Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Make your likes visible on Facebook?

Connect your Facebook account to Prezi and let your likes appear on your timeline.
You can change this under Settings & Account at any time.

No, thanks

Normal Tax vs. MCIT

No description
by

Nemie Boy Cataluña

on 7 September 2013

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Normal Tax vs. MCIT

Period Subject to MCIT
For purpose of the MCIT, the taxable year in which the business operations commenced shall be the year in which the domestic corporation registered with the BIR. Firms which were registered with the BIR in 1994 and earlier shall be covered by the MCIT beginning Jan. 1, 1998. Firms which were registered with BIR in any month in 1998 shall be covered by the MCIT 2002 after the lapse of three calendar years from 1998.
Accounting Treatment of Excess MCIT paid
Accounting Entries to Record MCIT
Illustration
Venus Corporation, a resident foreign corporation, is on its 5th year of operations in 2010. It has the following financial data:
Financial Data of Venus Corporation
Gross Sales Php 30, 000, 000
Sales Returns and Allowances 900, 000
Sales discounts 1, 500, 000
Costs of Goods Manufactured and sold 10, 500, 000
Deductions 15, 000, 000
Interest Income from International Bank under
the foreign currency system 3, 000, 000
Interest on notes receivable 50, 000
Dividends from Ceramic Corporation, a resident
foreign corporation 200, 000
Capital gain on sale of Beauty Corporation shares,
a domestic corporation, to a direct buyer 90, 000

Normal Tax
Gross Sales Php 30, 000, 000
Less: Sales Returns
& Allowances Php 900, 000
Sales Discounts 1, 500, 000 2, 400, 000
Net Sales Php 27, 600, 000
Less: Cost of goods
Manufactured and sold 10, 500, 000
Gross Profit from sales Php 17, 100, 000
Add: Other gross income 250, 000
Gross Income Php 17, 350, 000
Less: Deductions 15, 000, 000
Net Income Php 2, 350, 000
Multiply by Tax Rate 30 %
Normal Tax Php 705, 000
Minimum Corporate Income Tax
Gross Sales Php 30, 500, 000
Less: Sales Returns
& Allowances Php 900, 000
Sales Discount 1, 500, 000 2, 400, 000
Net Sales Php 27, 600, 000
Less: Cost of goods
Manufactured and sold 10, 500, 000

Gross Income Php 17, 100, 000
Multiply by 2 %
MCIT Php 342, 000
Normal Tax vs. MCIT
Gross Income and tax due for taxpayers engaged in the sale of service under the cash basis
Income Tax due Php 234, 800
Other gross income:
Interest on notes receivable Php 100, 000

Dividend from Aerobics Corporation is excempt.

Final tax on passive income:
Capital gain on the sale of Land and Building
( Php 6, 000, 000 x 6%) Php 360, 000
Illustration
Assume that Festival Corporation, a domestic corporation engaged in consulting services, is on its 4th year of operations in 2010. The following data relate to its operations for the taxable year 2010:
Income Tax due Php 705, 000
Other gross income:
Interest on notes receivable Php 50, 000
Dividend from Ceramics Corporation 200, 000
Total Php 250, 000

Final tax on passive income:
Interest income from International Bank
(Php 3, 000, 000 x 7.5%) Php 225, 000
Capital gain on the sale of Beauty Corporation
( Php 90, 000 x 5%) 4, 500
Total Php 229, 500
Normal Tax
Gross Recepits Php 18, 000, 000
Less: Sales Returns
& Allowances Php 900, 000
Sales Discounts 1, 500, 000 2, 400, 000
Net Sales Php 27, 600, 000
Less: Cost of goods
Manufactured and sold 10, 500, 000
Gross Profit from sales Php 17, 100, 000
Add: Other gross income 250, 000
Gross Income Php 17, 350, 000
Less: Deductions 15, 000, 000
Net Income Php 650, 000
Multiply by Tax Rate 30 %
Normal Tax Php 195, 000
Minimum Corporate Income Tax
Gross Receipts Php 18, 000, 000
Less: Sales Returns
& Allowances Php 360, 000
Sales Discount 900, 000 1, 260, 000
Net Receipts Php 16, 740, 000
Less: Cost of services 5, 000, 000

