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PRESIDENTIAL DECREE NO. 1800
PRESIDENTIAL DECREE NO. 1800
- PROVIDING FOR THE TAXATION OF CERTAIN PASSIVE INCOME
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WHEREAS,
there is a need to raise capital to hasten the industrialization of our
developing economy;chanroblesvirtualawlibrary
WHEREAS, it is a more desirable policy to raise the needed capital
through equity investment and at the same time to broaden the base of
equity ownership of existing corporations;chanroblesvirtualawlibrary
WHEREAS, there is a need to restructure our tax system on investment
income by realigning the taxation of dividend income and interest
income;chanroblesvirtualawlibrary
WHEREAS, there is a need to simplify the collection of taxes on all
types of investment income through a withholding tax system.
NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the powers vested
in me by the Constitution do hereby decree and order:cralaw:red
Section 1. Section 21 of the National Internal
Revenue Code is hereby amended by adding a new paragraph to read as
follows:cralaw:red
"Sec. 21. Rates of tax on citizens or residents. —chanroblesvirtualawlibrary
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Dividends received by an individual who is a citizen or resident of the
Philippines from a domestic corporation, shall be subject to a final
tax at the rate of fifteen (15%) per cent on the total amount thereof,
which shall be collected and paid as provided in Sections 53 and 54 of
this Code;chanroblesvirtualawlibrary
Section 2. Section 24, paragraph (c) of the National
Internal Revenue Code is hereby amended to read as follows:cralaw:red
xxx
xxx
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"(c) Rate of tax on certain dividends. — Dividends
received by a domestic or resident foreign corporation from a domestic
corporation liable to tax under this Code —chanroblesvirtualawlibrary
(1) Shall be subject to a final tax of 10% on the
total amount thereof, which shall be collected and paid as provided in
Sections 53 and 54 of this Code: Provided, That if the recipient of
such dividend is exempt from income taxation, no tax shall be imposed
and that if the recipient is enjoying preferential income tax
treatment, the preferential tax rates so provided shall apply;chanroblesvirtualawlibrary
(2) Shall not be included in the determination of the
gross income of the recipient corporation: Provided, however, That
interest paid or incurred on indebtedness abroad by a domestic or
resident foreign corporation, which indebtedness was incurred to
provide funds for investment in a domestic corporation shall be allowed
as a deduction from the intercorporate dividends before computing the
10% final tax. Any excess of the interest herein allowed as a deduction
from intercorporate dividends may be deducted from the other gross
income of the recipient corporation, subject to the provisions of
Section 30 (b) of this Code.
The above deduction of interest from intercorporate dividends shall be
allowed only if the recipient domestic or resident foreign corporation
submits an authenticated copy of the foreign loan agreement stipulating
the end-use of the loan proceeds and such other information as may be
required for its determination.
Section 3. Sub-paragraph (b) (8) of Section 29 of the
same Code is hereby amended by adding subparagraph (b) (8) (E) to read
as follows:cralaw:red
"Sec. 29. Gross income. —chanroblesvirtualawlibrary
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(E) Dividends received from a domestic corporation
subjected to the final tax under Sections 21 and 24 of this Code.
Section 4. Section 53, paragraph (c) of the National
Internal Revenue Code is hereby amended to read as follows:cralaw:red
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(c) Withholding tax on royalties. — Royalties (except
payments of any kind to mining claim-owners or lessees of mining rights
pursuant to any kind of agreement) received by individuals residing in
the Philippines and domestic and/or resident foreign corporations from
any person whether natural or juridical shall be subject to withholding
tax at source at the rate of fifteen (15%) per cent thereof. The tax
shall be withheld by the payor-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 sub-paragraph shall be credited
against the income tax liability of the recipient taxpayer for the
taxable year.
Section 5. Section 53, paragraph (d) of the National
Internal Revenue Code is hereby amended to read as follows:cralaw:red
(d) Withholding tax on dividends. — The tax imposed
by Sections 21 and 24(c) 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 6. Effectivity. — This Decree shall take
effect on passive income earned beginning January 1, 1981.
Done in the City of Manila this
16th day of January, in the year of Our Lord, nineteen hundred and
eighty-one.
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