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collection of Philippine laws, statutes and codes
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Chan Robles Virtual Law Library
PRESIDENTIAL DECREE NO. 1158
PRESIDENTIAL DECREE NO. 1158 - A
DECREE TO CONSOLIDATE AND CODIFY ALL THE INTERNAL REVENUE LAWS OF THE
PHILIPPINES
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chanroblesvirtualawlibrary
WHEREAS,
the present National Internal Revenue Code is the result of the first
codification of our tax laws dating back to the year 1939;chanroblesvirtualawlibrary
WHEREAS, there exists in the said Code a substantial number of
provisions which were rendered obsolete by recent amendments introduced
by various laws and presidential decrees;chanroblesvirtualawlibrary
WHEREAS, there are not innumerable tax laws enacted since the Code's
inception up to the present by various Republic Acts and Presidential
Decree that need consolidation and codification;chanroblesvirtualawlibrary
WHEREAS, it is imperative to adopt a consolidated tax code to integrate
such amendatory laws and decrees and to harmonize their provisions not
only for the proper guidance of the taxpayers but also for the
efficient administration thereof:cralaw:red
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of
the Philippines, by virtue of the powers in me vested by the
Constitution, do hereby order and decree as follows:cralaw:red
Section 1. Codification of all internal revenue laws.
— All internal revenue laws embodied in the present National Internal
Revenue Code and various laws and presidential decrees are hereby
consolidated and codified into a single tax code to be known as the
National Internal Revenue Code of 1977, which shall form an integral
part of this Decree.
Section 2. Effectivity. — The provisions of the
National Internal Revenue Code of 1977 shall take effect immediately
without prejudice, however, to the effectivity dates of the various
laws and decrees which have so far amended the provisions of National
Internal Revenue Code of 1939, as well as new revenue laws, as
consolidated with the National Internal Revenue Code of 1977.
Done in the City of Manila,
this 3rd day of June, in the year of Our Lord, nineteen hundred and
seventy-seven.
THE NATIONAL INTERNAL REVENUE CODE OF THE PHILIPPINES AS AMENDED by RA
Nos. 7496, 7497 & 7499, and other issuances
TITLE OF CODE
Section 1. Title of Code. — This Code shall be known
as National Internal Revenue Code of 1977.
TITLE I. ORGANIZATION AND FUNCTION OF BUREAU
Section 2. Chief Officials of the Bureau of Internal
Revenue. — The Bureau of Internal Revenue shall have a chief to be
known as Commissioner of Internal Revenue, and two assistant chiefs to
be known as Deputy Commissioner.
Section 3. Powers and Duties of Bureau. — The powers
and duties of the Bureau of Internal Revenue shall comprehend the
assessment and collection of all national internal revenue taxes, fees,
and charges, and the enforcement of all forfeitures, penalties, and
fines connected therewith including the execution of judgments in all
cases decided in its favor by the Court of Tax Appeals and the ordinary
courts. Said Bureau shall also give effect to and administer the
supervisory and police power conferred to it this Code or other laws.
Section 4. Specific Provisions to be Continued in
Regulations. — The regulations of the Bureau of Internal Revenue shall,
among other things, contain provisions specifying prescribing, or
defining:cralaw:red
(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 kept.
(b) The forms of labels, brands, or marks to be
required in goods subject to a specific tax, and the manner in which
the labeling, branding, or marking shall be effected. chanroblesvirtualawlibrary
(c) The conditions under which and the manner in
which goods intended for export, which if not exported would be subject
to a specific tax, shall be labelled, branded, or marked.
(d) The conditions to be observed by revenue
officers, provincial fiscal and other officials respecting the
institution and conduct of legal actions and proceedings.
(e) The conditions under which goods intended for
storage in bonded warehouses shall be conveyed thither, manner of
storage, and the method of keeping the entires 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 warehouses.
(f) The condition 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 of Internal Revenue, 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, any provision of Republic Act No. 5448 to the
contrary notwithstanding, 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.
(h) The conditions to be observed by revenue
officers, provincial fiscals, and other officials 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 prohibitions which the Commissioner of Internal Revenue 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, estate and gift taxes, specific taxes, percentage taxes,
documentary stamp taxes, mining taxes, taxes on banks, finance
companies, insurance companies, public utilities, taxes on amusements,
charges on forest products and such other taxes as may be added thereto
shall be paid through the collection agents of the Bureau of Internal
Revenue or through authorized agent commercial 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. chanroblesvirtualawlibrary
Section 5. Forms, Receipts, Certificates, and
Appliances. (a) Provision and Distribution to Proper Officials. — It
shall be the duty of the Commissioner, among other things, to
prescribe, provide, and distribute to the proper officials the
requisite licenses, internal revenue stamps, labels, all other forms,
certificates, bonds, records, invoices, books, receipts, instruments,
appliances and apparatus used in administering the laws falling within
the jurisdiction of the Bureau. For this purpose, internal revenue
stamps, strip stamps and labels shall be caused by the Commissioner to
be printed with adequate security features.
(b) Receipts for Payments Made. — It shall be the
duty of the Commissioner or his duly authorized representative to whom
any payment of any taxes is made under the provisions of this Code, to
issue to the person marking such payment a receipt, expressing the
amount paid and the particular account for which such payment was made.
(As amended by PD No. 1994)
Section 6. Agents and Deputies for Collection of
National Internal Revenue Taxes. — The following are hereby constituted
agents of the Commissioner of Internal Revenue:cralaw:red
(a) The Commissioner of Customs and his subordinates
with respect to the collection of national internal revenue taxes on
imported goods;chanroblesvirtualawlibrary
(b) The Commissioner of Land Transportation and his
subordinates with respect to the collection of energy tax; and
(c) Banks duly accredited by the Commissioner with
respect to receipt of payments of internal revenue taxes authorized to
be made thru banks.
Any officer or employee of a duly accredited bank assigned to receive
internal revenue tax payments and transmit tax returns or documents to
the Bureau of Internal Revenue shall be subject to the same sanctions
and penalties prescribed in Sections 268 and 269 of this Code. (As
amended by E.O. No. 273)
Section 7. Power of the Commissioner to Obtain
Information, Examine, Summon and Take Testimony. — For the purpose of
ascertaining the correctness of any return, making a return where none
has been made, determining the liability of any person for any internal
revenue tax, or collecting any such liability, the Commissioner is
authorized:cralaw:red
(1) To examine any book, paper, record or other data
which may be relevant or material to such inquiry;chanroblesvirtualawlibrary
(2) To obtain information from any office or officer
of the national and local governments, government agencies or its
instrumentalities including the Central Bank of the Philippines and
government owned or controlled corporations;chanroblesvirtualawlibrary
(3) 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;chanroblesvirtualawlibrary
(4) To take such testimony of the person concerned,
under oath, as may be relevant or material to such inquiry;
and chanroblesvirtualawlibrary
(5) 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. (As amended by PD No. 1994)
Section 8. Internal Revenue districts. — With the
approval of the Secretary of Finance, the Commissioner of Internal
Revenue shall divide the Philippines into such number of revenue
districts as may from time to time be required for administrative
purposes. Each of these districts shall be under the supervision of a
Revenue District Officer.
Section 9. Revenue Regional Director. — Under rules
and regulations, policies and standards formulated by the Commissioner
of Internal Revenue, the Revenue Regional Director shall, within the
region and district offices under his jurisdiction, among others:cralaw:red
(1) Implement laws, policies, plans, programs, rules
and regulations of the department or agencies in the regional area;chanroblesvirtualawlibrary
(2) Administer and enforce internal revenue laws and
regulations, including the assessment and collection of all internal
revenue taxes, charges and fees;chanroblesvirtualawlibrary
(3) Provide economical, efficient and effective
service to the people in the area;chanroblesvirtualawlibrary
(4) Coordinate with regional offices or other
departments, bureaus and agencies in the area;chanroblesvirtualawlibrary
(5) Exercise control and supervision over the
officers and employees within the region; and
(6) Perform such other function as may be provided
by law and as may be delegated by the Commissioner.
Section 10. Duties of Revenue District Officers and
other internal revenue officers. — It shall be the duty of every
Revenue District Officer or other internal revenue officers and
employees to see that all laws and regulations affecting national
internal revenue are faithfully executed and complied with, and tod in
the prevention, detection and punishment of frauds or delinquencies in
connection therewith.
It shall be the duty of every Revenue District Officer to examine into
the efficiency of all officers and employees of the Bureau of Internal
Revenue under his supervision, and to report in writing to the
Commissioner of Internal Revenue, 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.
Section 11. Authority of Revenue Examiner. — A
revenue examiner in any district may, in the name of the Revenue
District Officer in charge of such district and under the control of
such officer as his immediate superior, exercise any power or perform
any act which might be exercised or performed by such Revenue District
Officer himself.
Section 12. Assignment of internal revenue officers
to establishments where articles subject to specific tax are produced.
— The Commissioner of Internal Revenue shall employ and assign internal
revenue officers to regional offices and the Regional Director shall
assign them to establishments or places where articles subject to
specific tax are produced or kept.
Section 13. Assignment of internal revenue officers
and other employees to other duties. — The Commissioner of Internal
Revenue may, with the approval of the Secretary of Finance assign
internal revenue officers and other employees of the Bureau of Internal
Revenue without change in their official character or salary to such
special duties connected with the administration of the revenue laws as
the best interests of the service may require.
Section 14. Reports of violation of laws. — When an
internal revenue officer discovers evidence of a violation of this Code
or of any law or regulation administered by the Bureau of Internal
Revenue, of such character as to warrant the institution of criminal
proceedings, he shall immediately report the facts to the Commissioner
of Internal Revenue, through his immediate superior giving the name and
address of the offender and the names of the witnesses, if possible:
Provided, That in urgent cases, the Revenue Regional Director or
Revenue District Officer, as the case may be, may send the report to
the corresponding prosecuting officer. In the latter case, a copy of
his report shall be sent to the Commissioner of Internal Revenue.
It shall also be the duty of any officer or employee of the Bureau of
Internal Revenue to report to the Bureau of Forest Development any
violation of the Forestry Reform Code of the Philippines within his
knowledge. A duplicate of each such report shall be furnished the
Commissioner of Internal Revenue.
Section 15. Authority of internal revenue officers
to make arrests and seizures. — The Commissioner of Internal Revenue,
the Deputy Commissioners of Internal Revenue, the Revenue Regional
Directors, the Revenue District Officers and other internal revenue
officers shall have authority to make arrests and seizures for the
violation of any penal law or regulation administered by the Bureau of
Internal Revenue. Any person so arrested shall be forthwith brought
before a court, there to be dealt with according to law.
Section 16. Power of the Commissioner to make
assessments. — (a) Examination of returns and determination of tax. —
After a return is filed as required under the provisions of this Code,
the Commissioner shall examine it and assess the correct amount of the
tax. The tax or deficiency tax so assessed shall be paid upon notice
and demand from the Commissioner. Any return, statement or declaration
filed in any office authorized to receive the same shall not be
withdrawn: Provided, that the same may be modified or changed by filing
another amended return, statement or declaration.
(b) Failure to submit required returns, statements,
reports and other documents. — When a report required by law as a basis
for the assessment of any national internal revenue tax shall not be
forthcoming within the time fixed by law or regulation or when there is
reason to believe that any such report is false, incomplete or
erroneous, the Commissioner shall assess the proper tax on the evidence
obtainable.
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 documents, 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.
(c) Authority to conduct inventory taking,
surveillance and to prescribe presumptive gross sales and receipts. —
The Commissioner may at any time during the taxable year, order
inventory taking of goods of any taxpayer as a basis for determining
his internal revenue tax liabilities or may place the business
operations of any person, natural or juridical, under observation or
surveillance if there is reason to believe that such person is not
declaring his correct income, sale, or receipts for internal revenue
tax purposes. The findings may be used as a basis for assessing the
taxes for the other months or quarters of the same or different taxable
years and such assessment shall be deemed prima facie correct.
When it is found that a person has failed to issue receipt and invoices
in violation of the requirements of Sections 108 and 238 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 business 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 correct internal revenue
tax liabilities of such person.
(d) Authority to terminate taxable period. — When it
shall come to the knowledge of the Commissioner that a taxpayer is
retiring from the business subject to tax or intends to leave the
Philippines, or remove his property therefrom, or hide or conceal his
property, or perform any act tending to obstruct the proceedings for
the collection of the tax for the past or current quarter or year, or
render the same totally or partly ineffective unless such proceedings
are begun immediately, the Commissioner shall declare the tax period of
such taxpayer terminated at any time and shall send the taxpayer a
notice of such decision, together with a request for the immediate
payment of the tax for the period so declared terminated and the tax
for the preceding year or quarter, or such portion thereof as may be
unpaid, and said taxes shall be due and payable immediately and shall
be subject to all the penalties hereafter prescribed, unless paid
within the time, fixed in the demand made by the
Commissioner. chanroblesvirtualawlibrary
(e) Authority of the Commissioner to prescribe real
property values. — The Commissioner is hereby authorized to divide the
Philippines into different zones or areas and shall, upon consultation
with competent appraisers both from private and public sectors,
determine the fair market value of real properties located in each zone
or area. For purposes of computing any internal revenue tax the value
of the property shall be whichever is the higher of:cralaw:red
(1) The fair market value determined by the
Commissioner; or
(2) The fair market value as shown in the schedule of
values of the Provincial and City Assessors.
(f) Authority of the Commissioner to inquire into
bank deposit accounts. — The provisions of Republic Act No. 1405 to the
contrary notwithstanding, the Commissioner is hereby authorized to
inquire into the bank deposits of a decedent for the purpose of
determining the gross estate of such decedent.
In case a taxpayer offers to compromise the payment of his tax
liabilities on the ground that his financial position demonstrates a
clear inability to pay the tax assessed, his offer shall not be
considered unless he waives his privilege under the said law and such
waiver shall serve as authority of the Commissioner to inquire into the
bank deposits of said taxpayer.
(g) Authority to accredit and register tax agents. —
The Commissioner may require prior accreditation and registration,
based on competence and moral fitness, of person and general
professional partnerships or their representatives in the preparation
and filing of required tax returns, statements, reports, memoranda, or
in appearing or in filing protests or papers with the Bureau for
taxpayers. For this purpose, the Commissioner is empowered to create
national and regional accreditation boards and to designate from among
the ranks of senior officials of the Bureau, one chairman and two
members in each board and issue the necessary rules and regulations
subject to the approval of the Secretary of Finance.
(h) Authority of the Commissioner to prescribe
additional procedural or documentary requirements. — The Commissioner
may prescribe the manner of compliance with any documentary or
procedural requirements in connection with the submission or
preparation of financial statements accompanying the tax returns. (As
amended by E.O. No. 273)
Section 17. Authority of officers to administer
oaths and take testimony. — The Commissioner of Internal Revenue,
Deputy Commissioners, Service Chiefs, Assistant Service Chiefs, Revenue
Regional Directors, Assistant Revenue Regional Directors, Chiefs and
Assistant Chiefs of Division, Revenue District Officers, special
deputies of the Commissioner, internal revenue officers and any other
employee of the Bureau thereunto especially deputized by the
Commissioner shall have power to administer oaths and to take testimony
in any official matter or investigation conducted by them touching any
matter within the jurisdiction of the Bureau.
Section 18. Contents of Commissioner's annual
report. — The annual report of the Commissioner of Internal Revenue
shall contain a detailed statement of the collections and disbursements
of the Bureau with specifications of the sources of revenue and classes
of disbursements. chanroblesvirtualawlibrary
Section 19. Sources of revenue. — The following
taxes, fees and charges are deemed to be national internal revenue
taxes:cralaw:red
(a) Income tax;chanroblesvirtualawlibrary
(b) Estate and gift taxes;chanroblesvirtualawlibrary
(c) Excise taxes;chanroblesvirtualawlibrary
(d) Taxes on business;chanroblesvirtualawlibrary
(e) Documentary stamp taxes;chanroblesvirtualawlibrary
(f) Mining taxes; and
(g) Miscellaneous taxes, fees and charges, namely:
taxes on banks, finance companies, insurance companies, franchise
taxes, taxes on amusements, and charges on forest products, tobacco
inspection fees and such other taxes as are or hereafter may be imposed
and collected by the Bureau of Internal Revenue. (As amended by PD. No.
1994)
TITLE II. TAX ON INCOME
CHAPTER I
DEFINITIONS
Section 20. Definitions. — When used in this Title —chanroblesvirtualawlibrary
(a) The term "person" means an individual, a trust,
estate, or corporation.
(b) The term "corporation" includes partnership, 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.
(c) The term "domestic", when applied to a
corporation, means created or organized in the Philippines or under its
laws.
(d) The term "foreign" when applied to a corporation,
means a corporation which is not domestic.
(e) (1) The term "non-resident citizen" means one
who establishes to the satisfaction of the Commissioner the fact of his
physical presence abroad with a definite intention to reside thereto.
(2) A citizen leaving the Philippines during the
taxable year to reside abroad, either as an immigrant or for employment
on a more or less permanent basis and contract workers whose contract
of employment are renewed from time to time within or during the
taxable year under such circumstances as to require them to be
physically present abroad most of the time during the taxable year,
shall be considered as a nonresident for such taxable year with respect
to the income he derived from foreign sources from the date he actually
departed from the Philippines.
(3) A citizen who has been previously considered as
non-resident citizen and who arrives in the Philippines at any time
during the taxable year to reside permanently in the Philippines shall
likewise be treated as a non-resident citizen for the taxable year in
which he arrives in the Philippines with respect to his income derived
from sources abroad until the date of his arrival in the Philippines.
(4) The taxpayer shall submit proof to the
Commissioner of Internal Revenue 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 resident is within the Philippines and who is not a citizen
thereof.
(g) The term "non-resident alien" means an individual
whose residence is not within the Philippines and who is not a citizen
thereof.
(h) The term "resident foreign corporation" applies
to a foreign corporation engaged in trade or business within the
Philippines.
(i) The term "non-resident foreign corporation"
applies to a foreign corporation not engaged in trade or business
within the Philippines. chanroblesvirtualawlibrary
(j) The term "fiduciary" means a guardian trustee,
executor, administrator, receiver, conservator, or any person acting in
any fiduciary capacity for any person.
(k) The term "withholding agent" means any person
required to deduct and withhold any tax under the provision of section
fifty-one.
(l) The term "stock" includes the share in an
association, joint-stock company, or insurance company.
(m) The term "shareholder" includes a member in an
association, joint-stock company, or insurance company.
(n) The term "taxpayer" means any person subject to
tax imposed by this Title.
(o) The terms "including, 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 regulations prescribed by
the Department of Finance, the period for which such return is made.
(q) The term "fiscal year" means an accounting period
for twelve months ending on the last day of any months other than
December.
(r) The term "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.
(u) The term "dealer in securities" means a merchant
of stocks or securities, whether an individual, partnership or
corporation, with an established place of business, regularly engaged
in the purchase of securities and their resale to customers; that is,
one who as a merchant buys securities and sells them to customers with
a view to the gains and profits that may be derived
therefrom. chanroblesvirtualawlibrary
(v) The term "bank" means every banking institution
as defined in Section 2 of the General Banking Act, Republic Act 337,
as amended. A bank may either be a commercial bank, a thrift bank, a
development bank, a rural bank or a specialized government bank.
(w) The term "non-bank financial intermediary" means
financial intermediary as defined in Section 2-D (c) of the General
Banking Act, R.A. No. 337, as amended, authorized by the Central Bank
of the Philippines to perform quasi-banking activities.
(x) The term "quasi-banking activities" means
borrowing funds from twenty 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 borrowers' 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 financial their own needs or the needs of
their agents or dealers, shall not be considered as performing
quasi-banking functions.
(y) "deposit substitutes" shall mean an alternative
form of obtaining funds from the public, other than deposit, 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 banker's acceptances, promissory notes, repurchase
agreement, certificates of assignment or participation and similar
instruments with recourse as may be authorized by the Central Bank of
the Philippines, for banks and non-bank financial intermediaries or by
the Securities and Exchange Commission of the Philippines for
commercial, industrial, finance companies and other non-financial
companies: Provided, however, That only debt instruments issued for
inter-bank call loans to cover deficiency in reserves considered those
between or among banks and quasi-banks shall not be considered as
deposit substitute debt instruments. (As added by PD No. 1959)
(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 34 (a). 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 34 (a). 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 provision of this Title, as "ordinary loss"
shall be treated as loss from the sale or exchange of property which is
not a capital asset. (As added by Executive Order No. 37, July 31,
1986) chanroblesvirtualawlibrary
CHAPTER II
TAX ON INDIVIDUALS
Section 21. Tax on citizens or residents. — (a)
Taxable compensation income. — A tax is hereby imposed upon the taxable
compensation income as defined in Section 27, other than the incomes
subject to tax under paragraphs (b), (c), (d), (e) and (f) of this
section, received during each taxable year from all sources determined
in accordance with the following schedule:cralaw:red
Not over P2,500 0%
Over P2,500 but not over P5,000 1%
Over P5,000 but not over P10,000 P25
+ 3% of excess over P5,000
Over P10,000 but not over P20,000 P175
+ 7% of excess over P10,000
Over P20,000 but not over P40,000 P875
+ 11% of excess over P20,000
Over P40,000 but not over P60,000 P3,075+ 15%
of excess over P40,000
Over P60,000 but not over P100,000 P6,075+ 19%
of excess over P60,000
Over P100,000 but not over P250,000 P13,675+24% of
excess over 100,000
Over P250,000 but not over P500,000 P49,675+29% of
excess over 250,000
Over P500,000 P122,175+35% of excess over P500,000
(As amended by R.A. 7496, May 18, 1992)
In the case of married individuals, the husband and wife, subject to
the provision of Section 44 (d) hereof, shall compute separately their
individual income tax based on their respective total taxable incomes;
Provided, That if any income can not be definitely attributable to, or
identifiable as income exclusively earned or realized by either of the
spouses, the same shall be divided equally between the spouses for the
purpose of computing their respective taxable income. (As amended by
R.A. 7497)
(b) Foreign source gross income derived by a
non-resident citizen. — A tax is hereby imposed upon the taxable income
derived by a non-resident citizen from all sources without the
Philippines during each taxable year computed in accordance with the
following schedule: If the amount subject to tax is:cralaw:red
Not over U.S. $6,000.00 1%
Over U.S. $6,000.00 but not over
U.S. $20,000.00 U.S. $60
plus 2%
of excess over
U.S. $6,000
Over U.S. $20,000.00 U.S. $340 plus 3%
of excess over
U.S. $20,000
(c) Certain passive incomes. — A tax at the rate
prescribed below is hereby imposed upon the amount of the following
items of gross income received by a citizen or resident alien from
sources within the Philippines: chanroblesvirtualawlibrary
(1) Interest from any Philippine currency bank
deposit and yield or any other monetary benefit from deposit
substitutes and from trust fund and similar arrangements; royalties,
prizes (except prizes amounting to P3,000 or less which shall be
subject to tax under paragraph (a) and other winnings (except
Philippine Charity Sweepstakes winnings) — 20% and
(2) Dividends received from a domestic corporation
and the share of an individual partner in a partnership subject to tax
under Section 24 (a) at the rate of 15% in 1986; 10% effective January
1, 1987; 5% effective January 1, 1988; and 0% effective January 1,
1989.
(d) Capital gains from sales of shares of stock. —
The provisions of Section 33 (b) notwithstanding, capital gains
realized from the sale, exchanges or disposition of shares of stocks in
any domestic corporation shall be taxed as follows:cralaw:red
(1) Net capital gain as defined in Section 33 (a) (2)
realized during each taxable year from the sale, exchange or other
disposition of shares of stock not traded through a local stock
exchange:cralaw:red
Not over P100,000 10%
Over P100,000 20%
(2) Capital gains presumed to have been realized from
the sale, exchange or disposition of shares of stock listed and traded
through a local stock exchange — 1/4 of 1% based on the gross selling
price of the share or shares of stock.
(e) Capital gains from sales of real property. — The
provisions of Section 33 (b) notwithstanding, capital gains presumed to
have been realized from the sale, exchange or other disposition of real
property located in the Philippines classified as capital assets,
including pacto de retro sales and other forms of conditional sales, by
individuals, including estate and trust, shall be taxed at the rate of
5% based on the gross selling price or the fair market value prevailing
at the time of sale, whichever is higher. Provided, That the tax
liability, if any, on gains from sales or other dispositions of real
property to the government or any of its political subdivisions or
agencies or to government-owned or controlled corporations shall be
determined either under Section 21 (a) or under this sub-section, at
the option of the taxpayer. chanroblesvirtualawlibrary
(f) Simplified Net Income tax for the Self-Employed
and for Professionals Engaged in the Practice of Profession. — A tax is
hereby imposed upon the taxable net income as determined in Section 27
received during each taxable year from all sources, other than income
covered by paragraph (b), (c), (d) and (e) of this section by every
individual whether a citizen of the Philippines or an alien residing in
the Philippines who is self-employed or practices his profession herein
determine in accordance with the following schedule:cralaw:red
Not over P100,000 3%
Over P10,000 but not over P30,000 P300+9%of excess
over P10,000
Over P30,000 but not over P120,000 P2,100 + 15% of
excess over P30,000
Over P120,000 but not over P350,000 P15,600+20% of
excess over P120,000
Over P350,000 P61,600+30% of excess over P350,000
(As added by Republic Act No. 7496, May 18, 1992)
Section 22. Tax on non-resident alien individuals. —chanroblesvirtualawlibrary
(a) Non-resident alien engaged in trade or business
within the Philippines: (1) In general. — Non-resident aliens engaged
in trade or business in the Philippines shall be subject to tax in the
same manner as resident citizens and aliens on taxable income received
from all sources within the Philippines, except capital gains realized
from buying and/or selling shares of stock of Philippine corporations
listed in the dollar or any foreign currency board of stock exchange:
Provided, That for purposes of this Title, a non-resident alien
individual who shall come to the Philippines and stay therein for an
aggregate period of more than 180 days during any calendar year shall
be deemed a non-resident alien doing business in the Philippines,
Section 20 (g) of this Code notwithstanding.
(2) Dividends, share in the net profits of a taxable
partnership, interest, royalties, prizes and other winnings. —
Dividends from a domestic corporation, share in the net profits of a
partnership taxable under Section 24 (a) interest, royalties (in any
form) and prizes (except prizes amounting to P3,000 or less which shall
be subject to tax under paragraph (a) of Section 21) and other winnings
(except Philippine Charity Sweepstakes winnings), shall be subject to a
tax of thirty percent (30%) on the total amount thereof.
(3) Capital gains. — Capital gains realized sales of
shares of stock in domestic corporations and real properties shall be
subject to the tax prescribed under Sub-sections (d) and (e) of Section
21.
(b) Non-resident aliens not engaged in trade or
business within the Philippines. — There shall be levied, collected and
paid for each taxable year upon the entire income received from all
sources within the Philippines by every non-resident alien individual
not engaged in trade or business within the Philippines as interest,
dividends, rents, salaries, wages, premiums, annuities, compensation,
remuneration, emoluments, or other fixed or determinable annual or
periodical or casual gains, profits, and income, and capital gains
(except capital gains realized from buying and/or selling shares of
stock of Philippine corporation listed in the dollar or any acceptable
foreign currency board of any stock exchange), a tax equal to 30% of
such income: Provided, That capital gains realized from sales of shares
of stocks in any domestic corporation and real property shall be
subject to the tax prescribed under Sub-sections (d) and (e) of Section
21. chanroblesvirtualawlibrary
(c) Aliens employed by regional or area headquarters
of multinational corporations. — There shall be levied, collected and
paid for each taxable year upon the gross income received by every
alien individual employed by regional or area, headquarter established
in the Philippines, by multinational corporations as salaries, wages,
annuities, compensation, remuneration and other emoluments, such as
honoraria and allowances, from such regional or area headquarters, a
tax equal to 15% of such gross income: Provided, That the activities of
the said regional headquarters or area headquarters shall be limited to
acting as supervisory, communications and coordinating center for their
affiliates, subsidiaries or branches of such multi-national
corporations. For purposes of this chapter, the term "multinational
corporation" means a foreign firm or entity, engaged in international
trade with affiliates or subsidiaries or branch office in the Asia
Pacific Region.
(d) Aliens employed by offshore banking units. —
There shall be levied, collected and paid for each taxable year upon
the gross income recovered by every alien individual employed by
offshore banking units established in the Philippines as salaries,
wages, annuities, compensation, remuneration and other emoluments, such
as honoraria and allowances, from such offshore banking units, a tax
equal to 15% of such gross income.
(e) Aliens employed by petroleum service contractors
and subcontractors. — Aliens who are permanent residents of a foreign
country but who are employed and assigned in the Philippines by service
contractors or by subcontractors engaged in petroleum operations in the
Philippines shall be liable to a tax of 15% of the salaries, wages,
annuities, compensation, remuneration and other emoluments, such as
honoraria and allowances, received from such contractors or
subcontractors.
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 the National Internal Revenue Code, as amended.
Section 23. Tax liability of members of general
professional partnership. — (a) Persons exercising a common profession
in general partnership shall be liable for income tax only in their
individual capacity, and the share in the net profits of the general
professional partnership to which any taxable partner would be entitled
whether distributed or otherwise, shall be returned for taxation and
the tax paid in accordance with the provisions of this Title.
(b) In determining his distributive share in the net
income of the partnership, each partner —chanroblesvirtualawlibrary
(1) Shall take into account separately his
distributive share of the partnership's income, gain, loss, deduction,
or credit to the extent provided by the pertinent provisions of this
Code, and
(2) Shall be deemed to have elected the itemized
deductions, unless he declares his distributive share of the gross
income undiminished by his share of the deductions. chanroblesvirtualawlibrary
CHAPTER III
TAX ON CORPORATIONS
Section 24. Rates of tax on domestic corporations. —chanroblesvirtualawlibrary
(a) In general. — Unless otherwise provided, a tax of
35% is hereby imposed upon the taxable income received during each
taxable year from all sources within and without the Philippines by
every corporation organized in, or existing under the laws of the
Philippines, and partnership, no matter how created or organized, but
not including general professional partnerships.
(b) Private Educational Institutions. — Private
educational institutions, whether stock or non-stock, shall pay a tax
of 10% on their taxable income except those covered by paragraph (e)
hereof: Provided, That if the gross income from unrelated trade,
business or other activity exceeds 50% of the total gross income
derived by any educational institution from all sources, the tax
prescribed in paragraph (a) hereof shall be imposed on the entire
taxable income of the educational institution. For purposes of this
paragraph, the term, "unrelated trade, business or other activity"
means any trade, business or other activity, the conduct of which is
not substantially related to the exercise or performance by such
educational institution of its educational purpose or function. A
private educational institution is any "private school" maintained and
administered by private individuals or group issued a permit to operate
by the Department of Education, Culture and Sports (DECS) in accordance
with existing laws and regulations.
(c) Government-owned or controlled corporations
agencies on instrumentalities. — The provisions of existing special or
general laws to the contrary notwithstanding, all corporate taxpayers
not specifically exempt under Section 26 of this Code shall pay the
rates provided in this Section. All corporations, agencies, or
instrumentalities owned or controlled by the Government, including the
Government Service Insurance System and the Social Security System,
shall pay such rate of tax upon their taxable income as are imposed by
this section upon associations or corporations engaged in a similar
business, industry, or activity.
(d) Mutual life insurance companies. — Mutual life
insurance companies organized in and existing under the laws of the
Philippines shall pay a tax of 10% of their gross investment income
consisting of interest, dividends, rents, net capital gains, and income
from any other business than life insurance derived from all sources,
except those covered by paragraph (e) hereof.
(e) Tax on certain incomes derived by domestic
corporations. — (1) Interest from deposits and yield or any other
monetary benefit from deposit substitutes and from trust fund and
similar arrangements, and royalties. — Interest on Philippine currency
bank deposits and yield or any other monetary benefit from deposit
substitutes and from trust fund and similar arrangements received by
domestic corporations; and royalties, derived from sources within the
Philippines, shall be subject to a 20% tax.
(2) Capital gains from sales of shares of stock. —
Capital gains realized from sale, exchange or disposition of shares of
stocks in any domestic corporation shall be taxed as follows:cralaw:red
(A) Net capital gains as defined in Section 33 (a)
(2) realized during each taxable year from sale or exchange or other
disposition of shares of stock not traded through a local stock
exchange: chanroblesvirtualawlibrary
Not over P100,000 10%
Over P100,000 20%
(B) Capital gains presumed to have been realized from
the sale, exchange or disposition of share of stock listed and traded
through a local stock exchange — 1/4 of 1% based on the gross selling
price of the share or shares of stock.
(3) Tax on income derived under the Expanded Foreign
Currency Deposits System. — Income derived by a depository bank under
the expanded foreign currency deposit system from foreign currency
transactions with non-residents, off-shore banking units in the
Philippines, local commercial banks including branches of foreign banks
that may be authorized by the Central Bank to transact business with
foreign currency depository system units and other depository bank
under the expanded foreign currency deposit system shall be exempts
from all taxes, except taxable income from such transactions as may be
specified by the Secretary of Finance, upon recommendation of the
Monetary Board to be subject to the used income tax payable by banks:
Provided, That interest income from foreign currency loans granted by
such depository banks under said expanded system to residents (other
than off-shore banking units in the Philippines or other depository
banks under the expanded system) shall be subject to a 10% tax.
Any income of non-residents from transactions with depository banks
under the expanded system shall be exempt from income tax.
(4) Intercorporate dividends. — Dividends received by
a domestic corporation from another domestic corporation shall not be
subject to tax.
Section 25. Rates of tax on foreign corporation. —chanroblesvirtualawlibrary
(a) Tax on resident foreign corporations (1) In
general. — Unless otherwise provided, a corporation organized, or
existing under the laws of any foreign country, engaged in trade or
business within the Philippines, shall be subject to a tax equivalent
to 35% of the taxable income derived in the preceding taxable year from
all sources within the Philippines.
(2) International carriers. — International carries
doing business in the Philippines shall pay a tax of two and one-half
percent (2 ½%) on their "Gross Philippine Billings" as defined
hereunder:cralaw:red
(A) Internationalr carrier. — "Gross Philippine
Billings" means gross revenue realized from uplifts of passengers
anywhere in the world and excess baggage, cargo and mail originating
from the Philippines, covered by passage documents sold in the
Philippines: Provided, That documents sold outside the Philippines
under a "prepaid ticket advice" scheme for passengers originating from
the Philippines shall be considered as documents sold in the
Philippines. Gross revenue from chartered flights originating from the
Philippines shall likewise form part of the "Gross Philippine Billings"
regardless of the place of sale or payment of the passage documents.
For purposes of determining the taxability of revenue from chartered
flights, the term "originating from the Philippines" shall include
flights of passengers who stay in the Philippines for more than
forty-eight (48) hours prior to embarkation.
(B) International Shipping. —"Gross Philippine
Billings" means gross revenue whether for passenger, cargo or mail
originating from the Philippines up to final destination, regardless of
the place of sale or payments of the passage or freight
documents. chanroblesvirtualawlibrary
(3) Foreign mutual life insurance companies. —
Foreign mutual life insurance companies authorized to carry business in
the Philippines shall pay a tax of 10% on their gross investment income
derived from sources within the Philippines except those covered by
subsection (6) hereof.
(4) Offshore banking units. — The provisions of any
law to the contrary notwithstanding, income derived by off-shore
banking units authorized by the Central Bank of the Philippines from
foreign currency transactions with non-residents, other offshore
banking units, local commercial banks, including branches of foreign
banks that may be authorized by the Central Bank to transact business
with offshore banking units shall be exempt from all taxes except
taxable income from such transactions as may be specified by the
Secretary of Finance, upon recommendation of the Monetary Board, to be
subject to the normal income tax payable by banks: Provided, That any
interest income derived from foreign currency loans granted to
residents other than offshore banking units or local branches of
foreign banks that may be authorized by the Central Bank of the
Philippines to transact business with offshore banking units, shall be
subject only to a 10% tax.