Gross Income Php 11, 740, 000
Multiply by 2 %
MCIT Php 234, 800
Financial Data of Festival Corporation
Gross Receipts Php 18, 000, 000
Sales Returns and Allowances 360, 000
Sales discounts 900, 000
Costs of services 5, 000, 000
Deductions 16, 190, 000
Interest on notes receivable 100, 000
Dividends from Aerobics Corporation, a domestic
corporation 250, 000
Capital gain on sale of Land and Building at market value
Php 6, 000, 000 (higher than selling price) 2, 000, 000

Income Taxation

Normal Tax vs. MCIT
Gross Income and Tax Due for Trading/merchandising and manufacturing concerns:
Normal Tax
Gross Sales XXX
Less: Sales Returns
& Allowances XXX
Sales Discounts XXX XXX
Net Sales XXX
Less: Cost of goods/
Manufactured and sold XXX
Gross Profit from sales XXX
Add: Other gross income XXX
Gross Income XXX
Less: Deductions XXX
Net Income XXX
Multiply by Tax Rate 30 %
Normal Tax XXX
Minimum Corporate Income Tax
Minimum Corporate Income Tax



Gross Sales xxx
Less: Sales Returns
& Allowances xxx
Sales Discount xxx xxx
Net Sales xxx
Less: Cost of goods sold xxx

Gross Income xxx
Multiply by 2 %
MCIT xxx
Normal Tax
Gross Receipts XXX
Less: Sales Returns XXX
Sales Allowances XXX
Sales Discounts XXX XXX
Net Receipts XXX
Add: Other gross income XXX
Gross Income XXX
Less: Deductions XXX
Net Income XXX
Multiply by Tax Rate 30 %
Normal Tax XXX
Minimum Corporate Income Tax
Minimum Corporate Income Tax



Gross Receipts xxx
Less: Sales Returns xxx
Sales Allowances xxx
Sales Discount xxx xxx
Net Receipts xxx
Less: Cost of services xxx

Gross Income xxx
Multiply by 2 %
MCIT xxx
The reckoning point for firms using the fiscal year shall also be 1998.
For example, a firm which registered with the BIR on July 1, 1998 shall be subject to MCIT on his gross income earned for the entire fiscal year ending in the year 2002.
Assume that La Pagayo Corporation commenced business operations in the calendar year 1999. It is subject to MCIT beginning taxable year 2003. Assume, further, that its income taxes during the years from 2003 to year 2010 are as follows:
Year Normal Income MCIT Excess of MCIT over
Tax Normal Income Tax
2003 Php 25, 000 Php 100, 000 Php 75, 000
2004 130, 000 150, 000 20, 000
2005 200, 000 190, 000 -
2006 - 300, 000 300, 000
2007 10, 000 50, 000 40, 000
2008 15, 000 60, 000 45, 000
2009 8, 000 40, 000 32, 000
2010 1, 000 10, 000 49, 000
Illustration
2003
1. Provision for Income Tax Php 25, 000
Income Tax Payable Php 25, 000
To record the income tax liability using the
normal income tax rate.
2003
2. Deferred charges-MCIT Php 75, 000
Income Tax Payable Php 75, 000
To record excess MCIT.
2003
3. Income Tax payable Php 100, 000
Cash in Bank Php 100, 000
To record the income tax due
for 2003.
A. For taxable year 2003 when MCIT is greater than normal income tax liability of the company.
B. For taxable year 2005 when excess MCIT (2003 and 2004) is applied against normal income tax liability.
1. Provision for Income Tax Php 200, 000
Income Tax Payable 200, 000
To record income tax liability using
the normal income tax rate.
2. Income Tax Payable Php 95, 000
Deferred charges-MCIT 95, 000
To record application of excess MCIT
against normal income tax liability for taxable
year 2005 (Php 75, 000 + Php 20, 000)
3. Income Tax Payable Php 105, 000
Cash in Bank 105, 000
To record payment of income tax due
(Php 200, 000 - Php 95, 000)
C. For Taxable year 2010 when the expired portion of excess MCIT (Php 30, 000) for taxable year 2006 is closed to the retained earnings account due to its non-application.
Retained Earning Php 300, 000
Deferred Charges-MCIT 300, 000
To record the expired portion of Deferred Charges- MCIT.
Thank you.
Full transcript