Clarification on the Illustrative Examples in the Computation of Corporate Income Tax under Section 3 (B) and 3 (D) of Revenue Regulations No. 5-2021

June 11, 2021 REVENUE MEMORANDUM CIRCULAR NO. 76-2021 SUBJECT : Clarification on the Illustrative Examples in the Computation of Corporate Income Tax under Section 3 (B) and 3 (D) of Revenue Regulations No. 5-2021 TO : All Revenue Officers and Employees and Others Concerned Revenue Regulations (RR) No. 5-2021, which implemented the income tax provisions of Republic Act No. 11534 or the "Corporate Recovery and Tax Incentives for Enterprises Act" (CREATE Law), includes illustrative examples on how the income tax of corporation shall be computed. In the illustration under Section 3 (B) and 3 (D) of RR No. 5-2021 for proprietary educational institution and Regional Operating Headquarters (ROHQ), however, the income tax due and the gross income were inadvertently written to be in the amount of P1,000,000.00 and P558,500,000.00 instead of the correct amount of P100,000.00 and P58,500.000.00, respectively. HTcADC Hence, to avoid confusion, this Circular is being issued to clarify the aforesaid amounts, now correctly shown in the tables below: " B. PROPRIETARY EDUCATIONAL INSTITUTIONS xxx xxx xxx Related activities Unrelated Activities Total Gross Receipts/Sales 10,000,000.00 8,000,000.00 18,000,000.00 Less: Cost of Service/Sales 2,000,000.00 3,000,000.00 5,000,000.00 Gross Income 8,000,000.00 5,000,000.00 13,000,000.00 Less: Allowable Deductions 1,000,000.00 2,000,000.00 3,000,000.00 NET TAXABLE INCOME 7,000,000.00 3,000,000.00 10,000,000.00 REGULAR RATE 1% TAX DUE 100,000.00 xxx xxx xxx D. REGIONAL OPERATING HEADQUARTERS TY 2020 TY 2021 TY 2022 TY 2023 Annual Income 75,000,000.00 120,000,000.00 130,000,000.00 75,000,000.00 Cost of Services 41,250,000.00 66,000,000.00 71,500,000.00 41,250,000.00 Gross Income 33,750,000.00 54,000,000.00 58,500,000.00 33,750,000.00 Allowable Deductions 33,625,000.00 41,200,000.00 42,550,000.00 35,125,000.00 125,000.00 12,800,000.00 15,950,000.00 (1,375,000.00) Computation of Income Tax Due Net Taxable Income/Gross Income 125,000.00 12,800,000.00 15,950,000.00 (1,375,000.00) Multiply by 10% 10% 25% 25% Income Tax Due 12,500.00 1,280,000.00 3,987,500.00 0.00 MCIT: N/A N/A Gross Income 58,500,000.00 33,750,000.00 MCIT Rate 1% 1.5%* MCIT 585,000.00 506,250.00 Income Tax Due P3,987,500.00 P506,250.00 xxx xxx xxx" This Circular likewise clarifies that the 1% income tax rate for proprietary educational institutions and the 1% Minimum Corporate Income Tax (MCIT) for ROHQ shall be imposed only for the period July 1, 2020 until June 30, 2023, and January 1, 2022 to June 30, 2023, respectively. Thus, beginning July 1, 2023, the income tax rate for proprietary educational institutions and the MCIT shall revert to ten percent (10%) and 2%,respectively. All are enjoined to give this Circular a wide publicity as possible. CAIHTE (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue