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WHEREAS,the national government is in dire need of funds to finance its socio-economic program designed to upgrade the living standards of our people;
WHEREAS,it is necessary to amend further certain provisions of the said Code to make it more responsive to current conditions;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and decree:
SECTION 1. Section 24 of the National Internal Revenue Code is hereby amended to read as follows:
"Sec. 24. Rates of tax on corporations.-(a) Tax on domestic corporations.-A tax is hereby imposed upon the taxable net income received during each taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines, and partnerships, no matter how created or organized, but not including general professional partnerships, in accordance with the following:
"Twenty-five per cent upon the amount by which the taxable net income does not exceed one hundred thousand pesos; and
"Thirty-five per cent upon the amount by which the taxable net income exceeds one hundred thousand pesos.
"Private educational institutions, whether stock or non-stock shall pay a tax of ten per cent of their taxable net income from the operation of the school, related school activities, and on their passive investment income consisting of interest, dividends, royalties, and the like: Provided, however,That dividends received by a private educational institution, whether stock or non-stock, from a domestic or resident foreign corporation shall be subject to the inter-corporate dividends tax under subsection (e) hereof.
"(b) Tax on foreign corporation.-(1) Non-resident corporations.-A foreign corporation not engaged in trade or business in the Philippines shall pay a tax equal to thirty five percent of the gross income received during each taxable year from all sources within the Philippines, as interest, dividends, rents, royalties, salaries, premiums, annulties, remunerations for technical services, emoluments or other fixed or determinable annual, periodical or casual gains, profits and income, and capital gains: Provided, however, That-
"(i) Premiums shall not include reisurance premiums;
"(ii) Interest on foreign loans shall be subject to fifteen per cent tax;
"(iii) On dividends received from a domestic corporation liable to tax under this Chapter, the tax shall be 15 % of the dividends received, which shall be collected and paid as provided in Section 53(d) of this Code, subject to the condition that the country in which the non-resident foreign corporation is domiciled shall allow a credit against the tax due from the non-resident foreign corporation, taxes deemed to have been paid in the Philippines equivalent to 20% which represents the difference between the regular tax (35%) on corporations and the tax (15%) on dividends as provided in this Section;
"(iv) Cinematographic film owners, lessors, or distributors shall pay a tax of twenty-five per cent of their gross income from all sources within the Philippines. For purposes of this paragraph, the gross income of cinematographic film owners, lessors, or distributors shall include film rentals and all items of gross income under Section 29(a)
"(v) Rentals, lease and charter fees payable to non resident owners of vessels chartered by Philippine nationals as the term is defined under Section 3(c) of Presidential Decree No. 474, and which charter or lease has been duly approved by the Maritime Industry Authority, shall be subject to 4.5 % final tax, the return and payment of which shall be in accordance with Section 53 and 54 of this Code;
"(vi) Regional or area headquarters established in the Philippines by multi-national corporations and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating centers for their affillates, subsidiaries, or branches in the Asia-Pacific Region shall not be subject to tax.
"(2) Resident corporations.-A corporation organized, authorized, or existing under the laws of any foreign country, engaged in trade or business within the Philippines, shall be taxable as provided in subsection (a) of this section upon the total net income received in the preceding taxable year from all sources within the Philippines: Provided, however,That international carriers shall pay a tax of two and one half per cent on their gross Philippine billings: Provided, further That any profit remitted abroad by a branch office to its mother company shall be subject to tax of fifteen per cent ( except those registered with the Export Processing Zone Authority).
"(c) Rate of tax on certain dividends.-Dividends received by a domestic or resident foreign corporation from a domestic corporation liable to tax under this Code-
"(1) Shall be subject to a final tax at 10% on the total amount thereof, which shall be collected and paid as provided in Sections 53 and 54 of this Code; and
"(2) Shall not be included in the determination of the gross income of the recipient corporation:
"Provided, however,That interest paid or incurred on indebtedness abroad by a domestic or resident foreign corporation, which indebtedness was incurred to provide funds for investment in a domestic corporation shall be allowed as a deduction from the intercorporate dividends before computing the 10% final tax. Any excess of the interest herein allowed as deduction from intercorporate dividends may be deducted from the other gross income of the recipient corporation, subject to the provisions of Section 30 (b) of this Code.
"The above deduction of interest from intercorporate dividends shall be allowed only if the recipient domestic or resident foreign corporation submits an authenticated copy of the foreign loan agreement stipulating the end-use of the loan proceeds and such other information as may be required for its determination.
"The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate rules and regulations to implement the provisions of this paragraph.
"(d) Tax on mutual life insurance companies.-Mutual life insurance companies organized in and existing under the laws of the Philippines shall pay a tax of 10% of their gross investment income consisting of interest, dividends, rents, net capital gains and income from any other business than life insurance derived from all sources. Foreign mutual life insurance companies authorized to carry business in the Philippines shall pay the same rate of tax on the same items of gross investment income derived from sources within the Philippines.
"(e) Corporate development tax.-In addition to the tax imposed in subsection (a) of this Section, an addirtional tax in an amount equivalent to 5% of the same taxable net income shall be paid by a domestic or a resident foreign corporation:Provided,That this additional tax shall be imposed only if the net income exceeds 10% of the net worth, in case of a domestic corporation, or net assets in the Philippines, in case of a resident foreign corporation: Provided, however, That a closely-held corporation as defined hereinbelow shall be subject to the said additional income tax regardless of the rate of return on its net worth. The term "closely-held corporation" means any corporation, (a) at least 50% of the total combined voting power of all classes of stock entitled to vote, at any time during the taxable year, is owned directly or indirectly by or for not more than five persons, natural or juridical. For the purpose of determining whether an individual indirectly owns shares of stock in a corporation, the attribution rules prescribed by Section 66 of this Code shall be applied.
" The additional corporate income tax imposed in this subsection shall be collected and paid at the same time and in the same manner as the tax imposed in subsection (a) of this Section.
" (f) Tax on transaction by offshore banking units and under the expanded foreign currency deposit systems.-(1) Offshore banking units.-The provisions of any law to the contrary notwithstanding, the transactions of offshore banking units authorized by the Central Bank with non-residents and other offshore banking units shall be subject to a five per cent (5%) tax on the net income from such transactions which shall be in lied of all taxes on the said transactions: Provided, however,That transactions of offshore banking units with local commercial banks, including branches of foreign banks that may be authorized by the Central Bank of transact business with offshore banking units, shall likewise be subject to the same tax, except net income from such transactions as may be specified by the Secretary of Finance, upon recommendation of the Monetary Board, to be subject to the usual income tax payable by banks. Any income of non-residents from transactions with said offshore banking units shall be exempt from any tax.
" In case of transaction with residents (other than other offshore banking units or local commercial banks including local branches of foreign banks that may be authorized by the Central Bank of the Philippines to transact business with offshore bank ng units), interest income from loans granted to such residents shall be subject only to a ten percent (10%) withholding tax and final tax.
" (2) Expanded foreign currency deposit system.-The net income derived by a depository bank from foreign currency transactions with nonresidents, offshore banking units in the Philippines and other depository banks under the expanded foreign currency deposit system under the rules and regulations of the Central Bank shall be subject to a five per cent (5%) tax which shall be in lieu of all taxes on said transactions, except net income from such transactions as may be specified by the Secretary of Finance, upon recommendation of the Monetary Board, to be subject to the usual income tax payable by banks.
" Interest income from foreign currency loans granted by such dep[ository banks under said expanded system to residents (other than offshore banking units in the Philippines or other depository banks under the expanded system)shall be subject to a ten per cent (10%) withholding tax as a final tax.
" Income of non-residents not engaged in trade or business in the Philippines from foreign currency loans to depository banks under the expanded system shall be exempt from income tax.
" (g) The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers not specifically exempt under Section 27 of this Code shall pay the rates provided in this Section. All corporations, agencies or instrumentalities owned or controlled by the Government, including the Government Service Insurance System and the Social Security System but excluding educational institutions, shall pay such rate of tax upon their taxable net income as are imposed by this section upon associations or corporations engaged inn a similar business or industry."
SEC. 2. Subparagraph (b) of Section 29 of the National Internal Revenue Code is hereby amended to read as follows:
" (b) Exclusions from gross income.-The following items shall not be included in gross income and shall be exempt from taxation under this Title:
" (1) Life insurance.-The proceeds of life insurance policies paid to beneficiaries upon death of the insured, whether in a single sum or otherwise, but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income.
" (2) Amount received by insured as return of premium.-The amount received by the insured, as return of premium or premiums paid by him under life insurance, endorsement, or annuity contracts, either during the terms or at the maturity of the term mentioned in the contract or upon surrender of the contract.
" (3) Gifts, bequest, and devises.-The value of property acquired by gift, bequests, devise, or descent; but the income from such property shall be included in gross income.
" (4) Interest on Government securities.-Interest upon the obligations of the Government of the Republic of the Philippines or any political subdivision thereof, but in the case of such obligations issued after the approval of this Code, only to the extent provided in the act authorizing the issue thereof.
" (5) Compensation for inquiries or sickness.-Amounts received through Accident or Health Insurance or under Workmen's Compensation Acts, as compensation for personal injuries or sickness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness.
" (6) Income exempt under treaty.-Income of any kind, to the extent required by any treaty obligation binding upon the Government of the Philippines.
" (7) Retirement benefits, pensions, gratuities, etc.-(A) Retirement benefits received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer: Provided, That the retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less than fifty years of age at the time of his retirement: Provided, further,That the benefits granted under this Code shall be availed of by an official or employees only once. For purposes of this subsection, the term "reasonable private benefit plan" means a pension, gratuity, stock bonus or profit sharing plan maintained by an employer for the benefit of some or all of his officials or employees, wherein contributions are made by such employer for officials and employees, or both, for the purpose of distributing to such officials and employees the earnings and principal of the fund thus accumulated, and wherein it is provided in said plan that at no time shall any part of the corpus or income of the fund be used for, or be delivered to, any purpose other than for the exclusive benefit of the said officials and employees.
" (B) Any amount received by an official and employee or by his heirs from the employer as a consequence of separation of such official or employees from the service of the employer duer to death, sickness or other physical disability or for any cause beyond the control of the said official or employee.
" (C) The provisions of any existing law to the contrary notwithstanding, social security benefits, retirement gratuities, pensions and other similar benefits received by resident or non-resident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public.
" (D) Payments of benefits due or to become due to any person residing in the Philippines under the laws of the United States administered by the United States Veterans Administration.
" (E) Payments of benefits made under the Social Security Act of 1954, as amended.
" (F) Benefits received from the GSIS and the retirement gratuity received by government officials and employees.
" (8) Miscellaneous items.-(A) Income received from their investments in the Philippines, in loans, stock, bonds, or other domestic securities, or from interest on their deposit in banks in the Philippines by (1) foreign governments (2) financing institutions owned, controlled, or enjoying refinancing institutions owned, controlled, or enjoying refinancing from them, and (3) international or regional financing institutions established by governments.
" (B) Income derived from any public utility or from the exercises of any essential governmental function accruing to the Government of the Philippines or to any political subdivision thereof.
" (C) Income derived as rewards under Republic Act Numbered twenty-three hundred and thirty-eight, as amended by Presidential Decree No. 707."
SEC. 3. Subparagraph (d) of Section 30 of the National Internal Revenue Code is hereby amended to read as follows:
" (d) Lesses:
" (1) By individuals.-In the case of an individual, losses actually sustained during the taxable year and not compensated for by insurance or otherwise-
" (A) If incurred in trade or business; or
" (B) If incurred in any transaction entered into for profit, though not connected with the trade or business; or
" (C) Of property not connected with the trade or business, if the loss arises from fires, storms, or other casualty, or from robbery, theft, or embezzlement. No loss shall be allowed as a deduction under this paragraph if at the time of the filing of the return such loss has been claimed as a deduction for estate tax purposes in the estate tax return. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, is hereby authorized to promulgate rules and regulations prescribing among other things the time and manner by which the taxpayer shall submit a declaration of loss sustained from casualty or from robbery, theft, or embezzlement during the taxable year, Provided; however, That the time limit to be so prescribed in the regulations shall not be less than 20 days nor more than 90 days from the date of the occurrence of the casualty or robbery, theft or embezzlement giving rise to the loss.
