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1704 Improperly Accumulated Earnings Tax Return

This BIR form is to be filed by every domestic corporation classified as closely-held corporation except banks and other non-bank financial intermediaries, insurance companies, taxable partnerships, general professional partnerships, non- taxable joint ventures and enterprises duly registered with the Philippine Economic Zone Authority (PEZA) under R.A. 7916, and enterprises registered pursuant to the Bases Conversion and Development Act of 1992 (R.A. 7227), and other similar laws, shall render a true and accurate tax return in accordance with the provision of the Tax code.

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DLN:

BCS No.

Republika ng Pilipinas
Kagawaran ng Pananalapi

Kawanihan ng Rentas Internas
For Corporations

Part I

Background

TIN

9

BIR Form No.

Improperly Accumulated Earnings
Tax Return

Fill in all applicable spaces. Mark all appropriate boxes with an “X”.
Calendar
Fiscal 3 Amended Return?
1 For the
2 Year Ended
( MM / YYYY )
Yes
6

PSIC:

7

4

No. of sheets attached

5

1704
May 2001

ATC

I

No

C

3

7 0

Information
8 Line of Business/
Occupation

RDO Code

Taxpayer's Name

10 Registered Address

12 Date of Incorporation
(MM/DD/YYYY)
Part II

11 Zip Code

12A

Date of Registration with BIR
(MM/DD/YYYY)
Computation of Tax

12B

13 Taxable Income

13

14 Add: Income exempt from Tax
14A

14B

14C

14D

Income excluded from Gross Income

15

15A

15B

15C

15D

Income subject to Final Tax

16

16A

16B

16C

16D

Net Operating Loss Carry-over (NOLCO) deducted

17

17A

17B

18 Total (Sum of Item 13 and Item 17B)
19

18

Income tax paid/payable for the taxable year

19

20

Dividends actually or constructively paid/issued

20

21

Amount reserved for the reasonable needs of the business

Less:

(See Schedule I)
22 Improperly Accumulated Taxable Income (Item 18 less Item 21B)

21A

21B
22

23 Tax Rate

23

24 Improperly Accumulated Earnings Tax (Item 22 multiply by Item 23)
25

Add:

10%

24

Penalties
Surcharge

Interest

25A

Compromise

25B

25C

25D

26 Total Amount Payable (Sum of Item 24 and Item 25D)

26

We declare, under the penalties of perjury, that this return has been made in good faith, verified by us, and to the best of our knowledge and belief, is true
and correct, pursuant to the provisions of the National Internal Revenue Code, as amended, and the regulations issued under authority thereof.
27

28
Treasurer/Asst. Treasurer/Authorized Representative
(Signature over printed Name)

President/Vice-President/Authorized Representative
(Signature over printed Name)
Tax Agent

Tax Agent Accreditation No.

Community Tax Certificate Number
29
Part III

Date Issued
MM
DD
YYYY

Place of Issue
30

31

35 Tax Debit
35A
Memo……………………………
36A
36B
36 Others

32

D e t a i l s of P a y m e n t
Date
Number
MM DD
YYYY

Drawee Bank/
Particulars
Agency
33 Cash/Bank
Debit Memo…………………………………………………………………………….
34A
34B
34C
34 Check

Amount
33
34D

35B

35C

36C

36D

Machine Validation/Revenue Official Receipt Details (If not filed with the bank)

Amount

Stamp of Receiving
Office and
Date of Receipt

Schedule I

Schedule of amount reserved for the reasonable needs of the business
(emanating from the covered year's taxable income)
Allowance for the increase in the accumulation of earnings
up to 100% of the paid-up capital
Paid-up Capital as of balance sheet date (covered year)
P
Less: Accumulated Retained Earnings as of previous year
Allowable increase considered as reasonable accumulation
Reserved for definite corporate expansion projects or programs
Reserved for building, plants or equipment acquisition
Reserved for compliance with any loan covenant or pre-existing
obligation established under a legitimate business aggreement
Earnings with legal prohibition against distribution
For subsidiaries of foreign corporations,
Earnings intended or reserved for investment within the Philippines
Total amount reserved for the reasonable needs of the business (To Item No. 21)
BIR FORM NO. 1704
Improperly Accumulated Earnings Tax (IAET) Return
Guidelines and Instructions

