NIRC As Amended
NIRC As Amended
(5)
SECTION 1. Short Title. This Act shall be cited as the "Tax Reform
Act of 1997." cdtai
"TITLE I
"(A) To examine any book, paper, record, or other data which may be relevant
or material to such inquiry;
"(B) To obtain on a regular basis from any person other than the person whose
internal revenue tax liability is subject to audit or investigation, or from any office or
officer of the national and local governments, government agencies and
instrumentalities, including the Bangko Sentral ng Pilipinas and government-owned
or -controlled corporations, any information such as, but not limited to, costs and
volume of production, receipts or sales and gross incomes of taxpayers, and the
names, addresses, and financial statements of corporations, mutual fund companies,
insurance companies, regional operating headquarters of multinational companies,
joint accounts, associations, joint ventures or consortia and registered partnerships,
"(C) To summon the person liable for tax or required to file a return, or any
officer or employee of such person, or any person having possession, custody, or care
of the books of accounts and other accounting records containing entries relating to
the business of the person liable for tax, or any other person, to appear before the
Commissioner or his duly authorized representative at a time and place specified in
the summons and to produce such books, papers, records, or other data, and to give
testimony;
"(D) To take such testimony of the person concerned, under oath, as may be
relevant or material to such inquiry; and
"(E) To cause revenue officers and employees to make a canvass from time to
time of any revenue district or region and inquire after and concerning all persons
therein who may be liable to pay any internal revenue tax, and all persons owning or
having the care, management or possession of any object with respect to which a tax
is imposed.
"The tax or any deficiency tax so assessed shall be paid upon notice and
demand from the Commissioner or from his duly authorized representative.
"In case a person fails to file a required return or other document at the time
prescribed by law, or willfully or otherwise files a false or fraudulent return or other
document, the Commissioner shall make or amend the return from his own
knowledge and from such information as he can obtain through testimony or
otherwise, which shall be prima facie correct and sufficient for all legal purposes.
"When it is found that a person has failed to issue receipts and invoices in
violation of the requirements of Sections 113 and 237 of this Code, or when there is
reason to believe that the books of accounts or other records do not correctly reflect
the declarations made or to be made in a return required to be filed under the
provisions of this Code, the Commissioner, after taking into account the sales,
receipts, income or other taxable base of other persons engaged in similar businesses
under similar situations or circumstances or after considering other relevant
information, may prescribe a minimum amount of such gross receipts, sales and
taxable base, and such amount so prescribed shall be prima facie correct for purposes
of determining the internal revenue tax liabilities of such person.
"(2) the fair market value as shown in the schedule of values of the Provincial
and City Assessors.
"(2) any taxpayer who has filed an application for compromise of his tax
liability under Sec. 204(A)(2) of this Code by reason of financial incapacity to pay his
tax liability.
"In case a taxpayer files an application to compromise the payment of his tax
liabilities on his claim that his financial position demonstrates a clear inability to pay
the tax assessed, his application shall not be considered unless and until he waives in
writing his privilege under Republic Act No. 1405 or under other general or special
laws, and such waiver shall constitute the authority of the Commissioner to inquire
into the bank deposits of the taxpayer. cdtai
"(a) The power to recommend the promulgation of rules and regulations by the
Secretary of Finance;
"(c) The power to compromise or abate, under Sec. 204(A) and (B) of this
Code, any tax liability: Provided, however, That assessments issued by the regional
offices involving basic deficiency taxes of Five hundred thousand pesos (P500,000)
"(B) Receipts for Payment Made. It shall be the duty of the Commissioner
or his duly authorized representative or an authorized agent bank to whom any
payment of any tax is made under the provisions of this Code to acknowledge the
payment of such tax, expressing the amount paid and the particular account for which
such payment was made in a form and manner prescribed therefor by the
Commissioner.
"(a) Implement laws, policies, plans, programs, rules and regulations of the
department or agencies in the regional area;
"(b) Administer and enforce internal revenue laws, and rules and regulations,
including the assessment and collection of all internal revenue taxes, charges and
fees; cdtai
"(c) Issue Letters of Authority for the examination of taxpayers within the
region;
"(d) Provide economical, efficient and effective service to the people in the
area;
"(g) Exercise control and supervision over the officers and employees within
the region; and
"(h) Perform such other functions as may be provided by law and as may be
delegated by the Commissioner. cda
"It shall be the duty of every Revenue District Officer to examine the
efficiency of all officers and employees of the Bureau of Internal Revenue under his
supervision, and to report in writing to the Commissioner, through the Regional
Director, any neglect of duty, incompetency, delinquency, or malfeasance in office of
any internal revenue officer of which he may obtain knowledge, with a statement of
all the facts and any evidence sustaining each case.
"(a) The Commissioner of Customs and his subordinates with respect to the
collection of national internal revenue taxes on imported goods;
"(b) The head of the appropriate government office and his subordinates with
respect to the collection of energy tax; and
"In case the actual collection exceeds or falls short of target as set in the annual
national budget by fifteen percent (15%) or more, the Commissioner shall explain the
reasons for such excess or shortfall.
"(g) Such other taxes as are or hereafter may be imposed and collected by the
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Bureau of Internal Revenue.
"TITLE II
Tax on Income
"CHAPTER I
Definitions
"(B) The term 'corporation' shall include partnerships, 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.
"(2) A citizen of the Philippines who leaves the Philippines during the taxable
year to reside abroad, either as an immigrant or for employment on a permanent basis.
"(3) A citizen of the Philippines who works and derives income from abroad
and whose employment thereat requires him to be physically present abroad most of
the time during the taxable year. prem05cd
"(5) The taxpayer shall submit proof to the Commissioner to show his
intention of leaving the Philippines to reside permanently abroad or to return to and
reside in the Philippines as the case may be for purposes of this Section.
"(F) The term 'resident alien' means an individual whose residence is within
the Philippines and who is not a citizen thereof.
"(G) The term 'nonresident alien' means an individual whose residence is not
within the Philippines and who is not a citizen thereof.
"(K) The term 'withholding agent' means any person required to deduct and
withhold any tax under the provisions of Section 57.
"(L) The term 'shares of stock' shall include shares of stock of a corporation,
warrants and/or options to purchase shares of stock, as well as units of participation in
a partnership (except general professional partnerships), joint stock companies, joint
accounts, joint ventures taxable as corporations, associations, and recreation or
amusement clubs (such as golf, polo or similar clubs), and mutual fund certificates.
"(N) The term 'taxpayer' means any person subject to tax imposed by this Title.
"(O) The terms 'including' and 'includes', 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 rules and regulations prescribed by
the Secretary of Finance, upon recommendation of the Commissioner, the period for
which such return is made.
"(Q) The term 'fiscal year' means an accounting period of twelve (12) months
ending on the last day of any month other than December.
"(R) The terms '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.
"(V)(8) The term 'bank' means every banking institution, as defined in Section
2 of Republic Act No. 337, as amended, otherwise known as the General Banking
Act. A bank may either be a commercial bank, a thrift bank, a development bank, a
rural bank or a specialized government bank.
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 14
"(W) The term 'non-bank financial intermediary' means a financial
intermediary, as defined in Section 2(D)(c) of Republic Act No. 337, as amended,
otherwise known as the General Banking Act, authorized by the Bangko Sentral ng
Pilipinas (BSP) to perform quasi-banking activities.
"(X) The term 'quasi-banking activities' means borrowing funds from twenty
(20) or more personal or corporate lenders at any one time, through the issuance,
endorsement, or acceptance of debt instruments of any kind other than deposits for
the borrower's own account, or through the issuance of certificates of assignment or
similar instruments, with recourse, or of repurchase agreements for purposes of
relending or purchasing receivables and other similar obligations: Provided, however,
That commercial, industrial and other non-financial companies, which borrow funds
through any of these means for the limited purpose of financing their own needs or
the needs of their agents or dealers, shall not be considered as performing
quasi-banking functions. cdtai
"(Y) The term 'deposit substitutes' shall mean an alternative form of obtaining
funds from the public (the term 'public' means borrowing from twenty (20) or more
individual or corporate lenders at any one time), other than deposits, through the
issuance, endorsement, or acceptance of debt instruments for the borrower's own
account, for the purpose of relending or purchasing of receivables and other
obligations, or financing their own needs or the needs of their agent or dealer. These
instruments may include, but need not be limited to bankers' acceptances, promissory
notes, repurchase agreements, including reverse repurchase agreements entered into
by and between the Bangko Sentral ng Pilipinas (BSP) and any authorized agent
bank, certificates of assignment or participation and similar instruments with
recourse: Provided, however, That debt instruments issued for interbank call loans
with maturity of not more than five (5) days to cover deficiency in reserves against
deposit liabilities, including those between or among banks and quasi-banks, shall not
be considered as deposit substitute debt instruments.
"(Z) The term 'ordinary income' includes any gain from the sale or exchange of
property which is not a capital asset or property described in Section 39(A)(1). Any
gain from the sale or exchange of property which is treated or considered, under other
provisions of this Title, as 'ordinary income' shall be treated as gain from the sale or
exchange of property which is not a capital asset as defined in Section 39(A)(1). The
term 'ordinary loss' includes any loss from the sale or exchange of property which is
not a capital asset. Any loss from the sale or exchange of property which is treated or
considered, under other provisions of this Title, as 'ordinary loss' shall be treated as
"(AA) The term 'rank and file employees' shall mean all employees who are
holding neither managerial nor supervisory position as defined under existing
provisions of the Labor Code of the Philippines, as amended.
"(BB) The term 'mutual fund company' shall mean an open-end and close-end
investment company as defined under the Investment Company Act.
"(CC) The term 'trade, business or profession' shall not include performance of
services by the taxpayer as an employee.
"CHAPTER II
General Principles
"CHAPTER III
Tax on Individuals
"(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien
of the Philippines.
"(a) On the taxable income defined in Section 31 of this Code, other than
income subject to tax under Subsections (B), (C) and (D) of this Section, derived for
each taxable year from all sources within and without the Philippines by every
individual citizen of the Philippines residing therein;
"(b) On the taxable income defined in Section 31 of this Code, other than
income subject to tax under Subsections (B), (C) and (D) of this Section, derived for
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 17
each taxable year from all sources within the Philippines by an individual citizen of
the Philippines who is residing outside of the Philippines including overseas contract
workers referred to in Subsection (C) of Section 23 hereof; and
"(c) On the taxable income defined in Section 31 of this Code, other than
income subject to tax under Subsections (B), (C) and (D) of this Section, derived for
each taxable year from all sources within the Philippines by an individual alien who is
a resident of the Philippines.
"The tax shall be computed in accordance with and at the rates established in
the following schedule:
"Provided, That effective January 1, 1999, the top marginal rate shall be
thirty-three percent (33%) and effective January 1, 2000, the said rate shall be
thirty-two percent (32%).
"For married individuals, the husband and wife, subject to the provision of
Section 51(D) hereof, shall compute separately their individual income tax based on
their respective total taxable income: Provided, That if any income cannot be
definitely attributed to or identified as income exclusively earned or realized by either
of the spouses, the same shall be divided equally between the spouses for the purpose
of determining their respective taxable income.
"(1) Interests, Royalties, Prizes, and Other Winnings. A final tax at the rate
of twenty percent (20%) is hereby imposed upon the amount of interest from any
currency bank deposit and yield or any other monetary benefit from deposit
substitutes and from trust funds and similar arrangements; royalties, except on books,
as well as other literary works and musical compositions, which shall be imposed a
final tax of ten percent (10%); prizes (except prizes amounting to Ten thousand pesos
(P10,000) or less which shall be subject to tax under Subsection (A) of Section 24;
and other winnings (except Philippine Charity Sweepstakes and Lotto winnings),
derived from sources within the Philippines: Provided, however, That interest income
received by an individual taxpayer (except a nonresident individual) from a
depository bank under the expanded foreign currency deposit system shall be subject
to a final income tax at the rate of seven and one-half percent (7 1/2%) of such
interest income: Provided, further, That interest income from long-term deposit or
investment in the form of savings, common or individual trust funds, deposit
substitutes, investment management accounts and other investments evidenced by
certificates in such form prescribed by the Bangko Sentral ng Pilipinas (BSP) shall be
exempt from the tax imposed under this Subsection: Provided, finally, That should
the holder of the certificate pre-terminate the deposit or investment before the fifth
(5th) year, a final tax shall be imposed on the entire income and shall be deducted and
withheld by the depository bank from the proceeds of the long-term deposit or
investment certificate based on the remaining maturity thereof:
"Three (3) years to less than four (4) years 12%; and
"(2) Cash and/or Property Dividends. A final tax at the following rates
shall be imposed upon the cash and/or property dividends actually or constructively
received by an individual from a domestic corporation or from a joint stock company,
insurance or mutual fund companies and regional operating headquarters of
multinational companies, or on the share of an individual in the distributable net
income after tax of a partnership (except a general professional partnership) of which
he is a partner, or on the share of an individual in the net income after tax of an
association, a joint account, or a joint venture or consortium taxable as a corporation
of which he is a member or co-venturer:
"Provided, however, That the tax on dividends shall apply only on income
earned on or after January 1, 1998. Income forming part of retained earnings as of
December 31, 1997 shall not, even if declared or distributed on or after January 1,
1998, be subject to this tax. cdtai
"(C) Capital Gains from Sale of Shares of Stock not Traded in the Stock
Exchange. The provisions of Section 39(B) notwithstanding, a final tax at the rates
prescribed below is hereby imposed upon the net capital gains realized during the
taxable year from the sale, barter, exchange or other disposition of shares of stock in a
domestic corporation, except shares sold, or disposed of through the stock exchange.
"Three (3) years to less than four (4) years 12%; and
"(3) Capital Gains. Capital gains realized from sale, barter or exchange of
shares of stock in domestic corporations not traded through the local stock exchange,
and real properties shall be subject to the tax prescribed under Subsections (C) and
(D) of Section 24.
"Any income earned from all other sources within the Philippines by the alien
employees referred to under Subsections (C), (D) and (E) hereof shall be subject to
the pertinent income tax, as the case may be, imposed under this Code.
"For purposes of computing the distributive share of the partners, the net
income of the partnership shall be computed in the same manner as a corporation.
"Each partner shall report as gross income his distributive share, actually or
constructively received, in the net income of the partnership.
"CHAPTER IV
Tax on Corporations
"In the case of corporations adopting the fiscal-year accounting period, the
taxable income shall be computed without regard to the specific date when specific
sales, purchases and other transactions occur. Their income and expenses for the
fiscal year shall be deemed to have been earned and spent equally for each month of
the period. cd2uplaw05
"The corporate income tax rate shall be applied on the amount computed by
multiplying the number of months covered by the new rate within the fiscal year by
the taxable income of the corporation for the period, divided by twelve.
"The option to be taxed based on gross income shall be available only to firms
whose ratio of cost of sales to gross sales or receipts from all sources does not exceed
fifty-five percent (55%).
"The election of the gross income tax option by the corporation shall be
irrevocable for three (3) consecutive taxable years during which the corporation is
qualified under the scheme. IcDCaS
"For purposes of this Section, the term 'gross income' derived from business
shall be equivalent to gross sales less sales returns, discounts and allowances and cost
of goods sold. 'Cost of goods sold' shall include all business expenses directly
incurred to produce the merchandise to bring them to their present location and use.
"For a trading or merchandising concern, 'cost of goods sold' shall include the
invoice cost of the goods sold, plus import duties, freight in transporting the goods to
the place where the goods are actually sold, including insurance while the goods are
in transit.
"In the case of taxpayers engaged in the sale of service, 'gross income' means
gross receipts less sales returns, allowances and discounts.
"(1) Interest from Deposits and Yield or any other Monetary Benefit from
Deposit Substitutes and from Trust Funds and Similar Arrangements, and Royalties.
A final tax at the rate of twenty percent (20%) is hereby imposed upon the amount
of interest on currency bank deposit and yield or any other monetary benefit from
deposit substitutes and from trust funds and similar arrangements received by
domestic corporations, and royalties, derived from sources within the Philippines:
Provided, however, That interest income derived by a domestic corporation from a
depository bank under the expanded foreign currency deposit system shall be subject
to a final income tax at the rate of seven and one-half percent (7 1/2%) of such
interest income. lawcd2005
"(2) Capital Gains from the Sale of Shares of Stock Not Traded in the Stock
Exchange. A final tax at the rates prescribed below shall be imposed on net capital
gains realized during the taxable year from the sale, exchange or other disposition of
shares of stock in a domestic corporation except shares sold or disposed of through
the stock exchange:
"(3) Tax on Income Derived under the Expanded Foreign Currency Deposit
"(5) Capital Gains Realized from the Sale, Exchange or Disposition of Lands
and/or Buildings. A final tax of six percent (6%) is hereby imposed on the gain
presumed to have been realized on the sale, exchange or disposition of lands and/or
buildings which are not actually used in the business of a corporation and are treated
as capital assets, based on the gross selling price or fair market value as determined in
accordance with Section 6(E) of this Code, whichever is higher, of such lands and/or
buildings. EDIHSC
"(2) Carry Forward of Excess Minimum Tax. Any excess of the minimum
corporate income tax over the normal income tax as computed under Subsection (A)
"(3) Relief from the Minimum Corporate Income Tax Under Certain
Conditions. The Secretary of Finance is hereby authorized to suspend the
imposition of the minimum corporate income tax on any corporation which suffers
losses on account of prolonged labor dispute, or because of force majeure, or because
of legitimate business reverses.
"For a trading or merchandising concern, 'cost of goods sold' shall include the
invoice cost of the goods sold, plus import duties, freight in transporting the goods to
the place where the goods are actually sold including insurance while the goods are in
transit.
"In the case of taxpayers engaged in the sale of service, 'gross income' means
gross receipts less sales returns, allowances, discounts and cost of services. 'Cost of
services' shall mean all direct .costs and expenses necessarily incurred to provide the
services required by the customers and clients including (A) salaries and employee
benefits of personnel, consultants and specialists directly rendering the service and
(B) cost of facilities directly utilized in providing the service such as depreciation or
rental of equipment used and cost of supplies: Provided, however, That in the case of
banks, 'cost of services' shall include interest expense." (As amended by Sec. 1 of R.A.
No. 9337, May 24, 2005)
"In the case of corporations adopting the fiscal-year accounting period, the
taxable income shall be computed without regard to the specific date when sales,
purchases and other transactions occur. Their income and expenses for the fiscal year
shall be deemed to have been earned and spent equally for each month of the period.
"The corporate income tax rate shall be applied on the amount computed by
multiplying the number of months covered by the new rate within the fiscal year by
the taxable income of the corporation for the period, divided by twelve.
"(4) Offshore Banking Units(12). The provisions of any law to the contrary
notwithstanding, income derived by offshore banking units authorized by the Bangko
Sentral ng Pilipinas (BSP), from foreign currency transactions with nonresidents,
other offshore banking units, local commercial banks, including branches of foreign
banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact
business with offshore banking units shall be exempt from all taxes except net income
from such transactions as may be specified by the Secretary of Finance, upon
recommendation of the Monetary Board which shall be subject to the regular income
tax payable by banks: Provided, however, That any interest income derived from
foreign currency loans granted to residents other than offshore banking units or local
commercial banks, including local branches of foreign banks that may be authorized
by the BSP to transact business with offshore banking units, shall be subject only to a
final tax at the rate of ten percent (10%).
"(a) Interest from Deposits and Yield or any other Monetary Benefit from
Deposit Substitutes, Trust Funds and Similar Arrangements and Royalties. Interest
from any currency bank deposit and yield or any other monetary benefit from deposit
substitutes and from trust funds and similar arrangements and royalties derived from
sources within the Philippines shall be subject to a final income tax at the rate of
twenty percent (20%) of such interest: Provided, however, That interest income
derived by a resident foreign corporation from a depository bank under the expanded
foreign currency deposit system shall be subject to a final income tax at the rate of
seven and one-half percent (7%%) of such interest income.
"(c) Capital Gains from Sale of Shares of Stock not Traded in the Stock
Exchange. A final tax at the rates prescribed below is hereby imposed upon the net
capital gains realized during the taxable year from the sale, barter, exchange or other
disposition of shares of stock in a domestic corporation, except shares sold, or
disposed of through the stock exchange:
"(1) Prima Facie Evidence. The fact that any corporation is a mere holding
company or investment company shall be prima facie evidence of a purpose to avoid
the tax on its shareholders or members.
"Provided, however, That for corporations using the calendar year basis, the
accumulated earnings tax shall not apply on improperly accumulated income as of
December 31, 1997. In the case of corporations adopting the fiscal year accounting
period, the improperly accumulated income not subject to this tax, shall be reckoned,
as of the end of the month comprising the twelve (12)-month period of fiscal year
1997-1998. cdtai
"(E) Reasonable Needs of the Business. For purposes of this Section, the
term 'reasonable needs of the business' includes the reasonably anticipated needs of
the business.
"(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;
"(D) Cemetery company owned and operated exclusively for the benefit of its
members;
"(G) Civic league or organization not organized for profit but operated
exclusively for the promotion of social welfare;
"(J) 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; and
"CHAPTER V
"CHAPTER VI
"(1) Compensation for services in whatever form paid, including, but not
limited to fees, salaries, wages, commissions, and similar items;
"(2) Gross income derived from the conduct of trade or business or the
exercise of a profession;
"(4) Interests;
"(5) Rents;
"(6) Royalties;
"(7) Dividends;
"(8) Annuities;
"(11) Partner's distributive share from the net income of the general
professional partnership.
"(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 the heirs
or 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.
"(3) Gifts, Bequests, and Devises. The value of property acquired by gift,
bequest, devise, or descent: Provided, however, That income from such property, as
"(5) Income Exempt under Treaty. Income of any kind, to the extent
required by any treaty obligation binding upon the Government of the Philippines.
"(a)(14) Retirement benefits received under Republic Act No. 7641 and those
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 (50) years of age at the
time of his retirement: Provided, further, That the benefits granted under this
subparagraph shall be availed of by an official or employee 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 the officials or 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 diverted to, any purpose other than for the
exclusive benefit 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 because of 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
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Philippines under the laws of the United States administered by the United States
Veterans Administration.
"(e) Benefits received from or enjoyed under the Social Security System in
accordance with the provisions of Republic Act No. 8282.
"(f) Benefits received from the GSIS under Republic Act No. 8291, including
retirement gratuity received by government officials and employees.
