EXECUTIVE ORDER NO. 37
EXECUTIVE ORDER NO. 37 - FURTHER
AMENDING CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED
WHEREAS, it is necessary to
rationalize the present system of taxing incomes derived by individuals
and corporations to improve equity, to achieve greater administrative
simplicity, to broaden the tax base and improve revenue elasticity and
to provide incentives for greater resource allocation.
NOW, THEREFORE, I, CORAZON C. AQUINO, President of the Philippines, do
hereby order:
Section 1. Sec. 20 of the National Internal
Revenue Code, as amended, is hereby further amended by adding a new
paragraph (z) to read as follows:
“(z)
The term ‘ordinary income’ includes any gain from the sale or exchange
of property which is not a capital asset or property described in
Sec. 34 (a) Any gain from the sale or exchange of property which is
treated or considered, under other provisions of this Title, as
‘ordinary income’ shall be treated as gain from the sale or exchange of
property which is not a capital asset as defined in Sec. 34 (a). The
term ‘ordinary loss’ includes any loss from the sale or exchange of
property which is not a capital asset. Any loss from the sale or
exchange of property which is treated or considered, under other
provisions of this Title, as ‘ordinary loss’ shall be treated as loss
from the sale or exchange of property which is not a capital asset.”
Sec. 2. Sec. 21 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
21. Tax on citizens or residents. — (a) Taxable
compensation, business and other income. — A tax is hereby imposed upon
the taxable compensation, business and other income as defined in
Sec. 28, other than the incomes subject to tax under paragraphs (b),
(c), (d), and (e) 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%
excess over
P2,500
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
60,000 P3,75 + 15% of
excess over
P40,000
Over P60,000 but not over
P100,000 6,075 + 19% of
excess over
P60,000
Over P100,000 but not over
P250,000 P13,000 + 24% of
excess over
P100,000
Over P250,000 but not over
P500,000 P49,675 + 29% of
excess over
P250,000
Over P500,000
122,175 + 35% of
excess over
P500,000
In
the case of married individuals, the husband and wife, subject to the
provision of Sec. 45(d) hereof, may elect to compute separately
their individual income tax based on their respective total taxable
incomes: Provided, That if any income can not be definitely
attributable to or identifiable as income exclusively earned or
realized by either of the spouses, the same shall be divided equally
between the spouses for the purpose of computing their respective
taxable income.
(b)
Foreign source gross income derived by a non-resident citizen. — A tax
is hereby imposed upon the taxable income derived by a nonresident
citizen from all sources without the Philippines during each taxable
year computed in accordance with the following schedule:
If the amount subject to tax is:
Not
over U.S. $6,000.00 1%
Over U.S. $6,000.00 but not over
U.S.
$20,000.00 U.S. $60 plus 2%
of excess
over U.S. $6,000
Over U.S. $20,000.00
U.S. $340 plus 3%
of excess
over U.S.
$20,000
(c)
Certain passive incomes. — A tax at the rate prescribed below is hereby
imposed upon the amount of the following items of gross income received
by a citizen or resident alien from sources within the Philippines:
(1)
Interest from any Philippine currency bank deposit and yield or any
other monetary benefit from deposit substitutes and from trust fund and
similar arrangements; royalties, prizes, (except prizes amounting to
P3,000 or less which shall be subject to tax under paragraph (a) and
other winnings (except Philippine Charity Sweepstakes winnings) — 20%;
and
(2) Dividends
received from a domestic corporation and the share of an individual
partner in a partnership subject to tax under Sec. 24(a) at the rate
of 15% in 1986; 10% effective January 1, 1987; 5 effective January 1,
1988; and 0% effective January 1, 1989.
(d)
Capital gains from sales of shares of stock. — The provisions of
Sec. 34(b) notwithstanding, capital gains realized from the sale,
exchange or disposition of shares of stocks in any domestic corporation
shall be taxed as follows:
(1)
Net capital gain as defined in Sec. 34(a) (2) realized during each
taxable year from the sale, exchange or other disposition of shares of
stock not traded through a local stock exchange:
Not
over P100,000 10%
Over P100,000
20%
(2)
Capital gains presumed to have been realized from the sale, exchange or
disposition of shares of stock listed and traded through a local stock
exchange — 1/4 of 1% based on the gross selling price of the share or
shares of stock.
(e)
Capital gains from sales of real property. — The provisions of Sec. 34(b) notwithstanding, capital gains presumed to have been realized
from the sale, exchange or other disposition of real property located
in the Philippines classified as capital assets, including pacto de
retro sales and other forms of conditional sales, by individuals,
including estates and trusts, shall be taxed at the rate of 5% based on
the gross selling price or the fair market value prevailing at the time
of sale, whichever is higher: Provided, That the tax liability if any,
on gains from sales or other dispositions of real property to the
government or any of its political subdivisions or agencies or to
government-owned or controlled corporations shall be determined either
under Sec. 21(a) under this sub-section, at the option of the
taxpayer.”
Sec. 3. Sec. 22 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
22. Tax on nonresident alien individuals. — (a)
Nonresident alien engaged in trade or business within the Philippines.
(1) In general. — Nonresident aliens engaged in trade or business in
the Philippines shall be subject to tax in the same manner as resident
citizens and aliens on taxable income received from all sources within
the Philippines, except capital gains realized from buying and/or
selling shares of stock of Philippine corporations listed in the dollar
or any foreign currency board of stock exchange: Provided, That for
purposes of this Title, a nonresident alien individual who shall come
to the Philippines and stay therein for an aggregate period of more
than 180 days during any calendar year shall be deemed a nonresident
alien doing business in the Philippines, Sec. 20(g) of this Code
notwithstanding.
(2) Dividends,
share in the net profits of a taxable partnership, interest, royalties,
prizes and other winnings. — Dividends from a domestic corporation,
share in the net profits of a partnership taxable under Sec. 24(a),
interest, royalties (in any form) and prizes (except prizes amounting
to P3,000 or less which shall be subject to tax under paragraph (a) of
Sec. 21) and other winnings (except Philippine Charity Sweepstakes
winnings), shall be subject to a tax of thirty percent (30%) on the
total amount thereof.
(3) Capital
gains. — Capital gains realized from sales of shares of stocks in
domestic corporations and real properties shall be subject to the tax
prescribed under Sub-sections (d) and (e) of Sec. 21.
(b)
Nonresident aliens not engaged in trade or business within the
Philippines. — There shall be levied, collected and paid for each
taxable year upon the entire income received from all sources within
the Philippines by every nonresident alien individual not engaged in
trade or business within the Philippines as interest, dividends, rents,
salaries, wages, premiums, annuities, compensation, remuneration,
emoluments, or other fixed or determinable annual or periodical or
casual gains, profits, and income, and capital gains (except capital
gains realized from buying and/or selling shares of stock of Philippine
corporations listed in the dollar or any acceptable foreign currency
board of any stock exchange), a tax equal to 30% of such income:
Provided, That capital gains realized from sales of shares of stock in
any domestic corporation and real property shall be subject to the tax
prescribed under Sub-sections (d) and (e) of Sec. 21.
(c) Aliens
employed by regional or area headquarters of multinational
corporations. — There shall be levied, collected and paid for each
taxable year upon the gross income received by every alien individual
employed by regional or area headquarters established in the
Philippines by multinational corporations as salaries, wages,
annuities, compensation, remuneration and other emoluments, such as
honoraria and allowances, from such regional or area headquarters, a
tax equal to 15% of such gross income: Provided, That the activities of
the said regional headquarters or area headquarters shall be limited to
acting as supervisory, communications and coordinating center for their
affiliates, subsidiaries or branches of such multinational
corporations. For purposes of this chapter, the term “multinational
corporation” means a foreign firm or entity engaged in international
trade with affiliates or subsidiaries or branch offices in the Asia
Pacific Region.
(d) Aliens
employed by offshore banking units. — There shall be levied, collected
and paid for each taxable year upon the gross income received by every
alien individual employed by offshore banking units established in the
Philippines as salaries, wages, annuities, compensation, remuneration
and other emoluments, such as honoraria and allowances, from such
offshore banking units, a tax equal to 15% of such gross income.
(e) Aliens
employed by petroleum service contractors and subcontractors. — Aliens
who are permanent residents of a foreign country but who are employed
and assigned in the Philippines by service contractors or by
subcontractors engaged in petroleum operations in the Philippines shall
be liable to a tax of 15% of the salaries, wages, annuities,
compensation, remuneration and other emoluments, such as honoraria and
allowances, received from such contractors or subcontractors.
Any income earned from all other
sources within the Philippines by the alien employees referred to under
subsections (c), (d) and (e) hereof shall be subject to the pertinent
income tax, as the case may be, imposed under the National Internal
Revenue Code, as amended.”
Sec. 4. The provisions of Sec. 23 of the
National Internal Revenue Code, as amended, are hereby superseded by
new provisions to read as follows:
“Sec.
23. Tax liability of members of general professional
partnerships. — (a) Persons exercising a common profession in general
partnership shall be liable for income tax only in their individual
capacity, and the share in the net profits of the general professional
partnership to which any taxable partner would be entitled whether
distributed or otherwise, shall be returned for taxation and the tax
paid in accordance with the provisions of this Title.
