MINIMUM

CORPORATE INCOME
TAX
What is MCIT?

The MCIT is 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.
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 paying
the income tax.
When is MCIT reported and paid?

It is paid on a quarterly and annual basis.

(R.R. No. 12-2007)
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?

• PHEI
• 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.
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.
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
corporation’s books as an asset under account
title “Deferred charges-MCIT”