"(c) Prizes and Awards. Prizes and awards made primarily in recognition of
religious, charitable, scientific, educational, artistic, literary, or civic achievement but
only if:
"(i) The recipient was selected without any action on his part to enter the
contest or proceeding; and
"(d) Prizes and Awards in Sports Competition. All prizes and awards
granted to athletes in local and international sports competitions and tournaments
whether held in the Philippines or abroad and sanctioned by their national sports
associations.
"(e)(15) 13th Month Pay and Other Benefits. Gross benefits received by
officials and employees of public and private entities: Provided, however, That the
total exclusion under this subparagraph shall not exceed Thirty thousand pesos
"(i) Benefits received by officials and employees of the national and local
government pursuant to Republic Act No. 6686;
"(f) GSIS, SSS, Medicare and Other Contributions. GSIS, SSS, Medicare
and Pag-Ibig contributions, and union dues of individuals.
"(B) Fringe Benefit Defined. For purposes of this Section, the term 'fringe
benefit' means any good, service or other benefit furnished or granted in cash or in
kind by an employer to an individual employee (except rank and file employees as
defined herein) such as, but not limited to, the following:
"(1) Housing;
"(5) Interest on loan at less than market rate to the extent of the difference
between the market rate and actual rate granted;
"(6) Membership fees, dues and other expenses borne by the employer for the
employee in social and athletic clubs or other similar organizations;
"(10) Life or health insurance and other non-life insurance premiums or similar
amounts in excess of what the law allows.
"(C) Fringe Benefits Not Taxable. The following fringe benefits are not
taxable under this Section:
"(3) Benefits given to the rank and file employees, whether granted under a
collective bargaining agreement or not; and
"CHAPTER VII
Allowable Deductions
"(A) Expenses.
There shall be allowed as deduction from gross income all the ordinary and
necessary expenses paid or incurred during the taxable year in carrying on or which
are directly attributable to, the development, management, operation and/or conduct
of the trade, business or exercise of a profession, including:
"(ii) A reasonable allowance for travel expenses, here and abroad, while away
from home in the pursuit of trade, business or profession;
"(iii) A reasonable allowance for rentals and/or other payments which are
required as a condition for the continued use or possession, for purposes of the trade,
business or profession, of property to which the taxpayer has not taken or is not
taking title or in which he has no equity other than that of a lessee, user or possessor;
"(B) Interest.
"(a) If within the taxable year an individual taxpayer reporting income on the
cash basis incurs an indebtedness on which an interest is paid in advance through
discount or otherwise: Provided, That such interest shall be allowed as a deduction in
the year the indebtedness is paid: Provided, further, That if the indebtedness is
payable in periodic amortizations, the amount of interest which corresponds to the
amount of the principal amortized or paid during the year shall be allowed as
deduction in such taxable year;
"(b) If both the taxpayer and the person to whom the payment has been made
or is to be made are persons specified under Section 36(B); or
"(C) Taxes.
"(b) Income taxes imposed by authori ty 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 credits for taxes of foreign countries);
"(d) Taxes assessed against local benefits of a kind tending to increase the
value of the property assessed.
"(3) Credit Against Tax for Taxes of Foreign Countries. If 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:
"(b) Partnerships and Estates. In the case of any such individual who is a
member of a general professional partnership or a beneficiary of an estate or trust, his
proportionate share of such taxes of the general professional partnership or the estate
or trust paid or incurred 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.
"An alien individual and a 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
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Section shall be subject to each of the following limitations:
"(a) The amount of the credit in respect to the tax paid or incurred to any
country shall not exceed the same proportion of the tax against which such credit is
taken, which the taxpayer's taxable income from sources within such country under
this Title bears to his entire taxable income for the same taxable year; 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 taxable income from
sources without the Philippines taxable under this Title bears to his entire taxable
income for the same taxable year.
"(6) Year in Which Credit Taken. The credits provided for in Subsection
(C)(3) of this Section 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 were incurred, subject, however, to the conditions
prescribed in Subsection (C)(5) of this Section. 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 Subsection (C)(3) hereof shall
be allowed only if the taxpayer establishes to the satisfaction of the Commissioner the
following:
"(a) The total amount of income derived from sources without the Philippines;
"(c) All other information necessary for the verification and computation of
such credits.
"(D) Losses.
"(1) In General. Losses actually sustained during the taxable year and not
compensated for by insurance or other forms of indemnity shall be allowed as
deductions:
"(b) Of property connected with the trade, business or profession, if the loss
arises from fires, storms, shipwreck, or other casualties, or from robbery, theft or
embezzlement.
"(c) No loss shall be allowed as a deduction under this Subsection 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.
"(3) Net Operating Loss Carry-over. The net operating loss of the business
or enterprise for any taxable year immediately preceding the current taxable year,
which had not been previously offset as deduction from gross income shall be carried
over as a deduction from gross income for the next three (3) consecutive taxable years
immediately following the year of such loss: Provided, however, That any net loss
incurred in a taxable year during which the taxpayer was exempt from income tax
shall not be allowed as a deduction under this Subsection: Provided, further, That a
net operating loss carry-over shall be allowed only if there has been no substantial
change in the ownership of the business or enterprise in that
"(i) Not less than seventy-five percent (75%) in nominal value of outstanding
issued shares, if the business is in the name of a corporation, is held by or on behalf of
the same persons; or
"(ii) Not less than seventy-five percent (75%) of the paid up capital of the
corporation, if the business is in the name of a corporation, is held by or on behalf of
the same persons.
"For purposes of this Subsection, the term 'net operating loss' shall mean the
excess of allowable deduction over gross income of the business in a taxable year:
"Provided, That for mines other than oil and gas wells, a net operating loss
without the benefit of incentives provided for under Executive Order No. 226, as
amended, otherwise known as the Omnibus Investments Code of 1987, incurred in
any of the first ten (10) years of operation may be carried over as a deduction from
taxable income for the next five (5) years immediately following the year of such
loss. The entire amount of the loss shall be carried over to the first of the five (5)
taxable years following the loss, and any portion of such loss which exceeds the
taxable income of such first year shall be deducted in like manner from the taxable
income of the next remaining four (4) years.
"(5) Losses From Wash Sales of Stock or Securities. Losses from 'wash
sales' of stock or securities as provided in Section 38.
"(a) In the event a contract area where petroleum operations are undertaken is
partially or wholly abandoned, all accumulated exploration and development
expenditures pertaining thereto shall be allowed as a deduction: Provided, That
accumulated expenditures incurred in that area prior to January 1, 1979 shall be
allowed as a deduction only from any income derived from the same contract area. In
all cases, notices of abandonment shall be filed with the Commissioner.
"(F) Depreciation.
"(2) Use of Certain Methods and Rates. The term 'reasonable allowance' as
used in the preceding paragraph shall include, but not limited to, an allowance
computed in accordance with rules and regulations prescribed by the Secretary of
Finance, upon recommendation of the Commissioner, under any of the following
methods:
"(b) Declining-balance method, using a rate not exceeding twice the rate which
would have been used had the annual allowance been computed under the method
described in Subsection (F)(1);
"(d) Any other method which may be prescribed by the Secretary of Finance
upon recommendation of the Commissioner.
"Provided, however, That where the taxpayer has adopted such useful life and
depreciation rate for any depreciable asset and claimed the depreciation expenses as
deduction from his gross income, without any written objection on the part of the
Commissioner or his duly authorized representative, the aforesaid useful life and
depreciation rate so adopted by the taxpayer for the aforesaid depreciable asset shall
be considered binding for purposes of this Subsection.
"(a) At the normal rate of depreciation if the expected life is ten (10) years or
less; or
"(b) Depreciated over any number of years between five (5) years and the
expected life if the latter is more than ten (10) years, and the depreciation thereon
allowed as deduction from taxable income: Provided, That the contractor notifies the
Commissioner at the beginning of the depreciation period which depreciation rate
"(1) In General. In the case of oil and gas wells or mines, a reasonable
allowance for depletion or amortization computed in accordance with the
cost-depletion method shall be granted under rules and regulations to be prescribed by
the Secretary of Finance, upon recommendation of the Commissioner: Provided, That
when the allowance for depletion shall equal the capital invested no further allowance
shall be granted: Provided, further, That after production in commercial quantities has
commenced, certain intangible exploration and development drilling costs: (a) shall
be deductible in the year incurred if such expenditures are incurred for non-producing
wells and/or mines, or (b) shall be deductible in full in the year paid or incurred or, at
the election of the taxpayer, may be capitalized and amortized if such expenditures
incurred are for producing wells and/or mines in the same contract area.
"'Net income from mining operations', as used in this Subsection, shall mean
gross income from operations less 'allowable deductions' which are necessary or
related to mining operations. 'Allowable deductions' shall include mining, milling and
marketing expenses, and depreciation of properties directly used in the mining
operations. This paragraph shall not apply to expenditures for the acquisition or
improvement of property of a character which is subject to the allowance for
depreciation.
"In no case shall this paragraph apply with respect to amounts paid or incurred
for the exploration and development of oil and gas.
"(3) Depletion of Oil and Gas Wells and Mines Deductible by a Nonresident
Alien Individual or Foreign Corporation. In the case of a nonresident alien
individual engaged in trade or business in the Philippines or a resident foreign
corporation, allowance for depletion of oil and gas wells or mines under paragraph (1)
of this Subsection shall be authorized only in respect to oil and gas wells or mines
located within the Philippines.
"(2) Which, not later than the 15th day of the third month after the close of the
accredited nongovernment organizations taxable year in which contributions are
received, makes utilization directly for the active conduct of the activities constituting
the purpose or function for which it is organized and operated, unless an extended
period is granted by the Secretary of Finance in accordance with the rules and
regulations to be promulgated, upon recommendation of the Commissioner;
"(ii) Any amount paid to acquire an asset used (or held for use) directly in
carrying out one or more purposes for which the accredited nongovernment
organization was created or organized.
"An amount set aside for a specific project which comes within one or more
purposes of the accredited nongovernment organization may be treated as a
utilization, but only if at the time such amount is set aside, the accredited
nongovernment organization has established to the satisfaction of the Commissioner
that the amount will be paid for the specific project within a period to be prescribed in
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rules and regulations to be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, but not to exceed five (5) years, and the
project is one which can be better accomplished by setting aside such amount than by
immediate payment of funds.
"(a) Paid or incurred by the taxpayer in connection with his trade, business or
profession;
"The election provided by paragraph (2) hereof may be made for any taxable
year beginning after the effectivity of this Code, but only if made not later than the
"(a) Any expenditure for the acquisition or improvement of land, or for the
improvement of property to be used in connection with research and development of a
character which is subject to depreciation and depletion; and
"(b) Any expenditure paid or incurred for the purpose of ascertaining the
existence, location, extent, or quality of any deposit of ore or other mineral, including
oil or gas.
"In the case of married individuals where only one of the spouses is deriving
gross income, only such spouse shall be allowed the personal exemption.
"For purposes of this paragraph, the term 'head of family' means an unmarried
or legally separated man or woman with one or both parents, or with one or more
brothers or sisters, or with one or more legitimate, recognized natural or legally
adopted children living with and dependent upon him for their chief support, where
such brothers or sisters or children are not more than twenty-one (21) years of age,
unmarried and not gainfully employed or where such children, brothers or sisters,
regardless of age are incapable of self-support because of mental or physical defect.
"The additional exemption for dependents shall be claimed by only one of the
spouses in the case of married individuals.
"If the taxpayer dies during the taxable year, his estate may still claim the
personal and additional exemptions for himself and his dependent(s) as if he died at
the close of such year.
"(A) General Rule. In computing net income, no deduction shall in any case
be allowed in respect to
"(2) Any amount paid out for new buildings or for permanent improvements,
or betterments made to increase the value of any property or estate; cdtai
"This Subsection shall not apply to intangible drilling and development costs
incurred in petroleum operations which are deductible under Subsection (G)(1) of
Section 34 of this Code.
"(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.
"(1) Between members of a family. For 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; or
"(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
"(B) Mutual Insurance Companies. In the case of mutual fire and mutual
employers' 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
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losses and expenses and reinsurance reserves.
"(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 (30) days before the date of such sale or disposition and ending thirty
(30) 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 34 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, upon recommendation of the
Commissioner.
"(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 non-deductibility of the
loss, shall be determined under rules and regulations prescribed by the Secretary of
Finance, upon recommendation of the Commissioner.
"(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 34; or
real property used in 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.
"(3) Net Capital Loss. The term 'net capital loss' means the excess of the
losses from sales or exchanges of capital assets over the gains from such sales or
exchanges.
"(B) Percentage Taken into Account. In the case of a taxpayer, other than a
corporation, only the following percentages of the gain or loss recognized upon the
sale or exchange of a capital asset shall be taken into account in computing net capital
gain, net capital loss, and net income:
"(1) One hundred percent (100%) if the capital asset has been held for not
more than twelve (12) months; and
"(2) Fifty percent (50%) if the capital asset has been held for more than twelve
(12) months;
"(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 (12)
months.
"(E) Retirement of Bonds, Etc. For purposes 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 interest coupons or in registered
form, shall be considered as amounts received in exchange therefor.
"(F) Gains and Losses from Short Sales, Etc. For purposes 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
"(A) Computation of Gain or Loss. The gain from the sale or other
disposition of property shall be the excess of the amount realized therefrom over the
basis or adjusted basis for determining gain, and the loss shall be the excess of the
basis or adjusted basis for determining loss over the amount realized. The amount
realized from the sale or other disposition of property shall be the sum of money
received plus the fair market value of the property (other than money) received;
"(B) Basis for Determining Gain or Loss from Sale or Disposition of Property.
The basis of property shall be
"(1) The cost thereof in the case of property acquired on or after March 1,
1913, if such property was acquired by purchase; or
"(2) The fair market price or value as of the date of acquisition, if the same was
acquired by inheritance; or
"(3) If the property was acquired by gift, the basis shall be the same as if it
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would be in the hands of the donor or the last preceding owner by whom it was not
acquired by gift, except that if such basis is greater than the fair market value of the
property at the time of the gift then, for the purpose of determining loss, the basis
shall be such fair market value; or
"(4) If the property was acquired for less than an adequate consideration in
money or money's worth, the basis of such property is the amount paid by the
transferee for the property; or
"(5) The basis as defined in paragraph (C)(5) of this Section, if the property
was acquired in a transaction where gain or loss is not recognized under
paragraph(C)(2) of this Section.
"(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.
"(b) If, in connection with the exchange described in the above exceptions, the
transferor corporation receives not only stock permitted to be received without the
recognition of gain or loss but also money and/or other property, then (i) if the
corporation receiving such money and/or other property distributes it in pursuance of
the plan of merger or consolidation, no gain to the corporation shall be recognized
from the exchange, but (ii) 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.
"(b) If the amount of the liabilities assumed plus the amount of the liabilities to
which the property is subject exceed the total of the adjusted basis of the property
transferred pursuant to such exchange, then such excess shall be considered as a gain
from the sale or exchange of a capital asset or of property which is not a capital asset,
as the case may be.
"(5) Basis.
"(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.
"(6) Definitions.
"(a) The term 'securities' means bonds 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: (i) the ordinary merger or consolidation, or (ii) 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 must 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 Section, shall mean ownership of
stocks in a corporation possessing at least fifty-one percent (51%) of the total voting
power of all classes of stocks entitled to vote.
"If a taxpayer, after having complied with the terms and conditions prescribed
by the Commissioner, uses a particular method of valuing its inventory for any
taxable year, then such method shall be used in all subsequent taxable years unless:
"(ii) the Commissioner finds that the nature of the stock on hand (e.g., its
scarcity, liquidity, marketability and price movements) is such that inventory gains
should be considered realized for tax purposes and, therefore, it is necessary to
modify the valuation method for purposes of ascertaining the income, profits, or loss
in a more realistic manner: Provided, however, That the Commissioner shall not
exercise his authority to require a change in inventory method more often than once
every three (3) years: Provided, further, That any change in an inventory valuation
method must be subject to approval by the Secretary of Finance.
"(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) Interests. Interests derived from sources within the Philippines, and
interests on bonds, notes or other interest-bearing obligations of residents, corporate
or otherwise;
"(b) From a foreign corporation, unless less than fifty percent (50%) of the
gross income of such foreign corporation for the three-year period ending with the
close of its taxable 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 Philippines 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.
"(4) Rentals and Royalties. Rentals and royalties from property located in
the Philippines or from any interest in such property, including rentals or royalties for
"(a) The use of or the right or privilege to use in the Philippines any copyright,
patent, design or model, plan, secret formula or process, goodwill, trademark, trade
brand or other like property or right;
"(b) The use of, or the right to use in the Philippines any industrial,
commercial or scientific equipment;
"(d) The supply of any assistance that is ancillary and subsidiary to, and is
furnished as a means of enabling the application or enjoyment of, any such property
or right as is mentioned in paragraph (a), any such equipment as is mentioned in
paragraph (b) or any such knowledge or information as is mentioned in paragraph (c);
"(ii) Films or video tapes for use in connection with television; and
"(5) Sale of Real Property. Gains, profits and income from the sale of real
property located in the Philippines; and
"(6) Sale of Personal Property. Gains, profits and income from the sale of
personal property, as determined in Subsection (E) of this Section.
"(1) General Rule. From the items of gross income specified in Subsection
(A) of this Section, there shall be deducted the expenses, losses and other deductions
properly allocated thereto and a ratable part of expenses, interests, losses and other
deductions effectively connected with the business or trade conducted exclusively
within the Philippines which cannot definitely be allocated to some items or class of
gross income: Provided, That such items of deductions shall be allowed only if fully
substantiated by all the information necessary for its calculation. The remainder, if
any, shall be treated in full as taxable income from sources within the Philippines.
"(C) Gross Income From Sources Without the Philippines. The following
items of gross income shall be treated as income from sources without the
Philippines:
"(1) Interests other than those derived from sources within the Philippines as
provided in paragraph (1) of Subsection (A) of this Section;
"(2) Dividends other than those derived from sources within the Philippines as
provided in paragraph (2) of Subsection (A) of this Section;
"(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) Taxable 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 expense, loss or other deduction which cannot
definitely be allocated to some items or classes of gross income. The remainder, if
any, shall be treated in full as taxable 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 Subsections (A) and (C) of this Section, shall be allocated or apportioned to
sources within or without the Philippines, under the rules and regulations prescribed
by the Secretary of Finance, upon recommendation of the Commissioner. Where
items of gross income are separately allocated to sources within the Philippines, there
shall be deducted (for the purpose of computing the taxable 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 items or classes of gross income. The remainder, if any, shall be
included in full as taxable income from sources within the Philippines. In the case of
gross income derived from sources partly within and partly without the Philippines,
the taxable income may first be computed by deducting the expenses, losses or other
deductions apportioned or allocated thereto and a ratable part of any expense, loss or
other deduction which cannot definitely be allocated to some items or classes of gross
income; and the portion of such taxable 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 within and sold
without 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
"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: Provided, however, That gain from the sale
of shares of stock in a domestic corporation shall be treated as derived entirely from
sources within the Philippines regardless of where the said shares are sold. The
transfer by a nonresident alien or a foreign corporation to anyone of any share of
stock issued by a domestic corporation shall not be effected or made in its book
unless: (1) the transferor has filed with the Commissioner a bond conditioned upon
the future payment by him of any income tax that may be due on the gains derived
from such transfer, or (2) the Commissioner has certified that the taxes, if any,
imposed in this Title and due on the gain realized from such sale or transfer have been
paid. It shall be the duty of the transferor and the corporation the shares of which are
sold or transferred, to advise the transferee of this requirement.
"(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'.
"CHAPTER VIII
"SECTION 45. 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.
"(A) Returns for Short Period Resulting from Change of Accounting Period.
If a taxpayer, other than an individual, with the approval of the Commissioner,
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) Sales of Realty and Casual Sales of Personalty. 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 (P1,000), or
(2) of a sale or other disposition of real property, if in either case the initial payments
do not exceed twenty-five percent (25%) of the selling price, the income may, under
rules and regulations prescribed by the Secretary of Finance, upon recommendation
of the Commissioner, 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 payments
received in cash or property other than evidences of indebtedness of the purchaser
during the taxable period in which the sale or other disposition is made.
"CHAPTER IX
"(A) Requirements.
"(b) Every Filipino citizen residing outside the Philippines, on his income from
sources within the Philippines;
"(c) Every alien residing in the Philippines, on income derived from sources
within the Philippines; and
"(2) The following individuals shall not be required to file an income tax
return:
"(a) An individual whose gross income does not exceed his total personal and
additional exemptions for dependents under Section 35: Provided, That a citizen of
the Philippines and any alien individual engaged in business or practice of profession
within the Philippines shall file an income tax return, regardless of the amount of
gross income;
"(c) An individual whose sole income has been subjected to final withholding
tax pursuant to Section 57(A) of this Code; and
"(d) An individual who is exempt from income tax pursuant to the provisions
of this Code and other laws, general or special.
"(4) The income tax return shall be filed in duplicate by the following persons:
"(b) A nonresident citizen on his income derived from sources within the
Philippines;
"(c) A resident alien on his income derived from sources within the
Philippines; and
"(1) The return of any individual specified above shall be filed on or before the
fifteenth (15th) day of April of each year covering income for the preceding taxable
year.
"(a) From the sale or exchange of shares of stock not traded thru a local stock
exchange as prescribed under Section 24(C) shall file a return within thirty (30) days
after each transaction and a final consolidated return on or before April 15 of each
year covering all stock transactions of the preceding taxable year; and
"(b) From the sale or disposition of real property under Section 24(D) shall file
a return within thirty (30) days following each sale or other disposition.
"(F) Persons Under 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
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return and incurring penalties provided for erroneous, false or fraudulent returns.
"(D) Return on Capital Gains Realized from Sale of Shares of Stock not
Traded in the Local Stock Exchange. Every corporation deriving capital gains
from the sale or exchange of shares of stock not traded thru a local stock exchange as
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prescribed under Sections 24(C), 25(A)(3), 27(E)(2), 28(A)(8)(c) and 28(B)(5)(c)
shall file a return within thirty (30) days after each transaction and a final
consolidated return of all transactions during the taxable year on or before the
fifteenth (15th) day of the fourth (4th) month following the close of the taxable year.
"SECTION 56. Payment and Assessment of Income Tax for Individuals and
Corporations.
"(1) In General. The total amount of tax imposed by this Title shall be paid
by the person subject thereto at the time the return is filed. In the case of tramp
vessels, the shipping agents and/or the husbanding agents, and in their absence, the
captains thereof are required to file the return herein provided and pay the tax due
thereon before their departure. Upon failure of the said agents or captains to file the
return and pay the tax, the Bureau of Customs is hereby authorized to hold the vessel
and prevent its departure until proof of payment of the tax is presented or a sufficient
bond is filed to answer for the tax due.
