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Philippine Tax Update - Chan Robles Virtual Law Library


  
FULL TEXT
OF THE
NATIONAL INTERNAL REVENUE CODE
OF THE PHILIPPINES
[Tax Reform Act of 1997]
Republic Act No. 8424
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TITLE I
ORGANIZATION AND FUNCTION OF THE
BUREAU OF INTERNAL REVENUE



      SEC. 24. Income tax rates
            (A)  Rate of income tax on individual citizen and individual resident alien of the Philippines
            (B)  Rates of tax on certain passive incomes
            (C)  Capital gains from sales of shares of stock not traded in the stock exchange
            (D)  Capital gains from sales of real property
      SEC. 25. Tax on nonresident alien individual
           (A)  Nonresident alien engaged in trade  or business within the Philippines
            (B)  Nonresident alien individual not engaged in trade or business within the Philippines
            (C)  Alien individual employed by regional  or area headquarters and regional operating  headquarters of multinational company
            (D)  Alien individual employed by offshore banking units
            (E)  Alien individual employed  by petroleum service contractor and subcontractor
      SEC. 26. Tax liability of members of general  professional partnerships

      Chapter IV
      Tax on Corporations

      SEC. 27. Rates of income tax on domestic corporations
           (A)  In general
            (B)  Proprietary educational institutions and hospitals
            (C)  Government-owned or controlled corporations, agencies or instrumentalities
            (D)  Rates of tax on certain passive incomes
               (1)  Interest from deposits yield or any other monetary benefit  from
                     deposit substitutes and from trust  funds and similar arrangements, and royalties
               (2)  Capital gains  from the sale of shares of stock not traded in the stock exchange
               (3)  Tax on income derived under the expanded foreign currency deposit system
               (4)  Incorporate dividends
               (5)  Capital gains from the sale, exchange or disposition of lands and/or buildings
            (E)  Minimum corporate income tax on domestic corporations
               (1)  Imposition of tax
               (2)  Carry forward of excess minimum tax
               (3)  Relief from the minimum corporate income tax under certain conditions
               (4)  Gross income defined
      SEC. 28. Rates of income tax on foreign corporations
            (A)  Tax on resident foreign corporations
               (1)  In general
               (2)  Minimum corporate income tax on resident foreign corporations
               (3)  International carrier
               (4)  Offshore banking units
               (5)  Tax on branch profit remittances
               (6)  Regional  or area headquarters and regional operating headquarters of multinational companies
               (7)  Tax on certain incomes received by a resident foreign corporation
            (B)  Tax on nonresident foreign corporations
               (1)  In general
               (2)  Nonresident cinematographic film owner, lessor or distributor
               (3)  Nonresident owner or lessor of vessels chartered by Philippine nationals
               (4)  Nonresident lessor of aircraft, machineries and other equipment
               (5)  Tax certain incomes received by a nonresident foreign corporation
      SEC. 29. Imposition of improperly accumulated earnings tax
            (A)  In general
            (B)  Tax on corporations subject to improperly accumulated earnings
               (1)  In general
               (2)  Exceptions
            (C)  Evidence for purpose to avoid income tax
               (1)  Prima facie evidence
               (2)  Evidence determinative  of purpose
            (D)  Improperly accumulated taxable income
            (E)  Reasonable  needs of the business
      SEC. 30. Exemptions from tax on corporations



      Chapter VI
      Computation of Gross Income

      SEC. 32. Gross income
           (A)  General definition
           (B)  Exclusions from gross income
                     (1)  Life Insurance
                     (2)  Amount received by insured as return of premium
                     (3)  Gifts, bequests, and devises
                     (4)  Compensation for injuries or sickness
                     (5)  Income exempt under treaty
                     (6)  Retirement benefits, pensions, gratuities, etc.
                     (7)  Miscellaneous items
      SEC. 33. Special treatment of fringe benefit
           (A)  Imposition of tax
           (B)  Fringe benefit defined
           (C)  Fringe benefits not taxable