Any income of non-residents from transactions with said offshore
banking units shall be exempt from income tax.
(5) Tax on branch profits remittances. — Any profit
remitted by a branch to its head office shall be subject to a tax of
15% (except those registered with the Export Processing Zone
Authority): Provided, That any profit remitted by a branch to its head
office authorized to engage in petroleum operations in the Philippines
shall be subject to tax at 71/2%. In both cases, the tax shall be
collected and paid in the same manner as provided in Sections 51 and 52
of this Code: and Provided, further, That interests, dividends, rents,
royalties, including remuneration, for technical services, salaries,
wages, premiums, annuities, emoluments or other fixed or determinable
annual, periodical or casual gains, profits, income and capital gains
received by a foreign corporation during each taxable year from all
sources within the Philippines shall not be considered as branch
profits unless the same are effectively connected with the conduct of
its trade or business in the Philippines.
(6) Tax on certain incomes received by resident
foreign corporations. (A) Interest from deposits and yield or any other
monetary benefits from deposit substitutes, trust funds and similar
arrangements and royalties. — Interest on Philippine currency bank
deposits and yield or any other monetary benefit from deposit
substitutes and from trust fund and similar arrangements and royalties
derived from sources within the Philippines shall be subject to a 20%
tax.
(B) Income derived under the Expanded Foreign
Currency Deposit System. — Income derived by a depository bank under
the expanded foreign currency deposit system from foreign currency
transactions with non-residents, offshore banking units in the
Philippines, local commercial banks including branches of foreign banks
that may be authorized by the Central Bank of the Philippines to
transact business with foreign currency depository system units and
other depository banks under the expanded foreign currency deposit
system shall be exempt from all taxes, except taxable income from such
transactions as may be specified by the Secretary of Finance, upon
recommendation of the Monetary Board to be subject to the usual income
tax payable by banks: Provided, That interest income from foreign
currency loans granted by such depository banks under said expanded
system to residents (other than offshore banking units in the
Philippines or other depository banks under the expanded system) shall
be subject to a 10% tax.
Any income of non-residents from transactions with depository banks
under the expanded system shall be exempt from income tax.
(C) Capital gains from sales shares of stock. —
capital gains realized from sale, exchange or disposition of shares of
stock in any domestic corporation shall be taxed as
follows: chanroblesvirtualawlibrary
(i) Net capital gains as defined in Section 33 (a)
(2) realized during each taxable year from sale or exchange or other
disposition of shares of stocks not traded through a local stock
exchange shall be taxes as follows:cralaw:red
Not over P100,000 10%
Over P100,000 20%
(ii) Capital gains presumed to have been realized
from the sale, exchange or disposition of shares stock listed and
traded through a local stock exchange — 1/4 of 1% based on the gross
selling price of the share or shares of stock.
(D) Intercorporate Dividends. — Dividends received by
a resident foreign corporation from a domestic corporation liable to
tax under this Code shall not be subject to tax under this Title.
(b) Non-resident foreign corporations. — (1) In
general. — Unless otherwise provided, a foreign corporation not engaged
in trade or business in the Philippines shall pay a tax equal to 35% of
the gross income received during each taxable year from all sources
within the Philippines such as interest, dividends, rents, royalties,
salaries, premiums (except reinsurance premiums), annuities, emoluments
or other fixed or determinable annual, periodical or casual gains,
profits and income, and capital gains, except capital gains subject to
tax under subparagraph 5 (C).
(2) Non-resident cinematographic films owners,
lessors or distributors. — Cinematographic film owners, lessors, or
distributors shall pay a tax of 25% of their gross income from all
sources within the Philippines.
(3) Non-resident owners of vessels chartered by
Philippine nationals. — Rentals, charter fees derived by non-resident
owners of vessels chartered by Philippine nationals and which charter
or lease has been duly approved by the Maritime Industry Authority
shall be subject to a 4.5% tax.
(4) Non-resident lessors ofrcrafts, machineries and
other equipment. — Rentals, charter and other fees derived by
non-resident lessors ofrcrafts, machineries and other equipment shall
be subject to a tax of not less than 5% but not more than 10% to be
fixed and determined by the President upon recommendation of the
Secretary of Finance: Provided, That the rate of 7 ½% shall be
imposed on such rentals, charter and other fees until such time as the
President shall have prescribed the rates appropriate for each category
of property.
(5) Tax on certain incomes received by non-resident
foreign corporations. — (A) Interest on foreign loans contracted on or
after August 1, 1986 shall be subject to a 20% tax;chanroblesvirtualawlibrary
(B) On dividends received from a domestic corporation
liable to tax under this Chapter, the tax shall be 15% of the dividends
received, which shall be collected and paid as provided in Section 50
(a) of the National Internal Revenue Code, as amended, subject to the
condition that the country in which the non-resident foreign
corporation is domiciled shall allow a credit against the tax due from
the non-resident foreign corporation, taxes deemed to have been paid in
the Philippines equivalent to 20% which represents the different
between the regular tax (35%) on corporations and the tax (15%) on
dividends as provided in this subparagraph;chanroblesvirtualawlibrary
(C) Capital gains realized from sale, exchange or
disposition of shares of stock in any domestic corporation shall be
subject to tax as follows:cralaw:red
(i) Net capital gains as defined in Section 33 (a)
(2) realized during each taxable year from sale or exchange or other
disposition of shares of stocks not traded through a local stock
exchange: chanroblesvirtualawlibrary
Not over P100,000 10%
Over P100,000 20%
(ii) Capital gains presumed to have been realized
from the sale, exchange or disposition of shares of stock listed and
traded through a local stock exchange — 1/4 1% based on the gross
selling price of the share or shares of stock. (As amended by E.O. No.
37).
Section 26. Exemptions from tax on corporations. —
The following organizations shall not be taxed under this Title in
respect to income received by them as such —chanroblesvirtualawlibrary
(1) Government educational institution. (As added by
E.O. No. 37)
(a) Labor, agriculture, or horticultural organization
not organized principally for profit;chanroblesvirtualawlibrary
(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;chanroblesvirtualawlibrary
(c) Fraternal beneficiary society, order or
association, operating under the lodge system or for the exclusive
benefit of the members of a fraternity itself operating under the lodge
system and providing for the payment of life, sickness, accident, or
other benefits to the members of such society, order, or association,
or their dependents;chanroblesvirtualawlibrary
(d) Cemetery company owned and operated exclusively
for the benefit of its members;chanroblesvirtualawlibrary
(e) Corporation or association organized and operated
exclusively for religious, charitable, scientific, athletic, or
cultural purposes, or for the rehabilitation of veterans, no part of
the net income of which inures to the benefit of any private
stockholder or individual;chanroblesvirtualawlibrary
(f) Business league, chamber of commerce, or board of
trade, not organized for profits and no part of the net income of which
inures to the benefit of any private stockholder or individual:cralaw:red
(g) Civic league or organization not organized for
profit but operated exclusively for the promotion of social welfare;chanroblesvirtualawlibrary
(h) Club organized and operated exclusively for
pleasure, for recreation, and other non-profitable purposes, no part of
the net income of which inures to the benefit of any private
stockholder or member; chanroblesvirtualawlibrary
(i) 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;chanroblesvirtualawlibrary
(j) Farmers,' fruit growers', or like associations
organized and operated as a sales agent for the purpose of marketing
the products of its members and turning back to them the proceeds of
sales, less the necessary selling expenses, on the basis of the
quantity of produced finished by them;chanroblesvirtualawlibrary
(k) Corporation or association organized for the
exclusive purpose of holding title to property, collecting income
therefrom, and turning over the entire amount thereof less expenses, to
an organization which is itself exempt from the tax imposed by this
Title.
Notwithstanding the provisions in the preceding paragraphs, the income
of whatever kind and character of the foregoing organizations from any
of their properties, real or personal, or from any of their activities
conducted for profits, regardless of the disposition made of such
income, shall be subject to tax imposed under this Code.
CHAPTER IV
COMPUTATION OF TAXABLE COMPENSATION INCOME AND NET INCOME
Section 27. Taxable Income. — The term "taxable
income" means the pertinent items of gross income specified in this
Code less the deductions, if any, authorized by such type of income by
this Code or other special laws: Provided, That for purposes of Section
21 (b) "taxable income" means gross income from all sources without the
Philippines less the deductions allowed in Section 29 (m). (As amended
by E.O. No. 37)
Section 28. Gross Income. — (a) General definition. —
Gross income means all income from whatever source derived, including
(but not limited to) the following items:cralaw:red
(1) Compensation for services, including fees,
commissions, and similar items;chanroblesvirtualawlibrary
(2) Gross income derived from business;chanroblesvirtualawlibrary
(3) Gains derived from dealing in property;chanroblesvirtualawlibrary
(4) Interest;chanroblesvirtualawlibrary
(5) Rents;chanroblesvirtualawlibrary
(6) Royalties;chanroblesvirtualawlibrary
(7) Dividends;chanroblesvirtualawlibrary
(8) Annuities;chanroblesvirtualawlibrary
(9) Prizes and winnings;chanroblesvirtualawlibrary
(10) Pensions; and
(11) Partner's distributive share of the gross income
of 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:cralaw:red
(1) Life insurance. — The proceeds of life insurance
policies paid to the heirs or beneficiaries upon death of the insured,
whether in a single sum or otherwise, but if such amount are held by
the insurer under an agreement to pay interest thereon, the interest
payments shall be included in gross income.
(2) Amount received by insured as return of premium.
— The amount received by the insured, as a return of premiums paid by
him under life insurance, endowment, or annuity contracts, either
during the term or at the maturity of the term mentioned in the
contract or upon surrender of the contract.
(3) Gifts, bequests, and devises. — The value of
property acquired by gift, bequest, devise, or descent; but the income
from such property shall be included in gross income.
(4) Interest on Government securities. — Interest
upon the obligations of the Government of the Republic of the
Philippines or any political subdivisions thereof, but in the case of
such obligations issued after the approval of this Code, only to the
extent provided in the Act authorized the issue thereof.
(5) Compensation for injuries or sickness. — Amount
received through Accident or Health Insurance or under Workmen's
Compensation Acts, as compensation for personal injuries or sickness,
plus the amount of any damage received whether by suit or agreement on
account of such injuries or sickness.
(6) Income exempt under treaty. — Income of any kind,
to the extent required by any treaty obligation binding upon the
Government of the Philippines.
(7) Retirement benefits, pensions, gratuities, etc. —
(A) Retirement benefits received by officials and employees of private
firms whether individuals 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 10 years and is not less than 50 year 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 one. 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, where contributions are
made by such employer for 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 official 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 due to 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
non-resident 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 to any person residing
in the Philippines under the laws of the United States administered by
the United States Veterans Administration.
(E) Payments of benefits made under the Social
Security Act of 1954, as amended.
(F) Benefits received from the GSIS and the
retirement gratuity received by government officials and employees.
(8) Miscellaneous items. —chanroblesvirtualawlibrary
(A) Income received from their investments in the
Philippines in loans stocks, bonds or other domestic securities, or
from interest on their deposits in banks in the Philippines by (i)
foreign governments, (ii) financing institutions owned, controlled, or
enjoying refinancing from them, and (iii) international or regional
financing institutions established by governments.
(B) Income derived from any public utility or from
the exercise of any essential government function accruing to the
Government of the Philippines or to any political subdivision thereof.
(C) Income derived as rewards under Section 316 (now
281) of this Code, as amended.
(D) Interest earned from deposits maintained with a
bank under the expanded foreign currency deposit system.
(E) Prizes and awards made primarily in recognition
of religious, charitable, scientific, educational, artistic, literary,
or civic achievement but only if:cralaw:red
(i) The recipient was selected without any action on
his part to enter the contest or proceeding; and
(ii) The recipient is not required to render
substantial future services as a condition to receiving the prize or
award.
Section 29. Deductions from gross income. — In
computing taxable income subject to tax under Sections 21 (a), 24(a),
(b) and (c); and 25 (a) (1), there shall be allowed as deductions the
items specified in paragraphs (a) to (i) of this section; Provided,
however, That in computing taxable income subject to tax under Section
21 (f) in the case of individuals engaged in business or practice of
profession, only the following direct costs shall be allowed as
deductions:cralaw:red
(a) Raw materials, supplies and direct labor;chanroblesvirtualawlibrary
(b) Salaries of employees directly engaged in
activities in the course of or pursuant to the business or practice of
their profession;chanroblesvirtualawlibrary
(c) Telecommunications, electricity, fuel, light and
water;chanroblesvirtualawlibrary
(d) Business rentals;chanroblesvirtualawlibrary
(e) Depreciation;chanroblesvirtualawlibrary
(f) Contributions made to the Government and
accredited relief organizations for the rehabilitation of calamity
stricken areas declared by the President; and
(g) Interest paid or accrued within a taxable year on
loans contracted from accredited financial institutions which must be
proven to have been incurred in connection with the conduct of a
taxpayer's profession, trade or business.
For individuals whose cost of goods sold and direct costs are difficult
to determine, a maximum of forty per cent (40%) of their gross receipts
shall be allowed as deductions to answer for business or professional
expenses as the case may be. (As amended by Republic Act No. 7496, May
18, 1992)
In the case of an individual, the optional standard deduction under
paragraph (k) shall be allowed in lieu of itemized deductions under
said paragraphs (a) to (i). In addition, the appropriate personal and
additional exemptions allowed under paragraph (l) may be claimed by an
individual whose income is subject to tax under Section 21 (a):
Provided, That no deductions other than the deduction provided in
paragraph (l) may be allowed from compensation income arising from
personal services rendered under an employer-employee relationship.
(a) Expenses. — (1) Business expenses. — (A) In
general. — All ordinary and necessary expenses paid or incurred during
the taxable year in carrying on any trade or business, including a
reasonable allowance for salaries or other compensation for personal
services actually rendered; travelling expenses while away from home in
the pursuit of a trade profession or business, rentals or other
payments required to be made as a condition to the continued use or
possession, for the purpose of the trade, profession or business, of
property to which the taxpayer has not taken or is not taking title or
in which he has no equity.
(2) Expenses allowable to private educational
institutions. — In addition to the expenses allowable as deductions
under subparagraph (a) (1) (A) above, a private educational
institution, referred to under Section 24 (b) of this Code, may at its
option elect either (A) to deduct expenditures otherwise considered as
capital outlays of depreciable assets incurred during the taxable year
for the expansion of school facilities or (B) to deduct allowance for
depreciation thereof under paragraph (f) of this section.
(b) Interest. — (1) In general. — The amount of
interest paid or accrued within a taxable year on indebtedness in
connection with the taxpayer's profession, trade or business, except on
indebtedness incurred or continued to purchase or carry obligation the
interest upon which is exempt from taxation as income under this Title.
(2) No deduction shall be allowed in respect of
interest under the succeeding sub-paragraphs:cralaw:red
(i) If within the taxable year an individual taxpayer
reporting income on the case 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: and 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.
(ii) If both the taxpayer and the person to whom the
payment has been made or is to be made are persons specified Section 30
(b). chanroblesvirtualawlibrary
(iii) If the indebtedness is incurred to finance
petroleum exploration.
(c) Taxes. — (1) In general. — Taxesd or accrued
within the taxable year in connection with the taxpayer's profession,
trade or business, except:cralaw:red
(A) The income tax provided for under this Title;chanroblesvirtualawlibrary
(B) Income war profits, and excess profits taxes
imposed by authority 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);chanroblesvirtualawlibrary
(C) Estate and gift taxes;chanroblesvirtualawlibrary
(D) Taxes assessed against local benefits of a kind
tending to increase the value of the property assessed; and
(E) Electric energy consumption tax imposed by Batas
Pambansa Blg. 36
(2) Limitations on deductions. (A) In the case of a
non-resident alien individual and a foreign corporation, the deductions
for taxes provided in paragraph (1) of this subsection (c) shall be
allowed only if and to the extent that they are connected with income
from sources within the Philippines; and
(B) In the case of a citizen of a foreign country
residing in the Philippines whose income from sources within such
foreign country is not taxable under this Title, only that portion of
the taxes paid to such foreign country which corresponds to his taxable
income under this Title shall be allowed as deduction.
(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.
(A) Citizen and domestic corporation. — In the case
of a citizen of the Philippines and of a domestic corporation, the
amount of any income, war profits, and excess profits taxes paid or
accrued during the taxable year to any foreign country;chanroblesvirtualawlibrary
(B) Alien resident of the Philippines. — In the case
of an alien resident of the Philippines, the amount of any such taxes
paid or accrued during the taxable year to any foreign country, if the
foreign country of which such alien resident is a citizen or subject,
in imposing such taxes allows a similar credit to citizens of the
Philippines residing in such country; and
(C) Partnership 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 accrued 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.
Non-resident alien individuals and foreign corporations 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 section shall be subject to each of the following
limitations:cralaw:red
(A) The amount of the credit in respect to the tax
paid or accrued 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 source without the Philippines
taxable under this Title bears to his entire taxable income for the
same taxable year.
(5) Adjustment on payment of accrued taxes. — If
accrued taxes when paid differ from the amounts claimed as credits by
the taxpayer, or if any tax paid is refunded in whole or in part, the
taxpayer shall notify the Commissioner, who shall redetermine the
amount of the tax for the year or years affected, and the amount of tax
due upon such redetermination, if any, shall be paid by the taxpayer
upon notice and demand by the Commissioner, or the amount of tax
overpaid, if any, shall be credited or refunded to the taxpayer. In the
case of such a tax accrued but not paid, the Commissioner as a
condition precedent to the allowance of this credit may require the
taxpayer to give a bond with sureties satisfactory to and to be
approved by the Commissioner in such sum as he may require, conditioned
upon the payment by the taxpayer of any amount of tax found due upon
any such redetermination. The bond herein prescribed shall contain such
further conditions as the Commissioner may require.
(6) Year in which credit taken. — The credit provided
for in paragraph (c) (3) 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 accrued,
subject, however, to the conditions prescribed in paragraph (c) (5). If
the taxpayer elects to take such credit 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
paragraph (c) (3) shall be allowed only if the taxpayer establishes to
the satisfaction of the Commissioner (A) the total amounts of income
derived from sources without the Philippines, (B) the amount on income
derived from each country, the tax paid or accrued to which is claimed
as a credit under said paragraph, such amount to be determined under
rules and regulations prescribed by the Secretary of Finance, and (C)
all other informations necessary for the verification and computation
of such credits.
(8) Taxes of foreign subsidiary. — For purposes of
this subsection a domestic corporation, which owns a majority of the
voting stock of a foreign corporation from which it receives dividends
in any taxable year shall be deemed to have paid the same proportion of
any income, war profits or excess profits taxes paid by such foreign
corporation to any foreign country, upon or with respect to the
accumulated profits of such foreign corporation from which such
dividends were paid which the amount of such dividend bears to the
amount of such accumulated profits: Provided, That the amount of tax
deemed to have been paid under this subsection shall in no case exceed
the same proportion of the tax against which credit is taken which the
amount of such dividends bears to the amount of the entire taxable
income of the domestic corporation in which such dividends are
included. The term "accumulated profits" when used in this subsection
in reference to a foreign corporation, means the amount of its gains,
profits, or income in excess of the income, war profits, and excess
profits taxes imposed upon or with respect to such profits or income;
and the Commissioner shall have full power to determine from the
accumulated profits of what year or years such dividends were paid,
treating dividends paid in the first 60 days of any year as having been
paid from the accumulated profits of the preceding year or years
(unless to his satisfaction shown otherwise), and in other respect
treating dividends as having been paid from the most recently
accumulated gains, profits, or earnings. In the case of a foreign
corporation, the income, war profits, and excess profits taxes of which
are determined on the basis of an accounting period of less than one
year, the word "year" as used in this subsection shall be construed to
mean such accounting period.
(9) Taxes of shareholder paid by corporation. — The
deduction for taxes allowed by paragraph (c) shall be allowed to a
corporation in the case of taxes imposed upon a shareholder of the
corporation upon his interest as shareholder which are paid by the
corporation without reimbursement from the shareholder, but in such
cases no deduction shall be allowed the shareholder for the amount of
such taxes.
(d) Losses. — (1) By individuals. — In the case of an
individual, losses actually sustained during the taxable year and not
compensated for by insurance or otherwise:cralaw:red
(A) If incurred in trade, profession, or business;chanroblesvirtualawlibrary
(B) If incurred in any transaction entered into for
profit, though not connected with the trade or business;chanroblesvirtualawlibrary
(C) Of property connected with the trade or business,
if the loss arises from fires storm, shipwreck, or other casualties, or
from robbery, theft, or embezzlement. The Secretary of Finance, upon
recommendation of the Commissioner of Internal Revenue, is hereby
authorized to promulgate, rules and regulations prescribing, among
other things, the time and manner by which the taxpayer shall submit a
declaration of loss sustained from casualty or from robbery, theft, or
embezzlement during the taxable year: Provided, however, That the time
limit to be so prescribed in the regulations shall not be less than 30
days nor more than 90 days from the date of the occurrence of the
casualty or robbery, theft, or embezzlement giving rise to the loss.
(D) No loss shall be allowed as a deduction under
this paragraph 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.
(2) By corporation. — In the case of a corporation,
all losses actually sustained and charged off within the taxable year
and not compensated for by insurance or otherwise.
(3) Proof of loss. — In the case of a non-resident
alien individual or foreign corporation, the losses deductible are
those actually sustained during the year incurred in business or trade
conducted within the Philippines, and losses actually sustained during
the year in transactions entered into for in the Philippines although
not connected with their business or trade, when such losses are not
compensated for by insurance or otherwise. The Secretary of Finance,
upon recommendation of the Commissioner of Internal Revenue, is hereby
authorized to promulgate rules and regulations prescribing, among other
things, the time and manner by which the taxpayer shall submit a
declaration of loss sustained from casualty or from robbery, theft, or
embezzlement during the taxable year: Provided, That the time to be so
prescribed in the regulations shall not be less than 30 days nor more
than 90 days from the date of the occurrence of the casualty or
robbery, theft, or embezzlement giving rise to the loss. chanroblesvirtualawlibrary
(4) Capital losses. — (A) Limitation. — Losses from
sales or exchanges of capital assets shall be allowed only to the
extent provided in Section 34.
(B) Securities becoming worthless. — If securities as
defined in Section 20 become worthless during the taxable year and are
capital assets, the loss resulting therefrom shall, for the purposes of
this Title, be considered as a loss from the sale or exchanges, on the
last day of such taxable year, of capital assets.
(5) Losses on wash sales of stock or securities —
Losses on "wash sales" of stock or securities as provided in Section
32.
(6) Wagering losses. — Losses from wagering
transactions shall be allowed only to the extent of the gains from such
transactions.
(7) Abandonment losses. — (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 of Internal Revenue.
(B) In case a producing well is subsequently
abandoned, the unamortized costs thereof, as well as the undepreciated
costs of equipment directly used therein shall be allowed as a
deduction in the year such well, equipment or facility is abandoned by
the contractor: Provided, That if such abandoned well is reentered and
production is resumed, or if such equipment or facility is restored
into service, the said costs shall be included as part of gross income
in the year of resumption or restoration and shall be amortized or
depreciated, as the case may be.
(e) Bad Debts. — (1) In general. — Debts due to the
taxpayer actually ascertained to be worthless and charged off within
the taxable year except those not connected with profession, trade or
business and those sustained in a transaction entered into between
parties mentioned under Section 30 (b) of this Code.
(2) Securities becoming worthless. — If securities as
defined in Section 20 are ascertained to be worthless and charged off
within the taxable year and are capital assets, the loss resulting
therefrom shall, in the case of a taxpayer other than a bank or trust
company incorporated under the laws of the Philippines a substantial
part of whose business is the receipt of deposits, for the purpose of
this Title, be considered as a loss from the sale or exchange, on the
last day of such taxable year of capital assets.
(f) Depreciation. (1) General rule. — There shall be
allowed as a depreciation deduction a reasonable allowance for the
exhaustion, wear and tear (including reasonable allowance for
obsolescence) of property used in the trade or business. In the case of
property held by one person for life with remainder to another person,
the deduction shall be computed as if the life tenant were the absolute
owner of the property and shall be allowed to the life tenant. In the
case of property held in trust, the allowable deduction shall be
apportioned between the income beneficiaries and the trustees in
accordance with the pertinent provisions of the instrument creating the
trust, or in the absence of such provisions, on the basis of the trust
income allowable to each.
(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
regulations prescribed by the Secretary of Finance, under any of the
following methods:cralaw:red
(A) The straight line method.
(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 paragraph (f)
(1).
(C) The sum of the year-digits method, and
(D) Any other method which may be prescribed by the
Secretary of Finance upon recommendation of the Commissioner of
Internal Revenue.
(3) Agreement as to useful life on which depreciation
rate is based. — Where under regulations prescribed by the Secretary of
Finance, the taxpayer and the Commissioner of Internal Revenue have
entered into an agreement in writing a specifically dealing with the
useful life and rate of depreciation of any property, the rate so
agreed upon shall be binding on both the taxpayer and the Secretary of
Finance in the absence of facts and circumstances not taken into
consideration in the adoption of such agreement. The responsibility of
establishing the existence of such facts and circumstances shall rest
with the party initiating the modification. Any change in the agreed
rate and useful life specified in the agreement shall not be effective
for taxable year before the taxable year in which notice in writing by
certified mail or registered mail is served by the party to the
agreement initiating such change.
(4) Depreciation of properties used in petroleum
operations. — An allowance for depreciation in respect to all
properties directly related to production of petroleum initially placed
in service in a taxable year under the straight-line or
double-declining balance method of depreciation at the option of the
service contractor. However, if the service contractor initially elects
the double declining method, it may at any subsequent date, shift to
the straight-line method. The useful life of properties used in or
related to production of petroleum shall be 10 years or such shorter
life as may be permitted by the Commissioner of Internal Revenue.
Properties not used directly in the production of petroleum shall be
depreciated under the straight-line method on the basis of an estimated
useful life of 5 years.
(5) Depreciation deductible by non-resident aliens or
foreign corporations. — In the case of a non-resident alien individual
or foreign corporation, a reasonable allowance for the deterioration of
property arising out of its use or employment or its non-use in the
business or trade shall be permitted only when such property is located
within the Philippines.
(g) Depletion of oil and gas wells and mines. — (1)
In general. — In the case of oil and gas wells and 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: Provided, That when the
allowance shall equal the capital invested on 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 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 in the same contract area.
Intangible costs in petroleum operations refer to any costs incurred in
petroleum operations which in itself has no salvage value and which is
incidental to and necessary for the drilling of wells and preparation
of wells for the production of petroleum: Provided, That said cost
shall not pertain to the acquisition or improvement of property of a
character subject to the allowance for depreciation except that the
allowances for depreciation on such property, shall be deductible under
this subsection.
Any intangible exploration, drilling and development expenses allowed
as a deduction in computing taxable income during the year shall not be
taken into consideration in computing the adjusted cost basis for the
purpose of computing allowable cost depletion.
(2) Election to deduct exploration and development
expenditures. — In computing taxable income, the taxpayer may, at his
option, deduct exploration and development expenditures accumulated as
cost or adjusted basis for cost depletion as of January 1, 1978, as
well as exploration and development expenditures paid or incurred
during the taxable year: Provided, That the total amount deductible for
exploration and development expenditures shall not exceed twenty-five
percent (25%) of the taxable income from mining operations computed
without the benefit of any tax incentive under existing laws. This
subparagraph shall not apply to expenditures for the acquisition or
improvement of property of a character which is subject to the
allowance for depreciation under Section 29 (f) (1) of this Code but
the allowance for depreciation thereon shall be treated as expenditure.
The election by the taxpayer to deduct the exploration and development
expenditures is irrevocable and shall be binding in succeeding taxable
years.
In no case shall this paragraph apply with respect to amounts paid or,
incurred for the exploration and development of oil and gas. The term
"exploration expenditures" means expenditures paid or incurred for the
purpose of ascertaining the existence, location, extent, or quality of
any deposit of ore or other mineral, and paid or incurred before the
"development expenditures" means expenditures paid or incurred during
the development stage of the mine or other natural deposits. The
development stage of a mine or other natural deposit shall begin at the
time when deposits of one other minerals are shown to exist in
sufficient commercial quantity and quality and shall end upon
commencement of actual commercial extraction.
(3) Depletion of oil and gas wells and mines
deductible by a non-resident alien individual or foreign corporation. —
In the case of a non-resident alien individual or a foreign
corporation, allowance for depletion of oil and gas wells or mines
under subparagraph (1) shall be authorized only in respect to oil and
gas wells or mines located within the Philippines.
(h) Charitable and other contributions. — (1) In
general. — Contributions or gifts actually paid or made within the
taxable year to, or for the use of the Government of the Philippines or
any of its agencies or any political subdivision thereof for
exclusively public purposes, or to domestic-corporations or
associations organized and operated exclusively for religious,
charitable, scientific, youth and sports development, cultural or
educational purposes or for the rehabilitation of veterans, or to
social welfare institutions, no part of the net income of which inures
to the benefit of any private stockholder or individual in an amount
not in excess of 6% in the case of an individual, and 3% in the case of
a corporation, of the taxpayer's income derived from business as
computed without the benefit of this and the following subparagraphs.
(2) Contributions deductible in full. —
Notwithstanding the provisions of the preceding subparagraph, donations
to the following institutions or entities shall be deductible in full:cralaw:red
(A) Donations to the Government. — Donations to the
Government of the Philippines or to any of its agencies or political
subdivisions including fully-owned government corporations exclusively
to finance, to provide for, or to be used in undertaking priority
activities in education, health, youth and sports development, human
settlements, science and culture, and in economic development according
to a national priority plan to be determined by the NEDA, in
consultation with appropriate government agencies, including its
regional development councils and private philanthropic persons and
institutions: Provided, That any donation which is made to the
Government or to any of its agencies or political subdivisions not in
accordance with the said annual priority plan shall be subject to the
limitations prescribed in subparagraph (1) of this section.
(B) Donations to certain foreign-institutions or
international organizations. — Donations to foreign institutions or
international organizations which are fully deductible in pursuance of
or in compliance with agreements, treaties, or commitments entered into
by the Government of the Philippines and the foreign institutions or
international organizations or in pursuance of special laws.
(C) Donations to certain private foundations. — The
term "private foundation" means a non-profit domestic corporation:cralaw:red
(i) Organized and operated exclusively for
scientific, research, educational, character-building and youth and
sports development, health, social welfare, cultural or charitable
purposes, or a combination thereof, no part of the net income of which
inures to the benefit of any private individual;chanroblesvirtualawlibrary
(ii) Which, not later than the 15th day of the third
month after the close of the foundation's 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
regulation to be promulgated;chanroblesvirtualawlibrary
(iii) The level of administrative expense of which,
shall on an annual basis conform with the rules and regulations to be
prescribed by the Secretary of Finance but in no case to exceed thirty
percent (30) of total expenses; and
(iv) The assets of which in the event of dissolution
would be distributed to another non-profit domestic corporation
organized for similar purpose or purposes, or to the State for public
purpose, or would be distributed by a court to another organization to
be used in such manner as in the judgment of said court shall best
accomplish the general purpose for which the dissolved organization was
organized.
Subject to such terms and conditions as may be prescribed by the
Secretary of Finance, the term "utilization" means:cralaw:red
(i) Any amount in cash or in kind (including
administrative expenses) paid or utilized to accomplish one or more
purposes for which the private foundation was created or organized.
(ii) Any amount paid to acquire an asset used (or
held for use) directly in carrying out one or more purposes for which
the foundation was created or organized.
An amount set aside for a specific project which comes within one or
more purposes of the foundation may be treated as a utilization, but
only if at the time such amount is set aside, the private foundation
establishes to the satisfaction of the Commissioner of Internal Revenue
that the amount will be paid for the specific project within a period
to be prescribed in regulations to be promulgated by the Secretary of
Finance, but not to exceed 5 years, and the project is one which can be
better accomplished by setting aside such amount than by immediate
payment of funds.
(3) Valuation. — Properties other than cash donated
shall be valued in accordance with the rules and regulations prescribed
by the Secretary of Finance in consultation with appropriate government
agencies.
(4) Proof of deductions. — Contributions or gifts
shall be allowable as deduction only if verified under the regulations
prescribed only if verified under the regulation prescribed by the
Secretary of Finance.
(i) Pension trusts. — An employer establishing or
maintaining a pension trust to provide for the payment of reasonable
pensions to his employees shall be allowed as a deduction (in addition
to the contributions to such trust during the taxable year to cover the
pension liability accruing during the year, allowed as a deduction
under subsection (a) (1) of this section) a reasonable amount
transferred or paid into such trust during the taxable year in excess
of such contributions, but only if such amount (1) has not theretofore
been allowable as a deduction, and (2) is apportioned in equal parts
over a period of 10 consecutive years beginning with the year which the
transfer or payment is made.
(j) Additional requirement for deductibility of
certain payments. — Any amount paid or payable which is otherwise
deductible from, or taken into account in computing gross income or for
which depreciation or amortization may be allowed under this section,
shall be allowed as a deduction only if it is shown that the tax
required to be deducted and withheld therefrom has been paid to the
Bureau of Internal Revenue in accordance with this section, Section 51
and 74 of this Code.
(k) Optional standard deduction. — In lieu of the
deductions allowed under the preceding paragraph of this section an
individual subject to tax under Section 21 (a) other than a
non-resident alien, may elect a standard deduction in an amount not
exceeding ten percent (10%) of his gross income. Unless the taxpayer
signifies, in his return his intention to elect the optional standard
deduction, he shall be considered as having availed himself of the
deductions allowed in the preceding subsection. The Secretary of
Finance shall prescribe the manner of the election. Such election when
made in the return shall be irrevocable for taxable year for which the
return is made.
Notwithstanding the provisions of the preceding paragraphs, the
Secretary of Finance upon recommendation of the Commissioner, after a
public hearing shall have been held for this purpose may prescribe by
regulations, limitations or ceilings for any of the itemized deductions
under paragraphs (a) to (i) of this section: Provided, That for
purposes of determining such ceiling or limitations, the Secretary of
Finance shall consider the following factors: (1) adequacy of the
prescribed limits on the actual expenditure requirements of each
particular industry; and (2) effects of inflation on expenditure
levels: Provided, further, That no ceilings shall further be imposed on
items of expense already subject to ceiling under present
law. chanroblesvirtualawlibrary
(1) Personal exemptions allowable to individuals. —
(1) Basic personal exemption. — For the purpose of determining the tax
provided in Section 21 (a) of this Title, there shall be allowed a
basic personal exemption as follows:cralaw:red
For single individual or married individual judicially
decreed as legally separated with no qualified
dependents P9,000
For head of a family P12,000
For each married individual P18,000
Provided, That in case one of the spouses is deriving taxable income,
only said spouse shall be allowed to avail of the aforesaid basic
personal exemption for married individual. (As amended by R.A. 7497)
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.
(2) Additional exemption
(A) Taxpayers with dependents. — A married individual
or a head of a family shall be allowed an additional exemption of five
thousand pesos (P5,000) for each dependent: Provided, That the total
number of dependents for which additional exemptions may be claimed
shall not exceed four dependents: Provided, further, That the
additional exemption for dependents shall be claimed by only one of the
spouses in the case of married individuals. (As amended by R.A. 7497)
In case of legally separated spouses, additional exemptions may be
claimed only by the spouse who was awarded custody of the child or
children: Provided, That the total amount of addition exemptions that
may be claimed by both shall not exceed the maximum additional
exemptions herein allowed.
For purposes of this paragraph, a dependent means a legitimate,
recognized natural or legally adopted child chiefly dependent upon and
living with the taxpayer if such dependent is not more than twenty-one
(21) years of age, unmarried and not gainfully employed or if such
dependent, regardless of age, is incapable of self-support because of
mental or physical defect.
(B) Taxpayers with gross compensation income not
exceeding P20,000. — A special additional exemption of Four thousand
pesos (P4,000) shall be allowed if the gross income of a single,
married or legally separated individual, or head of family does not
exceed the aggregate amount of P20,000: Provided, That in case married
individual elect to compute their income tax separately, the spouse
claiming the additional exemption for dependent children shall be
entitled to the special additional exemption of P4,000.
