THE

NATIONALINTERNALREVENUECODE

OFTHEPHILIPPINES

[TaxReformActof1997]

RepublicActNo.8424

ANACTAMENDINGTHENATIONALINTERNALREVENUECODE,ASAMENDED,ANDFOROTHERPURPOSES

SECTION1.ShortTitle‐ThisActshallbecitedasthe"TaxReformActof1997".

SEC.2.StatePolicy.–ItisherebydeclaredthepolicyoftheStatetopromotesustainableeconomicgrowththroughtherationalizationofthePhilippineinternalrevenuetaxsystem,includingtaxadministration;toprovide,asmuchaspossible,anequitablerelieftoagreaternumberoftaxpayersinordertoimprovelevelsofdisposableincomeandincreaseeconomicactivity;andtocreatearobustenvironmentforbusinesstoenablefirmstocompetebetterintheregionalaswellastheglobalmarket,atthesametimethattheStateensuresthatGovernmentisabletoprovidefortheneedsofthoseunderitsjurisdictionandcare.

SEC.3.PresidentialDecreeNo.1158,asamendedby,amongothers,PresidentialDecreeNo.1994andExecutiveOrderNo.273,otherwiseknownastheNationalInternalRevenueCode,isherebyfurtheramended.

TITLEI

ORGANIZATIONANDFUNCTIONOF

THEBUREAUOFINTERNALREVENUE

SECTION1.TitleoftheCode.‐ThisCodeshallbeknownastheNationalInternalRevenueCodeof1997.

SEC.2.PowersandDutiesoftheBureauofInternalRevenue.‐TheBureauofInternalRevenueshallbeunderthesupervisionandcontroloftheDepartmentofFinanceanditspowersanddutiesshallcomprehendtheassessmentandcollectionofallnationalinternalrevenuetaxes,fees,andcharges,andtheenforcementofallforfeitures,penalties,andfinesconnectedtherewith,includingtheexecutionofjudgmentsinallcasesdecidedinitsfavorbytheCourtofTaxAppealsandtheordinarycourts.TheBureaushallgiveeffecttoandadministerthesupervisoryandpolicepowersconferredtoitbythisCodeorotherlaws.

SEC.3.ChiefOfficialsoftheBureauofInternalRevenue.‐TheBureauofInternalRevenueshallhaveachieftobeknownasCommissionerofInternalRevenue,hereinafterreferredtoastheCommissionerandfour(4)assistantchiefstobeknownasDeputyCommissioners.

SEC.4.PoweroftheCommissionertoInterpretTaxLawsandtoDecideTaxCases.‐ThepowertointerprettheprovisionsofthisCodeandothertaxlawsshallbeundertheexclusiveandoriginaljurisdictionoftheCommissioner,subjecttoreviewbytheSecretaryofFinance.

Thepowertodecidedisputedassessments,refundsofinternalrevenuetaxes,feesorothercharges,penaltiesimposedinrelationthereto,orothermattersarisingunderthisCodeorotherlawsorportionsthereofadministeredbytheBureauofInternalRevenueisvestedintheCommissioner,subjecttotheexclusiveappellatejurisdictionoftheCourtofTaxAppeals.

SEC.5.PoweroftheCommissionertoObtainInformation,andtoSummon,Examine,andTakeTestimonyofPersons.‐Inascertainingthecorrectnessofanyreturn,orinmakingareturnwhennonehasbeenmade,orindeterminingtheliabilityofanypersonforanyinternalrevenuetax,orincollectinganysuchliability,orinevaluatingtaxcompliance,theCommissionerisauthorized:

(A)Toexamineanybook,paper,record,orotherdatawhichmayberelevantormaterialtosuchinquiry;