" (2) By corporations.-In the case of a corporation, all losses actually sustained and charged off within the taxable year and not compensated for by insurance or otherwise.
" (3) By non-resident aliens or foreign corporations.-In the case of a non-resident alien individual or a foreign corporation, the losses deductible are those actually sustained during the year incurred in the business or trade conducted within the Philippines, and losses of property within the Philippines arising from fires, storms or other casualty, and from robbery, theft, or embezzlement, and losses actually sustained during the year in transactions entered into for profit in the Philippines although not connected with their business or trade, when such losses are not compensated for by insurance or otherwise. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, is hereby authorized to promulgate rules and regulations prescribing among other things the item and manner by which the taxpayer shall submit a declaration of loss sustained from casualty or from robbery, theft or embezzlement during the taxable year, Provided, however,That the time to be so prescribed in the regulations, shall not be less than 30 days nor more than 90 days from the date of the occurrence of the casualty or robbery theft or embezzlement giving rise to the loss.'
SEC. 4. Section 45(a) of the National Internal Revenue Code is hereby amended to read as follows:
"SEC. 45. Individual returns.-(a) Requirements.-(1) The following individuals are required to file an income tax return, if they have a gross income of at least P1,800 for the taxable year:
" (A) Every Filipino citizen, whether residing in the Philippines or abroad and,
" (B) Every alien residing in the Philippines, regardless of whether the gross income was derived from sources within or outside the Philippines.
(2) Regardless of amount, every non-resident alien engaged in trade or business in the Philippines shall file an income tax return.
" The income tax return shall be filed in duplicate, and shall set forth specifically the gross amount of income from all sources, except that of non-resident aliens engaged in trade or business in the Philippines which shall contain only such income derived from sources within the Philippines.
" (3) Notwithstanding the provisions of the preceding paragraphs, an individual (except a non-resident alien engaged in trade or business in the Philippines) whose gross income derived solely from salaries, wages, remunerations and other similar compensation for services rendered, does not exceed his personal exemption of P1,800 if he/she is single or P3,000 if he/she is married or head of the family, plus the optional standard deduction to which he/she is entitled to claim under sub-paragraph (K) of Section 30, is not required to file an income tax return."
SEC. 5. Section 53 of the National Internal Revenue Code is hereby amended by adding a new paragraph as follows:
" (c) Resident individuals and corporations.-Dividends perceived by individuals residing in the Philippines from a domestic corporation, as well as royalties in any form received by such individuals and domestic and/or resident foreign corporations from any person whether natural or juridical shall be subject to withholding tax at sources at the rate of 10% thereof. The tax shall be withhold by the payor-corporation and/or person and paid in the same manner and subject to the same conditions as provided in section 54 of the National Internal Revenue Code: Provided, however, That the tax withheld under this sub-paragraph shall be credited against the income tax liability of the recipient-taxpayer for the taxable year."
SEC. 6. Article 1. Requirements of declaration.-Every individual subject to income tax under Section twenty-one or twenty-two of this Title, receiving income other than that subject to withholding under Supplement A of this Title, and every corporation subject to income tax under Section twenty-four of this Title shall file a declaration of its net taxable income for each quarter of its taxable year: Provided, however, That individuals and corporations that have paid the income tax herein required and have filed the adjustment return prescribed in Article Three of this supplement shall be exempt from filing the return required in Section forty-five and forty-six of this Title."
SEC. 7. Article 2 of H.B. No. 5480, enacted as an integral part of Presidential Decree No. 30, as amended, is hereby amended to read as follows:
"Article 2. Time for filing corporate quarterly income tax return and manner of paying the income tax.-Every corporation shall file in duplicate a quarterly summary declaration of its gross income and deductions on a cumulative basis for the preceding quarter or quarters upon which the income tax, as provided in Title II of this Code, shall be levied, collected and paid. The tax so computed shall be decreased by the amount of tax previously paid or assessed during the preceding quarters and shall be paid not later than sixty (60) days from the close of each of the first three (3) quartered of the taxable year, whether calendar or fiscal year."
SEC. 8. Article 4 of H.B. No. 5480 enacted as an integral part of Presidential Decree No. 30, as amended, is hereby amended to read as follows:
"Article 4. Filing of adjustment returns and final payment of income tax.-On or before the fifteenth day of April or on or before the fifteenth day of April or on or before the fifteenth day of the fourth month following the close of the fiscal year, every taxpayer covered by this Supplement shall file an adjustment return covering the total net taxable income of the preceding calendar or fiscal year and if the sum of the quarterly tax payments made during that year is not equal to the total tax due on the entire net taxable income of that year, the corporation shall either (a) pay the excess tax still due or (b) the refunded the excess amount paid, as the case may be. In case the corporation is entitled to a refund of excess quarterly income taxes paid, the refundable amount shown in its final and adjustment return may be credited against the quarterly income tax liabilities for the taxable quarters of the succeeding taxable year."
SEC. 9. Subparagraph (e) of Section 88 of the National Internal Revenue Code is hereby amended to read as follows:
" (e) Proceeds of life insurance.-To the extent of the amount receivable by the estate of the deceased of the deceased, his executor, or administrator, as insurance under policies taken out by the decedent upon his own life, irrespective of whether or not the insured retained the power of revocation, or to the extent of the amount receivable by any beneficiary designated in the policy of insurance, except when it is expressly stipulated that the designation of beneficiary is irrevocable."
SEC. 10. Subparagraph (b) of Section 137 (b) of the National Internal Revenue Code is hereby amended to read as follows:
" (b) Cigarettes-
" (1) On cigarettes per packed in thirties, the retail price of which per pack does not exceed eighty centavos, on each thousand, three pesos;
" (2) On cigarettes packed in thirties, the retail price of which per pack exceeds eighty centavos but does not exceeds eighty centavos but does not exceed one peso on each thousand, five pesos;
" (3) On cigarettes packed in thirties, the retail price of which per packed exceeds one peso but does not exceed one peso and ten centavos, on each thousand, eight pesos;
" (4) On cigarettes packed in twenties, the retail price of which per packed does not exceed one peso and ten centavos, on each thousand, ten pesos;
" (5) On cigarettes packed in twenties, the retail price of which per packed exceeds one peso and ten centavos, but does not exceed one peso and forty centavos, on each thousand, sixteen pesos;
" (6) On cigarettes packed in twenties, the retail price of which per pack exceeds one peso and forty centavos, but does not exceed one peso and forty centavos, on each thousand, sixteen pesos;
" (7) One cigarettes packed in twenties, the retail price of which per pack exceeds one peso and seventy centavos, but does not exceed two pesos, on each thousand, twenty pesos;
" (8) On cigarettes packed in twenties, the retail price of which per pack exceeds two pesos, but does not exceed two pesos and fifty centavos, on each thousand, thirty two pesos;
" (9) On cigarettes packed in twenties, the retail price of which per pack exceeds two pesos and fifty centavos, but does not exceed three pesos, on each thousand, forty pesos;
" (10) On cigarettes packed in twenties, the retail price of which per pack exceeds three pesos on each thousand, fifty pesos;
" (11) If the cigarettes of local manufacture are foreign brands or trade marks and being manufactured locally under licensing agreements with the foreign brand or trade mark owners, the tax shall be increased by fifty per centum per thousand: Provided,Thar, any subsequent transfer or alienation of title or right over a cigarette brand or trade mark by a foreign owner to a local manufacturer in whatever manner, form or description shall not affect the rates of tax then prevailing after the effectivity of this Code;
" (12) If the cigarettes of local manufacture are mechanically wrapped or packed, the tax shall be increased by one hundred twenty per centum per thousand. Cigarettes shall be considered mechanically wrapped or packed, the tax shall be increased by one hundred twenty per centum per thousand. Cigarettes shall be considered mechanically wrapped or packed when at any stage of the wrapping or packing thereof, a machine or any mechanical contrivance shall have been used;
" (13) If the cigarettes are of foreign manufacture, regardless of the retail price per pack or the manner of wrapping or packing thereof, on each thousand, eighty pesos.
" Cigarettes subject to tax at lower rates before the effectivity of the new tax rates herein prescribed shall automatically be subject to the corresponding higher rates and there is nothing under this subsection (b) which allows any downward reclassification of tax rates for existing brands or cigarettes duly registered at the time the herein rates become effective.
" Duly registered and/or existing brands of cigarettes packed in 20's at the time of the new rates herein prescribed shall not be allowed to be packed in 30's."
" * * * * * * * "
" * * * * * * * "
SEC. 11. Subparagraphs (1) and (2) of Section 182 (A) of the National Internal Revenue Code are hereby amended to read as follows:
"Sec. 182. Fixed taxes.-(1) Persons subject to percentage tax.-Unless otherwise provided, every
person engaging in business on which the percentage tax is imposed shall pay a fixed annual tax of one hundred pesos.
" (2) Persons not subject to percentage tax.-Every person who is not required to pay the percentage tax prescribed under this Title shall pay for each calendar year in which the person shall engaged in business a fixed annual tax based upon his gross annual sales during the preceding calendar year, as follows:
" Twenty pesos, if the amount of the gross annual sales does not exceed two thousand four hundred pesos;
" Forty pesos, if the amount of the gross annual sales exceeds two thousand four hundred pesos but not exceed ten thousand pesos;
" Eighty pesos, if the amount of the gross annual sales exceed ten thousand pesos but does not exceed thirty thousand pesos;
" One hundred sixty pesos, if the amount of the gross annual sales exceeds fifty thousand pesos but does not exceed thousand pesos;
" Two hundred fifty pesos, if the amount of the gross annual sales exceeds fifty thousand pesos but does not exceed seventy-five thousand pesos;
" Three hundred fifty pesos, if the amount of the gross annual sales exceeds seventy-five thousand pesos but does not exceed one hundred thousand pesos;
" Five hundred pesos, if the amount of the gross annual sales exceeds one hundred thousand pesos but does not exceed one hundred fifty thousand pesos;
" Nine hundred pesos, if the amount of the gross annual sales exceeds on hundred fifty thousand pesos but does not exceed three hundred thousand pesos;
" One thousand six hundred persos, if the amount of the gross annual sales exceeds three hundred thousand pesos but does not exceed five hundred thousand pesos;
" Three thousand pesos, if the amount of the gross annual sales exceeds five hundred thousand pesos but does not exceed one million pesos;
" Five thousand pesos, if the amount of the gross annual sales exceeds one million pesos but does not exceed one million five hundred thousand pesos;
" Seven thousand pesos, if the amount of the gross annual sales exceeds one million five hundred thousand pesos but does not exceed two million pesos;
" Nine thousand pesos, if the amount of the gross annual sales exceeds two million pesos but does not exceed two million five hundred thousand pesos;
" Eleven thousand pesos, if the amount of the gross annual sales exceeds two million five hundred thousand pesos but does not exceed three million pesos;
" Fourteen thousand pesos, if the amount of the gross annual sales exceeds three million pesos but does not exceed four million pesos;
" Eighteen thousand pesos, if the amount of the gross annual sales exceeds four million pesos but does not exceed five million pesos;
" Twenty-two thousand pesos, if the amount of the gross annual sales exceeds five million pesos but does not exceed six million pesos;
" Twenty-six thousand pesos, if the amount of the gross sales exceeds six million pesos but does not exceed seven million pesos;
" Thirty thousand pesos, if the amount of the gross annual sales exceeds seven million pesos but does not exceed eight million pesos;
" Thirty-four thousand pesos, if the amount of the gross annual sales exceeds eight million pesos but does not exceed nine million pesos;
" Thirty-eight thousand pesos, if the amount of the gross annual sales exceeds nine million pesos but does not exceed ten million pesos;
" If the amount of the gross annual sales exceeds ten million pesos, the graduated fixed tax shall be thirty eight thousand pesos plus one thousand pesos for every one million pesos of gross sales or a fractional part thereof in excess of ten million pesos.
" If a merchant is engaged in two or more businesses, one or more of which is subject to, and others exempt from, the percentage tax, he shall pay the graduated fixed annual tax provided above, based on the individual sales of his business not subject to the percentage tax under this Title. The initial graduated fixed annual tax to be paid by the person first engaging in business subject to the said tax shall be twenty pesos."
