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PRESIDENTIAL DECREE NO. 1682
PRESIDENTIAL DECREE NO. 1682 -
AMENDING CERTAIN SectionS OF THE NATIONAL INTERNAL REVENUE CODE OF
1977, AS AMENDED
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WHEREAS,
there is a need to further amend certain provisions of the National
Internal Revenue Code of 1977, as amended, to make them more responsive
to current conditions presently being conducted in the Philippines;chanroblesvirtualawlibrary
NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines by
virtue of the powers vested in me by the Constitution, do hereby order
and decree the following:
Section 1. Section 20, paragraph (b) of the National
Internal Revenue Code is hereby amended to read as follows:cralaw:red
"(b) The term "corporation" includes partnerships, no
matter how created or organized, joint-stock companies, joint accounts
(cuentas en participacion), associations or insurance companies, but
does not include general professional partnerships and a joint venture
formed for the purpose of undertaking construction projects or engaging
in petroleum operations pursuant to an operating agreement under a
service contract with the Government. General professional partnerships
are partnerships formed by persons for the sole purpose of exercising
their common profession, no part of the income of which is derived from
engaging in any trade or business."
Section 2. Section 24, paragraph (b) (2) of the
National Internal Revenue Code is hereby further amended by adding
thereto a proviso to read as follows:cralaw:red
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xxx
xxx
"Provided, That any profit remitted abroad by a branch office to its
mother company shall be subject to tax at fifteen per cent (15%)
(except those registered with the Export Processing Zone Authority):
PROVIDED FURTHER, That any profit remitted by a branch office to its
mother company authorized to engage in petroleum operations in the
Philippines shall be subject to tax at seven and one-half per cent
(7.5%)." chanroblesvirtualawlibrary
Section 3. Section 29(b) (8) of the National Internal
Revenue Code is hereby amended by adding thereto a new paragraph to
read as follows:cralaw:red
"(8) Miscellaneous items. —chanroblesvirtualawlibrary
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"(E) Filipino participation incentive allowance
received by a Philippine corporation pursuant to an operating agreement
under a petroleum service contract entered into between a service
contractor and the Government under Presidential Decree No. 87."
Section 4. Section 30(b) (3) of the National Internal
Revenue Code, as amended, is hereby further amended by adding a new
sub-paragraph thereto to read as follows:cralaw:red
"(C) If the indebtedness is incurred to finance
petroleum exploration."
Section 5. Section 30, paragraph (d) of the National
Internal Revenue Code is hereby amended by adding a new paragraph
thereto to read as follows:cralaw:red
"(d) Losses:cralaw:red
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xxx
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"(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, however, That accumulated expenditures incurred in that area
prior to January 1, 1979 shall be allowed as 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 is 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, however, That if such abandoned well is
reentered and production is resumed, or if such equipment or 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. chanroblesvirtualawlibrary
Section 6. Section 30, paragraph (f) is hereby
amended by adding a new paragraph thereto to read as follows:cralaw:red
"(f) Depreciation.
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xxx
xxx
"(3) 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 a depreciation at the operation 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 ten (10) years or such shorter life
as may be permitted by the Commissioner of Internal
Revenue. chanroblesvirtualawlibrary
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 five (5) years."
Section 7. Section 30, paragraph (g) (1) of the
National Internal Revenue Code, is hereby amended to read as follows:cralaw:red
"(g) Depletion of oil and gas well and mines:cralaw:red
"(1) In general. — In the case of oil and gas well
and mines, a reasonable allowance for depletion or amortization
computed in accordance with the cost depletion method shall be granted
under rules and regulations to be prescribed by the Minister of
Finance: Provided, That when the allowances shall equal the capital
invested no further allowance shall be granted: Provided, Further, That
after production in commercial quantities has commenced, certain
intangible exploration and development drilling costs (i) shall be
deductible in the year incurred if such expenditures are incurred for
non-producing wells or (ii) 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 not
producing wells in the same contract area. chanroblesvirtualawlibrary
Intangible costs in petroleum operations refer to any cost incurred in
petroleum operations which 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 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.
Section 8. Section 31(a) (2) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 31 (a) (2). Any amount paid out for new
buildings or for permanent improvements or betterments made to increase
the value of any property or estate.
"This sub-section shall not apply to intangible drilling and
development cost incurred in petroleum operations which are deductible
under sub-section (g) (1) of Section 30 of this Code."
Section 9. Applicability Clause. — The pertinent
provisions of Title II of the National Internal Revenue Code of 1977,
as amended, and the implementing regulations promulgated thereunder
shall apply to any corporation authorized to engage in petroleum
operations in the Philippines pursuant to a service contract entered
into by said corporation and the Government for —chanroblesvirtualawlibrary
(a) Contracts entered into pursuant to Presidential
Decree No. 87 and amended after January 1, 1979; and
(b) New contracts entered into after January 1, 1979.
Section 10. Repealing Clause. — All other laws,
decrees, regulations and others inconsistent herewith are hereby
modified or amended accordingly.
Section 11. Effectivity Date. — This Decree shall
take effect as of January 1, 1979.
Done in the City of Manila,
this 13th day of March, in the year of Our Lord, nineteen hundred and
eighty.
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