(B)Toobtainonaregularbasisfromanypersonotherthanthepersonwhoseinternalrevenuetaxliabilityissubjecttoauditorinvestigation,orfromanyofficeorofficerofthenationalandlocalgovernments,governmentagenciesandinstrumentalities,includingtheBangkoSentralngPilipinasandgovernment‐ownedor‐controlledcorporations,anyinformationsuchas,butnotlimitedto,costsandvolumeofproduction,receiptsorsalesandgrossincomesoftaxpayers,andthenames,addresses,andfinancialstatementsofcorporations,mutualfundcompanies,insurancecompanies,regionaloperatingheadquartersofmultinationalcompanies,jointaccounts,associations,jointventuresofconsortiaandregisteredpartnerships,andtheirmembers;

(C)Tosummonthepersonliablefortaxorrequiredtofileareturn,oranyofficeroremployeeofsuchperson,oranypersonhavingpossession,custody,orcareofthebooksofaccountsandotheraccountingrecordscontainingentriesrelatingtothebusinessofthepersonliablefortax,oranyotherperson,toappearbeforetheCommissionerorhisdulyauthorizedrepresentativeatatimeandplacespecifiedinthesummonsandtoproducesuchbooks,papers,records,orotherdata,andtogivetestimony;

(D)Totakesuchtestimonyofthepersonconcerned,underoath,asmayberelevantormaterialtosuchinquiry;and

(E)Tocauserevenueofficersandemployeestomakeacanvassfromtimetotimeofanyrevenuedistrictorregionandinquireafterandconcerningallpersonsthereinwhomaybeliabletopayanyinternalrevenuetax,andallpersonsowningorhavingthecare,managementorpossessionofanyobjectwithrespecttowhichataxisimposed.

Theprovisionsoftheforegoingparagraphsnotwithstanding,nothinginthisSectionshallbeconstruedasgrantingtheCommissionertheauthoritytoinquireintobankdepositsotherthanasprovidedforinSection6(F)ofthisCode.

SEC.6.PoweroftheCommissionertoMakeassessmentsandPrescribeadditionalRequirementsforTaxAdministrationandEnforcement.‐

(A)ExaminationofReturnsandDeterminationofTaxDue.‐AfterareturnhasbeenfiledasrequiredundertheprovisionsofthisCode,theCommissionerorhisdulyauthorizedrepresentativemayauthorizetheexaminationofanytaxpayerandtheassessmentofthecorrectamountoftax:Provided,however;ThatfailuretofileareturnshallnotpreventtheCommissionerfromauthorizingtheexaminationofanytaxpayer.

Anyreturn,statementofdeclarationfiledinanyofficeauthorizedtoreceivethesameshallnotbewithdrawn:Provided,Thatwithinthree(3)yearsfromthedateofsuchfiling,thesamemaybemodified,changed,oramended:Provided,further,Thatnonoticeforauditorinvestigationofsuchreturn,statementordeclarationhasinthemeantimebeenactuallyserveduponthetaxpayer.

(B)FailuretoSubmitRequiredReturns,Statements,ReportsandotherDocuments.‐Whenareportrequiredbylawasabasisfortheassessmentofanynationalinternalrevenuetaxshallnotbeforthcomingwithinthetimefixedbylawsorrulesandregulationsorwhenthereisreasontobelievethatanysuchreportisfalse,incompleteorerroneous,theCommissionershallassessthepropertaxonthebestevidenceobtainable.

Incaseapersonfailstofilearequiredreturnorotherdocumentatthetimeprescribedbylaw,orwillfullyorotherwisefilesafalseorfraudulentreturnorotherdocument,theCommissionershallmakeoramendthereturnfromhisownknowledgeandfromsuchinformationashecanobtainthroughtestimonyorotherwise,whichshallbeprimafaciecorrectandsufficientforalllegalpurposes.

(C)AuthoritytoConductInventory‐taking,surveillanceandtoPrescribePresumptiveGrossSalesandReceipts.‐TheCommissionermay,atanytimeduringthetaxableyear,orderinventory‐takingofgoodsofanytaxpayerasabasisfordetermininghisinternalrevenuetaxliabilities,ormayplacethebusinessoperationsofanyperson,naturalorjuridical,underobservationorsurveillanceifthereisreasontobelievethatsuchpersonisnotdeclaringhiscorrectincome,salesorreceiptsforinternalrevenuetaxpurposes.Thefindingsmaybeusedasthebasisforassessingthetaxesfortheothermonthsorquartersofthesameordifferenttaxableyearsandsuchassessmentshallbedeemedprimafaciecorrect.

