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PRESIDENTIAL DECREE NO. 1154
PRESIDENTIAL DECREE NO. 1154 -
FURTHER AMENDING CERTAIN SectionS OF THE NATIONAL INTERNAL REVENUE
CODE, AS AMENDED, SO AS TO IMPOSE A FINAL TAX ON THE INTERESTS DERIVED
FROM EVERY COMMERCIAL PAPER ISSUED IN THE PRIMARY MARKET
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chanroblesvirtualawlibrary
WHEREAS,
there is a need to improve the administrative provisions of the
National Internal Code so as to ensure the collection of the tax on
interest derived from commercial papers issued in the primary market as
principal instrument. chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers in me vested by the Constitution, do hereby
order and decree:cralaw:red
Section 1. The National Internal Revenue Code, as
amended, is hereby further amended by adding a new section thereto to
read as follows:cralaw:red
"Sec. 195-C. Tax on certain interest. — There shall
be levied, assessed, collected and paid on every commercial paper
issued in the primary market as principal instrument, a transaction tax
equivalent to thirty-five per cent (35%) based on the gross amount of
interest thereto as defined hereunder, which shall be paid by the
borrower/issuer: Provided, however, that in the case of a long-term
commercial paper whose maturity exceeds more than one year, the
borrower shall pay the tax based on the amount of interest
corresponding to one year, and thereafter shall pay the tax upon
accrual or actual payment (whichever is earlier) of the untaxed portion
of the interest which corresponds to a period not exceeding one year.
"The transaction tax imposed in this section shall be a final tax to be
paid by the borrower and shall be allowed as a deductible item for
purposes of computing the borrower's taxable income.
"For purposes of this tax —
"(a) "Commercial paper" shall be defined as an
instrument evidencing indebtedness of any person or entity, including
banks and non-banks performing quasi-banking functions, which is
issued, endorsed, sold, transferred or in any manner conveyed to
another person or entity, either with or without recourse and
irrespective of maturity. Principally, commercial papers are promissory
notes and/or similar instruments issued in the primary market and shall
not include repurchase agreements, certificates of assignments,
certificates of participations, and such other debt instruments issued
in the secondary market. chanroblesvirtualawlibrary
"(b) The term "interest" shall mean the difference
between what the principal borrower received and the amount it paid
upon maturity of the commercial paper which shall, in no case, be lower
than the interest rate prevailing at the time of the issuance or
renewal of the commercial paper. Interest shall be deemed synonymous
with discount and shall include all fees, commissions, premiums and
other payments which form integral parts of the charges imposed as a
consequence of the use of money.
"In all cases where no interest rate is stated or if the rate stated is
lower than the prevailing interest rate at the time of the issuance or
renewal of commercial paper, the Commissioner of Internal Revenue, upon
consultation with the Monetary Board of the Central Bank of the
Philippines, shall adjust the interest rate in accordance herewith, and
assess the tax on the basis thereof.
"The tax herein imposed shall be remitted by the borrower to the
Commissioner of Internal Revenue or his Collection Agent in the
municipality where such borrower has its principal place of business
within five (5) working days from the issuance of the commercial paper.
In the case of long term commercial paper, the tax upon the untaxed
portion not exceeding one year shall be paid upon accrual payment,
whichever is earlier."
Section 2. Section 29 (b) of the National Internal
Revenue Code, as amended, is hereby further amended by adding a new
paragraph thereto to read as follows:cralaw:red
"Sec. 29 (b). Exclusions from gross income. —chanroblesvirtualawlibrary
xxx
xxx
xxx
"(8) Interest earned on commercial papers issued in
the primary market as principal instrument subjected to the final tax
under Section 195-C."
Section 3. Section 77 of the National Internal
Revenue Code, as amended is hereby further amended by adding a new
paragraph thereto to read as follows:cralaw:red
"Sec. 77. Information at source as to payments of one
thousand eight hundred pesos or more.
xxx
xxx
xxx
"However, such information return shall not be required in case of
payment of interest on commercial papers, regardless of amount, upon
which the transaction tax imposed under Section 195-C has been paid."
Section 4. Upon the recommendation of the
Commissioner of Internal Revenue and in consultation with the Monetary
Board of the Central Bank of the Philippines, the Secretary of Finance
shall promulgate rules and regulations to implement the provisions of
this Decree.
Section 5. This Decree shall take effect and shall be
applicable to paid or accrued interest on commercial papers issued on
or after approval of this Decree.
Done in the City of Manila,
this 3rd day of June, in the year of Our Lord, nineteen hundred and
seventy-seven.
SUBJECT : Proposal to impose a
final tax of 35% on certain interest and providing for the manner of
collection thereof chanroblesvirtualawlibrary
HIGHLIGHTS AND JUSTIFICATIONS OF PROPOSAL
I. RECOMMENDATION
To impose a tax on commercial papers used as principal instrument
issued in the primary market at the rate of 35% based on the gross
amount of interest stipulated in the aforesaid instrument. The said tax
shall be —
(1) assumed by the borrower thereby exempting the
lender;
(2) a final tax;
(3) allowed as a deductible item for purposes of
computing the borrower's taxable income.
II. JUSTIFICATION
(1) The proposal ismed primarily to improve the
administrative provisions of the National Internal Revenue Code to
ensure the collection on the tax on interest on commercial papers used
as principal instruments issued in the primary market. Presently, the
Bureau has no means of enforcing strictly the taxation on interest
income earned in the money market transactions.
(2) The proposal would mean an increase in revenue of
the government approximating P100 Million. The proceeds would boost the
socio-economic development of the government.
III. REVENUE ESTIMATES
The proposed would amount to an increase in revenue estimated at P100
Million.
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