250,000
30,000
3rd 250,000
100,000
40,000
4th
50,000
120,000
35,000
Total 520,000
550,000
125,000
======
======
======

10,000

40

Computation
Annual Income Tax (MCIT)
Annual corporate income tax due
(higher amount between normal
income tax and MCIT) MCIT
P550,000
Less : Taxes Withheld Prior Year
10,000
Taxes Withheld 1st qtr
20,000
Taxes Withheld 2nd qtr
30,000
Taxes Withheld 3rd qtr
40,000
Taxes Withheld 4th qtr
35,000
Net income tax payment 1st qtr
40,000
Net income tax payment 3rd qtr
70,000
MCIT paid in the 2nd quarter
230,000
475,000
Annual Net Income Tax Due MCIT
P 75,000
=======
41

Illustration 3: - Carry forward of excess MCIT

Any excess of the MCIT over the normal

income tax as computed under Sec. 27(A)
shall be carried forward on an annual basis
and credited against the normal income
tax for the three (3) immediately
succeeding years.

The excess MCIT cannot be claimed as a

credit against the MCIT itself or against
any other losses.

Illustration:
YEAR NORMAL IT
MCIT EXCESS
2004 25,000.00
2008 130,000.00
2009 200,000.00
2010 150,000.00
2011 100,000.00 250,000.00 150,000.00
2002 125,000.00 100,000.00
25,000.00
2013
8,000.00
5,000.00
3,000.00
2014
5,000.00
4,000.00
1,000.00
2015 100,000.00
98,000.00
2,000.00

2012
NCIT or MCIT
100T
Less: Excess of MCIT
-_
Income tax
100T

2013

125T
125T

8T

====

5T

8T

====

===

2014 2015

5T
===

Accounting Entries

For 2011
Provision for Income tax
P250,000
Income Tax Payable
P250,000
To record Income Tax
liability - normal rate.

Deferred Charges MCIT

P150,000
Income tax payable
P150,000
To record excess MCIT

Accounting Entries
Income Tax Payable
P250,000
Cash in Bank
P250,000
To record payment of income tax due
for 2011.

For year 2012

Provision for Income Tax
P125,000
Income Tax Payable
P125,000
To record IT liability using the normal
rate.

Accounting Entries
Income Tax Payable
P125,000
Deferred Charges-MCIT
P125,000
To record application of excess MCIT
against normal IT for year 2012.
For 2013
Provision for Income Tax
P8,000
Income Tax Payable
P8,000
To record IT liability using the normal
rate.

Accounting Entries
For 2013
Income Tax Payable
P8,000
Deferred Charges-MCIT
P8,000
To record application of excess MCIT against
normal IT for year 2013.
For 2015
Retained Earnings
P12,000
Deferred Charges-MCIT
P12,000
To record the expired portion of the
Deferred Charges-MCIT

Suspension of MCIT
Instances when MCIT may be suspended

Substantial losses on account of

Prolonged labor dispute
Force majeure
Legitimate business reverses

Who may suspend

Secretary of Finance upon recommendation of
the CIR

49

Suspension of MCIT
Required documentation
Submission of proof by the corporation
Duly verified by the CIRs duly authorized
representative

Definition of Terms
Substantial losses from prolonged labor dispute Losses
arising from strike which lasted for more than 6 months
and which ahs caused the temporary shutdown of business
operations

50

Definition of Terms
Force majeure Cause due to an irresistible force as
by act of God like lightning, earthquake, storm,
flood. Also includes armed conflicts such as war
or insurgency
Legitimate business reverses These shall include
substantial losses sustained due to fire, robbery,
theft or embezzlement or for other economic
reason as determined by the Sec. of Finance

51

IMPROPERLY
ACCUMULATED
EARNINGS
TAX
(IAET)
RA 8424 / RR 2-2001

CONCEPT OF IAET
Taxpayer is a corporation

Improper accumulation of taxable income

beyond the reasonable needs of the business

Non-distribution of earnings/profits to
stockholders
The purpose of accumulation is to avoid the
payment of the income tax
Imposition of tax equivalent to 10% of the
improperly accumulated taxable income
53

EVIDENCE OF PURPOSE
TO AVOID THE TAX
1.The corporation is a mere holding or
investment company
2. Earnings or profits are permitted to
accumulate beyond the reasonable
needs of the business

54

Concept of IAET
IAET is in addition to other taxes imposed under
Title II (Income Tax);
10% tax is imposed for permitting the earnings and
profits of the corporation to accumulate instead
of distributing them to the shareholders;
As a form of deterrent to the avoidance of tax upon
shareholders who are supposed to pay dividend tax;

Concept of IAET

Tax is imposed in the nature of penalty to a corporation

for improper accumulation of earnings beyond the
reasonable needs of the business.

