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Chan Robles Virtual Law Library
PRESIDENTIAL DECREE NO. 1705
PRESIDENTIAL DECREE NO. 1705 -
AMENDING CERTAIN SectionS OF THE NATIONAL INTERNAL REVENUE CODE OF 1977
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chanroblesvirtualawlibrary
WHEREAS, in
the light of the experience of the Bureau of Internal Revenue in
enforcing the provisions of the National Internal Revenue Code, it is
necessary to make further amendments in order to strengthen the
enforcement of powers of the said Bureau;chanroblesvirtualawlibrary
WHEREAS, it is necessary to simplify compliance procedures and make it
easy for taxpayers to comply with revenue laws.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of
the Philippines, by virtue of the powers vested in me by the
Constitution do hereby decree and order:cralaw:red
Section 1. The phrase "Secretary of Finance"
appearing in any section of the National Internal Revenue Code is
hereby amended to read as "Minister of Finance."
Section 2. Section 7 of the National Internal Revenue
Code is hereby amended to read as follows:cralaw:red
"(a) From Government Officers or Agencies. — When it
comes to the knowledge of the Commissioner of Internal Revenue that
certain offices of the National and local governments such as the
Office of the Register of Deeds, the Securities Exchange Commission,
the Philippine Patent Office, those of mayors and treasurers, the
Government Service Insurance System, the Social Security System, the
Philippine Medical Care Commission and others, possess valuable
information for discovery of potential taxpayers, the Commissioner or
his deputies shall obtain that information upon proper request from the
offices concerned. It shall be the duty of those offices to furnish the
desired information within thirty days from receipt of the request of
the Commissioner of Internal Revenue or his deputies. chanroblesvirtualawlibrary
"(b) From other persons. — 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 books, papers, records, or other
data which may be relevant or material to such inquiry."
"(2) To summon any person having possession, custody,
or care of books of accounts containing entries, or of any information
relating to the tax liability of any person to appear before the
Commissioner or his authorized representative at a time and place named
in the summons and to produce such books, papers, records, or other
data, and to give to such testimony; and
"(3) To take such testimony of person concerned,
under oath, as may be relevant or material to such inquiry.
"Any person who neglects or refuse to obey such summons, or to produce
books, papers, records or other data, or to give testimony, as
required, shall be liable to the penalties prescribed by Section 337
hereof;chanroblesvirtualawlibrary
Section 3. Section 16 of the National Revenue Code is
hereby amended to read as follows:cralaw:red
"Sec. 16. Power of Commissioner of Internal Revenue
to make assessments. — (a) Failure to submit required reports,
statements, etc. 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 of Internal Revenue shall assess the proper
tax on the best evidence obtainable. chanroblesvirtualawlibrary
"(b) Authority to conduct surveillance. — The
Commissioner of Internal Revenue may place the business operations of
any person, natural or juridical, under observation or surveillance for
a period of two months to be determined under regulations to be
prescribed by the Minister of Finance if there are reasons to believe
that such person is not declaring his correct income and receipts for
internal revenue tax purposes. The findings for this period may be used
as a basis for assessing the taxes for the other months of the same or
different taxable years and such assessment shall be considered prima
facie correct.
"(c) Authority to terminate taxable period. — When it
shall come to the knowledge of the Commissioner of Internal Revenue
that a taxpayer is retiring from the business subject to taxation, 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 for the past or current quarter
or year, render the same totally or partly ineffective unless such
proceedings are begun immediately, the Commissioner of Internal Revenue
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 tax 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 request of the
Commissioner of Internal Revenue.