(3) Change of status. — If the taxpayer married or
should have additional dependents as defined above during the taxable
year, the taxpayer may claim the corresponding personal and additional
exemptions, as the case may be, in full for such year.
If the taxpayer should die during the taxable year, his estate may
still claim the personal and additional exemptions for himself and his
dependents as if he died at the close of such year.
If the spouse or any of the dependents should die or if any of such
dependents becomes twenty-one years old during the taxable year, the
taxpayer may still claim the same exemptions as if they died, or if
such dependents become twenty-one years old at the closed of such year.
(4) Allowances for adjustment. — Upon the
recommendation of the Secretary of Finance, the President shall
automatically adjust not more often than once every three years, the
personal and additional exemptions taking into account, among others,
the movement in consumer price indices, levels of minimum wages, and
bare subsistence levels.
(5) Personal exemptions allowable to
nonresident-alien individuals. — A non-resident alien individual
engaged in trade or business in the Philippines shall be entitled to
personal exemption in the amount equal to the exemptions allowed by the
income tax law of the country of which he is a subject or citizen to
citizens of the Philippines not residing in such country, but not to
exceed the amount fixed in this section as exemption for citizen or
residents of the Philippines: Provided, That said non-resident alien
should file a true and accurate return of the total income received by
him from all sources in the Philippines, as required by this Title.
(m) Exemption and deduction allowable from foreign
source income derived by non-resident citizens. — In computing the
taxable income subject to tax under Section 21 (b) the following
deductions shall be allowed from gross income derived by a non-resident
citizen from all sources without the Philippines:cralaw:red
(1) An allowance for personal exemption in the amount
of two thousand dollars (U.S. $2,000), if the person making the return
is a single or a married person legally separated from his or her
spouse; or four thousand dollars (U.S. $4,000), if the person making
the return is married or head of the family, as defined in Section 29
of this Code; and
(2) The total amount of the national income tax
actually paid to the government of the foreign country of his
residence. For thus purpose, every non-resident citizen availing of
this deduction shall attach to his Philippines income tax return a copy
of the income tax return he has filed with the government of the
foreign country of his residence. (As amended by E.O. No. 37)
Section 30. Items not deductible. — (a) General rule.
— In computing net income no deduction shall in any case be allowed in
respect of —chanroblesvirtualawlibrary
(1) Personal, living, or family expenses;chanroblesvirtualawlibrary
(2) Any amount paid out for new building or for
permanent improvements, or betterment made to increase the value of any
property or estate;chanroblesvirtualawlibrary
This subsection shall not apply to intangible drilling and development
cost incurred in petroleum operations which are deductible under
subsection (g) (1) of Section 29 of this Code. (As added by PD No.
1682.)
(3) Any amount expended in restoring property or in
making good the exhaustion thereof for which an allowance is or has
been made; or
(4) Premium paid on any life insurance policy
covering the life of any officer or employee, or of any person
financial 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.
(b) Losses from sales or exchanges of property. — In
computing net income no deduction shall in any case be allowed in
respect of losses from sales or exchanges of property directly or
indirectly —chanroblesvirtualawlibrary
(1) Between members of a family. For the purpose 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; chanroblesvirtualawlibrary
(2) Except in the case of distributions in
liquidation, between an individual and a corporation more than fifty
per centum in value of the outstanding stock of which is owned,
directly or indirectly, by or for such individual;chanroblesvirtualawlibrary
(3) Except in the case of distributions in
liquidation, between two corporations more than fifty per centum in
value of the outstanding stock of each of which is owned, directly or
indirectly, by or for the same individual, if either one of such
corporations, with respect to the taxable year of the corporation
preceding the date of the sale or exchange was under the law applicable
to such taxable year, a personal holding company or a foreign personal
holding company;chanroblesvirtualawlibrary
(4) Between the grantor and a fiduciary of any trust;chanroblesvirtualawlibrary
(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
(6) Between a fiduciary of a trust and a beneficiary
of such trust.
Section 31. Special provisions regarding income and
deductions of insurance companies, whether domestic or foreign. — (a)
Special deductions allowed to insurance companies. — In case of
insurance companies, whether domestic or foreign doing business in the
Philippines, the net additions, if any, required by law to be made
within the year to reserve funds and the sums other than dividends paid
within the year on policy and annuity contracts may be deducted from
their gross income: Provided, however, That the released reserve be
treated as income for the year of release.
(b) Mutual insurance companies. — In the case of
mutual fire and mutual employer's 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 policy holders, but shall return as taxable
income all income received by them from all other sources plus portion
of the premium deposits as are retained by the companies for purposes
other than the payment of losses and expenses and reinsurance reserves.
(c) Mutual marine insurance companies. — Mutual
marine insurance companies shall include in their return of gross
income, gross premiums collected and received by them less amounts paid
for reinsurance, but shall be entitled to include in deductions from
gross income amounts repaid to policy holders on account of premiums
previously paid by them and interest paid upon those amount between the
ascertainment and payment thereof.
(d) Assessment insurance companies. — Assessment
insurance companies, whether domestic or foreign, may deduct from their
gross income the actual deposit of sums with the officers of the
Government of the Philippines pursuant to law, as additions to
guarantee or reserve funds.
Section 32. Losses from wash sales of stock or
securities. — (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 days
before the date of such sale or disposition and ending thirty 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 thirty 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.
(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.
Section 33. Capital gains and losses. — (a)
Definitions. — As used in this Title. —chanroblesvirtualawlibrary
(1) Capital assets. — The "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 twenty-nine; or real
property used in the 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. chanroblesvirtualawlibrary
(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 exchanges of a capital
asset shall be taken into account in computing net capital gain, net
capital loss, and net income:cralaw:red
(1) One hundred per centum if the capital asset has
been held for not more than twelve months;chanroblesvirtualawlibrary
(2) Fifty per centum if the capital asset has been
held for more than twelve months.
(c) Limitation on capital losses. — Losses from sales
or exchange of capital assets shall be allowed only to the extent of
the gains from such sales or exchanges. If a bank or trust company
incorporated under the laws of the Philippines, a substantial part of
whose business is the receipt of deposits, sells any bond, debenture,
note, or certificate or other evidence of indebtedness issued by any
corporation (including one issued by a government or political
subdivision thereof), with interest coupons or in registered form, any
loss resulting from such sale shall not be subject to the foregoing
limitation and shall not be included in determining the applicability
of such limitation to other losses.
(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
months.
(e) Retirement of bonds, etc. — For the 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 the interest coupons
or in registered form, shall be considered as amounts received in
exchange therefor.
(f) Gains and losses from short sales, etc. — For the
purpose of this Title —chanroblesvirtualawlibrary
(1) Gains or losses from short sales of property
shall be considered as gains or losses from sales or exchanges of
capital assets; and
(2) Gains or losses attributable to the failure to
exercise privileges or options to buy or sell property shall be
considered as capital gains or losses. (As amended by E.O. No. 37)
Section 34. Determination of amount of and
recognition of gain or loss. —chanroblesvirtualawlibrary
(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. (As amended by E.O. No. 37)
(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 cases of property acquired on or before 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 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, other than capital asset
referred to in Section 21 (e), was acquired for less than an adequate
consideration in money or money's worth, the basis of such property is
(i) the amount paid by the transferee for the property or (i) the
transferor's adjusted basis at the time of the transfer whichever is
greater.
(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. (As
amended by E.O. No. 37)
(c) Exchange of property.
(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.
(2) Exception. — No gain or loss shall be recognized
if in pursuance of a plan of merger or consolidation (a) a corporation
which is a party to a merger or consolidation exchanges property solely
for stock in a corporation which is a party to the merger or
consolidation, (b) a shareholder exchanges stock in a corporation which
is a party to the merger or consolidation solely for the stock of
another corporation also a party to the merger or consolidation, or (c)
a security holder of a corporation which is a party to the merger or
consolidation exchanges his securities in such corporation solely for
stock or securities in another corporation, a party to the merger or
consolidation.
No gain or loss shall also be recognized of property is transferred to
a corporation by a person in exchange for stock in such corporation of
which as a result of such exchange said person, alone or together with
others, not exceeding four persons, gains, control of said corporation:
Provided, That stocks issued for services shall not be considered as
issued in return of property.
(3) Exchange not solely in kind —chanroblesvirtualawlibrary
(a) If, in connection with a exchange described in
the above exception, an individual, a shareholder, security holder or
corporation receives not only stock or securities permitted to be
received without recognition of gain or loss, but also money and/or
other property, the gain if any, but not the loss shall be recognized
but in an amount not in excess of the sum of the money and the fair
market value of such other property received: Provided, That as to the
shareholder, if the money and or other property received has the effect
of a distribution of a taxable dividend, there shall be taxed as
dividend to the shareholder an amount of the gain recognized not in
excess of his proportionate share of the undistributed earning and
profits of the corporation; the remainder, if any, of the gain
recognized shall be treated as a capital gain.
(b) If, in connection with the exchange described in
the above exceptions, the transferor corporation received not only
stock permitted to be received without the recognition of gain or loss
but also money and/or other property, then (1) if the corporation
receiving such money and/or other property distributed it in pursuance
of the plan of merger or consolidation, no gain to the corporation
shall be recognized from the exchange, but (2) 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.
(4) Assumption of liability. — (a) If the taxpayer,
in connection with the exchanges described in the foregoing exception,
receives stock or securities which would be permitted, to be received
without the recognition of the gain if it were the sole consideration,
and as a part of the consideration, another party to the exchange
assumes a liability of the taxpayer, or acquired from the taxpayer
property, subject to a liability, then such assumption or acquisition
shall not be treated as money and or other property, and shall not
prevent the exchange from being within the exceptions.
(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. — (a) The basis of the stock or securities
received by the transferor upon the exchange specified in the above
exception shall be the same as the basis of the property, stock or
securities exchanged, decreased by (1) the money received, and (2) the
fair market value of the other property received, and increased by (a)
the amount treated as dividend of the shareholder and (b) the amount of
any gain that was recognized on the exchange: Provided, That the
property received as "boot" shall have as basis its fair market value:
Provided, further, That if as part of the consideration to the
transferor, the transferee of property assumes a liability of the
transferor or acquires from the latter property subject to a liability,
such assumption or acquisition (in the amount of the liability) shall,
for purposes of this paragraph be treated as money received by the
transferor on the exchange: Provided, finally, That if the transferor
received several kinds of stock or securities, the Commissioner of
Internal Revenue is hereby authorized to allocate the basis among the
several classes of stocks or securities. chanroblesvirtualawlibrary
(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: (1) the ordinary merger or
consolidation or (2) 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 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
transaction shall be considered and the whole transaction or series of
the 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 of the total voting power of all classes of stocks
entitled to vote.
(d) The Secretary of Finance upon recommendation of
the Commissioner of Internal Revenue is hereby authorized to issue
rules and regulations for the purpose of determining the proper amount
of transferred assets which meet the standard of the phrase
"substantially all" and for the proper implementation of this section.
Section 35. Inventories. — Whenever in the judgment
of the Commissioner of Internal Revenue, the use of inventories is
necessary in order to determine clearly the income of any taxpayer,
inventories shall be taken by such taxpayer upon such basis as the
Secretary of Finance may, by regulations, prescribe as conforming as
nearly as may be to the best accounting practice in the trade or
business and as most clearly reflecting the income.
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:cralaw:red
(i) With the approval of the Commissioner, a change
to a different method is authorized; or
(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 a Commissioner shall not
exercise his authority to require a change in inventory method more
often than once every three years: and Provided, further, That any
change in an inventory, valuation method must be subject to approval by
the Secretary of Finance.
Section 36. Income from sources within the
Philippines. — (a) Gross income from sources within the Philippines. —
The following items of gross income shall be treated as gross income
from sources within the Philippines:cralaw:red
(1) Interest. — Interest derived from sources within
the Philippines, and interest on bonds, notes, or other interest
bearing obligations of residents, corporate or otherwise;chanroblesvirtualawlibrary
(2) Dividends. — The amount received as dividends:cralaw:red
(A) From a domestic corporation;chanroblesvirtualawlibrary
(B) From a foreign corporation unless less than fifty
per centum of the gross income of such foreign corporation for the
three-year period ending with the close of its 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 bear the same ratio to such dividends as the
gross come of the corporation for such period derived from sources
within the Philippines bear to its gross income from all sources;chanroblesvirtualawlibrary
(3) Services. — Compensation for labor or personal
services performed in the Philippines; chanroblesvirtualawlibrary
(4) Rentals and royalties. — Rentals and royalties
from property located in the Philippines or from any interest on such
property, including rentals or royalties for —chanroblesvirtualawlibrary
(A) The use of or the right or privilege to use in
the Philippines any copyright, patent, design or model, plant, secret
formula or process, goodwill, trademark, trade brand or other like
property or right;chanroblesvirtualawlibrary
(B) The use of, or the right to use in the
Philippines of any industrial, commercial or scientific equipment;chanroblesvirtualawlibrary
(C) The supply of scientific, technical, industrial
or commercial knowledge or information;chanroblesvirtualawlibrary
(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 paragraph (b) or any such knowledge or information as is
mentioned in paragraph (c); or
(E) The supply of services by a non-resident person
or his employee in connection with the use of property or rights
belonging to, or the installation or operation of any brand, machinery
or other apparatus purchased from such non-resident person;chanroblesvirtualawlibrary
(F) Technical advice, assistance or services rendered
in connection with technical management or administration of any
scientific, industrial or commercial undertaking, venture, project or
scheme;chanroblesvirtualawlibrary
(G) The use of or right to use —chanroblesvirtualawlibrary
(i) motion picture films;chanroblesvirtualawlibrary
(ii) films or video tapes for the use in connection
with television;chanroblesvirtualawlibrary
(iii) tapes for use in connection with radio
broadcasting.
(5) Sale of real property. — Gains, profits, and
income from the sale of real property, as determined in subsection (e)
of this section.
(6) Sale of personal property. — Gains, profits and
income from the sale of personal property, as determined in subsection
(e) of this section.
(b) Taxable income from sources within the
Philippines. — (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, interest, 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. (As
amended by E.O. No. 37)
(2) Exception. — No deductions for interest paid or
incurred abroad shall be allowed from the item of gross income
specified in subsection (a) unless indebtedness was actually incurred
to provide funds for use in connection with the conduct or operation of
trade or business in the Philippines. (As amended by E.O. No. 37)
(c) Gross income from sources without the
Philippines. — The following items of gross income shall be treated as
income from sources without the Philippines:cralaw:red
(1) Interest other than that derived from sources
within the Philippines as provided in paragraph (1) of subsection (a)
of this section;chanroblesvirtualawlibrary
(2) Dividends other than those derived from sources
within the Philippines as provided in paragraph (2) of subsection (a)
of this section; chanroblesvirtualawlibrary
(3) Compensation for labor or personal service
performed without the Philippines;chanroblesvirtualawlibrary
(4) Rentals or royalties from property located
without the Philippines or from any interest in such property including
rentals or royalties for the use of or for the privilege of using
without the Philippines, patents, copyrights, secret processes and
formulas, goodwill, trademarks, trade brands, franchises and other like
properties; and
(5) Gains, profits, and income from the sale of real
property located without the Philippines.
(d) Net income from sources without the Philippines.
— From the items of gross income specified in subsection (c) of this
section there shall be deducted the expenses, losses, and other
deductions properly apportioned or allocated thereto and a ratable part
of any expenses, losses or other deductions which cannot definitely be
allocated to some item or class of gross income. The remainder, if any,
shall be treated in full as net income from sources without the
Philippines.
(e) Income from sources partly within and partly
without the Philippines. — Items of gross income, expenses, losses and
deductions, other than those specified in subsection (a) and (c) of
this section shall be allocated or apportioned to source within or
without the Philippines, under the rules and regulations prescribed by
the Secretary of Finance. Where items or gross income are separately
allocated to sources within the Philippines, there shall be deducted
(for the purpose of computing the net income therefrom) the expenses,
losses, and other deductions properly apportioned or allocated thereto
and a ratable part of other expenses, losses or other deductions which
cannot definitely be allocated to some item or class of gross income.
The remainder, if any, shall be included in full as net income from
sources within the Philippines. In the case of gross income derived
from sources partly within and partly without the Philippines, the net
income may first be computed by deducting the expenses, losses, or
other deductions apportioned or allocated thereto and a ratable part of
any expenses, losses or other deductions which cannot definitely be
allocated to some items or class of gross income; and the portion of
such net income attributable to sources within the Philippines may be
determined by processes or formulas of general apportionment prescribed
by the Secretary of Finance. Gains, profits, and income from the sale
of personal property produced (in whole or in part) by the taxpayer
without and sold within the Philippines, or produced (in whole or in
part) by the taxpayer without and sold within the Philippines, shall be
treated as derived partly from sources within and partly from sources
without the Philippines. Gains, profits, and income derived from the
purchase of personal property within and its sale without the
Philippines or from the purchase of personal property without and its
sale within the Philippines shall be treated as derived entirely from
sources within the country in which sold: 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
non-resident 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 V
ACCOUNTING PERIOD AND METHODS OF ACCOUNTING
Section 37. General rule. — The net income shall be
computed upon the basis of the taxpayer's annual accounting period
(fiscal year or calendar year, as the case may be) in accordance with
the method of accounting regularly employed in keeping the books of
such taxpayer; but if no such method of accounting has been so
employed, or if the method employed does not clearly reflect the
income, the computation shall be made in accordance with such method as
in the opinion of the Commissioner of Internal Revenue does clearly
reflect the income. If the taxpayer's annual accounting period is other
than a fiscal year, as defined in section twenty or if the taxpayer has
no annual accounting period, or does not keep books, or if the taxpayer
is an individual, the net income shall be computed on the basis of the
calendar year.
Section 38. Period in which items of gross income
included. — The amount of all items of gross income shall be included
in the gross income for the taxable year in which received by the
taxpayer, unless, under methods of accounting permitted under section
thirty eight, any such amounts are to be properly accounted for as of a
different period. In the case of the death of a taxpayer there shall be
included in computing net income 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 includible in respect of such period or a prior
period.
Section 39. 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.
Section 40. Change of accounting period. — If a
taxpayer, other than an individual, changes his accounting period from
fiscal year to calendar year from calendar year to fiscal year, or from
one fiscal year to another, the net income shall, with the approval of
the Commissioner of Internal Revenue, be computed on the basis of such
new accounting period, subject to the provisions of Section forty-two.
Section 41. Final or adjustment returns for a period
of less than twelve months. — (a) Return for short period resulting
from change of accounting period. — If a taxpayer, other than an
individual, with the approval of the Commissioner of Internal Revenue,
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) Income computed on basis of short period. — Where
a separate final or adjustment return is made under subsection (a) on
account of a change in the accounting period, and in all other cases
where a separate final or adjustment return is required or permitted by
regulations prescribed by the Secretary of Finance, to be made for a
fractional part of a year, then the income shall be computed on the
basis of the period for which separate final or adjustment return is
made.
Section 42. Installment basis. — (a) Sales of dealers
in personal property. — Under regulations prescribed by the Secretary
of Finance, a person who regularly sells or otherwise disposes of
personal property on the installment plan may return as income
therefrom in any taxable year that proportion of the installment
payments actually received in that year which the gross profit realized
or to be realized when payment is completed, bears to the total
contract price.
(b) Sales of realty and casual sales of personality.
— 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, or 92) of
a sale or other disposition of real property, if in either case the
initial payments do not exceed twenty-five percent of the selling
price, the income may under regulations prescribed by the Secretary of
Finance, 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 payment received in cash or property other than evidence of
indebtedness of the purchaser during the taxable period in which the
sale or other disposition is made.
(c) Sales of real property considered as capital
asset by individuals. — An individual who sells or disposes of real
property, considered as capital asset, and is otherwise qualified to
report the gain therefrom under paragraph (b) may pay the capital gains
tax in installments under regulations to be promulgated by the
Secretary of Finance.
(d) Change from accrual to installment basis. — If a
taxpayer entitled to the benefits of subsection (a) elects for any
taxable year to report his taxable income on the installment basis,
then in computing his income for the year of change or any subsequent
year, amounts actually received during any such year on account of sale
or other dispositions of property made in any prior year shall not be
excluded.
Section 43. Allocation of income and deductions. — In
any case of two or more organizations, trades, or businesses (whether
or not incorporated and whether or not organized in the Philippines)
owned or controlled directly or indirectly by the same interests, the
Commissioner of Internal Revenue is authorized to distribute,
apportion, or allocate gross income or deductions between or among such
organization, trades, or businesses, if he determines that such
distribution, apportionment, or allocation is necessary in order to
prevent evasion of taxes or clearly to reflect the income of any such
organizations, trades or businesses. chanroblesvirtualawlibrary
CHAPTER VI
RETURN AND PAYMENT OF TAX
Section 44. Individual returns. — (a) Requirements. —
(1) Except as provided in paragraph (2) of this Section, the following
individuals are required to file an income tax return.
(A) Every Filipino citizen, whether residing in the
Philippines or abroad,
(B) Every alien residing in the Philippines,
regardless of whether the gross income was derived from sources within
or without the Philippines, and
(C) Every non-resident alien engaged in trade or
business in the Philippines.
(2) The following individuals shall not be required
to file an income tax return:cralaw:red
(A) Individuals whose gross income does not exceed
his total personal and additional exemptions for dependents under
Section 29: Provided, That a citizen of the Philippines engaged in
business or practice of profession within or without 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.
(B) Regardless of the amount of income, the following
individuals shall not also be required to file an income tax
return: chanroblesvirtualawlibrary
(i) Individuals whose income consists solely of
interest, prizes, winnings, royalties, dividends, share of an
individual person in a partnership referred to under Section 21 (c);chanroblesvirtualawlibrary
(ii) Alien employees of regional or area headquarters
of multinational corporations with respect to income referred to under
Section 22 (c);chanroblesvirtualawlibrary
(iii) Alien employed by offshore banking units with
respect to income under Section 22 (d);chanroblesvirtualawlibrary
(iv) Alien employees of service contractors and
subcontractors engaged in petroleum exploration in the Philippines with
respect to income referred to under Section 22 (e); and
(v) Other individuals not required to file an income
tax return, pursuant to other provisions of this Code and other laws,
general or special.
(C) Individuals with respect to pure compensation
income, as defined in Section 28 (a) (1), derived from sources within
the Philippines, the income tax on which has been withheld under the
provisions of Section 72 of this Code: Provided, That an individual
deriving compensation concurrently from two or more employers at any
time during the taxable year shall file an income tax return: Provided,
further, That an individual whose pure compensation income exceeds
sixty thousand pesos (P60,000) shall also file an income tax return.
(As added by R.A. 7497)
(3) The income tax return shall be filed in
duplicate, and shall set forth specifically the gross amount of income
from all sources, except that of non-resident aliens engaged in trade
or business in the Philippines which shall contain only such income
derived from sources within the Philippines.
(b) Where to file. — Except in cases where the
Commissioner of Internal Revenue otherwise permits, the return shall be
filed with the Revenue District Officer, Collection Agent, or duly
authorized Treasurer of the Municipality in which such person has his
legal residence or principal place of business in the Philippines, or
if there be no legal residence or place of business in the Philippines,
then with the Office of the Commissioner of Internal Revenue.
(c) When to file. — (1) The return of any individual
specified above shall be filed on or before the fifteenth day of April
of each year covering income for the preceding taxable year.
(2) Individuals subject to tax on capital gains:cralaw:red
(i) From the sale or exchange of shares of stock not
traded thru a local stock exchange as prescribed under Section 21 (d)
(1) shall file a return within thirty 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.
(ii) From the sale or disposition of real property
under Section 21 (e) shall file a return within thirty days following
each sale or other disposition.
(d) Husband and wife. — Married individuals, whether
citizens, resident or non-resident aliens who do not derive income
purely from compensation, shall file a return for the taxable year to
include the income of both spouses, but where it is impracticable for
the spouses to file one return, each spouse may file a separate return
of income but the returns so filed shall be consolidated by the Bureau
for purposes of verification for the taxable year. (As amended by R.A.
7497)
(e) Return of parent to include income of children. —
The income of unmarried minors derived from property received from a
living parent shall be included in the return of the parent, except (1)
when the gift tax has been paid on such property, or (2) when the
transfer of such property is exempt from gift tax.
(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
return and incurring penalties provided for erroneous, false or
fraudulent returns.
(g) Signature presumed correct. — The fact that an
individual's name is signed to a filed return shall be prima facie
evidence for all purposes that the return was actually signed by him.
(As amended by E.O. No. 37)
Section 45. Corporation returns. — (a) Requirements.
— Every corporation, subject to the tax herein imposed, except foreign
corporations not engaged in trade or business in the Philippines shall
render, in duplicate, a true and accurate quarterly income tax return
and final or adjustment return in accordance with the provisions of
Chapter IX of this Title. The return shall be filed by the president,
vice-president or other principal assistant treasurer.
(b) Taxable year of corporation. — A corporation may
employ either calendar year or fiscal year as a basis for filing its
annual income tax return: Provided, That the corporation shall not
change the accounting period employed without prior approval from the
Commissioner of Internal Revenue in accordance with the provisions of
Section 41 of this Code.
(c) Return of corporation contemplating dissolution.
— Every corporation shall within thirty days after the adoption by the
corporation of a resolution or plan for the dissolution of the
corporation or for the liquidation of the whole or any part of its
capital stock, including corporations which have been notified of
possible involuntary dissolution by the Securities and Exchange
Commission, render a correct return to the Commissioner of Internal
Revenue, verified under oath, setting forth the terms of such
resolution or plan and such other information as the Secretary of
Finance shall, by regulations, prescribe. The dissolving corporation
prior to the insurance of the Certificate of Dissolution by the
Securities and Exchange Commission shall secure a certificate of tax
clearance from the Bureau of Internal Revenue which certificate shall
be submitted to the Securities and Exchange Commission.
(d) Return on capital gains realized from sale of
shares of stocks. — Every corporation deriving capital gains from the
sale or exchange of shares of stock not traded thru a local stock
exchange as prescribed under Sections 24 (e) (2) (A), 25 (a) (6) (C)
(i) and 25 (b) (5) (C) (i), shall file a return within thirty days
after each transaction and a final consolidated return of all
transactions during the taxable year on or before the fifteenth day of
the fourth month following the close of the taxable year. (As amended
by E.O. No. 37)
Section 46. Extension of time of file returns. — The
Commissioner of Internal Revenue may, in meritorious cases, grant a
reasonable extension of time for filing returns of income (or final and
adjustment returns in the case of corporations), subject to the
provisions of Section fifty of the Code.
Section 47. Return of receivers, trustees in
bankruptcy or assignees. — In cases wherein receivers, trustees in
bankruptcy, or assignees are operating the property or business of a
corporation, subject to the tax imposed by this Title, such receivers,
trustees, or assignees shall make returns of net income as and for such
corporation, in the same manner and form as such organization is
hereinbefore required to make returns, and any tax due on the income as
returned by receivers, trustees, or assignees shall be assessed and
collected in the same manner as if assessed directly against the
organizations of whose business or properties they have custody and
control.
Section 48. Returns of general professional
partnerships. — Every general professional partnership shall file, in
duplicate, a return of its income, except income exempt under Section
twenty-eight (b) of this Title, setting forth the items of the gross
income and the deductions allowed by this Title, and the names and
addresses and shares of the partners.
Section 49. Payment and assessment of income tax for
individuals and corporations.
(a) Payment of Tax. — (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 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.
(2) Installment payment. — When the tax due is in
excess of P2,000, the taxpayer other than a corporation may elect to
pay the tax in 2 equal installments in which case, the first
installment shall be paid at the time the return is filed and the
second installment, on or before July 15 following the close of the
calendar year. If any installment is not paid on or before the date
fixed for its payment, the whole amount of the tax unpaid becomes due
and payable, together with the delinquency penalties.
(3) Installment payment for non-resident citizens. —
When the tax due from a non-resident citizen is in excess of U.S. $200,
the taxpayer may elect to pay the tax in 2 equal installments in which
case, the first installment shall be paid at the time the return is
filed and the second installment, on or before July 15 following the
close of the calendar year. If any installment is not paid on or before
the date fixed for its payment the whole amount of the tax unpaid
becomes due and payable together with the delinquency penalties.
(4) Payment of capital gains tax. — The total amount
of tax imposed and prescribed under Sections 21 (d) (1), 21 (e), 24 (e)
(2) (A), 25 (a) (6) (C) (i) and 25 (b) (5) (C) (i) shall be paid on the
date the return prescribed thereof 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, 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: and Provided, finally, That if the seller, having paid the
tax, submits such proof of intent within 6 months from the registration
of the document transferring 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 43 of this Code, the tax due from each
installment payment shall be paid within 30 days from the receipt of
such payments.
No registration of any document transferring real property shall be
effected by the Register of Deeds unless the Commissioner of Internal
Revenue or his duly authorized representative has certified that such
transfer has been reported, and the tax herein imposed, if any, has
been paid.
(b) Assessment and payment of deficiency tax. — After
the return is filed, the Commissioner of Inter Revenue 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:cralaw:red
(1) The amount by which the tax imposed by this Title
exceeds the amount shown as the tax by the taxpayer 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 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. (As amended by E.O. No. 37)
Section 50. Withholding of tax at source.
(a) Withholding of final tax on certain incomes. —
The tax imposed or prescribed by Sections 21 (c), 21 (d) (2); 22 (a)
(2), (b), (c), (d), (e); 24 (e) (1), (e) (2) (B), (e) (3); and 25 (a)
(4), (a) (5), (a) (6) (A), (a) (6) (B), (C) (ii), (b) (1), (b) (2), (b)
(3), (b) (4), (b) (5) (A), (b) (5) (B), (b) (5) (C) (ii) of this Code
on specified items of income shall be withheld by payor-corporation
and/or person and paid in the same manner and subject to the same
conditions as provided in Section 51 of the National Internal Revenue
Code, as amended.
(b) Withholding of creditable tax at source. — The
Secretary of Finance may upon the recommendation of the Commissioner of
Internal Revenue, require also the withholding of a tax on the items of
income payable to persons (natural or juridical) residing in the
Philippines by payor-corporation/persons as provided for by law at the
rate of not less than 2 ½% but not more than 35% thereof which
shall be credited against the income tax liability of the taxpayer for
the taxable year.
(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 30% of
the interest or other payments upon those bonds, mortgages, a 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 non-resident alien or to a citizen or resident of the Philippines.
(As amended by E.O. No. 37) chanroblesvirtualawlibrary
Section 51. Returns and payment of taxes withheld at
source. — (a) Quarterly returns and payment of taxes withheld. — Taxes
deducted and withheld under Section fifty-three (now 50) shall be
covered by a return and paid to the Revenue District Officer,
Collection Agent, or duly authorized Treasurer of the city, or
municipality where the withholding agent has his legal residence or
principal place of business or where the withholding agent is a
corporation, where the principal office is located. 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
Commissioner of Internal Revenue may, with the approval of the
Secretary of Finance, 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. The return for
final withholding tax shall be filed and the payment made within 25
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.
[(b) Penalties for failure to render returns; for
rendering false or fraudulent returns; and for non-payment of taxes
withheld. — The surcharges and the penalties imposed in Sections
Seventy-two and Seventy-three, respectively, of this Title shall apply
to failure to file returns, to filing false or fraudulent returns or
failure to pay the tax required under this Section.
In case the taxes deducted and withheld are not paid within the time
prescribed, there shall be added to the amount of the unpaid tax a
surcharge of twenty-five per centum plus interest at the rate of twenty
per centum per annum from the date the same become due until paid.
If the withholding agent is the government or any of its agencies,
political subdivisions, or instrumentalities, or a government-owned or
controlled corporations, the employee responsible for the withholding
and remittance of the tax shall be personally liable for the surcharge
and interest imposed herein.]
(c) Statement of income payments made and taxes
withheld. — Every withholding agent required to deduct and withhold
taxes under Section fifty-three (now 50) shall furnish each recipient,
in respect to his or its receipts during the calendar quarter or year a
written statement showing the income or other payments made by the
withholding agent during such quarter or year, and the amount of the
tax deducted and withheld therefrom, simultaneously upon payment at the
request of the payee, but not later than the 20th day following the
close of the quarter in the case of corporate payee or not later than
March 1 of the following year in the case of individual payee for
creditable withholding taxes. For final withholding taxes the statement
should be given to the payee on or before January 31 of the succeeding
year.
(d) Annual returns. — Every withholding agent
required to deduct and withhold taxes under Section fifty-three (now
50) shall submit to the Commissioner of Internal Revenue a
reconciliation statement of quarterly payments and list of payees and
income payments. In the case of final withholding taxes, the return
shall be filed on or before January 31 of the succeeding year, and for
creditable withholding taxes, not later than March 1 of the year
following the year for which the annual report is being submitted. This
return, if made and filed in accordance with regulations approved by
the Secretary of Finance, shall be sufficient compliance with the
requirements of Section seventy-seven (now 61) of this Title in respect
to the income payments.
The Commissioner may, by regulations, grant to any withholding agent a
reasonable extension of time to furnish and submit the return requires
in this subsection.
[(e) Surcharge and interest for failure to deduct and
withhold. — If the withholding agent, in violation of the provisions of
the preceding section and implementing regulations thereunder, fails to
deduct and withhold the amount of tax required under said section and
regulations, he shall be liable to pay in addition to the tax required
to be deducted and withheld, a surcharge of fifty per centum if the
failure is due to willful neglect or with intent to defraud the
Government, or twenty-five per centum if the failure is not due to such
causes, plus interest at the rate of fourteen per centum per annum from
the time the tax is required to be withheld until the date of
assessment.]
(f) Income of recipient. — Income upon which any
creditable tax is required to be withheld at the source under Section
53 (now 50) 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 295 (now
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 50.
(g) All taxes withheld pursuant to the provisions of
this Code and its implementing 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.
[Any violation of this provisions shall be subject to the surcharges
and penalties prescribed in paragraph (b) of this Section.] (As added
by PD No. 1959) chanroblesvirtualawlibrary
Section 52. Tax on profits collectible from owner or
other persons. — The tax imposed under this Title upon gains, profits,
and income not falling under the foregoing and not returned and paid by
virtue of the foregoing or as otherwise provided by law shall be
assessed by personal return under rules and regulations to be
prescribed by the Secretary of Finance. The intent and purpose of the
Title is that all gains, profits, and income of a taxable class, as
defined in this Title, shall be charged and assessed with the
corresponding tax prescribed by this Title, and said tax shall be paid
by the owners of such gains, profits, and income, or the proper person
having the receipt, custody, control, or disposal of the same. For the
purpose of this Title, ownership of such gains, profits and income or
liability to pay the tax shall be determined as of the year for which a
return is required to be rendered.
CHAPTER VII
ESTATES AND TRUSTS
Section 53. Imposition of Tax. — (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 —chanroblesvirtualawlibrary
(1) Income accumulated in trust for the benefit of
unborn or unascertained person or persons with contingent interests,
and income accumulated or held for future distribution under the terms
of the will or trust;chanroblesvirtualawlibrary
(2) Income which is to be distributed currently by
the fiduciary to the beneficiaries, and income collected by a guardian
of an infant which is to be held or distributed as the court may
direct;chanroblesvirtualawlibrary
(3) Income received by estates of deceased persons
during the period of administration or settlement of the estate, and
(4) Income which, in the discretion of the fiduciary,
may be either distributed to the beneficiaries or
accumulated. chanroblesvirtualawlibrary
(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
employees, 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 satisfaction of all
liabilities with respect to employees under the trust, for any part of
the corpus on 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.