"(3) Payment of Capital Gains Tax. The total amount of tax imposed and
prescribed under Sections 24(C), 24(D), 27(E)(2), 28(A)(8)(c) and 28(B)(5)(c) shall
be paid on the date the return prescribed therefor is filed by the person liable thereto:
Provided, That if the seller submits proof of his intention to avail himself of the
benefit of exemption of capital gains under existing special laws, no such payments
shall be required: Provided, further, That in case of failure to qualify for exemption
under such special laws and implementing rules and regulations, the tax due on the
gains realized from the original transaction shall immediately become due and
payable, and subject to the penalties prescribed under applicable provisions of this
Code: Provided, finally, That if the seller, having paid the tax, submits such proof of
intent within six (6) months from the registration of the document transferring the real
property, he shall be entitled to a refund of such tax upon verification of his
compliance with the requirements for such exemption.
"In case the taxpayer elects and is qualified to report the gain by installments
under Section 49 of this Code, the tax due from each installment payment shall be
paid within thirty (30) days from the receipt of such payments.
"(B) Assessment and Payment of Deficiency Tax. After the return is filed,
the Commissioner shall examine it and assess the correct amount of the tax. The tax
or deficiency income tax so discovered shall be paid upon notice and demand from
the Commissioner.
"As used in this Chapter, in respect of a tax imposed by this Title, the term
'deficiency' means:
"(1) The amount by which the tax imposed by this Title exceeds the amount
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shown as the tax by the taxpayer upon his return; but the amount so shown on the
return shall be increased by the amounts previously assessed (or collected without
assessment) as a deficiency, and decreased by the amount previously abated, credited,
returned or otherwise repaid in respect of such tax; or
"(2) If no amount is shown as the tax by the taxpayer upon his return, or if no
return is made by the taxpayer, then the amount by which the tax exceeds the amounts
previously assessed (or collected without assessment) as a deficiency; but such
amounts previously assessed or collected without assessment shall first be decreased
by the amounts previously abated, credited, returned or otherwise repaid in respect of
such tax.
"(C) Tax-free Covenant Bonds. 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 percent (30%) of the interest or other payments upon those bonds, mortgages,
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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 without the Philippines, if the interest or other payment is
payable to a nonresident alien or to a citizen or resident of the Philippines.
"The taxes deducted and withheld by the withholding agent shall be held as a
special fund in trust for the government until paid to the collecting officers.
"The return for final withholding tax shall be filed and the payment made
within twenty-five (5) days from the close of each calendar quarter, while the return
for creditable withholding taxes shall be filed and the payment made not later than the
last day of the month following the close of the quarter during which withholding was
made: Provided, That the Commissioner, with the approval of the Secretary of
Finance, may require these withholding agents to pay or deposit the taxes deducted or
withheld at more frequent intervals when necessary to protect the interest of the
government.
"(D) Income of Recipient. Income upon which any creditable tax is required
to be withheld at source under Section 57 shall be included in the return of its
recipient but the excess of the amount of tax so withheld over the tax due on his
return shall be refunded to him subject to the provisions of Section 204; if the income
tax collected at source is less than the tax due on his return, the difference shall be
paid in accordance with the provisions of Section 56.
"All taxes withheld pursuant to the provisions of this Code and its
implementing rules and regulations are hereby considered trust funds and shall be
maintained in a separate account and not commingled with any other funds of the
withholding agent.
"CHAPTER X
"(A) Application of Tax. The tax imposed by this Title upon individuals
shall apply to the income of estates or of any kind of property held in trust, including:
"(4) Income which, in the discretion of the fiduciary, may be either distributed
to the beneficiaries or accumulated.
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"(B) Exception. The tax imposed by this Title shall not apply to employee's
trust which forms part of a pension, stock bonus or profit-sharing plan of an employer
for the benefit of some or all of his employees (1) if contributions are made to the
trust by such employer, or employees, or both for the purpose of distributing to such
employees the earnings and principal of the fund accumulated by the trust in
accordance with such plan, and (2) if under the trust instrument it is impossible, at
any time prior to the satisfaction of all liabilities with respect to employees under the
trust, for any part of the corpus or income to be (within the taxable year or thereafter)
used for, or diverted to, purposes other than for the exclusive benefit of his
employees: Provided, That any amount actually distributed to any employee or
distributee shall be taxable to him in the year in which so distributed to the extent that
it exceeds the amount contributed by such employee or distributee.
"(1) In General. The tax shall be computed upon the taxable income of the
estate or trust and shall be paid by the fiduciary, except as provided in Section 63
(relating to revocable trusts) and Section 64 (relating to income for the benefit of the
grantor).
"(B) In the case of income received by estates of deceased persons during the
period of administration or settlement of the estate, and in the case of income which,
in the discretion of the fiduciary, may be either distributed to the beneficiary or
accumulated, there shall be allowed as an additional deduction in computing the
taxable income of the estate or trust the amount of the income of the estate or trust for
its taxable year, which is properly paid or credited during such year to any legatee,
heir or beneficiary but the amount so allowed as a deduction shall be included in
computing the taxable income of the legatee, heir or beneficiary.
"SECTION 63. Revocable Trusts. Where at any time the power to revest
in the grantor title to any part of the corpus of the trust is vested (1) in the grantor
either alone or in conjunction with any person not having a substantial adverse
interest in the disposition of such part of the corpus or the income therefrom, or (2) in
any person not having a substantial adverse interest in the disposition of such part of
the corpus or the income therefrom, the income of such part of the trust shall be
included in computing the taxable income of the grantor.
"(A) Where any part of the income of a trust (1) is, or in the discretion of the
grantor or of any person not having a substantial adverse interest in the disposition of
such part of the income may be held or accumulated for future distribution to the
grantor; or (2) may, or in the discretion of the grantor or of any person not having a
substantial adverse interest in the disposition of such part of the income, be
distributed to the grantor; or (3) is, or in the discretion of the grantor or of any person
not having a substantial adverse interest in the disposition of such part of the income
may be applied to the payment of premiums upon policies of insurance on the life of
the grantor, such part of the income of the trust shall be included in computing the
taxable income of the grantor.
"CHAPTER XI
"(B) Form and Contents of Return. Such return shall be in such form and
shall set forth, under oath, in respect of each such corporation, to the full extent of the
information within the possession or knowledge or under the control of the person
required to file the return, such information as the Secretary of Finance, upon
recommendation of the Commissioner, shall prescribe by rules and regulations as
necessary for carrying out the provisions of this Title. Nothing in this Section shall be
construed to require the divulging of privileged communications between attorney
and client. cdtai
"(A) Definition of Dividends. The term 'dividends' when used in this Title
means any distribution made by a corporation to its shareholders out of its earnings or
profits and payable to its shareholders, whether in money or in other property.
"CHAPTER XII
"In case the corporation is entitled to a tax credit or refund of the excess
estimated quarterly income taxes paid, the excess amount shown on its final
adjustment return may be carried over and credited against the estimated quarterly
income tax liabilities for the taxable quarters of the succeeding taxable years. Once
the option to carry-over and apply the excess quarterly income tax against income tax
due for the taxable quarters of the succeeding taxable years has been made, such
option shall be considered irrevocable for that taxable period and no application for
cash refund or issuance of a tax credit certificate shall be allowed therefor.
"(B) Time of Filing the Income Tax Return. The corporate quarterly
declaration shall be filed within sixty (60) days following the close of each of the first
three (3) quarters of the taxable year. The final adjustment return shall be filed on or
before the fifteenth (15th) day of April, or on or before the fifteenth (15th) day of the
fourth (4th) month following the close of the fiscal year, as the case may be.
"(C) Time of Payment of the Income Tax. The income tax due on the
corporate quarterly returns and the final adjustment income tax returns computed in
accordance with Sections 75 and 76 shall be paid at the time the declaration or return
is filed in a manner prescribed by the Commissioner.
"CHAPTER XIII
Withholding on Wages
"(A) Wages. The term 'wages' means all remuneration (other than fees paid
"(1) For agricultural labor paid entirely in products of the farm where the labor
is performed, or
"(3) For casual labor not in the course of the employer's trade or business, or
"(B) Payroll Period. The term 'payroll period' means a period for which
payment of wages is ordinarily made to the employee by his employer, and the term
'miscellaneous payroll period' means a payroll period other than, a daily, weekly,
biweekly, semi-monthly, monthly, quarterly, semi-annual, or annual period. cdtai
"(C) Employee. The term 'employee' refers to any individual who is the
recipient of wages and includes an officer, employee or elected official of the
Government of the Philippines or any political subdivision, agency or instrumentality
thereof. The term 'employee' also includes an officer of a corporation.
"(D) Employer. The term 'employer' means the person for whom an
individual performs or performed any service, of whatever nature, as the employee of
such person, except that:
"(1) If the person for whom the individual performs or performed any service
does not have control of the payment of the wages for such services, the term
'employer' (except for the purpose of Subsection A) means the person having control
of the payment of such wages; and
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"(2) In the case of a person paying wages on behalf of a nonresident alien
individual, foreign partnership or foreign corporation not engaged in trade or business
within the Philippines, the term 'employer' (except for the purpose of Subsection A)
means such person.
"(1) Employer. When there has been an overpayment of tax under this
Section, refund or credit shall be made to the employer only to the extent that the
amount of such overpayment was not deducted and withheld hereunder by the
employer.
"(2) Employees. The amount deducted and withheld under this Chapter
during any calendar year shall be allowed as a credit to the recipient of such income
against the tax imposed under Section 24(A) of this Title. Refunds and credits in
cases of excessive withholding shall be granted under rules and regulations
promulgated by the Secretary of Finance, upon recommendation of the
Commissioner.
"Any excess of the taxes withheld over the tax due from the taxpayer shall be
returned or credited within three (3) months from the fifteenth (15th) day of April.
Refunds or credits made after such time shall earn interest at the rate of six percent
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(6%) per annum, starting after the lapse of the three-month period to the date the
refund of credit is made.
"(c) Use of Certificates. The certificates filed hereunder shall be used by the
employer in the determination of the amount of taxes to be withheld.
"(1) estimate the wages which will be paid to an employee in any quarter of the
"(2) determine the amount to be deducted and withheld upon each payment of
wages to such employee during such quarter as if the appropriate average of the
wages so estimated constituted the actual wages paid; and
"(3) deduct and withhold upon any payment of wages to such employee during
such quarter such amount as may be required to be deducted and withheld during
such quarter without regard to this Subsection.
"(F) Husband and Wife. When a husband and wife each are recipients of
wages, whether from the same or from different employers, taxes to be withheld shall
be determined on the following bases:
"(1) The husband shall be deemed the head of the family and proper claimant
of the additional exemption in respect to any dependent children, unless he explicitly
waives his right in favor of his wife in the withholding exemption certificate.
"(2) Taxes shall be withheld from the wages of the wife in accordance with the
schedule for zero exemption of the withholding tax table prescribed in Subsection
(D)(2)(d) hereof.
"(H) Year-end Adjustment. On or before the end of the calendar year but
prior to the payment of the compensation for the last payroll period, the employer
shall determine the tax due from each employee on taxable compensation income for
the entire taxable year in accordance with Section 24(A). The difference between the
tax due from the employee for the entire year and the sum of taxes withheld from
January to November shall either be withheld from his salary in December of the
current calendar year or refunded to the employee not later than January 25 of the
succeeding year.
"(A) Employer. The employer shall be liable for the withholding and
remittance of the correct amount of tax required to be deducted and withheld under
this Chapter. If the employer fails to withhold and remit the correct amount of tax as
required to be withheld under the provision of this Chapter, such tax shall be collected
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from the employer together with the penalties or additions to the tax otherwise
applicable in respect to such failure to withhold and remit.
shall not be refunded to the employee but shall be forfeited in favor of the
Government.
"The return shall be filed and the payment made within twenty-five (25) days
from the close of each calendar quarter: Provided, however, That the Commissioner
may, with the approval of the Secretary of Finance, require the employers to pay or
deposit the taxes deducted and withheld at more frequent intervals, in cases where
such requirement is deemed necessary to protect the interest of the Government.
"The taxes deducted and withheld by employers shall be held in a special fund
in trust for the Government until the same are paid to the said collecting officers.
"TITLE III
"CHAPTER I
Estate Tax
Over But Not Over The Tax Shall Be Plus Of the Excess Over
P200,000 Exempt
P200,000 500,000 0 5% P200,000
500,000 2,000,000 P15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 And Over 1,215,000 20% 10,000,000
"SECTION 85. Gross Estate. The value of the gross estate of the
decedent shall be determined by including the value at the time of his death of all
property, real or personal, tangible or intangible, wherever situated: Provided,
however, That in the case of a nonresident decedent who at the time of his death was
not a citizen of the Philippines, only that part of the entire gross estate which is
situated in the Philippines shall be included in his taxable estate.
"(1) To the extent of any interest therein, of which the decedent has at any time
made a transfer (except in case of bona fide sale for an adequate and full
consideration in money or money's worth) by trust or otherwise, where the enjoyment
thereof was subject at the date of his death to any change through the exercise of a
power (in whatever capacity exercisable) by the decedent alone or by the decedent in
conjunction with any other person (without regard to when or from what source the
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decedent acquired such power), to alter, amend, revoke or terminate, or where any
such power is relinquished in contemplation of the decedent's death.
"(2) For the purpose of this Subsection, the power to alter, amend or revoke
shall be considered to exist on the date of the decedent's death even though the
exercise of the power is subject to a precedent giving of notice or even though the
alteration, amendment or revocation takes effect only on the expiration of a stated
period after the exercise of the power, whether or not on or before the date of the
decedent's death notice has been given or the power has been exercised. In such cases,
proper adjustment shall be made representing the interests which would have been
excluded from the power if the decedent had lived, and for such purpose if the notice
has not been given or the power has not been exercised on or before the date of his
death, such notice shall be considered to have been given, or the power exercised, on
the date of his death.
"(H) Capital of the Surviving Spouse. The capital of the surviving spouse of
a decedent shall not, for the purpose of this Chapter, be deemed a part of his or her
gross estate.
"SECTION 86. Computation of Net Estate. For the purpose of the tax
imposed in this Chapter, the value of the net estate shall be determined:
"(a) For actual funeral expenses or in an amount equal to five percent (5%) of
the gross estate, whichever is lower, but in no case to exceed Two hundred thousand
pesos (P200,000);
"(c) For claims against the estate: Provided, That at the time the indebtedness
was incurred the debt instrument was duly notarized and, if the loan was contracted
within three (3) years before the death of the decedent, the administrator or executor
shall submit a statement showing the disposition of the proceeds of the loan;
"(d) For claims of the deceased against insolvent persons where the value of
decedent's interest therein is included in the value of the gross estate; and
"(e) For unpaid mortgages upon, or any indebtedness in respect to, property
where the value of decedent's interest therein, undiminished by such mortgage or
indebtedness, is included in the value of the gross estate, but not including any
income tax upon income received after the death of the decedent, or property taxes
not accrued before his death, or any estate tax. The deduction herein allowed in the
case of claims against the estate, unpaid mortgages or any indebtedness shall, when
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founded upon a promise or agreement, be limited to the extent that they were
contracted bona fide and for an adequate and full consideration in money or money's
worth. There shall also be deducted losses incurred during the settlement of the estate
arising from fires, storms, shipwreck, or other casualties, or from robbery, theft or
embezzlement, when such losses are not compensated for by insurance or otherwise,
and if at the time of the filing of the return such losses have not been claimed as a
deduction for income tax purposes in an income tax return, and provided that such
losses were incurred not later than the last day for the payment of the estate tax as
prescribed in Subsection (A) of Section 91.
"One hundred percent (100%) of the value, if the prior decedent died within
one (1) year prior to the death of the decedent, or if the property was transferred to
him by gift within the same period prior to his death;
"Eighty percent (80%) of the value, if the prior decedent died more than one
(1) year but not more than two (2) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to his death;
"Sixty percent (60%) of the value, if the prior decedent died more than two (2)
years but not more than three (3) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to his death;
"Forty percent (40%) of the value, if the prior decedent died more than three
(3) years but not more than four (4) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to his death; and
"Twenty percent (20%) of the value, if the prior decedent died more than four
(4) years but not more than five (5) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to his death.
"These deductions shall be allowed only where a donor's tax or estate tax
imposed under this Title was finally determined and paid by or on behalf of such
donor, or the estate of such prior decedent, as the case may be, and only in the amount
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finally determined as the value of such property in determining the value of the gift,
or the gross estate of such prior decedent, and only to the extent that the value of such
property is included in the decedent's gross estate, and only if in determining the
value of the estate of the prior decedent, no deduction was allowable under paragraph
(2) in respect of the property or properties given in exchange therefor. Where a
deduction was allowed of any mortgage or other lien in determining the donor's tax,
or the estate tax of the prior decedent, which was paid in whole or in part prior to the
decedent's death, then the deduction allowable under said Subsection shall be reduced
by the amount so paid. Such deduction allowable shall be reduced by an amount
which bears the same ratio to the amounts allowed as deductions under paragraphs (1)
and (3) of this Subsection as the amount otherwise deductible under said paragraph
(2) bears to the value of the decedent's estate. Where the property referred to consists
of two or more items, the aggregate value of such items shall be used for the purpose
of computing the deduction.
"(3) Transfers for Public Use. The amount of all bequests, legacies, devises
or transfers to or for the use of the Government of the Republic of the Philippines, or
any political subdivision thereof, for exclusively public purposes.
"(4) The Family Home. An amount equivalent to the current fair market
value of the decedent's family home: Provided, however, That if the said current fair
market value exceeds One million pesos (P1,000,000), the excess shall be subject to
estate tax. As a sine qua non condition for the exemption or deduction, said family
home must have been the decedent's family home as certified by the barangay captain
of the locality.
"(7)(18) Amount Received by Heirs Under Republic Act No. 4917. Any
amount received by the heirs from the decedent's employer as a consequence of the
death of the decedent-employee in accordance with Republic Act No. 4917: Provided,
That such amount is included in the gross estate of the decedent.
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nonresident not a citizen of the Philippines, by deducting from the value of that part
of his gross estate which at the time of his death is situated in the Philippines:
"One hundred percent (100%) of the value, if the prior decedent died within
one (1) year prior to the death of the decedent, or if the property was transferred to
him by gift, within the same period prior to his death;
"Eighty percent (80%) of the value, if the prior decedent died more than one
(1) year but not more than two (2) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to his death;
"Sixty percent (60%) of the value, if the prior decedent died more than two (2)
years but not more than three (3) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to his death:
"Forty percent (40%) of the value, if the prior decedent died more than three
(3) years but not more than four (4) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to his death; and
"Twenty percent (20%) of the value, if the prior decedent died more than four
(4) years but not more than five (5) years prior to the death of the decedent, or if the
property was transferred to him by gift within the same period prior to his death.
"These deductions shall be allowed only where a donor's tax, or estate tax
imposed under this Title is finally determined and paid by or on behalf of such donor,
or the estate of such prior decedent, as the case may be, and only in the amount finally
determined as the value of such property in determining the value of the gift, or the
gross estate of such prior decedent, and only to the extent that the value of such
property is included in that part of the decedent's gross estate which at the time of his
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death is situated in the Philippines; and only if, in determining the value of the net
estate of the prior decedent, no deduction is allowable under paragraph (2) of
Subsection (B) of this Section, in respect of the property or properties given in
exchange therefor. Where a deduction was allowed of any mortgage or other lien in
determining the donor's tax, or the estate tax of the prior decedent, which was paid in
whole or in part prior to the decedent's death, then the deduction allowable under said
paragraph shall be reduced by the amount so paid. Such deduction allowable shall be
reduced by an amount which bears the same ratio to the amounts allowed as
deductions under paragraphs (1) and (3) of this Subsection as the amount otherwise
deductible under paragraph (2) bears to the value of that part of the decedent's gross
estate which at the time of his death is situated in the Philippines. Where the property
referred to consists of two (2) or more items, the aggregate value of such items shall
be used for the purpose of computing the deduction.
"(3) Transfers for Public Use. The amount of all bequests, legacies, devises
or transfers to or for the use of the Government of the Republic of the Philippines or
any political subdivision thereof, for exclusively public purposes.
"(C) Share in the Conjugal Property. The net share of the surviving spouse
in the conjugal partnership property as diminished by the obligations properly
chargeable to such property shall, for the purpose of this Section, be deducted from
the net estate of the decedent.
"(1) In General. The tax imposed by this Title shall be credited with the
amounts of any estate tax imposed by the authority of a foreign country.
"(2) 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 to any country shall not
exceed the same proportion of the tax against which such credit is taken, which the
decedent's net estate situated within such country taxable under this Title bears to his
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entire net estate; 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 decedent's net estate situated outside
the Philippines taxable under this Title bears to his entire net estate.
"(C) The transmission from the first heir, legatee or donee in favor of another
beneficiary, in accordance with the desire of the predecessor; and
"(D) All bequests, devises, legacies or transfers to social welfare, cultural and
charitable institutions, no part of the net income of which inures to the benefit of any
individual: Provided, however, That not more than thirty percent (30%) of the said
bequests, devises, legacies or transfers shall be used by such institutions for
administration purposes.
"(B) Properties. The estate shall be appraised at its fair market value as of
the time of death. However, the appraised value of real property as of the time of
death shall be, whichever is the higher of
"(2) The fair market value as shown in the schedule of values fixed by the
Provincial and City Assessors.
"(1) The value of the gross estate of the decedent at the time of his death, or in
case of a nonresident, not a citizen of the Philippines, of that part of his gross estate
situated in the Philippines;
"(2) The deductions allowed from gross estate in determining the estate as
defined in Section 86; and
"(3) Such part of such information as may at the time be ascertainable and such
supplemental data as may be necessary to establish the correct taxes.
"Provided, however, That estate tax returns showing a gross value exceeding
Two million pesos (P2,000,000) shall be supported with a statement duly certified to
by a Certified Public Accountant containing the following:
"(a) Itemized assets of the decedent with their corresponding gross value at the
time of his death, or in the case of a nonresident, not a citizen of the Philippines, of
that part of his gross estate situated in the Philippines;
"(b) Itemized deductions from gross estate allowed in Section 86; and
"(c) The amount of tax due whether paid or still due and outstanding.
"(B) Time for Filing. For the purpose of determining the estate tax provided
for in Section 84 of this Code, the estate tax return required under the preceding
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Subsection (A) shall be filed within six (6) months from the decedent's death.
