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Frequently Asked Questions

Minimum Corporate Income Tax
Is the Minimum Corporate Income Tax (MCIT) an addition to the regular or normal income tax?
No, the MCIT is not an additional tax. An MCIT of 2% of the gross income as of the end of taxable year (whether calendar or fiscal year, depending on the accounting period employed) is imposed on a corporation taxable under Title II of the Tax Code, as amended, beginning on the 4th taxable year immediately following the taxable year in which such corporation commenced its business operations when the MCIT is greater than the regular income tax. The MCIT is compared with the regular income tax, which is due from a corporation. If the regular income is higher than the MCIT, then the corporation does not pay the MCIT but the amount of the regular income tax.
Who are covered by MCIT?
The MCIT covers domestic and resident foreign corporations which are subject to the regular income tax. The term “regular income tax” refers to the regular income tax rates under the Tax Code. Thus, corporations which are subject to a special corporate tax or to preferential rates under special laws do not fall within the coverage of the MCIT.

For corporations whose operations or activities are partly covered by the regular income tax and partly covered by the preferential rate under special law, the MCIT shall apply the regular income tax rate on its operations not covered by the tax incentives. Newly established corporations or firms which are on their first 3 years of operations are not covered by the MCIT.
When does a corporation start to be covered by the MCIT?
A corporation starts to be covered by the MCIT on the 4th year following the year of the commencement of its business operations. The period of reckoning which is the start of its business operations is the year when the corporation was registered with the BIR. This rule will apply regardless of whether the corporation is using the calendar year or fiscal year as its taxable year.
When is the MCIT reported and paid? Is it quarterly?
The MCIT is paid on an annual basis and quarterly basis. The rules are governed by Revenue Regulations No. 12-2007.
How is MCIT computed?
The MCIT is 2% of the gross income of the corporation at the end of the taxable year.

The computation and the payment of MCIT, shall likewise apply at the time of filing the quarterly corporate income tax as prescribed under Section 75 and Section 77 of the Tax Code, as amended. Thus, in the computation of the tax due for the taxable quarter, if the computed quarterly MCIT is higher than the 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 which is two percent (2%) of the gross income as of the end of the taxable quarter.
What is the carry forward provision under the MCIT?
Any excess of the MCIT over the normal income tax may be carried forward and credited against the normal income tax for the three (3) immediately succeeding taxable years.
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”