(b) In
determining his distributive share in the net income of the
partnership, each partner —
(1)
Shall take into account separately his distributive share of the
partnership’s income, gain, loss, deduction, or credit to the extent
provided by the pertinent provisions of this Code; and
(2) Shall be
deemed to have elected the itemized deductions, unless he declares his
distributive share of the gross income undiminished by his share of the
deductions.”
Sec. 5. Sec. 24 of the National Internal
Revenue Code, as amended, is hereby further amended, in its entirety to
read as follows:
“Sec.
24. Rates of tax on domestic corporations. — (a) In
general. — Unless otherwise provided, a tax of 35% is hereby imposed
upon the taxable income received during each taxable year from all
sources within and without the Philippines by every corporation
organized in, or existing under the laws of the Philippines, and
partnership, no matter how created or organized, but not including
general professional partnerships.
(b) Private
Educational Institutions. — Private educational institutions, whether
stock or non-stock, shall pay a tax of 10% on their taxable income
except those covered by paragraph (e) hereof: Provided, That if the
gross income from unrelated trade, business or other activity exceeds
50% of the total gross income derived by any educational institution
from all sources, the tax prescribed in paragraph (a) hereof shall be
imposed on the entire taxable income of the educational institution.
For purposes of this paragraph, the term “unrelated trade, business or
other activity” means any trade, business or other activity, the
conduct of which is not substantially related to the exercise or
performance by such educational institution of its educational purpose
or function. A private educational institution is any “private school”
maintained and administered by private individuals or groups issued a
permit to operate by the Ministry of Education, Culture and Sports
(MECS) in accordance with existing laws and regulations.
(c)
Government-owned or controlled corporations, agencies or
instrumentalities. — The provisions of existing special or general laws
to the contrary notwithstanding, all corporate taxpayers not
specifically exempt under Sec. 27 of this Code shall pay the rates
provided in this Section . All corporations, agencies or
instrumentalities owned or controlled by the Government, including the
Government Service Insurance System and the Social Security System,
shall pay such rate of tax upon their taxable income as are imposed by
this section upon associations or corporations engaged in a similar
business, industry, or activity.
(d) Mutual
life insurance companies. — Mutual life insurance companies organized
in and existing under the laws of the Philippines shall pay a tax of
10% of their gross investment income consisting of interest, dividends,
rents, net capital gains, and income from any other business than life
insurance derived from all sources, except those covered by paragraph
(e) hereof.
(e) Tax on
certain incomes derived by domestic corporations. — (1) Interest from
deposits and yield or any other monetary benefit from deposit
substitutes and from trust fund and similar arrangements, and
royalties. — Interest on Philippine currency bank deposits and yield or
any other monetary benefit from deposit substitutes and from trust fund
and similar arrangements received by domestic corporations, and
royalties, derived from sources within the Philippines, shall be
subject to a 20% tax.
(2)
Capital gains from sales of shares of stock. — Capital gains realized
from the sale, exchange or disposition of shares of stocks in any
domestic corporation shall be taxed as follows:
(A)
Net capital gains as defined in Sec. 34(a) (2) realized during each
taxable year from sale of stock not traded through a local stock
exchange:
Not
over P100,000 10%
Over P100,000
20%
(B) Capital
gains presumed to have been realized from the sale, exchange or
disposition of shares of stock listed and traded through a local stock
exchange — 1/4 of 1% based on the gross selling price of the share or
shares of stock.
(3)
Tax on income derived under the Expanded Foreign Currency Deposit
System. — Income derived by a depository bank under the expanded
foreign currency deposit system from foreign currency transactions with
nonresidents, offshore banking units in the Philippines, local
commercial banks including branches of foreign banks that may be
authorized by the Central Bank to transact business with foreign
currency depository system units and other depository banks under the
expanded foreign currency deposit system shall be exempt from all
taxes, except taxable income from such transactions as may be specified
by the Minister of Finance, upon recommendation of the Monetary Board
to be subject to the usual income tax payable by banks: Provided, That
interest income from foreign currency loans granted by such depository
banks under said expanded system to residents (other than offshore
banking units in the Philippines or other depository banks under the
expanded system) shall be subject to a 10% tax.
Any income of nonresidents from
transactions with depository banks under the expanded system shall be
exempt from income tax.
(4)
Intercorporate dividends. — Dividends received by a domestic
corporation from another domestic corporation from another domestic
corporation shall not be subject to tax.”
Sec. 6. The provisions of Sec. 25 of the
National Internal Revenue Code, as amended, are hereby superseded by
new provisions to read as follows:
“Sec.
25. Rates of tax on foreign corporation. —
(a)
Tax on resident foreign corporation. (1) In general. — Unless otherwise
provided, a corporation organized, authorized, or existing under the
laws of any foreign country, engaged in trade or business within the
Philippines, shall be subject to a tax equivalent to 35% of the taxable
income derived in the preceding taxable year from all sources within
the Philippines.
(2)
International carriers. — International carriers doing business in the
Philippines shall pay a tax of two and one-half percent (2 ½% on
their ‘Gross Philippine Billings’ as defined hereunder:
(A)
International air carrier. — ‘Gross Philippine Billings’ means gross
revenue realized from uplifts of passengers anywhere in the world and
excess baggage, cargo and mail originating from the Philippines,
covered by passage documents sold in the Philippines: Provided, That
documents sold outside the Philippines under a ‘prepaid ticket advice’
scheme for passengers originating from the Philippines shall be
considered as documents sold in the Philippines. Gross revenue from
chartered flights originating from the Philippines shall likewise form
part of the ‘Gross Philippine Billings’ regardless of the place of sale
or payment of the passage documents. For purposes of determining the
taxability of revenues from chartered flights, the term ‘originating
from the Philippines’ shall include flights of passengers who stay in
the Philippines for more than forty-eight (48) hours prior to
embarkation.
(B)
International Shipping. — ‘Gross Philippine Billings’ means gross
revenue whether for passenger, cargo or mail originating from the
Philippines up to final destination, regardless of the place of sale or
payments of the passage of freight documents.
(3)
Foreign mutual life insurance companies. — Foreign mutual life
insurance companies authorized to carry business in the Philippines
shall pay a tax of 10% on their gross investment income derived from
sources within the Philippines except those covered by subsection (6)
hereof.
(4) Offshore
banking units. — The provisions of any law to the contrary
notwithstanding, income derived by offshore banking units authorized by
the Central Bank of the Philippines from foreign currency transactions
with nonresidents, other offshore banking units, local commercial
banks, including branches of foreign banks that may be authorized by
the Central Bank to transact business with offshore banking units shall
be exempt from all taxes except taxable income from such transactions
as may be specified by the Minister of Finance, upon recommendation of
the Monetary Board, to be subject to the normal income tax payable by
banks: Provided, That any interest income derived from foreign currency
loans granted to residents other than offshore banking units or local
branches of foreign banks that may be authorized by the Central bank of
the Philippines to transact business with offshore banking units, shall
be subject only to a 10% tax.
Any income of nonresidents from
transactions with said offshore banking units shall be exempt from
income tax.
(5) Tax on
branch profits remittance. — Any profit remitted by a branch to its
head office shall be subject to a tax of 15% (except those registered
with the Export Processing Zone Authority): Provided, That any profit
remitted by a branch to its head office authorized to engaged in
petroleum operations in the Philippines shall be subject to tax at
7-1/2%. In both cases, the tax shall be collected and paid in the same
manner as provided in Section s 51 and 52 of this Code: and Provided,
further, That interests, dividends, rents, royalties, including
remuneration for technical services, salaries, wages, premiums,
annuities, emoluments or other fixed or determinable annual, periodical
or casual gains, profits, income and capital gains received by a
foreign corporation during each taxable year from all sources within
the Philippines shall not be considered as branch profits unless the
same are effectively connected with the conduct of its trade or
business in the Philippines.
(6) Tax on
certain incomes received by resident foreign corporations. — (A)
Interest from deposits and yield or any other monetary benefit from
deposit substitutes, trust fund and similar arrangements and royalties.
— Interest on Philippine currency bank deposits and yield or any other
monetary benefit from deposit substitutes and from trust fund and
similar arrangements and royalties derived from sources within the
Philippines shall be subject to a 20% tax.
(B) Income
derived under the Expanded Foreign Currency Deposit System. — Income
derived by a depository bank under the expanded foreign currency
deposit system from foreign currency transactions with nonresidents,
offshore banking units in the Philippines, local commercial banks
including branches of foreign banks that may be authorized by the
Central Bank of the Philippines to transact business with foreign
currency depository system units and other depository banks under the
expanded foreign currency deposit system be exempt from all taxes,
except taxable income from such transactions as may be specified by the
Minister of Finance, upon recommendation of the Monetary Board to be
subject to the usual income tax payable by banks: Provided, That
interest income from foreign currency loans granted by such depository
banks under said expanded system to residents (other than offshore
banking units in the Philippines or other depository banks under the
expanded system) shall be subject to a 10% tax.
Any income of nonresidents from
transactions with depository banks under the expanded system shall be
exempt from income tax.
