Presidential Decree No. 1354 (PD 1354) — Imposing Final Income Tax on Subcontractors and Alien Employees of Service Contractors and Subcontractors Engaged in Petroleum Operations in the Philippines Under Presidential Decree No. 87.
WHEREAS, foreign subcontractors involved in petroleum
operations in the Philippines are taxable as resident foreign corporations;
WHEREAS, the said foreign subcontractors perform transitory
activities during the taxable year and neither maintain regular office or fixed
place of business nor keep books of accounts in the Philippines;
WHEREAS, the aliens employed by the said service contractors
and by their subcontractors are likewise taxable on their income from Philippine
sources;
WHEREAS, it is also difficult to determine whether the said
aliens are resident aliens or nonresident aliens engaged or not engaged in trade
or business in the Philippines which in turn make it difficult to determine
their income tax;
WHEREAS, it is therefore necessary to simplify the method of
taxing the said foreign subcontractors and the aliens involved in petroleum
operations in the Philippines so as to insure the collection of whatever tax
that is due from them;
WHEREAS, in order to place local or domestic subcontractors
on equal footing and to make them competitive with foreign subcontractors, they
should similarly be taxed as foreign subcontractors;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the Constitution, do hereby
decree as follows:
SECTION 1. Tax on subcontractors. Every
subcontractor, whether domestic or foreign entering into a contract with a
service contractor engaged in petroleum operations in the Philippines shall be
liable to a final income tax equivalent to eight percent (8%) of its gross
income derived from such contract, such tax to be in lieu of any and all taxes,
whether national or local: Provided, however, that any income received
from all other sources within and without the Philippines in the case of
domestic subcontractors and within the Philippines in the case of foreign
subcontractors shall be subject to the regular income tax imposed under the
National Internal Revenue Code. The term "gross income" means all income earned
or received as a result of the contract entered into by the subcontractor with a
service contractor engaged in petroleum operations in the Philippines under
Presidential Decree No. 87.
SECTION 2. Taxation of aliens employed by petroleum
service contractors and subcontractors. Aliens who are permanent residence
of a foreign country but who are employed and assigned in the Philippines by
service contractors or by subcontractors engaged in petroleum operations in the
Philippines, shall be liable to a final income tax equal to fifteen percent
(15%) of the salaries, wages, annuities, compensations, remunerations and
emoluments received from such contractors or subcontractors. Any income earned
from all other sources within the Philippines by the said alien employees shall
be subject to the income tax imposed under the National Internal Revenue
Code.
SECTION 3. Manner of collecting the tax. (a) Every
service contractor shall deduct, withhold, and pay the tax imposed in Section 1
of this Decree from the amounts paid by the service contractor to the
subcontractor under the contract entered into by and between them in the same
manner and subject to the same conditions as provided in Section 54 of the
National Internal Revenue Code.
(b) Every service contractor shall also deduct, withhold and pay the tax
imposed in Section 2 of this Decree from the salaries, wages, annuities,
compensations, remunerations and emoluments paid to (1) its alien employees and
(2) the aliens employed by its foreign subcontractors in the same manner and
under the same conditions as provided in Section 54 of the National Internal
Revenue Code.
(c) Every domestic subcontractor shall deduct, withhold and pay the tax
imposed in Section 2 of this Decree from the salaries, wages, annuities,
compensations, remunerations and emoluments paid to its alien employees in the
same manner and under the same conditions as provided in Section 54 of the
National Internal Revenue Code.
SECTION 4. Registration of service contracts. All
contracts relating to oil operations entered into between the service contractor
and a subcontractor engaged in petroleum operations in the Philippines shall be
registered with the Bureau of Energy Development.
SECTION 5. Additional conditions for reimbursement of
operating expense. The cost of subcontracts shall be considered as part of
reimburseable operating expenses of the service contractor under Presidential
Decree No. 87 only if it is shown that the contract has been properly registered
with the Bureau of Energy Development and the taxes due under this Decree have
been withheld and paid in accordance with the provisions of Sections 53 and 54
of the National Internal Revenue Code.
SECTION 6. Repealing Clause. Any provision of
existing general and special laws inconsistent with the provisions of this
Decree is hereby modified, amended or repealed accordingly.
Effectivity.
SECTION 7. Effectivity.—This Decree shall take
effect upon approval.
DONE in the City of Manila, this 21st day of April, in the year of Our Lord,
Nineteen Hundred and Seventy-Eight.
(Sgd.) FERDINAND E. MARCOS
President of the
Philippines
By the President:
(Sgd.) JACOBO C. CLAVE
Presidential Executive
Assistant
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