"(d) Protesting of Assessment. — When the
Commissioner or his duly authorized representative finds that proper
taxes should be assessed on the best evidence obtainable in accordance
with subsection (a) hereof, 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 regulations 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 person 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 4. Section 24 (b) (2) of the National
Internal Revenue Code is hereby amended to read as follows: chanroblesvirtualawlibrary
"(2) Resident corporations. — (a) In general. — A
corporation organized, authorized, or existing under the laws of any
foreign country, engaged in trade or business within the Philippines,
shall be taxable as provided in subsection (a) of this section upon the
total net income derived in the preceding taxable year form all sources
within the Philippines: Provided, however, That international carriers
shall pay a tax of two and one-half per cent (2 ½%) on their
gross Philippine billings: "Gross Philippine Billings" include gross
revenue realized from uplifts any where in the world by any
international carrier doing business in the Philippines of passage
documents sold therein, whether for passenger, excess baggage or mail,
provided the cargo or mail originates from the Philippines. The gross
revenue realized from the said cargo or mail include the gross freight
charge up to final destination. Gross revenue from chartered flights
originating from the Philippines shall likewise form part on "Gross
Philippine Billings" regardless of the place of sale or payment of the
passage documents. For purposes of determining the taxability of
revenues from chartered flights, the term "originating from the
Philippines" shall include flight of passengers who stay in the
Philippines from more than forty-eight (48) hours prior to embarkation.
"(b) Tax on branch profits remittances. — Any profit
remitted abroad by a branch office to its mother company shall be
subject to a tax of fifteen per cent (15%) (Except those registered
with the Export Processing Zone Authority); Provided, That, any profit
remitted by a branch office to its mother company authorized to engage
in petroleum operations in the Philippines shall be subject to tax at
seven and one-half per cent (7.5.%); and provided, further that fixed
or determinable annual periodical gains, profits, and income or certain
gains described in Section 24 (b) (1) or 53 (b) (2) of this code shall
not be considered as branch profits unless the same are effectively
connected with the conduct of a trade or business in the Philippines by
foreign corporation,"
Section 5. Section 26 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
Sec. 26. 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 partnership 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
Section 6. Section 30 (c) of the National Internal
Revenue Code is hereby amended by adding new sub-paragraphs (f) and (g)
to read as follows:cralaw:red
(f) Taxes paid on articles imported by the taxpayer
where such importation is not connected with this trade or business.
(g) Excess electric energy consumption tax imposed by
Batas Pambansa Blg. 36."
Section 7. Section 35 (c) (2) of the National
Internal Revenue Code is hereby amended to read as follows:cralaw:red
"(2) Exception. — No gains or loss shall be
recognized if in pursuance of a plan of merger or consolidation,
exchanges property solely for stock in a corporation which is (a) a
corporation which is a party to the merger or a 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 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 be recognized if property is transferred to a corporation by
a person in exchange for stock in such a 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 for property." chanroblesvirtualawlibrary
Section 8. Section 45 (c) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"When to file. — The return of the following individuals shall be filed
on or before the eighteenth day of March of each year, covering income
of the preceding taxable year:cralaw:red
"(a) Residents of the Philippines, whether citizen or
aliens whose income have been derived solely from salaries, wages,
interests, dividends, allowances, commissions, bonuses, fees, pensions,
or any combination thereof.
"(b) The return of all other individuals not
mentioned above, including non-resident citizens shall be filed on or
before the fifteenth day of April of each year covering income of the
preceding taxable year."
Section 9. Section 46 (c) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"(b) Fiscal year of corporations. — Every corporation
(other than partnerships, no matter how created or organized) may
designate the last day of any month in the year as the day of closing
of its fiscal year, and shall be entitled to have the tax payable by it
computed upon the basis of the net income ascertained as herein
provided for the year ending on the day so designated in the year
preceding the date of assessment instead of upon the basis of the net
income for the calendar year preceding the date of assessment; and it
shall give notice of the day it has thus designated as the closing of
its fiscal year to the Commissioner of Internal Revenue at any time not
less that thirty days prior to the fifteenth day of April of the year
in which its return would be filed if made upon the basis of the
calendar year."
Section 10. Paragraphs (a) (1) and (a) (2), (d) and
(e) of Section 51 of the National Internal Revenue Code are hereby
amended to read as follows:cralaw:red
"Sec. 51. Payment and assessment of income tax. — (a)
Payment of tax. — (1) In general. — The total amount of tax imposed by
this Title shall be paid at the time the return is filed. Such tax
shall be paid by the person subject thereto.
If the return is filed after the time prescribed by law (including
cases in which an extension of time for filing the return has been
granted under section forty-seven of this Code), there shall be paid at
the time of such filing the tax or installment which would have been
payable on or before such time if the return had been filed within the
time prescribed by law, and the remaining installment shall be paid at
the time at which, and in the amount in which, it would have been
payable if the return had been so filed, subject to the payment of
interest at twenty per centum per annum from the original due date.