(C) Capital
gains from sales of shares of stock. — Capital gains realized from
sale, exchange or disposition of shares of stocks in any domestic
corporation shall be taxed as follows:
(i)
Net capital gains as defined in Sec. 34(a) (2) realized during
taxable year from sale or exchange or other disposition of shares of
stocks not traded through a local stock exchange shall be taxed as
follows:
Not
over P100,000 10%
Over
P100,000 20%
(ii)
Capital gains presumed to have been realized from the sale, exchange or
disposition of shares of stock listed and traded through a local stock
exchange — 1/4 of 1% based on the gross selling price of the share or
shares of stock.
(D)
Intercorporate Dividends. — Dividends received by a resident foreign
corporation from a domestic corporation liable to tax under this Code
shall not be subject to tax under this Title.
(b)
Nonresident foreign corporations. — (1) In general. — Unless otherwise
provided, a foreign corporation not engaged in trade or business in the
Philippine shall pay a tax equal to 35% of the gross income received
during each taxable year from all sources within the Philippines such
as interest, dividends, rents, royalties, salaries, premiums (except
reinsurance premiums), annuities, emoluments or other fixed or
determinable annual, periodical or casual gains, profits and income,
and capital gains, except capital gains subject to tax under
subparagraph 5(C).
(2)
Nonresident cinematographic film owners, lessors, or distributors. —
Cinematographic film owners, lessors, or distributors shall pay a tax
of 25% of their gross income from all sources within the Philippines.
(3)
Nonresident owners of vessels chartered by Philippine nationals. —
Rentals, lease and charter fees derived by nonresident owners of
vessels chartered by Philippine nationals and which charter or lease
has been duly approved by the Maritime Industry Authority shall be
subject to a 4.5% tax.
(4)
Nonresident lessors of aircrafts, machineries and other equipment. —
Rentals, charter and other fees derived by nonresident lessors of
aircrafts, machineries and other equipment shall be subject to a tax of
not less than 5% but not more than 10% to be fixed and determined by
the President upon recommendation of the Minister of Finance: Provided,
That the rate of 7-1/2% shall be imposed on such rentals, charter and
other fees until such time as the President shall have prescribed the
rates appropriate for each category of property.
(5) Tax on
certain incomes received by nonresident foreign corporations. — (A)
Interest on foreign loans contracted on or after August 1, 1986 shall
be subject to a 20% tax;
(B)
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 Sec. 51(a) of the
National Internal Revenue Code, as amended, 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 subparagraph;
(C) Capital
gains realized from sale, exchange or disposition of shares of stocks
in any domestic corporation shall be subject to tax as follows:
(i)
Net capital gains as defined in Sec. 34(a) (2) realized during each
taxable year from sale or exchange or disposition of shares of stocks
not traded through a local stock exchange:
Not over
P100,000 10%
Over P100,000
20%
(ii) Capital
gains presumed to have been realized from the sale, exchange or
disposition of shares of stock listed and traded through a local stock
exchange — 1/4 of 1% based on the gross selling price of the share or
shares of stock.”
Sec. 7. Sec. 26 of the National Internal
Revenue Code, as amended is hereby repealed.
Sec. 8. Sec. 27 of the National Internal
Revenue Code, as amended, is hereby further amended by adding a new
sub-section (1) to the first paragraph thereof as follows:
“(1)
Government educational institution.”
Sec. 9. Sec. 28 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
28. Taxable Income. — The term ‘taxable income’ means
the pertinent items of gross income specified in this Code less the
deductions, if any, authorized by such types of income by this Code or
other special laws: Provided, That for purposes of Section s 21(b)
‘taxable income’ means gross income from all sources without the
Philippines less the deductions allowed in Sec. 30(m).”
Sec. 10. Sec. 29 of the National Internal
Revenue Code, as amended, is hereby further amended to read as
follows:
“Sec.
29. Gross Income. — (a) General definition. — Gross
income means all income from whatever source derived, including (but
not limited to) the following items:
(1)
Compensation for services, including fees, commissions, and similar
items;
(2) Gross
income derived from business;
(3) Gains
derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Annuities;
(9) Prizes and
winnings;
(10) Pensions;
and
(11) Partner’s
distributive of the gross income of general professional partnership.
(b)
Exclusions from gross income. — The following items shall not be
included in gross income and shall be exempt from taxation under this
Title:
(1)
Life insurance. — The proceeds of life insurance policies paid to the
heirs of beneficiaries upon the death of the insured, whether in a
single sum or otherwise, but if such amounts are held by the insurer
under an agreement to pay interest thereon, the interest payments shall
be included in gross income.
(2) Amount
received by insured as return of premium. — The amount received by the
insured, as a return of premiums paid by him under life insurance,
endowment, or annuity contracts, either during the term or at the
maturity of the term mentioned in the contract or upon surrender of the
contract.
(3) Gifts,
bequest, and devises. — The value of property acquired by gift,
bequest, devise, or descent; but the income from such property shall be
included in gross income.
(4) Interest
on Government securities. — Interest upon the obligations of the
Government of the Republic of the Philippines or any political
subdivisions thereof, but in the case of such obligations issued after
the approval of this Code, only to the extent provided in the act
authorizing the issue thereof.
(5)
Compensation for injuries of sickness. — Amounts received, through
Accident or Health Insurance or under Workmen’s Compensation Acts, as
compensation for professional injuries or sickness, plus the amounts of
any damages whether by suit or agreement on account of such injuries or
sickness.
(6) Income
exempt under treaty. — Income of any kind, to the extent required by
any treaty obligation binding upon the Government of the Philippines.
(7) Retirement
benefits, pensions, gratuities, etc. — (A) Retirement benefits received
by officials and employees of private firms, whether individual or
corporate, in accordance with a reasonable private benefit plan
maintained by the employer: Provided, That the retiring official or
employee has been in the service of the same employer for at least 10
years and is not less than 50 years of age at the time of his
retirement: Provided, further, That the benefits granted under this
subparagraph shall be available of by an official or employee only
once. For purposes of this subsection, the term ‘reasonable private
benefit plan’ means a pension, gratuity, stock bonus or profit-sharing
plan maintained by an employer for the benefit of some or all of his
officials or employees, wherein contributions are made by such employer
for officials or employees, or both, for the purpose of distributing to
such officials and employees the earnings and principal of the fund
thus accumulated, and wherein it is provided in said plan that at no
time shall any part of the corpus or income of the fund be used for, or
delivered to, any purpose other than for the exclusive benefit of the
said officials and employees.
(B) Any amount
received by an official or employee or by his heirs from the employer
as a consequence of separation of such official or employee from the
service of the employer due to death, sickness or other physical
disability or of any cause beyond the control of the said official or
employee.
(C) The
provisions of any existing law to the contrary notwithstanding, social
security benefits, retirement gratuities, pensions and other similar
benefits received by resident or nonresident citizens of the
Philippines or aliens who come to reside permanently in the Philippines
from foreign government agencies and other institutions, private or
public.
(D) Payments
of benefits due or to become due to any person residing in the
Philippines under the laws of the United States administered by the
United States Veterans Administration.
(E) Payments
of benefits made under the Social Security Act of 1954, as amended.
(F) Benefits
received from the GSIS and the retirement gratuity received by
Government officials and employees.
(8)
Miscellaneous items. —
(A)
Income received from their investments in the Philippines in loans,
stocks, bonds or other domestic securities, or from interest on their
deposits in banks in the Philippines by (i) foreign governments, (ii)
financing institutions owned, controlled, or enjoying refinancing from
them and (ii) international or regional financing institutions
established by governments.
(B) Income
derived from any public utility or from the exercise of any essential
governmental function accruing to the Government of the Philippines or
to any political subdivision thereof.
(C) Income
derived as rewards under Sec. 316 of this Code, as amended.
(D) Interest
earned from deposits maintained with a bank under the expanded foreign
currency deposit system.
(E) Prizes and
awards made primarily in recognition of religious, charitable,
scientific, educational, artistic, literary, or civic achievement but
only if:
(i)
the receipt was selected without any action on his part to enter the
contest or proceeding; and
(ii) the
recipient is not required to render substantial future services as a
condition to receiving the prize or award.
Sec. 11. Sec. 30 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
30. Deductions from gross income. — In computing
taxable income subject to tax under Sec. 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.
In the case of an individual,
the optional standard deduction under paragraph (k) shall be allowed in
lieu of itemized deductions under said paragraphs (a) to (i). In
addition, the appropriate personal and additional exemptions allowed
under paragraph (1) made by claimed by an individual whose income is
subject to tax under Sec. 21(a): Provided, That no deductions other
than the deduction provided in paragraph (1) may be allowed from
compensation income arising from personal services rendered under an
employer-employee relationship.
(a)
Expenses. — (1) Business expenses.
(A)
In general. — All ordinary and necessary expenses paid or incurred
during the taxable year in carrying on any trade or business, including
a reasonable allowance for salaries or other compensation for personal
services as actually rendered; travelling expenses while away from home
in the pursuit of a trade, profession or business, rentals or other
payments required to be made as a condition to the continued use or
possession, for the purpose of the trade, profession or business, of
property to which the taxpayer has not taken or is not taking title or
in which he has no equity.
(2)
Expenses allowable to private educational institutions. — In addition
to the expenses allowable as deductions under subparagraph (a) (1) (A)
above, a private educational institutions, referred to under Sec. 24(b) of this Code, may at its option elect either (A) to deduct
expenditures otherwise considered as capital outlays of depreciable
assets incurred during the taxable year for the expansion of school
facilities or (B) to deduct allowance for depreciation thereof under
paragraph (f) of this section.
