Revisiting Section 42 of the Revised Corporation Code of the Philippines Towards Amendment Implementation Framework

Abstract

This study revisits Section 42 of the revised Corporation Code of the Philippines, focusing on its implementation framework. The study aims to determine the extent of implementation, including the reduction of corporate income tax rates, changes to allowable deductions from gross income for business persons, and the effect of the CREATE amendment.

The study focuses on the industries that are the priority beneficiaries of the provisions of Section 42 in the following areas: IPP/Transitional SIPP. The study aims to determine its scope and limitations, which will serve as the basis for further improvement. Documentary analysis is a research method that involves documents as data, allowing researchers to interpret documents to give voice and meaning to an assessment topic. There are three primary types of documents: public records, personal documents, and physical evidence.

The study aims to provide a comprehensive understanding of the changes made to Section 42 and its implications for the industries it aims to study. The findings will inform future improvements and ensure that the provisions of Section 42 are effectively implemented and applied to the industries it aims to study.

The study revisits Section 42 of the revised Corporation Code of the Philippines, focusing on its amendment implementation framework. The study reveals changes to the corporate income tax rate, minimum corporate income tax (MCIT), percentage tax, and the imposition of improperly accumulated earnings. The corporate tax rate is decreased from 30% to 20% for domestic firms with net taxable revenue of no more than P5,000,000 and total assets of no more than P100,000,000, except land on which the business entity’s office, plant, and equipment are located during the tax year. The minimal corporate income tax (NCIT) rate is cut from 2% to 1% beginning July 1, 2020 and ending June 30, 2023. The tax rate is cut from 3% to 1% from July 1, 2020 to June 30, 2023. The imposition of improperly accumulated earnings is repealed.

Upon the effectivity of the CREAT, Under presidential Decree No. 442, Series of 1974, or the labor code of the Philippines, as amended, enterprise shall be granted an additional deduction from taxable income of half of t he value of labor training expenses incurred for the skill development of enterprise-based trainees enrolled in Public Senior High Schools, Public Higher Education Institutions, or Public Education Institutions and duly covered by an apprenticeship agreement. The improperly accumulated earnings tax under the create bill shall no longer be imposed on corporations upon the effectivity of the CREATE onwards.

The Revised Corporation Code of the Philippines (RCC) was signed into law by President Rodrigo Duterte on February 20 2019. The new law aims to improve the ease of business in the country and gives existing corporations two years to comply. Some salient amendments include the organization of corporations, the removal of the absolute requirement of having a minimum of five individuals in the formation of corporations, and the establishment of One-Person Corporations (OPCs). Stock corporations are not required to have a minimum capital stock, and the corporate term limit of 50 years has been removed.