In the case of tramp vessels, the shipping agents and/or the husbanding
agents, and in their absence, the captains thereof are required to file
the return herein provided and pay the tax due thereon before their
departure. Upon failure of the said agents or captains to file the
return and pay the tax, the Bureau of Customs is hereby authorized to
hold the vessel and prevent its departure until proof of payment of the
tax is presented or a sufficient bond is filed to answer for the tax
due.
"(2) Installment payment. — When the tax due is in
the excess of two thousand pesos, the taxpayer other than a corporation
taxable under Section twenty-four, self-employed individuals who may be
required to pay estimated income tax under Chapter X, and the
withholding agents required to deduct and withhold the tax under
Sections 53 and 54, all of this Title, may elect to pay the tax in two
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 the eighteenth day of July 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."
"(d) Interest on deficiency. — Interest upon the
amount determined as a deficiency shall be assessed at the same time as
the deficiency and shall be paid upon notice and demand from the
Commissioner and shall be collected as a part of the tax at the rate of
twenty per centum per annum from the date prescribed for the payment of
the tax, (or, if the tax is paid in installment from the date
prescribed for the payment of the first installment) to the date the
deficiency is assessed: Provided, That the maximum amount that may be
collected as interest on the deficiency shall in no case exceed the
amount corresponding to a period of three years, the present provisions
regarding prescription to the contrary notwithstanding."
"(e) Additions to the tax in case of nonpayment. —
(1) Tax shown on the return. — Where the amount determined by the
taxpayer as the tax imposed by this Title or any installment thereof,
or any part of such amount or installment, is not paid on or before the
date prescribed for its payment, there shall be collected as a part of
the tax, interest upon such unpaid amount at the rate of twenty per
centum per annum from the date prescribed for its payment until it is
paid: Provided, That the maximum amount that may be collected as
interest on deficiency shall in no case exceed the amount corresponding
to a period of three years, the present provisions regarding
prescription to the contrary notwithstanding."
"(2) Deficiency. — Where a deficiency, or any
interest assessed in connection therewith under paragraph (d) of this
section, or any addition to the taxes provided for in Section
seventy-two of this Code is not paid in full within thirty days from
the date of notice and demand from the Commissioner of Internal
Revenue, there shall be collected upon the unpaid amount as part of the
tax, interest at the rate of twenty per centum per annum from the date
of such notice and demand until it is paid: Provided, That the maximum
amount that may be collected as interest on deficiency shall in no case
exceed the amount corresponding to a period of three years, the present
provisions regarding prescription to the contrary notwithstanding."
"(3) Surcharge. — If any amount of tax shown on the
return is not paid in full on or before the date prescribed for its
payment under paragraph (a) of this Section, or any amount of
deficiency, and any interest assessed in connection therewith, is not
paid in full within the period prescribed in the assessment notice and
demand required under paragraph (b) of this Section, there shall be
collected in addition to the interest prescribed herein and in
paragraph (d) above and as part of the tax a surcharge of ten per
centum of the amount of tax unpaid." chanroblesvirtualawlibrary
Section 11. Paragraph (c) of Section 53 of the
National Internal Revenue Code is hereby amended to read as follows:cralaw:red
"(c) Resident individuals and corporations. —
Dividends received by individuals residing in the Philippines from a
domestic corporation, as well as royalties (except payments of any kind
to mining claim-owners or lessees of mining rights pursuant to any kind
of agreement) received by such individuals and domestic and/or resident
foreign corporations from any persons whether natural or juridical
shall be subject to withholding tax at source at the rate of 10%
thereof. A tax shall be withheld by the payer-corporation and/or person
and paid in the same manner and subject to the same conditions as
provided in Section 54 of the National Internal Revenue Code: Provided,
however, That the tax withheld under this subparagraph shall be
credited against the income tax liability of the recipient-taxpayer for
the taxable year."