(b) Interest.
— (1) In general. — The amount of interest paid or accrued within a
taxable year on indebtedness in connection with the taxpayer’s
profession, trade or business, except on indebtedness incurred or
continued to purchase or carry obligation the interest upon which is
exempt from taxation as income under this Title.
(2)
No deduction shall be allowed in respect of interest under the
succeeding sub-paragraphs:
(i)
If within the taxable year an individual taxpayer reporting income on
the cash basis incurs an indebtedness on which an interest is paid in
advance through discount or otherwise: Provided, That such interest
shall be allowed as a deduction in the year the indebtedness is paid:
and Provided, further, That if the indebtedness is payable in periodic
amortizations, the amount of interest which corresponds to the amount
of the principal amortized or paid during the year shall be allowed as
deduction in such taxable year.
(ii) If both
the taxpayer and the person to whom the payment has been made or is to
be made are persons specified under Sec. 31 (b).
(iii) If the
indebtedness is incurred to finance petroleum exploration.
(c)
Taxes. — (1) In general. — Taxes paid or accrued within the taxable
year in connection with the taxpayer’s profession, trade or business,
except:
(A)
The income tax provided for under this Title;
(B) Income,
war profits, and excess profits taxes imposed by authority of any
foreign country; but this deduction shall be allowed in the case of a
taxpayer who does not signify in his return his desire to have to any
extent the benefits of paragraph (3) of this subsection (relating to
credits for taxes of foreign countries);
(C) Estate and
gift taxes;
(D) Taxes
assessed against local benefits of a kind tending to increase the value
of the property assessed; and
(E) Electric
energy consumption tax imposed by Batas Pambansa Blg. 36.
(2)
Limitations on deductions. — (A) In the case of a nonresident alien
individual and a foreign corporation, the deductions for taxes provided
in paragraph (1) of this subsection (c) shall be allowed only if and to
the extent that they are connected with income from sources within the
Philippines; and
(B)
In the case of a citizen of a foreign country residing in the
Philippines whose income from sources within such foreign country is
not taxable under this Title, only that portion of the taxes paid to
such foreign country which corresponds to his taxable income under this
Title shall be allowed as deduction.
(3) Credit
against tax for taxes of foreign countries. — If the taxpayers
signifies in his return his desire to have the benefits of this
paragraph, the tax imposed by this Title shall be credited with:
(A)
Citizen and domestic corporation. — In the case of a citizen of the
Philippines and of a domestic corporation, the amount of any income,
war profits, and excess profits taxes paid or accrued during the
taxable year to any foreign country:
(B) Alien
resident of the Philippines. — In the case of an alien resident of the
Philippines, the amount of any such taxes paid or accrued during the
taxable year to any foreign country; if the foreign country of which
such alien resident is a citizen or subject, in imposing such taxes
allows a similar credit to citizens of the Philippines residing in such
country; and
(C)
Partnerships and estate. — In the case of any such individual who is a
member of a general professional partnership or a beneficiary of an
estate or trust, his proportionate share of such taxes of the general
professional partnership or the estate or trust paid or accrued during
the taxable year to a foreign country, if his distribute share of the
income of such partnership or trust is reported for taxation under this
Title.
Nonresident alien individuals
and foreign corporations shall not be allowed the credits against the
tax for the taxes of foreign countries allowed under this paragraph.
(4)
Limitations on credit. — The amount of the credit taken under this
section shall be subject to each of the following limitations:
(A)
The amount of the credit in respect to the tax paid or accrued to any
country shall not exceed the same proportion of the tax against which
such credit is taken, which the taxpayer’s taxable income from sources
within such country under this Title bears to his entire taxable income
for the same taxable year; and
(B) The total
amount of the credit shall not exceed the same proportion of the tax
against which such credit is taken, which the taxpayer’s taxable income
from sources without the Philippines taxable under this Title bears to
his entire taxable income for the same taxable year.
(5)
Adjustments on payment of accrued taxes. — If accrued taxes when paid
differ from the amounts claimed as credits by the taxpayers, or if any
tax paid is refunded in whole or in part, the taxpayer shall notify the
Commissioner, who shall redetermine the amount of the tax for the year
or years affected, and the amount of tax due upon such redetermination,
if any, shall be paid by the taxpayer upon notice and demand by the
Commissioner, or the amount of tax overpaid, if any, shall be credited
or refunded to the taxpayer. In the case of such a tax accrued but not
paid, the Commissioner as a condition precedent to the allowance of
this credit may require the taxpayer to give a bond with sureties
satisfactory to and to be approved by the Commissioner in such sum as
he may require, conditioned upon the payment by the taxpayer of any
amount of tax found due upon any such redetermination. The bond herein
prescribed shall contain such further conditions as the Commissioner
may require.
(6) Year in
which credit taken. — The credits provided for in paragraph (c) (3)
may, at the option of the taxpayer and irrespective of the method of
accounting employed in keeping his books, be taken in the year in which
the taxes of the foreign country accrued, subject, however, to the
conditions prescribed in paragraph (c) (5) . If the taxpayer elects to
take such credits in the year in which the taxes of the foreign country
accrued, the credits for all subsequent years shall be taken upon the
same basis, and no portion of any such taxes shall be allowed as a
deduction in the same or any succeeding year.
(7) Proof of
credits. — The credits provided in paragraph (c) (3) shall be allowed
only if the taxpayer establishes to the satisfaction of the
Commissioner (A) the total amount of income derived from sources
without the Philippines, (B) the amount of income derived from each
country, the tax paid or accrued to which is claimed as a credit under
said paragraph, such amount to be determined under rules and
regulations prescribed by the Minister of Finance, and (C) all other
information necessary for the verification and computation of such
credits.
(8) Taxes of
foreign subsidiary. — For purposes of this subsection a domestic
corporation, which owns a majority of the voting stock of a foreign
corporation from which it receives dividends in any taxable year shall
be deemed to have paid the same proportion of any income, war profits,
or excess profits taxes paid by such foreign corporation to any foreign
country upon or with respect to the accumulated profits of such foreign
corporation from which such dividends were paid which the amount of
such dividend bears to the amount of such accumulated profits:
Provided, That the amount of tax deemed to have been paid under this
subsection shall in no case exceed the same proportion of the tax
against which credit is taken which the amount of such dividends bears
to the amount of the entire taxable income of the domestic corporation
in which such dividends are included. The term ‘accumulated profits’
when used in this subsection in reference to a foreign corporation,
means the amount of its gains, profits, or income in excess of the
income, war profits, and excess profits taxes imposed upon or with
respect to such profits or income; and the Commissioner shall have full
power to determine from the accumulated profits of what year or years
such dividends were paid, treating dividends paid in the first 60 days
of any year as having been paid from the accumulated profits of the
preceding year or years (unless to his satisfaction shown otherwise),
and in other respects treating dividends as having been paid from the
most recently accumulated gains, profits, or earnings. In the case of a
foreign corporation, the income, war profits, and excess profits taxes
of which are determined on the basis of an accounting period of less
than one year, the word ‘year’ as used in this subsection shall be
construed to mean such accounting period.
(9) Taxes of
shareholder paid by corporation. — The deduction for taxes allowed by
paragraph (c) shall be allowed to a corporation in the case of taxes
imposed upon a shareholder of the corporation upon his interest as
shareholder which are paid by the corporation without reimbursement
from the shareholder, but in such cases no deduction shall be allowed
the shareholder for the amount of such taxes.
(d)
Losses. — (1) By individuals. — In the case of an individual, losses
actually sustained during the taxable year and not compensated for by
insurance or otherwise:
(A)
If incurred in trade, profession, or business;
(B) If
incurred in any transaction entered into for profit, though not
connected with the trade or business;
(C) Of
property connected with the trade or business, if the loss arises from
fires, storms, shipwreck, or other casualties, or from robbery, theft,
or embezzlement. The Minister of Finance, upon recommendation of the
Commissioner of Internal Revenue, is hereby authorized to promulgate
rules and regulations prescribing, among other things, the time and
manner by which the taxpayer shall submit a declaration of loss
sustained from casualty or from robbery, theft, or embezzlement during
the taxable year: Provided however, That the time to be so prescribed
in the regulations shall not be less than 30 days no more than 90 days
from the date of the occurrence of the casualty or robbery, theft, or
embezzlement giving rise to the loss.
(D) No loss
shall be allowed as a deduction under this paragraph if at the time of
the filing of the return, such loss has been claimed as a deduction for
estate tax purposes in the estate tax return.
(2) By
corporation. — In the case of a corporation, all losses actually
sustained and charged off within the taxable year and not compensated
for by insurance or otherwise.
(3)
Proof of loss. — In the case of a nonresident alien individual or
foreign corporation, the losses deductible are those actually sustained
during the year incurred in business or trade conducted within the
Philippines, and losses actually sustained during the year in
transactions entered into for profit in the Philippines although not
connected with their business or trade, when losses are not compensated
for by insurance or otherwise. The Minister of Finance, upon
recommendation of the Commissioner of Internal Revenue, is hereby
authorized to promulgate rules and regulations prescribing, among other
things, the time and manner by which the taxpayer shall submit a
declaration of loss sustained from casualty or from robbery, theft, or
embezzlement during the taxable year: Provided, that the time to be so
prescribed in the regulations shall not be less than 30 days nor more
than 90 days from the date of the occurrence of the casualty or
robbery, theft, or embezzlement giving rise to the loss.
