Implementation of Minimum Corporate Income Tax on GOCCs

September 15, 2000 BIR RULING NO. 041-00 27 (E) (1) & (3) 000-00 Commission on Audit Commonwealth Avenue Quezon City Gentlemen: Attention: Ms . Natividad Espina State Auditor IV Corporate Audit Office II Gentlemen : This refers to your letter dated October 6, 1999 requesting for a ruling concerning the implementation of the Minimum Corporate Income Tax (MCIT) in so far as Government-owned and controlled corporations (GOCCs) are concerned. Specifically, your question is whether or not the MCIT shall be imposed if a GOCC incurs a net loss after deducting the administrative expenses but has income prior to the deduction of such administrative expenses. You also want to know if there is a regulation suspending the imposition of the MCIT for GOCCs that have sustained substantial losses. In reply, please be informed of the pertinent provisions of Revenue Regulations No. 9-98 relative to the Imposition of the Minimum Corporate Income Tax (MCIT) on Domestic Corporations and Resident Foreign Corporations, as follows: "Section 2.27 (E) Minimum Corporate Income Tax (MCIT) On Domestic Corporations "(1) Imposition of the Tax A minimum corporate income tax (MCIT) of two percent (2%) of the gross income as of the end of the taxable year (whether calendar or fiscal year, depending on the accounting period employed) is hereby imposed upon any domestic corporation beginning the fourth (4th) taxable year immediately following the taxable year in which such corporation commenced its business operations. The MCIT shall be imposed whenever such corporation has zero or negative taxable income or whenever the amount of minimum corporate income tax is greater than the normal income tax due from such corporation. xxx xxx xxx" The term "domestic corporations" undoubtedly includes GOCCs since they are now subject to the corporate income tax like ordinary corporations. It follows, therefore, that the 2% MCIT shall also be imposed on the gross income of GOCC beginning the 4th taxable year in which such GOCC commenced its business operations even though it has a zero or negative taxable income or whenever the amount of the minimum corporate income tax is greater than the normal income tax due from such GOCC. Similarly, a GOCC may request for the suspension of the MCIT by submitting proof that it has sustained substantial losses on account of a prolonged labor dispute or because of "force majeure" or because of legitimate business reverses. Please be guided accordingly. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue