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PRESIDENTIAL DECREE NO. 778
PRESIDENTIAL DECREE NO. 778 -
AMENDING CERTAIN SectionS OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED
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WHEREAS,
there is a need to update, simplify, reduce the number of special tax
classifications, and equalize taxation of similar business activities;chanroblesvirtualawlibrary
WHEREAS, there is need to improve the administrative provisions of the
National Internal Revenue Code. chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers in me vested by the Constitution, do hereby
order and decree the following:cralaw:red
Section 1. Section 24 of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 24. Rates of tax on corporations. — (a) Tax on
domestic corporations. — A tax is hereby imposed upon the taxable net
income received during each taxable year from all sources by every
corporation organized in, or existing under the laws of the
Philippines, and partnerships, no matter how created or organized, but
not including general professional partnerships, in accordance with the
following:cralaw:red
"Twenty-five per cent upon the amount by which the taxable net income
does not exceed one hundred thousand pesos.
"Thirty-five per cent upon the amount by which the taxable net income
exceeds one hundred thousand pesos.
"Private educational institutions, whether stock or non-stock shall pay
a tax of ten per cent of their taxable income from the operation of the
school, related school activities, and on their passive investment
income consisting of interest, dividends, royalties, and the like:
Provided, However, That dividends received by a private educational
institution, whether stock or non-stock, from a domestic or resident
foreign corporation shall be subject to the intercorporate dividends
tax under subsection (c) hereof.
"(b) Tax on foreign corporations. — (1) Non- resident
corporations. — A foreign corporation not engaged in trade or business
in the Philippines shall pay a tax equal to thirty-five per cent of the
gross income received during each taxable year from all sources within
the Philippines as interest,(except interest on foreign loans which
shall be subject to fifteen per cent tax), dividends, rents, royalties,
salaries, remunerations for technical services, emoluments or other
fixed or determinable annual, periodical or casual gains, profits, and
income, and capital gains: Provided, however, That premium shall not
include reinsurance premiums: Provided, further, That cinematographic
film owners, lessors or distributors shall pay a tax of fifteen per
cent of their gross income from all sources within the Philippines:
Provided, still further, That 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 Section 53 (d) of this Code subject to the condition that the
country in which the non- resident foreign corporation is domiciled
shall allow a credit against the tax due from the non-resident 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 section: Provided, finally, That regional or area headquarters
established in the Philippines by multinational corporations and which
headquarters do not earn or derive income from the Philippines and
which act as supervisory, communications and coordinating centers for
their affiliates, subsidiaries or branches in the Asia-Pacific Region
shall not by subject to tax.
"For purposes of this paragraph, the gross income of cinematographic
film owners, lessor, or distributors shall include film rentals and all
items of gross income under Section 29 (a). chanroblesvirtualawlibrary
"(2) Resident corporations. — A corporation
organized, authorized, or existing under the laws of any foreign
country, engaged in trade or business within the Philippines, shall be
taxable as provided in subsection (a) of this section upon the total
net income received in the preceding taxable year from all sources
within the Philippines: Provided, however, That international carriers
shall pay a tax of two and one-half per cent on their gross Philippine
billings: Provided, further, That any profit remitted abroad by a
branch office to its mother company shall be subject to tax of twenty
per cent (except those registered with the Export Processing Zone
Authority).
"(c) Rate of tax on certain dividends. — Dividends
received by a domestic or resident foreign corporation from a domestic
corporation liable to tax under this Code shall be subject to a final
tax at 10%, on the total amount of thereof, which shall be collected
and paid as provided in Section 53 and 54 of this Code; and which shall
not be included in the determination of gross income.
"(d) The provisions of existing special or general
laws to the contrary notwithstanding all corporate taxpayers not
specifically exempt under Section 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 but
excluding educational institutions, shall pay such rate of tax upon
their taxable net income as are imposed by this section upon
associations or corporations engaged in a similar business or
industry."
Section 2. Section 26 of the National Internal
Revenue Code is hereby amended to read as follows: chanroblesvirtualawlibrary
"Sec. 26. Tax liability of members of general
professional partnerships. — Persons exercising a common profession in
general partnership, shall be liable for income tax only in their
individual capacity, and the share in the 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."