(c) Computation and payment. —chanroblesvirtualawlibrary
(1) In general. — The tax shall be computed upon the
net income of the estate or trust and shall be paid by the fiduciary,
except as provided in Section fifty-seven (relating to revocable trust)
and Section fifty-eight (relating to income for the benefit of the
grantor);chanroblesvirtualawlibrary
(2) Consolidation of income of two or more trusts. —
Where, in the case of two or more trusts the creator of the trust in
each instance is the same person and the beneficiary in each instance
is the same, the net income of all the trust shall be consolidated and
the tax provided in this section computed on such consolidated income,
and such proportion of said tax shall be assessed and collected from
each trustee which the net income of the trust administered by him
bears to the consolidated income of the several trusts.
Section 54. Net Income. — The net income of the
estate or trust shall be computed in the same manner and on the same
basis as in the case of an individual, except that —chanroblesvirtualawlibrary
(a) There shall be allowed as a deduction in
computing the net income of the estate or trust the amount of the
income of the estate or trust for the taxable year which is to be
distributed currently by the fiduciary to the beneficiaries, and the
amount of the income collected by a guardian of an infant which is to
be held or distributed as the court may direct, but the amount so
allowed as a deduction shall be included in computing the net income of
the beneficiaries whether distributed to them or not. Any amount
allowed as a deduction under this subsection shall not be allowed as a
deduction under subsection (b) of this section in the same or any
succeeding taxable year.
(b) In the case of income received by estate 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 additional deduction in computing the net
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 net income of the
legatee, heir, or beneficiary. chanroblesvirtualawlibrary
(c) In the case of a trust administered in a foreign
country, the deductions mentioned in subsections (a) and (b) of this
section shall not be allowed: Provided, That the amount of any income
included in the return of said trust shall not be included in computing
the income of the beneficiaries.
Section 55. Exemption allowed to estates and trusts.
— For the purpose of the tax provided for in this Title, there shall be
allowed an exemption of Six thousand pesos from the income of the
estate or trust. (As amended by E.O. No. 37)
Section 56. 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 net income of the
grantor.
Section 57. Income for benefit of 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, in the
discretion of the grantor or of any person not having a substantial
adverse interest in the disposition of such part of 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 net income of the grantor.
(b) As used in this section, the term "in the
discretion of the grantor" means in the discretion of the grantor,
either alone or in conjunction with any person not having a substantial
adverse interest in the disposition of the part of the income in
question.
Section 58. Fiduciary returns. — Guardians, trustees,
executors, administrators, receivers, conservators, and all persons or
corporations, acting in any fiduciary capacity, shall render, in
duplicate, a return of the income of the person, trust or estate for
whom or which they act, and be subject to all the provisions of this
Title, which apply to individuals in case such person, estate, or trust
has a gross income of Three thousand pesos or over during the taxable
year. Such fiduciary or person filing the return for him or it, shall
take oath that he has sufficient knowledge of the affairs of such
person, trust, or estate to enable him to make such return and that the
same, is, to the best of his knowledge and belief, true and correct,
and be subject to all the provisions of this Title which apply to
individuals: Provided, That a return made by or for one or two or more
joint fiduciaries filed in the province where such fiduciary resides,
under such regulations as the Secretary of Finance may prescribe shall
be a sufficient compliance with the requirements of this section. chanroblesvirtualawlibrary
Section 59. Fiduciaries indemnified against claims
for taxes paid. — Trustees, executors, administrators, and other
fiduciaries are indemnified against the claims or demands of every
beneficiary for all payments of taxes which they shall be required to
make under the provisions of this Title, and they shall have credit for
the amount of such payments against the beneficiary or principal in any
accounting which they make as such trustees or other fiduciaries.
CHAPTER VIII
[PERSONAL HOLDING COMPANIES]
Section 60. Collection of foreign items. — All
persons, corporations, duly registered general co-partnerships
(compania colectivas) undertaking for profit or otherwise the
collection of foreign payments of interest or dividends by means of
coupons, checks, or bills of exchange shall obtain license from the
Commissioner of Internal Revenue, and shall be subject to such
regulations enabling the Government to obtain the information required
under this Title, as the Secretary of Finance shall prescribe; and
whoever knowingly undertakes to collect such payments as aforesaid
without having obtained a license therefor, or without complying with
such regulations, shall, for each offense, be fined in a sum not
exceeding ten thousand pesos or imprisoned for a term not exceeding one
year, or both.
Section 61. Information at source as to income
payments. — All persons, corporations or duly registered
co-partnerships (companias colectivas), in whatever capacity acting,
lessees or mortgagors of real or personal property, trustees, acting in
any trust capacity, executors, administrators, receivers, conservators,
and employees making payment to another person, corporation, or duly
registered general co-partnership (compania colectiva) of interest,
rents, salaries, wages, premiums, annuities, compensations,
remunerations, emoluments, or other fixed or determinable gains,
profits, and income, other than payment described in Section 75
(deleted and transferred) and 62, in any taxable year, or, in the case
of such payments made by the Government of the Philippines, the
officers or employees of the Government having information as to such
payments and required to make returns in regard thereto, are authorized
and required to render a true and accurate return to the Commissioner
of Internal Revenue, under such rules and regulations and in such form
and manner as may be prescribed by the Secretary of Finance, setting
forth the amount of such gains, profits, and income, and the name and
address of the recipient of such payments: Provided, That such return
shall be required, in the case of payments of interest upon bonds and
mortgages or deeds of trust or other similar obligations of
corporations, and in the case of collection of items, not payable in
the Philippines, or interest upon the bonds of foreign countries and
interest from the bonds and dividends from the stock of foreign
corporations by persons, corporations, or duly registered general
co-partnership (companias colectivas), undertaking as a matter of
business or for profit or otherwise the collection of foreign payments
of such interest or dividends by means of coupons or bills of
exchange. chanroblesvirtualawlibrary
Section 62. Return of information of brokers. — Every
person, corporation, or duly registered general co-partnership
(compania colectivas), doing business as a broker in any exchange or
board or other similar place of business shall, when required by the
Commissioner of Internal Revenue, render a correct return duly verified
under oath, under such regulations as the Secretary of Finance may
prescribe, showing the names of customers for whom such person,
corporation, or duly registered general co-partnership (compania
colectiva), has transacted any business, with such details as to the
profits, losses, or other information which the Commissioner may
required as to each of such customers as will enable the Commissioner
of Internal Revenue to determine whether all income tax due on profits
or gains of such customers has been paid.
Section 63. Returns as to formation, etc., of foreign
corporations. —chanroblesvirtualawlibrary
(a) Requirements. — Under regulations prescribed by
the Secretary of Finance, any attorney, accountant, fiduciary, bank,
trust company, financial institution, or other person, who, after the
date of the enactment of this Code,ds, assists, counsels, or advises
in, or with respect to, the formation, organization or reorganization
of any foreign corporation, shall, within thirty days thereafter, file
with the Commissioner of Internal Revenue a return.
(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 shall
prescribe by regulations as necessary for carrying out the provisions
of this Title. Nothing in this section shall be construed to require
the divulging of privileged communication between attorney and client.
Section 64. Disposition of income tax returns;
publication of lists of persons filing returns and paying taxes. —
After the assessment shall have been made, as provided in this Title,
the return, together with any corrections thereof which may have been
made by the Commissioner, shall be filed in the office of the
Commissioner of Internal Revenue and shall constitute public records
and be open to inspection as such upon the order of the President of
the Philippines under rules and regulations to be prescribed within
sixty days from the date of effectivity of this Code by the Secretary
of Finance.
The Commissioner of Internal Revenue may in each year cause to be
prepared and published in any newspaper and otherwise make available to
public inspection upon written request and pursuant to regulations to
be prescribed by the Secretary of Finance, lists containing the names
and addresses of persons who have filed income tax returns with the
amount of income declared and the income tax paid by each. The list of
taxpayers for the preceding taxable year in each municipality or city
shall be posted at the main entrance of the respective municipal
building or city hall. chanroblesvirtualawlibrary
Section 65. Suit to recover tax based on false or
fraudulent returns. — When an assessment is made in case of any list,
statement, or return, which in the opinion of the Commissioner of
Internal Revenue was false or fraudulent, or contained any
understatement or undervaluation, no tax collected under such
assessment shall be recovered by any suits unless it is proved that the
said list, statement, or return was not false or fraudulent and did not
contain any understatement or undervaluation; but this provision shall
not apply to statements or returns made or to be made in good faith
regarding annual depreciation of oil or gas wells and mines.
Section 66. Distribution of dividends or assets by
corporations. — (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 earning or profits accrued since March first,
nineteen hundred and thirteen, and payable to its shareholders, whether
in money or in other property.
Where a corporation distributes all of its assets incomplete
liquidation or dissolution, the gain realized or loss sustained by the
stockholder, whether individual or corporate, is taxable income or a
deductible loss, as the case may be.
(b) Stock dividend. — A stock dividend representing
the transfer of surplus to capital account shall not be subject to tax.
However, if a corporation cancels or redeems stock issued as a dividend
at such time and in such manner as to make the distribution and
cancellation or redemption, in whole or in part, essentially equivalent
to the distribution of a taxable dividend, the amount so distributed in
redemption or cancellation of the stock shall be considered as taxable
income to the extent that it represents a distribution of earnings or
profits accumulated after March first, nineteen hundred and thirteen.
(c) Dividends distributed are deemed made from most
recently accumulated profits. — Any distribution made to the
shareholders or members of a corporation in the year nineteen hundred
and thirty-nine or subsequent tax years, shall be deemed to have been
made from the most recently accumulated profits or surplus, and shall
constitute a part of the annual income of the distributee for the year
in which received: Provided, That nothing herein shall be construed as
taxing any earnings or profits accrued prior to March first, nineteen
hundred and thirteen, but such earnings or profits may be distributed
in stock dividends or otherwise, exempt from the tax, after the
distribution of earnings and profits accrued since March first,
nineteen hundred and thirteen, has been made.
(d) Net income or a partnership deemed constructively
received by partners. — The income declared by a partnership for a
taxable year which is subject to tax under Section 24 (a) of this Code,
after deducting the corporate income tax imposed therein, shall be
deemed to have been actually or constructively received by the partners
in the same taxable year and shall be taxed to them in their individual
capacity, whether actually distributed or not. chanroblesvirtualawlibrary
CHAPTER IX
QUARTERLY CORPORATE INCOME TAX
Annual Declaration and Quarterly Payments of Income Taxes.
Section 67. Declaration of income tax for
individuals. — (a) In General. — Except as otherwise provided in this
Section, every individual subject to income tax under Sections 21 and
22 (a) of this Title, receiving self-employment income whether it
constitutes the sole source of his income or in combination with
salaries, wages and other fixed or determinable income shall make and
file a declaration of his estimated income for the current taxable year
on or before April 15 of the same taxable year. In general
self-employment income consists of the earnings derived by the
individual from the practice of profession or conduct of trade or
business carried on by him as a sole proprietor or by a partnership of
which he is a member. Non-resident Filipino citizens, with respect to
income from without the Philippines, and non-resident aliens not
engaged in trade, or business in the Philippines, are not required to
render a declaration of estimated income tax. The declaration shall
contain such pertinent information as the Secretary of Finance may by
rules and/or regulations prescribe. An individual may make amendments
of a declaration filed during the taxable year under the regulations
prescribed by the Secretary of Finance.
(b) Return and payment of estimated income tax by
individuals. — The amount of estimated income tax as defined in
paragraph (c) with respect to which a declaration is required under
paragraph (a) shall be paid in four installments. The first installment
shall be paid at the time of the declaration and the second and third
shall be paid on August 15 and November 15 of the current year,
respectively. The forty installment shall be paid on or before April 15
of the following calendar year when the final income tax return is due
to be filed.
(c) Definition of Estimated Tax. — In the case of an
individual, the term "Estimated Tax" means the amount which the
individual declared as income tax in his final and income tax return
for the preceding taxable year, minus the sum of the credits allowed
under this title, against the said tax. If, during the current taxable
year, the taxpayer reasonably expects to pay a bigger income tax, he
shall file an amended declaration during any interval of installment
payment dates. chanroblesvirtualawlibrary
Section 68. Declaration of Corporate Quarterly Income
Tax. — Every corporation shall file in duplicate a quarterly summary
declaration of its gross income and deductions on a cumulative basis
for the preceding quarter or quarters upon which the income tax, as
provided in Title II of this Code shall be levied, collected and paid.
The tax so computed shall be decreased by the amount of tax previously
paid or assessed during the preceding quarters and shall be paid not
later than sixty (60) days from the close of each of the first three
(3) quarters of the taxable year, whether calendar or fiscal year.
Section 69. Final Adjustment Return. — Every
corporation liable to tax under Section 24 shall file a final
adjustment return covering the total net income for the preceding
calendar or fiscal year. If the sum of the quarterly tax payments made
during the said taxable year is not equal to the total tax due on the
entire taxable net income of that year the corporation shall either:cralaw:red
(a) Pay the excess tax still due; or
(b) Be refunded the excess amount paid, as the case
may be.
In case the corporation is entitled to a refund of the excess estimated
quarterly income taxes paid, the refundable amount shown on its final
adjustment return may be credited against the estimated quarterly
income tax liabilities for the taxable quarters of the succeeding
taxable year.
Section 70. (a) Place of filing. — The quarter income
tax declaration required in Section 68 and the final adjustment return
required in Section 69 shall be filed with the Revenue District
Officer, or the Collection Agent or duly authorized treasurer of the
city or municipality having jurisdiction over the location of the
principal office of the corporation filing the return or place where
its main books of accounts and other data from which the return is
prepared are kept.
(b) Time of filing the income tax return. — The
corporate quarterly declaration shall be filed within (60) days
following the close of each of the first three quarter of the taxable
year. The final adjustment return shall be filed on or before the 15th
day of April or on or before the 15th day of the 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 income tax
returns computed in accordance with Section 68 and 69 shall be paid at
the time the declaration or return is filed in a manner prescribed by
the Commissioner of Internal Revenue. chanroblesvirtualawlibrary
CHAPTER X
WITHHOLDING ON WAGES
Section 71. Definitions. — As used in this Chapter. —
(a) Wages. — The term "wages" means all remuneration (other than fees
paid to a public official) for services performed by an employee for
his employer, including the cash value of all remuneration paid in any
medium other than cash, except that such term shall not include
remuneration paid —chanroblesvirtualawlibrary
(1) For agricultural labor paid entirely in products
of the farm where the labor is performed, or
(2) For domestic service in a private home, or
(3) For casual labor not in the course of the
employer's trade or business, or
(4) For services by a citizen or resident of the
Philippines for a foreign government or an international organization.
If the remuneration paid by an employer to an employee for services
performed during one-half or more of any payroll period of not more
than thirty-one consecutive days constitutes wages, all the
remuneration paid by such employer to such employee for such period
shall be deemed to be wages; but if the remuneration paid by an
employer to an employee for services performed during more than
one-half of any such payroll period does not constitute wages, then
none of the remuneration paid by such employer to such employee for
such period shall be deemed to be wages.
(b) Payroll period. — The term "payroll period" means
a period for which a 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.
(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: chanroblesvirtualawlibrary
(1) If the person for whom the individual performs or
performed any services does not have control of the payment of the
wages for such services, the term" employer" [(except for the purposes
of subsection (a)] means the person having control of the payment of
such wages; and
(2) In the case of a person paying wages on behalf of
a non-resident alien individual, foreign partnership or foreign
corporation, not engaged in trade or business within the Philippines,
the term "employer" [(except for the purposes of subsection (a)] means
such person.
Section 72. Income tax collected at source. — (a)
Requirement of withholding. — Every employer making payment of wages
shall deduct and withhold upon such wages a tax determined in
accordance with regulations to be prepared by the Secretary of Finance.
(As amended by E.O. No. 37)
(b) Tax paid by recipient. — If the employer, in
violation of the provisions of this chapter, fails to deduct and
withhold the tax as required under this chapter, and thereafter the tax
against which such tax may be credited is paid, the tax so required to
be deducted and withheld shall not be collected from the employer; but
this subsection shall in no case relieve the employer from liability
for any penalties or additions to the tax otherwise applicable in
respect of such failure to deduct and withhold.
(c) Refunds or credits. — (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 21 (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.
Any excess of the taxes withheld over the tax due from the taxpayer
shall be returned or credited within three months from the fifteenth
day of April. Refunds or credits made after such time shall earn
interest at the rate of six per cent (6%) per annum starting after the
lapse of the three-month period to the date the refund or credit is
made.
Refunds shall be made upon warrants drawn by the Commissioner of
Internal Revenue or by his duly authorized representative without the
necessity of counter-signature by the Chairman, Commission on Audit or
the latter's duly authorized representative as an exception to the
requirement prescribed by Section 621 of the Revised Administrative
Code. (As amended by E.O. No. 37)
(d) Personal exemptions. — (1) In general. — Unless
otherwise provided by this chapter, the personal and additional
exemptions applicable under this chapter shall be determined in
accordance with the main provisions of this Title. chanroblesvirtualawlibrary
(2) Exemption certificates. —chanroblesvirtualawlibrary
(A) When to be filed. — On or before the date of
commencement of employment with an employer, or within ten days, from
the effectivity of this Code in case of persons already employed, the
employee shall furnish the employer with a signed withholding exemption
certificate relating to the personal and additional exemptions to which
he is entitled.
(B) Change of status. — In case of change of status
of an employee as a result of which he would be entitled to a lesser or
greater amount of exemption, the employee shall, within ten days from
such change, file with the employer a new withholding exemption
certificate reflecting the change. (As amended by R.A. 7497)
(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.
(D) Failure to furnish certificate. — Where an
employee, in violation of this chapter, either fails or refuses to file
a withholding exemption certificate the employer shall withhold the
taxes prescribed under the schedule for zero exemption of the
withholding tax table in subsection (a).
(e) Withholding on basis of average wages. — The
Commissioner of Internal Revenue may, under regulations promulgated by
the Secretary of Finance, authorize employers (1) to estimate the wages
which will be paid to an employee in any quarter of the calendar year,
(2) to 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) to deduct and withhold upon any payment of wages to
such employee during such quarter amount as may be required to be
deducted and withheld during such quarter without regard to his
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;chanroblesvirtualawlibrary
(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. (As amended by
R.A. 7479)
(2) Taxes shall be withheld from the wages of the
wife in accordance with the schedule for zero exemption of the
withholding tax table in subsection (a).
(g) Non-resident aliens. — Wages paid to non-resident
alien individuals engaged in trade or business in the Philippines shall
be subject to the provisions of this chapter.
(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 21(a). The different 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. (As added by R.A. 7497)
Section 73. Liability for tax. — (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 from the employer together with the
penalties or additions to the tax otherwise applicable in respect of
such failure to withhold and remit.
(b) Employee. — Where an employee fails or refused to
file the withholding exemption certificate or willfully supplies false
or inaccurate information thereunder, the tax otherwise to be withheld
by the employer shall be collected from him including penalties or
additions to the tax from the due date of remittance until the date of
payment. On the other hand, excess taxes withheld made by the employer
due to: (a) failure or refusal to file the withholding exemption
certificate; or (b) false and inaccurate information shall not be
refunded to the employee but shall be forfeited in favor of the
Government. (As amended by R.A. 7497)
Section 74. Return and payment to the Government of
taxes withheld. — Taxes deducted and withheld hereunder by the employer
on wages of employees shall be covered by a return and paid to the
collection agent of the city or municipality in which the employer has
his legal residence or principal place of business, or, in case the
employer is a corporation, in which the principal office is located.
The return shall be filed and the payment made within twenty-five days
from the close of each calendar quarter. The taxes deducted and
withheld by employers shall be held in special fund in trust for the
Government until the same are paid to the said collecting officers. The
Commissioner of Internal Revenue may with the approval of the Secretary
of Finance, require 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.
Section 75. Return and payment in case of Government
employees. — If the employer is the Government of the Philippines or
any political subdivision, agency or instrumentality thereof, the
return of the amount deducted and withheld upon any wages shall be made
by the officer or employee having control of the payment of such wages,
or by any officer or employee duly designated for that purpose.
Section 76. Statements and returns. — (a)
Requirements. — Every employer required to deduct and withhold a tax in
respect of the wages of an employee shall furnish to each such employee
in respect of his employment during the calendar year, on or before
January thirty-first of the succeeding year, on the day of which the
last payment of wages is made, a written statement showing the wages
paid by the employer to such employee during the calendar year, and the
amount of the tax deducted and withheld under this Chapter in respect
of such wages. The statement required to be furnished by this section
in respect of any wages shall be furnished at such other times, shall
contain such other information, and shall be in such form as the
Secretary of Finance, may, by regulations prescribe.
(b) Returns. — Every employer required to deduct and
withhold the taxes in respect of the wages of his employees shall, on
or before January thirty-first of the succeeding year, submit to the
Commissioner of Internal Revenue a return of the total amount withheld
during the year accompanied by copies of the statement referred to in
the preceding paragraph. This return, if made and filed in accordance
with regulations with the requirements of Section seventy-one (now
sixty-one) of this Title in respect of such wages.
(c) Extension of time. — The Commissioner of Internal
Revenue, under such regulations as may be promulgated by the Secretary
of Finance, may grant to any employer a reasonable extension of time to
furnish and submit the statement and returns required under this
section. chanroblesvirtualawlibrary
TITLE III. ESTATE AND DONOR'S TAXES
Section 77. Rates of estate tax. — There shall be
levied assessed, collected and paid upon the transfer of the net estate
as determined in accordance with Section 78 and 79 of every decedent,
whether resident or non-resident of the Philippines, a tax based on the
value of such net estate, as computed in accordance with the following
schedules:cralaw:red
If the net estate is:
Over But Not
The Tax Plus Of Excess
Over Shall be
Over
P200,000 Exempt
P200,000 500,000
5% P200,000
500,000
2,000,000 P15,000
8% 500,000
2,000,000
5,000,000 135,000
12% 2,000,000
5,000,000
10,000,000 495,000
21% 5,000,000
10,000,000 And
Over 1,545,000
35% 10,000,000
(As amended by Republic Act No. 7499.)
Section 78. 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, whether situated; Provided, however, That in the case of a
non-resident 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.
(a) Decedent's interest. — To the extent of the
interest therein of the decedent at the time of his death;chanroblesvirtualawlibrary
(b) Transfer in contemplation of death. — To the
extent of any interest therein of which the decedent has at any time
made a transfer, by trust or otherwise, in contemplation of or intended
to take effect in possession or enjoyment at or after his death, or of
which he has at any time made a transfer, by trust or otherwise, under
which he has retained for his life or for any period not ascertainable
without reference to his death or for any period which does not in fact
end before his death (1) the possession or enjoyment of, or the right
to the income from the property, or (2) the right either alone or in
conjunction with any person, to designate the person who shall possess
or enjoy the property or the income therefrom; except in case of a bona
fide sale for an adequate and full consideration in money or money's
worth. chanroblesvirtualawlibrary
(c) Revocable transfer. — (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
exerciseable) by the decedent alone or by the decedent in conjunction
with any other person (without regard to when or from what source the
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 purposes of this subsection the power to
alter, amend or revoke shall be considered to exist on the date of the
decedent's death even through 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.
(3) [The relinquishment of any such power, nor
admitted or shown to have been in contemplation of the decedent's
death, made within three year prior to his death without such a
consideration and affecting the interest or interest (whether arising
from one or more transfers or the creation of one or more trusts) of a
value or aggregate value, at the time of such death, in excess of two
thousand pesos, then to the extent of such excess, such relinquishment
or relinquishments shall, unless shown on the contrary, be deemed to
have been made in contemplation of death within the meaning of this
Chapter.]
(d) Property passing under general power of
appointment. — To the extent of any property passing under a general
power of appointment exercised by the decedent (1) by will, or (2) by
deed executed in contemplation of or intended to take effect in
possession or enjoyment at or after his death, or (3) by deed under
which he has retained for his life or any period not ascertainable
without reference to his death or for any period which does not in fact
end before his death (a) the possession or enjoyment of, or the right
to the income from, the property, or (b) the right, either alone or in
conjunction with any person, to designate the persons who shall possess
or enjoy the property or the income therefrom; except in case of a bona
fide sale for an adequate and full consideration in money or money's
worth.
(e) Proceeds of life insurance. — To the extent of
the amount receivable by the estate of the deceased, his executor, or
administrator, as insurance under policies taken out by the decedent
upon his own life, irrespective of whether or not insured retained the
power of revocation, or to the extent of the amount receivable by any
beneficiary designated in the policy of insurance, except when it is
expressly stipulated that the designation of the beneficiary is
irrevocable. chanroblesvirtualawlibrary
(f) Prior interests. — Except as other specifically
provided therein, subsections (b), (c), and (e) of this section shall
apply to the transfers, trusts, estate, interests, rights, powers and
relinquishment of powers, as severally enumerated and described
therein, whether, made, created, arising, existing, exercised, or
relinquished before or after the enactment of this Code.
(g) Transfers for insufficient consideration. — If
any one of the transfers, trusts, interests, rights, or powers
enumerated and described in subsections (b), (c), and (d) of this
section is made, created, exercised, or relinquished for a
consideration in money or money's worth, but is not a bona fide sale
for an adequate and full consideration in money or money's worth, there
shall be included in the gross estate only the excess of the fair
market value, at the time of death, of the property otherwise to be
included on account of such transaction, over the value of the
consideration received therefor by the decedent.
(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 79. Computation of net estate and estate tax.
— For the purpose of the tax imposed in this Chapter, the value of the
net estate shall be determined:cralaw:red
(a) In the case of a citizen or resident of the
Philippines, by deducting from the value of the gross estate —chanroblesvirtualawlibrary
(1) Expenses, losses, indebtedness, and taxes. — Such
amounts —chanroblesvirtualawlibrary
(A) For actual funeral expenses or in an amount equal
to five per centum of the estate, whichever is lower, but in no case to
exceed P100,000;chanroblesvirtualawlibrary
(B) For judicial expenses of the testamentary or
intestate proceedings;chanroblesvirtualawlibrary
(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 year before the
death of the decedent, the administrator or executive shall submit a
statement showing the disposition of the proceeds of the loan;chanroblesvirtualawlibrary
(D) For the 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 chanroblesvirtualawlibrary
(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 taxes upon income
received after the death of the decedent, or property taxes not accrues
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 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 last day for the payment of the estate tax as
prescribed in subsection (a) of Section 84.
(2) Property previously taxed. — An amount equal to
the value specified be low of any property forming a part of the gross
estate situated in the Philippines of any person who died within five
years prior to the death of the decedent, or transferred to the
decedent by gift within five years prior to his death; where such
property can be identified as having been received by the decedent from
the donor by gift, or from such prior decedent by gift, bequest,
devise, or inheritance, or which can be identified as having been
acquired in exchange for property so received.
On hundred per centum of the value if the prior decedent died within
one 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;chanroblesvirtualawlibrary
Eighty per centum of the value if the prior decedent died more than one
year but not more than two 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;chanroblesvirtualawlibrary
Sixty per cent of the value if the prior decedent died more than two
years but not more than three 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
Forty per centum of the value if the prior decedent died more than
three years but not more than four 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 per centum of the value if the prior decedent died more than
four years but not more than five 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 gift tax, or estate tax
imposed under this Title were 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 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 gift tax, or the estate
tax of the prior decedent, which were paid in whole or in part 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 said paragraph (2) bear 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. chanroblesvirtualawlibrary
(4) The family home. — An amount equivalent to the
current or fair market value or zonal value of the decedent's family
home, whichever is higher: Provided, however, That, if the said current
or fair market value or zonal 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. (As amended by Republic Act No. 7499)
(b) Deductions allowed to non-resident estates. — In
the case of a non-resident 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 —chanroblesvirtualawlibrary
(1) Expenses, losses, indebtedness, and taxes. — That
proportion of the deductions specified in paragraph (1) of subsection
(a) of his section which the value of such part bears to the value of
his entire gross estate wherever situated;chanroblesvirtualawlibrary
(2) Property previously taxed. — An amount equal to
the value specified below of any property forming part of the gross
estate situated in the Philippines of any person who died within five
years prior to the death of the decedent, or transferred to the
decedent by gift within five years prior to his death, where such
property can be identified as having been received by the decedent from
the donor by gift, or from such prior decedent by gift, bequest,
devise, or inheritance, or which can be identified as having been
acquired in exchange for property so received:cralaw:red
One hundred per centum of the value if the prior decedent died within
one 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;chanroblesvirtualawlibrary
Eighty per centum of the value if the prior decedent died more than one
year but not more than two years prior to the death of the decedent, or
if the property was transferred to him gift within the same period
prior to his death;chanroblesvirtualawlibrary
Sixty per centum of the value if the prior decedent died more than two
years but not more than three 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;chanroblesvirtualawlibrary
Forty per centum of the value if the prior decedent died more than
three years but not more than four 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 per centum of the value if the prior decedent died more than
four years but not more than five 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 gift 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 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 death is situated in the Philippines, and only if in
determining the value of the net estate of the prior decedent no
deduction was 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 gift tax, or the estate tax of the prior decedent,
which were 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 or more
items the aggregate value of such item shall be used for the purpose of
computing the deduction.
(3) Transfer 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.
(d) Miscellaneous provisions. — No deduction shall be
allowed in the case of a non-resident not a citizen of the Philippines
unless the executor, administrator, or anyone of the heirs, as the case
may be, included in the return required to be filed under Section 83
the value at the time of his death of that part of the gross estate of
the non-resident not situated in the Philippines.
(e) Tax credit for estate taxes paid to a foreign
country. — (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:cralaw:red
(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
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.
Section 80. Exemption of certain acquisitions and
transmissions. — The following shall not be taxed:cralaw:red
(a) The merger of usufruct in the owner of the naked
title.
(b) The transmission or delivery of the inheritance
or legacy by the fiduciary heir or legatee to the fideicommissary.
(c) The transmission from the first heir, legatee, or
donee in favor of another beneficiary, in accordance with the desire of
the predecessor.
(d) All bequests, devises, legacies or transfer 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 30% of the said bequests, devises, legacies
or transfers shall be used by such institutions for administration
purposes.
Section 81. Determination of value of the estate. —
(a) Usufruct. — To determine the value of the right of usufruct, use or
habitation, as well as that of annuity, there shall be taken into
account the probable life of the beneficiary in accordance with the
latest American Tropical Experience Table.
(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 —chanroblesvirtualawlibrary
(1) The fair market value as determined by the
Commissioner, or chanroblesvirtualawlibrary
(2) The fair market value as shown in the schedule of
values fixed by the Provincial and City Assessors. (As amended by PD
No. 1994)
Section 82. Notice of death to be filed. — In all
cases of transfers subject to tax, or where, though exempt from tax,
the gross value of the estate exceeds three thousand pesos, the
executor, administrator, or any of the legal heirs as the case may be,
within two months after the decedent's death, or within a like period
after qualifying as such executor or administrator, shall give a
written notice thereof to the Commissioner of Internal Revenue.
Section 83. Return. — (a) Requirements. — In all
cases of transfer subject to tax, or where, though exempt from tax, the
gross value of the estate exceeds three thousand pesos, the executor,
or administrator, or any of the legal heirs, as the case may be shall
file a return under oath in duplicate, setting forth: (1) the value of
the gross estate of the decedent at the time of his death, or in case
of a non-resident not a citizen of the Philippines, of the part of his
gross estate situated in the Philippines: (2) the deductions allowed
from gross estate in determining the estate as defined in Section 79,
(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 returns showing a gross value of
fifty thousand pesos or more shall be accompanied with a statement of
(1) itemized assets of the decedent with their corresponding gross
value at the time of his death, or in the case of a non-resident not a
citizen of the Philippines, of that part of his gross estate situated
in the Philippines; (2) itemized deductions from gross estate allowed
in section 79; and (3) the amount of tax due whether paid or still due
and outstanding duly certified to by a certified public accountant.
(b) Time for filing. — For the purpose of determining
the estate tax provided for in Section 77 of this Code, the estate tax
return required under the preceding subsection (a) shall be filed
within six 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 days after the promulgation of such order. (As amended by
Republic Act No. 7499).
(c) Extension of time. — The Commissioner of Internal
Revenue shall have authority to grant, in meritorious cases, a
reasonable extension not exceeding thirty days for filing the return.
(d) Place of filing. — Except in cases where the
Commissioner of Internal Revenue permits, the return required under
subsection (a) shall be filed with the Revenue District Officer,
Collection Agent or duly authorized treasurer of the city or
municipality in which the decedent was domiciled at the time of his
death or if there be no legal residence in the Philippines, then with
the Office of the Commissioner of Internal Revenue.
Section 84. Payment of tax. — (a) Time of payment. —
The estate tax imposed by Section 77 shall be paid at the time the
return is filed by the executor, administrator or the heirs.
(b) Extension of time. — When the Commissioner of
Internal Revenue 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 years, in case the estate is
settled though the courts or two 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 the limitation for assessment as provided in Section 203 of
this Code shall be suspended for the period of any such extension.
Where the taxes are assessed by reason of negligence, intentional
disregard of rules and regulations, or fraud on the part of the
taxpayer, no extension will be granted by the Commissioner.
If an extension is granted, the Commissioner of Internal Revenue may
require the executor, or administrator, or beneficiary, as the case may
be, to furnish a bond in such amount, not exceeding double the amount
of the tax and with such sureties as the Commissioner deems necessary,
conditioned upon the payment of the said tax in accordance with the
terms of the extension.
(c) Liability for payment. — The estate tax imposed
by Section 77 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.
Section 85. Discharge of executor or administrator
from personal liability. — If the executor or administrator makes a
written application to the Commissioner of Internal Revenue for
determination of the amount of the estate tax and discharge from
personal liability therefor, the Commissioner of Internal Revenue (as
soon as possible, and in any event within one year after the making of
such application, or, if the application is made before the return is
filed, then within one year after the return is filed, but not after
the expiration of the period prescribed for the assessment of the tax
in Section 203) shall notify the executor or administrator of the
amount of the tax. The executor or administrator, upon payment of the
amount of which he is notified, shall be discharged from personal
liability for any deficiency in the tax thereafter found to be due and
shall be entitled to a receipt or writing showing such
discharge. chanroblesvirtualawlibrary
Section 86. Definition of deficiency. — As used in
this Chapter, the term "deficiency" means:cralaw:red
(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
(b) If no amount is shown as the tax by executor,
administrator or any of the heirs upon his return, or if no return is
made by executor, administrator, or any heir, 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, refunded, or otherwise repaid in respect of such
tax.
Section 87. 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.
Section 88. Duties of certain officers and debtors. —
Registers of deeds shall not register in the registry of property and
document transferring real property or real rights therein or any
chattel mortgage, by way of gifts inter vivos or mortis causa, legacy
or inheritance, unless a certification from the Commissioner that the
tax fixed in this Title and actually due thereon had been paid is
shown, and they shall immediately notify the Commissioner, Regional
Director, Revenue District Officer or Collection Agent of the city or
municipality where their offices are located, of the nonpayment of the
tax discovered by them. Any lawyer, notary public, or any Government
officer who, by reason of his ,official duties, intervene in the
preparation or acknowledgment of documents regarding partition or
disposal of donation inter vivos or mortis causa, legacy or
inheritance, shall have the duty of furnishing the Commissioner,
Regional Director, Revenue District Officer or Collection Agent of the
place where he may have his principal office, with copies of such
documents and any information whatsoever which may facilitate the
collection of the aforementioned tax. Neither shall a debtor of the
deceased pay his debts to the heirs, legatee, executor, or
administrator of his creditor, unless the certification of the
Commissioner that the tax fixed in this Chapter had been paid is shown;
but he may pay the executor or judicial administrator without said
certification if the credit is included in the inventory of the estate
of the deceased.
Section 89. Restitution of tax upon satisfaction of
outstanding obligations. — If, after the payment of the estate tax, new
obligations of the decedent shall appear, and the persons interested
shall have satisfied them by order of the court, they shall have a
right to the restitution of the proportional part of the tax paid.
Section 90. Payment of tax antecedent to the transfer
of shares, bonds, or rights. — There shall not be transferred to any
new owner in the books of any corporation, sociedad anonima,
partnership, business, or industry organized or established in the
Philippines, any shares; obligations, bonds, or rights by way of gift
inter vivos or mortis causa, legacy, or inheritance unless a
certification from the Commissioner that the taxes fixed in this Title
and due thereon have been paid is shown.