Section 12. Paragraph (b) of Section 54 of the
National Internal Revenue Code is hereby amended to read as follows:cralaw:red
"(b) Penalties for failure to render returns for
rendering false or fraudulent returns for non-payment of taxes
withheld. — The surcharges prescribed in Section seventy-three of this
Title in cases of failure to render returns, for filing false or
fraudulent returns and for failure to pay tax shall apply to failure to
file returns or 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 became due until paid. If the employer
is the government or any of its agencies, political subdivisions or
instrumentalities, or is a government owned or controlled corporation,
the employee, thereof responsible for the withholding and remittance of
the tax shall be personally liable for the surcharge imposed
herein." chanroblesvirtualawlibrary
Section 13. Section 83 of the National Internal
Revenue Code is hereby amended by adding a new paragraph to read as
follows:cralaw:red
"(d) Net income of a partnership deemed
constructively received by partners. — The net 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."
Section 14. Chapter X of Title II of the National
Internal Revenue Code is hereby amended as follows:cralaw:red
"CHAPTER X. — QUARTERLY CORPORATE INCOME TAX
ANNUAL DECLARATION AND QUARTERLY PAYMENTS OF INCOME TAXES.
"Sec. 84. Declaration of Income Tax for Individuals. —chanroblesvirtualawlibrary
"(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
filed a declaration of this estimated income for the current taxable
year on or before April 15 of the same taxable year. In general,
self-employment income consist 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 Minister of Finance may be
forms and/or regulations prescribed. An individual may make amendments
of a declaration filed during the taxable year under the regulations
prescribed by the Minister of Finance.
"(b) Return and payment of estimated income tax by
individuals. — The amount of estimated tax (as defined in paragraph (c)
with respect to which a declaration is required under paragraph (a)
shall be paid in four installment. 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
fourth 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 annual 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 expect to pay a bigger income
tax, he shall file an amended declaration during any interval of
installment payment dates."
"Sec. 85. 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." chanroblesvirtualawlibrary
"Sec. 86. 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."
"Sec. 87. (a) Place of Filing. — The quarterly income
tax declaration required in Section 85 and the final adjustment return
required in Section 86 shall be filed with the Revenue District
Officer, or the Collection Agent or duly authorized treasurer of the
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 of the income tax return. — The
corporate quarterly declaration shall be filed within sixty (60) days
following the close of each of the first three quarters of the taxable
year. The final adjustment return shall be filed on or before the 15th
day of April or on 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 85 and 86 shall be paid at
the time the declaration or return is filed in a manner prescribed by
the Commissioner of Internal Revenue."
"Sec. 88. Civil penalties. — (a) Individuals. — (1)
Addition to the tax. — In the case of the underpayment of the estimated
tax, there shall be added to the tax an amount determined at the rate
of 20% per annum upon the amount of the underpayment (determined under
subsection (b) (2) for the period of the underpayment (determined under
subsection (b) (3).
"(2) Amount of Underpayment. — For purposes of
subsection (b) (1), the amount of the underpayment shall be the excess
of —chanroblesvirtualawlibrary
(A) The amount of the installment which would be
required to be paid if the estimated tax were equal to 80% of the tax
shown on the return for the taxable year or, if no return was filed,
80% of the tax for such year, over,
(B) The amount, if any, of the installment paid on or
before the last day prescribed for such payment.
"(3) For purposes of applying subsection (a) (1) and
(a) (2) —chanroblesvirtualawlibrary
"(A) The estimated tax shall be computed without any
reduction for the amount which the individual estimates as his credit
for taxes withheld at source on wages, dividend and interest, and
"(B) The amount of the creditable taxes for the
taxable year shall be deemed a payment of estimated tax, and an equal
part of such amount shall be deemed on each installment date for
taxable year, unless all amounts were actually withheld, in which case
the amounts so withheld shall be deemed payments of estimated tax on
the dates which such amounts were actually withheld. chanroblesvirtualawlibrary
"(4) Period of Underpayment. — The period of
underpayment shall run from the date the installment was required to be
paid to whichever of the following dates is the earlier.
"(A) The 15th day of March following the close of the
taxable year.
"(B) With respect to any portion of the underpayment,
the date on which such portion is paid. For purposes of this paragraph,
a payment of estimated tax on any installment date shall be considered
a payment of any previous underpayment only to the extent that such
payment exceeds the amount of the installment determined under
subsection (2) (A) for such installment date.