SEC. 12. Section 183 of the National Internal Revenue Code is hereby amended by adding a new paragraph (c) to read as follows:
" (c) Flexibility clause.-In the interest of the national economy and the general welfare, and subject to the limitations herein prescribed, the President upon recommendation of the Secretary of Finance and the National Economic Development Authority is hereby empowered to revise the rates of percentage taxes, including any necessary change in the classification of the articles enumerated in sections 194, 195, 196, 197, 198, 199 and 201. The existing rates may be increased by not more than 50% or decreased by not more than 10%.
" The above authority may be exercised by the President if any of the following condition exists:
" (1) Economic conditions render it necessary to increase revenue, or to redirect expenditure or consumption patterns by increasing or decreasing the rates of percentage tax on certain commodities;
" (2) Where, in the light of technological and social changes, it is necessary to classify new products or to reclassify certain articles subject to the sales tax on the basis of the changed concepts of essentiality or the degree of manufacturing done; or
" (3) Where it is necessary to counter an adverse action on the part of another country."
SEC. 13 Section 186-B of the National Internal Revenue Code is hereby amended to read as follows:
" SEC. 186-B. Percentage tax on sales of processed meat, milk and vegetable, fish and other sea foods, wheat flour and feeds.-
There shall be levied, assessed and collected once on every original sale, barter, exchange and similar transaction either for nominal or valuable consideration, intended to transfer ownership of, or title to, the articles enumerated heinbelow, a tax equivalent to five per centum of the gross selling price or gross value in money of the articles to sold, bartered, exchanged, or transferred, such tax to be paid by the manufacturer or producer:
" (a) Processed meat, milk and vegetables; fish and other sea foods;
" (b) Wheat flour; and
" (c) Poultry and animal feeds.
Provided, however, That where the articles are manufactured out of materials subject to tax under this section, Section 186, or Section 189, the total cost of such materials as duly established, shall be deductible from the gross selling price or gross value in money of the manufactured articles.
" For purposes of this section, processed meat, milk, and vegetables, fish and other sea foods include such food products which have undergone the process of curring, canning, bottling or similar processes but exclude such food products which have undergone only simple preserving processes such as freezing, drying, salting or smoking."
SEC. 14. The above sections are amended by this Decree shall be incorporated in the consolidation and codification of all existing internal revenue laws under a separate Presidential Decree.
SEC. 15. Effectivity date.-This Decree shall take effect immediately.
Done in the City of Manila, this 3rd day of June in the year of our Lord, nineteen hundred and seventy-seven.
(Sgd.) FERDINAND E. MARCOS
President of the Philippines
By the President:
(Sgd.) JUAN C. TUVERA
Presidential Assistant
TITLE OF CODE
SEC. 16. Power of Commissioner of Internal Revenue to make assessments. - When a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law or regulation, or when there is reason to believe that any such report is false, incomplete, or erroneous, the Commissioner of Internal Revenue shall assess the proper tax on the best evidence obtainable.
When it shall come to the knowledge of the Commissioner or Internal Revenue that a taxpayer is retiring from the business subject to taxation, or intends to leave the Philippines, or remove his property therefrom, or hide or conceal his property, or perform any act tending to obstruct the proceedings for collecting the tax for the past or current quarter or year, or render the same totally or partly inefficient, unless such proceeding are begun immediately, the Commissioner of Internal Revenue shall declare the tax period of such taxpayer terminated at any time and shall send the taxpayer a notice of such decision, together with a request for the immediate payment of the tax for the tax period so declared terminated and the tax for the preceding year or quarter, or such portion thereof as may be unpaid and said taxes shall be due and payable immediately and shall be subject to all the penalties hereafter prescribed, unless paid within the time fixed in the request of the Commissioner of Internal Revenue.
SEC. 17. Authority of officers to administer oaths and take testimony. — The Commissioner of Internal Revenue, Deputy Commissioners, Service Chiefs, Assistant Service Chiefs, Revenue Regional Directors, Assistant Revenue Regional Directors, Chiefs and Assistant Chiefs of Division, Revenue District Officers, special deputies of the Commissioner, internal revenue officers and any other employee of the Bureau thereunto especially deputized by the Commissioner shall have power to administer oaths and to take testimony in any official matter or investigation conducted by them touching any matter within the jurisdiction of the Bureau.
SEC. 18. Contents of Commissioner's annual report. — The annual report of the Commissioner of Internal Revenue shall contain a detailed statement of the collections and disbursements of the Bureau with specifications of the sources of revenue and classes of disbursements.
SEC. 19. Sources of revenue. — The following taxes, fees and charges are deemed to be national internal revenue taxes:
(a) Income tax;
(b) Estate and gift taxes;
(c) Excise taxes;
(d) Taxes on business;
(e) Documentary stamp taxes;
(f) Mining taxes; and
(g) Miscellaneous taxes, fees and charges, namely: taxes on banks, finance companies, insurance companies, franchise taxes, taxes on amusements, and charges on forest products, tobacco inspection fees and such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue. (As amended by PD. No. 1994)
SEC. 20. Definitions. — When used in this Title —
(a) The term "person" means an individual, a trust, estate, or corporation.
(b) The term "corporation" includes partnership, no matter how created or organized, joint stock companies, joint accounts (cuentas en participacion), associations or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government. General professional partnerships are partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business.
(c) The term "domestic", when applied to a corporation, means created or organized in the Philippines or under its laws.
(d) The term "foreign" when applied to a corporation, means a corporation which is not domestic.
(e) The term "non-resident citizen" means one who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad for an uninterrupted period which includes an entire taxable year.
(f) The term "resident alien" means an individual whose resident is within the Philippines and who is not a citizen thereof.
(g) The term "non-resident alien" means an individual whose residence is not within the Philippines and who is not a citizen thereof.
(h) The term "resident foreign corporation" applies to a foreign corporation engaged in trade or business within the Philippines.
(i) The term "non-resident foreign corporation" applies to a foreign corporation not engaged in trade or business within the Philippines.
(j) The term "fiduciary" means a guardian trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person.
(k) The term "withholding agent" means any person required to deduct and withhold any tax under the provision of section fifty-three
(l) The term "stock" includes the share in an association, joint-stock company, or insurance company.
(m) The term "shareholder" includes a member in an association, joint-stock company, or insurance company.
(n) The term "taxpayer" means any person subject to tax imposed by this Title.
(o) The terms "including, when used in a definition contained in this Title, shall not be deemed to exclude other things otherwise within the meaning of the term defined.
(p) The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the net income is computed under this Title. "Taxable year" includes, in the case of a return made for a fractional part of a year under the provisions of this Title or under regulations prescribed by the Department of Finance, the period for which such return is made.
(q) The term "fiscal year" means an accounting period for twelve months ending on the last day of any months other than December.
(r) The term "paid or incurred" and "paid or accrued" shall be construed according to the method of accounting upon the basis of which the net income is computed under this Title.
(s) The term "trade or business" includes the performance of the functions of a public office.
(t) The term "securities" means shares of stock in a corporation and rights to subscribe for or to receive such shares. The term includes bonds, debentures, notes, or certificates, or other evidence of indebtedness, issued by any corporation, including those issued by a government or political subdivision thereof, with interest coupons or in registered form.
(u) The term "dealer in securities" means a merchant of stocks or securities, whether an individual, partnership or corporation, with an established place of business, regularly engaged in the purchase of securities and their resale to customers; that is, one who as a merchant buys securities and sells them to customers with a view to the gains and profits that may be derived therefrom.
SEC. 21. Rates of tax on citizens or residents. A tax is hereby imposed upon the taxable net income received during each taxable year from all sources by every individual, whether a citizen of the Philippines residing therein or an alien residing in the Philippines determined in accordance with the following schedule: Provided, however, That non resident citizens shall be subject to tax under this schedule only on citizens shall be subject to tax under this schedule only on income derived by them from sources within the Philippines.
Not over P2,000
(3%)
Over P2,000 but not over P 4,000
P 60 plus 6% of excess over P 2,000
Over P4,000 but not over P 6,000
P 180 plus 9% of excess over P 4,000
Over P6,000 but not over P 8,000
P 360 plus 12% of excess over P 6,000
Over P8,000 but not over P 10,000
P 600 plus 14% of excess over P 8,000
Over P10,000 but not over P 12,000
P 880 plus 16% of excess over P 10,000
Over P12,000 but not over P 14,000
P 1,200 plus 18% of excess over P 12,000
Over P14,000 but not over P 16,000
P 1,560 plus 20% of excess over P 14,000
Over P16,000 but not over P 18,000
P 1,960 plus 22% of excess over P 16,000
Over P18,000 but not over P 20,000
P 2,400 plus 24% of excess over P 18,000
Over P20,000 but not over P 24,000
P 2,880 plus 27% of excess over P 20,000
Over P24,000 but not over P 28,000
P 3,960 plus 30% of excess over P 24,000
Over P28,000 but not over P 32,000
P 5,160 plus 33% of excess over P 28,000
Over P32,000 but not over P 36,000
P 6,480 plus 36% of excess over P 32,000
Over P36,000 but not over P 40,000
P 7,920 plus 39% of excess over P 36,000
Over P40,000 but not over P 46,000
P 9,460 plus 42% of excess over P 40,000
Over P46,000 but not over P 52,000
P 12,000 plus 44% of excess over P 46,000
Over P52,000 but not over P 58,000
P 14,640 plus 46% of excess over P 52,000
Over P58,000 but not over P 64,000
P 17,400 plus 48% of excess over P 58,000
Over P64,000 but not over P 70,000
P 20,000 plus 50% of excess over P 64,000
Over P70,000 but not over P 78,000
P 23,280 plus 52% of excess over P 70,000
Over P78,000 but not over P 86,000
P 27,440 plus 54% of excess over P 78,000
Over P86,000 but not over P 94,000
P 31,760 plus 56% of excess over P 86,000
Over P94,000 but not over P 102,000
P 36,240 plus 57% of excess over P 94,000
Over P102,000 but not over P 110,000
P 40,800 plus 58% of excess over P 102,000
Over P110,000 but not over P 1200,000
P 45,440 plus 59% of excess over P 110,000
Over P120,000 but not over P 130,000
P 51,340 plus 60% of excess over P 120,000
Over P130,000 but not over P 140,000
P 57,340 plus 61% of excess over P 130,000
Over P140,000 but not over P 150,000
P 63,440 plus 62% of excess over P 140,000
Over P150,000 but not over P 160,000
P 69,640 plus 63% of excess over P 150,000
Over P160,000 but not over P 180,000
P 75,940 plus 64% of excess over P 160,000
Over P180,000 but not over P 200,000
P 88,740 plus 65% of excess over P 180,000
Over P200,000 but not over P 250,000
P 101,740 plus 66% of excess over P 200,000
Over P250,000 but not over P 300,000
P 134,740 plus 67% of excess over P 250,000
Over P300,000 but not over P 400,000
P 168,240 plus 68% of excess over P 300,000
Over P400,000 but not over P 500,000
P 236,240 plus 69% of excess over P 400,000
Over P500,000
P 305,240 plus 70% of excess over P 500,000
Provided, further, That on the income of non-resident citizens from all sources without the Philippines, there is hereby imposed a tax on the gross amount of such income after deducting therefrom the following:
(a) An allowance for personal exemption in the amount of two thousand dollars (U.S. $2,000.00), if the person making the return is a single person or a married person legally separated from his or her spouse; or four thousand dollars (U.S. 84,000.00), if the person making the return is a married man or head of the family, as defined in Section twenty-three of this Code; and
(b) The total amount of the national income tax actually paid to the government of the foreign country of his residence.
The Philippine income tax on the adjusted gross income shall be computed in accordance with the following schedule:
If the amount subject to tax is:
Not over $6,000.00
1%
Over 56,000.00 but not over §20,000.00
2%
Over $20,000.00
3%
Every non-resident citizen availing of the special rates provided herein is required to support his declaration of gross income, exemptions and deductions claimed by attaching to his Philippine income tax return a copy of the income tax return he has filed with the government of the foreign country of his residence.