If a bank has knowledge of the death of a person who maintained a bank
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 of
the heirs of the decedent may upon authorization by the Commissioner of
Internal Revenue, withdraw an amount not exceeding P10,000 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 (GIFT) TAX
Section 91. Imposition of tax. — (a) There shall be
levied, assessed, collected, and paid upon the transfer by any person,
resident or non-resident, of the property by gift, a tax, computed as
provided in Section 92.
(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.
Section 92. Rates of tax payable by donor. — (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:cralaw:red
If the gift is:cralaw:red
DONOR'S TAX
Over But Not
The tax Plus Of Excess
Over Shall Be
Over
P50,000 Exempt
P50,000 100,000
1.5% P50,000
100,000 200,000
750 3% 100,000
200,000 500,000
3,750 5% 200,000
500,000
1,000,000 18,750
8% 500,000
1,000,000
3,000,000 58,750
10% 1,000,000
3,000,000
5,000,000 285,750
15% 3,000,000
5,000,000
558,750 20% 5,000,000
(b) Tax payable by donor if donees is a stranger. —
When the donee or beneficiary is a stranger, the tax payable by the
donor shall be ten percent (10%) of the net gifts. For the purpose of
this tax, a stranger is a person who is not a: chanroblesvirtualawlibrary
(i) Brother, sister (whether by whole or half blood),
spouse, ancestor, and lineal descendant; or
(ii) Relative by consanguinity in the collateral line
within the fourth degree of relationship.
(c) Any contribution in cash or in kind to any
candidate, political party or coalition of parties for campaign
purposes, shall be governed by the Election Code, as amended. (As
amended by R.A. 7499)
Section 93. Transfer for less than adequate and full
consideration. — Where property, other than real property referred to
in Section 21 (e), 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 exceed 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. (As amended by E.O. No. 37, July 31, 1986)
Section 94. Exemption of certain gifts. — The
following gifts or donations shall be exempt from the tax provided for
in this Chapter:cralaw:red
(a) In the case of gifts made by a resident:cralaw:red
(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
extend of the first ten thousand pesos;chanroblesvirtualawlibrary
(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 profits, or to any political subdivisions of the said
Government; and
(3) Gifts in favor of an educational and/or
charitable, religious, cultural or social welfare corporation,
institution, foundation, trust or philanthropic organization or
research institution or organization: Provided, however, That not more
than thirty per centum of said gifts shall be used by such donee for
administration purposes. chanroblesvirtualawlibrary
For the purpose of this exemption, a non-profit educational and/or
charitable corporation, institution, foundation, trust or philanthropic
organization and/or research institution or organization is a school,
college or university and/or charitable corporation, foundation, trust
or philanthropic organization and/or research institution, or
organization, incorporated as a non-stock entity, paying no dividends
governed by trustees who received no compensation, and devoting all its
income, whether student's fees, or gifts, donations, subsidies or other
forms of philanthropy, to the accomplishment and promotion of the
purposes enumerated in its articles of incorporation.
(b) In the case of gifts made by a non-resident not a
citizen of the Philippines:cralaw:red
(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.
(2) Gifts in favor of an educational and/or
charitable, religious, cultural or social welfare corporation,
institution, foundation, trust or philanthropic organization or
research institution or organization: Provided, however, That not more
than thirty per centum of said gifts shall be used by such donee for
administration purposes.
(c) Tax credit for donor's taxes paid to a foreign
country. — (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 taxes 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:cralaw:red
(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.
Section 95. Valuation of gifts made in property. — If
the gift is made in property, the fair market value thereof at the time
of the gift shall be considered the amount of the gift. In case of real
property, the provisions of paragraph two, Section 81 shall apply to
the valuation thereof.
Section 96. Returns. — (a) Requirements. — Any
individual who makes any transfer by gift (except those which, under
Section 94, 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; (2) the
deductions claimed and allowable; (3) any previous net gifts made
during the same calendar year; (4) the name of the donee; and (5) such
further information as may be required by regulations made pursuant to
the law.
(b) Time and place of filing. — The return of the
donor required in this section shall be filed within thirty days after
the date the gift is made and, except in cases where the Commissioner
permits, the return shall be filed with the Revenue District Officer,
Collection Agent or duly authorized Treasurer of the City or
municipality in which the donor was domiciled at the time of the
transfer or if there be no legal residence in the Philippines, then
with the Office of the Commissioner of Internal Revenue.
(c) Extension of time for filing. — The Commissioner
shall have authority to grant, in meritorious cases, a reasonable
extension not exceeding thirty days for filing the return required
under this section.
Section 97. Payment of Tax. — (a) Time and place of
payment of tax. — The donor's tax imposed by Section 92, shall be paid
at the time the return is filed. The tax shall be paid by the donor to
the Revenue District Officer, Collection Agent or duly authorized
treasurer of the city or municipal in which the donor was domiciled at
the time of the transfer or if there is no legal residence in the
Philippines, with the Office of the Commissioner of Internal Revenue.
(b) Extension of time. — When the Commissioner of
Internal Revenue finds that the payment on the due date of the tax or
of any part of the said amount, would impose undue hardship upon the
donor, the Commissioner of Internal Revenue may extend the time for
payment thereof not to exceed six months from the date prescribed for
the payment of the tax. 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.
Where the tax is assessed by reason of negligence international
disregard of rules and regulations, or fraud on the part of the
taxpayer, no extension will be granted by the Commissioner.
If an extension is granted, the Commissioner of Internal Revenue may
require the donor to furnish a bond in such amount not exceeding double
the amount of the tax and with such sureties as the Commissioner deems
necessary, conditioned upon the payment of the said tax in accordance
with the terms of the extension.
Section 98. Definitions. — For the 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 non-resident
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 issued
by any corporation or sociedad anonima organized or constituted in the
Philippines in accordance with its laws; shares, obligations, or bonds
issued by any foreign corporation eighty-five per centum 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; and
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. chanroblesvirtualawlibrary
The term "deficiency" means (1) 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 (2) 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 amounts previously assessed, or collected without
assessment, shall first be decreased by the amounts previously abated,
refunded, or otherwise repaid in respect of such tax.
TITLE IV. VALUE-ADDED TAX
CHAPTER I
IMPOSITION OF TAX
Section 99. Persons liable. — Any person who, in the
course of trade or business, sells, barters or exchanges goods, renders
services, or engages in similar transactions and any person who imports
goods shall be subject to the value-added tax (VAT) imposed in Sections
100 to 102 of this Code.
Section 100. Value-added tax on sale of goods. — (a)
Rate and base of tax. — There shall be levied, assessed and collected
on every sale, barter or exchange of goods, a value-added tax
equivalent to 10% of the gross selling price or gross value in money of
the goods sold, bartered or exchanged such tax to be paid by the seller
or transferor: Provided, That the following sales by VAT-registered
persons shall be subject to 0%:cralaw:red
(1) Export sales; and
(2) Sales to persons or entities whose exemption
under special laws or international agreements to which the Philippines
is a signatory effectively subjects such sales to zero rate.
"Export Sales" means the sale and shipment or exportation 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, or foreign currency
denominated sales. "Foreign currency denominated sales", means sales to
non-residents of goods assembled or manufactured in the Philippines,
for delivery to residents in the Philippines and paid for in
convertible foreign currency remitted through the banking system in the
Philippines.
(b) Transaction deemed sale. — The following
transactions shall be deemed sale:cralaw:red
(1) Transfer, use, or consumption not in the course
of business of goods originally intended for sale or for use in the
course of business.
(2) Distribution or transfer to:cralaw:red
(A) Shareholders or investors as share in the profits
of the VAT-registered person; or
(B) Creditors in payment of debt.
(3) Consignment of goods if actual sale is not made
within 60 days following the date such goods were consigned.
(4) Retirement from or cessation of business, with
respect to inventories of taxable goods existing as of such retirement
or cessation.
(c) Changes in or cessation of status of a
VAT-registered person. — The tax imposed in paragraph (a) of this
Section shall also apply to goods disposed of or existing as of a
certain date if under circumstances to be prescribed in Regulations to
be promulgated by the Secretary of Finance, the status of a person as a
VAT-registered person changes or is terminated.
(d) Determination of the tax. — (1) Tax billed as a
separate item in the invoice. — If the tax is billed as a separate item
in the invoice, the tax shall be based on the gross selling price,
excluding the tax. "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, excluding the value-added tax. The excise tax, if any, on such
goods shall form part of the gross selling price.
(2) Tax not billed separately or is billed
erroneously in the invoice. — In case the tax is not billed separately
or is billed erroneously in the invoice, the tax shall be determined by
multiplying the gross selling price, including the amount intended by
the seller to cover the tax or the tax billed erroneously, by the
factor 1/11 or such factor as may be prescribed by regulations in case
of persons partially exempt under special laws.
(3) Sales returns, allowances and sales discounts. —
The value of goods 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 discounts granted and
indicated in the invoice at the time of sale may be excluded from the
gross sales within the same quarter.
(4) Authority of the Commissioner to determine the
appropriate tax base. — The Commissioner shall, by regulations,
determine the appropriate tax base in cases where a transaction is
deemed a sale, barter or exchange of goods under paragraph (b) hereof,
or where the gross selling price is unreasonably lower than the actual
market value.
Section 101. Value-added tax on importation of goods.
— (a) In general — There shall be levied, assessed and collected on
every importation of goods a value-added tax equipment to 10% based on
the total value used by the Bureau of Customs in determining tariff and
customs duties, plus customs duties, excise taxes, if any, and other
charges, such tax to be paid by the importer prior to
the release of such goods from customs custody: Provided, That where
the customs duties are determined on the basis of the quantity or
volume of the goods, the value-added tax shall be based on the landed
cost plus excise taxes, if any.
(b) Transfer of goods into the Philippines by
persons, entities, or agencies exempt from tax where such goods are
subsequently sold, transferred or exchanged in the Philippines to
non-exempt persons or entities, the purchasers, transferees or
recipients shall be considered the importers thereof who shall be
liable for any internal revenue tax on such importation. The tax due on
such importation shall constitute a lien on the goods superior to all
charges or liens on the goods, irrespective of the possessor thereof.
Section 102. Value-added tax on sale of services. —
(a) Rate and base of tax. — There shall be levied, assessed and
collected, a value-added tax equivalent to 10% percent of gross
receipts derived by any person engaged in the sale of services. The
phrase "sale of services" means the performance of all kinds of
services for other 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 personal property; lessors or distributors of
cinematographic films; persons engaged in milling, processing,
manufacturing or repacking goods for others; and similar services
regardless of whether or not the performance thereof calls for the
exercise or use of the physical or mental faculties: Provided That the
following services performed in the Philippines by VAT-registered
persons shall be subject to 0%:cralaw:red
(1) Processing manufacturing or repacking goods for
other persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in acceptable
foreign currency, inwardly remitted to the Philippines and accounted
for in accordance with the rules and regulations of the Central Bank of
the Philippines.
(2) Services other than those mentioned in the
preceding sub-paragraph, the consideration for which is paid for in
acceptable foreign currency which is remitted inwardly to the
Philippines and accounted for in accordance with the rules and
regulations of the Central Bank of the Philippines.
(3) Services rendered to persons or entities whose
exemption under special laws or international agreements to which the
Philippines is a signatory effectively subjects the supply of such
services to zero rate.
"Gross receipts" means the total amount of money or its equivalent
representing the contract price, compensation or service fee, including
the amount charged for materials supplied with the services and
deposits or advance payments actually or constructively received during
the taxable quarter for the service performed or to be performed for
another person, excluding value-added tax.
(b) Determination of the tax. — (1) Tax billed as a
separate item in the invoice. — If the tax is billed as a separate item
in the invoice, the tax shall be based on the gross receipts, excluding
the tax.
(2) Tax not billed separately or is billed
erroneously in the invoice. — If the tax is not billed separately or is
billed erroneously in the invoice, the tax shall be determined by
multiplying the gross receipts (including the amount intended to cover
the tax or the tax billed erroneously) by 1/11.
Section 103. Exempt Transactions. — The following
shall be exempt from the value-added tax:cralaw:red
(a) Sale of nonfood agricultural; marine and forest
products in their original state by the primary producer or the owner
of the land where the same are produced.
(b) Sale or importation in their original state of
agricultural and marine food products; livestock and poultry of a kind
generally used as, or yielding or producing food for human consumption;
and breeding stock and genetic materials therefor.
Products classified under this paragraph and paragraph (a) shall be
considered in their original state even if they have undergone the
simple processes of preparation or preservation for the market, such as
freezing, drying, salting, smoking or stripping. Polished and/or husked
rice, corn grits and raw cane sugar shall be considered in their
original state for purposes of this paragraph.
(c) Sale or importation of fertilizers, pesticides
and herbicides; chemicals for the formulation of pesticides; seeds,
seedlings and fingerlings; fish animal and poultry feeds; and soya bean
and fish meals;chanroblesvirtualawlibrary
(d) Sale or importance of petroleum products (except
lubricating oil, processed gas, grease, wax and petrolatum) subject to
excise tax imposed under Title VI;chanroblesvirtualawlibrary
(e) Sale or importation of raw materials to be used
by the buyer or importer himself in the manufacture of petroleum
products (except lubricating oil and grease) subject to excise tax;chanroblesvirtualawlibrary
(f) Printing, publication, importation or sale of
books and any newspaper, magazine, review, or bulletin which appears at
regular intervals with fixed prices for subscription and sale and which
is not devoted principally to the publication of advertisements;chanroblesvirtualawlibrary
(g) Importation of passenger and/or cargo vessel of
more than ten thousand tons, whether coastwise or ocean-going,
including engine and spare parts of said vessel, to be used by the
importer himself as operator thereof; chanroblesvirtualawlibrary
(h) Importation of personal and household effects
belonging to residents of the Philippines returning from abroad and
non-resident citizens coming to resettle in the Philippines: Provided,
That such goods are exempt from customs duty under the Tariff and
Customs Code of the Philippines;chanroblesvirtualawlibrary
(i) Importation of professional instruments and
implements, wearing apparel, domestic animals, and personal household
effects (except any vehicle, vessel,rcraft, machinery, other goods for
use in manufacture and merchandise of any kind in commercial quantity)
belonging to persons coming to settle for the first time in the
Philippines, for their own use and not for sale, barter or exchange,
accompanying such persons, or arriving within ninety days before or
after their arrival, upon the production of evidence satisfactory to
the Commissioner of Internal Revenue, that such persons are actually
coming to settle in the Philippines and that the change of residence is
bona fide;chanroblesvirtualawlibrary
(i) Services rendered by persons subject to
percentage tax under Title V;chanroblesvirtualawlibrary
(k) Services by agricultural contract growers and
milling for others of palay into rice, corn into grits and sugar cane
into raw sugar;chanroblesvirtualawlibrary
(l) Medical, dental hospital and veterinary services;chanroblesvirtualawlibrary
(m) Educational services rendered by private
educational institutions, duly accredited by the Department of
Education, Culture and Sports, and those rendered by government
educational institutions;chanroblesvirtualawlibrary
(n) Sale by the artist himself of his works of art,
literary works, musical compositions and similar creations, or his
services performed for the production of such works;chanroblesvirtualawlibrary
(o) Services performed as actors or actresses,
talents, singers and emcees; radio and television broadcasters,
choreographers; musical, radio, movie, television and stage directors;chanroblesvirtualawlibrary
(p) Services performed as professional athletes;chanroblesvirtualawlibrary
(q) Leasing of real property;chanroblesvirtualawlibrary
(r) Services performed in the exercise of profession
or calling (except customs brokers) subject to the occupation tax under
the Local Tax Code, and professional services performed by registered
general professional partnerships;chanroblesvirtualawlibrary
(s) Services rendered by individual pursuant to an
employer-employee relationship;chanroblesvirtualawlibrary
(t) Services rendered by regional or area
headquarters established in the Philippines by multinational
corporations which act as supervisory, communications and coordinating
centers for their affiliates, subsidiaries or branches in the
Asia-Pacific region and do not earn or derive income from the
Philippines;chanroblesvirtualawlibrary
(u) Transactions which are exempt under special laws
or international agreements to which the Philippines is a signatory;chanroblesvirtualawlibrary
(v) Export sales by persons who are not
VAT-registered; and
(w) Sales and/or services performed by persons other
than those mentioned in the preceding paragraphs where annual gross
sales and/or receipts do not exceed the amount prescribed in
regulations to be promulgated by the Secretary of Finance which shall
not be less than P100,000 or higher than P500,000.
Section 104. Tax Credits. — (a) Creditable input tax.
— Any input tax on the:cralaw:red
(1) Purchase or importation of goods:cralaw:red
(A) For sale or for conversion into or intended to
form part of a finished product for sale or for use in the course of
business; or
(B) For use as supplies in the course of business; or
(C) For use as materials supplied in the sale of
service; or
(D) For use in trade or business for which deduction
for depreciation is allowed under Section 29 (f) of this Code;chanroblesvirtualawlibrary
and
(2) Service performed by a VAT-registered person
shall be credited against the output tax payable by the VAT-registered
person: Provided, That in the case of domestic purchase of goods or
services, the invoice or receipt was issued therefor by a
VAT-registered person in a manner prescribed in Section 108.
A VAT-registered person who is also engaged in transactions not subject
to the value-added tax shall be allowed tax credit as follows:cralaw:red
(A) Total input tax which can be directly attributed
to transactions subject to value-added tax; and
(B) A ratable portion of any input tax which cannot
be directly attributed to either activity.
"Input tax" means the value-added tax paid by a VAT registered person
in the course of his trade or business on importation of goods or local
purchases of goods or services from a VAT-registered person. It shall
also include the transitional input tax determined in accordance with
Section 105 of this Code and other transitional input taxes as
prescribed by regulations.
In case tax exempt products of a pioneer enterprise registered with the
BOI as of August 1, 1986 are sold domestically to Value-added tax
registered person, the value-added tax otherwise due on such products
shall also be considered as input tax creditable against his output tax
payable.
The term "output tax" means the value-added tax due on the sale of
taxable goods or services by any person registered or required to
register under Section 107 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. Any input tax attributable to the purchase of
capital goods or 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 106.
Section 105. Transitional input tax credits. — A
person who becomes liable to value-added tax or any person who elects
to be a VAT-registered person shall, subject to the filing of an
inventory as prescribed by regulations, be allowed input tax on his
beginning inventory of goods, materials and supplies equivalent to 8%
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.
Section 106. Refunds or tax credits of input tax. —
(a) Export Sales. — An exported who is a VAT-registered person may
within two years from the date of exportation, apply for the issuance
of a tax credit certificate or refund of the input tax attributable to
the goods exported, to the extent that such input tax has not been
applied to output tax and upon presentation of proof that the foreign
exchange proceeds has been accounted for in accordance with the
regulations of the Central Bank of the Philippines.
(b) Zero-rated or effectively zero-rated sales. — Any
person, except those covered by paragraph (a) above, whose sales are
zero-rated or are effectively zero-rated may, within two years after
the close of the quarter when such sales were made, apply for the
issuance of a tax credit certificate or refund of the input taxes
attributable to such sales to the extent that such input tax has not
been applied against output tax.
(c) Capital goods. — A VAT-registered person may
apply for the issuance of a tax credit certificate or refund of input
taxes paid on capital goods imported or locally purchased, to the
extent that such input taxes have not been applied against output
taxes. The application for refund may be made only after the expiration
of 2 succeeding quarters following the quarter in which the importation
or local purchase was made: Provided, That a VAT-registered person who
is just commencing business may apply for refund of input taxes under
this paragraph not earlier than 180 days from the date of registration
or actual start of business operations, whichever comes later:
Provided, however, That the application is filed not later than 2 years
from the dates herein prescribed. chanroblesvirtualawlibrary
(d) Cancellation of VAT-registration. — A person
whose registration has been cancelled due to retirement from or
cessation of business, or due to changes in or cessation of status
under Section 100 (c) of this Code may, within 2 years from the date of
cancellation, apply for the issuance of a tax credit certificate for
any unused input tax which he may use in payment of his other internal
revenue taxes.
(e) Period within which refund of input taxes may be
made by the Commissioner. — The Commissioner shall refund input taxes
within 60 days from the date the application for refund of input taxes
shall be allowed unless the VAT-registered person files an application
for refund within the period prescribed in paragraph (a), (b) and (c)
as the case may be.
(f) Manner of giving refund. — Refunds shall be made
upon warrants drawn by the Commissioner or by his duly authorized
representative without the necessity of being counter-signed by the
Chairman, Commission on Audit, the provisions of the Revised
Administrative Code to the contrary notwithstanding: Provided, That
refunds under this paragraph shall be subject to post audit by the
Commission on Audit.
CHAPTER II
COMPLIANCE REQUIREMENTS
Section 107. Registration of value added taxpayers. —
(a) In general. — Any person subject to a value-added tax under
Sections 100 and 102 of this Code shall register with the appropriate
Revenue District Officer. A person who maintains a head or main office
and branches in different places shall register with the revenue
district office which has jurisdiction over the place where the main or
head office is located.
(b) Persons commencing a business. — Any person who
expects to realize gross sales or receipts subject to value-added tax
in excess of the amount prescribed by the Secretary of Finance for the
next 12-month period from the commencement of the business shall,
within 30 days before the start of the said business, register with the
Revenue District Officer who has jurisdiction over his principal place
of business.
(c) Persons becoming liable to value-added tax. — Any
person whose gross sales or receipts in any 12-months period exceeds
the amount prescribed by regulations for exemption from value-added tax
shall register within 30 days after the end of the last month of that
period, and shall be liable to the value-added tax commencing from the
first day of the month following his registration.
(d) Optional registration of exempt person. — Any
person whose transactions are exempt from value-added tax under Section
103 (a), (b), (c), (f), and (w) of this Code, may apply for
registration as a VAT-registered person not later than 10 days before
the beginning of a taxable quarter.
A VAT-registered person who is, at same time, engaged in activities
exempted under Section 103 (a), (b), (c) and (f) of this Code may
register any or all of his exempt activities within the same period
provided for in this paragraph.
In any case, the Commissioner may, for administrative reasons, deny any
application for registration.
For purposes of this Title, any person registered in accordance with
the provisions of this section shall be referred to as "VAT-registered
person." Each VAT-registered person shall be assigned only one
registration number.
(e) Cancellation of Registration. — The registration
of any person who ceases to be liable to the value-added tax shall be
cancelled by the Commissioner upon filing of an application for
cancellation of registration. Any person who opted to be registered
under paragraph (d) of this section may, under regulations of the
Secretary of Finance, apply for cancellation of such registration.
Section 108. Invoicing and accounting requirements
for VAT-Registered persons. — (a) Invoicing requirements. — A
VAT-registered person shall, for every sale, issue an invoice or
receipt. In addition to the information required under Section 238, the
following information shall be indicated in the invoice or receipt:cralaw:red
(1) The VAT registration number.
(2) If the seller bills the tax as a separate item in
the invoice:cralaw:red
(A) The amount of gross selling price or gross
receipts on which the value-added tax is based;chanroblesvirtualawlibrary
(B) The amount of value-added tax determined by
multiplying the amount of gross selling price or gross receipts by the
rate of tax; and
(C) The sum of (i) the gross selling price or gross
receipts and (ii) the value-added tax which the purchaser pays or is
obligated to pay to the vendor.
(3) If the seller elects not to bill the tax as a
separate item in the invoice or receipt the total amount charged
against the buyer.
(b) Accounting requirements. — Notwithstanding the
provisions of Section 233, all persons subject to the value-added tax
under Sections 100 and 102 shall, in addition to the regular accounting
records required, maintain a subsidiary sales journal and subsidiary
purchase journal on which the daily sales and purchases are recorded.
The subsidiary journals shall contain such information as may be
required by the Secretary of Finance.
Section 109. Notification requirements. — (a) Change
of place of business. — It shall be the duty of every VAT-registered
person to file a notice of change of his principal place of business or
any of his branches or office. Such notification shall be filed within
15 days from the date of such change with the Revenue District Officers
who have jurisdiction of his former and new place of business.
(b) Other changes. — Any person registered in
accordance with Section 107 shall notify the Revenue District Officer
of the change or termination of his status as a VAT-registered person.
Section 110. Return and payment of value-added tax. —
(a) Where to file the return and pay the tax. — Every person subject to
value-added tax shall file a quarterly return of his gross sales or
receipts and pay the tax due thereon to a bank duly accredited by the
Commissioner located in the revenue district where such person is
registered or required to be registered. However, in cases where there
are no duly accredited agent banks within the city or municipality, the
return shall be filed and any amount due shall be paid to any duly
accredited bank within the district, or to the Revenue District
Officer, Collection Agent or duly authorized Treasurer of the city or
municipality where such taxpayer has his principal place of business.
Only one consolidated return shall be filed by the taxpayer for all the
branches and lines of business subject to value-added tax. If no tax is
payable because the amount of input tax and any amount authorized to be
offset against the output tax is equal to or is in excess of the output
tax due on the return, the taxpayer shall file the return with the
Revenue District Officer, Collection Agent or authorized municipal
treasurer where the taxpayer's principal place of business is located.
(b) Time for filing of return and payment of tax. —
The return shall be filed and the tax paid within 20 days following the
end of each quarter specifically prescribed for a VAT-registered person
under regulations to be promulgated by the Secretary of Finance:
Provided, however, That any person whose registration is cancelled in
accordance with paragraph (e) of Section 107 shall file a return within
20 days from the cancellation of such registration.
(c) Initial returns. — The Commissioner may prescribe
an initial taxable period for any VAT-registered person for his first
return, which in no case shall exceed 5 months.
Section 111. Power of the Commissioner to suspend the
business operations of a taxpayer. — The Commissioner or his authorized
representative is hereby empowered to suspend the business operations
and temporarily close the business establishment of any person for any
of the following violations:cralaw:red
(a) In the case of a VAT-registered person —chanroblesvirtualawlibrary
(1) Failure to issue receipts or invoices.
(2) Failure to file a value-added tax return as
required under Section 110.
(3) Understatement of taxable sales or receipts by
30% or more of his correct taxable sales or receipt for the taxable
quarter.
(b) Failure of any person to register as required
under Section 107.
The temporary closure of the establishment shall be for a duration of
not less than five (5) days and shall be filed only upon compliance
with whatever requirements prescribed by the Commissioner in the
closure order.
TITLE V. OTHER PERCENTAGE TAXES
Section 112. Tax on persons exempt from value-added
tax (VAT). — Any person whose sales or receipts are exempt under
Section 103 (w) of this Code from payment of the value-added tax and
who is not a VAT-registered person shall pay a tax equivalent to two
(2) percent of his gross quarterly sales ore receipts.
Section 113. Hotels, motels and others. — There is
hereby imposed on proprietors, operators or keepers of hotels, motels,
resthouses, pension houses, lodging houses and resorts, a tax
equivalent to twelve per cent of their gross receipts derived from room
occupancy. (As amended by PD No. 1994)
Section 114. Caterer's tax. — A caterer's tax is
hereby imposed as follows:cralaw:red
(1) On proprietors or operators of restaurants,
refreshment parlors, and other eating places, including clubs and
caterers, four (4%) per centum of their gross receipts;chanroblesvirtualawlibrary
(2) On proprietors or operators of restaurants, bars,
cafes and other eating places, including clubs where distilled spirits,
fermented liquors or wines are served, four (4%) per centum of their
gross receipts from the sale of food or refreshments and eight (8%) per
centum of their gross receipts from sale of distilled spirits,
fermented liquors or wines. Two sets of commercial invoices or receipts
serially numbered in duplicate shall be separately prepared and issued,
one for each sale of food or refreshment served and another for each
sale of distilled spirits, fermented liquors or wines served, the
originals of the invoices or receipts to be issued to the purchaser or
customer;chanroblesvirtualawlibrary
(3) On proprietors or operators of restaurants,
refreshment parlors bars, cafes, and other eating places which are
maintained within the premises or compound of a cockpit, cabaret, night
or day club, Jai-Alai, race track, or which are accessible to patrons
of such cockpit, cabaret, night or day club, Jai-Alai, race track by
means of a connecting door or passage twelve (12%) per centum in the
case of cockpit, cabaret, night or day club, and twenty-five (25%) per
centum in the case of Jai-Alai and race track, of their gross receipts.
Where the establishments enumerated above are operated or maintained by
clubs of any kind or nature (irrespective of the disposition of their
net income and whether or not they cater exclusively to members or
their guests), the keepers of the establishments shall pay the
corresponding tax at the rates fixed above. (As amended by P.D. No.
1959)
Section 115. Percentage tax on carriers and keepers
of garages. — Keepers of garages, cars for rent or hire driven by the
lessee, transportation contractors, persons who transport passenger or
freight for hire, and common carriers by land,r or water, except owners
of bancas and owners of animal-drawn two wheeled vehicles, shall pay a
tax equivalent to three (3%) per centum of their quarterly gross
receipts.
In computing the percentage tax provided in this Section, the following
shall be considered the minimum quarterly gross receipts in each
particular case:cralaw:red
Autocalesa:
1. Manila and other cities
P1,200,00
2. Provincial 600.00
Jeepney for hire —
1. Manila and other cities
P2,400.00
2. Provincial 1,200.00
Public utility bus —
Not exceeding 30 passengers P3,600.00
Exceeding 30 but not exceeding 50 passengers 6,000.00
Exceeding 50 passengers 7,200.00
Taxis —
1. Manila and other cities
P3,600.00
2. Provincial 2,400.00
Car for hire (w/chauffeur) 3,000.00
Car for hire (w/out chauffeur) 1,800.00
(As amended by P.D. No. 1959)
Section 116. Percentage tax on dealers in securities;
lending investors. — Dealers in securities and lending investors shall
pay a tax equivalent to six (6%) per centum of their gross income.
Lending investors shall pay a tax equivalent to five (5%) per cent of
their gross income. (As amended by PD. No. 1994)
Section 117. Tax on franchises. — Any provision of
general or special laws to the contrary notwithstanding, there shall be
levied, assessed and collected in respect to all franchise, upon the
gross receipts from the business covered by the law granting the
franchise, a tax in accordance with the schedule prescribed hereunder:cralaw:red
(a) On electric utilities, city gas and water
supplies Two (2%) per cent
(b) On telephone and/or telegraph systems,
and radio/or broadcasting stations
Three (3%) per cent
(c) On other franchises Five (5%)
per cent
The grantee shall file the return with, and pay the tax due thereon to,
the Commissioner of Internal Revenue or his duly authorized
representative in accordance with the provisions of Section 125 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 Executive Order No. 72, Nov. 25, 1986)
Section 118. Tax on overseas dispatch, message, or
conversation originating from the Philippines. (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 per centum on the amount paid for such services.
The tax imposed in this 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 —chanroblesvirtualawlibrary
(i) Government. — Amounts paid for messages
transmitted by the Government of the Republic of the Philippines or any
of its political subdivisions or instrumentalities.
(ii) Diplomatic services. — Amounts paid for message
transmitted by any Embassy and consular offices of a foreign
government.
(iii) International organizations. — Amount paid for
message transmitted by a public international organization or any of
its agencies based in the Philippines enjoying privileges, exemptions
and immunities which the Government of the Philippines is committed to
recognize pursuant to an international agreement.
(iv) News services. — Amount paid for messages from
any newspapers, 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 in
dissemination of news through, public press, radio or television
broadcasting, or a newsticker service furnishing a general news service
similar to that of the public press.
Section 119. Tax on banks and non-bank financial
intermediaries. — There shall be collected a tax on gross receipts
derived from sources within the Philippines by all banks and non-bank
financial intermediaries in accordance with the following schedule:cralaw:red
(a) On interest, commissions and discounts from
lending activities as well as income from financial leasing, on the
basis of remaining maturities of instruments from which such receipts
are derived.
Short-term maturity not in excess of two (2) year 5%
Medium-term maturity — over two year but not
exceeding four (4) year 3%
Long term maturity:cralaw:red
(i)Over four (4) years but not exceeding
seven (7) year 1%
(ii)Over seven (7) years 0%
(b) On dividends 0%
(c) On royalties, rentals of property, real or
personal,
profits from exchange and all other
items treated
as gross income under Section 28 of this
Code 5%
Provided, however, That in case the maturity period referred to in
paragraph (a) is shortened thru pretermination, then the maturity
period shall be reckoned to end as of the date of pretermination for
purposes of classifying the transaction as short, medium or long term
and the correct rate of tax shall be applied accordingly.
Nothing in this Code shall preclude the Commissioner from imposing the
same tax herein provided on persons performing similar banking
activities.
Section 120. Tax on finance companies. — There shall
be collected a tax of five per centum on the gross receipt derived by
all finance companies as well as other financial intermediaries not
performing quasi-banking functions doing business in the Philippines
from interests, discounts, and all other items treated as gross income
under this Code: Provided, That interest, commissions and discounts
from lending activities, as well as income from financial shall be
taxed, on the basis of remaining maturities of the instruments from
which such receipts are derived in accordance with the following
schedule:cralaw:red
Short-term maturity — not in excess of two (2) years
5%
Medium-term maturity — over (2) years but not exceeding
four (4) years 3%
Long-term maturity:
(i) Over four (4) years but not
exceeding seven
(7) years 1%
(ii) Over seven (7)
years 0%
Provided, however, That in case the maturity period is shortened thru
pretermination, then the maturity period shall be reckoned to end as of
the date of pretermination for purposes of classifying the transaction
as short, medium or long-term and the correct rate of tax shall be
applied accordingly.
Nothing in this Code shall preclude the Commissioner from imposing the
same tax herein provided on persons performing similar financing
activities.
Section 121. Tax on insurance premium. — There shall
be collected from every person, company; or corporation (except purely
cooperative companies or associations) doing insurance business of any
sort in the Philippines a tax of five per centum (5%) of the total
premium collected whether such premiums are paid in money, notes,
credits or any substitute for money; but premiums refunded within six
months after payment on account of rejection of risk or returned for
other reason to a person insured shall not be included in the taxable
receipts; nor shall any tax be paid upon reinsurance by a company that
has already paid the tax; nor upon premiums collected ore received by
any branch of a domestic corporation, firm or association doing
business outside the Philippines on account of any life insurance of
the insured who is a non-resident, if any tax on such premium is
imposed by the foreign country where the branch is established nor upon
premiums collected or received on account of any reinsurance, if the
risk insured against covers property located outside the Philippines,
or the insured, in case of personal insurance, resides outside of the
Philippines, if any tax on such premiums is imposed by the foreign
country where the original insurance has been issued or perfected; nor
upon that portion of the premiums collected or received by the
insurance companies on variable contracts (as defined in Section 232
(2) of Presidential Decree No. 612), in excess of the amounts necessary
to insure the lives of the variable contract workers.
Cooperative companies or associations are such as are conducted by the
members thereof with the money collected from among themselves and
solely for their own protection and not for profit. (As amended by PD.
No. 1994)
Section 122. Tax on agents of foreign insurance
companies. — Every fire, marine, or miscellaneous insurance agent
authorized under the Insurance Code to procure policies of insurance as
he may have previously been legally authorized to transact on risks
located in the Philippines for companies not authorized to transact
business in the Philippines shall pay a tax equal to twice the tax
imposed in Section 121: Provided, That the provisions of this section
shall not apply to reinsurance: Provided, however, That the provisions
of this section shall not affect the right of an owner of property to
apply for and obtain for himself policies in foreign companies in cases
where said owner does not make use of the services of any agent,
company, or corporation residing or doing business in the Philippines.
In all cases where owners of property obtain insurance directly with
foreign companies, it shall be the duty of said owners to report to the
Insurance Commissioner and to the Commissioner of Internal Revenue each
case where insurance has been so effected, and shall pay the tax of
five per cent on premiums paid, in the manner required by Section 121.
