Excess contributions; corporate income tax

THE Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. 27-2011 revoking previous BIR Rulings which excluded from the gross income of the taxpayer, hence exempt from the Income Tax, contributions to Pag-Ibig, GSIS, SSS, Life Insurance, Pre-need Plan in excess of the mandatory monthly contribution; GSIS Optional Insurance Premium, GSIS Educational Plan Premium, GSIS Memorial Plan Premium, and GSIS Unlimited Optional Insurance Premium.

It has been observed by the BIR that the grant of Income Tax exemption to SSS, GSIS, PHIC, and Pag-ibig contributions in excess of the mandatory contributions is being abused.

As an example, aside from the mandatory contribution of P100/month to Pag-Ibig Fund and 1 percent (for those with monthly compensation of P1,500 and below) or 2 percent (for those with monthly compensation of over P1,500) to PHIC, an employee may contribute additional P1,000/month to Pag-Ibig and P1,000/month to PHIC as voluntary contributions which can be gleaned as a form of investment.

The money being invested by the employees in these programs are not being taxes. Aside from that, employers who are mandated by the BIR to correctly withhold the tax due of their employees find it difficult to comply since voluntary contributions by their employees may not always pass through them.

Citing provisions of the Government Service Insurance System Act of 1997, Social Security Act of 1997, National Health Insurance Act, and Home Development Mutual Fund Law, the BIR ruled that the contributions referred to in the Tax Code, which are exempt from the Income Tax, and consequently the withholding tax on compensation, cover only the mandatory/compulsory contributions of the concerned employees to SSS, GSIS, PHIC and HDMF.

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CORPORATE

INCOME TAX

Every corporation, partnership—no matter how created or organized, joint stock companies—joint accounts, associations (except foreign corporation not engaged in trade or business in the Philippines and joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations), government-owned or controlled corporations, agencies and instrumentalities is required to render a true and accurate income tax return in accordance with the provisions of the Tax Code. The return shall be filed by the president, vice president or other principal officer and shall be sworn to by such officer and by the treasurer or assistant treasurer.

The regular rates of income tax are as follows:

Jan. 1 to Oct. 31, 2005 – 32 percent; Nov. 31, 2005 to Dec. 31, 2008 – 35 percent; Jan 1, 2009 and onwards – 30 percent.

Likewise, every general professional partnership shall file a return of its income setting forth the items of gross income and of deductions and the names, tax identification numbers, addresses and shares of each of the partners.

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