SEC. 22. Tax on non-resident alien individuals. — (a) Non-resident alien engaged in trade or business within the Philippines: There shall be levied, collected, and paid for each taxable year upon the entire net income received from all sources within the Philippines by every nonresident alien individual engaged in trade or business within the Philippines the tax imposed by Section twenty-one:
Provided, That for purposes of this Title, a non-resident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than one hundred eighty days during any calendar year shall be deemed a non-resident alien, doing business in the Philippines, the provision of Section twenty (g) of this Code to the contrary notwithstanding.
(b) Non-resident aliens not engaged in trade or business within the Philippines. — There shall be levied, collected and paid for each taxable year upon the entire income received from all sources within the Philippines by every nonresident alien individual not engaged in trade or business within the Philippines as interest, dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinate annual or periodical or casual gains, profits, and income, and capital gains, (except capital gains realized by non resident investors from buying and/or selling shares of stock of Philippine corporations listed in the dollar or any acceptable foreign currency board of any stock exchange), a tax equal to thirty per centum of such income.
(c) Aliens employed by regional or area headquarters of multinational corporations. — There shall be levied, collected and paid for each taxable year upon the gross income received by every alien individual employed by regional or area, headquarter established in the Philippines, by multinational corporations as salaries, wages, annuities, compensation, remuneration and other emoluments, such as honoraria and allowances, from such regional or area headquarters, a tax equal to 15% of such gross income: Provided, That the activities of the said regional headquarters or area headquarters shall be limited to acting as supervisory, communications and coordinating center for their affiliates, subsidiaries or branches of such multi-national corporations. For purposes of this chapter, the term "multinational corporation" means a foreign firm or entity, engaged in international trade with affiliates or subsidiaries or branch office in the Asia Pacific Region.
(d) Aliens employed by offshore banking units. — There shall be levied, collected and paid for each taxable year upon the gross income recovered by every alien individual employed by offshore banking units established in the Philippines as salaries, wages, annuities, compensation, remuneration and other emoluments, such as honoraria and allowances, from such offshore banking units, a tax equal to 15% of such gross income.
SEC. 23. Amount of personal exemptions allowable to individuals.—For the purpose of the tax provided for in this Title, there shall be allowed in the nature of a deduction from the amount of net income the following personal exemptions:
(a) Personal exemption of single individuals.—The sum of one thousand eight hundred pesos, if the person making the return is a single person or a married person legally separated from his or her spouse.
(b) Personal exemption of married persons or heads of family.—The sum of three thousand pesos, if the person making the return is a married man or a married woman or the head of a family: Provided, That only one exemption of three thousand pesos shall be made from the aggregate income of both husband and wife when not legally separated. For the purpose of this section, the term "head of the family" includes an unmarried man or woman with one or both parents, or one or more brothers or sisters, or one or more legitimate, recognized natural, or adopted children living with and dependent upon him or her for their chief support where such brothers, sisters, or children are not more than twenty-one years of age, unmarried, and not gainfully employed, or where such children are incapable of self-support because mentally or physically defective.
(c) Additional exemption for dependents.—The sum of one thousand pesos for each legitimate, recognized natural, or adopted child, wholly dependent upon and living with the taxpayer if such dependents are not more than twenty one years of age, unmarried, and not gainfully employed or incapable of self-support because mentally or physically defective. The additional exemption under this subsection shall be allowed only if the person making the return is the head of the family: Provided, however, That the total number of dependents for which additional exemptions may be claimed shall not exceed four dependents.
(d) Change of status.—If the taxpayer married or should have additional dependents as defined in subsection (c) above during the taxable year, the taxpayer may claim the corresponding personal exemption in full for such year, If the taxpayer should die during the taxable year, his estate may still claim the personal and additional exemptions for himself and his dependents as if he died at the close of such year. If the spouse or any of the dependents should die or become twenty-one years old during the taxable year, the taxpayer may still claim the same exemptions as if they died, or as if such dependents became twenty-one years old at the close of such year.
(e) Personal exemptions allowable to a on-resident alien individual.—A nonresident alien individual engaged in trade or business in the Philippines shall be entitled to personal exemption in an amount equal to the exemptions allowed by the income tax law in the country of which he is a subject or citizen to citizens of the Philippines not residing in such country, but not to exceed the amount fixed in this section as exemption for citizens or residents of the Philippines: Provided, That said nonresident alien file a true and accurate return of the total income received by him from all sources in the Philippines, as required by this Title.
SEC. 24. Rates of tax on corporation. - (a) Tax on domestic corporations - A tax is hereby imposed upon the taxable net income received during each taxable year from all sources by every corporation organized in, or existing under the laws of the Philippines, and partnerships, no matter how created or organized, but not including general professional partnerships, in accordance with the following:
Twenty-five per cent upon the amount by which the taxable net income does not exceed one hundred thousand pesos; and
Thirty-five per cent upon the amount by which the taxable net income exceeds one hundred thousand pesos.
Private educational institutions, whether stock or nonstock shall pay a tax of ten per cent of their taxable net income from the operation of the school, related school activities, and on their passive investment income consisting of interest, dividends, royalties, and the like: Provided, however, that dividends received by a private educational institution, whether stock or non-stock, from a domestic or resident foreign corporation shall be subject to the inter-corporate dividends tax under subsection (e) hereof.
(b) Tax on foreign corporations—(1) Nonresident corporations.—A foreign corporation not engaged in trade or business in the Philippines shall pay a tax equal to thirty-five per cent of the gross income received during each taxable year from all sources within the Philippines, as interest, dividends, rents, royalties, salaries, premiums, annuities, remunerations for technical services, emoluments or other fixed or determinable annual, periodical or casual gains, profits and income, and capital gains: Provided, however, That—
(i)
Premiums shall not include reinsurance premiums;
(ii)
Interest on foreign loans shall be subject to fifteen per cent tax;
(iii)
On dividends received from a domestic corporation liable to tax under this Chapter, the tax shall be 15% of the dividends received, which shall be collected and paid as provided in Section 53 (d) of this Code, subject to the condition that the country in which the non-resident foreign corporation is domiciled shall allow a credit against the tax due from the nonresident foreign corporation, taxes deemed to have been paid in the Philippines equivalent to 20 % which represents the difference between the regular tax (35%) on corporations and the tax (15%) on dividends as provided in this Section;
(iv)
Cinematographic film owners, lessors, or distributors shall pay a tax of twenty-five per cent of their gross income from all sources within the Philippines. For purposes of this paragraph, the gross income of cinematographic film owners, lessors, or distributors shall include film rentals and all items of gross income under Section 29 (a) ;
(v)
Rentals, lease and charter fees payable to nonresident owners of vessels chartered by Philippine nationals as the term is defined under Section 3 (c) of Presidential Decree No. 474, and which charter or lease has been duly approved by the Maritime Industry Authority, shall be subject to 4.5% final tax, the return and payment of which shall be in accordance with Sections 53 and 54 of this Code;
(vi)
Regional or area headquarters established in the Philippines by multinational corporations and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries, or branches in the Asia-Pacific Region shall not be subject to tax.
(2) Resident corporation. - A corporation organized authorized, or existing under the laws of any foreign country, engaged in trade or business within the Philippines, shall be taxable as provided in subsection (a) of this section upon the total net income received in the preceding taxable year from all sources within the Philippines: Provided, however, That international carriers shall pay a tax of two and one-half per cent on their gross Philippine billings: Provided, further, That any profit remitted abroad by a branch office to its mother company shall be subject to tax of fifteen per cent (except those registered with the Export Processing Zone Authority).
(c) Rate of tax on certain dividends.—Dividends received by a domestic or resident foreign corporation from a domestic corporation liable to tax under this Code—
(1) Shall be subject to a final tax of 10% on the total amount thereof, which shall be collected and paid as provided in Sections 53 and 54 of this Code; and
(2) Shall not be included in the determination of the gross income of the recipient corporation:
Provided, however, That interest paid or incurred on indebtedness abroad by a domestic or resident foreign corporation, which indebtedness was incurred to provide funds for investment in a domestic corporation shall be allowed as a deduction from the intercorporate dividends before computing the 10% final tax. Any excess of the interest herein allowed as deduction from intercorporate dividends may be deducted from the other gross income of the recipient corporation, subject to the provisions of Section 30 (b) of this Code.
The above deduction of interest from intercorporate dividends shall be allowed only if the recipient domestic or resident foreign corporation submits an authenticated copy of the foreign loan agreement stipulating the end-use of the loan proceeds and such other information as may be required for its determination.
The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate rules and regulations to implement the provisions of this paragraph.
(d) Tax on mutual life insurance companies.—Mutual life insurance companies organized in and existing under the laws of the Philippines shall pay a tax of 10% of their gross investment income consisting of interest, dividends, rents, net capital gains and income from any other business than life insurance derived from all sources. Foreign mutual life insurance companies authorized to carry business in the Philippines shall pay the same rate of tax on the same items of gross investment income derived from sources within the Philippines.
(e) Corporate development tax.—In addition to the tax imposed in subsection (a) of this Section, an additional tax in an amount equivalent to 5% of the same taxable net income shall be paid by a domestic or a resident foreign corporation: Provided, That this additional tax shall be imposed only if the net income exceeds 107° of the net worth, in the case of a domestic corporation, or net assets in the Philippines, in the case of a resident foreign corporation: Provided, however, That a closely-held corporation as defined here in below shall be subject- to the said additional income tax regardless of the rate of return on its net worth. The term "closely-held corporation" means any corporation, (a) at least 50 % in value of the outstanding stock or (b) at least 50% of the total combined voting power of all classes of stock entitled to vote, at any time during the taxable year, is owned directly or indirectly by or for not more than five persons, natural or juridical. For the purpose of determining whether an individual indirectly owns shares of stock in a corporation, the attribution rules prescribed by Section 66 of this Code shall be applied.
The additional corporate income tax imposed in this subsection shall be collected and paid at the same time and in the same manner as the tax imposed in subsection (a) of this Section.
(f) Tax on transactions by offshore banking units and under the expanded foreign, currency deposit system.-
(1) Offshore banking units.—The provisions of any law to the contrary notwithstanding, the transactions of off shore banking units authorized by the Central Bank with non-residents and other offshore banking units shall be subject to a five per cent (5%) tax on the net income from such transactions which shall be in lieu of all taxes on the said transactions: Provided, however, that trans actions of offshore banking units with local commercial banks, including branches of foreign banks that may be authorized by the Central Bank to transact business with offshore banking units, shall likewise be subject to the same tax, except net income from such transactions as may be specified by the Secretary of Finance, upon re commendation of the Monetary Board, to be subject to the usual income tax payable by banks. Any income of non-residents from transactions with said offshore banking units shall be exempt from any tax.
In the case of transaction with residents (other than offshore banking units or local commercial banks including local branches of foreign banks that may be authorized by the Central Bank of the Philippines to transact business with offshore banking units), interest income from loans granted to such residents shall be subject only to a ten per cent (10%) withholding tax as final tax.
(2) Expanded foreign currency deposit system.—The net income derived by a depository bank from foreign currency transactions with nonresidents, offshore banking units in the Philippines and other depository banks under the expanded foreign currency deposit system under the rules and regulations of the Central Bank shall be subject to a five per cent (5%) tax which shall be in lieu of all taxes on said transactions, except net income from such transactions as may be specified by the Secretary of Finance, upon recommendation of the Monetary Board, to be subject to the usual income tax payable by banks.
Interest income from foreign currency loans granted by such depository banks under said expanded system to residents (other than offshore banking units in the Philippines or other depository banks under the expanded system) shall be subject to a ten per cent (10%) withholding tax as a final tax.
Income of non-residents not engaged in trade or business in the Philippines from foreign currency loans to depository banks under the expanded system shall be exempt from income tax.
(g) The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers not specifically exempt under Section 27 of this Code shall pay the rates provided in this Section. All corporations, agencies, or instrumentalities owned or controlled by the Government, including the Government Service Insurance System and the Social Security System but excluding educational institutions, shall pay such rate of tax upon their taxable net income as are imposed by this section upon associations or corporations engaged in a similar business or industry.
SEC. 25. Additional tax on corporations improperly accumulating profits or surplus.—(a) Imposition of tax.— If any corporation, except banks, insurance companies, or personal holding companies whether domestic or foreign, is formed or availed of for the purpose of preventing the imposition of the tax upon its shareholders or members or the shareholders or members of another corporation, through the medium of permitting its gains and profits to accumulate instead of being divided or distributed, there is levied and assessed against such corporation, for each taxable year a tax equal to twenty-five per centum of the undistributed portion of its accumulated profits or surplus which shall be addition to the tax imposed by Section twenty-four, and shall be computed, collected and paid in the same manner and subject to the same provisions of law, including penalties, as that tax.