(As amended by E.O. No. 273) chanroblesvirtualawlibrary
Section 123. Amusement taxes. — There shall be
collected from the proprietor, lessee or operator of cockpits,
cabarets, night or day clubs, boxing exhibitions, professional
basketball games, Jai-Alai, race tracks and bowling alleys, a tax
equipment to:cralaw:red
1. Eighteen per centum in the case of cockpits;chanroblesvirtualawlibrary
2. Eighteen per centum in the case of cabarets, night
or day club;chanroblesvirtualawlibrary
3. Fifteen per centum in the case of boxing
exhibitions;chanroblesvirtualawlibrary
4. Fifteen per centum in the case of professional
basketball games as envisioned in Presidential Decree No. 871.
Provided, however, That the tax herein shall be in lieu of all other
percentage taxes of whatever nature and description.
5. Thirty per centum in the case of Jai-Alai and race
tracks; and
6. Fifteen per centum in the case of bowling alleys
of their gross receipts, irrespective of whether or not any amount is
charged or paid for admission. For the purpose of the amusement tax,
the term "gross receipts" embraces all the receipts of the proprietor,
lessor 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 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. [If the tax is not paid within the time prescribed
above, the amount of the tax shall be increased by twenty-five per
centum, the increment to be part of the tax.]
[In case of willful neglect to file the return within the period
prescribed herein, or in case a false or fraudulent return is willfully
made, there shall be added to the tax or to the deficiency tax, in case
any payment has been made on the basis of the return before the
discovery of the falsity or fraud, a surcharge of fifty per
centum of its amount. The amount so added to any tax shall be collected
at the same time and in the same manner and as part of the tax unless
the tax has been paid before the discovery of the falsity or fraud, in
which case, the amount so assessed shall be collected in the same
manner as the tax.]
Section 124. Tax on Winning. — Every person who wins
in horse races shall pay a tax equivalent to ten (10%) per cent 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 (4%) per cent. In the case of
owners of winning race horses, the tax shall be ten (10%) per cent of
the prizes. (Sec. 3 of Executive Order No. 194; now deemed Sec. 124 of
NIRC)
The tax herein prescribed shall be deducted from the "dividends"
corresponding to each winning ticket or the "prize" of each winning
race horse owner and withheld by the operator, manager, or person in
charge of the horse races before paying the dividends or prizes to the
persons entitled thereto. (Ibid.)
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 Commission of the Bureau of Internal Revenue 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. (Ibid.)
Section 125. Returns and payment of percentage taxes.
— (a) Return of gross sales, receipts or earnings and payment of tax.
(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 20 days after the end of
each taxable quarter; Provided, That in the case a person whose VAT
registration is cancelled and who becomes liable to the tax imposed in
Section 112 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 days after closing his business.
(3) Exceptions. — The Commissioner may, by
regulations prescribe:cralaw:red
(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 chanroblesvirtualawlibrary
(B) The manner and time of payment of percentages
taxes other than as hereinabove prescribed, including a scheme of tax
prepayment.
(4) Determination of correct sales or receipts. —
When it is found that a person has failed to issue receipts or
invoices, or when no return is filed, 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 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.
(b) Where to file. — Every person liable to the
percentage tax under this Title may, at his option file a separate
return for each branch or place of business or a consolidated return
for all branches or places of business with the Revenue District
Officer, Collection agent or duly authorized Treasurer of the City or
Municipality where said business or principal place of business is
located, as the case may be. (As amended by E.O. No. 273)
TITLE VI. EXCISE TAXES ON CERTAIN GOODS
CHAPTER I
GENERAL PROVISIONS
Section 126. Goods subject to excise taxes. — Excise
taxes apply to goods manufactured or produced in the Philippines for
domestic sale or consumption or for any other disposition and to things
imported. The excise tax imposed herein shall be in addition to the
value-added tax imposed under Title IV.
For purposes of this Title, excise taxes herein imposed and based on
weight or 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 goods shall
be referred to as "ad valorem tax."
Section 127. Payment of excise taxes on domestic
products. — (a) Persons liable; time for payment. — Unless otherwise
especially allowed, excise taxes on domestic products shall be paid by
the manufacturer or producer before removal from the place of
production: Provided, That the excise tax on locally manufactured
petroleum products and indigenous petroleum levied under Sections 145
and 151 (a) (4), respectively, of this Title shall be paid within 15
days from the date of removal thereof from the place of production.
Should domestic products be removed from the place of production
without the payment of the tax, the owner or person having possession
thereof shall be liable for the tax due thereon. chanroblesvirtualawlibrary
(b) Determination of gross selling price of goods
subject to ad valorem tax. — Unless otherwise provided, the price,
excluding the value-added tax, at which the goods are sold at wholesale
in the place of production or through their sales agents to the public
shall constitute the gross selling price. If the manufacturer also
sells or allows such goods to be sold at wholesale in another
establishment of which he is the owner or in the profits at which he
has an interest, the wholesale price in such establishment shall
constitute the gross selling price. Should such price be less than the
cost of manufacture plus expenses incurred until the goods are finally
sold, then a proportionate margin of profit, not less than 10% of such
manufacturing cost and expenses, shall be added to constitute the gross
selling price.
(c) Manufacturer's or producer's sworn statement. —
Every manufacturer or producer of goods or products subject to excise
taxes shall file with the Commissioner on the date or dates designated
by the latter, and as often as may be required, a sworn statement
showing among other information, the different goods or products
manufactured or produced and their corresponding gross selling price or
market value, together with the cost of manufacture or production plus
expenses incurred or to be incurred until the goods or products are
finally sold.
(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. (As amended by E.O. No. 273)
Section 128. Payment of excise taxes on imported
articles. — (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 customhouse, 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 exempted 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. The tax due on such
article shall constitute a lien on the article itself, 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. chanroblesvirtualawlibrary
Section 129. Mode of computing contents of cask of
package. — Every fractional part of a proof liter equal to or greater
than a half liter in a cask or package containing more than one liter
shall be taxed as a liter, and any smaller fractional part shall be
exempt; but any package of spirits the total contents of which are less
than a proof liter shall be taxed as one liter.
CHAPTER II
EXEMPTION ON CONDITIONAL TAX-FREE REMOVAL OF CERTAIN ARTICLES
Section 130. Removal of wines and distilled spirits
for treatment of tobacco leaf— Upon permit from the Commissioner and
subject to the regulations of the Department of Finance, manufacturers
of cigars and cigarettes may withdraw from bond, free of excise tax
local and imported wines and distilled spirits in specific quantities
and grades for use in the treatment of tobacco leaf to be used in the
manufacture of cigars and cigarettes; but such wines and distilled
spirits must first be suitably denatured.
Section 131. Domestic denatured alcohol. — Domestic
alcohol of not less than one hundred eighty degrees proof (ninety
percent absolute alcohol) shall when suitably denatured and rendered
unfit for oral intake, be exempt from the specific tax prescribed in
Section 138: Provided, however, That such denatured alcohol shall be
subject to tax under Section 165 of this Code: Provided, further, That
if such alcohol is to be used for motive power, it shall be taxed under
Section 145 (a) (4) of this Code.
Section 132. Petroleum products sold to foreign
international carriers. — Petroleum products sold to an international
carrier for its use or consumption outside of the Philippines shall not
be subject to excise taxes, Provided: That the country of said carrier
exempts from similar taxes petroleum products sold to Philippines
carriers.
Section 133. Denaturation, withdrawal and use of
denatured alcohol. — Any persons who produces, withdraws, sells,
transports or knowingly uses, or is in possession of denatured alcohol,
or article containing denatured alcohol in violation of laws or
regulations now or hereafter in force pertaining thereto shall be
required to pay the corresponding tax, in addition to the penalties
provided for under Title X of this Code.
Section 134. Removal of spirits under bond. — Spirits
requiring rectification may be removed from the place of production to
some other establishment for the purpose of rectification without the
prepayment of the excise tax: Provided, the distiller removing such
spirits and the rectifier receiving them shall file with the
Commissioner their joint bond conditioned upon the payment by the
rectifier of the excise tax due on the finished product: Provided,
further, That in cases where alcohol has already been rectified either
by original and continuous distillation or by redistillation is further
re-rectified, no loss for rectification and handling shall be allowed
and the rectifier thereof shall pay the specific tax due on such
losses. (As amended by E.O. No. 22)
Section 135. Removal of fermented liquors to bonded
warehouse. — Any brewer may remove or transport from his brewery or
other place of manufacture to a bonded warehouse used by him
exclusively for the storage or sale in bulk of fermented liquor of his
own manufacture, any quantities of such fermented liquors, not less
than one thousand liters at one removal, without payment of the tax
thereon under a permit which shall be granted by the Commissioner. Such
permit shall be affixed to every package so removed and shall be
cancelled or destroyed in such manner as the Commissioner may
prescribe. Thereafter, the manufacturer of such fermented liquors shall
pay the tax in the same manner and under the same penalty and liability
as when paid at the brewery.
Section 136. Removal of damaged liquors free of tax.
— When any fermented liquor has become sour or otherwise damaged so as
to be unfit for use as such, brewers may sell and, after securing a
special permit from the Commissioner, under such conditions as may be
prescribed in the regulations of the Department of Finance, remove the
same without the payment of tax thereon, in cask or other packages,
distinct from those ordinarily used for fermented liquors, each
containing not less than one hundred seventy-five liters with a note of
their contents permanently affixed thereon.
Section 137. Removal of tobacco products without
prepayment of tax. — Products of tobacco entirely unfit for chewing or
smoking may be removed free of tax for agricultural or industrial use,
under such conditions as may be prescribed in the regulations of the
Department of Finance. Stemmed leaf tobacco, fine-cut shorts, the
refuse of fine-cut chewing tobacco, scraps, cuttings, clippings, stems
or midribs, and sweepings of tobacco may be sold in bulk as raw
material by one manufacturer directly to another, without payment of
the tax under such conditions as may be prescribed in the regulations
of the Department of Finance.
"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
EXCISE TAX ON ALCOHOL PRODUCTS
Section 138. Distilled spirits. — On distilled
spirit, there shall be collected, subject to the provisions of Section
130 of this Code, specific taxes as follows:cralaw:red
(a) If produced from 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, three pesos
and twenty centavos: Provided, That if produced in a pot still or other
similar primary distilling apparatus by a distiller producing not more
than 100 liters, a day containing not more than fifty percent of
alcohol by volume, per proof liter, one peso:cralaw:red
(b) If produced from raw materials other than those
enumerated in the preceding paragraph, per proof liter twenty five
pesos; and
(c) Medical preparations, flavoring extracts, and all
other preparations, except toilet preparations, of which, excluding
water, distilled spirits form the chief ingredient, shall be subject to
the same tax as such chief ingredient.
This tax shall be proportionally increased for any strength of the
spirits taxed over proof spirits, and the tax shall attach to his
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 substance either in the process of original production or by
any subsequent process.
"Spirits or distilled spirits" is the substance known as ethyl alcohol,
ethanol or spirits of wine, including all dilutions, purifications and
mixtures thereof, from whatever source by whatever process produced and
shall include whisky, brandy, rum, gin and vodka, and other similar
products or mixtures.
"Proof spirits" is liquor containing 1/2 of its volume of alcohol of a
specific gravity of seven thousand nine hundred and thirty nine ten
thousands (0.7939) at fifteen degrees centigrade. A proof liter means a
liter of proof spirits. (As amended by E.O. No. 273)
Section 139. Wines. — On wines, there shall be
collected per liter of volume capacity, the following taxes:cralaw:red
(a) Sparkling wines regardless of proof, sixteen
pesos;chanroblesvirtualawlibrary
(b) Still wines containing fourteen percent of
alcohol by volume or less, one peso; and
(c) Still wines containing more than twenty-five
percent of alcohol by volume, four pesos;chanroblesvirtualawlibrary
Fortified wines containing more than twenty-five percent of alcohol by
volume shall be taxed as distilled spirits. Fortified wines shall mean
natural wines to which distilled spirits are added to increase their
alcoholic strength. (As amended by E.O. No. 273)
Section 140. Fermented liquor. — There shall be
levied assessed and collected an ad valorem tax equivalent to
thirty-seven percent (37%) of the brewer's wholesale price, excluding
the ad valorem tax imposed under this section and the value added tax
imposed under Title IV, on beer, lager beer, ale, porter and other
fermented liquors except tuba, basi, tapuy and similar domestic
fermented liquors, but in no case shall the sum total of the ad valorem
tax and value-added tax be less than P1.00 per regular 320 ml. bottle.
(As amended by E.O. No. 273)
CHAPTER IV
EXCISE TAX ON TOBACCO PRODUCTS
Section 141. Tobacco Products. — There shall be
collected a tax of seventy-five centavos on each kilogram of the
following products of tobacco:cralaw:red
(a) Tobacco twisted by hand or reduced into a
condition to be consumed in any manner other than ordinary mode of
drying and curing;chanroblesvirtualawlibrary
(b) Tobacco prepared or partially prepared with or
without the use of any machine or instruments or without being pressed
or sweetened; and
(c) Fine-cut shorts and refuse, scraps, clippings,
cuttings, stems and sweepings of tobacco.
Fine-cut shorts and refuse, scraps, clippings, cutting, stems and
sweepings of tobacco resulting from the handling or stripping of whole
leaf tobacco may be transferred, disposed of, or otherwise sold,
without prepayment of the specific tax herein provided for under such
conditions as may be prescribed in the regulations promulgated by the
Secretary of Finance upon recommendation of the Commissioner if the
same are to be exported or to be used in the manufacture of other
tobacco products on which the excise tax will eventually be paid on the
finished products.
On tobacco specially prepared for chewing so as to be unsuitable for
use in any other manner, on each kilogram, sixty centavos.
Section 142. Cigar and cigarettes. — (a) Cigars. —
There shall be levied, assessed and collected on cigars an ad valorem
tax of five percent (5%) of the manufacturer's or importer's registered
wholesale price.
(b) Cigarettes packed in thirties. — There shall be
levied, assessed and collected on cigarettes packed in thirties an ad
valorem tax of fifteen percent (15%) of the manufacturer's registered
wholesale price.
(c) Cigarettes packed in twenties. — There shall be
levied, assessed and collected on cigarette packed in twenties an ad
valorem tax at the rates prescribed below based on the manufacturer's
registered wholesale price:cralaw:red
(1) On locally manufactured cigarettes bearing a
foreign brand, fifty percent (50%); Provided, That this rate shall
apply regardless of whether or not the right to use or title to the
foreign brand was sold or transferred by its owner to the local
manufacturer. Whenever it has to be determined whether or not a
cigarette bears a foreign brand, the listing of brands manufactured in
foreign countries appearing in the current World Tobacco Directory
shall govern.
(2) On other locally manufactured cigarettes, forty
percent (40%).
Duly registered or existing brands of cigarettes packed in twenties
shall not be allowed to be packed in thirties.
When the existing registered wholesale price, including tax, of
cigarettes packed in twenties does not exceed P3.60 per pack, the rate
for the cigarettes packed in thirties shall apply.
(d) Imported cigarettes. — If the cigarettes are of
foreign manufacture, regardless of the contents per pack, there shall
be levied, assessed and collected an ad valorem tax of sixty-five
percent (65%) of the importer's wholesale price.
For purposes of this section, "manufacturer's or importer's registered
wholesale price" shall include the ad valorem tax imposed in paragraphs
(a), (b), (c) or (d) hereof and the amount intended to cover the
value-added tax imposed under Title IV of this Code. (As amended by
E.O. No. 273)
Section 143. Inspection fees. — For inspection made
in accordance with this Chapter, there shall be collected a fee of
fifty centavos for each thousand cigars or fraction thereof; ten
centavos for each thousand cigarettes or fraction thereof; two centavos
for each kilogram of leaf tobacco or fraction thereof, and three
centavos for each kilogram or fraction thereof of scrap and other
manufactured tobacco.
The inspection fee on cigars, cigarettes and other tobacco products
shall be paid by the manufacturer, producer or owner within ten days
after the end of each month while the inspection fee on leaf tobacco,
scrap and other manufactured tobacco shall be paid immediately before
removal from the establishment of the wholesaler, manufacturer, or
redrying plant. In case of imported leaf tobacco and products thereof,
the inspection fee shall be paid by the imported before removal from
customs' custody.
[If the inspection fee is not paid within the time specified above, the
amount of the fee shall be increased by twenty-five per centum, the
increment to be a part of the fee.]
Fifty per centum of the tobacco inspection fee shall accrue to the
Tobacco Inspection Fund created by Section 12 of Act No. 2416, as
amended by Act No. 319 and fifty per centum shall accrue to the
Cultural Center of the Philippines.
CHAPTER V
EXCISE TAX ON PETROLEUM PRODUCTS
Section 145. Manufactured oils and other fuels. —
There shall be collected on refined and manufactured mineral oils and
motor fuels, the following specific taxes which shall attach to the
goods hereunder enumerated as soon as they are in existence as such:cralaw:red
(1) Lubricating oils and greases including but not
limited to basestock for lube oils and greases, high vacuum
distillates, aromatic extracts and other similar preparations, and
additives for lubricating oils and greases whether such additives are
petroleum based or not per liter of volume capacity, Four pesos and
fifty centavos (P4.50): Provided, however, That the specific taxes paid
on the purchased feedstock (bunker) used in the manufacture of
exciseable articles and forming part thereof shall be credited against
the specific tax due therefrom: Provided, further, That lubricating
oils and greases produced from basestocks and additives on which the
specific tax has already been paid shall no longer be subject to
specific tax:cralaw:red
(2) Processed gas, per liter of volume capacity, Five
centavos (P0.05);chanroblesvirtualawlibrary
(3) Waxes and petroleum, per kilogram, Three pesos
and fifty centavos (P3.50);chanroblesvirtualawlibrary
(4) 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 specific 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 proof (ninety percent absolute
alcohol) shall be deemed to have been removed for motive power, unless
shown otherwise;chanroblesvirtualawlibrary
(5) Naphtha, regular gasoline and other similar
products of distillation, per liter of volume capacity, Two pesos and
twenty-eight centavos (P2.28);chanroblesvirtualawlibrary
(6) Premium gasoline, per liter of volume capacity,
Two pesos and fifty-two centavos (2.52);chanroblesvirtualawlibrary
(7) Aviation turbo jet fuel, per liter of volume
capacity, Two pesos and thirty-eight centavos (P2.38);chanroblesvirtualawlibrary
(8) Kerosene, per liter of volume capacity, Fifty
centavos (P0.50);chanroblesvirtualawlibrary
(9) Diesel fuel oil, and on similar fuel oils having
more or less the same generating power, per liter of volume capacity,
Forty-five centavos (P0.45);chanroblesvirtualawlibrary
(10) Liquefied petroleum, per liter, zero (P0.00):
Provided, that liquefied petroleum gas used for motive power shall be
taxed at the equivalent rate as the specific tax on diesel fuel oil;chanroblesvirtualawlibrary
(11) Asphalts, pert kilogram, Fifty-six centavos
(P0.56);chanroblesvirtualawlibrary
(12) Bunker fuel oil, and on similar fuel oils having
more or less the same generating power, per liter of volume capacity,
zero (P0.00); and
(13) Naphtha, when used as a raw material in the
production of petrochemical products, per liter of volume capacity,
zero (P0.00): Provided, That naphtha processed by domestic refineries,
if available as determined by the Energy Regulatory Board, shall be
utilized before any naphtha may be imported for this purpose: Provided,
further, That the by-product including fuel oil, diesel fuel, kerosene,
pyrolysis gasoline, liquified 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 specific 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 specific tax under
this section. (As amended by R.A. 6965)
CHAPTER VI
EXCISE TAX ON MISCELLANEOUS ARTICLES
Section 146. Fireworks. — There shall be collected on
all fireworks, a tax of thirty pesos per kilogram. "Fireworks" as
herein used shall include firecrackers, sparklers, rockets and similar
devices which are exploded or burned to produce noises or brilliant
lighting effects.
Section 147. Cinematographic films. — (a) Taxable
films. — There shall be collected, once only, on cinematographic film,
including television films or tapes in reels, regardless of which, a
tax of seventy centavos per linear meter.
(b) Films not subject to tax. — (1) Educational films
or cinematographic films used for visual education, whether
manufactured in the Philippines or imported; and
(2) Any tax-paid cinematographic films subsequently
returned to the Philippines or on any negative film or unprinted
positive film, and on any reversal film used in amateur photography of
sixteen millimeters or less.
Section 148. Saccharine. — There shall be collected
on saccharine, sodium saccharine and all its derivatives on salts of
saccharine and other artificial sweetening agents a tax of sixty pesos
(P60) per kilogram. (As amended by E.O. No. 273)
Section 149. Automobiles. — There shall be levied,
assessed and collected an ad valorem tax on automobiles based on the
manufacturer's or importer's selling price net of excise and
value-added tax, in accordance with the following schedule:cralaw:red
Engine displacement (in cc)
Gasoline Diesel Tax Rate
up to 1600 up to 1800 15%
1601 to 2000 1801 to 2300 35%
2001 to 2700 2301 to 3000 50%
2701 or Over 3001 or over 100%
Provided, That in the case of imported automobiles not for sale, the
tax imposed herein shall be based on the total value used by the Bureau
of Customs in determining tariff and customs duties, including customs
duty and all other charges, plus (10%) of the total thereof. (As
amended by E.O. No. 273)
Section 150. Non-essential goods. — There shall be
levied, assessed and collected a tax equivalent to 20% based on the
wholesale price or the value of importation used by the Bureau of
Customs in determining tariff and customs duties; net of excise tax and
value-added tax, of the following goods:cralaw:red
(a) All goods commonly or commercially known as
jewelry, whether real or imitation pearls, precious and semi-precious
stones and imitations thereof; goods made of, or ornamented, mounted or
fitted with, precious metals or imitations thereof or ivory (not
including surgical and dental instruments, silver-plated wares, frames
or mountings for spectacles or eyeglasses, and dental gold or gold
alloys and other precious metals used in filling, mounting or fitting
of the teeth); opera glasses and lorgnettes. The term "precious metals"
shall include platinum, gold, silver, and other metals of similar or
greater value. The terms "imitations thereof" shall include platings
and alloys of such metals;chanroblesvirtualawlibrary
(b) Perfumes and toilet waters;chanroblesvirtualawlibrary
(c) Yachts and other vessels intended for pleasure or
sports. (As amended by E.O. No. 273)
CHAPTER VII
EXCISE TAX ON MINERAL PRODUCTS
Section 151. Mineral Products. — (a) Rates of Tax. —
There shall be levied assessed and collected on mineral, mineral
products and quarry resources, excise tax as follows:cralaw:red
(1) On coal and coke, a tax of ten pesos (P10.00) per
metric ton.
(2) On all non-metallic minerals and quarry
resources, a tax of three percent (3%) based on the actual market value
of the annual 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 of five percent
(5%) 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.
(4) On indigenous petroleum, a tax of fifteen percent
(15%) of the fair international market price thereof, on the first
taxable sale, such tax to be paid by the buyer or purchaser within 15
days from the date of actual or constructive delivery to the said buyer
or purchaser. The phrase "first taxable sale, barter, exchange or
similar transaction" means the transfer of indigenous petroleum in its
original state to a first taxable transferee. The fair international
market price shall be determined in consultation with an appropriate
government agency. (As amended by E.O. No. 311, Dec. 10, 1987)
For the purpose of this subsection, "indigenous petroleum" shall
include locally extracted mineral oil, hydrocarbon gas, bitumen, crude
asphalt, mineral gas and all other similar or naturally associated
substances with the exception of coal, peat, bituminous shale and/or
stratified mineral deposits.
(b) For purposes of this section, the term —chanroblesvirtualawlibrary
(1) "Gross output" shall be interpreted as the actual
market value of minerals or mineral products, or of bullion from each
mine or mineral lands 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.
(3) "Mineral products" shall mean things produced and
prepared in a marketable state by simple treatment processes such as
washing or drying, but without undergoing any chemical change or
process or manufacturing by the lessee, concessionaire or owner of
mineral lands.
(4) "Quarry resources" shall mean any common stone or
other common mineral substances as the Director of the Bureau of Mines
and Geo-Sciences 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.
(c) Time, manner and place of payment of excise tax
on mineral and mineral products. — Unless otherwise provided, the
excise tax on minerals and mineral products shall be due and payable
upon removal of the minerals or mineral products or quarry resources
from the locality where mined or upon removal from customs custody in
the case of importations.
Any person liable to pay the excise tax on locally produced or
extracted mineral, mineral products or quarry resources shall, before
removal of such products file, in duplicate, a return setting forth the
quantity and the actual market value of the mineral or mineral products
to be removed and pay the excise taxes due thereon to the Collection
Agent, or the Treasurer of the city or municipality of the place where
the mine is located except as herein below provided.
However, the output of the mine may be removed from such locality
without the prepayment of such excise taxes if the lessee, owner, or
operator of the mining claim shall file a bond in the form and amount
and with such sureties as the Commissioner may require, conditioned
upon the payment of such excise taxes. It shall be the duty of every
lessee, owner or operator to make a true and complete return in
duplicate setting forth the quantity and the actual market value of the
minerals or mineral products or quarry resources removed during such
calendar quarter, of the balance, if any, in cases where payments are
made upon removal, and pay the excise taxes due thereon within 20 days
after the end of such quarter to the Collection Agent, or the Treasurer
of the city or municipality of the place where the mine is located.
In the case of indigenous petroleum, the tax due thereon shall be paid
by the buyer or purchaser within 15 days from the date of actual or
constructive delivery to the said buyer or purchaser. (As amended by
E.O. No. 273)
CHAPTER VIII
ADMINISTRATIVE PROVISIONS REGULATING BUSINESS OF PERSONS DEALING IN
ARTICLES SUBJECT TO EXCISE TAX
Section 152. Extent of supervision over establishment
producing taxable output. — The Bureau of Internal Revenue has
authorized to supervise establishments where articles subject to a
specific tax are made or kept. The Department of Finance shall
prescribe regulations as to the mode in which the process of production
shall be conducted in so far as may be necessary to secure a sanitary
output and to safeguard the revenue.
Section 153. Records to be kept by manufacturers. —
Assessment based thereon. — Manufacturers of article subject to
specific tax shall keep such records, as are required by regulations
recommended by the Commissioner and approved by the Secretary of
Finance and such records, whether of raw materials received into the
factory or of articles produced therein shall be deemed public and
official documents for all purposes.
The records of raw materials kept by such manufacturers may be used as
evidence by which to determine the amount of specific taxes due from
them, and whenever the amounts of raw material received into any
factory exceeds the amount of manufactured or partially manufactured
products on hand and lawfully removed from the factory, plus waste
removed or destroyed, and a reasonable allowance for unavoidable loss
in manufacture, the Commissioner may assess and collect the tax due on
the products which should have been produced from the excess.
[The specific 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. In case of failure to pay upon demand or
within the period specified, the amount of tax due shall be increased
by twenty-five per centum, the increment to be part of the tax and the
entire amount shall be subject to interest at the rate of fourteen per
centum per annum computed from date the demand has been duly served or,
received or such specific date until the actual payment is made.]
Section 154. Premises subject to approval by
Commissioner. — No person shall engage in business as a manufacturer of
or dealer in articles subject to a specific tax unless the premises
upon which the business is to be conducted shall have been approved by
the Commissioner.
Section 155. Manufacturers to provide themselves with
counting or metering devices to determine production. — Manufacturers
of cigarettes, alcoholic products, oil products, and other articles
subject to specific tax that can be similarly measured shall provide
themselves with such necessary number of suitable counting or meeting
devices to determine as accurately as possible the volume, quantity or
number of the articles produced by them under regulations promulgated
by the Secretary of Finance upon the recommendation of the
Commissioner.
This requirement shall be complied with twelve months from date of
approval of this Code in the case of existing firms and before
commencement of operations in the case of new firms.
Section 156. Labels and form of packages. — All
articles of domestic manufacture subject to a specific tax and all leaf
tobacco shall be put up and prepared by the manufacturer or producer,
when removed for sale or consumption, in such packages only and bearing
such marks or brands as shall be prescribed in the regulations of the
Department of Finance; and goods of similar character imported into the
Philippines shall likewise be packaged and marked in such a manner as
may be required.
Section 157. Removal of articles after 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
products. 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 of
Internal Revenue; Provided, That withdrawals shall be taxed and
accounted for on a "first-in, first out" basis. (As amended by E.O. No.
273)
Section 158. Storage of goods in internal-revenue
bonded warehouses. — An internal-revenue bonded warehouse may be
maintained in any port of entry for the storing of imported or
manufactured goods which are subject to a specific tax. The taxes on
such goods shall be payable only upon removal from such warehouse, and
a reasonable charge shall be made for their storage therein. The
Commissioner may, in his discretion, exact a bond to secure the payment
of the tax on any goods so stored.
Section 159. Proof of exportation; Exporters bond. —
Exporters of goods that would be subject to a specific tax if sold or
removed for consumption in the Philippines shall submit proof of
exportation satisfactory to the Commissioner, and, when the same is
deemed necessary, shall be required to give a bond prior to the removal
of the goods for shipment, conditioned upon the exportation of the same
in good faith.
Section 160. Manufacturers' and importers' bond. —
Manufacturers and importers of articles subject to a specific tax shall
give bond in an amount equal, as nearly as can be estimated, to twenty
per centum of the taxes payable by them during an average year. Such
bond shall be conditioned upon the faithful compliance, during the time
such business if followed, with law and regulations relating to such
business and for the satisfaction of all fines and penalties imposed by
this Code. No such bond shall be required in an amount exceeding five
hundred thousand pesos nor be received in a sum less than ten thousand
pesos.
Section 161. Records to be kept by wholesale dealers.
— Wholesale dealers shall keep records of their purchases and sales or
deliveries of articles subject to a specific tax, in such from as shall
be prescribed in the regulations of the Department of Finance. These
records and the entire stock of goods subject to tax shall be subject
at all times to the inspection of internal-revenue officers.
Section 162. Records to be kept by dealers in leaf
tobacco. — Dealers in leaf tobacco shall keep records of the products
sold or delivered by them to other persons in such manner as may be
prescribed in the regulations of the Department of Finance, such
records to be at all times subject to the inspection of internal
revenue officers.
Section 163. Preservation of invoices and stamps. —
All dealers whosoever shall preserve for the period prescribed in
Section 235 all official invoices received by them from other dealers
or from manufacturers, together with the fractional parts of stamps
affixed thereto, if any, and upon demand shall deliver or transmit the
same to any internal revenue officer.
Section 164. Information to be given by
manufacturers, importers, indentors, and wholesalers of any apparatus
or mechanical contrivances specially for the manufacture of articles,
subject to tax and importers, indentors, manufacturers or sellers of
cigarette paper in bobbins, cigarette tipping paper or cigarette filter
tips. — Manufacturers, indentors, wholesalers and importers of any
apparatus or mechanical contrivance specially for the manufacture of
articles subject to tax shall before any such apparatus or mechanical
contrivance is removed from the place of manufacture or from the
customhouse, give written information to the Commissioner as to the
nature and capacity of the same, the time when it is to be removed, and
the place for which it is destined as well as the name of the person by
whom it is to be used; and such apparatus or mechanical contrivance
shall not be set up nor dismantled or transferred without a permit in
writing from the Commissioner.
A written permit from the Commissioner for importing, manufacturing or
selling of cigarette paper in bobbins or rolls, cigarette tipping paper
or cigarette filter tips is required before any person shall engage in
the importation, manufacture, or sale of the said articles. No permit
to sell said articles shall be granted unless the name and address of
the prospective buyer is first submitted to the Commissioner of
Internal Revenue and approved by him. Records showing the stock of the
said articles and the disposal thereof by sale to persons with their
respective addresses as approved by the Commissioner shall be kept by
the seller, and records showing stock of said articles and consumption
thereof shall be kept by the buyer, subject to inspection by
internal-revenue officers.
[It shall be unlawful for any person to have in his possession
cigarette paper in bobbins or rolls, cigarette tipping paper or
cigarette filter tips, without the corresponding authority therefor
issued by the Commissioner. Any person, importer, manufacturer of cigar
and cigarette, who has in his or its stock cigarette paper in bobbins
or rolls, cigarette tipping paper or cigarette filter tips and which
are not supported by permit from the Commissioner shall be fined in an
amount of not less than ten thousand pesos and imprisoned for not less
than five years.]
Section 165. Establishment of distillery warehouse. —
Every distiller, when so required by the Commissioner, shall provide at
his own expense a warehouse, to be situated on and to constitute a part
of his distillery premises and to be used only for the storage of
distilled spirits of his own manufacture until the tax thereon shall
have been paid; but no dwelling house shall be used for such purpose.
Such warehouse, when approved by the Commissioner, is declared to be a
bonded warehouse, to be known as a distillery warehouse.
Section 166. Custody of distillery warehouse. — Every
distillery or distillery warehouse shall be in the joint custody of the
revenue inspector, if one is assigned thereto, and of the proprietor
thereof. It shall be kept securely locked, and shall at no time be
unlocked or opened or remain unlocked or opened unless in the presence
of such revenue inspector or other person who may be designated to act
for him as provided by law.
Section 167. Limitation on quantity of spirits
removed from warehouse. — No distilled spirits shall be removed from
any distillery, distillery warehouse, or bonded warehouse in quantities
of less than fifteen gauge liters at any one time, except bottled
goods, which may be removed by the case of not less than twelve
bottles.
Section 168. Denaturing within premises. — For
purposes of this Title, the process of denaturing alcohol shall be
effected only within the distillery premises where the alcohol to be
denatured is produced in accordance with formulas duly approved by the
Bureau of Internal Revenue and only in the presence of duly designated
representatives of said bureau.
Section 169. Recovery of alcohol for use in arts and
industries. — Manufacturers employing processes in which denatured
alcohol used in arts and industries is expressed or evaporated from the
articles manufactured may, under regulations to be prescribed by the
Department of Finance, be permitted to recover the alcohol so used and
restore it again to a condition suitable solely for use manufacturing
processes.
Section 170. Requirements governing rectification and
compounding of liquors. — Persons engaged in the rectification or
compounding of liquors shall, as to the mode of conducting their
business and supervision over the same, be subject to all the
requirements of law applicable to distilleries: Provided, That where a
rectifier makes use of spirits upon which the specific tax has been
paid; no further tax shall be collected on any rectified spirits
produced exclusively therefrom: And provided, further, That compounders
in the manufacture of any intoxicating beverage whatever, shall not be
allowed to make use of spirits upon which the specific tax has not been
previously paid.
Section 171. Authority of internal-revenue officer in
searching for taxable articles. — Any internal revenue officer may, in
the discharge of his official duties enter any house, building, or
place where articles subject to tax under this Title are produced or
kept, or are believed by him upon reasonable grounds to be produced or
kept so far as may be necessary to examine, discover, or seize the
same.
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 specific tax has not been paid.
Section 172. Detention of package containing taxable
articles. — Any revenue officer may detain any package containing or
supposed to contain articles subject to specific tax when he has good
reason to believe that the lawful tax has not been paid or that the
package has been or is being removed in violation of law, and every
such packages shall be held by such officer in a safe place until it
shall be determined whether the property so detained is liable by law
to be proceeded against for forfeiture; but such summary detention
shall not continue in any case longer than seven days without process
of law or intervention of the officer to whom such detention is to be
reported.
TITLE VII. DOCUMENTARY STAMP TAX
Section 173. Stamp taxes upon documents, instruments,
and papers. — Upon documents, instruments, and papers, and upon
acceptances, assignments, sales, and transfers of the obligation,
right, or property incident thereto, there shall be levied, collected
and paid for, and in respect of the transaction so had or accomplished,
the corresponding documentary stamp taxes prescribed in the following
sections of this Title, by the person making, signing, issuing,
accepting, or transferring the same, and at the same time such act is
done or transaction has: Provided, That whenever one party to the
taxable document enjoys exemption from the tax herein imposed, the
other party thereto who is not exempt shall be the one directly liable
for the tax. (As amended by PD No. 1994.)
Section 174. Stamp tax on bonds, debentures, and
certificates of indebtedness. — On all bonds, debentures, and
certificates of indebtedness issued by any association, company, or
corporation, there shall be collected a documentary stamp tax of one
peso on each two hundred pesos, or fractional part thereof, of the face
value of such documents.