"A certified copy of the schedule of partition and the order of the court
approving the same shall be furnished the Commissioner within thirty (30) days after
the promulgation of such order.
"(A) Time of Payment. The estate tax imposed by Section 84 shall be paid
at the time the return is filed by the executor, administrator or the heirs.
"(B) Extension of Time. When the Commissioner finds that the payment on
the due date of the estate tax or of any part thereof would impose undue hardship
upon the estate or any of the heirs, he may extend the time for payment of such tax or
any part thereof not to exceed five (5) years, in case the estate is settled through the
courts, or two (2) years in case the estate is settled extrajudicially. In such case, the
amount in respect of which the extension is granted shall be paid on or before the date
of the expiration of the period of the extension, and the running of the Statute of
Limitations for assessment as provided in Section 203 of this Code shall be suspended
for the period of any such extension.
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accordance with the terms of the extension.
"(C) Liability for Payment. The estate tax imposed by Section 84 shall be
paid by the executor or administrator before delivery to any beneficiary of his
distributive share of the estate. Such beneficiary shall, to the extent of his distributive
share of the estate, be subsidiarily liable for the payment of such portion of the estate
tax as his distributive share bears to the value of the total net estate.
"For the purpose of this Chapter, the term 'executor' or 'administrator' means
the executor or administrator of the decedent, or if there is no executor or
administrator appointed, qualified, and acting within the Philippines, then any person
in actual or constructive possession of any property of the decedent.
"(a) The amount by which the tax imposed by this Chapter exceeds the amount
shown as the tax by the executor, administrator or any of the heirs upon his return; but
the amount so shown on the return shall first be increased by the amounts previously
assessed (or collected without assessment) as a deficiency and decreased by the
amounts previously abated, refunded or otherwise repaid in respect of such tax; or
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"SECTION 94. Payment Before Delivery by Executor or Administrator.
No judge shall authorize the executor or judicial administrator to deliver a distributive
share to any party interested in the estate unless a certification from the Commissioner
that the estate tax has been paid is shown.
"If a bank has knowledge of the death of a person, who maintained a bank
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deposit account alone, or jointly with another, it shall not allow any withdrawal from
the said deposit account, unless the Commissioner has certified that the taxes imposed
thereon by this Title have been paid; Provided, however, That the administrator of the
estate or any one (1) of the heirs of the decedent may, upon authorization by the
Commissioner, withdraw an amount not exceeding Twenty thousand pesos (P20,000)
without the said certification. For this purpose, all withdrawal slips shall contain a
statement to the effect that all of the joint depositors are still living at the time of
withdrawal by any one of the joint depositors and such statement shall be under oath
by the said depositors.
"CHAPTER II
Donor's Tax
"(A) There shall be levied, assessed, collected and paid upon the transfer by
any person, resident or nonresident, of the property by gift, a tax, computed as
provided in Section 99.
"(B) The tax shall apply whether the transfer is in trust or otherwise, whether
the gift is direct or indirect, and whether the property is real or personal, tangible or
intangible.
"(A) In General. The tax for each calendar year shall be computed on the
basis of the total net gifts made during the calendar year in accordance with the
following schedule:
"Over But Not Over The Tax Shall Be Plus Of the Excess O
P100,000 Exempt
P100,000 200,000 0 2% P100,000
200,000 500,000 2,000 4% 200,000
500,000 1,000,000 14,000 6% 500,000
1,000,000 3,000,000 44,000 8% 1,000,000
3,000,000 5,000,000 204,000 10% 3,000,000
5,000,000 10,000,000 404,000 12% 5,000,000
10,000,000 1,004,000 15% 10,000,000
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"(B) Tax Payable by Donor if Donee is a Stranger. When the donee or
beneficiary is a stranger, the tax payable by the donor shall be thirty percent (30%) of
the net gifts. For the purpose of this tax, a 'stranger' is a person who is not a:
"(2) Relative by consanguinity in the collateral line within the fourth degree of
relationship.
"SECTION 100. Transfer for Less Than Adequate and Full Consideration.
Where property, other than real property referred to in Section 24(D), is
transferred for less than an adequate and full consideration in money or money's
worth, then the amount by which the fair market value of the property exceeded the
value of the consideration shall, for the purpose of the tax imposed by this Chapter, be
deemed a gift, and shall be included in computing the amount of gifts made during
the calendar year.
"(1) Dowries or gifts made on account of marriage and before its celebration or
within one year thereafter by parents to each of their legitimate, recognized natural, or
adopted children to the extent of the first Ten thousand pesos (P10,000);
"(2) Gifts made to or for the use of the National Government or any entity
created by any of its agencies which is not conducted for profit, or to any political
subdivision of the said Government; and
"(1) Gifts made to or for the use of the National Government or any entity
created by any of its agencies which is not conducted for profit, or to any political
subdivision of the said Government.
"(1) In General. The tax imposed by this Title upon a donor who was a
citizen or a resident at the time of donation shall be credited with the amount of any
donor's tax of any character and description imposed by the authority of a foreign
country.
"(2) 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 to any country shall not
exceed the same proportion of the tax against which such credit is taken, which the
net gifts situated within such country taxable under this Title bears to his entire net
gifts; 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 donor's net gifts situated outside the
Philippines taxable under this Title bears to his entire net gifts. cdtai
"(A) Requirements. Any individual who makes any transfer by gift (except
those which, under Section 101, are exempt from the tax provided for in this Chapter)
shall, for the purpose of the said tax, make a return under oath in duplicate. The return
shall set forth:
"(1) Each gift made during the calendar year which is to be included in
computing net gifts;
"(3) Any previous net gifts made during the same calendar year;
"(B) Time and Place of Filing and Payment. The return of the donor
required in this Section shall be filed within thirty (30) days after the date the gift is
made and the tax due thereon shall be paid at the time of filing. Except in cases where
the Commissioner otherwise permits, the return shall be filed and the tax paid to an
authorized agent bank, the Revenue District Officer, Revenue Collection Officer or
duly authorized Treasurer of the city or municipality where the donor was domiciled
at the time of the transfer, or if there be no legal residence in the Philippines, with the
Office of the Commissioner. In the case of gifts made by a nonresident, the return
may be filed with the Philippine Embassy or Consulate in the country where he is
domiciled at the time of the transfer, or directly with the Office of the Commissioner.
"SECTION 104. Definitions. For purposes of this Title, the terms 'gross
estate' and 'gifts' include real and personal property, whether tangible or intangible, or
mixed, wherever situated: Provided, however, That where the decedent or donor was
a nonresident alien at the time of his death or donation, as the case may be, his real
and personal property so transferred but which are situated outside the Philippines
shall not be included as part of his 'gross estate' or 'gross gift': Provided, further, That
franchise which must be exercised in the Philippines; shares, obligations or bonds
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issued by any corporation or sociedad anonima organized or constituted in the
Philippines in accordance with its laws; shares, obligations or bonds by any foreign
corporation eighty-five percent (85%) of the business of which is located in the
Philippines, shares, obligations or bonds issued by any foreign corporation if such
shares, obligations or bonds have acquired a business situs in the Philippines; shares
or rights in any partnership, business or industry established in the Philippines, shall
be considered as situated in the Philippines: Provided, still further, That no tax shall
be collected under this Title in respect of intangible personal property: (a) if the
decedent at the time of his death or the donor at the time of the donation was a citizen
and resident of a foreign country which at the time of his death or donation did not
impose a transfer tax of any character, in respect of intangible personal property of
citizens of the Philippines not residing in that foreign country, or (b) if the laws of the
foreign country of which the decedent or donor was a citizen and resident at the time
of his death or donation allows a similar exemption from transfer or death taxes of
every character or description in respect of intangible personal property owned by
citizens of the Philippines not residing in that foreign country.
"The term 'deficiency' means: (a) the amount by which the tax imposed by this
Chapter exceeds the amount shown as the tax by the donor upon his return; but the
amount so shown on the return shall first be increased by the amount previously
assessed (or collected without assessment) as a deficiency, and decreased by the
amounts previously abated, refunded or otherwise repaid in respect of such tax, or (b)
if no amount is shown as the tax by the donor, then the amount by which the tax
exceeds the amounts previously assessed (or collected without assessment) as a
deficiency, but such amount previously assessed, or collected without assessment,
shall first be decreased by the amount previously abated, refunded or otherwise repaid
in respect of such tax.
"TITLE IV
Value-Added Tax
"CHAPTER I
Imposition of Tax
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"The value-added tax is an indirect tax and the amount of tax may be shifted or
passed on to the buyer, transferee or lessee of the goods, properties or services. This
rule shall likewise apply to existing contracts of sale or lease of goods, properties or
services at the time of the effectivity of Republic Act No. 7716.
"The phrase 'in the course of trade or business' means the regular conduct or
pursuit of a commercial or an economic activity, including transactions incidental
thereto, by any person regardless of whether or not the person engaged therein is a
nonstock, nonprofit private organization (irrespective of the disposition of its net
income and whether or not it sells exclusively to members or their guests), or
government entity.
"(A) Rate and Base of Tax. There shall be levied, assessed and collected on
every sale, barter or exchange of goods or properties, a value-added tax equivalent to
ten percent (10%) of the gross selling price or gross value in money of the goods or
properties sold, bartered or exchanged, such tax to be paid by the seller or transferor:
Provided, That the President, upon the recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent
(12%), after any of the following conditions has been satisfied:
"(1) The term 'goods or properties' shall mean all tangible and intangible
objects which are capable of pecuniary estimation and shall include:
"(a) Real properties held primarily for sale to customers or held for lease in
the ordinary course of trade or business; HSCATc
"(b) The right or the privilege to use patent, copyright, design or model, plan,
secret formula or process, goodwill, trademark, trade brand or other like property or
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right;
"(c) The right or the privilege to use in the Philippines of any industrial,
commercial or scientific equipment;
"(d) The right or the privilege to use motion picture films, films, tapes and
discs; and
"The term 'gross selling price' means the total amount of money or its
equivalent which the purchaser pays or is obligated to pay to the seller in
consideration of the sale, barter or exchange of the goods or properties, excluding the
value-added tax. The excise tax, if any, on such goods or properties shall form part of
the gross selling price.
"(1) The sale and actual shipment of goods from the Philippines to a foreign
country, irrespective of any shipping arrangement that may be agreed upon which
may influence or determine the transfer of ownership of the goods so exported and
paid for in acceptable foreign currency or its equivalent in goods or services, and
accounted for in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);
"(5) Those considered export sales under Executive Order No. 226, otherwise
known as the Omnibus Investment Code of 1987, and other special laws; and
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"(6) The sale of goods, supplies, equipment and fuel to persons engaged in
international shipping or international air transport operations.
"(3) Consignment of goods if actual sale is not made within sixty (60) days
following the date such goods were consigned; and
"(D) Sales Returns, Allowances and Sales Discounts. The value of goods or
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 118
properties sold and subsequently returned or for which allowances were granted by a
VAT-registered person may be deducted from the gross sales or receipts for the
quarter in which a refund is made or a credit memorandum or refund is issued. Sales
discount granted and indicated in the invoice at the time of sale and the grant of
which does not depend upon the happening of a future event may be excluded from
the gross sales within the same quarter it was given.
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thereof." (As amended by Sec. 4 of R.A. No. 9337, May 24, 2005.)
"(A) Rate and Base of Tax. There shall be levied, assessed and collected, a
value-added tax equivalent to ten percent (10%) of gross receipts derived from the
sale or exchange of services, including the use or lease of properties: Provided, That
the President, upon the recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any
of the following conditions has been satisfied:
"The phrase 'sale or exchange of services' means the performance of all kinds
of services in the Philippines for others for a fee, remuneration or consideration,
including those performed or rendered by construction and service contractors; stock,
real estate, commercial, customs and immigration brokers; lessors of property,
whether personal or real; warehousing services; lessors or distributors of
cinematographic films; persons engaged in milling, processing, manufacturing or
repacking goods for others; proprietors, operators or keepers of hotels, motels,
resthouses, pension houses, inns, resorts; proprietors or operators of restaurants,
refreshment parlors, cafes and other eating places, including clubs and caterers;
dealers in securities; lending investors; transportation contractors on their transport of
goods or cargoes, including persons who transport goods or cargoes for hire and other
domestic common carriers by land relative to their transport of goods or cargoes;
common carriers by air and sea relative to their transport of passengers, goods or
cargoes from one place in the Philippines to another place in the Philippines; sales of
electricity by generation companies, transmission, and distribution companies;
services of franchise grantees of electric utilities, telephone and telegraph, radio and
television broadcasting and all other franchise grantees except those under Section
119 of this Code and non-life insurance companies (except their crop insurances)
including surety, fidelity, indemnity and bonding companies; and similar services
regardless of whether or not the performance thereof calls for the exercise or use of
the physical or mental faculties. The phrase 'sale or exchange of services' shall
likewise include:
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"(1) The lease or the use of or the right or privilege to use any copyright,
patent, design or model, plan, secret formula or process, goodwill, trademark, trade
brand or other like property or right;
"(2) The lease or the use of, or the right to use of any industrial, commercial or
scientific equipment;
"(4) The supply of any assistance that is ancillary and subsidiary to and is
furnished as a means of enabling the application or enjoyment of any such property,
or right as is mentioned in subparagraph (2) or any such knowledge or information as
is mentioned in subparagraph (3); EcAISC
"(7) The lease of motion picture films, films, tapes and discs; and
"(8) The lease or the use of or the right to use radio, television, satellite
transmission and cable television time.
"The term 'gross receipts' means the total amount of money or its equivalent
representing the contract price, compensation, service fee, rental or royalty, including
the amount charged for materials supplied with the services and deposits and
advanced payments actually or constructively received during the taxable quarter for
the services performed or to be performed for another person, excluding value-added
tax.
"(2) Services other than those mentioned in the preceding paragraph rendered
to a person engaged in business conducted outside the Philippines or to a nonresident
person not engaged in business who is outside the Philippines when the services are
performed, the consideration for which is paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP); SHADcT
"(6) Transport of passengers and cargo by air or sea vessels from the
Philippines to a foreign country; and
"(7) Sale of power or fuel generated through renewable sources of energy such
as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy,
and other emerging energy sources using technologies such as fuel cells and hydrogen
fuels." (As amended by Sec. 6 of R.A. No. 9337, May 24, 2005) DHECac(
"(F) Services by agricultural contract growers and milling for others of palay
into rice, corn into grits and sugar cane into raw sugar;
"(G) Medical, dental, hospital and veterinary services except those rendered by
professionals;
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"(I) Services rendered by individuals pursuant to an employer-employee
relationship;
"(P) Sale of real properties not primarily held for sale to customers or held for
lease in the ordinary course of trade or business, or real property utilized for low-cost
and socialized housing as defined by Republic Act No. 7279, otherwise known as the
Urban Development and Housing Act of 1992, and other related laws, residential lot
valued at One million five hundred thousand pesos (P1,500,000) and below, house
and lot, and other residential dwellings valued at Two million five hundred thousand
pesos (P2,500,000) and below: Provided, That not later than January 31, 2009 and
every three (3) years thereafter, the amounts herein stated shall be adjusted to their
present values using the Consumer Price Index, as published by the National Statistics
Office (NSO);
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"(Q) Lease of a residential unit with a monthly rental not exceeding Ten
thousand pesos (P10,000): Provided, That not later than January 31, 2009 and every
three (3) years thereafter, the amount herein stated shall be adjusted to its present
value using the Consumer Price Index, ass published by the National Statistics Office
(NSO);
"(2) A VAT-registered person may elect that Subsection (1) not apply to its
sale of goods or properties or services: Provided, That an election made under this
Subsection shall be irrevocable for a period of three (3) years from the quarter the
election was made." (As amended by Sec. 7 of R.A. No. 9337, May 24, 2005.)
"(1) Any input tax evidenced by a VAT invoice or official receipt issued in
accordance with Section 113 hereof on the following transactions shall be creditable
against the output tax:
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"(a) Purchase or importation of goods:
"(ii) For conversion into or intended to form part of a finished product for sale
including packaging materials; or
"(v) For use in trade or business for which deduction for depreciation or
amortization is allowed under this Code.
"(b) Purchase of services on which a value-added tax has actually been paid.
"(b) To the importer upon payment of the value-added tax prior to the release
of the goods from the custody of the Bureau of Customs.
"(a) Total input tax which can be directly attributed to transactions subject to
value-added tax; and HDIaST
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"(b) A ratable portion of any input tax which cannot be directly attributed to
either activity.
"The term 'input tax' means the value-added tax due from or paid by a
VAT-registered person in the course of his trade or business on importation of goods
or local purchase of goods or services, including lease or use of property, from a
VAT-registered person. It shall also include the transitional input tax determined in
accordance with Section 111 of this Code.
"The term 'output tax' means the value-added tax due on the sale or lease of
taxable goods or properties or services by any person registered or required to register
under Section 236 of this Code.
"(B) Excess Output or Input Tax. If at the end of any taxable quarter the
output tax exceeds the input tax, the excess shall be paid by the VAT-registered
person. If the input tax exceeds the output tax, the excess shall be carried over to the
succeeding quarter or quarters: Provided, That the input tax inclusive of input VAT
carried over from the previous quarter that may be credited in every quarter shall not
exceed seventy percent (70%) of the output VAT: Provided, however, That any input
tax attributable to zero-rated sales by a VAT-registered person may at his option be
refunded or credited against other internal revenue taxes, subject to the provisions of
Section 112.
"(C) Determination of Creditable Input Tax. The sum of the excess input
tax carried over from the preceding month or quarter and the input tax creditable to a
VAT-registered person during the taxable month or quarter shall be reduced by the
amount of claim for refund or tax credit for value-added tax and other adjustments,
such as purchase returns or allowances and input tax attributable to exempt sale.
"The claim for tax credit referred to in the foregoing paragraph shall include
not only those filed with the Bureau of Internal Revenue but also those filed with
other government agencies, such as the Board of Investments and the Bureau of
Customs." (As amended by Sec. 8 of R.A. No. 9337, May 24, 2005.)
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 127
tax on his beginning inventory of goods, materials and supplies equivalent to two
percent (2%) of the value of such inventory or the actual value-added tax paid on such
goods, materials and supplies, whichever is higher, which shall be creditable against
the output tax.
"As used in this Subsection, the term 'processing' shall mean pasteurization,
canning and activities which through physical or chemical process alter the exterior
texture or form or inner substance of a product in such manner as to prepare it for
special use to which it could not have been put in its original form or condition." (As
amended by Sec. 9 of R.A. No. 9337, May 24, 2005.)
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 128
cessation of status under Section 106(C) of this Code may, within two (2) years from
the date of cancellation, apply for the issuance of a tax credit certificate for any
unused input tax which may be used in payment of his other internal revenue taxes.
"(C) Period within which Refund or Tax Credit of Input Taxes shall be Made.
In proper cases, the Commissioner shall grant a refund or issue the tax credit
certificate for creditable input taxes within one hundred twenty (120) days from the
date of submission of complete documents in support of the application filed in
accordance with Subsection (A) hereof.
"In case of full or partial denial of the claim for tax refund or tax credit, or the
failure on the part of the Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within thirty (30) days from the receipt
of the decision denying the claim or after the expiration of the one hundred twenty
day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.
aAHTDS
"CHAPTER II
Compliance Requirements
"(1) A VAT invoice for every sale, barter or exchange of goods or properties;
and
"(2) A VAT official receipt for every lease of goods or properties, and for
every sale, barter or exchange of services.
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receipt:
"(2) The total amount which the purchaser pays or is obligated to pay to the
seller with the indication that such amount includes the value-added tax: Provided,
That:
"(a) The amount of the tax shall be shown as a separate item in the invoice or
receipt; ETDHaC
"(b) If the sale is exempt from value-added tax, the term 'VAT-exempt sale'
shall be written or printed prominently on the invoice or receipt;
"(c) If the sale is subject to zero percent (0%) value-added tax, the term
'zero-rated sale' shall be written or printed prominently on the invoice or receipt;
"(d) If the sale involves goods,. properties or services some of which are
subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or
receipt shall clearly indicate the break-down of the sale price between its taxable,
exempt and zero-rated components, and the calculation of the value-added tax on
each portion of the sale shall be shown on the invoice or receipt: Provided, That the
seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated
components of the sale.
"(3) The date of transaction, quantity, unit cost and description of the goods or
properties or nature of the service; and
"(4) In the case of sales in the amount of One thousand pesos (P1,000) or
more where the sale or transfer is made to a VAT-registered person, the name,
business style, if any, address and Taxpayer Identification Number (TIN) of the
purchaser, customer or client.
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"(D) Consequence of Issuing Erroneous VAT Invoice or VAT Official Receipt.
"(a) The issuer shall, in addition to any liability to other percentage taxes, be
liable to:
"(i) The tax imposed in Section 106 or 108 without the benefit of any input
tax credit; and
"(ii) A fifty percent (50%) surcharge under Section 248 (B) of this Code; TSEcAD
"(b) The VAT shall, if the other requisite information required under
Subsection (B) hereof is shown on the invoice or receipt, be recognized as an input
tax credit to the purchaser under Section 110 of this Code.
"(A) In General. Every person liable to pay the value-added tax imposed
under this Title shall file a quarterly return of the amount of his gross sales or receipts
within twenty-five (25) days following the close of each taxable quarter prescribed
for each taxpayer: Provided, however, That VAT-registered persons shall pay the
value-added tax on a monthly basis. EScAID
"Any person, whose registration has been cancelled in accordance with Section
236, shall file a return and pay the tax due thereon within twenty-five (25) days from
the date of cancellation of registration: Provided, That only one consolidated return
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 131
shall be filed by the taxpayer for his principal place of business or head office and all
branches.
"(B) Where to File the Return and Pay the Tax. Except as the
Commissioner otherwise permits, the return shall be filed with and the tax paid to an
authorized agent bank, Revenue Collection Officer or duly authorized city or
municipal Treasurer in the Philippines located within the revenue district where the
taxpayer is registered or required to register.
"The value-added tax withheld under this Section shall be remitted within ten
(10) days following the end of the month the withholding was made." (As amended by
Sec. 12 of R.A. No. 9337, May 24, 2005)
"(2) Failure to file a value-added tax return as required under Section 114; or
"The temporary closure of the establishment shall be for the duration of not
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less than five (5) days and shall be lifted only upon compliance with whatever
requirements prescribed by the Commissioner in the closure order.