"(b) Corporations. — (1) Deficiency, defined. — As
used, and in respect of the tax referred to in Section 85, the term
"Deficiency" means:cralaw:red
"(i) The amount by which eighty per centum of the tax
referred to in Section 85 exceeds the amount shown by the taxpayer as
the tax on its quarterly return, including tax credit allowable;chanroblesvirtualawlibrary
"(ii) If no amount is shown by the taxpayer as tax on
it's return, or if no return is filed by the taxpayer, and the taxpayer
has tax credit allowable against such tax; or
"(iii) If no amount is shown by the taxpayer as tax on its return, and
the taxpayer has no tax credit allowable, eight per centum of the
estimated tax referred to in Section 85.
"(2) (i) Interest. — Interest upon the amount
determined as a deficiency shall be assessed at the same time as the
deficiency; and shall be paid upon notice and demand from the
Commissioner of Internal Revenue; and shall be collected as part of the
tax at the rate of twenty per centum per annum from the date prescribed
for the payment of the tax to the date the deficiency is assessed:
Provided, That the maximum amount that may be collected as interest on
deficiency shall in no case exceed the amount corresponding to a period
not later than the fifteenth day of April or the fifteenth day of
fourth month following the close of the taxable year: Provided,
further, That no interest on deficiency quarterly income tax shall be
assessed at any time after assessment of the actual income tax due for
the taxable year. chanroblesvirtualawlibrary
"(ii) Addition to estimated tax in case of
nonpayment. — (1) Tax shown on the quarterly return. — Where the amount
shown by the taxpayer as tax on its quarterly return or part of such
amount, is not paid on or before the date prescribed for its payment,
there shall be collected, as part of the tax interest upon such unpaid
amount at the rate of twenty per centum per annum from the date
prescribed for its payment until it is paid but not later than the
fifteenth day of April or the fifteenth day of the fourth month
following the close of the taxable year.
"(2) Deficiency. — Where the deficiency, or interest
on deficiency, assessed under subsection (a) of this Section, or part
thereof, is not paid in full within thirty days from the date of
receipt by the taxpayer of the notice and demand from the Commissioner
of Internal Revenue, there shall be collected upon such unpaid amount,
as part of the tax, interest at the rate of twenty per centum per annum
from the date of receipt by the taxpayer of such notice and demand
until it is paid not later than the fifteenth day of April or the
fifteenth day of the fourth month following the close of the taxable
year.
"Sec. 89. Declaration under penalties of perjury. —
(1) The declaration and return required under this Chapter shall, in
lieu of an oath, contain a written declaration that they are made under
the penalties of perjury.
"(2) Any person who willfully files a declaration or
return 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 15. The provisions of Section 84 and 88(b) of
the National Internal Revenue Code as amended by this Act, shall take
effect only upon promulgation of implementing rules and regulations by
the Minister of Finance. The other provisions of the Act shall take
effect upon approval thereof.
Section 16. Section 100 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"(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 of 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
and 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."
Section 17. Section 101 (d) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"(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, includes in the return required to be filed under
Section 105 the value at the time of his death of that part of the
gross estate the nonresident not situated in the Philippines."
Section 18. Section 105 (d) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"(d) Place of filing. — Except in case where the
Commissioner permits, the return required under subsection (a) shall be
filed with the Revenue District Officer, Collection Agent or duly
Authorized Treasurer of the 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 19. Section 113 (c) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"(c) Surcharge. — If any amount of tax included in
the notice and demand from the Commissioner of Internal Revenue shown
on the Return is not paid in full on or before the date prescribed for
its payment under paragraph (a) of this section, or any amount of
deficiency, or any interest assessed in connection therewith is not
paid full within the period prescribed in the assessment notice and
demand required under paragraph (b) of this Section, there shall be
collected in addition to the interest prescribed herein and in Section
111 and 112 and as part of the tax surcharge of ten per centum of the
unpaid amount."
Section 20. Section 114 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 114. Ad Valorem Penalties. — (a) Failure to
file return, etc. — The Commissioner shall add to the tax twenty-five
per centum (25%) of its amount: chanroblesvirtualawlibrary
"(i) In case of any failure to make and file a return
within the time prescribed by law or by the Commissioner except that
when a return is voluntarily and without notice from the Commissioner
filed after such time, and it is shown that the failure to file it was
due to a reasonable cause, no such addition shall be made to the tax;chanroblesvirtualawlibrary
"(ii) In case the return is filed with a person other
than that mentioned in Section 105 (d) of this Code.