Section 175. Stamp tax on original issue of
certificates of stock. — On every original issue, whether on
organization, reorganization or for any lawful purpose, of certificates
of stock by any association, company, or corporations, there shall be
collected a documentary stamp tax of one peso and seventy centavos on
each two hundred pesos, or fractional part thereof, of the par value of
such certificates: Provided, That in the case, of the original issue of
stock without par value the amount of the documentary stamp tax herein
prescribed shall be based upon the actual consideration received by the
association, company, or corporation for the issuance of such stock,
and in the case of stock dividends on the actual value represented by
each share.
Section 176. Stamp tax on sale, agreements to sell,
memoranda of sales, deliveries or transfer of bonds, due-bills,
certificates of obligation, or shares or certificates of stock. — On
all sales, or agreements to sell, or memoranda of sales, or deliveries,
or transfer of bonds, due-bills, certificates of obligation, or shares
or certificates of stock in any association, company or corporation, or
transfer of such securities by assignment in blank, or by delivery, or
by any paper or agreement, or memorandum or other evidences of transfer
or sale whether entitling the holder in any manner to the benefit of
such bonds, due-bills, certificate of obligation or stock, or to secure
the future payment of money, or for the future transfer of any bond,
due-bill, certificates of obligation or stock, or to secure the future
payment of money, or for the future transfer of any bond, due-bill,
certificates of obligation or stock, there shall be collected a
documentary stamp tax of fifty centavos on each two hundred pesos, or
fractional part thereof, of the par value of such bond, due-bill,
certificates of obligation or stock: Provided, That only one tax shall
be collected on each sale or transfer of stock or securities from one
person to another, regardless of whether or not a certificate of stock
or obligation is issued, indorsed, or delivered in pursuance of such
sale or transfer: and provided, further, That in the case of stock
without par value the amount of the documentary stamp tax herein
prescribed shall be equivalent to twenty-five per centum of the
documentary stamp tax paid upon the original issue of said stock.
Section 177. Stamp tax on bonds, debentures,
certificates of stock or indebtedness issued in foreign countries. — On
all bonds, debentures, certificates of stock, or certificates of
indebtedness issued in any foreign country, there shall be collected
from the person selling or transferring the same in the Philippines,
such tax as is required by law or similar instruments when issued,
sold, or transferred in the Philippines.
Section 178. Stamp tax on certificates of profits or
interests in property or accumulations. — On all certificates of
profits, or any certificate or memorandum showing interest in the
property or accumulations of any association, company, or corporation,
and on all transfers of such certificates or memoranda, there shall be
collected a documentary stamp tax of twenty centavos on each two
hundred pesos, or fractional part thereof, of the face value of such
certificate or memorandum.
Section 179. Stamp tax on bank checks, draft,
certificates of deposit not bearing interest, and other instruments. —
On each bank check, draft, or certificate of deposit not drawing
interest, or order for the payment of any sum of money drawn upon or
issued by any bank, trust company, or any person or persons, companies
or corporations, at sight or on demand, there shall
be collected a documentary stamp tax of twenty centavos.
Section 180. Stamp tax on promissory notes, bills of
exchanges, drafts, certificates of deposit bearing interest and others
not payable on sight or demand. — On all bills of exchange (between
point within the Philippines), draft or certificates of deposits
drawing interest, or orders for the payment of any sum of money
otherwise than at sight or on demand, or on all promissory notes,
whether negotiable or non-negotiable, except bank notes issued for
circulation, and on each renewal of any such note, there shall be
collected a documentary stamp tax of twenty centavos on each two
hundred pesos, or fractional part thereof, of the face value of any
such bill of exchange, draft, certificate of deposit, or note.
Section 181. Stamp tax upon acceptance of bills of
exchange and others. — Upon any acceptance or payment of any bill of
exchange or order for the payment of money purporting to be drawn in a
foreign country but payable in the Philippines, there shall be
collected a documentary stamp tax of thirty centavos on each two
hundred pesos, or fractional part thereof, of the face value of any
such bill of exchange, or order, or the Philippine equipment of such
value, if expressed in foreign country.
Section 182. Stamp tax on foreign bills of exchange
and letters of credit. — On all foreign bills of exchange and letters
of credit (including orders, by telegraph or otherwise, for the payment
of money issued by express or steamship companies or by person or
persons) drawn in but payable out of the Philippines in a set of three
or more according to the custom of merchants and bankers, there shall
be collected a documentary stamp tax of thirty centavos on each two
hundred pesos, or fractional part thereof, of the face value of such
bill of exchange or letter of credit, or the Philippine equivalent of
such face value, if expressed in foreign country.
Section 183. Stamp tax on life insurance policies. —
On all policies of insurance or other instruments by whatever name the
same may be called, whereby any insurance shall be made or renewed upon
only life or lives there shall be collected a documentary stamp tax of
fifty centavos on each two hundred pesos or fractional part thereof, of
the amount issued by any such policy.
Section 184. Stamp tax on policies of insurance upon
property. — On all policies of insurance or other instruments by
whatever name the same may be called, by which insurance shall be made
or renewed upon property of any description, including rents or
profits, against peril by sea or on inland waters, or by fire or
lightning, there shall be collected a documentary stamp tax of thirty
centavos on each four pesos, or fractional part thereof, of the amount
of premium charged: Provided, however, That no documentary stamp tax
shall be collected on reinsurance risks under any reinsurance agreement
is effected or recorded.
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 bonds 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 thirty centavos on each four
pesos, or fractional part thereof of the premium charged.
Section 186. Stamp tax on policies of annuities. — On
all policies of annuities, or other instruments by whether name the
same may be called, whereby an annuity may be made, transferred, or
redeemed, there shall be collected a documentary stamp tax of one peso
on each two hundred pesos, or fractional part thereof, of the capital
of the annuity, or should this be unknown, then on each two hundred
pesos, or fractional part thereof, of thirty-three and one-third times
the annual income.
Section 187. Stamp tax on indemnity bonds. — On all
bonds for indemnifying any person, firm or corporation who shall become
bound or engaged as surety for the payment of any sum of money or for
the due execution or performance of the duties of any office or
position or to account for money received by virtue thereof, and on all
other bonds of any description, except such as may be required in legal
proceedings, or are otherwise provided for herein, there shall be
collected a documentary stamp tax of three pesos and fifty centavos.
Section 188. Stamp tax on certificates. — On each
certificates of damage or otherwise, and on every other certificate or
document issued by any customs officer, marine surveyor, or other
person acting as such, and on each certificate issued by a notary
public, and on each certificate of any description required by law or
by rules or regulations of a public office, or which is issued for the
purpose of giving information, or establishing proof of a fact, and not
otherwise specified herein, there shall be collected a documentary
stamp tax of three pesos.
Section 189. Stamp tax on warehouse receipts. — On
each warehouse receipt for property held in storage in a public or
private warehouse or yard for any other persons than the proprietor of
such warehouse or yard, there shall be collected a documentary stamp
tax of one peso and fifty centavos: Provided, That no tax shall be
collected on each warehouse receipt issued to any one person in any one
calendar month covering property the value of which does not exceed two
hundred pesos. (As amended by P.D. No. 1994)
Section 190. Stamp tax on Jai-Alai or horse race
tickets. — On each Jai-Alai or horse race tickets, there shall be
collected a documentary stamp tax of twenty centavos: Provided, That if
the cost of the tickets exceeds one peso, an additional tax of twenty
centavos on every one peso of fractional part thereof shall be
collected.
Section 191. Stamp tax on bills of lading or
receipts. — On each set of bills of lading or receipt (except charter
party) for any goods, merchandise, or effects shipped from one port or
plate in the Philippines to another port or place in the Philippines
(except on ferries across rivers), or to any foreign port, three shall
be collected a documentary stamp tax of fifty centavos, if the value of
such goods exceeds P100 and does not exceed P1,000; one peso, if the
value exceeds P1,000 and does not exceed P10,000; three pesos if the
value exceeds P10,000; Provided however, That freight tickets covering
goods, merchandise or effects carried as accompanied baggage of
passengers on land and water carriers primarily engaged in the
transportation of passengers are hereby exempt.
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 tax of
two pesos and fifty centavos.
Section 193. Stamp tax on powers of attorney. — On
each power of attorney to perform any act whatsoever, except acts
connected with the collection of claims due from or accruing to the
Government of the Republic of the Philippines, or the government of any
province, city or municipality, there shall be collected a documentary
stamp tax of two pesos: Provided, however, That on each power of
attorney which authorizes another to administer, sell, lease, or
otherwise dispose of the property of a principal, there shall be
collected a documentary stamp tax of three pesos.
Section 194. Stamp tax on leases and other hiring
agreements. — On each lease, agreement, memorandum, or contract for
hire, use or rent of any lands or tenements, or portions thereof, there
shall be collected a documentary stamp of three pesos for each year of
the term of said contracts or agreement.
Section 195. Stamp tax on mortgages, pledges, and
deeds of trust. — On every mortgage or pledge of lands, estate, or
property, real or personal, heritable or movable, whatsoever, where the
same shall be made as a security for the payment of any definite and
certain sum of money lent at the time or previously due and owing or
forborne to be paid being payable, and on any conveyance of land,
estate, or property whatsoever, in trust or to be sold, or otherwise
converted into money which shall be and intended only as security,
either by express stipulation or otherwise, there shall be collected a
documentary stamp tax the following rates:cralaw:red
(a) When the amount secured does not exceed five
thousand pesos, ten pesos.
(b) On each five thousand pesos, or fractional part
thereof in excess of five thousand pesos, an additional tax of five
pesos.
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 of trust shall be computed on the amount
actually loaned or given at 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, 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.
Section 196. Stamp tax on deeds of sale and
conveyance of real
property. — On all conveyances, deeds, instruments, or writings, other
than grants, patents, or original certificates of adjudication issued
by the Government, whereby any lands, tenements or other realty sold
shall be granted, assigned, transferred, or otherwise conveyed to the
purchaser, or purchasers, or to any person or persons designated by
such purchaser or purchasers, there shall be collected a documentary
stamp tax at the following rates:cralaw:red
(a) When the consideration, or value received or
contracted to be paid for such realty, after making proper allowance of
any encumbrance, does not exceed one thousand pesos, ten pesos.
(b) For each additional one thousand pesos, or
fractional part thereof in excess of one thousand pesos of such
consideration or value, ten pesos.
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.
Section 197. Stamp tax on charter parties and similar
instruments. — On every charter party, contract, or agreement for the
charter of any ship, vessel, or steamer, or any letter or memorandum or
other writing between the captain, master, or owner, or other person
acting as agent of any ship, vessel, or steamer and any other person or
persons for or relating to the charter of any such ship, vessel, or
steamer, and on any renewal or transfer of such charter, contract,
agreement, letter or memorandum, there shall be collected a documentary
stamp tax at the following rates:cralaw:red
(a) If the registered gross tonnage of the ship,
vessel, or steamer does not exceed three hundred tons, and the duration
of the charter or contract does not exceed six months, one hundred
pesos; and for each month of fraction of a month in excess of six
months, an additional tax of twenty pesos shall be paid.
(b) If the registered gross tonnage exceeds three
hundred tons and does not exceed six hundred tons, and the duration of
the charter or contract does not exceed six months, two hundred pesos;
and for each month or fraction of a month in excess of six months, an
additional tax of forty pesos shall be paid.
(c) If the registered gross tonnage exceeds six
hundred tons and the duration of the charter or contract does not
exceed six months, three hundred pesos; and for each month or fraction
of a month in excess of six months, an additional tax of fifty four
pesos shall be paid.
Section 198. Stamp tax on assignments and renewals of
certain instruments. — Upon each and every assignment or transfer of
any mortgage, lease or policy of insurance, or the renewal or
continuance of any agreement, contract, charter, or any evidence of
obligation or indebtedness by altering or otherwise, there shall be
levied, collected and paid a documentary stamp tax, at the same rate as
that imposed on the original instrument.
Section 199. Documents and papers not subject to
stamp tax. — The provisions of Section 173 to the contrary
notwithstanding, the following instruments, documents, and papers shall
be exempt from the documentary stamp tax:cralaw:red
(1) Policies of insurance or annuities made or
granted by a fraternal or beneficiary society, order, association, or
cooperative company, operated on the lodge system or local cooperation
plan and organized and conducted solely by the members thereof for the
exclusive benefit of each member and not for profit.
(2) Certificates of oaths administered to any
government official in his official capacity or of acknowledgment by
any government official in the performance of his official duties,
written appearance in any court by any government official, in his
official capacity; certificates of the administration of oaths to any
person as to the authenticity of any paper required to be filed in
court by any person or party thereto, whether the proceedings be civil
or criminal; papers and documents filed in courts by or for the
national, provincial, city, or municipal governments; affidavits of
poor persons for the purpose of proving poverty; statements and other
compulsory information required of persons of corporations by the rules
and regulations of the national, provincial, city or municipal
governments exclusively for statistical purposes and which are wholly
for the use of or for the use or benefit of the person filing them;
certified copies and 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 in value assessed, furnished by provincial, city, or municipal
treasurer to applicants for registration of title to land. (As amended
by PD No. 1994)
Section 200. Payment of documentary stamp tax. —
Cancellation of stamp. — Documentary stamp taxes shall be paid by the
purchase and affixture of documentary stamps to the document or
instrument taxed or to such other paper as may be indicated by law or
regulations as the proper recipient of the stamp, and by the subsequent
cancellation to be accomplished by writing, stamping or perforating the
date of the cancellation across the face of each stamp in such manner
that part of the writing, impression, or perforation shall be on the
stamp itself and part on the paper to which it is attached: Provided,
That if the cancellation is accomplished by writing or by stamping the
date of cancellation, a hole sufficiently large to be visible to the
naked eye shall be punched, cut or perforated on both the stamp and the
document either by the use of a hand punch, knife, perforating
machines, scissors, or any other cutting instrument; but if the
cancellation is accomplished by perforating the date of cancellation,
no other hole need be made on the stamp.
In appropriate cases, and in the discretion of the Commissioner,
documentary stamps may be imprinted on certain documents upon payment
of the face value of such stamps, in which case the imprinted stamps
need not be cancelled as indicated in the preceding paragraph.
When the evidence of sale or transfer is shown only on the books of the
company, the stamp shall be affixed to such books; and in case of the
issuance of certificates of stock or other securities the stamp shall
be affixed to the stub or duplicate to the kept in the office of the
person or company issuing such certificates, securities, or tickets;
and in case the change of ownership is by transfer of certificates the
stamp shall be affixed to the certificates; and in case of an agreement
to sell, or when the transfer is by delivery of the certificate
assigned in blank, there shall be made and delivered by the seller to
the buyer a bill or memorandum of such sale to which the stamp shall be
affixed; and every such bill or memorandum of sale, or agreement to
sell, shall show the date thereof, the name of the seller and/or of the
purchaser, the amount of the sale, and the matter or thing to which it
refers: Provided, That where the sale is effected through a broker, the
memorandum of sale herein required shall be made and delivered by said
broker: And provided, further, That for the purpose of this section a
notice of sale to the vendor commonly known as "confirmation slip",
shall be considered as bill or memorandum of sale.
Section 201. Effect of failure of stamp taxable
document. — An instrument, document, or paper which is required by law
to be stamped and which has been signed, issued, accepted, or
transferred without being duly stamped, shall not be recorded, nor
shall it or any copy thereof or any record of transfer of the same be
admitted or used in evidence in any court until the requisite stamps
shall have been affixed thereto and cancelled.
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
PERIOD OF LIMITATION IN GENERAL AND COMPROMISE
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 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.
Section 203. Period of limitation upon assessment and
collection. — Except as provided in the succeeding section, internal
revenue taxes shall be assessed within three years after the last day
prescribed by law for the filing of the return, and no proceeding in
court without assessment for the collection of such taxes shall be
begun after the expiration of such period: Provided, That in a case
where a return is filed beyond the period prescribed by law, the
three-year period shall be counted from the day the return was filed.
For the purposes of this section, a return filed before the last day
prescribed by law for the filing thereof shall be considered as filed
on such last day. (As amended by B.P. Blg. 700)
Section 204. Authority of the Commissioner to
compromise, abate, and refund/credit taxes. — The Commissioner may —chanroblesvirtualawlibrary
(1) Compromise the payment of any internal revenue
tax when —chanroblesvirtualawlibrary
(a) A reasonable doubt as to the validity of the
claim against the taxpayer exists; or
(b) The financial position of the taxpayer
demonstrates a clear inability to pay the assessed tax.
(2) Abate or cancel a tax liability, when —chanroblesvirtualawlibrary
(a) The tax or any portion thereof appears to be
unjustly or excessively assessed; or
(b) The administration and collection costs involved
do not justify the collection of the amount due.
All criminal violation may be compromised except; (a) those already
filed in court, and (b) those involving fraud.
The Commissioner of Internal Revenue may delegate his power to
compromise internal revenue cases, to the Deputy Commissioners and the
Regional Directors, subject to such limitations and restrictions as may
be imposed under rules and regulations to be promulgated for the
purpose.
(3) Credit refund taxes erroneously or illegally
received, penalties imposed without authority, refund the value of
internal revenue stamps when they are returned in goods condition by
the purchaser, and, in his discretion, redeem or change unused stamps
that have been rendered unfit for use and refund their value upon proof
of destruction. No credit or refund of taxes or penalties shall be
allowed unless the taxpayer files in writing with the Commissioner a
claim for credit or refund within two year after the payment of the tax
or penalty.
CHAPTER II
CIVIL REMEDIES FOR COLLECTION OF TAXES
Section 205. Remedies for the collection of
delinquent taxes. — The civil remedies for the collection of internal
revenue taxes, fees, or charges, and any increment thereto resulting
from delinquency shall be (a) by distraint of goods, chattels, or
effects, and other personal property of whatever character, including
stocks and other securities, debts, credits, bank accounts, and
interest in and rights to personal property, and by levy upon real
property and interest in or rights to real property; and (b) by civil
or criminal action. Either of these remedies or both simultaneously may
be pursued in the discretion of the authorities charged with the
collection of such taxes: Provided, however, That the remedies of
distraint and levy shall not be availed of where the amount of tax
involved is not more than one hundred pesos.
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.
Section 206. Constructive distraint of the property
of a taxpayer. — To safeguard the interest of the Government, the
Commissioner may place under constructive distraint the property of a
delinquent taxpayer or any taxpayer who, in his opinion, is retiring
from any business subject to tax, or intends to leave the Philippines,
or remove his property therefrom, or hide or conceal his property, or
perform any act tending to obstruct the proceedings for collecting the
tax due or which may be due from him.
The constructive distraint of personal property shall be effected by
requiring the taxpayer or any person having possession or control of
such property to sign a receipt covering the property distrained and
obligate himself to preserve the same intact and unaltered and not to
dispose of the same in any manner whatever without the express
authority of the Commissioner.
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 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.
Section 207. Distraint of personal property. — The
remedy by distraint shall proceed as follows: Upon the failure of the
person owing any delinquent tax or delinquent revenue to pay the same,
at the time required, the Revenue District Officer, if the amount
involved does not exceed five thousand pesos; the Revenue Regional
Director, if the amount involved is more than five thousand pesos but
does not exceed twenty thousand pesos; and the Commissioner, if the
amount involved exceeds twenty thousand pesos shall seize and distraint
not earlier than three months nor later than six months from receipt of
demand any goods, chattels, or effects, and the personal property,
including stocks and other securities, debts, credits, bank account,
and interest in and rights to personal property, of such 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 any distraint shall, within ten days from receipt of the
warrant, be submitted by the distraining officer to the Revenue
District Officer, to the Revenue Regional Director and to the
Commissioner.
Section 208. Mode of procedure. — The officer levying
the distraint shall make or cause to be made an account of the goods,
chattels, effects, or other personal property distrained, a copy of
which, signed by himself, shall be left either with the owner or person
from whose possession such goods, chattels, or effects. or other
personal property were taken, or at the dwelling or place of business
of such person and with someone of suitable age and discretion, to
which list shall be added a statement of the sum demanded and note of
the time and place of sale.
Stocks and other securities shall be distrained by serving a copy of
the warrant of distraint upon the taxpayer and upon the president,
manager, treasurer, or other responsible officer of the corporation,
company or association which issued the said stocks or securities.
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 owing
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.
Bank accounts shall be garnished by serving a warrant of garnishment
upon the taxpayer and upon the president, manage, treasurer, or other
responsible officer of the bank. Upon receipt of the warrant of
garnishment, the bank shall turn over to the Commissioner so much of
the bank accounts as may be sufficient to satisfy the claim of the
Government.
Section 209. Sale of property distrained and
disposition of proceeds. — The officer levying the distraint shall
forthwith cause a notification to be exhibited in not less than two
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 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 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 produce or stock exchanges.
In the case of stocks and other securities, the officer making the sale
shall execute a bill of sale which he will 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 certificate of stock or other securities.
Any residue over 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.
Section 210. Release of distrained property upon
payment prior to sale. — If at any time prior to the consummation of
the sale all proper charges are paid to the officer conducting the
sale, the goods or effects distrained shall be restored to the owner.
Section 211. Report of sale to Bureau of Internal
Revenue. — Within two days after the sale the office making the same
shall make a report of his proceedings in writing to the Commissioner
and shall himself preserve a copy of such report as an official record.
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 costs due thereon.
Property so purchased may be resold by the Commissioner or his deputy,
subject to the regulations of the Secretary of Finance, the net
proceeds to be remitted into the National Treasury and accounted for as
internal revenue.
Section 213. Levy on real estate. — After the
expiration of the time required to pay the delinquent tax or delinquent
revenue as prescribed in Section 207, 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 Revenue District Officer, or the Revenue Regional
Director or the Commissioner, as the case may be, 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 legal execution throughout the Philippines.
Levy shall be effected by writing upon said certificate a description
of the property upon which levy is made. At the same time, written
notice of the levy shall be mailed to or served upon the Register of
Deeds of the province or city where the property is located and upon
the delinquent taxpayer, or, if he be absent from the Philippines, to
his agent or the manager of the business in respect to which the
liability arose, or, if there be none, to the occupant of the property
in question.
In case the 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 Revenue District Officer, Regional Director or
Commissioner, as the case may be, shall within thirty days after
execution of the distraint, proceed with the levy on the taxpayer's
real property.
A report on any levy shall, within ten days after receipt of the
warrant, be submitted by the levying officer to the District Revenue
Officer, the Revenue Regional Director, and to the Commissioner.
Section 214. Advertisement and sale. — Within twenty
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 costs of sale; and such
advertisement shall cover a period of at least thirty 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 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 days after the sale a return by the distraining or levying
officer of the proceedings shall be entered upon the records of the
Collection Agent, the Revenue District Officer, the Revenue Regional
Director, and the Commissioner. The collection agent, 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 properly 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.
The collection agent, upon approval by the Revenue District 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 founds on the latter.
In his monthly collection reports, such advances shall be reflected and
supported by receipts.
Section 215. Redemption of property sold. — Within
one 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 interests thereon from the
date of delinquency to the date of sale, together with interest on said
purchase price at the rate of fifteen per centum 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 allowed for its redemption.
Section 216. Forfeiture to Government for want of
bidder. — In case there is no bidder for real property exposed for sale
as hereinabove provided or if the highest bid is for an amount
insufficient to pay the taxes, penalties, and costs, the internal
revenue officer conducting the sale shall declare the property
forfeited to the Government in satisfaction of the claim in question
and within two days thereafter shall make a return of his proceedings
and the forfeiture which shall be spread upon the records of his
office. It shall be the duty of the Register of Deeds concerned upon
registration with his Office of any such declaration of forfeiture to
transfer the title of the property forfeited to the government without
the necessity of an order from a competent Court.
Within one 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 Collection Agent the full amount of the taxes and
penalties, together with interest thereon and the cost of sale; but if
the property be not thus redeemed, the forfeiture shall become
absolute.
Section 217. 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 days notice sell and dispose of the same
at public auction, or, with the prior approval of the Secretary Head,
may dispose of the same at private sale. In either case the proceeds of
the sale shall be deposited in the National Treasury, and an accounting
of the same be rendered to the Chairman of the Commission on Audit.
Section 218. Further distraint or levy. — The remedy
by distraint of personal property and levy on realty may be repeated if
necessary until the full amount due, including all expenses, is
collected.
Section 219. Injunction not available to restrain
collection of tax. — No court shall have the authority to grant an
injunction to restrain the collection of any national internal revenue
tax, fee, or charge imposed by this Code.
Section 220. Nature and extent of tax lien. — If any
person, corporation, partnership, joint-account (cuenta en
participacion), association, or insurance company liable to pay an
internal revenue tax, neglects or refuses to pay the same after demand,
the amount shall be a lien in favor of the Government of the
Philippines from the time when the assessment was made by the
Commissioner until paid, with interest, penalties, and costs that may
accrue in addition thereto upon all property and rights to property
belonging to the taxpayer: Provided, That this lien shall not be valid
against any mortgagee, purchaser, or judgment creditor until notice of
such lien shall be filed by the Commissioner in the Office of the
Register of Deeds of the province or city where the property of the
taxpayer is situated or located.
Section 221. 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 the provincial or city fiscal, or the Solicitor-General,
or by the legal officers of the Bureau of Internal Revenue deputized by
the Secretary of Justice, but no civil and criminal actions for the
recovery of taxes or the enforcement of any fine, penalty or forfeiture
under this Code shall be begun without the approval of the
Commissioner.
Section 222. Remedy for enforcement of statutory
penal provisions. — The remedy for enforcement of statutory penalties
of all sorts shall be by criminal or civil action, as the particular
situation may require, subject to the approval of the Commissioner.
Section 223. Exceptions as to period of limitation of
assessment and collection of taxes. — (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 begun without assessment, at any time
within ten 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 city or criminal action for the collection thereof.
(b) If before the expiration of the time prescribed
in the preceding section 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 above-prescribed may be collected by
distraint or levy or by a proceeding in court within three 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
three-year period. The period so agreed upon may be extended by
subsequent written agreements made before the expiration of the period
previously agreed upon.
(e) Provided, however, That nothing in the
immediately preceding section and paragraph (a) hereof shall be
construed to authorize the examination and investigation or inquiry
into any tax returns filed in accordance with the provisions of any tax
amnesty law or decree. (As amended by BP Blg. 700)
Section 224. Suspension of running of statute. — The
running of the statute of limitation provided in Section 203 and 223 on
the making of assessment and the beginning of distraint or levy or a
proceeding in court for collection, in respect of any deficiency, shall
be suspended for the period during which the Commissioner is prohibited
from making the assessment or beginning distraint or levy or a
proceeding in court and for sixty days thereafter; when the taxpayer
requests for a reinvestigation which is granted by the Commissioner;
when the taxpayer cannot be located in the address given by him in the
return filed upon which a tax is being assessed or collected: Provided,
That, if the taxpayer inform the Commissioner of any change in address,
the running of the statute of limitations will not be suspended; when
the warrant of distraint and levy is duly served upon the taxpayer, his
authorized representative, or a members of his household with
sufficient discretion, and no property could be located; and when the
taxpayer is out of the Philippines.
Section 225. Remedy for enforcement of forfeitures. —
The forfeiture of chattels and removable fixtures of any sort shall be
enforced by the seizure and sale, or destruction, of the specific
forfeited property. The forfeiture of real property shall be enforced
by a judgment of condemnation and sale in a legal action or proceeding,
civil or criminal, as the case may require.
Section 226. When property to be sold or destroyed. —
Sales of forfeited chattels and removable fixtures shall be effected,
so for as practicable, in the same manner and under the same condition
as the public notice and the time and manner of sale as are prescribed
for sales of personal property distrained for the non-payment of taxes.
Distilled spirits, liquors, cigars, cigarettes, other manufactured
products of tobacco, and all apparatus used in or about the illicit
production of such articles may, upon forfeiture, be destroyed by order
of the Commissioner, when the sale of the same for consumption or use
would be injurious to the public health or prejudicial to the
enforcement of the law.
All other articles subject to specific 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 days
after seizure.
Section 227. Disposition of funds recovered in legal
proceedings or obtained from forfeitures. — All judgments and moneys
recovered and received for taxes, costs, forfeitures, fines, and
penalties shall be paid to the Commissioner or his authorized deputies
as the themselves are required to be paid, and, except as specially
provided, shall be accounted for and dealt with in the same way.
Section 228. Satisfaction of judgment recovered
against any internal revenue officer. — When an action is brought
against any revenue officer to recover damages by reason of any act
done in the performance of official duty, and the Commissioner is
notified of such action in time to make defense against the same,
through the Solicitor General, any judgment, damages, or costs
recovered in such action shall be satisfied by the Commissioner upon
approval of the Secretary Head, or if the same be paid by the person
sued, shall be repaid or reimbursed to him.
No such judgment, damages, or costs shall be paid or reimbursed in
behalf of a person who has acted negligently or in faith, or with
willful oppression.
CHAPTER III
PROTESTING AN ASSESSMENT, REFUND, ETC
Section 229. Protesting of assessment. — When the
Commissioner of Internal Revenue or his duly authorized representative
finds that proper taxes should be assessed, he shall first notify the
taxpayer of his findings. Within a period to be prescribed by
implementing regulations, the taxpayer shall be required to respond to
said notice. If the taxpayer fails to respond, the Commissioner shall
issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request
for reconsideration or reinvestigation in such form and manner as may
be prescribed by implementing regulation within thirty (30) days from
receipt of the assessment; otherwise, the assessment shall become final
and unappealable.
If the protest is denied in whole or in part, the individual,
association or corporation adversely affected by the decision on the
protest may appeal to the Court of Tax Appeals within thirty (30) days
from receipt of the said decision; otherwise, the decision shall become
final, executory and demandable.
Section 230. Recovery of tax erroneously or illegally
collected. — No suit or proceeding shall be maintained in any court for
the recovery of any national internal revenue tax hereafter alleged to
have been erroneously or illegally assessed or collected, or of any
penalty claimed to have been collected without authority, or of any sum
alleged to have been excessive or in any manner wrongfully collected,
until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or
not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be begun after the
expiration of two 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.
Forfeiture of refund. — A refund check or warrant issued in accordance
with the pertinent provisions of this Code which shall remain unclaimed
or uncashed within five (5) years from the date the said warrant or
check was mailed or delivered shall be forfeited in favor of the
government and the amount thereof shall revert to the General Fund.
Section 231. Action to contest forfeiture of chattel.
— In case of the seizure of personal property under claim of
forfeiture, the owner desiring to contest the validity of the
forfeiture may, at time before sale or destruction of the property,
bring an action against the person seizing the property or having
possession thereof to recover the same, and upon giving proper bond may
enjoin the sale; or after the sale and within six months he may bring
an action to recover the net proceeds realized at the sale.
TITLE IX. COMPLIANCE REQUIREMENTS
CHAPTER I
KEEPING OF BOOKS OF ACCOUNTS AND RECORDS
Section 232. (A) Corporations companies, partnerships
or persons required to keep books of accounts. — All corporations,
companies, partnerships, or persons, required by law to pay internal
revenue taxes shall keep a journal and a ledger, or their equivalents:
Provided, however, That those whose quarterly sales, earnings,
receipts, or output do not exceed five thousand pesos shall keep and
use a simplified set of bookkeeping records duly authorized by the
Secretary of Finance wherein all transactions and results of operations
are shown and from which all taxes due the government may readily and
accurately be ascertained and determined any time of the year: And
provided, further, That in the case of corporations, companies,
partnerships, or persons whose gross quarterly sales, earnings,
receipts of output exceed twenty-five thousand pesos, they shall have
their books of accounts audited and examined yearly by independent
Certified Public Accountants and their income tax returns accompanied
with certified balance sheets, profit and loss statements, schedules
listing income-producing properties and the corresponding income
therefrom and other relevant statements.
(B) Independent Certified Public Accountant defined.
— The term "Independent Certified Public Accountant" as used in the
preceding paragraph, means an accountant who possesses the independence
as defined in Article four, Section seven of the rules and regulations
of the Board of Accountancy promulgated by authority of Republic Act
Numbered Five thousand one hundred sixty-six, as amended.
(C) Penal Provision. — Any certified public
accountant employed to examine and audit books of taxpayers under
subsection (A) of this section or any person under his direction who
willfully falsifies report or statement bearing on any examination or
audit, or renders a report, including exhibits, statements, schedules
or other forms of accountancy work which has not been verified by him
personally or under his supervision or by a member of his firm or by a
member of his staff in accordance with sound auditing practices, or
certified financial statements of a business enterprise containing an
essential misstatement of facts or omission in respect to the
transactions, taxable income, deduction and exemption of his client or
who, not being an Independent Certified Public Accountant according to
subsection (b) of this section, examines and audits books of taxpayers,
or any person who offers any taxpayer to use wrong
accounting/bookkeeping records, or in any way commits an act or
omission in violation of the provision of this section shall be
punished by a fine of not exceeding five thousand pesos and
imprisonment of not less than two years. If the offender is a certified
public accountant, upon conviction, his certificate as a certified
public accountant shall be automatically revoked or cancelled. In the
case of foreigners, conviction under this Code shall constitute a
ground for deportation.
Section 233. Subsidiary books. — All corporations,
companies, partnerships, or persons keeping the books of accounts
mentioned in the preceding section may, at their option, keep
subsidiary books as the needs of their business may require: Provided,
That where such subsidiaries are kept, they shall form part of the
accounting system of the taxpayer and shall be subject to the same
rules and regulations as to their keeping translation, production and
inspection as are applicable to the journal and the ledger.
Section 234. Language in which books are to be kept;
translation. — All such corporations, companies, partnerships, or
persons shall keep the books or records mentioned in Section 232 hereof
in a native language, English or Spanish: Provided, however, That if in
addition to said books or records the taxpayer keeps other books or
records in a language other than a native language, English or Spanish,
he shall make a true and complete translation of all the entries in
such other books or records into a native language, English, or
Spanish, and the said translation must be made by the bookkeeper or
such taxpayer, or, in his absence, by his manager and must be certified
under oath as to its correctness by the said bookkeeper or manager, and
shall form an integral part of the books of accounts aforesaid. The
keeping of such books or records in any language other than a native
language, English or Spanish, is hereby prohibited.
Section 235. Preservation of books of accounts and
other accounting records. — All books of accounts including the
subsidiary books, and other accounting records of corporations,
partnerships, or persons shall be preserved by them for a period
beginning from the last entry in each book until the last day
prescribed by Section 203 within which the Commissioner is authorized
to make an assessment. The said books and records shall be subject to
examination and inspection by internal revenue officers: Provided, That
for income tax purposes, such examination and inspection shall be made
only in a taxable year, except in the following cases:cralaw:red
(a) Fraud, irregularity or mistakes as determined by
the Commissioner;chanroblesvirtualawlibrary
(b) The taxpayer requests reinvestigation;chanroblesvirtualawlibrary
(c) Verification of compliance with withholding tax
laws and regulations;chanroblesvirtualawlibrary
(d) Verification of capital gains tax liabilities;
and
(e) In the exercise of the Commissioner's power under
Section 7 (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 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.
Any provision of existing general or special law to the contrary
notwithstanding, the books of accounts and other pertinent records of
tax-exempt organizations or grantees of tax incentives shall be subject
to examination by the Bureau of Internal Revenue for purposes of
ascertaining compliance with the conditions under which they have been
granted tax exemptions or tax incentives, and their tax liability, if
any. (As amended by P.D. No. 1959)
Section 236. Supplying of taxpayer account number. —
Any person required under the authority of this Code to make, render,
or file a return, statement, or other document shall be supplied with
or assigned a taxpayer account number which he shall include in such
return, statement or document filed with the Commissioner for his
proper identification for tax purposes.
Only one account number shall be given to a person required to have
one, and any persons who shall secure more than one account number
shall be criminally liable under the provisions of Section 337 (should
now be 274) of this Code.