(4) Capital
losses. — (A) Limitations. — Losses from sales or exchanges of capital
assets shall be allowed only to the extent provided in Sec. 34.
(B) Securities
becoming worthless. — If securities as defined in Sec. 20 become
worthless during the taxable year and are capital assets, the loss
resulting therefrom shall, for the purposes of this Title, be
considered as a loss from the sale or exchange, on the last day of such
taxable year, of capital assets.
(5) Losses on
wash sales of stock or securities. — Losses on ‘wash sales’ of stock or
securities as provided in Sec. 33.
(6) Wagering
losses. — Losses from wagering transactions shall be allowed only to
the extent of the gains from such transactions.
(7)
Abandonment losses. — (A) In the event a contract area where petroleum
operations are undertaken is partially or wholly abandoned, all
accumulated exploration and development expenditures pertaining thereto
shall be allowed as a deduction: Provided, that accumulated
expenditures incurred in that area prior to January 1, 1979, shall be
allowed as a deduction only from any income derived from the same
contract area. In all cases, notices of abandonment shall be filed with
the Commissioner of Internal Revenue.
(B) In case a
producing well in subsequently abandoned, the unamortized costs
thereof, as well as the undepreciated costs of equipment directly used
therein shall be allowed as a deduction in the year such well,
equipment or facility is abandoned by the contractor: Provided, that if
such abandoned well is reentered and production is resumed, or if such
equipment of facility is restored into service, the said costs shall be
included as part of gross income in the year of resumption or
restoration and shall be amortized or depreciated, as the case may be.
(e) Bad Debts.
— (1) In general. — Debts due to the taxpayer actually ascertained to
be worthless and charged off within the taxable year except those not
connected with profession, trade or business and those sustained in a
transaction entered into between parties mentioned under Sec. 31(b)
of this Code.
(2) Securities
becoming worthless. — If securities as defined in Sec. 20 are
ascertained to be worthless and charged off within the taxable year and
are capital assets, the loss resulting therefrom shall, in the case of
a taxpayer other than a bank or trust company incorporated under the
laws of the Philippines a substantial part of whose business is the
receipt of deposits, for the purpose of this Title, be considered as a
loss from the sale or exchange, on the last day of such taxable year of
capital assets.
(f)
Depreciation. (1) General rule. — There shall be allowed as a
depreciation deduction a reasonable allowance for the exhaustion, wear
and tear (including reasonable allowance for obsolescence) of property
used in the trade or business. In the case of property held by any
person for life with remainder to another person, the deduction shall
be computed as if the life tenant were the absolute owner of the
property and shall be allowed to the life tenant. In the case of
property held in trust, the allowable deduction shall be apportioned
between the income beneficiaries and the trustees in accordance with
the pertinent provisions of the instrument creating the trust, or in
the absence of such provisions, on the basis of the trust income
allowable to each.
(2) Use of
certain methods and rates. — The term ‘reasonable allowance’ as used in
the preceding paragraph shall include (but not limited to) an allowance
computed in accordance with the regulations prescribed by the Minister
of Finance, under any of the following methods:
(A)
The straight line method.
(B) Declining
balance method, using a rate not exceeding twice the rate which would
have been used had the annual allowance been computed under the method
described in paragraph (f) (1).
(C) The sum of
the years-digits method, and
(D) Any other
method which may be prescribed by the Minister of Finance upon
recommendation of the Commissioner of Internal Revenue.
(3)
Agreement as to useful life on which depreciation rate is based. —
Where under regulations prescribed by the Minister of Finance, the
taxpayer and the Commissioner of Internal Revenue have entered into an
agreement in writing specifically dealing with the useful life and rate
of depreciation of any property, the rate so agreed upon shall be
binding on both the taxpayer and the Minister of Finance in the absence
of facts and circumstances not taken into consideration in the adoption
of such agreement. The responsibility of establishing the existence of
such facts and circumstances shall rest with the party initiating the
modification. Any change in the agreed rate and useful life specified
in the agreement shall not be effective for taxable years before the
taxable year in which the notice in writing by certified mail or
registered mail is served by the party to the agreement initiating such
change.
(4)
Depreciation of properties used in petroleum operations. — An allowance
for depreciation in respect to all properties directly related to
production of petroleum initially placed in service in a taxable year
under the straight-line or double-declining balance method of
depreciation at the option of the service contractor. However, if the
service contractor initially elects the double-declining method, it may
at any subsequent date, shift to the straight-line method. The useful
life of properties used in or related to production of petroleum shall
be 10 years or such shorter life as may be permitted by the
Commissioner of Internal Revenue.
Properties not used directly in
the production of petroleum shall be depreciated under the straight-
line method on the basis of an estimated useful life of 5 years.
(5)
Depreciation deductible by nonresident aliens or foreign corporations.
— In the case of a nonresident alien individual or foreign corporation,
a reasonable allowance for the deterioration of property arising out of
its use or employment or its non-use in the business or trade shall be
permitted only when such property is located within the Philippines.
(g) Depletion
of oil and gas wells and mines. —
(1)
In general. — In the case of oil and gas wells and mines, a reasonable
allowance for depletion or amortization computed in accordance with the
cost depletion motion shall be granted under rules and regulations to
be prescribed by the Minister of Finance: Provided, That when the
allowance shall equal the capital invested no further allowance shall
be granted: Provided, further, that after production in commercial
qualities has commenced, certain intangible exploration and development
drilling costs (A) shall be deductible in the year incurred if such
expenditures are incurred for non-producing wells or (b) shall be
deductible in full in the year paid or incurred or at the election of
the taxpayer, may be capitalized and amortized if such expenditures
incurred are for producing wells in the same contract area.
Intangible costs in petroleum
operations refer to any costs incurred in petroleum operations refer in
itself has no salvage value and which is incidental to and necessary
for the drilling of wells and preparation of wells for the production
of petroleum: Provided, That said cost shall not pertain to the
acquisition or improvement of property of a character subject to the
allowance for depreciation except that the allowances for depreciation
on such property, shall be deductible under this subsection.
Any intangible exploration,
drilling and development expenses allowed as a deduction in computing
taxable income during the year shall not be taken into consideration in
computing the adjusted cost basis for the purpose of computing
allowable cost depletion.
(2) Election
to deduct exploration and development expenditures. — In computing
taxable income, the taxpayer may, at his option, deduct exploration and
development expenditures accumulated as cost or adjusted basis for cost
depletion as of January 1, 1978, as well as exploration and development
expenditures paid or incurred during the taxable year: Provided, That
the total amount deductible for exploration and development
expenditures shall not exceed twenty-five percent (25%) of the taxable
income from mining operations computed without the benefit of any tax
incentives under existing laws This subparagraph shall not apply to
expenditures for the acquisition or improvement of property of a
character which is subject to the allowance for depreciation under
Sec. 30(f) (1) of this Code but the allowance for depreciation
thereon shall be treated as expenditures.
The election by the taxpayer to
deduct the exploration and development expenditures is irrevocable and
shall be binding in succeeding taxable years.
In no case shall this paragraph
apply with respect to amounts paid or incurred for the exploration and
development of oil and gas. The term ‘exploration expenditures’ means
expenditures paid or incurred for the purpose of ascertaining the
existence, location, extent, or quality of any deposit of ore or other
mineral, and paid or incurred before the beginning of the development
stage of the mine deposit. The term ‘development expenditures’ means
expenditures paid or incurred during the development stage of the mine
or other natural deposits. The development stage of a mine or other
natural deposit shall begin at the time when deposits of ore or other
minerals are shown to exist in sufficient commercial quantity and
quality and shall end upon commencement of actual commercial
extraction.
(3) Depletion
of oil and gas wells and mines deductible by a nonresident alien
individual or foreign corporation. — In the case of a nonresident alien
individual or a foreign corporation, allowance for depletion of oil and
gas wells or mines under subparagraph (1) shall be authorized only in
respect to oil and gas wells or mines located within the Philippines.
(h)
Charitable and other contributions. — (1) In general. — Contributions
or gifts actually paid or made within the taxable year to, or for the
use of the Government of the Philippines or any of its agencies or any
political subdivision thereof for exclusively public purposes, or to
domestic corporations or associations organized and operated
exclusively for religious, charitable, scientific, youth and sports
development, cultural or educational purposes or for the rehabilitation
of veterans, or to social welfare institutions, no part of the net
income of which inures to the benefit of any private stockholder or
individual in an amount not in excess of 6% in the case of an
individual, and 3% in the case of a corporation, of the taxpayer’s
taxable income derived from business as computed without the benefit of
this and the following subparagraphs.
(2)
Contributions deductible in full. — Notwithstanding the provisions of
the preceding subparagraph, donations to the following institutions or
entities shall be deductible in full:
(A)
Donations to the Government. — Donations to the Government of the
Philippines or to any of its agencies or political subdivisions
including fully-owned government corporations exclusively to finance,
to provide for, or to be used in undertaking priority activities in
education, health, youth and sports development, human settlements,
science and culture, and in economic development according to a
national priority plan to be determined by the NEDA, in consultation
with appropriate government agencies, including its regional
development councils and private philanthropic persons and
institutions: Provided, That any donation which is made to the
Government or to any of its agencies or political subdivisions not in
accordance with the said annual priority plan shall be subject to the
limitations prescribed in subparagraph (1) of this section.