WhenitisfoundthatapersonhasfailedtoissuereceiptsandinvoicesinviolationoftherequirementsofSections113and237ofthisCode,orwhenthereisreasonto

believethatthebooksofaccountsorotherrecordsdonotcorrectlyreflectthedeclarationsmadeortobemadeinareturnrequiredtobefiledundertheprovisionsofthisCode,theCommissioner,aftertakingintoaccountthesales,receipts,incomeorothertaxablebaseofotherpersonsengagedinsimilarbusinessesundersimilarsituationsorcircumstancesorafterconsideringotherrelevantinformationmayprescribeaminimumamountofsuchgrossreceipts,salesandtaxablebase,andsuchamountsoprescribedshallbeprimafaciecorrectforpurposesofdeterminingtheinternalrevenuetaxliabilitiesofsuchperson.

(D)AuthoritytoTerminateTaxablePeriod.‐WhenitshallcometotheknowledgeoftheCommissionerthatataxpayerisretiringfrombusinesssubjecttotax,orisintendingtoleavethePhilippinesortoremovehispropertytherefromortohideorconcealhisproperty,orisperforminganyacttendingtoobstructtheproceedingsforthecollectionofthetaxforthepastorcurrentquarteroryearortorenderthesametotallyorpartlyineffectiveunlesssuchproceedingsarebegunimmediately,theCommissionershalldeclarethetaxperiodofsuchtaxpayerterminatedatanytimeandshallsendthetaxpayeranoticeofsuchdecision,togetherwitharequestfortheimmediatepaymentofthetaxfortheperiodsodeclaredterminatedandthetaxfortheprecedingyearorquarter,orsuchportionthereofasmaybeunpaid,andsaidtaxesshallbedueandpayableimmediatelyandshallbesubjecttoallthepenaltieshereafterprescribed,unlesspaidwithinthetimefixedinthedemandmadebytheCommissioner.

(E)AuthorityoftheCommissionertoPrescribeRealPropertyValues.‐TheCommissionerisherebyauthorizedtodividethePhilippinesintodifferentzonesorareasandshall,uponconsultationwithcompetentappraisersbothfromtheprivateandpublicsectors,determinethefairmarketvalueofrealpropertieslocatedineachzoneorarea.Forpurposesofcomputinganyinternalrevenuetax,thevalueofthepropertyshallbe,whicheveristhehigherof:

(1)thefairmarketvalueasdeterminedbytheCommissioner,or

(2)thefairmarketvalueasshowninthescheduleofvaluesoftheProvincialandCityAssessors.

(F)AuthorityoftheCommissionertoinquireintoBankDepositAccounts.‐NotwithstandinganycontraryprovisionofRepublicActNo.1405andothergeneralorspeciallaws,theCommissionerisherebyauthorizedtoinquireintothebankdepositsof:

(1)adecedenttodeterminehisgrossestate;and

(2)anytaxpayerwhohasfiledanapplicationforcompromiseofhistaxliabilityunderSec.204(A)(2)ofthisCodebyreasonoffinancialincapacitytopayhistaxliability.

Incaseataxpayerfilesanapplicationtocompromisethepaymentofhistaxliabilitiesonhisclaimthathisfinancialpositiondemonstratesaclearinabilitytopaythetaxassessed,hisapplicationshallnotbeconsideredunlessanduntilhewaivesinwritinghisprivilegeunderRepublicActNo.1405orunderothergeneralorspeciallaws,andsuchwaivershallconstitutetheauthorityoftheCommissionertoinquireintothebankdepositsofthetaxpayer.