CHAPTER II
MISCELLANEOUS ADMINISTRATIVE PROVISIONS
Section 237. Registration of name or style with the
revenue district officer or collection agent. — Every person, other
than persons required to be registered under the provisions of Section
107, engaged in any business shall, on or before the commencement of
his business, or whenever he transfers to another revenue district,
register with the revenue district officer concerned within 10 days
from commencement of business or transfer. In cities or municipalities
where no revenue district officer is stationed, such person shall
register with the collection agent. The registration shall contain his
name or style, place of residence, business, the place where such
business is carried on, and such other information as may be required
by the Commissioner in the form prescribed thereof. In case of a firm
the names and residences of the various persons constituting the same
shall also be registered. The Commissioner, after taking into
consideration the volume of sales, financial condition and other
relevant factors, may required the registrant to guarantee the payment
of his taxes by way of advance payment, or the posting or filing of a
security, guarantee or collateral acceptable to the Commissioner. (As
amended by E.O. No. 273)
Section 238. Insurance of receipts or sales or
commercial invoices. — All person, subject to an internal revenue tax
shall for each sale or transfer of merchandise or for services rendered
valued at P25 or more, issue receipts or sales or commercial invoices,
prepared at least in duplicate, showing the date of transaction,
quantity, unit cost and description of merchandise or nature of
service; Provided, That in the case of sales, receipts or transfers in
the amount of P100 or more, or, regardless of amount. where the sale or
transfer is made by persons subject to value-added tax to other persons
also subject to value-added tax; or, where the receipt is issued to
cover payment made as rentals, commissions, compensation or fees,
receipts or invoices shall be issued which shall show the name,
business style, if any, and address of the purchaser, customer, or
client. The original of each receipt or invoice shall be issued to the
purchaser, customer or client at the time the transaction is effected,
who, if engaged in business or in the exercise of profession, shall
keep and preserve the same in his place of business for a period of 3
years from the close of the taxable year in which such invoice or
receipt was issued, while the duplicate shall be kept and preserved by
the issuer, also in his place of business, for a like period.
The Commissioner may, in meritorious cases, exempt any person subject
to an internal revenue tax from compliance with the provisions of this
section. (As amended by E.O. No. 273)
Section 239. Printing of receipts or sales or
commercial invoices. — All persons who print receipts or sales or
commercial invoices shall, for every job order, secure from the Bureau
of Internal Revenue an authority to print said receipts or invoices
before printing the same.
No authority to print receipts or sales or commercial invoices shall be
granted unless the receipt or invoices to be printed are serially
numbered and shall show, among other things, the name, business style,
taxpayer account number and business address of the person or entity to
use the same.
Within twenty (20) days from the end of every calendar quarter, the
printer shall submit to the Bureau of Internal Revenue a report
containing the following information: (1) Names, addresses, taxpayer
account numbers of the persons or entities for whom the receipt or
sales or commercial invoices were printed during the preceding quarter,
and (2) Quantity of receipts or invoices printed and the serial numbers
of the receipts or invoices in each booklet.
Section 240. Sign to be exhibited by distiller,
rectifier, compounder, repacker, and wholesale liquor dealer. — Every
person engaged in distilling or rectifying spirits, compounding
liquors, repacking wines or distilled spirits, and every wholesale
liquor dealer, shall keep conspicuously on the outside of his place of
business a sign exhibiting, in letters not less than six centimeters
high, his name or firm style, with the words "Registered distiller",
"Rectifier of spirits", "Compounder of liquors", "Repacker of wines or
distilled spirits", or Wholesale liquor dealer", as the case may be,
and his assessment number.
Section 241. Sign to be exhibited by manufacturer of
products of tobacco. — Every manufacturer of cigars, cigarettes or
tobacco, and every wholesale dealer in leaf tobacco or manufactured
products of tobacco shall place and keep on the building wherein his
business is carried on, so that it can be distinctly seen, a sign
stating his full name and business in letters not less than six
centimeters high and also his assessment number.
Section 242. Exhibition of certificate of payment at
place of business. — The certificate or receipts showing payments of
taxes issued to a person engaged in a business subject to a privilege
tax shall be kept conspicuously exhibited in plain view in or at the
place where the business is conducted; and, in case of a peddler or
other persons not having a fixed place of business, shall be kept in
the possession of the holder thereof, subject to production upon the
demand of any internal revenue officer.
Section 243. Continuation of business of deceased
person. — When any individual paying a business tax dies and the same
business is continued by the person or persons interested in his
estate, no additional payment shall be required for the residue of the
term for which the tax was paid: Provided, however, that the person or
persons interested in the estate should within thirty days from the
death of the decedent submit to the Bureau of Internal Revenue or the
regional or revenue district office inventories of goods or stocks had
at the time of such death.
The requirement under this section shall also be applicable in the case
of transfer of ownership or change of name of the business
establishment.
Section 244. Removal of business to other location. —
Any business for which the privilege tax has been paid may, subject to
the regulations of the Department of Finance, be removed and continued
in any other place without the payment of additional tax during the
term for which the payment was made.
CHAPTER III
RULES AND REGULATIONS
Section 245. Authority of Secretary of Finance to
promulgate rules and regulations. — The Secretary of Finance, upon
recommendation of the Commissioner, shall promulgate all needful rules
and regulations for the effective enforcement of the provisions of this
Code.
The authority of the Secretary of Finance to determine articles similar
or analogous to those subject to a rate of sales tax under a certain
category enumerated in Sections 163, and 165 of this Code shall be
without prejudice to the power of the Commissioner of Internal Revenue
to make rulings or opinions in connection with the implementation of
the provisions of internal revenue laws, including rulings on the
classification of articles for sales tax and similar purposes.
Section 246. Non-retroactivity of rulings. — Any
revocation, modification or reversal of any of the rules and
regulations promulgated in accordance with the preceding section or any
of the rulings or circulars promulgated by the Commissioner shall not
be given retroactive application if the revocation, modification, or
reversal will be prejudicial to the taxpayers except in the following
cases: (a) where the taxpayer deliberately misstates or omits material
facts from his return or in 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 (c) where the taxpayer acted in bad
faith.
TITLE X. STATUTORY OFFENSES AND PENALTIES
CHAPTER I
ADDITIONS TO THE TAX
Section 247. General provisions. — (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 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.
Section 248. Civil Penalties. — (a) There shall be
imposed, in addition to the tax required to be paid, penalty equivalent
to twenty-five percent (25%) of the amount due, in the following cases:cralaw:red
(1) Failure to file any return required under the
provisions of this Code or regulations on the date prescribed; or
(2) Filing a return with an internal revenue officer
other than those with whom the return is required to be filed; or
(3) Failure to pay the tax within the time prescribed
for its payment; or
(4) Failure to pay the full amount of tax shown or
any return required to be filed under the provisions of this Code or
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 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.
(c) The penalties imposed hereunder shall form part
of the tax and the entire amount shall be subject to the interest
prescribed in Section 249.
(d) In the case of failure to affix proper
documentary stamps to a document or instrument, there shall, for every
violation, be imposed, in addition to the amount of documentary stamp
tax required to be paid, an amount equivalent to twenty-five percent of
such unpaid amount which shall be in lieu of the interest prescribed in
Section 249: Provided, That when the amount is not paid within the time
prescribed in the notice and demand, there shall be collected on the
total unpaid amount, including the surcharge, the interest prescribed
in Section 249 (a) from the due date prescribed in the notice and
demand until the amount is fully paid, which interest shall form part
of the tax.
Section 249. Interest, (a) In general. — There shall
be assessed and collected on any unpaid amount of tax, interest at the
rate of twenty percent (20%) per annum, or such higher rate as may be
prescribed by regulations, from the date prescribed for payment until
the amount is fully paid.
(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 paragraph (a) hereof, which interest shall be
assessed and collected from the date prescribed for its payment until
the full payment thereof.
(c) Delinquency interest. — In case of failure to
pay:cralaw:red
(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 paragraph (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 thereof, 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.
Section 250. Failure to file certain information
returns. — In the case of each failure to file information return,
statement or list, or keep any record, or supply any information
required by this Code or by the Commissioner on the date prescribed
thereof, unless it is shown that such failure is due to reasonable
cause and not to willful neglect, there shall, upon notice and demand
by the Commissioner, be paid by the person failing to file, keep or
supply the same, one thousand pesos for each such failure: Provided,
however, That the aggregate amount to be imposed for all such failure
during a calendar year shall not exceed twenty-five thousand pesos.
Section 251. Failure of a withholding agent to
collect and remit tax. — Any person required to collect, account for,
and remit any tax imposed by this Code who willfully fails to collect
such tax, or account for and remit such tax, or willfully assists in
any manner to evade any such tax or the payment thereof, shall, in
addition to other penalties provided for under this Chapter, be liable
to a penalty equal to the total amount of the tax not collected or not
accounted for and remitted.
Section 251-A. Failure of a withholding agent to
refund excess withholding tax. — Any employer/withholding agent who
fails, or refuses to refund excess withholding tax shall, in addition
to the penalties provided in this Title, be liable to a penalty equal
to the total amount of refunds which was not refunded to the employee
resulting from any excess of the amount withheld over the tax actually
due on their return. (As added by R.A. 7497)
CHAPTER II.
CRIMES, OTHER OFFENSES AND FORFEITURES
Section 252. General Provisions. — (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 willfullyds or abet in the
commission of a crime penalties herein or who causes the commission of
any such offense by another, shall be liable in the same manner as the
principal.
(c) If the offender is not a citizen of the
Philippines, he shall be deported immediately after serving the
sentence without further proceedings for deportation. If he is a public
officer or employee, the maximum penalty prescribed for the offense
shall be imposed and, in addition, he shall be dismissed from the
public service and perpetually disqualified from holding any public
office, to vote and to participate in any election. If the offender is
a certified public accountant, his certificate as a certified public
accountant shall, upon conviction, be automatically revoked or
cancelled.
(d) In the case of associations, partnerships, or
corporations, the penalty shall be imposed on the partner, president,
general manager, branch manager, treasurer, officer-in-charge, and
employees responsible for the violation.
Section 253. Attempt to evade or defeat tax. — Any
person who willfully attempts in any manner to evade or defeat any tax
imposed under this code or the payment thereof shall, in addition to
other penalties provided by law, upon conviction thereof, be fined not
more than ten thousand pesos or imprisoned for not more than two years,
or both.
Section 254. Failure to file return, supply correct
and accurate information, pay tax, withhold and remit tax and refund
excess taxes withheld on compensation. — Any person required under this
Code or by regulations promulgated thereunder to pay any tax, make a
return, keep any record, or supply correct and accurate information,
who willfully fails to pay such tax, make such return, keep such
record, or supply such correct and accurate information, or withhold or
remit taxes withheld, or refund excess taxes withheld on compensation,
at the time or times required by law or regulations shall, in addition
to other penalties provided by law, upon conviction thereof, be fined
not less than ten thousand pesos (P10,000) and imprisonment of not less
than one (1) year but not more than ten (10) years. (As amended by R.A.
7497)
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 thereof be fined not less than three
thousand pesos or imprisoned for not more than one year, or both.
Section 255. Penal liability of corporations. — Any
corporation, association or general co-partnership liable for any of
the acts or omissions penalized under this Code, in addition to the
penalties imposed herein upon the responsible corporate officers,
partners or employees, shall upon conviction, for each act or omission
be fined for not less than ten thousand pesos but not more than one
hundred thousand pesos.
Section 256. Penal liability for making false entries
records or reports. — (a) Any independent certified public accountant
engaged to examine and audit books of accounts of taxpayer under
subparagraph (a) of Section 232 and any person under this direction
who:cralaw:red
(1) Willfully falsifies any report or statement
bearing on any examination or audit, or renders a report, including
exhibits, statements, schedules or other forms of accountancy work
which has not been verified by him personally or under his supervision
or by a member of his firm or by a member of his staff in accordance
with sound auditing practices, or
(2) Certifies financial statements of a business
enterprise containing an essential misstatement of facts or omission in
respect of the transactions, taxable income, deduction and exemption of
his client, or
(b) Any person who:cralaw:red
(1) Not being an Independent Certified Public
Accountant according to subparagraph (8) of Section 232, examines and
audits books of accounts of taxpayers, or
(2) Offers top sign and certify financial statements
without audit, or
(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 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
(5) Keeps two or more sets of such records or books
on accounts, or
(6) In any way commits an act or omission, in
violation of the provisions of this Section, 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 231 of
this Code, or whose books of accounts or records kept in a native
language, English, or Spanish are found to be at material variance with
books or records kept by him in another language, shall, upon
conviction for each act or omission, be punished by a fine of not less
than ten thousand pesos but not more than fifty thousand pesos or by
imprisonment of not less than four years and one day but not more than
six years, or both.
Section 257. Unlawful pursuit of business. — Any
person who carries on any business for which a privilege tax is imposed
without paying the tax as required by law shall, upon conviction for
each act or omission, be fined not less than one thousand pesos but
more than five thousand pesos or imprisoned for not less than one month
but not more than six months, or both; Provided, That in the case of a
person engaged in the business of distilling, rectifying, repacking,
compounding or manufacturing any article subject to excise tax, he
shall, upon conviction for each act or omission, be fined for not less
than five thousand pesos but not more than twenty-five thousand pesos
or imprisoned for a term of not less than six months but not more than
three years, or both.
Section 258. Illegal collection of foreign payments.
— Any person who knowingly undertakes the collection of foreign payment
as provided under Section 70 (now 60) of this Code without having
obtained a license therefor, or without complying with its implementing
regulations, shall, upon conviction for each act or omission, be fined
for not less than five thousand pesos nor more than twenty-five
thousand pesos, or imprisoned for not less than six months but not more
than three years, or both.
Section 259. Unlawful possession of cigarette paper
in bobbins, etc. — It shall be unlawful for any person to have in his
possession cigarette papers in bobbins or rolls, cigarette tipping
paper or cigarette filter tips, without the corresponding authority
therefor issued by the Commissioner. Any person, importer, manufacturer
of cigar and cigarettes who has been found guilty under this Section
shall upon conviction of each act or omission be fined a sum not less
than twenty thousand pesos but not more than one hundred thousand pesos
and imprisoned for a term of not less than six years and one day but
not more than twelve years.
Section 260. Unlawful use of denatured alcohol. — Any
person who for the purpose of manufacturing any beverage uses denatured
alcohol or alcohol specially denatured to be used for motive power or
withdrawn under bond for industrial uses or alcohol knowingly
misrepresented to be denatured to be unfit for oral intake or who
knowingly sells or offers for sale any beverage made in whole or in
part from such alcohol or who uses such alcohol for the manufacture of
liquid medicinal preparations taken internally or knowingly sells or
offers for sale such preparations containing as an ingredient such
alcohol shall upon conviction for each act or omission be fined for not
less than twenty thousand pesos but not more than one hundred thousand
pesos and imprisoned for a term of not less than six years and one day
but not more than twelve years.
Any person who shall unlawfully recover or attempt to recover by
distillation or other process any denatured alcohol or who knowingly
sells or offers for sale conceals or otherwise disposes of alcohol so
recovered or redistilled shall be subject to the same penalties imposed
under this Section.
Section 261. Shipment or removal of liquor or tobacco
products under false name or brand or as an imitation of any existing
or otherwise known products name or brand. — Any person who ships,
transports or removes spirituous compounded or fermented liquors, wines
or any manufactured products of tobacco under any other than the proper
name or brand known to the trade as designating the kind and quality of
the contents of the cask, bottle or package containing the same or as
an imitation of any existing or otherwise known product name or brand
or causes such act to be done, shall, upon conviction for each act or
omission, be fined for not less than twenty thousand pesos but not more
than one hundred thousand pesos and imprisoned for not less than six
years and one day but not more than twelve years.
Section 262. Unlawful possession or removal of
articles subject to excise tax without payment of the tax. — Any person
who owns and/or is found in possession of imported article subject to
excise tax, the tax on which had not been paid in accordance with law
or any person who owns and/or is found in possession of imported
tax-exempt articles other than those to whom they are legally issued
shall be punished by:cralaw:red
1. A fine of not less than one hundred pesos nor more
than five hundred pesos and imprisonment of not less than fifteen days
nor more than thirty 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 five hundred pesos.
2. A fine of not less than one thousand pesos nor
more than five thousand pesos and imprisonment of not less than six
months and one day nor more than four 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 exceed five hundred pesos
but does not exceed fifty thousand pesos.
3. A fine of not less than ten thousand pesos nor
more than twenty-five thousand pesos and imprisonment of not less than
four years and one day nor more than eight years, if the appraised
value, to be determined in the manner prescribed in the Tariff and
Customs Code, including taxes and duties, of the articles is more than
fifty thousand pesos but does not exceed one hundred fifty thousand
pesos.
4. A fine of not less than twenty thousand pesos nor
more than fifty thousand pesos and imprisonment of not less than ten
years and one day nor more than fourteen years, if the appraised value,
to be determined in the manner prescribed in the Tariff and Customs
Code, including taxes and duties, of the articles exceeds one hundred
fifty thousand pesos.
Any person who is found in possession locally manufactured articles
subject to excise tax, the tax on which has 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
times the amount of excise tax due on the articles found but not less
than five hundred pesos nor more than ten thousand pesos and
imprisonment of from six months and one day to four years.
Any manufacturer, owner, or person in charge of any article subject to
excise tax who removes or allows or caused the unlawful removal of any
such articles from the place of production or bonded warehouse, upon
which the articles subject to excise tax has not been paid at the time
and in manner required, and any person who knowinglyds or abets in the
removal of such articles as aforesaid, or conceals the same after
illegal removal shall, for the first offense, be punished with a fine
of not less than ten times the amount of excise tax due on the
articles, but not less than one thousand pesos nor more than one
hundred thousand pesos and imprisonment of not less than six months and
one day but not more than six 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
punished under this Section.
Section 263. Failure or refusal to issue receipts or
sales or commercial invoices; violations related to the printing of
such receipts or invoices and other violations. — (a) Any person who,
being required under Section 238 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 shown therein or uses
multiple or double receipts or invoices, shall, upon conviction, for
each act or omission be fined not less than one thousand pesos but not
more than fifty thousand pesos or imprisonment for a term of not less
than six months and one day but not more than two years or both.
(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:cralaw:red
1. Prints receipts or sales or commercial invoices
without authority from the Bureau of Internal Revenue;chanroblesvirtualawlibrary
2. Prints double or multiple sets of invoices or
receipted;chanroblesvirtualawlibrary
3. Prints unnumbered receipts or sales or commercial
invoices, not bearing the name, business style, taxpayer account
number, and business address of the person or entity; or
4. Fails to submit the quarterly report required in
Section 239.
Section 264. Offenses relating to stamps. — Any
person who commits any of the acts enumerated hereunder shall, upon
conviction thereof, be fined not more than ten thousand pesos or
imprisoned for not more than five years, or both:cralaw:red
(1) Makes, imports, sells, uses or possesses without
express authority from the Commissioner, any die for printing or making
stamps, labels, tags or playing cards.
(2) Erases the cancellation marks of any stamps
previously used or alters the written figures or letters or
cancellation marks on internal revenue stamps.
(3) Possesses false, counterfeit, restored or altered
stamps, labels or tags or causes the commission of any such offense by
another.
(4) Sells or offers for sale any box or package
containing articles subject to excise tax with false, spurious or
counterfeit stamps or labels or sells from any such fraudulent box,
package or container as aforesaid.
(5) Gives away or accepts from another or sells, buys
or uses containers on which the stamps are not completely destroyed.
Section 265. 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 fined not less than one thousand pesos or imprisoned for
not more than one year, or both.
Section 266. Declaration under penalties of perjury.
— Any declaration, return and other statements required under this
Code, shall, in lieu of an oath, contain a written statement that they
are made under the penalties of perjury. Any person who willfully files
a declaration, return or statement containing information which is not
true and correct as to every material matter shall, upon conviction, be
subject to the penalties prescribed for perjury under the Revised Penal
Code.
Section 267. Other crimes and offenses. (a)
Misdeclaration or misrepresentation of manufacturers subject to excise
tax. — Any manufacturer who, in violation of the provision of Title IV
(now VI) of this Code misdeclares in the sworn statement required
therein or in the sales invoice, any pertinent data or information
shall be punished by a summary cancellation or withdrawal of the permit
to engage in business as a manufacturer of articles subject to excise
tax.
(b) Forfeiture of property used in unlicensed
business or dies used for printing false stamps, etc. — All chattels,
machinery, and removable fixtures of any sort used in the unlicensed
production of articles subject to excise tax shall be forfeited.
Dies and other equipment used for the printing or making of any
internal revenue stamp, label, or tag which is in imitation of or
purports to be a lawful stamp, label, or tag shall also be forfeited.
(c) Forfeiture of goods illegally stored or removed.
— Unless otherwise specifically authorized by the Commissioner, all
articles subject to excise tax should not be stored or allowed to
remain in a distillery, distillery warehouse, bonded warehouse, or
other place where made, after the tax thereon has been paid, otherwise
all such articles shall be forfeited. Article withdrawn from any such
place or from customs custody or imported into the country without the
payment of the required tax shall likewise be forfeited.
CHAPTER III
PENALTIES IMPOSED ON PUBLIC OFFICERS
Section 268. Violations committed by government
enforcement officers. — Every official, agent or employee of the Bureau
of Internal Revenue or any other agency of the government charged with
the enforcement of the provisions of this Code, who is guilty of any of
the offenses hereinbelow specified, shall, upon conviction for each act
or omission, be fined in a sum of not less than five thousand pesos but
not more than fifty thousand pesos or imprisoned for a term of not less
than one year but not more than ten years, or both:cralaw:red
1. Those guilty of extortion or willful oppression
through the use of his office;chanroblesvirtualawlibrary
2. Those who knowingly demand other or greater sums
than are authorized by law or receive any fees, compensation or reward,
except as by law prescribed, for the performance of any duty;chanroblesvirtualawlibrary
3. Those who willfully neglect to give receipts, as
by law required, for any sums collected in the performance of duty or
who willfully neglect to perform any other duties enjoined by law;chanroblesvirtualawlibrary
4. Those who conspire or collude with another or
others to defraud the revenues or otherwise violate the provisions of
this Code;chanroblesvirtualawlibrary
5. Those who by neglect or design permit the
violation of the law by any other person;chanroblesvirtualawlibrary
6 Those who made or sign any false entry or
entries in any books, or make or sign any false certificate or return;chanroblesvirtualawlibrary
7. Those who allow, or conspire or collude with
another to allow the unauthorized retrieval, withdrawal or recall of
return, statement or declaration after the same has been officially
received by the Bureau of Internal Revenue;chanroblesvirtualawlibrary
8. Those who, having knowledge or information of a
violation of this Code or of any fraud committed on the revenues
collectible by the Bureau of Internal Revenue, fail to report such
knowledge or information to their superior officer or to report as
otherwise required by law; and
9. Those who, without the authority of law, demand or
accept or attempt to collect, directly or indirectly, as payment or
otherwise any sum of money or other thing of value for the compromise,
adjustment, or settlement of any charge or complaint for any violation
or alleged violation of this Code.
Section 269. Unlawful divulgence of trade secrets. —
Except as provided in Section 74 (now 64) of this Code and Section 26
of Republic Act Numbered 6388, any officer or employee of the Bureau of
Internal Revenue who divulges to any person or makes known in any other
manner than may be provided by law information regarding the business,
income, or estate of any taxpayer, the secrets, operation, style or
work, or apparatus of any manufacturer or producer, or confidential
information regarding the business of any taxpayer, knowledge of which
was acquired by him in the discharge of his official duties, shall upon
conviction for each act or omission, be fined in a sum of not less than
five thousand pesos but not more than ten thousand pesos, or imprisoned
for a term of not less than six months but not more than five years or
both.
Section 270. Unlawful interest of revenue law
enforcers in business. — Any internal revenue officer who is or shall
become interested directly or indirectly, in the manufacture, sale, or
importation of any article subject to tax under Title IV (now VI) of
this Code or in the manufacture or repair or sale of any die for the
printing, or making of stamps, or labels shall, upon conviction for
each act or omission, be fined in a sum of not less than five thousand
pesos but not more than ten thousand pesos, or imprisoned for a term of
not less than two years and one day but not more than four years, or
both.
Section 271. Violation of withholding tax provision.
— Every officer or employee of the government of the Republic of the
Philippines or any of its agencies and instrumentalities, its political
subdivisions, as well as government-owned or controlled corporation
including the Central Bank who, under the provisions of this Code or
regulations promulgated thereunder, is charged with the duty to deduct
and withhold any internal revenue tax and to remit the same in
accordance with the provisions of this Code and other laws is guilty of
any offense hereinbelow specified shall, upon conviction for each act
or omission, be fined in a sum of not less than five thousand pesos but
not more than fifty thousand pesos or imprisoned for a term of not less
than six months and one day but not more than two years, or both:cralaw:red
1. Those who fail or cause the failure to deduct and
withhold any internal revenue tax under any of the withholding tax laws
and implementing regulations;chanroblesvirtualawlibrary
2. Those who fail or cause the failure to remit taxes
deducted and withheld within the time prescribed by law, and
implementing regulations; and
3. Those who fail or cause the failure to file return
or statement within the time prescribed, or render or furnish a false
or fraudulent return or statement required under the withholding tax
laws and regulations.
Section 272. Penalty for failure to issue and execute
warrant. — Any official who fails to issue or execute the warrant of
distraint or levy within thirty days after the expiration of the time
prescribed in Section 207 and 213 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
OTHER PENAL PROVISIONS
Section 273. Penalty for second and subsequent
offenses. — In the case of reincidence, the maximum of the penalty
prescribed for the offense shall be imposed.
Section 274. Violation of other provisions of this
Code or regulations in general. — A person who violates any provision
of this Code or any regulation of the Secretary of Finance promulgated
thereunder, for which no specific penalty is provided by law shall,
upon conviction for each act or omission, be fined in a sum of not more
than one thousand pesos or imprisoned for a term of not more than six
months, or both.
Section 275. Penalty for selling, transferring,
encumbering, or in any way disposing of property placed under
constructive distraint. — Any taxpayer whose property has been placed
under constructive distraint who sells, transfers, encumbers, or in any
way disposes of said property, or any part thereof, without the
knowledge and consent of the Commissioner, shall, upon conviction for
each act or omission be fined in a sum of not less than twice the value
of the property so sold, encumbered or disposed of, but not less than
five thousand pesos, or imprisoned for a term of not less than two
years and one day but not more than four years, or both.
Section 276. Failure to surrender property placed
under distraint and levy. — Any person having in his possession or
under his control any property or rights to property, upon which a
warrant of constructive distraint or of actual distraint and levy has
been issued shall, upon demand by the Commissioner or any of his
deputies executing such warrant, surrender such property or right to
property to the Commissioner or any of his deputies, unless such
property or right is, at the time of such demand, subject to an
attachment or execution under any judicial process. Any person who
fails or refuses to surrender any of such property or right shall be
liable in his own person and estate to the Government in a sum equal to
the value of the property or rights not so surrendered but not
exceeding the amount of the taxes (including penalties and interest)
for the collection of which such warrant had been issued, together with
costs and interest, if any, from the date of such warrant. In addition,
such person shall, upon conviction for each act or omission, be fined
in a sum of not less than five thousand pesos or imprisoned for a term
of not less than six months and one day but not more than two years, or
both.
Section 277. Procuring unlawful divulgence of trade
secrets. — Any person who causes or procures an officer or employee of
the Bureau of Internal Revenue to divulge any confidential information
regarding the business, income, or inheritance of any taxpayer,
knowledge of which was acquired by him in the discharge of his official
duties, and which it is unlawful for him to reveal, and any person who
publishes or prints in any manner whatever, not provided by law, any
income, profits, losses, or expenditures appearing in any income tax
return shall be fined in a sum of not more than two thousand pesos or
imprisoned for a term of not less than six months nor more than five
years, or both.
Section 278. Confiscation and forfeiture of the
proceeds or instruments of crime. — In addition to the penalty imposed
for the violation of the provisions of Title IV (now VI), Sections 163,
164 and 165 of Title V, and Chapter V and Chapter VI of Title VIII all
of this Code the same shall carry with it the confiscation and
forfeiture in favor of the government of the proceeds of the crime or
value of the goods, and the instruments or tools with which the crime
was committed: Provided, however, That if, in the course of the
proceedings it is established that the instruments or tools used in the
illicit act belong to a third person, the same shall be confiscated and
forfeited after due notice and hearing in a separate proceeding in
favor of the government if such third person leased, let, chartered, or
otherwise entrusted the same to the offender: Provided, further, That
in case the lessee subleased, or the borrower, charterer, or trustee
allowed the use of the instrument of tools to the offender, such
instruments, or tools shall, likewise, be confiscated and forfeited:
Provided, finally, That property of common carriers shall not be
subject to forfeiture when used in the transaction of their business as
such common carrier, unless the owner or operator of said common
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.
Section 279. Subsidiary penalty. — If the person
convicted for violation of the provisions of this Code has no property
with which to meet the fine imposed upon him by the court, or is unable
to pay such fine, he shall be subject to a subsidiary liability at the
rate of one day for each eight pesos and fifty centavos subject to the
rules established in Article 39 of the Revised Penal Code.
Section 280. Prescription for violations of any
provisions of this Code. — All violations of any provisions of this
Code shall prescribe after five years.
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 prescription shall be interrupted when proceedings are instituted
against the guilty persons and shall begin to run again if the
proceedings are dismissed for reasons not constituting jeopardy.
The term of prescription shall not run when the offender is absent from
the Philippines.
Section 281. Informer's reward to persons
instrumental in the discovery of violations of the National Internal
Revenue Code and in the discovery and seizure of smuggled goods.
(1) For violation of the National Internal Revenue
Code. — Any person, except an internal revenue official or employee, or
other public official, 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 fine or penalty, shall be rewarded in a
sum equivalent to fifteen per centum of the revenues; surcharges or
fees recovered and/or fine or penalty imposed and collected. The same
amount of reward shall also be given to an informer where the offender
has offered to compromise the violation of law committed by him and his
offer has been accepted by the Commissioner and in such a case, the
fifteen per centum reward fixed herein shall be based on the amount
agreed upon in the compromise 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, agent 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
regulations issued by the Commissioner of Internal Revenue with the
approval of the Secretary of Finance.
(2) For discovery and seizure of smuggled goods. — To
encourage the public and law-enforcement personnel to extend full
cooperation in eradicating smuggling, a cash reward equivalent to
fifteen per centum of the fair market value of the smuggled and
confiscated goods shall be given to persons instrumental in the
discovery and seizure of such smuggled goods.
TITLE XI. ALLOTMENT OF INTERNAL REVENUE
CHAPTER I
DISPOSITION AND ALLOTMENT OF NATIONAL INTERNAL REVENUE IN GENERAL
Section 282. Disposition of national internal
revenue. —chanroblesvirtualawlibrary
(a) In general. — National Internal Revenue collected
and not applied as hereinabove provided or otherwise specially disposed
of by law shall accrue to the National Treasury and shall be available
for the general purposes of the Government, with the exception of the
amounts set apart by way of allotment under the next succeeding
section.
(b) Shares of local governments. — Twenty per centum
of the collection from the national internal revenue taxes shall accrue
to local governments to be computed on the basis of the collections of
the third fiscal year preceding the current fiscal year. This allotment
shall be distributed as follows: Thirty per centum (30%) to provinces;
forty-five per centum (45%) to municipalities; twenty-five per centum
(25%) to cities and sixty-five million pesos (P65M) to the barangays.
The share of each province, city and municipality shall be determined
on the basis of the following formulae: seventy (70%) per centum —
population; twenty (20) per centum — land area; and ten (10%) per
centum — equal sharing.
For the new fiscal year commencing on January 1, 1977 and ending on
December 31, 1977, the annual allotment of any local government as
determined under this paragraph, shall not increase by more than
twenty-five per centum (25%), or, nor less than, the annual allotment
it shall actually receive for the fiscal year from July 1, 1975 to June
30, 1976.
(c) Five per cent (5%) of the total tax collected on
subsequent sale under Section 165 (B) of this Code shall accrue to the
city or municipality in which the tax is collected and another five per
cent (5%) of the total annual tax collected on said subsequent sales
shall accrue to the Secretary of Education, Culture and Sports. (As
added by PD. No. 2006)
Thereafter, or beginning January 1, 1978, the annual allotment shares
of each local government shall be determined solely on the basis of
this paragraph.
In addition, five per centum (5%) of the collection from national
internal revenue taxes not otherwise accruing to special funds and
special accounts in the general fund shall accrue to a local government
fund which shall be released by the President as financiald to local
governments or to projects.
Section 283. Allotment for the Commission on Audit. —
One-half of one, per centum (1/2 of 1%) of the collections from
national internal revenue taxes not otherwise accruing to special
accounts in the general fund of the national government shall accrue to
the Commission on Audit as a fee for auditing services rendered to
local government units, excluding maintenance, equipment, and other
operating expenses as provided for in Section 21 of Presidential Decree
No. 898.
The Secretary of Finance is hereby authorized to deduct from the
monthly internal revenue tax collections an amount equivalent to the
percentage as herein fixed, and to remit the same direct to the
Commission on Audit under such regulations as may be promulgated by the
Secretary of Finance and the Chairman of the Commission on Audit.
Section 284. In general. — All acts, laws, decrees,
executive orders, rules and regulations, or parts thereof, which are
contrary to or inconsistent within this Code are hereby repealed,
amended or modified accordingly.
CHAPTER II
SPECIAL DISPOSITION OF CERTAIN NATIONAL INTERNAL REVENUE TAXES
Section 285. Disposition of proceeds of insurance
premium tax. — Twenty-five per centum of the premium tax collected
under Section two hundred and twenty-three (now 121) of this Code shall
accrue to the Insurance Funds (as contemplated in Section four hundred
and eighteen of Presidential Decree numbered six hundred and twelve)
which shall be used for the purpose of defraying the expenses of the
Insurance Commission. The Commissioner of Internal Revenue shall turn
over and deliver the said Insurance Funds to the Insurance
Commissioners as soon as the collection is made.
Section 286. Granting provinces, cities and
municipalities shares in the specific tax on certain petroleum
products. — In addition to the internal revenue allotment under Section
three hundred forty-four, provinces, cities and municipalities shall
share in the specific taxes on the following petroleum products in such
amount as may be equivalent to the collection therefrom at the rates
indicated hereunder:cralaw:red
(a) Lubricating oil, per liter of volume capacity,
twenty centavos;chanroblesvirtualawlibrary
(b) Naptha, gasoline and all other similar products
of distillation, per liter of volume capacity, four centavos;chanroblesvirtualawlibrary
(c) On bunker fuel oil, and all similar fuel oil
having more or less the same generating power, per liter of volume
capacity, one-half centavos:cralaw:red
(d) On diesel fuel oil, and on all similar fuel oil
having more or less the same generating power, per liter of volume
capacity, one-half centavo.
The additional allotment is in lieu of local taxes imposed on petroleum
products and for this purpose. Section twenty-four of Presidential
Decree numbered two hundred thirty-one, otherwise known as the Local
Tax Code, has been repealed by Presidential Decree numbered four
hundred thirty-six on March thirty, nineteen hundred seventy-four.
The shares of provinces, cities and municipalities shall be allotted on
the basis of the collections in specific taxes during the second fiscal
year immediately preceding the current fiscal year in the following
proportions:cralaw:red
Twenty per centum (20%) of total shares to provinces
Thirty per centum (30%) of total shares to municipalities
Fifty per centum (50%) of total shares to chartered cities
The allotment of each provinces, city and municipality shall be
determined on the basis of the following formulae:cralaw:red
Seventy (70%) per cent — population
Twenty (20%) per cent — land area
Ten (10%) per cent — equal sharing
TITLE XII. REPEALING PROVISIONS
CHAPTER I
SEPARABILITY CLAUSE
Section 287. Separability Clause. — If any clause,
sentence, paragraph or part of this Code shall be adjudged by any Court
of competent jurisdiction to be invalid, such judgment shall not
affect, impair, or invalidate the clause, sentence, paragraph, or part
thereof directly involved in the controversy.
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