The intent of Congress relative to the minimum corporate income tax(MCIT) is to grant a 4-year suspension of tax payment to newly formed corporations. Corporations still starting their business operations have to stabilize their venture in order to obtain a stronghold in the industry.


• 1961- Manila Banking Corp was incorporated. It engaged in the banking industry til 1987.
• May 1987- Monetary Board of Bangko Sentral ng Pilipinas (BSP) issued Resolution # 505 {pursuant to the Central Bank Act (RA 265)} prohibiting Manila Bank from engaging in business by reason of insolvency. So, Manila Bank ceased operations and its assets and liabilities were placed under charge of a gov.- appointed receiver.
• 1998- Comprehensive Tax Reform Act (RA8424) imposed a minimum corporate income tax on domestic and resident foreign corporations.
     o Implementing law: Revenue Regulation # 9-98 stating that the law allows a 4year period from the time the corporations were registered with the BIR during which the minimum corporate income tax should not be imposed.
• June 23, 1999- BSP authorized Manila Bank to operate as a thrift bank.
     o NOTE: June 15, 1999 Revenue Regulation #4-95 (pursuant to Thrift Bank Act of 1995) provides that the date of commencement of operations shall be understood to mean the date when the thrift bank was registered with SEC or when Certificate of Authority to Operate was issued by the Monetary Board, whichever comes LATER.
• Dec 1999- Manila Bank wrote to BIR requesting a ruling on whether it is entitled to the 4 year grace period under RR 9-98.
• April 2000- Manila bank filed with BIR annual income tax return for taxable year 1999 and paid 33M.
• Feb 2001- BIR issued BIR Ruling 7-2001 stating that Manila Bank is entitled to the 4year grace period. Since it reopened in 1999, the min. corporate income tax may be imposed not earlier than 2002. It stressed that although it had been registered with the BIR before 1994, but it ceased operations 1987-1999 due to involuntary closure.
     o Manila Bank, then, filed with BIR for the refund. • Due to the inaction of BIR on the claim, it filed with CTA for a petition for review, which was denied and found that Manila Bank’s payment of 33M is correct, since its operations were merely interrupted during 1987-1999. CA affirmed CTA.

Issue: Whether or not Manila Bank is entitled to a refund of its minimum corporate income tax paid to BIR for 1999.

Held: Yes.

• CIR’s contensions are without merit. He contended that based on RR# 9-98, Manila Bank should pay the min. corporate income tax beg. 1998 as it did not close its operations in 1987 but merely suspended it. Even if placed under suspended receivership, its corporate existence was never affected. Thus falling under the category of a existing corporation recommencing its banking business operations
** Sec. 27 E of the Tax Code provides the Minimum Corporate Income Tax (mcit) on Domestic Corporations.

o (1) Imposition of Tax- MCIT of 2% of gross income as of the end of the taxable year, as defined here in, is hereby imposed on a corporation taxable under this title, beginning on the 4th taxable year immediately following the year in which such corp commenced its business operations, when the mcit is greater than the tax computed under Subsec. A of this section for the taxable year.

o (2) Any excess in the mcit over the normal income tax… shall be carried forward and credited against the normal income tax for the 3 succeeding taxable years.

• Let it be stressed that RR 9-98 imposed the mcit on corps, the date when business operations commence is the year in which the domestic corporation registered with the BIR. But under RR 4-95, the date of commencement of operations of thrift banks, is the date of issuance of certificate by Monetary Board or registration with SEC, whichever comes later. Clearly then, RR 4-95 applies to Manila banks, being a thrift bank. 4-year period= counted from June 1999.

MANILA BANKING CORP VS. CIR- Minimum Corporate Income Tax (MCIT)