P

P

Who shall file
Every domestic corporation (branch of a foreign corporation
not included) classified as closely-held corporation except banks and
other non-bank financial intermediaries, insurance companies, taxable
partnerships, general professional partnerships, non-taxable joint
ventures and enterprises duly registered with the Philippine Economic
Zone Authority (PEZA) under R.A. 7916, and enterprises registered
pursuant to the Bases Conversion and Development Act of 1992 (R.A.
7227), and other similar laws, shall render a true and accurate tax
return in accordance with the provisions of the Tax Code. The return
shall be filed in triplicate copies by the president, vice-president or
other principal officer, sworn to by such officer and by the Treasurer or
Assistant Treasurer.
When and Where to File
The return shall be filed within 15 days after the close of the
year immediately succeeding taxpayer’s
covered taxable year.
Example: For calendar year 2000, the IAET return shall be filed on or
before January 15, 2002. This return shall be filed with any Authorized
Agent Bank (AAB) located within the territorial jurisdiction of the
Revenue District Office where the taxpayer’s place of business is
located and registered.
In places where there are no AABs, the return shall be filed
with the Revenue Collection Officer or Duly Authorized City or
Municipal Treasurer of the municipality or city under the jurisdiction of
the Revenue District Office where the taxpayer’s principal place of
business is located and registered.
If the taxpayer is a large taxpayer, the return shall be filed
with the AAB located at the BIR National Office except if said taxpayer
is under the jurisdiction of a Large Taxpayer District Office, (LTDO), in
which case the return shall be filed with the LTDO having jurisdiction
over the taxpayer.
When and Where to Pay
Upon filing this return, the total amount payable shall be paid
in full to the AAB where the return is filed. In places where there are no
AABs, payment shall be made directly to the Revenue Collection
Officer or duly Authorized City or Municipal Treasurer who shall issue
Revenue Official Receipt (BIR Form No. 2524) therefor.
Where the return is filed with an AAB, the lower portion
must be duly machine validated and stamped received to serve as
receipt of payment. The machine validation shall reflect the amount
paid, the date of payment and the transaction code and the stamp
mark shall show the name of the AAB, branch code, teller’s code and
teller’s initial. The AAB shall also issue an Official Receipt as proof of
payment.
Rate and Base of Tax
The ten percent (10%) IAET is imposed on improperly
accumulated taxable income earned starting January 1, 1998 by
domestic corporations as defined under the Tax Code and which are
classified as closely-held corporation.
The IAET shall not apply on improperly accumulated income
as of December 31, 1997 in the case of corporations using the
calendar year basis. In the case of corporations adopting the fiscal
year accounting period, the IAET shall not apply on improperly
accumulated taxable income as of the end of the month comprising the
twelve-month period of fiscal year 1997-1998.
Closely-held Corporations
Closely-held corporations are those corporations at least fifty
percent (50%) in value of the outstanding capital stock or at least fifty
percent (50%) of the total combined voting power of all classes of
stock entitled to vote is owned directly or indirectly by or for not more
than twenty (20) individuals.
For purposes of determining whether the corporation is
closely held corporation, insofar as such determination is based on
stock ownership, the following rules shall be applied:
(1) Stock Not Owned by Individuals. – Stock owned
directly or indirectly
by or for
a corporation,
partnership, estate or trust shall be considered as being
owned proportionately by its shareholders, partners or
beneficiaries.

(2)

(3)

(4)

Family and Partnership Ownership. – An individual
shall be considered as owning the stock owned, directly
or indirectly, by or for his family, or by or for his partner.
For purposes of this paragraph, the ‘family of an
individual’ includes his brothers or sisters (whether by
whole or half-blood), spouse, ancestors or lineal
descendants.
Option to Acquire Stocks. – If any person has an option
to acquire stock, such stock shall be considered as
owned by such person.
For purposes of this
paragraph, an option to acquire such an option and
each one of a series of option shall be considered as
an option to acquire such stock.
Constructive Ownership as Actual Ownership. – Stock
constructively owned by reason of the application of
paragraph (1) or (3) hereof shall, for purposes of
applying paragraph (1) or (2), be treated as actually
owned by such person; but stock constructively owned
by the individual by reason of the application of
paragraph (2) hereof shall not be treated as owned by
him for purposes of again applying such paragraph in
order to make another the constructive owner of such
stock.

Penalties
There shall be imposed and collected as part of the tax:
A surcharge of twenty five percent (25%) for each of the
following violations:
a) Failure to file any return and pay the amount of
tax or installment due on or before the due date;
or
b) Unless
otherwise
authorized
by
the
Commissioner, filing a return with a person or
office other than those with whom it is required
to be filed; or
c) Failure to pay the full or part of the amount of tax
shown on the return on or before the due date; or
d) Failure to pay the deficiency tax within the time
prescribed for its payment in the notice of
assessment.
2. A surcharge of fifty percent (50%) of the tax or of the
deficiency tax, in case any payment has been made on the
basis of such return before the discovery of the falsity or
fraud, for each of the following violations:
a) Willful neglect to file the return within the period
prescribed by the code or by rules and
regulations; or
b) In case a false or fraudulent return is willfully
made.
3. Interest at the rate of twenty percent (20%) per annum or
such higher rates as may be prescribed by rules and
regulations, on any unpaid amount of tax, from the date
prescribed for the payment until it is fully paid.
4. Compromise penalty.
1.

Attachments:
1.

2.

Photocopy of the Annual Income Tax Return (BIR
Form No. 1702) and audited Financial
Statements/Account Information Forms of the
taxable year covered duly received by the BIR;
and
Sworn declaration as to dividends declared taken
from the covered year earnings and the
corresponding tax withheld, if any.

Note: All Background information must be properly filled up.
•
Nos. 1 and 2 of this form refer to transaction period and not
the date of filing this return.
•
TIN = Taxpayer Identification Number.
 
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