Income from sources within the Philippines.
Section 37
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".