TITLE IITAX ON
INCOMECHAPTER
IIITAX ON
INDIVIDUALS
SEC.
24. Income Tax Rates.-
(A) Rates of Income
Tax on Individual Citizen and Individual Resident Alien of the
Philippines.
(1) An income tax is
hereby imposed:
(a) On the taxable
income defined in Section 31 of this Code, other than income subject to
tax under Subsections (B), (C) and (D) of this Section, derived for
each
taxable year from all sources within and without the Philippines be
every
individual citizen of the Philippines residing therein;
(b) On the taxable
income defined in Section 31 of this Code, other than income subject to
tax under Subsections (B), (C) and (D) of this Section, derived for
each
taxable year from all sources within the Philippines by an individual
citizen
of the Philippines who is residing outside of the Philippines including
overseas contract workers referred to in Subsection(C) of Section 23
hereof;
and
(c) On the taxable
income defined in Section 31 of this Code, other than income subject to
tax under Subsections (b), (C) and (D) of this Section, derived for
each
taxable year from all sources within the Philippines by an individual
alien
who is a resident of the Philippines.
The tax shall be
computed
in accordance with and at the rates established in the following
schedule:
Not over
P10,000…………………………………....5%
Over P10,000 but
not
over P30,000………………P500+10% of the excess overP10,000
Over P30,000 but
not
over P70,000………………P2,500+15% of the excess overP30,000
Over P70,000 but
not
over P140,000……..………P8,500+20% of the excess overP70,000
Over P140,000 but
not
over P250,000……………P22,500+25% of the excess overP140,000
Over P250,000 but
not
over P500,000……………P50,000+30% of the excess overP250,000
Over P500,000
………………………….....
P125,000+34% of the excess overP500,000 in 1998.
Provided,
That
effective January 1, 1999, the top marginal rate shall be thirty-three
percent (33%) and effective January 1, 2000, the said rate shall be
thirty-two
percent (32%).
For married
individuals,
the husband and wife, subject to the provision of Section 51 (D)
hereof,
shall compute separately their individual income tax based on their
respective
total taxable income: Provided, That if any income cannot be
definitely
attributed to or identified as income exclusively earned or realized by
either of the spouses, the same shall be divided equally between the
spouses
for the purpose of determining their respective taxable income.
(B) Rate of Tax on Certain
Passive Income.
(1) Interests,
Royalties,
Prizes, and Other Winnings. - A final tax at the rate of twenty
percent
(20%) is hereby imposed upon the amount of interest from any currency
bank
deposit and yield or any other monetary benefit from deposit
substitutes
and from trust funds and similar arrangements; royalties, except on
books,
as well as other literary works and musical compositions, which shall
be
imposed a final tax of ten percent (10%); prizes (except prizes
amounting
to Ten thousand pesos (P10,000) or less which shall be subject to tax
under
Subsection (A) of Section 24; and other winnings (except Philippine
Charity
Sweepstakes and Lotto winnings), derived from sources within the
Philippines:
Provided, however, That interest income received by an
individual
taxpayer (except a nonresident individual) from a depository bank under
the expanded foreign currency deposit system shall be subject to a
final
income tax at the rate of seven and one-half percent (7 1/2%) of such
interest
income: Provided, further, That interest income from long-term
deposit
or investment in the form of savings, common or individual trust funds,
deposit substitutes, investment management accounts and other
investments
evidenced by certificates in such form prescribed by the Bangko Sentral
ng Pilipinas (BSP) shall be exempt from the tax imposed under this
Subsection:
Provided, finally, That should the holder of the certificate
pre-terminate
the deposit or investment before the fifth (5th) year, a
final
tax shall be imposed on the entire income and shall be deducted and
withheld
by the depository bank from the proceeds of the long-term deposit or
investment
certificate based on the remaining maturity thereof:
Four (4) years to
less
than five (5) years - 5%;
Three (3) years to
less than (4) years - 12%; and
Less than three (3)
years - 20%
(2) Cash and/or
Property Dividends - A final tax at the following rates shall be
imposed
upon the cash and/or property dividends actually or constructively
received
by an individual from a domestic corporation or from a joint stock
company,
insurance or mutual fund companies and regional operating headquarters
of multinational companies, or on the share of an individual in the
distributable
net income after tax of a partnership (except a general professional
partnership)
of which he is a partner, or on the share of an individual in the net
income
after tax of an association, a joint account, or a joint venture or
consortium
taxable as a corporation of which he is a member or co-venturer:
Six percent (6%)
beginning
January 1, 1998;
Eight percent (8%)
beginning January 1, 1999; and
Ten percent (10%
beginning
January 1, 2000.