(b) Prima facie evidence - That fact that any corporation is a mere holding company shall be prima facie evidence of a purpose to avoid the tax upon its shareholders or members, Similar presumption will lie in the case of an investment company where at any time during the taxable year more than fifty per centum in value of its outstanding stock is owned, directly or indirectly, by one person.
(c) Evidence determinative of purpose.—The fact that the earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of the business shall be determinative of the purpose to avoid the tax upon its shareholders or members unless the corporation, by clear preponderance of evidence, shall prove the contrary.
SEC. 26. Tax liability of members of general professional partnerships.—Persons exercising a common profession in general partnership shall be liable for income tax only in their individual capacity, and the share in the profits of the general professional partnership to which any taxable partner would be entitled, whether distributed or otherwise, shall be returned for taxation and the tax paid in accordance with the provisions of this Title.
SEC. 27. Exemptions from tax on corporations.—The following organizations shall not be taxed under this Title in respect to income received by them as such—
(a) Labor, agricultural, or horticultural organization not organized principally for profit;
(b) Mutual savings bank not having a capital stock represented by shares, and cooperative bank without capital stock organized and operated for mutual purposes and without profit;
(c) Fraternal beneficiary society, order or association, operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system and providing for the payment of life, sickness, accident, or other benefits to the members of such society, order, or associations, or their dependents;
(d) Cemetery company owned and operated exclusively for the benefit of its members;
(e) Corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of the net income of which inures to the benefit of any private stockholder or individual.
However, the income of any of the foregoing organizations of whatever kind and character from any of their properties, real or personal, or from any activity conducted for profit, regardless of the disposition made of such income, shall be liable to the tax imposed under this Title-
(f) Business league, chamber of commerce, or board of trade, not organized for profit and no part of the net income of which inures to the benefit of any private stock holder or individual;
(g) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare;
(h) Club organized and operated exclusively for pleasure, recreation, and other non-profitable purposes, no part of the net income of which inures to the benefit of any private stockholder or member;
(i) Farmers' or other mutual typhoon or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone company, or like organization of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses;
(j) Farmers', fruit growers', or like association organized and operated as a sales agent for the purpose of marketing the products of its members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity of produce furnished by them;
(k) Corporation or association organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt from the tax imposed by this Title; and
(1) Development banks as provided in Republic Act Numbered Four Thousand ninety-three, as amended.
SEC. 28. Meaning of net income.—"Net income" means the gross income computed under section twenty-nine, less the deductions allowed by section thirty.
SEC. 29. Gross income.— (a) General definitions.— "Gross income" includes gains, profits, and income derived from salaries, wages, or compensation for personal services of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interests, rents, dividends, securities, or the transactions of any business carried on for gain or profit, or gains, profits, and income derived from any source whatever.
(b) Exclusions from gross income.—The following items shall not be included in gross income and shall be exempt from taxation under this Title:
(1) Life insurance.—The proceeds of life insurance policies paid to beneficiaries upon the death of the insured, whether in a single sum or otherwise, but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income.
(2) Amount received by insured as return of premium.— The amount received by the insured, as a return of premium or premiums paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract.
(3) Gifts, bequests, and devises.—The value of property acquired by gift, bequests, devise, or descent; but the in come from such property shall be included in gross income.
(4) Interest on Government securities.—Interest upon the obligations of the Government of the Republic of the Philippines or any political subdivision thereof, but in the case of such obligations issued after the approval of this Code, only to the extent provided in the act authorizing the issue thereof.
(5) Compensation for injuries or sickness.—Amounts received, through Accident or Health Insurance or under Workmen's Compensation Acts, as compensation for personal injuries or sickness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness.
(6) Income exempt under treaty.—Income of any kind, to the extent required by any treaty obligation binding upon the Government of the Philippines.
(7) Retirement benefits, pensions, gratuities, etc.
(A) Retirement benefits received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer: Provided, That the retiring official or employee has been in the continuous service of the same employer for at least ten (10) years and is not less than fifty years of age at the time of his retirement: Provided, further, that the benefits granted under this sub-paragraph shall be availed of by an official or employee only once. For purposes of this sub-section, the term "reasonable private benefit plan" means a pension, gratuity, stock bonus or profit sharing plan maintained by an employer for officials and employees, or both, for the purpose of distributing to such officials and employees the earnings and principal of the fund thus accumulated, and wherein it is provided in said plan that thus accumulated, and wherein it is provided in said plan that at no time shall any part of the corpus or income of the fund be used for, or be diverted to, any purpose other than for the exclusive benefits of the said officials and employees.
(B) Any amount received by an official or employee or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee.
(C) The provisions of any existing law to the contrary notwithstanding, social security benefits, retirement gratuities, pensions and other similar benefits received by resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public.
(D) Payments of benefits due or to become due to any person residing in the Philippines under the laws of the United States administered by the United States Veterans Administration.
(E) Payments of benefits made under the Social Security Act of 1954, as amended.
(F) Benefits received from the GSIS and the retirement gratuity received by government officials and employees.
(8) Miscellaneous items.— (A) Income received from their investments in the Philippines, in loans, stock, bonds, or other domestic securities, or from interest on their deposits in banks in the Philippines by (1) foreign governments, (2) financing institutions owned, controlled, or enjoying refinancing from them, and (3) international or regional financing institutions established by governments.
(B) Income derived from any public utility or from the exercise of any essential governmental function accruing to the Government of the Philippines or to any political sub-division thereof.
(C) Income derived as rewards under Republic Act Numbered Twenty-three hundred and thirty-eight, as amended by Presidential Decree No. 707.
(D) Interest earned on commercial papers issued in the primary market as principal instrument subjected to the final tax under Section 210 (b).
SEC. 30. Deductions from gross income.—In computing net income there shall be allowed as deduction—
(a) Expenses:
(1) In general.—All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; travelling expenses while away from home in the pursuit of a trade or business, rentals or other payments required to be made as a condition to the continued use or possession, for the purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity.
In the case of an individual, ordinary and necessary entertainment expenses in an amount not in excess of one thousand pesos or five per centum of gross income, whichever is lesser, shall be allowed as deduction. Claims for such ordinary and necessary entertainment expenses in an amount exceeding this allowance shall be duly supported by the corresponding vouchers and/or receipts.
(2) Expenses allowable to citizens or resident individuals. -
(A) Expenses incurred and paid in the Philippines during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or his dependents as defined in section twenty-three (c).
(1) Definition. - For purpose of this subsection, the term "medical care expenses" means amounts paid for the diagnosis, or for the purpose of affecting any structure or function of the body, but excluding amounts paid for medicines.
(2) Limitation.—The deduction allowed in this sub section shall not exceed five hundred pesos for the tax payer and an additional five hundred pesos for the spouse and each dependent as defined in Section twenty-three (c), but not to exceed two thousand pesos in the aggregate.
(3) Proof of deductions.—In connection with claims for medical care expense deduction, the taxpayer shall furnish the name and address of each person to whom payment for medical care expenses has been made during the taxable year, as well as the amount and the date of the actual payment thereof in each case. Claims for deductions must be substantiated by a receipt or a statement from the individual to whom or entity to which payment for medical care was paid, showing the nature of the service rendered, the name of the person for whom the service is rendered, the amount paid therefor and the date of actual payment thereof, and such other information as the Commissioner may deem necessary.
(B) Expenses incurred and paid in the Philippines during the taxable year for basic tuition fees of taxpayer's dependents, as defined in Section twenty-three (c), who are studying in high schools.
(1) Definition.—For purposes of this subsection, the term "basic tuition fees" means amounts paid for the privilege to receive instruction in a high school but does not include matriculation fees and other miscellaneous fees such as library and athletic fees, laboratory- fee, entrance fee, ROTC fee, student council fee, graduation fee and similar fees.
(2) Limitation.—The deduction allowed in this sub section shall be two hundred fifty pesos for each of the taxpayer's dependents, as defined in Section twenty-three (c), who are studying in high schools but shall not exceed one thousand pesos in the aggregate.
(3) Proof of deductions.—In connection with claims for basic tuition fees deduction, the taxpayer shall furnish the name and date of birth of each dependent child who incurred the expense during the taxable year, as well as the amount and the date of actual payment thereof in each case. Claims for deductions must be substantiated by a receipt or statement of the school to which payment for basic tuition fees was made, showing the total school fees paid, as well as a break down of such fees, and such other information as the Commissioner may deem necessary.
(4) Expenses allowable to non-resident alien individuals and foreign corporations.—In the case of a non resident alien individual or a foreign corporation, the expenses deductible are the necessary expenses paid or incurred m carrying on any business or trade con ducted within the Philippines exclusively.
(5) Expenses allowable to private educational institutions. - In additional to the expenses allowable as deductions under paragraph (1) of this subsection, a private educational institution, whether stock or non-stock, shall also be allowed to deduct during the taxable year when they incurred expenses for the expansion of school facilities to be determined by rules and regulations issued jointly by the Department of Education and Culture and Finance.
(b) Interest:
(1) In general. - The amount of interest paid within the taxable year on indebtedness, except on indebtedness incurred or continued to purchase or carry obligations the interest upon which is exempt from taxation as income under this Title: Provided, however that interest on deposits paid by authorized agent banks of the Central Bank of the Philippines to depositors shall be allowed as a deduction only if it is shown that the tax on such interest was withheld and paid in accordance with the provisions of Section 53 and 54 of this Code.
(2) Interest allowable to non-resident aliens.—In the case of a non-resident alien individual or a foreign corporation, the amount of interest allowable is the proportion of the amount of interest paid within the year on indebtedness, except on indebtedness incurred or continued to purchase or carry obligations, the interest upon which is wholly exempt from taxation as income under this Title, which the gross amount of income for the year derived from sources within the Philippines bears to the gross amount of income derived from all sources within and without the Philippines; but this deduction shall be allowed only if such non-resident alien individual or foreign corporation includes in the return required by this Title all the information necessary for its calculation.
(c) Taxes:
(1) In general.—Taxes paid or accrued within the tax able year, except—
(A) The income tax provided for under this Title;
(B) Income, war-profits, and excess-profits taxes im posed by the authority of any foreign country; but this deduction shall be allowed in the case of a taxpayer who does not signify in his return his desire to have to any extent the benefits of paragraph (3) of this subsection (relating to credit for taxes of foreign countries);
(C) Estate, inheritance and gift taxes;
(D) Taxes assessed against local benefits of a kind tending to increase the value of the property assessed; and
(E) Stock transaction tax under section two hundred, ten of this Code.
(2) Limitations on deductions.—
(A) In the case of a non-resident alien individual and a foreign corporation, the deductions for taxes provided in paragraph (1) of this subsection (c) shall be allowed only if and to the extent that they are connected with income from sources within the Philippines; and
(B) In the case of a citizen of a foreign country residing in. the Philippines whose income from sources within such foreign country is not taxable under this Title, only that portion of the taxes paid to such foreign country which corresponds to his net income taxable under this Title shall be allowed as deduction.
(3) Credit against tax for taxes of foreign countries.— It the taxpayer signifies in his return his desire to have the benefits of this paragraph, the tax imposed by this Title shall be credited with—
(A) Citizen and domestic corporation.—In the case of a citizen of the Philippines and of a domestic corporation, the amount of any income, war-profits, and excess-profits taxes paid or accrued during the taxable year to any foreign country;
(B) Alien resident of the Philippines.—In the case of an alien resident of the Philippines, the amount of any such taxes paid or accrued during the taxable year to any foreign country, if the foreign country of which such alien resident is a citizen or subject, in imposing such taxes, allows a similar credit to citizens of the Philippines re siding m such country; and
(C) Partnership and estates. - In the case of any such individual who is a member of a partnership or a beneficiary of an estate or trust, his proportionate share of such taxes of the partnership or the estate or trust paid or accured during the taxable year to a foreign country, if his distributive share of the income of such partnership or trust is reported for taxation under this Title.