(G)AuthoritytoAccreditandRegisterTaxAgents.‐TheCommissionershallaccreditandregister,basedontheirprofessionalcompetence,integrityandmoralfitness,individualsandgeneralprofessionalpartnershipsandtheirrepresentativeswhoprepareandfiletaxreturns,statements,reports,protests,andotherpaperswithorwhoappearbefore,theBureaufortaxpayers.Withinonehundredtwenty(120)daysfromJanuary1,1998,theCommissionershallcreatenationalandregionalaccreditationboards,themembersofwhichshallserveforthree(3)years,andshalldesignatefromamongtheseniorofficialsoftheBureau,one(1)chairmanandtwo(2)membersforeachboard,subjecttosuchrulesandregulationsastheSecretaryofFinanceshallpromulgateupontherecommendationoftheCommissioner.

IndividualsandgeneralprofessionalpartnershipsandtheirrepresentativeswhoaredeniedaccreditationbytheCommissionerand/orthenationalandregionalaccreditationboardsmayappealsuchdenialtotheSecretaryofFinance,whoshallruleontheappealwithinsixty(60)daysfromreceiptofsuchappeal.FailureoftheSecretaryofFinancetoruleontheAppealwithintheprescribedperiodshallbedeemedasapprovaloftheapplicationforaccreditationoftheappellant.

(H)AuthorityoftheCommissionertoPrescribeAdditionalProceduralorDocumentaryRequirements.‐TheCommissionermayprescribethemannerofcompliancewithanydocumentaryorproceduralrequirementinconnectionwiththesubmissionorpreparationoffinancialstatementsaccompanyingthetaxreturns.

SEC.7.AuthorityoftheCommissionertoDelegatePower.‐TheCommissionermaydelegatethepowersvestedinhimunderthepertinentprovisionsofthisCodetoanyorsuchsubordinateofficialswiththerankequivalenttoadivisionchieforhigher,subjecttosuchlimitationsandrestrictionsasmaybeimposedunderrulesandregulationstobepromulgatedbytheSecretaryoffinance,uponrecommendationoftheCommissioner:Provided,however,ThatthefollowingpowersoftheCommissionershallnotbedelegated:

(a)ThepowertorecommendthepromulgationofrulesandregulationsbytheSecretaryofFinance;

(b)Thepowertoissuerulingsoffirstimpressionortoreverse,revokeormodifyanyexistingrulingoftheBureau;

(c)Thepowertocompromiseorabate,underSec.204(A)and(B)ofthisCode,anytaxliability:Provided,however,ThatassessmentsissuedbytheregionalofficesinvolvingbasicdeficiencytaxesofFivehundredthousandpesos(P500,000)orless,andminorcriminalviolations,asmaybedeterminedbyrulesandregulationstobepromulgatedbytheSecretaryoffinance,uponrecommendationoftheCommissioner,discoveredbyregionalanddistrictofficials,maybecompromisedbyaregionalevaluationboardwhichshallbecomposedoftheRegionalDirectorasChairman,theAssistantRegionalDirector,theheadsoftheLegal,AssessmentandCollectionDivisionsandtheRevenueDistrictOfficerhavingjurisdictionoverthetaxpayer,asmembers;and

(d)Thepowertoassignorreassigninternalrevenueofficerstoestablishmentswherearticlessubjecttoexcisetaxareproducedorkept.

SEC.8.DutyoftheCommissionertoEnsuretheProvisionandDistributionofforms,Receipts,Certificates,andAppliances,andtheAcknowledgmentofPaymentofTaxes.‐

(A)ProvisionandDistributiontoProperOfficials.‐ItshallbethedutyoftheCommissioner,amongotherthings,toprescribe,provide,anddistributetotheproperofficialstherequisitelicensesinternalrevenuestamps,labelsallother

forms,certificates,bonds,records,invoices,books,receipts,instruments,appliancesandapparatususedinadministeringthelawsfallingwithinthejurisdictionoftheBureau.Forthispurpose,internalrevenuestamps,stripstampsandlabelsshallbecausedbytheCommissionertobeprintedwithadequatesecurityfeatures.

Internalrevenuestamps,whetherofabarcodeorfusiondesign,shallbefirmlyandconspicuouslyaffixedoneachpackofcigarsandcigarettessubjecttoexcisetaxinthemannerandformasprescribedbytheCommissioner,uponapprovaloftheSecretaryofFinance.

