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This page features the full text of
Republic Act No. 7496
AN
ACT ADOPTING THE SIMPLIFIED NET INCOME TAXATION SCHEME FOR THE
SELF-EMPLOYED
AND PROFESSIONALS ENGAGED IN THE PRACTICE OF THEIR PROFESSION, AMENDING
SECTIONS 21 AND 29 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED.
REPUBLIC
ACT NO. 7496AN
ACT ADOPTING THE SIMPLIFIED NET INCOME TAXATION SCHEME FOR THE
SELF-EMPLOYED
AND PROFESSIONALS ENGAGED IN THE PRACTICE OF THEIR PROFESSION, AMENDING
SECTIONS 21 AND 29 OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED.
Section
1. It is hereby declared the
policy of the State to have a uniform and equitable tax system as
mandated
by the Constitution. The tax structure must be such that all tax groups
shall pay their fair share of taxes. The higher income groups shall
bear
a higher tax burden than the low income groups.
chanrobles virtuallaw libraryred
Sec.
2. As used herein, the term:
(a) "Self-employed"
means persons engaged in business and who derive their personal income
from such business. This includes single proprietorships, i.e.,
manufacturers,
traders, market vendors, owners of eateries, farmers and service shops;
and chanrobles virtuallaw libraryred(b) "Professionals"
means persons who derive their income from the practice of their
profession.
This includes lawyers and other persons who are registered with the
Professional
Regulation Commission such as doctors, dentists, certified public
accountants
and others similarly situated. The term "professional" also refers to
one
who pursues an art and makes his living therefrom such as artists,
athletes
and others similarly situated.chanrobles virtual law library
Sec.
3. The first subparagraph of
Section 21 (a) of the National Internal Revenue Code, as amended, is
hereby
further amended to read as follows: chanrobles virtuallaw libraryred
"(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:
Not
over P2,500 0%chanrobles virtuallaw libraryred"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 P20,000chanrobles virtuallaw libraryred
"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 P100,000
"Over
P250,000 but not over P500,000 P46,675+29%
of excess over P250,000
"Over
P500,000 P122,175+35% of excess
over P500,000
Sec.
4. A new paragraph to be known
as paragraph (f) is hereby inserted at the end of Section 21 of the
National
Internal Revenue Code, as amended, which shall read as follows: chanrobles virtuallaw libraryred
"(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 paragraphs (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 therein, determined in accordance with the following
schedule:
"Not
over P10,000 3%chanrobles virtuallaw libraryred"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 P350,000chanrobles virtuallaw libraryred
Sec.
5. The opening paragraph of Section
29 of the National Internal Revenue Code, as amended, is hereby further
amended to read as follows:
"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: "(a) Raw
materials, supplies and direct labor; chanrobles virtuallaw libraryred"(b) Salaries
of employees directly engaged in activities in the course of or
pursuant
to the business or practice of their profession;
"(c) Telecommunications,
electricity, fuel, light and water;
"(d) Business
rental; chanrobles virtuallaw libraryred
"(e) Depreciation;
"(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, including professionals as herein defined, a maximum of
forty
percent (40%) of their gross receipts shall be allowed as deductions to
answer for business or professional expenses as the case may be."
Sec.
6. The Secretary of Finance,
upon the recommendation of the Commissioner of Internal Revenue, shall
promulgate and publish the necessary rules and regulations for the
effective
implementation of the provisions of this Act.chanrobles virtual law library
chanrobles virtuallaw libraryred
Sec.
7. If any provision of this Act
is declared unconstitutional or the application thereof to any person,
circumstance or transaction is held invalid, the validity of the
remaining
provisions of this Act or the applicability of such provision to other
persons, circumstances or transactions shall not be affected thereby.
Sec.
8. The provision of Section 21
and 29 of the National Internal Revenue Code, as amended, and all other
laws, decrees, orders, rules and regulations, or parts thereof,
inconsistent
with this Act are hereby repealed or amended accordingly.chanrobles virtuallaw libraryred
Sec.
9. After three (3) years from
the effectivity of this Act, the Commissioner of Internal Revenue may
implement
a withholding tax scheme to further enhance the taxation of the
self-employed
and professionals as defined under this Act.cralaw:red
In
furtherance of this section, the Secretary of Finance, upon the
recommendation
of the Commissioner of Internal Revenue, shall issue and publish the
implementing
rules and regulations to implement this mandate.chanrobles virtuallaw libraryred
Sec.
10. This Act shall take effect
upon its approval.
Approved:
May
15, 1992
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