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
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.
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
(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.
Sec. 3. The first subparagraph of Sec. 21 (a)
of the National Internal Revenue Code, as amended, is hereby further
amended to read as follows:
"(a) Taxable compensation income. — A tax is hereby
imposed upon the taxable compensation income as defined in Sec. 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%
"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 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 Sec. 21 of the National
Internal Revenue Code, as amended, which shall read as follows:
"(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 Sec. 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%
"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
Sec. 5. The opening paragraph of Sec. 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 Section s 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 Sec. 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;
"(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;
"(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.
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 Sec. 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.
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.
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.
SECTION 10. This Act shall take effect upon its
approval.
Approved: May 15, 1992
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