(B)ReceiptsforPaymentMade.‐ItshallbethedutyoftheCommissionerorhisdulyauthorizedrepresentativeoranauthorizedagentbanktowhomanypaymentofanytaxismadeundertheprovisionofthisCodetoacknowledgethepaymentofsuchtax,expressingtheamountpaidandtheparticularaccountforwhichsuchpaymentwasmadeinaformandmannerprescribedthereforbytheCommissioner.

SEC.9.InternalRevenueDistricts.‐WiththeapprovaloftheSecretaryofFinance,theCommissionershalldividethePhilippinesintosuchnumberofrevenuedistrictsasmayformtimetotimeberequiredforadministrativepurposes.EachofthesedistrictsshallbeunderthesupervisionofaRevenueDistrictOfficer.

SEC.10.RevenueRegionalDirector.‐Underrulesandregulations,policiesandstandardsformulatedbytheCommissioner,withtheapprovaloftheSecretaryofFinance,theRevenueRegionaldirectorshall,withintheregionanddistrictofficesunderhisjurisdiction,amongothers:

(a)Implementlaws,policies,plans,programs,rulesandregulationsofthedepartmentoragenciesintheregionalarea;

(b)Administerandenforceinternalrevenuelaws,andrulesandregulations,includingtheassessmentandcollectionofallinternalrevenuetaxes,chargesandfees.

(c)IssueLettersofauthorityfortheexaminationoftaxpayerswithintheregion;

(d)Provideeconomical,efficientandeffectiveservicetothepeopleinthearea;

(e)Coordinatewithregionalofficesorotherdepartments,bureausandagenciesinthearea;

(f)Coordinatewithlocalgovernmentunitsinthearea;

(g)Exercisecontrolandsupervisionovertheofficersandemployeeswithintheregion;and

(h)PerformsuchotherfunctionsasmaybeprovidedbylawandasmaybedelegatedbytheCommissioner.

SEC.11.DutiesofRevenueDistrictOfficersandOtherInternalRevenueOfficers.‐ItshallbethedutyofeveryRevenueDistrictOfficerorotherinternalrevenueofficersandemployeestoensurethatalllaws,andrulesandregulationsaffectingnationalinternalrevenuearefaithfullyexecutedandcompliedwith,andtoaidintheprevention,detectionandpunishmentoffraudsofdelinquenciesinconnectiontherewith.

ItshallbethedutyofeveryRevenueDistrictOfficertoexaminetheefficiencyofallofficersandemployeesoftheBureauofInternalRevenueunderhissupervision,andtoreportinwritingtotheCommissioner,throughtheRegionalDirector,anyneglectofduty,incompetency,delinquency,ormalfeasanceinofficeofanyinternalrevenueofficerofwhichhemayobtainknowledge,withastatementofallthefactsandanyevidencesustainingeachcase.

SEC.12.AgentsandDeputiesforCollectionofNationalInternalRevenueTaxes.‐ThefollowingareherebyconstitutedagentsoftheCommissioner:

(a)TheCommissionerofCustomsandhissubordinateswithrespecttothecollectionofnationalinternalrevenuetaxesonimportedgoods;

(b)Theheadoftheappropriategovernmentofficeandhissubordinateswithrespecttothecollectionofenergytax;and

(c)BanksdulyaccreditedbytheCommissionerwithrespecttoreceiptofpaymentsinternalrevenuetaxesauthorizedtobemadethrubank.

AnyofficeroremployeeofanauthorizedagentbankassignedtoreceiveinternalrevenuetaxpaymentsandtransmittaxreturnsordocumentstotheBureauofInternalRevenueshallbesubjecttothesamesanctionsandpenaltiesprescribedinSections269and270ofthisCode.

