RMC No. 66-2003: Clarifies the taxability of the Philippine Airlines for Income Tax purposes as well as other similarly situated franchise grantees.

Key points

1. PAL with an operating loss. PAL may choose either the Minimum Corporate Income Tax (MCIT) of 2% of the gross income or the 2% franchise tax, whichever is lower.
2. PAL operating at a profit. Its income tax liability is the lower of two amounts: the 2% franchise tax, or the normal income tax or MCIT, whichever of those is higher.
3. Gross revenue for MCIT. Gross revenue consists only of Passenger Revenue, Cargo Revenue, Other Transport Revenue and Non-Transport Revenue.
4. Cost of service for MCIT. Cost of service covers only nine listed items. They include direct transport salaries and benefits, sales agent commissions, fuel and oil, transport-related insurance, traffic, aircraft and passenger servicing expenses, depreciation or lease of aircraft and equipment, and aircraft and equipment maintenance and repairs.
5. Other franchise grantees. The same computation applies to other franchise grantees whose legislative charters give them the option to compute income tax as provided in PD 1590.

Who is affected

• Philippine Airlines (PAL)
• Other franchise grantees with the PD 1590 option in their charters