(B) Donations
to certain foreign institutions or international organizations. —
Donations to foreign institutions or international organizations which
are fully deductible in pursuance of or in compliance with agreements,
treatise, or commitments entered into by the Government of the
Philippines and the foreign institutions or international organizations
or in pursuance of special laws.
(C) Donations
to certain private foundations. — The term ‘private foundation’ means a
non-profit domestic corporation:
(i)
Organized and operated exclusively for scientific, research,
educational, character-building and youth and sports development,
health, social welfare, cultural or charitable purposes, or a
combination thereof, no part of the net income of which inures to the
benefit of any private individual;
(ii) Which not
later than the 15th day of the third month after the close of the
foundation’s taxable year in which contributions are received, makes
utilization directly for the active conduct of the activities
constituting the purpose or function for which it is organized and
operated, unless an extended period is granted by the Minister of
Finance in accordance with the rules and regulations to be promulgated;
(iii) The
level of administrative expense of which, shall on an annual basis
conform with the rules and regulations to be prescribed by the Minister
of Finance but in no case to exceed thirty percent (30%) of the total
expenses; and
(iv) The
assets of which in the event of dissolution would be distributed to
another non-profit domestic corporation organized for similar purpose
or purposes, or to the State for public purpose, or would be
distributed by a court to another organization to be used in such
manner as in the judgment of said court shall best accomplish the
general purpose for which the dissolved organization was organized.
Subject to such terms and
conditions as may be prescribed by the Minister of Finance, the term
‘utilization’ means:
(i)
Any amount in cash or in kind (including administrative expenses) paid
or utilized to accomplish one or more purposes for which the private
foundation was created or organized.
(ii) Any
amount paid to acquire an asset used (or held for use) directly in
carrying out one or more purposes for which the foundation was created
or organized.
An amount set aside for specific
project which comes within one or more purposes of the foundation may
be treated as a utilization, but only if at the time such amount is set
aside, the private foundation establishes to the satisfaction of the
Commissioner of Internal Revenue that the amount will be paid for the
specific project within a period to be prescribed in regulations to be
promulgated by the Minister of Finance, but not to exceed 5 years, and
the project is one which can be better accomplished by setting aside
such amount than by immediate payment of funds.
(3)
Valuation. — Properties other than cash donated shall be valued in
accordance with the rules and regulations prescribed by the Minister of
Finance in consultation with appropriate government agencies.
(4) Proof of
deductions. — Contributions or gifts shall be allowable as deduction
only if verified under the regulations prescribed by the Minister of
Finance.
(i) Pension
trusts. — An employer establishing or maintaining a pension trust to
provide for the payment of reasonable pensions to his employees shall
be allowed as a deduction (in addition to the contributions to such
trust during the taxable year to cover the pension liability accruing
during the year, allowed as a deduction under subsection (a) (1) of
this section) a reasonable amount transferred or paid into such trust
during the taxable year in excess of such contributions, but only if
such amount (1) has not therefore been allowed as deduction and (2) is
apportioned in equal parts over a period of 10 consecutive years
beginning with the year in which the transfer or payment is made.
(j) Additional
requirement for deductibility of certain payments. — Any amount paid or
payable which is otherwise deductible from, or taken into account in
computing gross income for which depreciation or amortization may be
allowed under this section, shall be allowed as a deduction only if it
is shown that the tax required to be deducted and withheld therefrom
has been paid to the Bureau of Internal Revenue in accordance with this
section, Section s 52 and 84 of this Code.
(k) Optional
standard deduction. — In lieu of the deductions allowed under the
preceding paragraphs of this section an individual subject to tax under
this Sec. 21(a) other than a nonresident alien, may elect a standard
deduction in an amount not exceeding ten percent (10%) of his gross
income. Unless the taxpayer signifies in his return his intention to
elect the optional standard deduction, he shall be considered as having
availed himself of the deductions allowed in the preceding subsection.
The Minister of Finance shall prescribe the manner of the election.
Such election when made in the return shall be irrevocable for the
taxable year for which the return is made.
Notwithstanding the provisions
of the preceding paragraphs, the Minister of Finance upon
recommendation of the Commissioner, after a public hearing shall have
been held for this purpose may prescribe by regulations, limitations or
ceilings for any of the itemized deductions under paragraphs (a) to (i)
of this section: Provided, That for the purpose of determining such
ceilings or limitations, the Minister of Finance shall consider the
following factors: (1) adequacy of the prescribed limits on the actual
expenditure requirements of each particular industry; and (2) effects
of inflation on expenditures levels: Provided, further, that no
ceilings shall further be imposed on items of expense already subject
to ceilings under present law.
(l) Personal
exemptions allowable to individuals. — (1) Basic personal exemptions. —
For the purpose of determining the tax provided in Sec. 21(a) of
this Title, there shall be allowed a basic personal exemption as
follows:
For
single individual or
married
individual judicially
decreed as
legally separated
with no
qualified dependents — P6,000
For head of a
family
— P7,500
For married
individual — P12,000
Provided,
That husband and wife electing to compute their income tax separately
shall be entitled to a personal exemption of P6,000 each.
For purposes of this paragraph,
the term ‘Head of Family’ means an unmarried or legally separated man
or woman with one or both parents, or with one or more brothers or
sisters, or with one or more legitimate, recognized natural or legally
adopted children living with and dependent upon him for their chief
support, where such brothers or sisters or children are not more than
twenty-one (21) years of age, unmarried and not gainfully employed or
where such children, brothers or sisters, regardless of age are
incapable of self-support because of mental or physical defect.
(2)
Additional exemption
(A)
Taxpayers with dependents. — A married individual or a head of family
shall be allowed an additional exemption of three thousand pesos
(P3,000) for each dependent: Provided, that the total number of
dependents for which additional exemptions may be claimed shall not
exceed four dependents: Provided, further, that an additional exemption
of One thousand pesos (P1,000) shall be allowed for each child who
otherwise qualified as dependent prior to January 1, 1980: and
Provided, finally, That the additional exemption for dependents shall
be claimed by only one of the spouses in the case of married
individuals electing to compute their income liabilities separately.
In case of legally separated
spouses, additional exemptions may be claimed only by the spouse who
was awarded custody of the child or children: Provided, That the total
amount of additional exemptions that may be claimed by both shall not
exceed the maximum additional exemptions herein allowed.
For the purposes of this
paragraph, a dependent means a legitimate, recognized natural or
legally adopted child chiefly dependent upon and living with the
taxpayer if such dependent is not more than twenty-one (21) years of
age, unmarried and not gainfully employed or if such dependent,
regardless of age, is incapable of self-support because of mental or
physical defect.
(B) Taxpayers
with gross compensation income not exceeding P20,000. — A special
additional exemption of Four thousand pesos (P4,000) shall be allowed
if the gross income of a single, married or legally separated
individual, or head of family does not exceed the aggregate amount of
P20,000: Provided, That in case married individuals elect to compute
their income tax separately, the spouse claiming the additional
exemption for dependent children shall be entitled to the special
additional exemption of P4,000.
(3)
Change of status. — If the taxpayer married or should have additional
dependents as defined above during the taxable year, the taxpayer may
claim the corresponding personal and additional exemption as the case
may be, in full for such year.
If the taxpayer should die
during the taxable year, his estate may still claim the personal and
additional exemptions for himself and his dependents as if he died at
the close of such year.
If the spouse or any of the
dependents should die or if any of such dependents becomes twenty-one
years old during the taxable year, the taxpayer may still claim the
same exemptions as if they died, or if such dependents become
twenty-one years old at the close of such year.
(4) Allowances
for adjustment. — Upon the recommendation of the Minister of Finance,
the President shall automatically adjust not more often than once every
three years, the personal and additional exemptions taking into
account, among others, the movement in consumer price indices, levels
of minimum wages, and bare subsistence levels.
(5) Personal
exemptions allowable to nonresident alien individuals. — A nonresident
alien individual engaged in trade or business in the Philippines shall
be entitled to personal exemption in the amount equal to the exemptions
allowed by the income tax law of the country of which he is a subject
or citizen to citizens of the Philippines not residing in such country,
but not to exceed the amount fixed in this section as exemption for
citizens or residents of the Philippines: Provided, That said
nonresident alien should file a true and accurate return of the total
income received by him from all sources in the Philippines, as required
by this Title.
(m)
Exemption and deduction allowable from foreign source income derived by
nonresident citizens. — In computing the taxable income subject to tax
under Sec. 21 (b) the following deductions shall be allowed from
gross income derived by a non-resident citizen from source without the
Philippine:
(1)
An allowance for personal exemption in the amount of two thousand
dollars (U. S. $2,000), if the person making the return is a single or
a married person legally separated from his or her spouse; or four
thousand dollars (U.S. $4,000), if the person making the return is
married or head of family, as defined in Sec. 30 of this Code; and
(2) The total
amount of the national income tax actually paid to the government of
the foreign country of his residence. For this purpose, every
nonresident citizen availing of this deduction shall attach to his
Philippine income tax return a copy of the income tax return he has
filed with the government of the foreign country of his residence.”