      Chapter VII
      Allowable Deductions
       
      SEC. 34. Deductions from gross income
           (A)  Expenses
                      (1)  Ordinary and necessary trade, business or professional expenses
                      (2)  Expenses allowable to private educational institutions
           (B)  Interest
                      (1)  In general
                      (2)  Exceptions
                      (3)  Optional treatment of interest expense
           (C)  Taxes
                      (1)  In general
                      (2)  Limitations on deductions
                      (3)  Credit against tax for taxes of foreign countries
                      (4)  Limitations on credit
                      (5)  Adjustments on payment of incurred taxes
                      (6)  Year in which credit taken
                      (7)  Proof of credits
           (D)  Losses
                      (1)  In general
                      (2)  Proof of loss
                      (3)  Net operating loss carry-over
                      (4)  Capital losses
                      (5)  Losses on wash sales of stock or securities
                      (6)  Wagering losses
                      (7)  Abandonment losses
           (E)  Bad debts
                      (1)  In general
                      (2)  Securities becoming worthless
           (F)  Depreciation
                      (1)  General rule
                      (2)  Use of certain methods and rates
                      (3)  Agreement as to useful life in which depreciation rate is based
                      (4)  Depreciation of properties used in petroleum operations
                      (5)  Depreciation of properties used in mining operations
                      (6)  Depreciation deductible by nonresident aliens engaged in trade or
                  business or resident foreign corporations
           (G)  Depletion of oil and gas wells and mines
                      (1)  In general
                      (2)  Election to deduct exploration and development expenditures
                      (3)  Depletion of oil and gas wells and mines deductible by a nonresident alien individual or foreign corporation
           (H)  Charitable and other contributions
                      (1)  In general
                      (2)  Contributions deductible in full
                      (3)  Valuation
                      (4)  Proof of deductions
           (I)  Research and development
                      (1)  In general
                      (2)  Amortization of certain research and development expenditures
                      (3)  Limitations on deduction
           (J)  Pension trusts
           (K)  Additional requirements for deductibility of certain payments
           (L)  Optional standard deduction
           (M) Premium payments on health and/or hospitalization insurance of an individual taxpayer
      SEC. 35. Allowance of personal exemption for individual taxpayer
           (A)  In general
           (B)  Additional exemption for dependents
           (C)  Change of status
           (D)  Personal exemptions allowable to nonresident alien individual
      SEC. 36. Items not deductible
           (A)  General rule
           (B)  Losses from sales or exchange of property
      SEC. 37. Special provisions regarding income in deductions of insurance companies,
                    whether domestic or foreign
            (A)  Special deductions allowed to insurance companies
            (B)  Mutual insurance companies
            (C)  Mutual marine insurance companies
            (D)  Assessment insurance companies
      SEC. 38. Losses from wash sales of stock or securities
      SEC. 39. Capital gains and losses
            (A)  Definition
            (B)  Percentage taken into account
            (C)  Limitation on capital losses
            (D)  Net capital loss carry-over
            (E)  Retirement of bonds, etc.
            (F)  Gains and losses from short sales, etc.
      SEC. 40. Determination of amount of and recognition of gain or loss
           (A)  Computation of gain or loss
           (B)  Basis for determining gain or loss from sale or disposition of property
           (C)  Exchange or property
                     (1)  General rule
                     (2)  Exception
                     (3)  Exchange not solely in kind
                     (4)  Assumption of liability
                     (5)  Basis
                     (6)  Definitions
      SEC. 41. Inventories
      SEC. 42. Income from sources within the Philippines
           (A)  Gross income from sources within the Philippines
                     (1)  Interests
                     (2)  Dividends
                     (3)  Services
                     (4)  Rentals and royalties
                     (5)  Sale of real property
                     (6)  Sale of personal property
           (B)  Taxable income from sources within the Philippines
                     (1)  General rule
                     (2)  Exception
           (C)  Gross income from sources without the Philippines
           (D)  Taxable income from sources without the Philippines
           (E)  Income from sources partly within and  partly without the Philippines
           (F)  Definitions


































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