"TITLE V
"The gross receipts of common carriers derived from their incoming and
outgoing freight shall not be subjected to the local taxes imposed under Republic Act
No. 7160, otherwise known as the Local Government Code of 1991.
"In computing the percentage tax provided in this Section, the following shall
be considered the minimum quarterly gross receipts in each particular case:
"Taxis
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"1. Manila and other cities P3,600
"2. Provincial 2,400
"(A) International air carriers doing business in the Philippines shall pay a tax
of three percent (3%) of their quarterly gross receipts.
"(B) International shipping carriers doing business in the Philippines shall pay
a tax equivalent to three percent (3%) of their quarterly gross receipts.
"The grantee shall file the return with, and pay the tax due thereon to the
Commissioner or his duly authorized representative, in accordance with the
provisions of Section 128 of this Code, and the return shall be subject to audit by the
Bureau of Internal Revenue, any provision of any existing law to the contrary
notwithstanding." (As amended by Sec. 15 of R.A. No. 9337, May 24, 2005.) aTADCE
"(A) Persons Liable. There shall be collected upon every overseas dispatch,
message or conversation transmitted from the Philippines by telephone, telegraph,
telewriter exchange, wireless and other communication equipment services, a tax of
ten percent (10%) on the amount paid for such services. The tax imposed in this
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Section shall be payable by the person paying for the services rendered and shall be
paid to the person rendering the services who is required to collect and pay the tax
within twenty (20) days after the end of each quarter.
"(B) Exemptions. The tax imposed by this Section shall not apply to:
"(4) News Services. Amounts paid for messages from any newspaper, press
association, radio or television newspaper, broadcasting agency, or newstickers
services, to any other newspaper, press association, radio or television newspaper
broadcasting agency, or newsticker service or to a bona fide correspondent, which
messages deal exclusively with the collection of news items for, or the dissemination
of news item through, public press, radio or television broadcasting or a newsticker
service furnishing a general news service similar to that of the public press.
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and all other items treated as gross income under Section 32 of this Code 7%
"(d) On net trading gains within the taxable year on foreign currency, debt
securities, derivatives, and other similar financial instruments 7%
"Nothing in this Code shall preclude the Commissioner from imposing the
same tax herein provided on persons performing similar banking activities." (As
amended by Sec. 16 of R.A. No. 9337, May 24, 2005.)
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Nothing in this Code shall prelude the Commissioner from imposing the same
tax herein provided on persons performing similar financing activities." (As amended
by R.A. No. 9238,(34) Feb. 5, 2004)
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 137
where insurance has been so effected, and shall pay the tax of five percent (5%) on
premiums paid, in the manner required by Section 123.
"(b) Eighteen percent (18%) in the case of cabarets, night or day clubs;
"(c) Ten percent (10%) in the case of boxing exhibitions: Provided, however,
That boxing exhibitions wherein World or Oriental Championships in any division is
at stake shall be exempt from amusement tax: Provided, further, That at least one of
the contenders for World or Oriental Championship is a citizen of the Philippines and
said exhibitions are promoted by a citizen/s of the Philippines or by a corporation or
association at least sixty percent (60%) of the capital of which is owned by such
citizens;
"(e) Thirty percent (30%) in the case of Jai-Alai and racetracks of their gross
receipts, irrespective of whether or not any amount is charged for admission.
"For the purpose of the amusement tax, the term 'gross receipts' embraces all
the receipts of the proprietor, lessee or operator of the amusement place. Said gross
receipts also include income from television, radio and motion picture rights, if any.
A person or entity or association conducting any activity subject to the tax herein
imposed shall be similarly liable for said tax with respect to such portion of the
receipts derived by him or it.
"The taxes imposed herein shall be payable at the end of each quarter and it
shall be the duty of the proprietor, lessee or operator concerned, as well as any party
liable, within twenty (20) days after the end of each quarter, to make a true and
complete return of the amount of the gross receipts derived during the preceding
quarter and pay the tax due thereon.
"SECTION 126. Tax on Winnings. Every person who wins in horse races
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shall pay a tax equivalent to ten percent (10%) of his winnings or 'dividends', the tax
to be based on the actual amount paid to him for every winning ticket after deducting
the cost of the ticket: Provided, That in the case of winnings from double,
forecast/quinella and trifecta bets, the tax shall be four percent (4%). In the case of
owners of winning race horses, the tax shall be ten percent (10%) of the prizes.
"The operator, manager or person in charge of horse races shall, within twenty
(20) days from the date the tax was deducted and withheld in accordance with the
second paragraph hereof, file a true and correct return with the Commissioner in the
manner or form to be prescribed by the Secretary of Finance, and pay within the same
period the total amount of tax so deducted and withheld.
"(A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded
through the Local Stock Exchange. There shall be levied, assessed and collected
on every sale, barter, exchange or other disposition of shares of stock listed and
traded through the local stock exchange other than the sale by a dealer in securities, a
tax at the rate of one-half of one percent ( of 1%) of the gross selling price or gross
value in money of the shares of stock sold, bartered, exchanged or otherwise disposed
which shall be paid by the seller or transferor.
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thirty-three and one third percent (33 1/3%) 2%
"The tax herein imposed shall be paid by the issuing corporation in primary
offering or by the seller in secondary offering.
"For purposes of this Section, the term 'closely held corporation' means any
corporation at least fifty percent (50%) in value of the outstanding capital stock or at
least fifty percent (50%) of the total combined voting power of all classes of stock
entitled to vote is owned directly or indirectly by or for not more than twenty (20)
individuals.
"(3) Option. If any person has an option to acquire stock, such stock shall
be considered as owned by such person. For purposes of this paragraph, an option to
acquire such an option and each one of a series of options shall be considered as an
option to acquire such stock.
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"(1) Return on Capital Gains Realized from Sale of Shares of Stock Listed and
Traded in the Local Stock Exchange. It shall be the duty of every stock broker who
effected the sale subject to the tax imposed herein to collect the tax and remit the
same to the Bureau of Internal Revenue within five (5) banking days from the date of
collection thereof and to submit on Mondays of each week to the secretary of the
stock exchange, of which he is a member, a true and complete return which shall
contain a declaration of all the transactions effected through him during the preceding
week and of taxes collected by him and turned over to the Bureau of Internal
Revenue.
"(D) Common Provisions. Any gain derived from the sale, barter, exchange
or other disposition of shares of stock under this Section shall be exempt from the tax
imposed in Sections 14(C), 27(D)(2), 28(A)(8)(c), and 28(B)(5)(c) of this Code and
from the regular individual or corporate income tax. Tax paid under this Section shall
not be deductible for income tax purposes.
"(1) Persons Liable to Pay Percentage Taxes. Every person subject to the
percentage taxes imposed under this Title shall file a quarterly return of the amount of
his gross sales, receipts or earnings and pay the tax due thereon within twenty-five
(25) days after the end of each taxable quarter: Provided, That in the case of a person
whose VAT registration is cancelled and who becomes liable to the tax imposed in
Section 116 of this Code, the tax shall accrue from the date of cancellation and shall
be paid in accordance with the provisions of this Section.
"(2) Person Retiring from Business. Any person retiring from a business
subject to percentage tax shall notify the nearest internal revenue officer, file his
return and pay the tax due thereon within twenty (20) days after closing his business.
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 141
"(a) The time for filing the return at intervals other than the time prescribed in
the preceding paragraphs for a particular class or classes of taxpayers after
considering such factors as volume of sales, financial condition, adequate measures of
security, and such other relevant information required to be submitted under the
pertinent provisions of this Code; and
"(b) The manner and time of payment of percentage taxes other than as
hereinabove prescribed, including a scheme of tax prepayment.
"TITLE VI
"CHAPTER I
General Provisions
"For purposes of this Title, excise taxes herein imposed and based on weight or
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 142
volume capacity or any other physical unit of measurement shall be referred to as
'specific tax' and an excise tax herein imposed and based on selling price or other
specified value of the good shall be referred to as 'ad valorem tax.'
"(1) Persons Liable to File a Return. Every person liable to pay excise tax
imposed under this Title shall file a separate return for each place of production
setting forth, among others, the description and quantity or volume of products to be
removed, the applicable tax base and the amount of tax due thereon: Provided,
however, That in the case of indigenous petroleum, natural gas or liquefied natural
gas, the excise tax shall be paid by the first buyer, purchaser or transferee for local
sale, barter or transfer, while the excise tax on exported products shall be paid by the
owner, lessee, concessionaire or operator of the mining claim.
"(2) Time for Filing of Return and Payment of the Tax. Unless otherwise
specifically allowed, the return shall be filed and the excise tax paid by the
manufacturer or producer before removal of domestic products from place of
production: Provided, That the excise tax on locally manufactured petroleum products
and indigenous petroleum levied under Sections 148 and 151(A)(4), respectively, of
this Title shall be paid within ten (10) days from the date of removal of such products
for the period from January 1, 1998 to June 30, 1998; within five (5) days from the
date of removal of such products for the period from July 1, 1998 to December 31,
1998; and, before removal from the place of production of such products from
January 1, 1999 and thereafter: Provided, further, That the excise tax on nonmetallic
mineral or mineral products, or quarry resources shall be due and payable upon
removal of such products from the locality where mined or extracted, but with respect
to the excise tax on locally produced or extracted metallic mineral or mineral
products, the person liable shall file a return and pay the tax within fifteen (15) days
after the end of the calendar quarter when such products were removed subject to
such conditions as may be prescribed by rules and regulations to be promulgated by
the Secretary of Finance, upon recommendation of the Commissioner. For this
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purpose, the taxpayer shall file a bond in an amount which approximates the amount
of excise tax due on the removals for the said quarter. The foregoing rules
notwithstanding, for imported mineral or mineral products, whether metallic or
nonmetallic, the excise tax due thereon shall be paid before their removal from
customs custody.
"(3) Place for Filing of the Return and Payment of the Tax. Except as the
Commissioner otherwise permits, the return shall be filed with and the tax paid to any
authorized agent bank or Revenue Collection Officer, or duly authorized City or
Municipal Treasurer in the Philippines.
"(a) The time for filing the return at intervals other than the time prescribed in
the preceding paragraphs for a particular class or classes of taxpayers after
considering factors such as volume of removals, adequate measures of security and
such other relevant information required to be submitted under the pertinent
provisions of this Code; and
"(b) The manner and time of payment of excise taxes other than as herein
prescribed, under a tax prepayment, advance deposit or similar schemes. In the case
of locally produced or extracted minerals and mineral products or quarry resources
where the mine site or place of extraction is not the same as the place of processing or
production, the return shall be filed with and the tax paid to the Revenue District
Office having jurisdiction over the locality where the same are mined, extracted or
quarried: Provided, however, That for metallic minerals processed abroad, the return
shall be filed and the tax due thereon paid to the Revenue District Office having
jurisdiction over the locality where the same are mined, extracted or quarried.
"(D) Credit for Excise Tax on Goods Actually Exported. When goods
locally produced or manufactured are removed and actually exported without
returning to the Philippines, whether so exported in their original state or as
ingredients or parts of any manufactured goods or products, any excise tax paid
thereon shall be credited or refunded upon submission of the proof of actual
exportation and upon receipt of the corresponding foreign exchange payment:
Provided, That the excise tax on mineral products, except coal and coke, imposed
under Section 151 shall not be creditable or refundable even if the mineral products
are actually exported.
"(A) Persons Liable. Excise taxes on imported articles shall be paid by the
owner or importer to the Customs Officers, conformably with the regulations of the
Department of Finance and before the release of such articles from the customshouse,
or by the person who is found in possession of articles which are exempt from excise
taxes other than those legally entitled to exemption.
"In the case of tax-free articles brought or imported into the Philippines by
persons, entities, or agencies exempt from tax which are subsequently sold,
transferred or exchanged in the Philippines to non-exempt persons or entities, the
purchasers or recipients shall be considered the importers thereof, and shall be liable
for the duty and internal revenue tax due on such importation.
"Cigars and cigarettes, distilled spirits and wines within the premises of all
duty-free shops which are not labelled as hereinabove required, as well as tax and
duty-free articles obtained from a duty-free shop and subsequently found in a
non-duty-free shop to be offered for resale shall be confiscated, and the perpetrator of
such non-labelling or re-selling shall be punishable under the applicable provisions of
this Code. aTcIEH
"The tax due on any such goods, products, machinery, equipment or other
similar articles shall constitute a lien on the article itself, and such lien shall be
superior to all other charges or liens, irrespective of the possessor thereof.
"(B) Rate and Basis of the Excise Tax on Imported Articles. Unless
otherwise specified, imported articles shall be subject to the same rates and basis of
excise taxes applicable to locally manufactured articles." (As amended by Sec. 6, R.A.
No. 9334,(36) Dec. 21, 2004)
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"CHAPTER II
"(b) Exempt entities or agencies covered by tax treaties, conventions and other
international agreements for their use or consumption: Provided, however, That the
country of said foreign international carrier or exempt entities or agencies exempts
from similar taxes petroleum products sold to Philippine carriers, entities or agencies;
and
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"(c) Entities which are by law exempt from direct and indirect taxes.
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 148
contents permanently affixed thereon.
"'Stemmed leaf tobacco,' as herein used, means leaf tobacco which has had the
stem or midrib removed. The term does not include broken leaf tobacco.
"CHAPTER III
"(a) If produced from the sap of nipa, coconut, cassava, camote, or buri palm
or from the juice, syrup or sugar of the cane, provided such materials are produced
commercially in the country where they are processed into distilled spirits, per proof
liter, Eleven pesos and sixty-five centavos (P11.65); HSEcTC
"(b) If produced from raw materials other than those enumerated in the
preceding paragraph, the tax shall be in accordance with the net retail price per bottle
of seven hundred fifty milliliter (750 ml.) volume capacity (excluding the excise tax
and the value-added tax) as follows:
"(1) Less than Two hundred and fifty pesos (P250.00) One hundred
twenty-six pesos (P126.00) per proof liter;
"(2) Two hundred and fifty pesos (P250.00) up to Six hundred and
seventy-five pesos (P675.00) Two hundred fifty-two pesos (P252.00), per proof
liter; and
"(3) More than Six hundred and seventy five pesos (P675.00) Five hundred
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 149
four pesos (P504.00), per proof liter.
"This tax shall be proportionally increased for any strength of the spirits taxed
over proof spirits, and the tax shall attach to this substance as soon as it is in existence
as such, whether it be subsequently separated as pure or impure spirits, or transformed
into any other substances either in the process of original production or by any
subsequent process.
"Variants of existing brands and variants of new brands which are introduced
in the domestic market after the effectivity of this Act shall be taxed under the proper
classification thereof based on the their suggested net retail price: Provided, however,
That such classification shall not, in any case, be lower than the highest classification
of any variant of that brand.
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 150
"New brands, as defined in the immediately following paragraph, shall initially
be classified according to their suggested net retail price.
"'New brand' shall mean a brand registered after the date of effectivity of R.A.
No. 8240.
"'Suggested net retail price' shall mean the net retail price at which new brands,
as defined above, of locally manufactured or imported distilled spirits are intended by
the manufacturer or importer to be sold on retail in major supermarkets or retail
outlets in Metro Manila for those marketed nationwide, and in other regions, for those
with regional markets. At the end of three (3) months from the product launch, the
Bureau of Internal Revenue shall validate the suggested net retail price as defined
herein and determine the correct tax bracket to which a particular new brand of
distilled spirits, as defined above, shall be classified. After the end of eighteen (18)
months from such validation, the Bureau of Internal Revenue shall revalidate the
initially validated net retail price against the net retail price of the time of revalidation
in order to finally determine the correct tax bracket which a particular new brand of
distilled spirits shall be classified: Provided, however, That brands of distilled spirits
introduced in the domestic market between January 1, 1,997 and December 31, 2003
shall remain in the classification under which the Bureau of Internal Revenue has
determined them to belong as of December 31, 2003. Such classification of new
brands and brands introduced between January 1, 1997 and December 31, 2003 shall
not be revised except by an act of Congress. DEHaAS
"The rates of tax imposed under this Section shall be increase by eight percent
(8%) every two years starting on January 1, 2007 until January 1, 2011.
"The classification of each brand of distilled spirits based on the average net
retail price as of October 1, 1996, as set forth in Annex 'A', including the
classification of brands for the same products which, although not set forth in said
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Annex 'A', were registered and were being commercially produced and marketed on
or after October 1, 1996, and which continue to be commercially produced and
marketed after the effectivity of this Act, shall remain in force until revised by
Congress.
"Manufacturers and importers of distilled spirits shall, within thirty (30) days
from the effectivity of this Act, and within the first five (5) days of every third month
thereafter, submit to the Commissioner a sworn statement of the volume of sales for
each particular brand of distilled spirits sold at his establishment for the three-month
period immediately preceding.
"Any person liable for any of the acts or omission prohibited under this
Section shall be criminally liable and penalized under Section 254 of this Code. Any
person who willfully aids or abets in the commission of any such act or omission shall
be criminally liable in the same manner as the principal.
"(a) Sparkling wines/champagnes regardless of proof, if the net retail price per
bottle (excluding the excise tax and the value-added tax) is:
"(1) Five hundred pesos (P500.00) or less One hundred forty-five pesos and
sixty centavos (P145.60); and
"(2) More than Five hundred pesos (P500.00) Four hundred thirty-six pesos
and eighty centavos (P436.80).
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(b) Still wines containing fourteen percent (14%) of alcohol by volume or less,
Seventeen pesos and forty-seven centavos (P17.47); and
"(c) Still wines containing more than fourteen percent (14%) but not more than
twenty-five percent (25%) of alcohol by volume, Thirty-four pesos and ninety-four
centavos (P34.94).
"Variants of existing brands and variants of new brands which are introduced
in the domestic market after the effectivity of this Act shall be taxed under the proper
classification thereof based on their suggested net retail price: Provided, however,
That such classification shall not, in any case, be lower than the highest classification
of any variant of that brand.
"'New brand' shall mean a brand registered after the date of effectivity of R.A.
No. 8240. IDaCcS
"'Suggested net retail price' shall mean the net retail price at which new brands,
as defined above, of locally manufactured or imported wines are intended by the
manufacturer or importer to be sold on retail in major supermarkets or retail outlets in
Metro Manila for those marketed nationwide, and in other regions, for those with
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regional markets. At the end of three (3) months from the product launch, the Bureau
of Internal Revenue shall validate the suggested net retail price of the new brand
against the net retail price as defined herein and determine the correct tax bracket to
which a particular new brand of wine, as defined above, shall be classified. After the
end of eighteen (18) months from such validation, the Bureau of Internal Revenue
shall revalidate the initially validated net retail price against the net retail price as of
the time of revalidation in order to finally determine the correct tax bracket which a
particular new brand of wines shall be classified: Provided, however, That brands of
wines introduced in the domestic market between January 1, 1997 and December 31,
2003 shall remain in the classification under which the Bureau of Internal Revenue
has determined them to belong as of December 31, 2003. Such classification of new
brands and brands introduced between January 1, 1997 and December 31, 2003 shall
not be revised except by any act of Congress.
"The rates of tax imposed under this Section shall be increased by eight
percent (8%) every two years starting on January 1, 2007 until January 1, 2011.
"The classification of each brand of wines based on the average net retail price
as of October 1, 1996, as set forth in Annex 'B', including the classification of brands
for the same products which, although not set forth in said "Annex B", were
registered and were being commercially produced and marketed after the effectivity
of this Act, shall remain in force until revised by Congress.
"Manufacturers and importers of wines shall, within thirty (30) days from the
effectivity of this Act, and within the first five (5) days of every month thereafter,
submit to the Commissioner a sworn statement of the volume of sales for each
particular brand of wines sold at his establishment for the three-month period
immediately preceding.
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 154
omissions in violation of this Section shall be fined treble the amount of deficiency
taxes, surcharges and interest which may be assessed pursuant to this Section.
"Any person liable for any of the acts or omissions prohibited under this
Section shall be criminally liable and penalized under Section 254 of this Code. Any
person who willfully aids or abets in the commission of any such act or omission shall
be criminally liable in the same manner as the principal.
"(a) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is less than Fourteen pesos and fifty centavos (P14.50), the
tax shall be Eight pesos and twenty-seven centavos (P8.27) per liter; HDCTAc
"(b) If the net retail price (excluding the excise tax and the value-added tax)
per liter of volume capacity is Fourteen pesos and fifty centavos (P14.50) up to
Twenty-two pesos (P22.00), the tax shall be Twelve pesos and thirty centavos
(P12.30) per liter;
"(c) If the net retail price (excluding the excise tax and the value-added tax) per
liter of volume capacity is more than Twenty-two pesos (P22.00), the tax shall be
Sixteen pesos and thirty-three centavos (P16.33) per liter.
"Variants of existing brands and variants of new brands which are introduced
in the domestic market after the effectivity of this Act shall be taxed under the proper
classification thereof based on their suggested net retail price: Provided, however,
That such classification shall not, in any case, be lower than the highest classification
of any variant of that brand.
"'New brand' shall mean a brand registered after the date of effectivity of R.A.
No. 8240.
"'Suggested net retail price' shall mean the net retail price at which new brands,
as defined above, of locally manufactured or imported fermented liquor are intended
by the manufacturer or importer to be sold on retail in major supermarkets or retail
outlets in Metro Manila for those marketed nationwide, and in other regions, for those
with regional markets. At the end of three (3) months from the product launch, the
Bureau of Internal Revenue shall validate the suggested net retail price of the new
brand against the net retail price as defined herein and determine the correct tax
bracket to which a particular new brand of fermented liquor, as defined above, shall
be classified. After the end of eighteen (18) months from such validation, the Bureau
of Internal Revenue shall revalidate the initially validated net retail price against the
net retail price as of the time of revalidation in order to finally determine the correct
tax bracket which a particular new brand of fermented liquors shall be classified:
Provided, however, That brands of fermented liquors introduced in the domestic
market between January 1, 1997 and December 31, 2003 shall remain in the
classification under which the Bureau of Internal Revenue has determined them to
belong as of December 31, 2003. Such classification of new brands and brands
introduced between January 1, 1997 and December 31, 2003 shall not be revised
except by an act of Congress.
"The classification of each brand of fermented liquor based on its average net
retail price as of October 1, 1996, as set forth in Annex 'C', including the
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classification of brands for the same products which, although not set forth in said
Annex 'C', were registered and were being commercially produced and marketed on
or after October 1, 1996, and which continue to be commercially produced and
marketed after the effectivity of this Act, shall remain in force until revised by
Congress.