Sec. 12. Sec. 34, paragraphs (g) and (h) of the
National Internal Revenue Code, as amended, are hereby repealed.
Sec. 13. Sec. 35, paragraphs (a) and (b) of the
National Internal Revenue Code, as amended, are hereby amended to read
as follows:
“Sec.
35. Determination of amount of and recognition of
gain or loss. —
(a)
Computation of gain or loss. — The gain from the sale or other
disposition of property shall be the excess of the amount realized
therefrom over the basis or adjusted basis for determining gain and the
loss shall be the excess of the basis or adjusted basis for determining
loss over the amount realized. The amount realized from the sale or
other disposition of property shall be the sum of money received plus
the fair market value of the property (other than money) received.
(b) Basis for
determining gain or loss from sale or disposition of property. — The
basis of property shall be — (1) The cost thereof in the case of
property acquired on or before March 1, 1913, if such property was
acquired by purchase; or
(2) The fair
market price or value as of the date of acquisition if the same was
acquired by inheritance; or
(3) If the
property was acquired by gift the basis shall be the same as if it
would be in the hands of the donor or the last preceding owner by whom
it was not acquired by gift, except that if such basis is greater than
the fair market value of the property at the time of the gift, then for
the purpose of determining loss the basis shall be such fair market
value; or
(4) If the
property, other than capital asset referred to in Sec. 21(e), was
acquired for less than an adequate consideration in money or money’s
worth, the basis of such property is (i) the amount paid by the
transferee for the property of (ii) the transferor’s adjusted basis at
the time of the transfer whichever is greater.
(5) The basis
as defined in paragraph (c) (5) of this section if the property was
acquired in a transaction where gain or loss is not recognized under
paragraph (c) (2) of this section.”
Sec. 14. Sec. 37, paragraph (b) of the National
Internal Revenue Code, as amended, is hereby further amended to read as
follows:
“(b)
Taxable income from sources within the Philippines. — (1) General rule.
— From the items of gross income specified in subsection (a) of this
section there shall be deducted the expenses, losses, and other
deductions properly allocated thereto and a ratable part of expenses,
interests, losses, and other deductions effectively connected, with the
business or trade conducted exclusively within the Philippines which
cannot definitely be allocated to some items or class of gross income:
Provided, That such items of deductions shall be allowed only if fully
substantiated by all the information necessary for its calculation. The
remainder, if any, shall be treated in full as taxable income from
sources within the Philippines.
(2) Exception.
— No deductions for interest paid or incurred abroad shall be allowed
from the item of gross income specified in subsection (a) unless
indebtedness was actually incurred to provide funds for use in
connection with the conduct or operation of trade or business in the
Philippines.”
Sec. 15. Sec. 43 of the National Internal
Revenue Code, as amended, is hereby amended to read as follows:
“Sec.
43. Installment basis. — (a) Sales of dealers in
personal property. — Under regulations prescribed by the Minister of
Finance, a person who regularly sells or otherwise disposes of personal
property on the installment plan may return as income therefrom in any
taxable year that proportion of the installment payments actually
received in that year which the gross profit realized or to be realized
when payment is completed, bears to the total contract price.
(b)
Sales of realty and casual sales of personality. — In the case (1) of a
casual sale or other casual disposition of personal property (other
than property of a kind which would properly be included in the
inventory of the taxpayer if on hand at the close of the taxable year),
for a price exceeding one thousand pesos, or (2) of a sale or other
disposition of real property, if in either case the initial payments do
not exceed twenty-five percent of the selling price, the income may
under regulations prescribed by the Minister of Finance, be returned on
the basis and in the manner above prescribed in this section. As used
in this section the term ‘initial payment’ means the payments received
in cash or property other than evidences of indebtedness of the
purchaser during the taxable period in which the sale or other
disposition is made.
(c) Sales of
real property considered as capital asset by individuals. — An
individual who sells or disposes of real property, considered as
capital asset, and is otherwise qualified to report the gain therefrom
under paragraph (b) may pay the capital gains tax in installments under
regulations to be promulgated by the Minister of Finance.
(d) Change
from accrual to installment basis. — If a taxpayer entitled to the
benefits of subsection (a) elects for any taxable year to report his
taxable income for the year of change or any subsequent year, amounts
actually received during any such year on account of sales or other
dispositions of property made in any prior year shall not be excluded.”
Sec. 16. Sec. 45 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
45. Individual returns. — (a) Requirements — (1)
Except as provided in paragraph (2) of this Section , the following
individuals are required to file an income tax return:
(A)
Every Filipino citizen, whether residing in the Philippines or abroad;
(B) Every
alien residing in the Philippines regardless of whether the gross
income was derived from sources within or without the Philippines; and
(C) Every
nonresident alien engaged in trade or business in the Philippines.
(2)
The following individuals shall not be required to file an income tax
return:
(A)
Individuals whose gross income does not exceed his total personal and
additional exemptions for dependents under Sec. 30: Provided, That a
citizen of the Philippines engaged in business or practice of
profession within or without the Philippines and any alien individual
engaged in business or practice of profession within the Philippines,
shall file an income tax return, regardless of the amount gross income.
(B) Regardless
of the amount of income, the following individuals shall not also be
required to file an income tax return:
(i)
Individuals whose income consists solely of interest, prizes, winnings,
royalties, dividends, share of an individual person in a partnership
referred to under Sec. 21(c);
(ii) Alien
employees of regional or area headquarters of multinational
corporations with respect to income referred to under Sec. 22 (c);
(iii) Aliens
employed by offshore banking units with respect to income under Sec. 22 (c);
(iv) Alien
employees of service contractors and subcontractors engaged in
petroleum exploration in the Philippines with respect to income
referred to under Sec. 22(e); and
(v) Other
individuals not required to file an income tax return, pursuant to
other provisions of this Code and other laws, general or special.
(3)
The income tax return shall be filed in duplicate, and shall set forth
specifically the gross amount of income from all sources, except that
of nonresident aliens engaged in trade or business in the Philippines
which shall contain only such income derived from sources within the
Philippines.
(b) Where to
file. — Except in cases where the Commissioner of Internal Revenue
otherwise permits, the return shall be filed with Revenue District
Officer, Collection Agent, or duly authorized Treasurer of the
Municipality in which such person has his legal residence or principal
place of business in the Philippines, or if there be no legal residence
or place of business in the Philippines, then with the Office of the
Commissioner of Internal Revenue.
(c) When to
file. — (1) The return of any individual specified above shall be filed
on or before the fifteenth day of April of each year covering income
for the preceding taxable year.
(2)
Individuals subject to tax on capital gains:
(i)
From the sale or exchange of shares of stock not traded thru a local
stock exchange as prescribed under Sec. 21(d) (1) shall file a
return within thirty days after each transaction and a final
consolidated return on or before April 15 of each year covering all
stock transactions of the preceding taxable year.
(ii) From the
sale or disposition of real property under Sec. 21(e) shall file a
return within thirty days following each sale or other disposition.
(d)
Husband and Wife. — In the case of married persons, whether citizens,
resident or nonresident aliens, only one return for the taxable year
shall be filed by either spouse to cover the income of both spouses,
but where it is impracticable for the spouses to file one return, each
spouse may file a separate return of income but the returns so filed
shall be consolidated by the Bureau for purposes of verification.
(e) Return of
parent to include income of children. — The income of unmarried minors
derived from property received from a living parent shall be included
in the return of the parent, except (1) when the gift tax has been paid
on such property, or (2) when the transfer of such property is exempt
from gift tax.
(f) Persons
under disability. — If the taxpayer is unable to make his own return,
the return may be made by his duly authorized agent or representative
or by the guardian or other person charged with the care of his person
or property, the principal and his representative or guardian assuming
the responsibility of making the return and incurring penalties
provided for erroneous, false or fraudulent returns.
(g)
Signature presumed correct. — The fact that an individual’s name is
signed to a filed return shall be prima facie evidence for all purposes
that the return was actually signed by him.”
Sec. 17. Sec. 46 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
46. Corporation returns. — (a) Requirements. — Every
corporation, subject to the tax herein imposed, except foreign
corporations not engaged in trade or business in the Philippines shall
render, in duplicate, a true and accurate quarterly income tax return
and final or adjustment return in accordance with the provisions of
Chapter IX of this Title. The return shall be filed by the president,
vice-president or other principal officer, and shall be sworn to by
such officer and by the treasurer or assistant treasurer.
(b) Taxable
year of corporation. — A corporation may employ either calendar year or
fiscal year as a basis for filing its annual income tax return:
Provided, That the corporation shall not change the accounting period
employed without prior approval from the Commissioner of Internal
Revenue in accordance with the provisions of Sec. 41 of this Code.
(c) 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, prescribed, 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.
(d) Return on
capital gains realized from sale of shares of stocks. — Every
corporation deriving capital gains from the sale of exchange of shares
of stock not traded thru a local exchange as prescribed under Section s
24(e) (2) (A), 25(a) (6) (C) (i) and 25 (b) (5) (C) (i), shall file a
return within thirty days after each transaction and a final
consolidated return of all transactions during the taxable year on or
before the fifteenth day of the fourth month following the close of the
taxable year.”