(D) Non-resident aliens and foreign corporation - Non resident alien individuals and foreign corporation shall not be allowed the credits against the tax for the taxes of foreign countries allowed under this paragraph.
(4) Limitations on credit - The amount of the credit taken under this section shall be subject to each of the following limitations:
(A) The amount of the credit in respect to the tax paid or accrued to any country shall not exceed the same proportion of the tax against which such credit is taken, which the taxpayer's net income from sources within such country taxable under this Title; and
(B) The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the taxpayer's net income from sources without the Philippines taxable under this Title bears to his entire net income for the same taxable year.
(5) Adjustments on payment of accrued taxes.—If accrued taxes when paid differ from the amounts claimed as credits by the taxpayer, or if any tax paid is refunded in whole or in part, the taxpayer shall notify the Commissioner of Internal Revenue, who shall redetermine the amount of the tax for the year or years affected, and the amount of tax due upon such redetermination, if any, shall be paid by the taxpayer upon notice and demand by the Commissioner, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer. In the case of such a tax accrued but not paid, the Commissioner as a condition precedent to the allowance of this credit may require the taxpayer to give a bond with sureties satisfactory to and to be approved by the Commissioner in such sum as he may require, conditioned upon the payment by the taxpayer of any amount of tax found due upon any such redetermination. The bond herein prescribed shall contain such further conditions as the Com missioner may require.
(6) Year in which credit taken.—The credits provided for in paragraph (3) of this subsection may, at the option of the taxpayer and irrespective of the method of accounting employed in keeping his books, be taken in the year in which the taxes of the foreign country ac crued, subject, however, to the conditions prescribed in paragraph five of this subsection. If the taxpayer elects to take such credits in the year in which the taxes of the foreign country accrued, the credits for all subsequent years shall be taken upon the same basis, and no portion of any such taxes shall be allowed as a deduction in the same or any succeeding year.
(7) Proof of credits.—The credits provided in para graph (3) of this subsection shall be allowed only if the taxpayer establishes to the satisfaction of the Commissioner (1) the total amount of income derived from sources without the Philippines, (2) the amount of income derived from each country, the tax paid or accrued to which is claimed as a credit under said paragraph, such amount to be determined under rules and regulations prescribed by the Secretary of Finance, and (3) all other information necessary for the verification and computation of such credits.
(8) Taxes of foreign subsidiary.—For the purposes of this subsection a domestic corporation which owns a majority of the voting stock of a foreign corporation from which it receives dividends in any taxable year shall be deemed to have paid the same proportion of any income, war-profits, or excess-profits taxes paid by such foreign corporation to any foreign country, upon or with respect to the accumulated profits of such foreign corporation from which such dividends were paid, which the amount of such dividends bears to the amount of such accumulated profits: Provided, That the amount of tax deemed to have been paid under this subsection shall in no case exceed the same proportion of the tax deemed to have been paid under this subsection shall in no case exceed the same proportion of the tax against which credit is taken which the amount of such dividends bears to the amount of the entire net income of the domestic corporation in which such dividends are included. The term "accumulated profits" when used in this subsection in reference to a foreign corporation, means the amount of its gains, profits or income in excess of the income, war-profits, and excess-profits taxes imposed upon or with respect to such profits or income; and the Commissioner of Internal Revenue shall have full power to determine from the accumulated profits of what year or years such dividends were paid; treating dividends paid in the first sixty days of any year as having been paid from the accumulated profits of the preceding year or years (unless to his satisfaction shown otherwise), and in other respects treating dividends as having been paid from the most recently accumulated gains, profits, or earnings. In the case of a foreign corporation, the income, war-profits, and excess-profits taxes of which are determined on the basis of an accounting period of less than one year, the word "year" as used in this subsection shall be construed to mean such accounting period.
(9) Taxes of shareholder paid by corporation.—The deduction for taxes allowed by subsection (c) shall be allowed to a corporation in the case of taxes imposed upon a shareholder of the corporation upon his interest as shareholder which are paid by the corporation without reimbursement from the shareholder, but in such cases no deduction shall be allowed the shareholder for the amount of such taxes.
(d) Losses:
(1) By individuals.—In the case of an individual, losses actually sustained during the taxable year and not compensated for by insurance or otherwise.—
(A) If incurred in trade or business; or
(B) If incurred in any transaction entered into for profit, though not connected with the trade or business; or
(C) Of property not connected with the trade or business, if the loss arises from fires, storms, or other casualty, or from robbery, theft, or embezzlement. No loss shall be allowed as a deduction under this paragraph if at the time of the filing of the return such loss has been claimed as a deduction for estate tax purposes in the estate tax return. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, is hereby authorized to promulgate rules and regulations prescribing among other things the time and manner by which the taxpayer shall submit a declaration of loss sustained from casualty or from robbery, theft, or embezzlement during the taxable year, Provided, however, That the time limit to be so prescribed in the regulations shall not be less than 30 days nor more than 90 days from the date of the occurrence of the casualty or robbery, theft or embezzlement giving rise to the loss.
(2) By corporations.—In the case of a corporation, all losses actually sustained and charged off within the tax able year and not compensated for by insurance or other wise.
(3) By non-resident aliens or foreign corporations.— In the case of a non-resident alien individual or a, foreign corporation, the losses deductible are those actually sustained during the year incurred in business or trade conducted within the Philippines, and losses of property within the Philippines arising from fires, storms, or other casualty, and from robbery, theft, or embezzlement, and losses actually sustained during the year in transactions entered into for profit in the Philippines although not connected with their business or trade, when such losses are not compensated for by insurance or otherwise. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, is hereby authorized to promulgate rules and regulations prescribing among other things the item and manner by which the taxpayer shall submit a declaration of loss sustained from casualty or from robbery, theft or embezzlement during the taxable year, Provided, however, That the time to be so prescribed in the regulations, shall not be less than 30 days nor more than 90 days from the date of the occurrence of the casualty or robbery, theft or embezzlement giving rise to the loss.
(4) Capital losses.—
(A) Limitation—Losses from sales or exchanges of capital assets shall be allowed only to the extent provided m section thirty-four.
(B) Securities becoming worthless.—If any securities as defined m Section twenty become worthless during the taxable year and are capital assets, the loss resulting therefrom shall, for the purposes of this Title, be considered as a loss from the sale or exchange, on the last day of such taxable year, of capital assets.
(5) Losses on wash sales of stock or securities.—Losses on "wash sales" of stock or securities as provided in section thirty-three.
(6) Wagering losses.—Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions.
(e) Bad debts:
(1) In general.—Debts due to the taxpayer actually ascertained to be worthless and charged off within the tax able year.
(2) Bad debts deductible by non-resident aliens or foreign corporations.—In the case of a non-resident alien individual or a foreign corporation, bad debts are deduct ible if they have arisen in the course of business or trade conducted within the Philippines and actually ascertained to be worthless and charged off within the year.
(3) Securities becoming worthless.—If any securities as defined in section twenty are ascertained to be worth less and charged off within the taxable year and are cap ital assets, the loss resulting therefrom shall, in the case of a taxpayer other than a bank or trust company incorporated under the laws of the Philippines a substantial part of whose business is the receipt of deposits, for the purposes of this Title, be considered as a loss from the sale or exchange, on the last day of such taxable year, of capital assets.
(f) Depreciation:
(1) In general.—A reasonable allowance for deterioration of property arising out of its use or employment in the business or trade, or out of its not being used: Provided, That when the allowance authorized under this subsection shall equal the capital invested by the taxpayer or, in case of purchase made prior to March first, nineteen hundred and thirteen, the fair market value as of that date, no further allowance shall be made. In the case of property held by one person for life with remainder to another person, the deduction shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant. In the case of property held in trust, the allowable deduction shall be apportioned between the income beneficiaries and the trustees in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions, on the basis of the trust income allocable to each.
(2) Depreciation deductible by non-resident aliens or foreign corporations.—In the case of a non-resident alien individual or foreign corporation, a reasonable allowance for the deterioration of property arising out of its use or employment or its non-use in the business or trade shall be permitted only when such property is located within the Philippines.
(g) Depletion of oil and gas wells and mines:
(1) In general—(A) In the case of oil and gas wells, a reasonable allowance for actual reduction in flow, and production to be ascertained not by the flush flow, but by the settled production or regular flow; (B) In the case of mines, a reasonable allowance for depletion there- of not to exceed the market value in the mine of the product thereof, which has been mined and sold during the year for which the return and computation are made. The allowances shall be made under rules and regulations to be prescribed by the Secretary of Finance: Provided, That when the allowances shall equal the capital invested, no further allowance shall be made.
(2) Depletion of oil and gas wells and mines deductible by a non-resident alien individual or foreign corporation. - In the case of a non-resident alien individual or a foreign corporation, allowance for depletion of oil and gas wells or mines under paragraph (1) shall be authorized only in respect to oil and gas wells or mines located within the Philippines.
(h) Charitable and other contributions.—Contributions or gifts actually paid or made within the taxable year to or for the use of the Government of the Philippines or any political subdivision thereof for exclusively public purposes, or to domestic corporations or associations organized and operated exclusively for religious, charitable, scientific, athletic, cultural, or educational purposes or for the rehabilitation of veterans, or to societies for the prevention of cruelty to children or animals, no part of the net income of which inures to the benefit of any private stockholder or individual to an amount not in excess of six per centum in the case of an individual, and three per centum in the case of a corporation, of the taxpayer's taxable net income as computed without the benefit of this paragraph.
Notwithstanding the foregoing, the following donations shall be deductible in full and shall not be included for purposes of computing the maximum amount deductible under the preceding paragraph:
(1) Any donation made to any school, college, or university recognized by the Government either for general or special purposes: Provided, That said donation is not for the payment or granting of a salary increase, bonus, or personal benefits to any or all of the school officials, faculty, and personnel in case of a public school or to any of its stockholders, school officials, faculty, and personnel in case of private schools.
(2) Donations to the Artesian Well Fund as provided in Republic Act Numbered Nine hundred seventy-seven.
(3) Donations to the International Rice Research Institute as provided in Republic Act Numbered Two thou sand seven hundred seven.
(4) Donations to the National Science Development Boards and its agencies and to public or recognized private educational institutions, and scientific and research foundations, as provided in Republic Act Numbered Three thousand five hundred eighty-nine.
(5) Donations to the Ramon Magsaysay Award Foundation, as provided in Republic Act Numbered Three thou sand six hundred seventy-six.
(6) Donations to the University of the Philippines and other state colleges and universities subject to the same limitations in paragraph one above.
(7) Donations to the Philippine Rural Reconstruction Movement.
(8) Donations to the Catholic Relief Services-NCWC, and 'the Tools for Freedom Foundation as provided in Re public Act Numbered Four thousand four hundred eighty- one.
(9) Donations to the Cultural Center of the Philippines.
(10) Donations to the Trustees of the Press Foundation of Asia, Inc.
(11) Donations to the National Commission on Culture.
(12) Donations to Humanitarian Science Foundation.
(13) Donations to Roxas Education and Welfare Committee, Inc.
(14) Donations to the Integrated Bar of the Philippines as provided in Presidential Decree No. 181.
(15) Donations to the Development Academy of the Philippines as provided in Presidential Decree No. 205.
(16) Donations to Aquaculture, Department of the Southeast Asian Fisheries Development Center as provided in Presidential Decree No. 292.
(17) Donations to the National Social Action Council as provided in Presidential Decree No. 294.
(18) Donation to the Task Force on Human Settlements.
(19) Donations to the National Museum, Library and Archives as provided in Presidential Decree No. 373.
(20) Donations to the Department of Youth and Sports Development as provided in Presidential Decree No. 604.
(21) Donations to social welfare, cultural and charitable institution, no part of the net income of which inures to the benefit of any individual: Provided, however, That not more than 30% of the said donations be used by such institutions for administration purposes.
The provisions of existing special laws to the contrary notwithstanding, all other contributions or donations shall be subject to the limitations provided in the first paragraph of this subsection.
Such contribution or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the Secretary of Finance.
(i) Conditions under which a non-resident alien individual may receive benefit of deductions.—A non-resident alien individual engaged in trade or business in the Philippines shall receive the benefit of the deductions provided for in this section only by filing or causing to be filed with the Commissioner of Internal Revenue a true and accurate return of his total income, received from all sources, corporate or otherwise, in the Philippines, in the manner prescribed by this Code; and in case of his failure to file such return the Commissioner of Internal Revenue shall collect the tax on such income.