"(b) False or Fraudulent Return. — In case a false or
fraudulent return is made, the Commissioner of Internal Revenue shall
add to the tax or to the deficiency tax, in case any payment has been
made the basis of such return before the discovery of the falsity or
fraud, a surcharge of fifty per centum of it amount shall be added to
the tax."
Section 21. The second paragraph of Section 118 of
the National Internal Revenue Code is hereby amended to read as follows:cralaw:red
"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." chanroblesvirtualawlibrary
Section 22. Section 125 (b) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"(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 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."
Section 23. Section 131 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 131. Ad valorem penalties. — (a) Failure to
file return, etc. — The Commissioner shall add to the tax twenty five
per centum (25%) of each amount:cralaw:red
(i) In case of any failure to make and file a return
within the time prescribed by law or by the Commissioner, except that
when a return is voluntarily and without notice from the Commissioner
filed after such time, and it is shown that the failure to file it was
due to a reasonable cause and not to willful neglect no such addition
shall be made to the tax;chanroblesvirtualawlibrary
(ii) In case the return is file with a person other
than that mentioned in Section 125 (b) of this Code. chanroblesvirtualawlibrary
(b) False or fraudulent return. — In case a false or
fraudulent return is made, the Commissioner of Internal Revenue shall
add to the tax or to the deficiency tax, in case any payment has been
made on the basis of such return before the discovery of the falsity or
fraud, a surcharge of fifty per centum of its amount shall be added to
the tax.
Section 24. Section 158-A of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 158-A. Flexibility Clause. — (a) In general. —
In the interest of the national economy and general welfare, and
subject to the limitations herein prescribed, the President upon the
recommendation of the Minister of Finance and the National Economic and
Development Authority, is hereby empowered to revise the rates of
specific taxes and whenever necessary, readjust the statutory maximum
wholesale and retain prices of cigars and cigarettes, respectively.
"The foregoing authority may be exercised by the President if any of
the following conditions exist:cralaw:red
"(1) Where, in the interest of economic development,
it is necessary to redirect expenditure or consumption patterns;chanroblesvirtualawlibrary
"(2) Whenever by reason of fluctuation of currency
values and/or inflation or deflation, the existing taxable base and
rates levels are no longer realistic or consistent with current price
levels;chanroblesvirtualawlibrary
"(3) When it is necessary to counter adverse action
on the part of another country.
"(b) Specific limitation on the exercise of authority
granted.
"(1) The existing rates of specific taxes and the
maximum wholesale and retail prices of cigars and cigarettes,
respectively, may be increased by not more than 50% or decreased by not
more than 10%
"(2) Before any recommendation is submitted to the
President by the Minister of Finance and the National Economic and
Development Authority pursuant to the provisions of this section, a
public hearing shall whenever practicable be held and interested
parties afforded a reasonable opportunity to be heard."
Section 25. Section 181 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 181. Unlawful use of denatured alcohol. — Any
person who, for the purpose of manufacturing any beverage, uses
denatured alcohol or alcohol withdrawn under bond for industrial uses
or alcohol 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 on conviction be fined not less than ten thousand pesos
and imprisoned for not less than five years. If the violator is an
alien, he shall be liable for deportation.
"Any persons who shall unlawfully recover, or attempt to recover by
redistillations or other process any denatured alcohol or who knowingly
uses, sells or offers for sale, conceals or otherwise disposes of
alcohol so recovered or redistilled shall be subject to the same
penalties imposed under the foregoing paragraph of this section."
"Any internal revenue officer may destroy any emptied container upon
which an internal-revenue stamp or official taxpaid label is found
still undestroyed." chanroblesvirtualawlibrary
Section 26. Section 186 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 186. Shipment or removal of liquor or tobacco
product under false name or brand or as limitation of any existing
trade name or brand. — Any person who ships, transports or removes
spiritous, compounded to 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 or package containing the same, or as an imitation of any existing
trade name or brand, or causes such act to be done, shall on conviction
be subject to a fine of not less than ten thousand pesos and
imprisonment of not less than five years; and in additions, the article
or articles so transported or removed shall be forfeited. If the
violator is an alien, he shall be liable for deportation."