"The rates of tax imposed under this Section shall be increased by eight
percent (8%) every two years starting on January 1, 2007 until January 1, 2011.
"Every brewer or importer of fermented liquor shall, within thirty (30) days
from the effectivity of this Act, and within the first five (5) days of every month
thereafter, submit to the Commissioner a sworn statement of the volume of sales for
each particular brand of fermented liquor sold at his establishment for the three-month
period immediately preceding.
"Any person liable for any of the acts or omissions prohibited under this
Section shall be criminally liable and penalized under Section 254 of this Code. Any
person who willfully aids or abets in the commission of any such act or omission shall
be criminally liable in the same manner as the principal.
"CHAPTER IV
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Excise Tax on Tobacco Products
"(b) Tobacco prepared or partially prepared with or without the use of any
machine or instruments or without being pressed or sweetened except as otherwise
provided hereunder; and
"(c) Fine-cut shorts and refuse, scraps clippings, cuttings, stems and sweepings
of tobacco except as otherwise provided hereunder. DAEICc
"The rates of tax imposed under this Section shall be increased by six percent
(6%) every two years starting on January 1, 2007 until January 1, 2011.
"Manufacturers and importers of tobacco products shall, within thirty (30) days
from the effectivity of this Act, and within the first five (5) days of every month
thereafter, submit to the Commissioner a sworn statement of the volume of sales for
each particular brand of tobacco products sold at their establishment for the
three-month period immediately preceding.
"Any person liable for any of the acts or omission prohibited under this
Section shall be criminally liable and penalized under Section 254 of this Code. Any
person who willfully aids or abets in the commission of any such act or omission shall
be criminally liable in the same manner as the principal.
"(1) If the net retail price per cigar is Five hundred pesos, (P500.00) or less, ten
percent (10%); and CAHTIS
"(2) If the net retail price per cigar (excluding the excise tax and the
value-added tax) is more than Five hundred pesos (P500.00), Fifty pesos (P50.00)
plus fifteen percent (15%) of the net retail price in excess of Five hundred pesos
(P500.00).
"(1) If the net retail price (excluding the excise tax and the value-added tax) is
below Five pesos (P5.00) per pack, the tax shall be:
"Effective on January 1, 2009, Two pesos and forty-seven centavos (P2.47) per
pack; and
"(2) If the net retail price (excluding the excise tax and the value-added tax) is
Five pesos (P5.00) but does not exceed Six pesos and fifty centavos (P6.50) per pack,
the tax shall be:
"Effective on January 1, 2005, Six pesos and thirty-five centavos (P6.35) per
pack;
"Effective on January 1, 2007, Six pesos and seventy-four centavos (P6.74) per
pack;
"Effective on January 1, 2009, Seven pesos and fourteen centavos (P7.14) per
pack; and
"Effective on January 1, 2011, Seven pesos and fifty-six centavos (P7.56) per
pack.
"(3) If the net retail price (excluding the excise tax and the value-added tax)
exceeds Six pesos and fifty centavos (P6.50) but does not exceed Ten pesos (P10.00)
per pack, the tax shall be;
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 160
"Effective on January 1, 2005, Ten pesos and thirty-five centavos (P10.35) per
pack;
"(4) If the net retail price (excluding the excise tax and the value-added tax)
exceeds Six pesos and fifty centavos (P6.50) but does not exceed Ten pesos (P10.00)
per pack, the tax shall be: IcDCaS
"Effective on January 1, 2007, Twenty-six pesos and six centavos (P26.06) per
pack;
"Variants of existing brands and variants of new brands of cigarettes which are
introduced in the domestic market after the effectivity of this Act shall be taxed under
the proper classification thereof based on their suggested net retail price: Provided,
however, That such classification shall not, in any case, be lower than the highest
classification of any variant of that brand.
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 161
prohibited.
"'New brand' shall mean a brand registered after the date of effectivity of R.A.
No. 8240.
"'Suggested net retail price' shall mean the net retail price at which new brands,
as defined above, of locally manufactured or imported cigarettes are intended by the
manufacturer or importer to be sold on retail in major supermarkets or retail outlets in
Metro Manila for those marketed nationwide, and in other regions, for those with
regional markets. At the end of three (3) months from the product launch, the Bureau
of Internal Revenue shall validate the suggested net retail price of the new brand
against the net retail price as defined herein and determine the correct tax bracket
under which a particular new brand of cigarette, as defined above, shall be classified.
After the end of eighteen (18) months from such validation, the Bureau of Internal
Revenue shall revalidate the initially validated net retail price against the net retail
price as of the time of revalidation in order to finally determine the correct tax bracket
under which a particular new brand of cigarettes shall be classified: Provided,
however, That brands of cigarettes introduced in the domestic market between
January 1, 1997 and December 31, 2003 shall remain in the classification under
which the Bureau of Internal Revenue has determined them to belong as of December
31, 2003. Such classification of new brands and brands introduced between January
1, 1997 and December 31, 2003 shall not be revised except by an act of Congress.
"The classification of each brand of cigarettes based in its average net retail
price as of October 1, 1996, as set forth in Annex 'D', including the classification of
brands for the same products which, although not set forth in said Annex 'D', were
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registered and were being commercially produced and marketed on or after October
1, 1996, and which continue to be commercially produced and marketed after the
effectivity of this Act, shall remain in force until revised by Congress.
"Manufacturers and importers of cigars and cigarettes shall, within thirty (30)
days from the effectivity of this Act and within the first five (5) days of every month
thereafter, submit to the Commissioner a sworn statement of the volume of sales for
each particular brand of cigars and/or cigarettes sold at his establishment for the
three-month period immediately preceding. IEaCDH
"Any person liable for any of the acts or omissions prohibited under this
Section shall be criminally liable and penalized under Section 254 of this Code. Any
person who willfully aids or abets in the commission of any such act or omission shall
be criminally liable in the same manner as the principal.
"The inspection fee on leaf tobacco, scrap, cigars, cigarettes and other tobacco
products as defined in Section 147 of this Code shall be paid by the wholesaler,
manufacturer, producer, owner or operator of redrying plant, as the case may be,
immediately before removal thereof from the establishment of the wholesaler,
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manufacturer, owner or operator of the redrying plant. In case of imported leaf
tobacco and products thereof, the inspection fee shall be paid by the importer before
removal from customs' custody.
"Fifty percent (50%) of the tobacco inspection fee shall accrue to the Tobacco
Inspection Fund created by Section 12 of Act No. 2613, as amended by Act No. 3179,
and fifty percent (50%) shall accrue to the Cultural Center of the Philippines.
"(a) 'Cigars' mean all rolls of tobacco or any substitute thereof, wrapped in leaf
tobacco.
"(b) 'Cigarettes' mean all rolls of finely-cut leaf tobacco, or any substitute
therefor, wrapped in paper or in any other material.
"(c) 'Wholesale price' shall mean the amount of money or price paid for cigars
or cigarettes purchased for the purpose of resale, regardless of quantity.
"(d) 'Retail price' shall mean the amount of money or price which an ultimate
consumer or end-user pays for cigars or cigarettes purchased.
"CHAPTER V
"(a) Lubricating oils and greases, including but not limited to, basestock for
lube oils and greases, high vacuum distillates, aromatic extracts and other similar
preparations, anti additives for lubricating oils and greases, whether such additives are
petroleum based or not, per liter and kilogram, respectively, of volume capacity or
weight, Four pesos and fifty centavos (P4.50): Provided, however, That the excise
taxes paid on the purchased feedstock (bunker) used in the manufacture of excisable
articles and forming part thereof shall be credited against the excise tax due
therefrom: Provided, further, That lubricating oils and greases produced from
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basestocks and additives on which the excise tax has already been paid shall no
longer be subject to excise tax: Provided, finally, That locally produced or imported
oils previously taxed as such but are subsequently reprocessed, rerefined or recycled
shall likewise be subject to the tax imposed under this Section.
"(c) Waxes and petrolatum, per kilogram, Three pesos and fifty centavos
(P3.50);
"(d) On denatured alcohol to be used for motive power, per liter of volume
capacity, Five centavos (P0.05): Provided, That unless otherwise provided by special
laws, if the denatured alcohol is mixed with gasoline, the excise tax on which has
already been paid, only the alcohol content shall be subject to the tax herein
prescribed. For purposes of this Subsection, the removal of denatured alcohol of not
less than one hundred eighty degrees (180) proof (ninety percent (90%) absolute
alcohol) shall be deemed to have been removed for motive power, unless shown
otherwise; EaIDAT
"(e) Naphtha, regular gasoline and other similar products of distillation, per
liter of volume capacity, Four pesos and thirty-five centavos (P4.35): Provided,
however, That naphtha, when used as a raw material in the production of
petrochemical products or as replacement fuel for natural-gas-fired-combined cycle
power plant, in lieu of locally-extracted natural gas during the non-availability
thereof, subject to the rules and regulations to be promulgated by the Secretary of
Energy, in consultation with the Secretary of Finance, per liter of volume capacity,
zero (P0.00): Provided, further, That the by-product including fuel oil, diesel fuel,
kerosene, pyrolysis gasoline, liquefied petroleum gases and similar oils having more
or less the same generating power, which are produced in the processing of naphtha
into petrochemical products shall be subject to the applicable excise tax specified in
this Section, except when such by-products are transferred to any of the local oil
refineries through sale, barter or exchange, for the purpose of further processing or
blending into finished products which are subject to excise tax under this Section;
"(f) Leaded premium gasoline, per liter of volume capacity, Five pesos and
thirty-five centavos (P5.35); unleaded premium gasoline, per liter of volume capacity,
Four pesos and thirty-five centavos (P4.35);
"(g) Aviation turbo jet fuel, per liter of volume capacity, Three pesos and
sixty-seven centavos (P3.67);
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"(h) Kerosene, per liter of volume capacity, zero (P0.00): Provided, That
kerosene, when used as aviation fuel, shall be subject to the same tax on aviation
turbo jet fuel under the preceding paragraph (g), such tax to be assessed on the user
thereof;
"(i) Diesel fuel oil, and on similar fuel oils having more or less the same
generating power, per liter of volume capacity, zero (P0.00);
"(j) Liquefied petroleum gas, per liter, zero (P0.00): Provided, That liquefied
petroleum gas used for motive power shall be taxed at the equivalent rate as the
excise tax on diesel fuel oil;
"(l) Bunker fuel oil, and on similar fuel oils having more or less the same
generating power, per liter of volume capacity, zero (P0.00)." (As amended by Sec. 17
of R.A. No. 9337, May 24, 2005.)
"CHAPTER VI
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Provided. That the brackets reflecting the manufacturer's price or importer's selling
price, net of excise and value-added taxes, will be indexed by the Secretary of Finance
once every two (2) years if the change in the exchange rate of the Philippine peso
against the United States (U.S.) dollar is more than ten percent (10%) from the date of
effectivity of this Act, in the case of initial adjustment and from the last revision date in
the case of subsequent adjustments. TAcDHS
Provided, further, That in case the change in the exchange rate of the
Philippine peso against the U.S. dollar is at least twenty percent (20%) at anytime
within the two-year period referred to above, the Secretary of Finance shall index the
brackets reflecting the manufacturer's price or importer's selling price, net of excise
and value-added taxes, by the full rate of the peso depreciation or appreciation, as the
case may be.
(a) Automobile shall mean any four (4) or more wheeled motor vehicle
regardless of seating capacity, which is propelled by gasoline, diesel, electricity or
any other motive power: Provided, That for purposes of this Act, buses, trucks, cargo
vans, jeeps/jeepneys/jeepney substitutes, single cab chassis, and special-purpose
vehicles shall not be considered as automobiles.
(b) Truck/cargo van shall mean a motor vehicle of any configuration that is
exclusively designed for the carriage of goods and with any number of wheels and
axles: Provided, That pick-ups shall not be considered as trucks.
(d) Bus shall mean a motor vehicle of any configuration with gross vehicle
weight of 4.0 tons or more with any number of wheels and axles, which is generally
accepted and specially designed for mass or public transportation.
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(e) Single cab chassis shall mean a motor vehicle with complete engine power
train and chassis equipped with a cab that has a maximum of two (2) doors and only
one (1) row of seats.
(f) Special purpose vehicle shall mean a motor vehicle designed for specific
applications such as cement mixer, fire truck, boom truck, ambulance and/or medical
unit, and off-road vehicles for heavy industries and not for recreational activities.
Provided, That in the case of imported automobiles not for sale, the tax
imposed herein shall be based on the total landed value, including transaction value,
customs duty and all other charges.
Automobiles used exclusively within the freeport zone shall be exempt from
excise tax." (As amended by Sec. 1, R.A. No. 9224,(49) Aug. 29, 2003)
"CHAPTER VII
"(1) On coal and coke, a tax of Ten pesos (P10.00) per metric ton;
"(2) On all nonmetallic minerals and quarry resources, a tax of two percent
(2%) based on the actual market value of the gross output thereof at the time of
removal, in the case of those locally extracted or produced; or the value used by the
Bureau of Customs in determining tariff and customs duties, net of excise tax and
value-added tax, in the case of importation.
"(3) On all metallic minerals, a tax based on the actual market value of the
gross output thereof at the time of removal, in the case of those locally extracted or
produced; or the value used by the Bureau of Customs in determining tariff and
customs duties, net of excise tax and value-added tax, in the case of importation, in
accordance with the following schedule:
"(i) On the first three (3) years upon the effectivity of Republic Act No. 7729,
one percent (1%);
"(ii) On the fourth and the fifth years, one and a half percent (1 1/2%); and
"(1) 'Gross output' shall be interpreted as the actual market value of minerals
or mineral products, or of bullion from each mine or mineral land operated as a
separate entity, without any deduction from mining, milling, refining (including all
expenses incurred to prepare the said minerals or mineral products in a marketable
state), as well as transporting, handling, marketing or any other expenses: Provided,
That if the minerals or mineral products are sold or consigned abroad by the lessee or
owner of the mine under C.I.F. terms, the actual cost of ocean freight and insurance
shall be deducted: Provided, however, That in the case of mineral concentrate not
traded in commodity exchanges in the Philippines or abroad, such as copper
concentrate, the actual market value shall be the world price quotations of the refined
mineral products content thereof prevailing in the said commodity exchanges, after
deducting the smelting, refining and other charges incurred in the process of
converting the mineral concentrates into refined metal traded in those commodity
exchanges.
"(2) 'Minerals' shall mean all naturally occurring inorganic substances (found
in nature) whether in solid, liquid, gaseous or any intermediate state.
"(4) 'Quarry resources' shall mean any common stone or other common
mineral substances as the Director of the Bureau of Mines and GeoSciences may
declare to be quarry resources such as, but not restricted to marl, marble. granite,
volcanic cinders, basalt, tuff and rock phosphate: Provided, That they contain no
metal or metals or other valuable minerals in economically workable quantities." (As
amended by Sec. 18 of R.A. No. 9337, May 24, 2005.)
"CHAPTER VIII
"The excise tax due on the products as determined and assessed in accordance
with this Section shall be payable upon demand or within the period specified therein.
"SECTION 157. Removal of Articles After the Payment of Tax. When the
tax has been paid on articles or products subject to excise tax, the same shall not
thereafter be stored or permitted to remain in the distillery, distillery warehouse,
bonded warehouse, or other factory or place where produced. However, upon prior
permit from the Commissioner, oil refineries and/or companies may store or deposit
tax-paid petroleum products and commingle the same with its own manufactured
products not yet subjected to excise tax. Imported petroleum products may be allowed
to be withdrawn from customs custody without the prepayment of excise tax, which
products may be commingled with the tax-paid or bonded products of the importer
himself after securing a prior permit from the Commissioner: Provided, That
withdrawals shall be taxed and accounted for on a 'first-in, first-out' basis.
"(A) Initial Bond. In case of initial bond, the amount shall be equal to One
hundred thousand pesos (P100,000): Provided, That if after six (6) months of
operation, the amount of initial bond is less than the amount of the total excise tax
paid during the period, the amount of the bond shall be adjusted to twice the tax
actually paid for the period.
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"(B) Bond for the Succeeding Years of Operation. The bonds for the
succeeding years of operation shall be based on the actual total excise tax paid during
the year immediately preceding the year of operation.
"Such bond shall be conditioned upon faithful compliance, during the time
such business is followed, with laws and rules and regulations relating to such
business and for the satisfaction of all fines and penalties imposed by this Code.
"He may also stop and search any vehicle or other means of transportation
when upon reasonable grounds he believes that the same carries any article on which
the excise tax has not been paid.
"TITLE VII
For purposes of this section, the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to
debentures, certificates of indebtedness, due bills, bonds, loan agreements, including
those signed abroad wherein the object of contract is located or used in the
Philippines, instruments and securities issued by the government of any of its
instrumentalities, deposit substitute debt instruments, certificates or other evidences
of deposits that are either drawing interest significantly higher than the regular
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savings deposit taking into consideration the size of the deposit and the risks involved
or drawing interest and having a specific maturity date, orders for payment of any
sum of money otherwise than at sight or on demand, promissory notes, whether
negotiable or non-negotiable, except bank notes issued for circulation." (As amended
and renumbered by Sec. 5 of R.A. No. 9243(62), February 17, 2004)
"SECTION 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies.
On all policies of insurance or bonds or obligations of the nature of indemnity for
loss, damage or liability made or renewed by any person, association, company or
corporation transacting the business of accident, fidelity, employer's liability, plate,
glass, steam boiler, burglar, elevator, automatic sprinkler, or other branch of insurance
(except life, marine, inland, and fire insurance), and all bonds, undertakings, or
recognizances, conditioned for the performance of the duties of any office or position,
for the doing or not doing of anything therein specified, and on all obligations
guaranteeing the validity or legality of any bond or other obligations issued by any
province, city, municipality, or other public body or organization, and on all
obligations guaranteeing the title to any real estate, or guaranteeing any mercantile
credits, which may be made or renewed by any such person, company or corporation,
there shall be collected a documentary stamp tax of Fifty centavos (P0.50) on each
Four pesos (P4.00), or fractional part thereof, of the premium charged.
"SECTION 190. Stamp Tax on Jai-alai, Horse Race Tickets, Lotto or Other
Authorized Numbers Games. On each jai-alai, horse race ticket, lotto, or other
authorized numbers games, there shall be collected a documentary stamp tax of Ten
centavos (P0.10): Provided, That if the cost of the ticket exceeds One peso (P1.00),
an additional tax of Ten centavos (P0.10) on every One peso (P1.00), or fractional
part thereof, shall be collected.
"SECTION 192. Stamp Tax on Proxies. On each proxy for voting at any
election for officers of any company or association, or for any other purpose, except
proxies issued affecting the affairs of associations or corporations organized for
religious, charitable or literary purposes, there shall be collected a documentary stamp
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tax of Fifteen pesos (P15.00).
"(a) When the amount secured does not exceed Five thousand pesos (P5,000),
Twenty pesos (P20.00).
"(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess
of Five thousand pesos (P5,000), an additional tax of Ten pesos (P10.00).
"On any mortgage, pledge, or deed of trust, where the same shall be made as a
security for the payment of a fluctuating account or future advances without fixed
limit, the documentary stamp tax on such mortgage, pledge or deed or trust shall be
computed on the amount actually loaned or given at the time of the execution of the
mortgage, pledge or deed of trust. However, if subsequent advances are made on such
mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid
which shall be computed on the basis of the amount advanced or loaned at the rates
specified above: Provided, however, That if the full amount of the loan or credit,
granted under the mortgage, pledge or deed of trust is specified in such mortgage,
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pledge or deed of trust, the documentary stamp tax prescribed in this Section shall be
paid and computed on the full amount of the loan or credit granted.
"(b) For each additional One thousand pesos (P1,000), or fractional part
thereof in excess of One thousand pesos (P1,000) of such consideration or value,
Fifteen pesos (P15.00).
"When it appears that the amount of the documentary stamp tax payable
hereunder has been reduced by an incorrect statement of the consideration in any
conveyance, deed, instrument or writing subject to such tax the Commissioner,
provincial or city Treasurer, or other revenue officer shall, from the assessment rolls
or other reliable source of information, assess the property of its true market value
and collect the proper tax thereon.
"(a) If the registered gross tonnage of the ship, vessel or steamer does not
exceed one thousand (1,000) tons, and the duration of the charter or contract does not
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exceed six (6) months, Five hundred pesos (P500); and for each month or fraction of
a month in excess of six (6) months, an additional tax of Fifty pesos (P50.00) shall be
paid.
"(b) If the registered gross tonnage exceeds one thousand (1,000) tons and
does not exceed ten thousand (10,000) tons, and the duration of the charter or contract
does not exceed six (6) months, One thousand pesos (P1,000); and for each month or
fraction of a month in excess of six (6) months, an additional tax of One hundred
pesos (P100) shall be paid.
"(c) If the registered gross tonnage exceeds ten thousand (10,000) tons and the
duration of the charter or contract does not exceed six (6) months, One thousand five
hundred pesos (P1,500); and for each month or fraction of a month in excess of six
(6) months, an additional tax of One hundred fifty pesos (P150) shall be paid.
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national, provincial, city or municipal governments exclusively for statistical
purposes and which are wholly for the use of the bureau or office in which they are
filed, and not at the instance or for the use or benefit of the person filing them;
certified copies and other certificates placed upon documents, instruments and papers
for the national, provincial, city or municipal governments, made at the instance and
for the sole use of some other branch of the national, provincial, city or municipal
governments; and certificates of the assessed value of lands, not exceeding Two
hundred pesos (P200) in value assessed, furnished by the provincial, city or municipal
Treasurer to applicants for registration of title to land. aSECAD
(d) Loan agreements or promissory notes, the aggregate of which does not
exceed Two hundred fifty thousand pesos (P250,000), or any such amount as may be
determined by the Secretary of Finance, executed by an individual for his purchase on
installment for his personal use or that of his family and not for business or resale,
barter or hire of a house, lot, motor vehicle, appliance or furniture: Provided,
however, That the amount to be set by the Secretary of Finance shall be in accordance
with a relevant price index but not to exceed ten percent (10%) of the current amount
and shall remain in force at least for three (3) years.
(e) Sale, barter or exchange of shares of stock listed and traded through the
local stock exchange for a period of five (5) years from the effectivity of this Act.
(g) Fixed income and other securities traded in the secondary market or
through an exchange.
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derivatives.
(j) All forbearance arising from sales or service contracts including credit card
and trade receivables: Provided, That the exemption be limited to those executed by
the seller or service provider itself.
(l) All contracts, deeds, documents and transactions related to the conduct of
business of the Bangko Sentral ng Pilipinas.