Touchstone of Liability

PURPOSE (NOT CONSEQUENCE) of accumulation

of income
Use of undistributed earnings for reasonable needs of business
Determination of accumulation beyond reasonable needs of
business

Reasonable vs. Unreasonable Accumulation

Reasonable Needs of Business:

Immediate needs of business, including reasonably
anticipated needs (Immediacy Test)

Unreasonable Accumulation
Not necessary for the purpose of the business
considering all circumstances of the case

Reasonable Needs of Business

Earnings up to 100% of paid-up capital of corp.,
inclusive of accumulation taken from other years
Earnings Reserved
for definite corporate expansion projects
for building, plant or equipment acquisition
for compliance with loan covenant or preexisting obligation established under a
legitimate business agreement.

Unreasonable accumulation of Profits

Investment

of substantial earnings and profits

of the corporation in unrelated business or in
stock or securities of unrelated business;
Investment in bonds and other long term
securities; and
Accumulation of earnings in excess of 100%
of paid-up capital.

Exempt Corporation from IAET

Banks and non-bank financial intermediaries
Insurance companies
Publicly held corporations
taxable partnerships
GPP
Non-taxable joint ventures
Firms registered under RA 7916, 7227, and other
special ecozones

IMPOSITION OF IAET
Tax rate
Corporations liable

10%
Closely-held domestic

corporations
Deadline
15th day after the
end of he year following the
of the taxable year

close

61

Closely-held corporations:
are corporations at least 50% in value of the
outstanding capital stock or at least 50% of
the total combined voting power of all
classes of stocks entitled to vote is owned
directly or indirectly by or for not more than
20 individuals

TAX BASE OF IAET

Taxable income
P xxx
Add: Income subject to final tax
Pxxx
Income exempt from tax
xxx
Income excluded fr gross income xxx
Amount of NOLCO deducted
xxx
xxx
Total
P xxx
Less: Div. actually or const. paid/issued xxx
Income tax paid for the year xxx
Reserved for the reasonable
needs of the business
xxx
xxx
Improperly accumulated earnings
P xxx
===

63

Illustration
Add
Tax rates, amount and
(Deduct) accounts
GAAP Income
ND expenses
NOLCO
NT income
Base of ITE
TNDE
TNTI
Base of ITP

P 100
3
(1)
(2)
P 100
5
(4)
P 101

30% = P30.00 ITE

30% = 1.5 0 DT
30% = (1.20) DTL
30% = P30.30 TP

Computation of IAET
Taxable income
Add: NOLCO
Nontaxable income
TNTI
Total
Less: Income tax payable
Basis of IAET
Multiplied by IAET rate
IAET

P 101.00
P 1.00
2.00
4.00

7.00
P 108.00
30.30
P 77.70
10%
P 7.77

Payment of IAET

Dividend must be declared and paid not later than one

year following the close of the taxable year

Otherwise, IAET should be paid within 15 days

thereafter

Effect of the 10%

- Once the profit has been subjected to IAET, the
same shall no longer be subjected to IAET in later
years, even if not declared as dividend.

Income Tax
Forms and
Due Dates

Form
No.

1702Q

Form Name

Quarterly Income Tax

Return
(For Corporations,
Partnerships and Other
Non-individual
Taxpayers)

Deadline for Filing No. of Copies

60 days
following the
close of the first
3 taxable
quarters

3 copies

Attachments Required:
1.
Certificate of income payments not subjected to
withholding
tax (BIR Form 2304), if applicable.
2. Certificate of Creditable withholding tax withheld at
source (BIR Form 2307, if applicable).
3. Summary Alphalist of W/A (SAWT) per RR 2-2006;
4. Duly approved Tax Debit Memo, if applicable.