(j) Pension trusts.—General rule.—An employer establishing or maintaining a pension trust to provide for the payment of reasonable pensions to his employees shall be allowed as a deduction (in addition to the contributions to such trusts during the taxable year to cover the pension liability accruing during the year,! allowed as a deduction under subsection (a) of this section) a reasonable amount transferred or paid into such trust during the taxable year in excess of such contributions, but only if such amount
(1) has not theretofore been allowable as a deduction, and
(2) is apportioned in equal parts over a period of ten consecutive years beginning with the year in which the transfer or payment is made.
(k) Optional standard deduction.—In lieu of the deductions allowed under this section an individual, other than a non-resident alien, may elect a standard deduction. Such optional standard deduction shall be in the amount of five thousand pesos or in an amount equal to ten per centum of his gross income, whichever is the lesser. Unless the tax. payer signifies in his return his intention to elect the optional standard deduction, he shall be considered as having availed himself of the deductions allowed in the preceding subsection. The Secretary of Finance shall prescribe the manner of the election. Such election when made in the return shall be irrevocable for the taxable year for which the return is made.
(1) Standard deduction for working wife.—If the gross income reported in the return filed by the taxpayer includes that received by his wife, a standard deduction of ten per cent of the gross income received by his wife but not exceeding P500 shall be allowed as deduction from the, combined gross income, regardless of whether the taxpayer uses the itemized deductions under subsection (a) to (j), or the optional standard deduction under sub-section (k), of this Section.
SEC. 31. Items not deductible. - (a) General rule. - In computing net income no deducting shall in any case be allowed in respect of -
(1) Personal, living, or family expenses;
(2) Any amount paid out for new buildings or for permanent improvement, or betterments made to increase the value of any property or estate;
(3) Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made; or
(4) Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially interested in any trade or business carried on by the taxpayer, individual or corporate, when the taxpayer is directly or indirectly a beneficiary under such policy.
(b) Losses from sales or exchanges of property.—In computing net income no deduction shall in any case be allowed in respect of losses from sales or exchanges of property, directly or indirectly—
(1) Between members of u family.—For the purposes of this paragraph, the family of an individual shall include only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants;
(2) Except in the case of distributions in liquidation, between an individual and a corporation more than fifty per centum in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual;
(3) Except in the case of distributions in liquidation, between two corporations more than fifty per centum in value of the outstanding stock of each of which is owned, directly or indirectly, by or for the same individual, if either one of such corporations, with respect to the taxable year of the corporation preceding the date of the sale or exchange was, under the law applicable to such taxable year, a personal holding company or a foreign personal holding company;
(4) Between a grantor and a fiduciary of any trust;
(5) Between the fiduciary of a trust and the fiduciary of another trust, if the same person is a grantor with respect to each trust; or
(6) Between a fiduciary of a trust and a beneficiary of such trust.
SEC. 32. Special provisions regarding income and deductions of insurance companies, whether domestic or foreign.— (a) Special deductions allowed to insurance companies.—In the case of insurance companies, whether domestic or foreign doing business in the Philippines, the net additions, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts may be deducted from their gross income: Provided, however, That the released reserve be treated as income for the year of release.
(b) Mutual insurance companies.—In the case of mutual fire and mutual employer's liability and mutual workmen's compensation and mutual casualty insurance companies requiring their members to make premium deposits to provide for losses and expenses, said companies shall not return as income any portion of the premium deposits returned to their policyholders, but shall return as taxable income all income received by them from all other sources plus such portion of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and re-insurance reserves.
(c) Mutual marine insurance companies.—Mutual marine insurance companies shall include in their return of gross income, gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policyholders on account of premiums previously mid by them and interest paid upon those amounts between the ascertainment and payment thereof.
(d) Assessment insurance companies.—Assessment insurance companies, whether domestic or foreign, may deduct from their gross income the actual deposit of sums with the officers of the Government of the Philippines pursuant to law, as additions to guarantee or reserve funds
SEC. 33. Losses from wash sales of stock or securities. - (a) In the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning thirty days before the date of such sale or disposition and ending thirty days after such date, the taxpayer has acquired (by purchase or by exchange upon which the entire amount of gain or loss was recognized by law), or has entered into a contract or option so to acquire, substantially identical stock or securities, then no deduction for the loss shall be allowed under section thirty unless the claim is made by a dealer in stock or securities, and with respect to a transaction made in the ordinary course of the business of such dealer.
(b) If the amount of stock or securities acquired (or covered by the contract or option to acquire) is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be determined under rules and regulations prescribed by the Secretary of Finance.
(c) If the amount of stock or securities acquired (or covered by the contract or option to acquire) is not less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the acquisition of which (or the contract or option to acquire which) resulted in the nondeductibility of the loss shall be determined under rules and regulations prescribed by the Secretary of Finance.
SEC. 34. Capital gains and losses.— (a) Definitions.— As used in this Title-
(1) Capital assets.—The term "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property used in the trade or business, of a character which is subject to the allowance for depreciation provided in subsection (f) of section thirty; or real property used in the trade or business of the taxpayer.
(2) Net capital gain.—The term "net capital gain" means the excess of the gains from sales or exchanges of capital assets over the losses from such sales or exchanges.
(c) Limitation on capital losses.—Losses from sales or exchange of capital assets shall be allowed only to the extent of the gains from such sales or exchanges. If a bank or trust company incorporated under the laws of the Philippines, a substantial part of whose business is the receipt of deposits, sells any bond, debenture, note, or certificate or other evidence of indebtedness issued by any corporation (including one issued by a government or political subdivision thereof), with interest coupons or in registered form, any loss resulting from such sale shall not be subject to the foregoing limitation and shall not be included in determining the applicability of such limitation to other losses.
(d) Net capital loss carry over.—If any taxpayer, other than a corporation, sustains in any taxable year a net capital loss, such loss (in an amount not in excess of the net income for such year) shall be treated in the succeeding taxable year as a loss from the sale or exchange of a capital asset held for not more than twelve months.
(e) Retirement of bonds, etc. - For the purpose of this Title, amounts received by the holder upon the retirement of bonds, debentures, notes or certificates or other evidences of indebtedness issued by any corporation (including those issued by a government or political subdivision thereof) with the interest coupons or in registered form, shall be considered as amounts received in exchange therefor.
(f) Gains and losses from short sales, etc.—For the pur pose of this Title—
(1) Gains or losses from short sales of property shall be considered as gains or losses from sales or exchanges of capital assets; and
(2) Gains or losses attributable to the failure to exercise privileges or options to buy or sell property shall be considered as capital gains or losses.
(g) Gains from sale, barter, or exchange of shares of stock derived from sources within the Philippines shall be taxed under the following schedules:
Rates
Not over P10,000
10%
Over P10,000 but not over P15,000
12%
Over P15,000 but not over P20,000
14%
Over P20,000 but not over 35,000
17%
Over P35,000 but not over P50,000
20%
Over P50,000
25%
Provider however, That non-resident investors buying and/or selling shares of stock of Philippine corporations listed in the dollar or any acceptable foreign currency board of any stock exchange shall be subject only to the y± of 1% stock transaction tax.
SEC. 35. Determination of gain or loss from the sale or other disposition of property.—The gain derived or loss sustained from the sale or other disposition of property, real, personal, or mixed, shall be determined in accordance with the following schedule:
(a) In the case of property acquired before March first, nineteen hundred and thirteen, the fair market price or value of such property as of March first, nineteen hundred and thirteen.
(b) In the case of property acquired on or after March first, nineteen hundred and thirteen, the cost thereof if such property was acquired by purchase or the fair market price or value as of the date of the acquisition if the same was acquired by gratuitous title.
(c) Exchange of property—
(1) General rule.—Except as herein provided, upon the sale or exchange of property, the entire amount of the gain or loss, as the case may be, shall be recognized.
(2) Exemptions.—No gain or loss shall be recognized if m pursuance of a plan of merger or consolidation (a) a corporation which is a party to a merger or consolidation, exchanges property solely for stock in a corporation which is a party to the merger or consolidation, (b) a shareholder exchanges stock in a corporation which is a party to the merger or consolidation solely for the stock of another corporation, also a party to the merger or consolidation, or (c) a security holder of a corporation which is a party to the merger or consolidation exchanges his securities in such corporation solely for stock or securities in another corporation, a party to the merger or consolidation. No gain or loss shall also be recognized if a person exchanges his Property for stock in a corporation of which as a result of such exchange said person, alone or together with others not exceeding four person, alone or together with others, not exceeding four persons, gains control of said corporation: Provided, That stocks issued for services shall not be considered as issued in return for property.
(3) Exchange not solely in kind.—(a) If, in connection with an exchange described in the above exceptions, a shareholder, security holder or corporation receives not only stock or securities permitted to be received without recognition of gain or loss, but also money and/or other property, the gam, if any, but not the loss, shall be recognized but in an amount not in excess of the sum of the money and the fair market value of such other property received: Provided, That as to the shareholder, if the money and or other property received has the effect of a distribution of a taxable dividend, there shall be taxed as a dividend to the shareholder an amount of the gain recognized not in excess oi his ratable share of the undistributed earnings and profits of the corporation; the remainder, if any of the gain recognized shall be treated as a capital gain.
(b) If, in connection with the exchange described in the above exceptions, the transfer or corporation receives not only stock permitted to be received without the recognition of gain or loss, but also money and/or other property, then (1) if the corporation receiving such money and/or other property distributed it in pursuance to the plan of merger or consolidation, no gain to the corporation shall be recognized from the exchange, but (2) if the corporation receiving such other property and/or money does not distribute it in pursuance of the plan of merger or consolidation, the gain, if any, but not the loss, to the corporation shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not distributed.
(c) If the taxpayer, in connection with the exchanges described in the foregoing exception, receives stock or securities which would be permitted to be received without the recognition of the gain if it were the sole consideration, and as a part of the consideration, another party to the exchange assumes a liability of the taxpayer, or acquires from the taxpayer property subject to a liability, then such assumption or acquisition shall not be treated as money and or other property, and shall not prevent the exchange from being within the exceptions.
(4) Basis.—(a) The basis of the stock or securities received by the transfer or corporation or its shareholder or security holder upon the exchange specified in the above exception shall be the same as the basis of the property, stock or securities exchanged, decreased by (1) the money received, and (2) the fair market value of the other property received, and increased by (a) the amount treated as dividend of the shareholder and (b) the amount of any gain that was recognized on the exchange: Provided, That the property received as "boot" shall have as basis its fair market value: Provided, further, That if the corporation or its shareholders or security holders received several kinds of stock or securities, the Commissioner of Internal Revenue is hereby authorized to issue rules and regulations for the allocation of the basis among the several classes of stock or securities.
(b) The basis of the property transferred in the hands of the transferee shall be the same as it would be in the hands of the transferor, increased by the amount of the gain recognized to the transferor on the transfer.
(5) Definitions.—(a) The term "securities" moans bond and debentures but not "notes" of whatever class or duration.
(b) The term "merger" or "consolidation", -when used in this section, shall be understood to mean: (1) the ordinary merger or consolidation, or (2) the acquisition by one corporation of all or substantially all the properties of another corporation solely for stock: Provided, That for a transaction to be regarded as a merger or consolidation within the purview of this section, it nuts: be undertaken for a bona fide business purpose and not solely for the purpose of escaping- the burden of taxation: Provided, further, That in determining whether a bona fide business purpose exists, each and every step of the transaction shall be considered and the whole transaction or series of transactions shall be treated as a single unit: Provided., finally, That in determining whether the property transferred constitutes a substantial portion of the property of the transferor, the term "property" shall be taken to include the cash assets of the transferor.
(c) The term "control" when used in this action shall mean ownership of stocks in a corporation possessing at least fifty-one per cent of the total voting power of all classes of stocks entitled to vote.
