Section 53 of said Code is hereby amended to read as follows: "SEC. 53. Withholding of tax at source.
Section 9
SEC. 9. Section 53 of said Code is hereby amended to read as follows: "SEC. 53. Withholding of tax at source.— (a) Tax-free covenant bonds.— "(1) Requirements of withholding.—In any case where bonds, mortgages, deeds of trust, or other similar obligations of domestic or resident foreign corporations, contain a contract or provision by which the obligor agrees to pay any portion of the tax imposed in this Title upon the obligee or to reimburse the obligee for any portion of the tax or to pay the interest without deduction for any tax which the obligor may be required or permitted to pay thereon or to retain therefrom under any law of the Philippines, or any state or country, the obligor shall deduct and withhold a tax equal to thirty per centum (30%) of the interest or other payments upon those bonds, mortgages, deeds of trust, or other obligations, whether the interest or other payments are payable annually or at shorter or longer periods, and whether the bonds, securities or obligations had been or will be issued or marketed, and the interest or other payment thereon paid, within or outside the Philippines, if the interest or other payment is payable to a non-resident alien or to a citizen or resident of the Philippines. " (b) Withholding tax on royalties, prizes and other winnings.—The tax imposed by Sections 21 (c) and 24 of this Code on royalties, prizes (except prizes amounting to Three thousand pesos or less which shall be subject to tax under paragraph (b) of Section 21) and winnings shall be withheld 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. "(c) Withholding tax on dividends.—The tax imposed by Sections 21 and 24 (c) of this Code on dividends shall be withheld by the payor-corporation and paid in the same manner and subject to the same conditions as provided in Section 54 of this Code. "(d) Withholding of final tax on interest on bank deposits, yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements. "(1) Withholding of final tax.—Every bank or non-bank financial intermediary shall deduct and withhold from the interest on bank deposits or yield or any other monetary benefit from deposit substitutes a final tax equal to fifteen per centum (15%) of the interest on savings deposits and twenty per centum (20%) of the interest on time deposits or yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements: Provided, however, That no withholding tax shall be made if the aggregate amount of the interest on all deposit accounts maintained by a depositor alone or together with another in any one bank at any time during the taxable period does not exceed One thousand pesos (P1,000.00) a year or Two hundred fifty pesos (P250.00) per quarter. For this purpose, interest on a deposit account maintained by two persons shall be deemed to be equally owned by them. "(2) Depositors or placers/investors enjoying tax exemption privileges or preferential tax treatment.—In all cases where the depositor or placer/investor is tax-exempt or is enjoying preferential income tax treatment under existing laws, the withholding tax imposed in this paragraph shall be refunded or credited as the case may be upon submission to the Commissioner of Internal Revenue of Proof that the said depositor, or placer/investor is a tax exempt entity or enjoys a preferential income tax treatment. "(3) Manner of withholding.—Without divulging the names of the depositors, or placer/investors, the tax shall be withheld by the bank or non-bank financial intermediary and paid in the same manner and subject to the same conditions provided in Section 54 of this Code. "(e) Non-resident, aliens and foreign corporations. Non-resident aliens.—Every individual, corporation, partnership, or association, in whatever capacity acting, including a lessee or mortgagor of real or personal property, trustee acting in any trust capacity, executor, administrator, receiver, consevator, fiduciary, employer, and every officer or employee of the Government of the Republic of the Philippines having the control, receipt, custody, disposal, or payment of interest, dividends, rents, royalties, salaries, wages, premiums, annuities, compensation, remunerations, emoluments, or other fixed or determinate annual, periodical or casual gains, profits, and income, and capital gains, of any non-resident alien not engaged in trade or business within the Philippines, shall (except in the cases provided in subsection (a) (1) of this section) deduct and withhold from the annual, periodical, or casual gains, profits, and income, and capital gains, a tax equal to thirty per centum (30%) thereof. This deduction and withholding shall not be required in the case of dividends paid by a foreign corporation unless (1) the corporation is engaged in trade or business within the Philippines , and (2) more than eighty-five per centum (85%) of the gross income of the corporation for the three-year period ending with the close of each taxable year preceding the declaration of the dividends (or for such part of the period as the corporation has been in existence) was derived from sources within the Philippines as determined under the provisions of Section 37. The Commissioner may authorize the tax to be deducted and withheld from the interest or other income upon any security or obligation the owners of which are not known to the withholding agent. "(2) Non-resident foreign corporations.—In the case of foreign corporations subject to tax under this Title, not engaged in trade or business within the Philippines, there shall be deducted and withheld at the source in the same manner and upon the same items as provided in subsection (b) (1) of this section, as well as on remunerations for technical services or otherwise, a tax equal to thirty-five per centum (35%) thereof: Provided, That interest on foreign loans shall be subject to withholding tax of fifteen per centum (15%). This tax shall be returned and paid in the same manner and subject to the same conditions as provided in Section 54. This deduction and withholding shall not be required in the case of reinsurance premiums ceded to foreign insurance corporations not engaged in trade or business in the Philippines . "(f) Other cases of withholding tax at source—The Minister of Finance may upon recommendation of the Commissioner of Internal Revenue, require also the withholding of a tax on the same items of income payable to persons (natural or juridical) residing in the Philippines by the same persons mentioned in paragraph (b) (1) of this section at the rate of not less than two and one-half per centum (2-1/2%) but not more than thirty-five per centum (35%) thereof which shall be credited against the income tax liability of the taxpayer for the taxable year."