Basic Corporate Income Tax
The basic corporate income tax under Section 27 of the National Internal Revenue Code is computed on an annual basis in accordance with the taxable period (calendar year or fiscal year) employed by the corporation. The corporation, however, is required to file quarterly returns and pay the corresponding taxes due after deducting the taxes paid during the previous quarter/s.
The respective returns for the first three quarters must be filed within 60 days from the close of each quarter concerned. On or before the fifteenth day of April of the following year (if the corporation adopts a calendar year), the corporation shall file a final adjustment return. If the corporation is using a fiscal year, it is required to file a final adjustment return on or before the fifteenth day of the fourth month following the close of the fiscal year. The final adjustment return is the Annual Income Tax Return of the corporation.
These quarterly payments have two-fold purpose: 1) to ensure the liquidity of the government to enable it to meet its budgetary requirements, and 2) to lessen the burden of the taxpayer (corporation) by allowing it to pay its annual income tax on a staggered basis.
The quarterly tax payments are advance payments of the tax due on the entire taxable income of that particular taxable year. Thus, these quarterly tax payments are deducted from the total tax due for the entire year as indicated in the final adjustment return or annual income tax return. It may result in one of these three scenarios:
- The sum of the quarterly payments is equal to the total (annual) tax due;
- The sum of the quarterly payments is less than the total tax due; or
- The sum of the quarterly payments exceeds the total tax due.
If the total quarterly payments equal the total tax due, the corporation does not pay anything anymore. The quarterly payments serve as the final and complete settlement of its income tax due for the year. If the sum of the quarterly payments is less than the annual tax due, the corporation is required to pay the balance of tax still due. If the sum of the quarterly payments exceeds the total tax due, the NIRC provides the corporation 3 alternative options as follows:
- To carry over the excess amount to the succeeding taxable period/s;
- To be issued a tax credit certificate; or
- To be refunded.