(n) Interbank call loans with maturity of not more than seven (7) days to cover
deficiency in reserves against deposit liabilities, including those between or among
banks and quasi-banks." (As amended by Sec. 9, R.A. No. 9243,(69) Feb. 17, 2004.)
"(B) Time for Filing and Payment of the Tax. Except as provided by rules
and regulations promulgated by the Secretary of Finance, upon recommendation of
the Commissioner, the tax return prescribed in this Section shall be filed within ten
(10) days after the close of the month when the taxable document was made, signed,
issued, accepted, or transferred, and the tax thereon shall be paid at the same time the
aforesaid return is filed.
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of the city or municipality in which the taxpayer has his legal residence or principal
place of business.
"(D) Exception. In lieu of the foregoing provisions of this Section, the tax
may be paid either through purchase and actual affixture, or by imprinting the stamps
through a documentary stamp metering machine, on the taxable document, in the
manner as may be prescribed by rules and regulations to be promulgated by the
Secretary of Finance, upon recommendation of the Commissioner.
"No notary public or other officer authorized to administer oaths shall add his
jurat or acknowledgment to any document subject to documentary stamp tax unless
the proper documentary stamps are affixed thereto and cancelled.
"TITLE VIII
Remedies
"CHAPTER I
Remedies in General
"SECTION 202. Final Deed to Purchaser. In case the taxpayer shall not
redeem the property as herein provided, the Revenue District Officer shall, as grantor,
execute a deed conveying to the purchaser so much of the property as has been sold,
free from all liens of any kind whatsoever, and the deed shall succinctly recite all the
proceedings upon which the validity of the sale depends.
"(1) A reasonable doubt as to the validity of the claim against the taxpayer
exists; or
"(2) The financial position of the taxpayer demonstrates a clear inability to pay
the assessed tax.
"Where the basic tax involved exceeds One million pesos (P1,000,000) or
where the settlement offered is less than the prescribed minimum rates, the
compromise shall be subject to the approval of the Evaluation Board which shall be
composed of the Commissioner and the four (4) Deputy Commissioners.
"(2) The administration and collection costs involved do not justify the
collection of the amount due.
"All criminal violations may be compromised except: (a) those already filed in
court, or (b) those involving fraud.
"A Tax Credit Certificate validly issued under the provisions of this Code may
be applied against any internal revenue tax, excluding withholding taxes, for which
the taxpayer is directly liable. Any request for conversion into refund of unutilized tax
credits may be allowed, subject to the provisions of Section 230 of this Code:
Provided, That the original copy of the Tax Credit Certificate showing a creditable
balance is surrendered to the appropriate revenue officer for verification and
cancellation: Provided, further, That in no case shall a tax refund be given resulting
from availment of incentives granted pursuant to special laws for which no actual
payment was made.
"CHAPTER II
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"(b) By civil or criminal action.
"The judgment in the criminal case shall not only impose the penalty but shall
also order payment of the taxes subject of the criminal case as finally decided by the
Commissioner.
"The Bureau of Internal Revenue shall advance the amounts needed to defray
costs of collection by means of civil or criminal action, including the preservation or
transportation of personal property distrained and the advertisement and sale thereof,
as well as of real property and improvements thereon.
"In case the taxpayer or the person having the possession and control of the
property sought to be placed under constructive distraint refuses or fails to sign the
receipt herein referred to, the revenue officer effecting the constructive distraint shall
proceed to prepare a list of such property and, in the presence of two (2) witnesses,
leave a copy thereof in the premises where the property distrained is located, after
which the said property shall be deemed to have been placed under constructive
distraint.
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"(A) Distraint of Personal Property. Upon the failure of the person owing
any delinquent tax or delinquent revenue to pay the same at the time required, the
Commissioner or his duly authorized representative, if the amount involved is in
excess of One million pesos (P1,000,000), or the Revenue District Officer, if the
amount involved is One million pesos (P1,000,000) or less, shall seize and distraint
any goods, chattels, or effects, and the personal property, including stocks and other
securities, debts, credits, bank accounts, and interests in and rights to personal
property of such persons in sufficient quantity to satisfy the tax, or charge, together
with any increment thereto incident to delinquency, and the expenses of the distraint
and the cost of the subsequent sale.
"A report on the distraint shall, within ten (10) days from receipt of the
warrant, be submitted by the distraining officer to the Revenue District Officer, and to
the Revenue Regional Director: Provided, That the Commissioner or his duly
authorized representative shall, subject to rules and regulations promulgated by the
Secretary of Finance, upon recommendation of the Commissioner, have the power to
lift such order of distraint: Provided, further, That a consolidated report by the
Revenue Regional Director may be required by the Commissioner as often as
necessary.
"(B) Levy on Real Property. After the expiration of the time required to pay
the delinquent tax or delinquent revenue as prescribed in this Section, real property
may be levied upon, before, simultaneously or after the distraint of personal property
belonging to the delinquent. To this end, any internal revenue officer designated by
the Commissioner or his duly authorized representative shall prepare a duly
authenticated certificate showing the name of the taxpayer and the amounts of the tax
and penalty due from him. Said certificate shall operate with the force of a legal
execution throughout the Philippines.
"In case the warrant of levy on real property is not issued before or
simultaneously with the warrant of distraint on personal property, and the personal
property of the taxpayer is not sufficient to satisfy his tax delinquency, the
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Commissioner or his duly authorized representative shall, within thirty (30) days after
execution of the distraint, proceed with the levy on the taxpayer's real property.
"Within ten (10) days after receipt of the warrant, a report on any levy shall be
submitted by the levying officer to the Commissioner or his duly authorized
representative: Provided, however, That a consolidated report by the Revenue
Regional Director may be required by the Commissioner as often as necessary:
Provided, further, That the Commissioner or his duly authorized representative,
subject to rules and regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, shall have the authority to lift warrants of levy
issued in accordance with the provisions hereof. cdtai
"Debts and credits shall be distrained by leaving with the person owing the
debts or having in his possession or under his control such credits, or with his agent, a
copy of the warrant of distraint. The warrant of distraint shall be sufficient authority
to the person owning the debts or having in his possession or under his control any
credits belonging to the taxpayer to pay to the Commissioner the amount of such
debts or credits.
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The Revenue District Officer or his duly authorized representative, other than the
officer referred to in Section 208 of this Code shall, according to rules and regulations
prescribed by the Secretary of Finance, upon recommendation of the Commissioner,
forthwith cause a notification to be exhibited in not less than two (2) public places in
the municipality or city where the distraint is made, specifying the time and place of
sale and the articles distrained. The time of sale shall not be less than twenty (20)
days after notice to the owner or possessor of the property as above specified and the
publication or posting of such notice. One place for the posting of such notice shall be
at the Office of the Mayor of the city or municipality in which the property is
distrained.
"At the time and place fixed in such notice, the said revenue officer shall sell
the goods, chattels, or effects, or other personal property, including stocks and other
securities so distrained, at public auction, to the highest bidder for cash, or with the
approval of the Commissioner, through duly licensed commodity or stock exchanges.
"In the case of stocks and other securities, the officer making the sale shall
execute a bill of sale which he shall deliver to the buyer, and a copy thereof furnished
the corporation, company or association which issued the stocks or other securities.
Upon receipt of the copy of the bill of sale, the corporation, company or association
shall make the corresponding entry in its books, transfer the stocks or other securities
sold in the name of the buyer, and issue, if required to do so, the corresponding
certificates of stock or other securities.
"Any residue over and above what is required to pay the entire claim,
including expenses, shall be returned to the owner of the property sold. The expenses
chargeable upon each seizure and sale shall embrace only the actual expenses of
seizure and preservation of the property pending the sale, and no charge shall be
imposed for the services of the local internal revenue officer or his deputy.
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"SECTION 212. Purchase by Government at Sale Upon Distraint. When
the amount bid for the property under distraint is not equal to the amount of the tax or
is very much less than the actual market value of the articles offered for sale, the
Commissioner or his deputy may purchase the same in behalf of the National
Government for the amount of taxes, penalties and cost due thereon.
"SECTION 213. Advertisement and Sale. Within twenty (20) days after
levy, the officer conducting the proceedings shall proceed to advertise the property or
a usable portion thereof as may be necessary to satisfy the claim and cost of sale; and
such advertisement shall cover a period of at least thirty (30) days. It shall be
effectuated by posting a notice at the main entrance of the municipal building or city
hall and in a public and conspicuous place in the barrio or district in which the real
estate lies and by publication once a week for three (3) weeks in a newspaper of
general circulation in the municipality or city where the property is located. The
advertisement shall contain a statement of the amount of taxes and penalties so due
and the time and place of sale, the name of the taxpayer against whom taxes are
levied, and a short description of the property to be sold. At any time before the day
fixed for the sale, the taxpayer may discontinue all proceedings by paying the taxes,
penalties and interest. If he does not do so, the sale shall proceed and shall be held
either at the main entrance of the municipal building or city hall, or on the premises to
be sold, as the officer conducting the proceedings shall determine and as the notice of
sale shall specify.
"Within five (5) days after the sale, a return by the distraining or levying
officer of the proceedings shall be entered upon the records of the Revenue Collection
Officer, the Revenue District Officer and the Revenue Regional Director. The
Revenue Collection Officer, in consultation with the Revenue District Officer, shall
then make out and deliver to the purchaser a certificate from his records, showing the
proceedings of the sale, describing the property sold, stating the name of the
purchaser and setting out the exact amount of all taxes, penalties and interest:
Provided, however, That in case the proceeds of the sale exceeds the claim and cost of
sale, the excess shall be turned over to the owner of the property. cdtai
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Officer may, out of his collection, advance an amount sufficient to defray the costs of
collection by means of the summary remedies provided for in this Code, including the
preservation or transportation in case of personal property, and the advertisement and
subsequent sale, both in cases of personal and real property including improvements
found on the latter. In his monthly collection reports, such advances shall be reflected
and supported by receipts.
"SECTION 214. Redemption of Property Sold. Within one (1) year from
the date of sale, the delinquent taxpayer, or any one for him, shall have the right of
paying to the Revenue District Officer the amount of the public taxes, penalties, and
interest thereon from the date of delinquency to the date of sale, together with interest
on said purchase price at the rate of fifteen percent (15%) per annum from the date of
purchase to the date of redemption, and such payment shall entitle the person paying
to the delivery of the certificate issued to the purchaser and a certificate from the said
Revenue District Officer that he has thus redeemed the property, and the Revenue
District Officer shall forthwith pay over to the purchaser the amount by which such
property has thus been redeemed, and said property thereafter shall be free from the
lien of such taxes and penalties.
"The owner shall not, however, be deprived of the possession of the said
property and shall be entitled to the rents and other income thereof until the expiration
of the time for its redemption.
"Within one (1) year from the date of such forfeiture, the taxpayer, or any one
for him, may redeem said property by paying to the Commissioner or the latter's
Revenue Collection Officer the full amount of the taxes and penalties, together with
interest thereon and the costs of sale, but if the property be not thus redeemed, the
forfeiture shall become absolute.
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"SECTION 216. Resale of Real Estate Taken for Taxes. The
Commissioner shall have charge of any real estate obtained by the Government of the
Philippines in payment or satisfaction of taxes, penalties or costs arising under this
Code or in compromise or adjustment of any claim therefor; and said Commissioner
may, upon the giving of not less than twenty (20) days notice, sell and dispose of the
same at public auction, or with the prior approval of the Secretary of Finance, dispose
of the same at private sale. In either case, the proceeds of the sale shall be deposited
with the National Treasury, and an accounting of the same shall be rendered to the
Chairman of the Commission on Audit
"SECTION 220. Form and Mode of Proceeding in Actions Arising under this
Code. Civil and criminal actions and proceedings instituted in behalf of the
Government under the authority of this Code or other law enforced by the Bureau of
Internal Revenue shall be brought in the name of the Government of the Philippines
and shall be conducted by legal officers of the Bureau of Internal Revenue but no
civil or criminal action for the recovery of taxes or the enforcement of any fine,
penalty or forfeiture under this Code shall be filed in court without the approval of the
Commissioner.
"(a) In the case of a false or fraudulent return with intent to evade tax or of
failure to file a return, the tax may be assessed, or a proceeding in court for the
collection of such tax may be filed without assessment, at any time within ten (10)
years after the discovery of the falsity, fraud or omission: Provided, That in a fraud
assessment which has become final and executory, the fact of fraud shall be judicially
taken cognizance of in the civil or criminal action for the collection thereof.
"(b) If before the expiration of the time prescribed in Section 203 for the
assessment of the tax, both the Commissioner and the taxpayer have agreed in writing
to its assessment after such time, the tax may be assessed within the period agreed
upon. The period so agreed upon may be extended by subsequent written agreement
made before the expiration of the period previously agreed upon.
"(c) Any internal revenue tax which has been assessed within the period of
limitation as prescribed in paragraph (a) hereof may be collected by distraint or levy
or by a proceeding in court within five (5) years following the assessment of the tax.
"(d) Any internal revenue tax, which has been assessed within the period
agreed upon as provided in paragraph (b) hereinabove, may be collected by distraint
or levy or by a proceeding in court within the period agreed upon in writing before
the expiration of the five (5)-year period. The period so agreed upon may be extended
by subsequent written agreements made before the expiration of the period previously
agreed upon.
"All other articles subject to excise tax, which have been manufactured or
removed in violation of this Code, as well as dies for the printing or making of
internal revenue stamps and labels which are in imitation of or purport to be lawful
stamps, or labels may, upon forfeiture, be sold or destroyed in the discretion of the
Commissioner.
"Forfeited property shall not be destroyed until at least twenty (20) days after
seizure.
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specially provided, shall be accounted for and dealt within the same way.
"CHAPTER III
"(a) When the finding for any deficiency tax is the result of mathematical error
in the computation of the tax as appearing on the face of the return; or
"(b) When a discrepancy has been determined between the tax withheld and
the amount actually remitted by the withholding agent; or
"(c) When a taxpayer who opted to claim a refund or tax credit of excess
creditable withholding tax for a taxable period was determined to have carried over
and automatically applied the same amount claimed against the estimated tax
liabilities for the taxable quarter or quarters of the succeeding taxable year; or
"(d) When the excise tax due on excisable articles has not been paid; or
"The taxpayers shall be informed in writing of the law and the facts on which
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the assessment is made; otherwise, the assessment shall be void.
"If the protest is denied in whole or in part, or is not acted upon within one
hundred eighty (180) days from submission of documents, the taxpayer adversely
affected by the decision or inaction may appeal to the Court of Tax Appeals within
thirty (30) days from receipt of the said decision, or from the lapse of the one hundred
eighty (180)-day period; otherwise, the decision shall become final, executory and
demandable.
"In any case, no such suit or proceeding shall be filed after the expiration of
two (2) years from the date of payment of the tax or penalty regardless of any
supervening cause that may arise after payment: Provided, however, That the
Commissioner may, even without a written claim therefor, refund or credit any tax,
where on the face of the return upon which payment was made, such payment appears
clearly to have been erroneously paid.
"TITLE IX
Compliance Requirements
"CHAPTER I
"(e) In the exercise of the Commissioner's power under Section 5(B) to obtain
information from other persons in which case, another or separate examination and
inspection may be made. Examination and inspection of books of accounts and other
accounting records shall be done in the taxpayer's office or place of business or in the
office of the Bureau of Internal Revenue. All corporations, partnerships or persons
that retire from business shall, within ten (10) days from the date of retirement or
within such period of time as may be allowed by the Commissioner in special cases,
submit their books of accounts, including the subsidiary books and other accounting
records to the Commissioner or any of his deputies for examination, after which they
shall be returned. Corporations and partnerships contemplating dissolution must
notify the Commissioner and shall not be dissolved until cleared of any tax liability.
"CHAPTER II
Administrative Provisions
"(A) Requirements. Every person subject to any internal revenue tax shall
register once with the appropriate Revenue District Officer:
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"(1) Within ten (10) days from date of employment, or
"The registration shall contain the taxpayer's name, style, place of residence,
business, and such other information as may be required by the Commissioner in the
form prescribed therefor.
"A person maintaining a head office, branch or facility shall register with the
Revenue District Officer having jurisdiction over the head office, branch or facility.
For purposes of this Section, the term 'facility' may include but not be limited to sales
outlets, places of production, warehouses or storage places.
"The registration fee shall be paid to an authorized agent bank located within
the revenue district, or to the Revenue Collection Officer, or duly authorized
Treasurer of the city or municipality where each place of business or branch is
registered.
"(C) Registration of Each Type of Internal Revenue Tax. Every person who
is required to register with the Bureau of Internal Revenue under Subsection (A)
hereof, shall register each type of internal revenue tax for which he is obligated, shall
file a return and shall pay such taxes, and shall update such registration of any
changes in accordance with Subsection (E) hereof.
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"(E) Other Updates. Any person registered in accordance with this Section
shall, whenever applicable, update his registration information with the Revenue
District Office where he is registered, specifying therein any change in tax type and
other taxpayer details.
"(1) General Rule. The registration of any person who ceases to be liable to
a tax type shall be cancelled upon filing with the Revenue District Office where he is
registered, an application for registration information update in a form prescribed
therefor; SDECAI
"(b) He has ceased to carry on his trade or business, and does not expect to
recommence any trade or business within the next twelve (12) months.
"The cancellation of registration will be effective from the first day of the
following month.
"(1) Any person who, in the course of trade or business, sells, barters or
exchanges goods or properties, or engages in the sale or exchange of services, shall be
liable to register for value-added tax if:
"(a) His gross sales or receipts for the past twelve (12) months, other than
those that are exempt under Section 109(A) to (U), have exceeded One million five
hundred thousand pesos (P1,500,000); or EDcICT
"(b) There are reasonable grounds to believe that his gross sales or receipts for
the next twelve (12) months, other than those that are exempt under Section 109(A) to
(U), will exceed One million five hundred thousand pesos (P1,500,000).
"(2) Every person who becomes liable to be registered under paragraph (1) of
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this Subsection shall register with the Revenue District Office which has jurisdiction
over the head office or branch of that person, and shall pay the annual registration fee
prescribed in Subsection (B) hereof. If he fails to register, he shall be liable to pay the
tax under Title IV as if he were a VAT-registered person, but without the benefit of
input tax credits for the period in which he was not properly registered.
"(H) Optional Registration for Value-added Tax of Exempt Person. (1) Any
person who is not required to register for value-added tax under Subsection (G)
hereof may elect to register for value-added tax by registering with the Revenue
District Office that has jurisdiction over the head office of that person, and paying the
annual registration fee in Subsection (B) hereof.
"(2) Any person who elects to register under this Subsection shall not be
entitled to cancel his registration under Subsection (F)(2) for the next three (3) years.
"For purposes of Title IV of this Code, any person who has registered
value-added tax as a tax type in accordance with the provisions of Subsection (C)
hereof shall be referred to as a 'VAT-registered person' who shall be assigned only
one Taxpayer Identification Number (TIN).
"(7) Application for loan with banks, financial institutions, or other financial
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intermediaries;
"(9) Application for business license with the Department of Trade and
Industry; and
"(10) Such other documents which may hereafter be required under rules
and regulations to be promulgated by the Secretary of Finance, upon recommendation
of the Commissioner.
"In cases where a registered taxpayer dies, the administrator or executor shall
register the estate of the decedent in accordance with Subsection (A) hereof and a new
Taxpayer Identification Number (TIN) shall be supplied in accordance with the
provisions of this Section.
"All persons who print receipt or sales or commercial invoices shall maintain a
logbook/register of taxpayers who availed of their printing services. The
logbook/register shall contain the following information:
"(2) Number of booklets, number of sets per booklet, number of copies per set
and the serial numbers of the receipts or invoices in each booklet.
"The requirement under this Section shall also be applicable in the case of
transfer of ownership or change of name of the business establishment.
"CHAPTER III
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"SECTION 245. Specific Provisions to be Contained in Rules and
Regulations. The rules and regulations of the Bureau of Internal Revenue shall,
among other things, contain provisions specifying, prescribing or defining: cdtai
"(a) The time and manner in which Revenue Regional Directors shall canvass
their respective Revenue Regions for the purpose of discovering persons and property
liable to national internal revenue taxes, and the manner in which their lists and
records of taxable persons and taxable objects shall be made and kept;
"(c) The conditions under which and the manner in which goods intended for
export, which if not exported would be subject to an excise tax, shall be labelled,
branded or marked;
"(e) The conditions under which goods intended for storage in bonded
warehouses shall be conveyed thither, their manner of storage and the method of
keeping the entries and records in connection therewith, also the books to be kept by
Revenue Inspectors and the reports to be made by them in connection with their
supervision of such houses;
"(f) The conditions under which denatured alcohol may be removed and dealt
in, the character and quantity of the denaturing material to be used, the manner in
which the process of denaturing shall be effected, so as to render the alcohol suitably
denatured and unfit for oral intake, the bonds to be given, the books and records to be
kept, the entries to be made therein, the reports to be made to the Commissioner, and
the signs to be displayed in the business or by the person for whom such denaturing is
done or by whom, such alcohol is dealt in;
"(g) The manner in which revenue shall be collected and paid, the instrument,
document or object to which revenue stamps shall be affixed, the mode of
cancellation of the same, the manner in which the proper books, records, invoices and
other papers shall be kept and entries therein made by the person subject to the tax, as
well as the manner in which licenses and stamps shall be gathered up and returned
after serving their purposes;
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"(h) The conditions to be observed by revenue officers respecting the
enforcement of Title III imposing a tax on estate of a decedent, and other transfers
mortis causa, as well as on gifts and such other rules and regulations which the
Commissioner may consider suitable for the enforcement of the said Title III;
"(i) The manner in which tax returns, information and reports shall be prepared
and reported and the tax collected and paid, as well as the conditions under which
evidence of payment shall be furnished the taxpayer, and the preparation and
publication of tax statistics;
"(j) The manner in which internal revenue taxes, such as income tax, including
withholding tax, estate and donor's taxes, value-added tax, other percentage taxes,
excise taxes and documentary stamp taxes shall be paid through the collection officers
of the Bureau of Internal Revenue or through duly authorized agent banks which are
hereby deputized to receive payments of such taxes and the returns, papers and
statements that may be filed by the taxpayers in connection with the payment of the
tax: Provided, however, That notwithstanding the other provisions of this Code
prescribing the place of filing of returns and payment of taxes, the Commissioner
may, by rules and regulations, require that the tax returns, papers and statements and
taxes of large taxpayers be filed and paid, respectively, through collection officers or
through duly authorized agent banks: Provided, further, That the Commissioner can
exercise this power within six (6) years from the approval of Republic Act No. 7646
or the completion of its comprehensive computerization program, whichever comes
earlier: Provided, finally, That separate venues for the Luzon, Visayas and Mindanao
areas may be designated for the filing of tax returns and payment of taxes by said
large taxpayers.
