EXECUTIVE ORDER NO. 1026 - AMENDING Sec. 78 OF THE NATIONAL INTERNAL REVENUE CODE OF 1977, TO REQUIRE DISSOLVING CORPORATIONS TO FILE INFORMATION RETURNS AND SECURE TAX CLEARANCE FROM THE COMMISSIONER OF INTERNAL REVENUE, AND PROVIDING ADEQUATE PENALTIES FOR VIOLATION THEREOF

WHEREAS, corporations, particularly those with unpaid tax liabilities to the Government dissolve without prior notice to the Bureau of Internal Revenue, to the detriment of tax collection;

WHEREAS, the requirement under existing law making it obligatory for said corporations to notify the Commissioner of Internal Revenue of corporate dissolution is inadequate for aside from the imposition of relatively light penalties in case of violation, no BIR tax clearance as a prerequisite to dissolution is prescribed; 

WHEREAS, in order to remedy this defect and thus insure adequate collection of taxes, amendment of the aforecited provision of the Internal Revenue Code is necessary.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me under Sec. 290-B of the National Internal Revenue Code, as amended, do hereby order as follows:

Section 1. Sec. 78 of the National Internal Revenue Code, as amended, is hereby amended to read as follows:

“Sec. 78. Return of corporation contemplating dissolution. — Every corporation shall, within thirty days after the adoption by the corporation of a resolution or plan for the dissolution of the corporation or for the liquidation of the whole or any part of its capital stock, including corporations which have been notified of possible involuntary dissolution by the Securities and Exchange Commission, render a correct return to the Commissioner of Internal Revenue, verified under oath, setting forth the terms of such resolution or plan and such other information as the Minister of Finance shall, by regulations, prescribe. The dissolving corporation prior to the issuance of the Certificate of Dissolution by the Securities and Exchange Commission shall secure a certificate of tax clearance from the Bureau of Internal Revenue which certificate shall be submitted to the Securities and Exchange Commission. 

Failure to render the return and secure the certificate of tax clearance as above-mentioned shall subject the officer(s) of the corporation required by law to file the return under Sec. 46(a) of this Code, to a fine of not less than Five Thousand pesos or imprisonment of not less than two years and shall make them liable for all outstanding or unpaid tax liabilities of the dissolving corporation.”

Sec. 2. The Minister of Finance shall issue such rules and regulations as are necessary to implement the provisions of this act.

Sec. 3. Rules and Regulations. — All Acts, Executive Orders, rules and regulations or parts thereof which are inconsistent with the provisions of this Act are hereby repealed or amended accordingly.

Sec. 4. Effectivity. — This Order shall take effect upon its approval.

DONE in the City of Manila, this 14th day of May, in the year of Our Lord, nineteen hundred and eighty-five.
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