Section 27. Section 190 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 190. Time for payment of fixed taxes. — All
fixed taxes shall be payable annually, on or before the last day of the
first month of the taxable year adopted by the taxpayer for income tax
purposes. Any person first beginning a business must pay the tax before
engaging therein.
"If the privilege tax is not paid within the time specified, the amount
of tax shall be increased by twenty-five per centum, the increment to
be part of the tax."
Section 28. The first paragraph of Section 192(2) of
the National Internal Revenue Code is hereby amended to read as follows:cralaw:red
"(2) Persons not subject to percentage tax. — Every
person who is not required to pay the percentage tax prescribed under
this Title shall pay for each taxable year in which the person shall
engage in business a fixed annual tax based upon his gross annual sales
during the preceding taxable year, as follows:"
Section 29. Paragraphs (a), (b) and (d) of Section
193 of the National Internal Revenue Code is hereby amended to read as
follows:cralaw:red
"Sec. 193. Payment of percentage taxes. — In General
— (1) Declaration and payment of quarterly gross sales, receipts, etc.
— Unless otherwise specifically provide, it shall be the duty of every
person conducting a business on which a percentage tax is imposed under
this Title, to make a quarterly declaration on a cumulative basis of
the amount of his, her or its gross sales, receipts or earnings or
gross value of output actually removed from the factory or mill
warehouse, the tax so computed shall be decreased by the amount of tax
previously paid or assessed and by the sum of the tax credits against
the tax allowed under this title for the preceding and current quarter
and shall be paid not later than twenty days of each calendar or fiscal
quarter as the case may be: Provided, That any person retiring form a
business subject to the percentage tax shall notify the nearest
internal revenue officer, file his return or declaration and pay the
tax due thereon within 20 days after closing his business. chanroblesvirtualawlibrary
For purposes of this section, sales on consignment shall be considered
actually sold on the day of sale or sixty days after the date
consigned, whichever is earlier, of twenty per centum per annum. 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 of fraud, in which case, the amount
so added shall be collected in the same manner as the tax."
"(b) Sales tax on imported articles. — When the
articles are imported, the percentage taxes established in Section 194,
195, 196, 197, 198, 199 and 201 of this Code shall be paid in advance
by the importer, in accordance with the regulations promulgated by the
Minister of Finance and prior to the release of such articles from
customs custody, based on the home consumption value or price
(excluding internal excise taxes) thereof, plus ten (10) per cent of
such home consumption value or price, including postage, commission,
customs duty and all similar charges, except freight and insurance, TO
BE DECLARED IN AN IMPORTER'S RETURN, plus one hundred per centum of
such total value in the case of articles enumerated in Section 194 and
195; fifty per centum in the case of articles under Section 196 and
197; and twenty-five per centum in the case of articles under Sections
198, 199 and 201. The tax imposed in this section shall not apply to
articles to be used by the importer himself in the manufacture or
preparation of articles subject to specific tax; Provided, however,
That where the National Economic and Development Authority certifies to
the availability of local raw materials of sufficient quantity,
comparable quality and price to meet the needs of manufacturers subject
to specific tax the importation of such raw materials shall be subject
to the tax herein imposed. chanroblesvirtualawlibrary
"(d) Value-Added Tax. — The provisions of this Title
to the contrary notwithstanding, when public interest so requires, the
President, upon recommendation of the Ministry of Finance, may subject
the second sale of any article taxable under this Title to a
value-added tax at rates not exceeding twenty per cent (20%) based on
either the:cralaw:red
1. gross selling price or gross value of any of the
articles sold, bartered, exchanged or transferred, but the amount of
the tax so determined shall be reduced by the amount of tax credits
(tax credit method); or
2. the gross selling price or gross value of any of
the articles sold, bartered, exchanged, or transferred; less the cost
of raw materials (cost deduction method)."
