Tax on personal holding companies.
SEC. 63. Tax on personal holding companies. — There shall be levied, collected, and paid, for each taxable year, upon the undistributed net income of every personal holding company, in addition to the tax imposed by section 24 a tax equal to forty-five per centum of the undistributed net income of such personal holding company.
Definition of personal holding company.
SEC. 64. Definition of personal holding company. — (a) General rule. — For the purposes of this Title, the term "personal holding company" means any corporation, as defined in section 84 if — (1) Gross income requirement. — At least eighty per centum of its gross income for the taxable year is personal holding company income as defined in section 65, but if the corporation is a personal holding company with respect to any taxable year beginning after December thirty-first, nineteen hundred and thirty-eight, then, for each subsequent taxable year, the minimum percentage shall be seventy per centum in lieu of eighty, and it shall continue to be considered as a personal holding company until in a taxable year, during the whole of the last half of which, the stock ownership required by paragraph (2) does not exist, or until the expiration of three consecutive taxable years in each of which less than seventy per centum of the gross income is personal holding company income; and (2) Stock ownership requirement. — Any time during the last half of the taxable year more than fifty per centum in value of its outstanding stock is owned, directly or indirectly, by or for not more than five individuals. (b) Exceptions. — The term "personal holding company" does not include a corporation, firm or association exempt from taxation under section 27, a bank duly licensed to do business as such in the Philippines, a life insurance company, or a foreign personal holding company as defined in section 67. Section65. Personal holding company income. — For the purposes of this Title the term "personal holding company income" means the portion of the gross income which consists of: (a) Dividends, interest (other than interest constituting rent as defined in subsection (g) hereof), royalties (other than mineral, oil, or gas royalties), and annuities. The term "royalties", as herein used, includes income from copyrights, patents, and other similar revenues. (b) Stock and securities transactions. — Except in the case of regular dealers in stock or securities (as defined in subsection (s) of section 84), gains from the sale or exchange of stock or securities. (c) Commodities transactions. — Gains from future transactions in any commodity on or subject to the rules of a board of trade or commodity exchange. This subsection shall not apply to gains by a producer, processor, merchants, or handler of the commodity which arise out of bona fide hedging transactions reasonably necessary to the conduct of its business in the manner in which such business is customarily and usually conducted by others. (d) Estates and trusts. — Amounts incredible in computing the net income of estates and trusts under section 56; and gains from the sale or other disposition of any interest in an estate or trust. (e) Personal service contracts. — (1) Amounts received under a contract under which the corporation is to furnish personal services, if some person other than the corporation has the right to designate (by name or by description) the individual who is to perform the services, or if the individual who is to perform the services is designated (by name or by description) in the contract; and (2) amounts received from the sale or other disposition of such a contract. This subsection shall apply with respect to amounts received for services under a particular contract only if at some time during the taxable year twenty-five per centum or more in value of the outstanding stock of the corporation is owned, directly or indirectly, by or may be designated (by name or by description) as the one to perform, such services. (f) Use of corporation property by shareholder. — Amounts received as compensation (however designated and from whomsoever received) for the use of, or right to use, property of the corporation in any case where, at any time during the taxable year, twenty-five per centum or more in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for an individual entitled to the use of the property, whether such right is obtained directly from the corporation or by means of sublease or other arrangement. (g) Rents. — Rents, unless constituting fifty per centum or more of the gross income. For the purposes of this subsection, the term "rents" means compensation, however designated, for the use of, or right to use, property, and the interest on debts owed to the corporation, to the extent such debts represent the price for which real property held primarily for sale to customers in the ordinary course of its trade or business was sold or exchanged by the corporation; but does not include amounts constituting personal holding company income under subsection (f). (h) Mineral, oil, or gas royalties. — Mineral, oil, or gas royalties, unless (1) constituting fifty per centum or more of the gross income, and (2) the deductions relating to expenses, other than compensation for personal services rendered by shareholders, constitute fifteen per centum or more of the gross income.
Stock ownership.
SEC. 66. Stock ownership. — For the purpose of determining whether a corporation is a personal holding company, insofar as such determination is based on stock ownership, the following rules shall be observed: (a) Stock not owned by individual. — Stock owned, directly or indirectly, by or for a corporation, estate, or trust shall be considered as being owned proportionately by its shareholders, partners, or beneficiaries. (b) 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 the purposes of this subsection, the family of an individual includes only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants. (c) Options. — If any person has an option to acquire stock such stock shall be considered as owned by such person. For the purposes of this subsection, an option to acquire such an option, and each one of a series of such options, shall be considered as an option to acquire such stock.
Definition of foreign personal holding company.