Sec. 18. Sec. 50 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
50. Payment and assessment of income tax for
individuals and corporations. —
(a)
Payments of tax. — (1) In general. — The total amount of tax imposed by
this Title shall be paid by the person subject thereto at the time the
return is filed. In the case of tramp vessels, the shipping agents
and/or the husbanding agents, and in their absence, the captains
thereof are required to file the return herein provided and pay the tax
due thereon before their departure. Upon failure of the said agents or
captains to file the return and pay the tax, the Bureau of Customs is
hereby authorized to hold the vessel and prevent its departure until
proof of payment of the tax is presented or a sufficient bond is filed
to answer for the tax due.
(2)
Installment payment. — When the tax due is in excess of P2,000, the
taxpayer other than a corporation may elect to pay the tax in 2 equal
installments in which case, the first installment shall be paid at the
time the return is filed and the second installment, on or before July
15 following the close of the calendar year. If any installment is not
paid on or before the date fixed for its payment, the whole amount of
the tax unpaid becomes due and payable, together with the delinquency
penalties.
(3)
Installment payment for nonresident citizens. — When the tax due from a
nonresident citizen is in excess of U. S. $200, the taxpayer may elect
to pay the tax in 2 equal installments in which case, the first
installment shall be paid at the time the return is filed and the
second installment, on or before July 15 following the close of the
calendar year. If any installment is not paid on or before the date
fixed for its payment the whole amount of the tax unpaid becomes due
and payable together with the delinquency penalties.
(4) Payment of
capital gains tax. — The total amount of tax imposed and prescribed
under Sec. 21(d) (1), 21(e), (2) (A), 25(a) (6) (C) (i), and 25 (b)
(5) (C) (i) shall be paid on the date the return prescribed therefor is
filed by the person liable thereto: Provided, That if the seller
submits proof of his intention to avail himself to the benefit of
exemption of capital gains under existing special laws, no such
payments shall be required: Provided, further, That in case of failure
to qualify for exemption under such special laws and implementing
rules, the tax due on the gains realized from the original transaction
shall immediately become due and payable, and subject to the penalties
prescribed under applicable provisions of this Code: and Provided,
finally, That if the seller, having paid the tax, submits such proof of
intent within 6 months from the registration of the document
transferring real property, he shall be entitled to a refund of such
tax upon verification of his compliance with the requirements for such
exemption.
In case the taxpayer elects and
is qualified to report the gain by installments under Sec. 43 of
this Code, the tax due from each installment payment shall be paid
within 30 days from the receipt of such payments.
No registration of any document
transferring real property shall be effected by the Register of Deeds
unless the Commissioner of Internal Revenue or his duly authorized
representative has certified that such transfer has been reported and
the tax herein imposed, if any, has been paid.
(b) Assessment
and payment of deficiency tax. — After the return is filed, the
Commissioner of Internal Revenue shall examine it and assess the
correct amount of the tax. The tax or deficiency income tax so
discovered shall be paid upon notice and demand from the Commissioner.
As used in this Chapter, in
respect of a tax imposed by this Title, the term ‘deficiency’ means:
(1)
The amount by which the tax imposed by this Title exceeds the amount
shown as the tax by the taxpayer upon his return; but the amount so
shown on the return shall first be increased by the amounts previously
assessed (or collected without assessment) as a deficiency, and
decreased by the amount previously abated, credited, returned, or
otherwise repaid in respect of such tax; or
(2) If no
amount is shown as the tax by the taxpayer upon his return, or if no
return is made by the taxpayer, then the amount by which the tax
exceeds the amounts previously assessed (or collected without
assessment as a deficiency; but such amounts previously assessed or
collected without assessment shall first be decreased by the amounts
previously abated, credited, returned, or otherwise repaid in respect
of such tax.”
Sec. 19. Sec. 51 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
51. Withholding of tax at source. —
(a)
Withholding of final tax on certain incomes. — The tax imposed or
prescribed by Section s 21(c), 21(d) (2); 22(a) (2), (b), (c), (d), (e);
24(e) (1), (e) (2) (B), (e) (3); and 25(a) (4), (a) (5), (a) (6) (A),
(a) (6) (B), a(6) (C) (ii), (b) (1), (b) (2), (b) (3), (b) (4), (b) (5)
(A), (b) (5) (B), (b) (5) (C) (ii) of this Code on specified items of
income shall be withheld by payor-corporation and/or person and paid in
the same manner and subject to the same conditions as provided in
Sec. 52 of the National Internal Revenue Code as amended.
(b)
Withholding of creditable tax at source. — The Minister of Finance may
upon the recommendation of the Commissioner of Internal Revenue,
require also the withholding of a tax on items of income payable to
persons (natural or juridical) residing in the Philippines by
payor-corporation/persons as provided for by law at the rate of not
less than 2-½% but not more than 35% thereof which shall be
credited against the income tax liability of the taxpayer for the
taxable year.
(c) Tax-free
covenant bond. — In any case where bonds, mortgages, deeds of trust, or
other similar obligations of domestic or resident foreign corporations,
contain a contract or provision by which the obligor agrees to pay any
portion of the tax imposed in this Title upon the obligee or to
reimburse to the obligee for any portion of the tax or to pay the
interest without deduction for any tax which the obligor may be
required or permitted to pay thereon or to retain therefrom under any
law of the Philippines, or any state or country, the obligor shall
deduct and withhold a tax equal to 30% of the interest or other
payments upon those bonds, mortgages, deeds of trust, or other
obligations, whether the interest or other payments are payable
annually or at shorter or longer periods, and whether the bonds
securities or obligations had been or will be issued or marketed, and
the interest or other payment thereon paid, within or without the
Philippines, if the interest or other payment is payable to a
nonresident alien or to a citizen or resident of the Philippines.”
Sec. 20. Sec. 56 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follow:
“Sec.
56. Exemption allowed to estates and trust. — For the
purpose of the tax provided for in this Title, there shall be allowed
an exemption of P6,000 from the income of the estate or trust.”
Sec. 21. Section s 61 to 69 of the National
Internal Revenue Code, as amended, are hereby repealed.
Sec. 22. Sec. 82, paragraphs (a) and (c) (2) of
the National Internal Revenue Code, as amended, is hereby further
amended to read as follows:
“(a)
Requirements of withholding. — Every employer making payment of wages
shall deduct and withhold upon such wages a tax determined in
accordance with regulations to be prepared and promulgated by the
Minister of Finance.”
“(2)
Employees. — The amount deducted and withheld under this Chapter during
any calendar year shall be allowed as a credit to the recipient of such
income against the tax imposed under Sec. 21(a) of this Title.
Refunds and credits in cases of excessive withholding shall be granted
under rules and regulations promulgated by the Minister of Finance.
Any excess of the taxes withheld
over the tax due from the taxpayer shall be returned or credit within
three months from the fifteenth day of April. Refunds or credits made
after such time shall earn interest at the rate of six per cent (6%)
per annum starting after the lapse of the three-month period to the
date the refund or credit is made.
Refunds shall be made upon
warrants drawn by the Commissioner of Internal Revenue or by his duly
authorized representative without the necessity of counter-signature by
the Chairman, Commission on Audit or the latter’s duly authorized
representatives as an exception to the requirement prescribed by
Sec. 621 of the Revised Administrative Code.”
Sec. 23. Section 103 of the National Internal
Revenue Code, as amended, is hereby further amended to read as follows:
“Sec.
103. Transfer for less than adequate and full
consideration. — Where property, other than real property referred to
in Sec. 21(e), is transferred for less than an adequate and full
consideration in money or money’s worth, then the amount by which the
fair market value of the property exceeded the value of the
consideration shall, for the purpose of the tax imposed by this
Chapter, be deemed a gift, and shall be included in computing the
amount of gifts made during the calendar year.”
Sec. 24. The phrase “net income” and “net taxable
income” appearing in any provisions of Title II of the National
Internal Revenue Code, as amended, is hereby changed to “taxable
income”
Sec. 25. The Sec. 50 of the National Internal
Revenue Code as amended, which reads as follows:
“Sec.
50. Verification of Return. — The income tax return
shall contain a declaration that the taxpayer or his authorized
representative made it under the penalties of perjury.”
is hereby deleted, the same being covered by Sec. 301 of this Code.
Sec. 26. The Commissioner of Internal Revenue
shall renumber sequentially, codify and consolidate all internal
revenue laws embodied in the present National Internal Revenue Code, as
amended by various Executive Orders, including this Executive Order,
and other pertinent issuances, and to cause the publication thereof.
Sec. 27. All laws, orders, issuance, rules and
regulations or any part thereof inconsistent with this Executions or
any part thereof inconsistent with this Executive Order are hereby
repealed or modified accordingly.
Sec. 28. Effectivity. — The provision of Section s
21(c), 24(e) (1), 24(e) (4), 25(a) (6) (D) and Section 103 of the
National Internal Revenue Code, as amended by this Executive Order,
shall take effect on August 1, 1986. The other provisions, of the
National Internal Revenue Code, as amended by this Executive Order,
shall take effect beginning with the calendar year 1986, except that in
the case of corporations filing their income tax returns on a fiscal
year basis, the same shall take effect on fiscal years beginning on or
after July 1, 1986.
Done in the City of Manila,
this 31st day of July, in the year of Our Lord, nineteen hundred and
eighty-six.