(2) Final annual percentage tax return. — On or
before the twentieth day of February following the close of the taxable
year, every person liable to tax under this section shall file a final
percentage tax return covering the total gross sales, receipts or
earnings or gross value of output for the preceding calendar or fiscal
year. If the sum of the quarterly percentage tax payments made and the
tax credit allowed under this title during the taxable year are not
equal to the total tax due on the entire gross sales, receipts or
earnings or gross value of output for that year, the taxpayer shall
either:cralaw:red
(a) pay the excess tax still due; or
(b) credit to the extent allowable under this Title,
the amount of excess tax credits shown on its final adjustment return
against the quarterly percentage tax liabilities for the taxable
quarters of the succeeding taxable year." chanroblesvirtualawlibrary
(3) Where to file. — Except in cases where the
Commissioner otherwise permits, the percentage tax return required to
be filed in the preceding paragraph 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.
(4) Ad Valorem Penalties. — (i) Failure to file and
pay the tax. — If the percentage tax return is filed with a person
other than that mentioned in the preceding subparagraph, or if the
percentage tax on any business is not paid within the time specified
above, the amount of the tax shall be increased by twenty-five per
centum, the increment to be a part of the tax and the entire unpaid
amount shall be subject to the interest at the rate of twenty per
centum per annum.
"(ii) Willful neglect to file, or false, or false or
fraudulent return. — 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 such
return before the discovery of the falsity or fraud, a surcharge or
fifty per centum of its amount and the entire unpaid amount shall be
subject to interest at the rate.
Section 30. Section 292 of the National Internal
Revenue Code is hereby amended by adding thereto a new paragraph to
read as follows:cralaw:red
"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 31. Section 324 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 324. Preservations of books of accounts, and
other accounting records. — All the books of accounts including the
subsidiary books, and other accounting records, of corporations,
partnership, 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 318 within which the Commissioner is authorized
to make an assessment. The said books and records shall be subject to
examination and inspection only once in a taxable year by internal
revenue officers, 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 withholding tax laws
and regulations; and
(d) Verification of capital gains tax. chanroblesvirtualawlibrary
in which case, another or separate examination and inspection may be
made. Examination and inspection of books of account 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 with such period of time
as maybe 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.
Section 32. Section 330 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 330. Statutory offenses of officials and
employees. — (a) Those charged within the enforcement of the provisions
of this Code. — 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
delinquency hereinbelow specified, or who falls within any of the
classes hereinbelow indicated, shall be punished with a fine of not
less than five thousand pesos nor more than fifty thousand pesos and
imprisonment for not less than one year nor more than ten years:cralaw:red
1. Those guilty of extortion or willful oppression
under color of law.
2. Those who knowingly demand other or greater sums
than are authorized by law or received any fees, compensation or
reward, except as by law prescribed, for the performance of any duty.
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.
4. Those who conspire or collude with another or
others to defraud the revenues or otherwise violate the law.
5. Those who willfully make opportunity for any
person to defraud the revenues, or who do or omit to do any act with
intent to enable any other person to defraud the revenues.
6. Those who negligently or designed permit the
violation of the law by any other person.
7. Those who make or sign any false entry or entries
in any books, or make or sign any false certificate or return in any
case where the law requires the making by them of such entry,
certificates or return.
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.
9. Those who, without the authority of law, demand or
accept or attempt to collect, directly or indirectly, as payment of
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 law. chanroblesvirtualawlibrary
(b) Withholding agents under the provisions of this
Code or Regulations promulgated thereunder. — 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 corporations who, under the provisions
of this Code or regulations promulgated thereunder, is charged with the
duty to deduct and withhold any interval revenue tax and to remit the
same in accordance with the provisions of this Code and other laws is
guilty of any delinquency hereinbelow specified shall be punished by a
fine of not less than five thousand pesos (P5,000) and imprisonment of
not less than one year nor more than two years.
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.
2. Those who fail or cause the failure to remit taxes
deducted and withheld within the time prescribed by law and
implementing regulations.
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 33. Effectivity. — This Decree shall take
effect upon approval, except that the Minister of Finance upon
recommendation of the Commissioner of Internal Revenue shall promulgate
rules and regulations to implement the transitional effectivity of
Section 27, Section 28, and Section 29 of this Act. chanroblesvirtualawlibrary
Done in the City of Manila,
this 1st day of August, in the year of Our Lord, nineteen hundred and
eighty.
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