68

Income Tax Forms

Form
No.

1702

Form Name

Annual Income
Tax Return
(For
Corporations,
Partnerships and
Other Nonindividual
Taxpayers)

Deadline for Filing

On or before
April 15

No. of
Copies

3 copies

On or before the
15th day of the
month following
the close of the
fiscal year

69

Attachments Required:
1. Account Information Form (AIF) BIR Form 1702AIF and the Certificate of the Independent CPA
(The CPA Cert. is reqd. if the Gross sales, earnings,
receipts exceed P150,000.00);
2. Certificate of income payments not subjected to
withholding tax (BIR Form 2304), if applicable;
3. Certificate of Creditable withholding tax withheld at
source (BIR Form 2307, if applicable);

4.
5.
6.
7.
8.

Summary Alphalist of W/A (SAWT) per RR 2-2006;

Duly approved Tax Debit Memo, if applicable;
Proof of prior years excess credits, if applicable;
Proof of Foreign Tax credits, if applicable;
For amended return, proof of tax payment and the
return previously filed;
9. For those availing of fiscal incentives, see RMC No.
21-2007

Attachments

Shall be filed in TRIPLICATE COPIES

AABs (w/ payment)

RDO (w/o payment)

Deductions from the Income Tax Due

Taxes withheld from current years income

Tax credits for foreign taxes paid

Tax credits (tax credit memo)
Taxes paid in the first 3 quarters
Excess tax payments in the preceding year
74

NOTE:

Installment Payments
** Applicable to individual taxpayer
only and NOT ON CORPORATIONS.

75

Stamping of ITRs and

Attachments
Revenue Memorandum
Order No. 6-2010

Policies and Guidelines:

1.

All concerned Offices, including

AABs, shall receive the income
tax returns by stamping the
official receiving seal or stamp of
receipts of an internal revenue
office where the said returns are
filed on the space provided for in
the three (3) copies of the
returns.

2.

The attachments to the income tax

returns shall also be received in the same
manner as above, but for the attached
financial statements the same shall be
stamped received only on the page of the
Audit Certificate. Accordingly, the other
pages of the FS and its attachments need
not any more be stamped received.

3.

Taxpayer shall only accomplish and file

three (3) copies of tax returns with the
AAB and/or the BIR. Any tax return in
excess three (3) shall not be received by
the AAB and/or the BIR.

Submission of
STATEMENT OF MANAGEMENT
RESPONSIBILITY
(RMC 82-2007)

The contents and representations

as they are reflected in the tax
returns and information statements
filed with the BIR made in their
behalf by their tax agents, remain
their responsibility in their capacity
as the principals stated in the
aforesaid returns and information
statements.

The taxpayer is under strict obligation

to check , verify and validate:
The authenticity of a tax return
and/or
information
statement
made in their behalf.
The correctness and validity of
the information contained in such
documents.
The liability to pay the tax
payments remain the
responsibility of the concerned

Any findings, errors, violations or

infractions noted in the Tax Returns
(together
with
their
necessary
attachments) as a result of the verification
and authentication procedures made by
the BIR shall render both the taxpayer and
his/its
tax
agent
civilly,
and
administratively and criminally liable,
pursuant to existing laws and regulations.

Amended Audit Criteria for Taxable

Years 2009 and 2010
Revenue Memorandum Order No. 4-2011
(dated Feb. 3, 2011)

Policies and Guidelines:

1. All taxpayers are considered as possible
candidates
for audit.
2.

Priority shall be given to the following

taxpayers who render professional services:
*
Lawyers;
Doctors;
Engineers;
Accountants;
& Other Professionals.

3.

Last priority status for income tax

audit shall be accorded to those
taxpayers with an effective income
tax rate for eighteen percent (18%).
[Gross Income x 18%]
An exception to the last priority
status hall be those taxpayers where
there are findings/suspicions of
under-declaration of sales/revenues.

End of
Presentation . Exercise

caution in your
business affairs,
for the world is
full of trickery.
But let not this
blind you to
what virtue
there is; many
persons strive
for high ideals,