(d) The Commissioner of Internal Revenue is hereby authorized to issue rules and regulations for the purpose of determining the proper amount of transferred assets which meet the standard of the phrase "substantially all" and for the proper implementation of this section
SEC. 36. Inventories.—Whenever in the judgment of the Commissioner of Internal Revenue, the use of inventories is necessary in order to determine clearly the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as the Secretary of Finance may, by regulations, prescribe, as conforming as nearly as may be to the best accounting practice in the trade or business and as most dearly reflecting the income.
SEC. 37. Income from sources within the Philippines.— (a) Gross income from sources within the Philippines.— The following items of gross income shall be treated as gross income from sources within the Philippines.
(1) Interest.—Interest derived from sources within the Philippines, and interest on bonds, notes, or other interest- bearing obligations of residents, corporate or otherwise;
(2) Dividends.—The amount received as dividends;
(A) From a domestic corporation;
(B) From a foreign corporation unless less than fifty per centum of the gross income of such foreign corporation for the three-year period ending with the close of its tax able year preceding the declaration of such dividends (or for such part of such period as the corporation has been in. existence) was derived from sources within the Philip pines as determined under the provisions of this section; but only in an amount which bears the same ratio to such dividends as the gross income of the corporation for such period derived from sources within the Philippines bears to its gross income from all sources;
(3) Services.—Compensation for labor or personal services performed in the Philippines;
(4) Rentals or royalties from property located without the Philippines or from any interest in such property including rentals or royalties for the use of or for the privilege of using without the Philippines, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises and other like properties; and
(5) Gains, profits, and income from the sale of real property located without the Philippines.
(d) Net income from sources without the Philippines. — From the items of gross income specified in subsection (c) of this section there shall be deducted the expenses, losses, and other deductions properly apportioned or allocated thereto and a ratable part of any expenses, losses or other deductions which cannot definitely be allocated to some item or class of gross income. The remainder, if any, shall be treated in full as net income from sources without the Philippines.
(e) Income from sources partly within and partly without the Philippines. — Items of gross income, expenses, losses and deductions, other than those specified in subsection (a) and (c) of this section shall be allocated or apportioned to source within or without the Philippines, under the rules and regulations prescribed by the Secretary of Finance. Where items or gross income are separately allocated to sources within the Philippines, there shall be deducted (for the purpose of computing the net income therefrom) the expenses, losses, and other deductions properly apportioned or allocated thereto and a ratable part of other expenses, losses or other deductions which cannot definitely be allocated to some item or class of gross income. The remainder, if any, shall be included in full as net income from sources within the Philippines. In the case of gross income derived from sources partly within and partly without the Philippines, the net income may first be computed by deducting the expenses, losses, or other deductions apportioned or allocated thereto and a ratable part of any expenses, losses or other deductions which cannot definitely be allocated to some items or class of gross income; and the portion of such net income attributable to sources within the Philippines may be determined by processes or formulas of general apportionment prescribed by the Secretary of Finance. Gains, profits, and income from the sale of personal property produced (in whole or in part) by the taxpayer without and sold within the Philippines, or produced (in whole or in part) by the taxpayer without and sold within the Philippines, shall be treated as derived partly from sources within and partly from sources without the Philippines. Gains, profits, and income derived from the purchase of personal property within and its sale without the Philippines or from the purchase of personal property without and its sale within the Philippines shall be treated as derived entirely from sources within the country in which sold:
(f) Definitions. — As used in this section the words "sale" or "sold" include "exchange" or "exchanged"; and the word "produced" includes "created"; "fabricated", "manufactured", "extracted", "processed", "cured", or "aged".
SEC. 38. General rule. — The net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer; but if no such method of accounting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made in accordance with such method as in the opinion of the Commissioner of Internal Revenue does clearly reflect the income. If the taxpayer's annual accounting period is other than a fiscal year, as defined in section twenty or if the taxpayer has no annual accounting period, or does not keep books, or if the taxpayer is an individual, the net income shall be computed on the basis of the calendar year.
SEC. 39. Period in which items of gross income included. — The amount of all items of gross income shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under methods of accounting permitted under section thirty eight, any such amounts are to be properly accounted for as of a different period. In the case of the death of a taxpayer there shall be included in computing net income for the taxable period in which falls the date of his death, amounts accrued up to the date of his death if not otherwise properly includible in respect of such period or a prior period.
SEC. 40. Period for which deductions and credits taken. — The deductions provided for in this Title shall be taken for the taxable year in which "paid or accrued" or "paid or incurred", dependent upon the method of accounting upon the basis of which the net income is computed, unless in order to clearly reflect the income the deductions should be taken as of a different period. In the case of the death of a taxpayer there shall be allowed as deductions for the taxable period in which falls the date of his death, amounts accrued up to the date of his death if not otherwise properly allowable in respect of such period or a prior period.
SEC. 41. Change of accounting period. — If a taxpayer, other than an individual, changes his accounting period from fiscal year to calendar year from calendar year to fiscal year, or from one fiscal year to another, the net income shall, with the approval of the Commissioner of Internal Revenue, be computed on the basis of such new accounting period, subject to the provisions of Section forty-two.
SEC. 42. Final or adjustment returns for a period of less than twelve months. — (a) Return for short period resulting from change of accounting period. — If a taxpayer, other than an individual, with the approval of the Commissioner of Internal Revenue, changes the basis of computing net income from fiscal year to calendar year, a separate final or adjustment return shall be made for the period between the close of the last fiscal year for which return was made and the following December 31. If the change is from calendar year to fiscal year, a separate final or adjustment return shall be made for the period between the close of the last calendar year for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year a separate final or adjustment return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year.
(b) Income computed on basis of short period. — Where a separate final or adjustment return is made under subsection (a) on account of a change in the accounting period, and in all other cases where a separate final or adjustment return is required or permitted by regulations prescribed by the Secretary of Finance, to be made for a fractional part of a year, then the income shall be computed on the basis of the period for which separate final or adjustment return is made.
SEC. 43. Installment basis. — (a) Sales of dealers in personal property. — Under regulations prescribed by the Secretary of Finance, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the gross profit realized or to be realized when payment is completed, bears to the total contract price.
(b) Sales of realty and casual sales of personality. — In the case (1) of a casual sale or other casual disposition of personal property (other than property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year), for a price exceeding one thousand pesos, or 92) of a sale or other disposition of real property, if in either case the initial payments do not exceed twenty-five percent of the selling price, the income may under regulations prescribed by the Secretary of Finance, be returned on the basis and in the manner above prescribed in this section. As used in this section the term "initial payments" means the payment received in cash or property other than evidence of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made.
(c) Change from accrual to installment basis. — If a taxpayer entitled to the benefits of subsection (a) elects for any taxable year to report his taxable income on the installment basis, then in computing his income for the year of change or any subsequent year, amounts actually received during any such year on account of sale or other dispositions of property made in any prior year shall not be excluded.
SEC. 44. Allocation of income and deductions. — In any case of two or more organizations, trades, or businesses (whether or not incorporated and whether or not organized in the Philippines) owned or controlled directly or indirectly by the same interests, the Commissioner of Internal Revenue is authorized to distribute, apportion, or allocate gross income or deductions between or among such organization, trades, or businesses, if he determines that such distribution, apportionment, or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any such organizations, trades or businesses.
SEC. 45. Individual returns.— (a) Requirements.— (1) The following individuals are required to file an income tax return, if they have a gross income of at least P1,800 for the taxable year:
(A) Every Filipino citizen, whether residing in the Philippines or abroad and,
(B) Every alien residing in the Philippines, regardless of whether the gross income was derived from sources within or outside the Philippines.
(2) Regardless of amount, every non-resident alien engaged in trade or business in the Philippines shall file an income tax return. The income tax return shall be filed in duplicate, and shall set forth specifically the gross amount of income from all sources, except that of non-resident aliens engaged in trade or business in the Philippines which shall contain only such income derived from sources within the Philippines.
(3) Notwithstanding the provisions of the preceding paragraphs, an individual (except a non-resident alien engaged in trade or business in the Philippines) whose gross income derived solely from salaries, wages, remune rations and other similar compensation for services rendered, does not exceed his personal exemption of P1,800 if he/she is single or P3.000 if he/she is married or head of the family, plus the optional standard deduction to which he/she is entitled to claim under sub-paragraph (k) of Section 30, is not required to file an income tax return.
(b) Where to file.—The return shall be filed with the Commissioner of Internal Revenue, Revenue Regional Director, Revenue District Officer, Collection Agent, duly authorized treasurer of the province, city, municipality, or authorized agent banks in which such person has his legal residence or principal place of business in the Philippines, or if there be no legal residence or place of business in the Philippines, then with the Commissioner of Internal Revenue in Manila.
(c) When to file.—The return of the following individuals shall be filed on or before the fifteenth day of March of each year1, covering income of the preceding taxable year:
(A) Residents of the Philippines, whether citizens or aliens, whose income have been derived solely from salaries, wages, interest, dividends, allowances, commissions, bonuses, fees, pensions, or any combination thereof.
(B) The return of all other individuals not mentioned above, including non-resident citizens shall be filed on or before the fifteenth day of April of each year covering income of the preceding taxable year.
(d) Husband and Wife.—In the case of married per sons, whether citizens, resident or non-resident aliens, only one consolidated return for the taxable year shall be filed by either spouse to cover the income of both spouses; but where it is impracticable for the spouses to file one consolidated return, each spouse may file his separate return of income, but the returns so filed shall be consolidated for the purpose of the tax prescribed under this Title.
(e) Return of parent to include income of children.— The income of unmarried minors derived from property received from a living parent shall be included in the return of the parent, except (1) when the gift tax has been paid on such property, or (2) when the transfer of such property is exempt from gift tax.
(f) Persons wider disability.—If the taxpayer is unable to make his own return, the return may be made by his duly authorized agent or representative or by the guardian or other person charged with the care of his person or property, the principal and his representative or guardian assuming the responsibility of making the return and incurring penalties provided for erroneous, false or fraudulent returns.
(g) Signature presumed correct.—The fact that an individual's name is signed to a filed return shall be prima facie evidence for all purposes that the return was actually signed by him .
SEC. 46. Corporation returns.— (a) Requirement.— Every corporation, subject to the tax herein imposed, except foreign corporations not engaged in trade or business in the Philippines shall render, in duplicate, a true and accurate quarterly income tax returns and final or adjustment return in accordance with the provisions of chapter X of this Title. The return shall be filed by the president, vice-president, or other principal officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer.
(b) Fiscal year of corporations.—Every corporation and partnership subject to tax may designate the last day of any month in the year as the day of the closing of its fiscal year, and shall be entitled to have the tax payable by it computed upon the basis of the net income ascertained as herein provided for the year ending on the day so designated in the year preceding the date of assessment instead of upon the basis of the net income for the calendar year preceding the date of assessment; and it shall give notice of the day it has thus designated as the closing of its fiscal year to the Commissioner of Internal Revenue at any time not less than thirty days prior to the fifteenth day of April of the year in which its return would be filed if made upon the basis of the calendar year.
SEC. 47. Extension of time to file returns.—The Commissioner of Internal Revenue may, in meritorious cases, grant a reasonable extension of time for filing returns of income (or final and adjustment returns in the case of corporations), subject to the provisions of section fifty-one of this Code.
SEC. 48. Returns of receivers, trustees in bankruptcy or assignees.—In cases wherein receivers, trustees in bankruptcy, or assignees are operating the property or business cf a corporation, subject to the tax imposed by this Title, such receivers, trustees, or assignees shall make returns of net income as and for such corporation, in the same manner and form as such organization is herein before required to make returns, and any tax due on the income as returned by receivers, trustees, or assignees shall be assessed and collected in the same manner as if assessed directly against the organizations of whose businesses or properties they have custody and control.
SEC. 49. Returns of general professional partnerships — Every general professional partnership shall file, in duplicate, a return of its income, except income exempt under Section twenty-nine (b) of this Title, setting forth the items of the gross income and the deductions allowed by this Title, and the names and addresses and shares of the partners.
AMENDING CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE CODE OF 1939 FOR INCORPORATION IN THE CONSOLIDATION AND CODIFICATION OF ALL EXISTING REVENUE LAWS UNDER PRESIDENTIAL DECREE NO. 1158. (Official Gazette). Retrieved via LawPlayer, https://lawplayer.com/ph/act/pd-1158-a
Source: Official Gazette of the Republic of the Philippines — Philippine laws are public documents (works of the government).
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