Provided, however,
That the tax on dividends shall apply only on income earned on or after
January 1, 1998. Income forming part of retained earnings as of
December
31, 1997 shall not, even if declared or distributed on or after January
1, 1998, be subject to this tax.
(C) Capital Gains from
Sale of Shares of Stock not Traded in the Stock Exchange. - The
provisions
of Section 39(B) notwithstanding, a final tax at the rates prescribed
below
is hereby imposed upon the net capital gains realized during the
taxable
year from the sale, barter, exchange or other disposition of shares of
stock in a domestic corporation, except shares sold, or disposed of
through
the stock exchange.
Not over
P100,000……………………………........
5%
On any amount in
excess
of P100,000………… 10%
(D) Capital Gains from
Sale of Real Property. -
(1) In General.
- The provisions of Section 39(B) notwithstanding, a final tax of six
percent
(6%) based on the gross selling price or current fair market value as
determined
in accordance with Section 6(E) of this Code, whichever is higher, is
hereby
imposed upon 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:
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 Section 24 (A) or under this
Subsection,
at the option of the taxpayer.
(2) Exception.
- The provisions of paragraph (1) of this Subsection to the contrary
notwithstanding,
capital gains presumed to have been realized from the sale or
disposition
of their principal residence by natural persons, the proceeds of which
is fully utilized in acquiring or constructing a new principal
residence
within eighteen (18) calendar months from the date of sale or
disposition,
shall be exempt from the capital gains tax imposed under this
Subsection:
Provided, That the historical cost or adjusted basis of the
real
property sold or disposed shall be carried over to the new principal
residence
built or acquired: Provided, further, That the Commissioner
shall
have been duly notified by the taxpayer within thirty (30) days from
the
date of sale or disposition through a prescribed return of his
intention
to avail of the tax exemption herein mentioned: Provided, still
further,
That the said tax exemption can only be availed of once every ten (10)
years: Provided, finally, that if there is no full utilization
of
the proceeds of sale or disposition, the portion of the gain presumed
to
have been realized from the sale or disposition shall be subject to
capital
gains tax. For this purpose, the gross selling price or fair market
value
at the time of sale, whichever is higher, shall be multiplied by a
fraction
which the unutilized amount bears to the gross selling price in order
to
determine the taxable portion and the tax prescribed under paragraph
(1)
of this Subsection shall be imposed thereon.
SEC.
25. Tax on Nonresident Alien Individual. -
(A) Nonresident Alien
Engaged in trade or Business Within the Philippines. -
(1) In General.
- A nonresident alien individual engaged in trade or business in the
Philippines
shall be subject to an income tax in the same manner as an individual
citizen
and a resident alien individual, on taxable income received from all
sources
within the Philippines. A nonresident alien individual who shall come
to
the Philippines and stay therein for an aggregate period of more than
one
hundred eighty (180) days during any calendar year shall be deemed a
'nonresident
alien doing business in the Philippines'. Section 22 (G) of this Code
notwithstanding.
