WHEREAS, it
is imperative to adopt measures responsive to the requirements of the
developing economy foremost of which is the financing of economic
development programs; chanroblesvirtualawlibrary
WHEREAS, nonresident foreign corporations with investments in the
Philippines are taxed on their earnings from dividends at the rate of
35%;chanroblesvirtualawlibrary
WHEREAS, in order to encourage more capital investment for large
projects an appropriate tax need be imposed on dividends received by
nonresident foreign corporations in the same manner as the tax imposed
on interest on foreign loans;chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the Constitution
as Commander-in-Chief of the Armed Forces of the Philippines, and
pursuant to Proclamation No. 1081, dated September 21, 1972, and
General Order No. 1, dated September 22, 1972, as amended, do hereby
order and decree as follows: chanroblesvirtualawlibrary
Section 1. The first paragraph of subsection (b) of
Section 24 of the National Internal Revenue Code, as amended, is hereby
further amended to read as follows:cralaw:red
"(b) Tax on foreign corporations, — (1) Nonresident
corporation. — A foreign corporation not engaged in trade or business
in the Philippines, including a foreign life insurance company not
engaged in the life insurance business in the Philippines, shall pay a
tax equal to 35% of the gross income received during its taxable year
from all sources within the Philippines, an interest (except interest
on foreign loans which shall be subject to 15% tax), dividends, rents,
royalties, salaries, wages, premiums, annuities, compensations,
remunerations for technical services or otherwise, emoluments or other
fixed or determinable, annual, periodical or casual gains, profits, and
income, and capital gains: Provided, however, That premiums shall not
include reinsurance premiums: Provided, further, That cinematographic
film owners, lessors, or distributors, shall pay a tax of 15% on their
gross income from sources within the Philippines: Provided, still
further, That 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
53(d) of this Code, subject to the condition that the country in which
the nonresident foreign corporation is domiciled shall allow a credit
against the tax due from the nonresident foreign corporation, taxes
deemed to have been paid in the Philippines equivalent to 20% which
represents the difference between the regular tax (35%) on corporations
and the tax (15%) on dividends as provided in this section: Provided,
finally, That regional or area headquarters established in the
Philippines by multi-national corporations and which headquarters do
not earn or derive income from the Philippines and which act as
supervisory, communication and coordinating centers for their
affiliates, subsidiaries or branches in the Asia-Pacific Region shall
not be subject to tax." chanroblesvirtualawlibrary
Section 2. Subsection (d) of Section 24 of the
National Internal Revenue Code, as amended by Presidential Decree No.
299-A, is hereby further amended to read as follows:cralaw:red
"(d) Rate of tax on certain dividends. — Dividends
received by a domestic or resident foreign corporation from a domestic
corporation liable to tax under this Chapter shall be subject to tax at
8.75% on the total amount thereof, which shall be collected and paid as
provided in Section 53 and 54 of this Code."
Section 3. Subsection (d) of Section 53 of the
National Internal Revenue Code, as amended by Presidential Decree No.
299-A, is hereby further amended to read as follows:cralaw:red
"(d) Withholding tax on certain dividends. — The tax
imposed under Section 24 (b) (1) and (d) of this Code on dividends
shall be withheld by the payor corporation and paid in the same manner
and subject to the same conditions as provided in Section 54 of this
Code."
Section 4. The Commissioner of Internal Revenue shall
promulgate the rules and regulations to implement this Decree
subject to the approval of the Secretary of Finance.
Section 5. Effectivity. — This Decree shall take
effect on January 1, 1974.
Done in the City of Manila,
this 9th day of January, in the year of Our Lord, nineteen hundred and
seventy-four.
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