SEC. 67. Definition of foreign personal holding company. — (a) General rule. — For the purposes of this Title, the term "foreign personal holding company" means any foreign corporation if — (1) Gross income requirement. — At least sixty per centum of its gross income from all sources for the taxable year is foreign personal holding company income in accordance with section 68; but if the corporation is a foreign personal holding company with respect to any taxable year ending after December thirty-first, nineteen hundred and thirty-eight, then, for each subsequent taxable year, the minimum percentage shall be fifty per centum in lieu of sixty per centum, and it shall continue to be considered as a foreign personal holding company until in a taxable year, during the whole of which the stock ownership required by paragraph (2) does not exist, or until the expiration of three consecutive taxable years in each of which less than fifty per centum of the gross income is foreign personal holding company income; and (2) Stock ownership requirement. — At any time during the taxable year more than fifty per centum in value of its outstanding stock is owned, directly or indirectly, by or for not more than five individuals who are citizens or residents of the Philippines. (b) Exception. — The term "foreign personal holding company" does not include a corporation exempt from taxation under section 27.
Gross income and stock ownership requirements of foreign personal holding companies.
SEC. 68. Gross income and stock ownership requirements of foreign personal holding companies. — In determining the percentage of the gross income of a foreign personal holding company income, as well as the stock ownership requirement of such company, the same rules prescribed in sections 65 and 66 with regard to domestic personal holding companies shall apply.
Corporation income taxed to Philippine shareholders.
SEC. 69. Corporation income taxed to Philippine shareholders. — (a) General rule. — The undistributed net income of a foreign personal holding company shall be included in the gross income of the citizens or residents of the Philippines, domestic corporations, and estates or trusts, who are shareholders in such foreign personal holding company. (b) Amount included in gross income. — Each Philippine shareholder, who was a shareholder on the day in the taxable year of the company which was the last day on which the stockholders satisfying the stock ownership requirement defined under paragraph (2) of subsection (a) of section 67 existed with respect to the company, shall include in his gross income, as a dividend, for the taxable year in which or with which the taxable year of the company ends, the amount he would have received as a dividend if on such last day there had been distributed by the company, and received by the shareholders, an amount which bears the same ratio to the undistributed net income of the company for the taxable year as the portion of such taxable year up to and including such last day bears to the entire taxable year.
Information returns by officers and directors.
SEC. 70. Information returns by officers and directors. — (a) Monthly returns. — On the fifteenth day of each month which begins after the date of the enactment of this Code, each individual who on such day is an officer or a director of a foreign personal holding company, shall file with the Collector of Internal Revenue a return setting forth with respect to the preceding calendar month the name and address of each shareholder the class and number of shares held by each, together with any changes in stockholdings during such period, the name and address of any holder of securities convertible into stock of such corporation, and such other information with respect to the stock and securities of the corporation as the Secretary of Finance shall, by regulations, prescribe as necessary for carrying out the provisions of this Code. The Secretary of Finance may, by regulations, prescribe, as the period with respect to which returns shall be filed, a longer period than a month. In such case the return shall be due on the fifteenth day of the succeeding period, and shall be filed by the individuals who on such day are officers and directors of the corporation. (b) Annual returns. — On the sixtieth day after the close of the taxable year of a foreign personal holding company, each individual who on such sixtieth day is an officer or director of the corporation shall file with the Collector of Internal Revenue a return setting forth — (1) In complete detail the gross income, deductions and credits, net income, and undistributed net income of such foreign personal holding company for such taxable year; and (2) The same information with respect to such taxable year as is required in subsection (a) hereof; except that if all the required returns with respect to such year have been filed under said subsection (a), no information under this paragraph need be set forth in the return filed under this subsection.
Information returns by shareholders.
SEC. 71. Information returns by shareholders. — (a) Monthly returns. — On the fifteenth day of each month which begins after the date of the enactment of this Code, each Philippine shareholder, by or for whom fifty per centum or more in value of the outstanding stock of a foreign corporation is owned, directly or indirectly (including in the case of an individual, stock owned by the members of his family as defined in this Code), if such foreign corporation with respect to its taxable year preceding the taxable year in which such month occurs was a foreign personal holding company, shall file with the Collector of Internal Revenue a return setting forth with respect to the preceding calendar month the name and address of each shareholder, the class and number of shares held by each together with any changes in stockholdings during such period, the name and address of any holder of securities convertible into stock of such corporation, and such other information with respect to the stock and securities of the corporation as the Secretary of Finance shall, by regulations, prescribe as necessary for carrying out the provisions of this Code. The Secretary of Finance may, by regulations, prescribe, as the period with respect to which returns shall be filed, a longer period than a month. In such case the return shall be due on the fifteenth day of the succeeding period, and shall be due on the fifteenth day of the succeeding period, and shall be filed by the persons who on such day are Philippine shareholders. (b) Annual returns. — On the sixtieth day after the close of the taxable year of a foreign personal holding company, each Philippine shareholder by or for whom on such sixtieth day fifty per centum or more in value of the outstanding stock of such company is owned, directly or indirectly (including in the case of an individual stock owned by members of his family as defined in this Code), shall file with the Collector of Internal Revenue a return setting forth the same information with respect to such taxable year as is required in subsection (a) hereof; except that if all the required returns with respect to such year have been filed under said subsection (a), no return shall be required under this subsection.
Provisions on this page are reproduced verbatim from official open data. See the attribution line.
Source: Official Gazette of the Republic of the Philippines — Philippine laws are public documents (works of the government).