(2) Cash and/or
Property
Dividends from a Domestic Corporation or Joint Stock Company, or
Insurance
or Mutual Fund Company or Regional Operating Headquarters or
Multinational
Company, or Share in the Distributable Net Income of a Partnership
(Except
a General Professional Partnership), Joint Account, Joint Venture
Taxable
as a Corporation or Association., Interests, Royalties, Prizes, and
Other
Winnings. - Cash and/or property dividends from a domestic corporation,
or from a joint stock company, or from an insurance or mutual fund
company
or from a regional operating headquarters of multinational company, or
the share of a nonresident alien individual in the distributable net
income
after tax of a partnership (except a general professional partnership)
of which he is a partner, or the share of a nonresident alien
individual
in the net income after tax of an association, a joint account, or a
joint
venture taxable as a corporation of which he is a member or a
co-venturer;
interests; royalties (in any form); and prizes (except prizes amounting
to Ten thousand pesos (P10,000) or less which shall be subject to tax
under
Subsection (B)(1) of Section 24) and other winnings (except Philippine
Charity Sweepstakes and Lotto winnings); shall be subject to an income
tax of twenty percent (20%) on the total amount thereof: Provided,
however,
that royalties on books as well as other literary works, and royalties
on musical compositions shall be subject to a final tax of ten percent
(10%) on the total amount thereof: Provided, further, That
cinematographic
films and similar works shall be subject to the tax provided under
Section
28 of this Code: Provided, furthermore, That interest income
from
long-term deposit or investment in the form of savings, common or
individual
trust funds, deposit substitutes, investment management accounts and
other
investments evidenced by certificates in such form prescribed by the
Bangko
Sentral ng Pilipinas (BSP) shall be exempt from the tax imposed under
this
Subsection: Provided, finally, that should the holder of the
certificate
pre-terminate the deposit or investment before the fifth (5th)
year, a final tax shall be imposed on the entire income and shall be
deducted
and withheld by the depository bank from the proceeds of the long-term
deposit or investment certificate based on the remaining maturity
thereof:
Four (4) years to
less
than five (5) years - 5%;
Three (3) years to
less than four (4) years - 12%; and
Less than three (3)
years - 20%.
(3) Capital Gains.
- Capital gains realized from sale, barter or exchange of shares of
stock
in domestic corporations not traded through the local stock exchange,
and
real properties shall be subject to the tax prescribed under
Subsections
(C) and (D) of Section 24.
(B) Nonresident Alien
Individual 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, cash and/or property dividends, rents,
salaries,
wages, premiums, annuities, compensation, remuneration, emoluments, or
other fixed or determinable annual or periodic or casual gains,
profits,
and income, and capital gains, a tax equal to twenty-five percent (25%)
of such income. Capital gains realized by a nonresident alien
individual
not engaged in trade or business in the Philippines from the sale of
shares
of stock in any domestic corporation and real property shall be subject
to the income tax prescribed under Subsections (C) and (D) of Section
24.
(C) Alien Individual
Employed by Regional or Area Headquarters and Regional Operating
Headquarters
of Multinational Companies. - 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 and regional
operating
headquarters established in the Philippines by multinational companies
as salaries, wages, annuities, compensation, remuneration and other
emoluments,
such as honoraria and allowances, from such regional or area
headquarters
and regional operating headquarters, a tax equal to fifteen percent
(15%)
of such gross income: Provided, however, That the same tax
treatment
shall apply to Filipinos employed and occupying the same position as
those
of aliens employed by these multinational companies. For purposes of
this
Chapter, the term 'multinational company' means a foreign firm or
entity
engaged in international trade with affiliates or subsidiaries or
branch
offices in the Asia-Pacific Region and other foreign markets.cralaw:red
(D) Alien Individual
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 off-shore
banking units, a tax equal to fifteen percent (15%) of such gross
income:
Provided, however, That the same tax treatment shall apply to
Filipinos
employed and occupying the same positions as those of aliens employed
by
these offshore banking units.cralaw:red
(E) Alien Individual
Employed by Petroleum Service Contractor and Subcontractor. - An
Alien
individual who is a permanent resident of a foreign country but who is
employed and assigned in the Philippines by a foreign service
contractor
or by a foreign service subcontractor engaged in petroleum operations
in
the Philippines shall be liable to a tax of fifteen percent (15%) of
the
salaries, wages, annuities, compensation, remuneration and other
emoluments,
such as honoraria and allowances, received from such contractor or
subcontractor:
Provided, however, That the same tax treatment shall apply to a
Filipino
employed and occupying the same position as an alien employed by
petroleum
service contractor and subcontractor.cralaw:red
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 this Code.
SEC.
26. Tax Liability of Members of General Professional Partnerships.
- A general professional partnership as such shall not be subject to
the
income tax imposed under this Chapter. Persons engaging in business as
partners in a general professional partnership shall be liable for
income
tax only in their separate and individual capacities.cralaw:red
For purposes of computing
the distributive share of the partners, the net income of the
partnership
shall be computed in the same manner as a corporation.
Each partner shall report
as gross income his distributive share, actually or constructively
received,
in the net income of the partnership. |