Section 3. Section 45(c) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 45(c) When to file. — (1) The return of the
following individuals shall be filed on or before the fifteenth day of
March of each year, covering income of the preceding taxable year.
(A) Residents of the Philippines, whether citizens or
aliens, whose income have been derived solely from salaries, wages,
interest, dividends, allowances, commission, bonuses, fees, pensions or
any combination thereof: Provided, however, That residents of the
Philippines, whether citizens or aliens, who have no income or whose
income is below one thousand eight hundred pesos or who did not have
any transaction in any business carried on for gain or profit during
the preceding year, but are nevertheless required to file an income tax
return under paragraph No. 3, subsection (a) of this section, shall
file their income tax return on or before the fifteenth day of February
of each year.
"(2) The return of all other individuals not
mentioned above, including non-resident citizens shall be filed on or
before the fifteenth day of April of each year covering income of the
preceding year." chanroblesvirtualawlibrary
Section 4. Section 51(a) of the National Internal
Revenue Code is hereby amended to read as follows:cralaw:red
"Sec. 51. Payment and assessment of income tax. — (a)
Payment of tax. — (1) In general. — The total amount of tax imposed by
this Title shall be paid at the time the return is filed. Such tax
shall be paid by the person subject thereto.
"If the return is filed after the time prescribed by law (including
cases in which an extension of time for filing the return has been
granted under section forty-seven of this Code), there shall be paid at
the time of such filing the tax or installment which would have been
payable on or before such time if the return had been filed within the
time prescribed by law, and the remaining installments shall be paid at
the time at which, and in the amount in which, it would have been
payable if the return had been so filed, subject to the payment of
interest at fourteen per centum per annum from the original due date.
"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. Failure to file the return and pay the tax, the
Bureau of Customs is hereby authorized to hold the vessels 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. chanroblesvirtualawlibrary
"(2) Installment payments. — When the tax due is in
excess of one thousand pesos, the taxpayer other than a corporation
taxable under Section 24 and the withholding agents required to deduct
and withhold the tax under Section 53 and 54, all of this Title, may
elect to pay the tax in two equal installments, in which case, the
first installments shall be paid at the time the return is filed and
the second installment, on or before the fifteenth day of July
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 payments for non-resident citizens.
— When the tax due from a non-resident citizen is in excess of two
hundred dollars (U.S. $200.00), the taxpayer may elect to pay the tax
in two 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 the fifteenth day of July 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."
Section 5. Section 101 of the National Internal
Revenue Code is hereby amended by adding thereto subsection (b) which
shall read as follows: chanroblesvirtualawlibrary
"Sec. 101. Additions to the tax increase of
nonpayment. —.
"(b) Deficiency. —chanroblesvirtualawlibrary
"(1) Payment not extended. — Where a deficiency on
any interest assessed in connection therewith under Section 100, or any
addition to the taxes provided for in Section 102 is not paid in full
within thirty days from the date of the date of the notice and demand
from the Commissioner, there shall be collected as part of the taxes,
interest upon the unpaid amount at the rate of fourteen per centum per
annum from the date of such notice and unpaid until it is paid:
Provided, That the maximum amount that may be collected as interest on
deficiency shall in no case exceed the amount corresponding to a period
of three years, the present provisions regarding prescription to the
contrary notwithstanding. chanroblesvirtualawlibrary
"(2) Payment extended. — If the part of the
deficiency the time for payment of which is extended is not paid in
accordance with the terms of the extension, there shall be collected,
as part of the taxes, interest on such unpaid amount at the rate of
fourteen per centum per annum from the date the same was originally due
until it is paid.
"(c) Surcharge. — If any amount of the taxes included
in the notice and demand from the Commissioner of Internal Revenue is
not paid in full within thirty days after such notice and demand, there
shall be collected in addition to the interest prescribed herein and in
Section 99 and 100 and as part of the taxes a surcharge of five per
centum of the unpaid amount.
Section 6. Effectivity. — This Decree shall take
effect immediately.
DONE in the City of Manila,
this 24th day of August in the year of Our Lord nineteen hundred and
seventy-five.
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