"For purposes of this Section, 'large taxpayer' means a taxpayer who satisfies
any of the following criteria;
"(2) Excise Tax Business establishment with excise tax paid or payable of at
least One million pesos (P1,000,000) for the preceding taxable year;
"(3) Corporate Income Tax Business establishment with annual income tax
paid or payable of at least One million pesos (P1,000,000) for the preceding taxable
year; and
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"(4) Withholding Tax Business establishment with withholding tax payment
or remittance of at least One million pesos (P1,000,000) for the preceding taxable
year.
The penalties prescribed under Section 248 of this Code shall be imposed on
any violation of the rules and regulations issued by the Secretary of Finance, upon
recommendation of the Commissioner, prescribing the place of filing of returns and
payments of taxes by large taxpayers.
"(a) Where the taxpayer deliberately misstates or omits material facts from his
return or any document required of him by the Bureau of Internal Revenue;
"(b) Where the facts subsequently gathered by the Bureau of Internal Revenue
are materially different from the facts on which the ruling is based; or
"TITLE X
"CHAPTER I
"(a) The additions to the tax or deficiency tax prescribed in this Chapter shall
apply to all taxes, fees and charges imposed in this Code. The amount so added to the
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tax shall be collected at the same time, in the same manner and as part of the tax.
"(b) If the withholding agent is the Government or any of its agencies, political
subdivisions or instrumentalities, or a government-owned or -controlled corporation,
the employee thereof responsible for the withholding and remittance of the tax shall
be personally liable for the additions to the tax prescribed herein.
"(c) The term 'person', as used in this Chapter, includes an officer or employee
of a corporation who as such officer, employee or member is under a duty to perform
the act in respect of which the violation occurs.
"(1) Failure to file any return and pay the tax due thereon as required under the
provisions of this Code or rules and regulations on the date prescribed; or
"(3) Failure to pay the deficiency tax within the time prescribed for its payment
in the notice of assessment; or
"(4) Failure to pay the full or part of the amount of tax shown on any return
required to be filed under the provisions of this Code or rules and regulations, or the
full amount of tax due for which no return is required to be filed, on or before the date
prescribed for its payment.
"(B) In case of willful neglect to file the return within the period prescribed by
this Code or by rules and regulations, or in case a false or fraudulent return is
willfully made, the penalty to be imposed shall be fifty percent (50%) of the tax or of
the deficiency tax, in case any payment has been made on the basis of such return
before the discovery of the falsity or fraud: Provided, That a substantial
underdeclaration of taxable sales, receipts or income, or a substantial overstatement of
deductions, as determined by the Commissioner pursuant to the rules and regulations
to be promulgated by the Secretary of Finance, shall constitute prima facie evidence
of a false or fraudulent return: Provided, further, That failure to report sales, receipts
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 212
or income in an amount exceeding thirty percent (30%) of that declared per return,
and a claim of deductions in an amount exceeding thirty percent (30%) of actual
deductions, shall render the taxpayer liable for substantial underdeclaration of sales,
receipts or income or for overstatement of deductions, as mentioned herein.
"(B) Deficiency Interest. Any deficiency in the tax due, as the term is
defined in this Code, shall be subject to the interest prescribed in Subsection (A)
hereof, which interest shall be assessed and collected from the date prescribed for its
payment until the full payment thereof.
"(1) The amount of the tax due on any return required to be filed, or
"(2) The amount of the tax due for which no return is required, or
"(3) A deficiency tax, or any surcharge or interest thereon on the due date
appearing in the notice and demand of the Commissioner, there shall be assessed and
collected on the unpaid amount, interest at the rate prescribed in Subsection (A)
hereof until the amount is fully paid, which interest shall form part of the tax.
"(D) Interest on Extended Payment. If any person required to pay the tax is
qualified and elects to pay the tax on installment under the provisions of this Code,
but fails to pay the tax or any installment hereof, or any part of such amount or
installment on or before the date prescribed for its payment, or where the
Commissioner has authorized an extension of time within which to pay a tax or a
deficiency tax or any part thereof, there shall be assessed and collected interest at the
rate hereinabove prescribed on the tax or deficiency tax or any part thereof unpaid
from the date of notice and demand until it is paid.
"CHAPTER II
"(a) Any person convicted of a crime penalized by this Code shall, in addition
to being liable for the payment of the tax, be subject to the penalties imposed herein:
Provided, That payment of the tax due after apprehension shall not constitute a valid
defense in any prosecution for violation of any provision of this Code or in any action
for the forfeiture of untaxed articles.
"(b) Any person who willfully aids or abets in the commission of a crime
penalized herein or who causes the commission of any such offense by another shall
be liable in the same manner as the principal.
"(e) The fines to be imposed for any violation of the provisions of this Code
shall not be lower than the fines imposed herein or twice the amount of taxes,
interests and surcharges due from the taxpayer, whichever is higher. cdtai
"Any person who attempts to make it appear for any reason that he or another
has in fact filed a return or statement, or actually files a return or statement and
subsequently withdraws the same return or statement after securing the official
receiving seal or stamp of receipt of an internal revenue office wherein the same was
actually filed shall, upon conviction therefor, be punished by a fine of not less than
Ten thousand pesos (P10,000) but not more than Twenty thousand pesos (P20,000)
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and suffer imprisonment of not less than one (1) year but not more than three (3)
years.
"(3) Offers any taxpayer the use of accounting bookkeeping records for
internal revenue purposes not in conformity with the requirements prescribed in this
Code or rules and regulations promulgated thereunder; or
"(4) Knowingly makes any false entry or enters any false or fictitious name in
the books of accounts or records mentioned in the preceding paragraphs; or
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"(5) Keeps two (2) or more sets of such records or books of accounts; or
"(7) Fails to keep the books of accounts or records mentioned in Section 232 in
a native language, English or Spanish, or to make a true and complete translation as
required in Section 234 of this Code, or whose books of accounts or records kept in a
native language, English or Spanish, and found to be at material variance with books
or records kept by him in another language; or
"(8) Willfully attempts in any manner to evade or defeat any tax imposed
under this Code, or knowingly uses fake or falsified revenue official receipts, Letters
of Authority, certificates authorizing registration, Tax Credit Certificates, Tax Debit
Memoranda and other accountable forms shall, upon conviction for each act or
omission, be punished by a fine of not less than Fifty thousand pesos (P50,000) but
not more than One hundred thousand pesos (P100,000) and suffer imprisonment of
not less than two (2) years but not more than six (6) years.
"In the case of foreigners, conviction under this Code shall result in his
immediate deportation after serving sentence, without further proceedings for
deportation.
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67 of this Code without having obtained a license therefor, or without complying with
its implementing rules and regulations, shall, upon conviction for each act or
omission, be punished by a fine of not less than Twenty thousand pesos (P20,000) but
not more than Fifty thousand pesos (P50,000) and suffer imprisonment of not less
than one (1) year but not more than two (2) years.
"(a) A fine of not less than One thousand pesos (P1,000) nor more than Two
thousand pesos (P2,000) and suffer imprisonment of not less than sixty (60) days but
not more than one hundred (100) days, if the appraised value, to be determined in the
manner prescribed in the tariff and Customs Code, including duties and taxes, of the
articles does not exceed One thousand pesos (P1,000);
"(b) A fine of not less than Ten thousand pesos (P10,000) but not more than
Twenty thousand pesos (P20,000) and suffer imprisonment of not less than two (2)
years but not more than four (4) years, if the appraised value, to be determined in the
manner prescribed in the Tariff and Customs Code, including duties and taxes, of the
articles exceeds One thousand pesos (P1,000) but does not exceed Fifty thousand
pesos (P50,000);
"(c) A fine of not less than Thirty thousand pesos (P30,000) but not more than
Sixty thousand pesos (P60,000) and suffer imprisonment of not less than four (4)
years but not more than six (6) years, if the appraised value, to be determined in the
manner prescribed in the Tariff and Customs Code, including duties and taxes, of the
articles is more than Fifty thousand pesos (P50,000) but does not exceed One hundred
fifty thousand pesos (P150,000); or
"(d) A fine of not less than Fifty thousand pesos (P50,000) but not more than
One hundred thousand pesos (P100,000) and suffer imprisonment of not less than ten
(10) years but not more than twelve (12) years, if the appraised value, to be
determined in the manner prescribed in the Tariff and Customs Code, including duties
and taxes, of the articles exceeds One hundred fifty thousand pesos (P150,000).
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 219
subject to excise tax, the tax on which have not been paid in accordance with law, or
any person who is found in possession of such articles which are exempt from excise
tax other than those to whom the same is lawfully issued shall be punished with a fine
of not less than ten (10) times the amount of excise tax due on the articles found but
not less than Five hundred pesos (P500) and suffer imprisonment of not less than two
(2) years but not more than four (4) years.
"The mere unexplained possession of articles subject to excise tax, the tax on
which has not been paid in accordance with law, shall be punishable under this
Section.
"(a) Any person who, being required under Section 237 to issue receipts or
sales or commercial invoices, fails or refuses to issue such receipts or invoices, issues
receipts or invoices that do not truly reflect and/or contain all the information required
to be known therein, or uses multiple or double receipts or invoices, shall, upon
conviction for each act or omission, be punished by a fine of not less than One
thousand pesos (P1,000) but not more than Fifty thousand pesos (P50,000) and suffer
imprisonment of not less than two (2) years but not more than four (4) years.
"(b) Any person who commits any of the acts enumerated hereunder shall be
penalized in the same manner and to the same extent as provided for in this Section:
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"(3) Printing of unnumbered receipts or sales or commercial invoices, not
bearing the name, business style, Taxpayer Identification Number, and business
address of the person or entity.
"(b) Erasing the cancellation marks of any stamp previously used, or altering
the written figures or letters or cancellation marks on internal revenue stamps;
"(d) Selling or offering for sale any box or package containing articles subject
to excise tax with false, spurious or counterfeit stamps or labels or selling from any
such fraudulent box, package or container as aforementioned; or
"SECTION 266. Failure to Obey Summons. Any person who, being duly
summoned to appear to testify, or to appear and produce books of accounts, records,
memoranda or other papers, or to furnish information as required under the pertinent
provisions of this Code, neglects to appear or to produce such books of accounts,
records, memoranda or other papers, or to furnish such information, shall, upon
conviction, be punished by a fine of not less than Five thousand pesos (P5,000) but
not more than Ten thousand pesos (P10,000) and suffer imprisonment of not less than
one (1) year but not more than two (2) years.
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true and correct as to every material matter shall, upon conviction, be subject to the
penalties prescribed for perjury under the Revised Penal Code.
"CHAPTER III
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"(a) Extortion or willful oppression through the use of his office or willful
oppression and harassment of a taxpayer who refused, declined, turned down or
rejected any of his offers specified in paragraph (d) hereof;
"(b) Knowingly demanding or receiving any fee, other or greater sums than are
authorized by law or receiving any fee, compensation or reward, except as by law
prescribed, for the performance of any duty;
"(c) Willfully neglecting to give receipts, as by law required, for any sum
collected in the performance of duty or willfully neglecting to perform any other
duties enjoined by law;
"(e) Neglecting or by design permitting the violation of the law by any other
person;
"(f) Making or signing any false entry or entries in any book, or making or
signing any false certificate or return;
"(a) Failing or causing the failure to deduct and withhold any internal revenue
Copyright 1994-2005 CD Technologies Asia, Inc. Philippine Laws - Premium Edition 224
tax under any of the withholding tax laws and implementing rules and regulations;
"(b) Failing or causing the failure to remit taxes deducted and withheld within
the time prescribed by law, and implementing rules and regulations; and
"(c) Failing or causing the failure to file return or statement within the time
prescribed, or rendering or furnishing a false or fraudulent return or statement
required under the withholding tax laws and rules and regulations.
"SECTION 273. Penalty for Failure to Issue and Execute Warrant. Any
official who fails to issue or execute the warrant of distraint or levy within thirty (30)
days after the expiration of the time prescribed in Section 207 or who is found guilty
of abusing the exercise thereof by competent authority shall be automatically
dismissed from the service after due notice and hearing.
"CHAPTER IV
"SECTION 274. Penalty for Second and Subsequent Offenses. In the case
of reincidence, the maximum of the penalty prescribed for the offense shall be
imposed.
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carrier was, at the time of the illegal act, a consenting party or privy thereto, without
prejudice to the owner's right of recovery against the offender in a civil or criminal
action. Articles which are not subject of lawful commerce shall be destroyed.
"Prescription shall begin to run from the day of the commission of the
violation of the law, and if the same be not known at the time, from the discovery
thereof and the institution of judicial proceedings for its investigation and
punishment.
"The term of prescription shall not run when the offender is absent from the
Philippines.
"(A) For Violations of the National Internal Revenue Code. Any person,
except an internal revenue official or employee, or other public official or employee,
or his relative within the sixth degree of consanguinity, who voluntarily gives definite
and sworn information, not yet in the possession of the Bureau of Internal Revenue,
leading to the discovery of frauds upon the internal revenue laws or violations of any
of the provisions thereof, thereby resulting in the recovery of revenues, surcharges
and fees and/or the conviction of the guilty party and/or the imposition of any of the
fine or penalty, shall be rewarded in a sum equivalent to ten percent (10%) of the
revenues, surcharges or fees recovered and/or fine or penalty imposed and collected
or One million pesos (P1,000,000) per case, whichever is lower. The same amount of
reward shall also be given to an informer where the offender has offered to
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compromise the violation of law committed by him and his offer has been accepted
by the Commissioner and collected from the offender: Provided, That should no
revenue, surcharges or fees be actually recovered or collected, such person shall not
be entitled to a reward: Provided, further, That the information mentioned herein shall
not refer to a case already pending or previously investigated or examined by the
Commissioner or any of his deputies, agents or examiners, or the Secretary of Finance
or any of his deputies or agents: Provided, finally, That the reward provided herein
shall be paid under rules and regulations issued by the Secretary of Finance, upon
recommendation of the Commissioner.
"TITLE XI
"CHAPTER I
"In addition to the internal revenue allotment as provided for in the preceding
paragraph, fifty percent (50%) of the national taxes collected under Sections 106, 108
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and 116 of this Code in excess of the increase in collections for the immediately
preceding year shall be distributed as follows:
"(a) Twenty percent (20%) shall accrue to the city or municipality where such
taxes are collected and shall be allocated in accordance with Section 150 of Republic
Act No. 7160, otherwise known as the Local Government Code of 1991; and
"CHAPTER II
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Special Disposition of Certain National Internal Revenue Taxes
"SECTION 287. Shares of Local Government Units in the Proceeds from the
Development and Utilization of the National Wealth. Local government units shall
have an equitable share in the proceeds derived from the utilization and development
of the national wealth, within their respective areas, including sharing the same with
the inhabitants by way of direct benefits.
"(1) One Percent (1%) of the gross sales or receipts of the preceding calendar
year; or
"(2) Forty percent (40%) of the excise taxes on mineral products, royalties, and
such other taxes, fees or charges, including related surcharges, interests or fines the
government agency or government-owned or -controlled corporation would have paid
if it were not otherwise exempt.
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distributed in the following manner:
"Provided, however, That where the natural resources are located in two (2) or
more provinces, or in two (2) or more component cities or municipalities or in two (2)
or more barangays, their respective shares shall be computed on the basis of: (1)
Population seventy percent (70%); and (2) Land area thirty percent (30%).
"Provided, however, That where the natural resources are located in two (2) or
more cities, the allocation of shares shall be based on the formula on population and
land area as specified in subsection (C)(1) hereof.
"(A) Incremental Revenues from Republic Act No. 7660. The incremental
revenues from the increase in the documentary stamp taxes under R.A. No. 7660 shall
be set aside for the following purposes:
"(1) In 1994 and 1995, twenty-five percent (25%) thereof respectively, shall
accrue to the Unified Home-Lending Program under Executive Order No. 90
particularly for mass-socialized housing program to be allocated as follows: fifty
percent (50%) for mass-socialized housing; thirty percent (30%) for the community
mortgage program; and twenty percent (20%) for land banking and development to be
administered by the National Housing Authority: Provided, That not more than one
percent (1%) of the respective allocations hereof shall be used for administrative
expenses;
"(2) In 1996, twenty-five percent (25%) thereof to be utilized for the National
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Health Insurance Program that hereafter may be mandated by law;
"(3) In 1994 and every year thereafter, twenty-five percent (25%) thereof shall
accrue to a Social Education Fund to be administered by the Department of
Education, Culture and Sports for the construction and repair of school facilities,
training of teachers, and procurement or production of instructional materials and
teaching aids; and
"(4) In 1994 and every year thereafter, fifty percent (50%) thereof shall accrue
to a Special Infrastructure Fund for the construction and repair of roads, bridges,
dams and irrigation, seaports and hydroelectric and other indigenous power projects:
Provided, however, That for the years 1994 and 1995, thirty percent (30%), and for
the years 1996, 1997 and 1998, twenty percent (20%), of this fund shall be allocated
for depressed provinces as declared by the President as of the time of the effectivity
of R.A. No. 7660: Provided, further, That availments under this fund shall be
determined by the President on the basis of equity. IASCTD
"Provided, finally, That in paragraphs (2), (3) and (4) of this Section, not more
than one percent (1%) of the allocated funds thereof shall be used for administrative
expenses by the implementing agencies.
"(B) Incremental Revenues from Republic Act No. 8240. Fifteen percent
(15%) of the incremental revenue collected from the excise tax on tobacco products
under R.A. No. 8240 shall be allocated and divided among the provinces producing
burley and native tobacco in accordance with the volume of tobacco leaf production.
The fund shall be exclusively utilized for programs in pursuit of the following
objectives.
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rules and regulations governing the allocation and disbursement of this fund.
"(C) Incremental Revenues from the Excise Tax on Alcohol and Tobacco
Products.
"(1) Two and a half percent (2.5%) of the incremental revenue from the excise
tax on alcohol and tobacco products starting January 2005 shall be remitted directly to
the Philippine Health Insurance Corporation for the purpose of meeting and
sustaining the goal of universal coverage of the National Health Insurance Program;
and
"(2) Two and a half percent (2.5%) of the incremental revenue from the excise
tax on alcohol and tobacco products starting January 2005 shall be credited to the
account of the Department of Health and constituted as a trust fund for its disease
prevention program.
"The earmarking provided under this provision shall be observed for five (5)
years starting from January 2005." (As amended by Sec. 21 of R.A. No. 9337, May 24,
2005.)
"The funds allotted shall be divided among the beneficiary provinces pro-rata
according to the volume of Virginia tobacco production.
"TITLE XII
Oversight Committee
"(1) Monitor and ensure the proper implementation of Republic Act No. 8240;
"(2) Determine that the power of the Commissioner to compromise and abate
is reasonably exercised;
"(3) Review the collection performance of the Bureau of Internal Revenue; and
"TITLE XIII
Repealing Provisions
"SECTION 291. In General. All laws, decrees, executive orders, rules and
regulations or parts thereof which are contrary to or inconsistent with this Code are
hereby repealed, amended or modified accordingly.
"TITLE XIV
Final Provisions
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(b) Services rendered by banks, nonbank financial intermediaries, finance
companies and other financial intermediaries not performing quasi-banking functions;
and
The taxpayers rendering services mentioned under paragraphs (a) and (b)
hereof, shall pay the applicable taxes prescribed under the pertinent provisions of the
National Internal Revenue Code, as amended. (As amended by R.A. No. 9010,(75)
Feb. 27, 2001)
Effective January 1, 2000, all thrift banks, whether in operation as of that date
or thereafter, shall no longer enjoy tax exemption as provided under Section 17 of R.
A. No. 7906, thereby subjecting all thrift banks to taxes, fees and charges in the same
manner and at the same rate as banks and other financial intermediaries.
(B) The provisions of the National Internal Revenue Code, as amended, and
all other laws, including charters of government-owned or -controlled corporations,
decrees, orders or regulations or parts thereof, that are inconsistent with this Act are
hereby repealed or amended accordingly.
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Endnotes
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EO 226-1987
EO 273-1987
EO 292-1987
EO 292-1987 as amended
EO 96-1999
EO 291-2000
EO 105-2002
EO 142-2002
EO 306-2004
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PD 66
PD 529
PD 612
PD 692
PD 851
PD 898
PD 1158
PD 1464
PD 1469
PD 1590
PD 1994
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RA 337 RA 8240 RA 9040 RA 9171
RA 1405 RA 8241 RA 9049 RA 9172
RA 1937 RA 8282 RA 9062 RA 9178
RA 4917 RA 8291 RA 9063 RA 9182
RA 6388 RA 8756 RA 9115 RA 9186
RA 6686 RA 8761 RA 9116 RA 9192
RA 7160 RA 8954 RA 9117 RA 9216
RA 7171 RA 8955 RA 9119 RA 9224
RA 7227 RA 8956 RA 9121 RA 9233
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RA 7279 RA 8959 RA 9124 RA 9235
RA 7364 RA 8960 RA 9127 RA 9238
RA 7616 RA 8961 RA 9129 RA 9243
RA 7641 RA 8962 RA 9130 RA 9250
RA 7646 RA 8992 RA 9131 RA 9257
RA 7660 RA 8994 RA 9133 RA 9272
RA 7716 RA 8995 RA 9142 RA 9283
RA 7903 RA 8997 RA 9148 RA 9294
RA 7906 RA 9002 RA 9149 RA 9299
RA 7922 RA 9010 RA 9169 RA 9311
RA 337 as amended
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RA 9312
RA 9313
RA 9314
RA 9315
RA 9316
RA 9317
RA 9318
RA 9319
RA 9321
RA 9334
RA 9335
RA 9337
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DOF Order No. 17-04 Guidelines to Implement the Registration of Barangay Micro
Business Enterprises and the Availment of Tax Incentives under RA 9178
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See Original Text: Sec. 28 (A) (7) (b) of R.A. No. 8424.
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Sec. 1 of RA 9224, Aug. 29, 2003
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The original Sec. 174 was deleted by Sec. 1 of R.A. No. 9243.
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See Original Text: Sec. 288 of R.A. No. 8424.
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R.A. No. 8761, February 15, 2000, amended this section before R.A. No. 9010 was enacted on
February 27, 2001.
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