SEC.13.AuthorityofaRevenueOffices.‐subjecttotherulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,aRevenueOfficerassignedtoperformassessmentfunctionsinanydistrictmay,pursuanttoaLetterofAuthorityissuedbytheRevenueRegionalDirector,examinetaxpayerswithinthejurisdictionofthedistrictinordertocollectthecorrectamountoftax,ortorecommendtheassessmentofanydeficiencytaxdueinthesamemannerthatthesaidactscouldhavebeenperformedbytheRevenueRegionalDirectorhimself.

SEC.14.AuthorityofOfficerstoAdministerOathsandTakeTestimony.‐TheCommissioner,DeputyCommissioners,ServiceChiefs,AssistantServiceChiefs,RevenueRegionalDirectors,AssistantRevenueRegionalDirectors,ChiefsandAssistantChiefsofDivisions,RevenueDistrictOfficers,specialdeputiesoftheCommissioner,internalrevenueofficersandanyotheremployeeoftheBureauthereuntoespeciallydeputizedbytheCommissionershallhavethepowertoadministeroathsandtotaketestimonyinanyofficialmatterorinvestigationconductedbythemregardingmatterswithinthejurisdictionoftheBureau.

SEC.15.AuthorityofInternalRevenueOfficerstoMakeArrestsandSeizures.‐TheCommissioner,theDeputyCommissioners,theRevenueRegionalDirectors,theRevenueDistrictOfficersandotherinternalrevenueofficersshallhaveauthoritytomakearrestsandseizuresfortheviolationofanypenallaw,ruleorregulationadministeredbytheBureauofInternalRevenue.Anypersonsoarrestedshallbeforthwithbroughtbeforeacourt,theretobedealtwithaccordingtolaw.

SEC.16.AssignmentofInternalRevenueOfficersInvolvedinExciseTaxFunctionstoEstablishmentsWhereArticlessubjecttoExciseTaxareProducedorKept.‐TheCommissionershallemploy,assign,orreassigninternalrevenueofficersinvolvedinexcisetaxfunctions,asoftenastheexigenciesoftherevenueservicemayrequire,toestablishmentsorplaceswherearticlessubjecttoexcisetaxareproducedorkept:Provided,Thataninternalrevenueofficerassignedtoanysuchestablishmentshallinnocasestayinhisassignmentformorethantwo(2)years,subjecttorulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

SEC.17.AssignmentofInternalRevenueOfficersandOtherEmployeestoOtherDuties.‐TheCommissionermay,subjecttotheprovisionsofSection16andthelawsoncivilservice,aswellastherulesandregulationstobeprescribedbytheSecretaryofFinanceupontherecommendationoftheCommissioner,assignorreassigninternalrevenueofficersandemployeesoftheBureauofInternalRevenue,withoutchangeintheirofficialrankandsalary,tootherorspecialdutiesconnectedwiththeenforcementoradministrationoftherevenuelawsastheexigenciesoftheservicemayrequire:Provided,Thatinternalrevenueofficersassignedtoperformassessmentorcollectionfunctionshallnotremaininthesameassignmentformorethanthree(3)years;Provided,further,ThatassignmentofinternalrevenueofficersandemployeesoftheBureautospecialdutiesshallnotexceedone(1)year.

SEC.18.ReportsofViolationofLaws.‐WhenaninternalrevenueofficerdiscoversevidenceofaviolationofthisCodeorofanylaw,ruleorregulationsadministeredbytheBureauofInternalRevenueofsuchcharacterastowarranttheinstitutionofcriminalproceedings,heshallimmediatelyreportthefactstotheCommissionerthroughhisimmediatesuperior,givingthenameandaddressoftheoffenderandthenamesofthewitnessesifpossible:Provided,Thatinurgentcases,theRevenueRegionaldirectororRevenueDistrictOfficer,asthecasemaybe,maysendthereporttothecorrespondingprosecutingofficerinthelattercase,acopyofhisreportshallbesenttotheCommissioner.

SEC.19.ContentsofCommissioner'sAnnualReport.‐TheAnnualReportoftheCommissionershallcontaindetailedstatementsofthecollectionsoftheBureauwithspecificationsofthesourcesofrevenuebytypeoftax,bymannerofpayment,byrevenueregionandbyindustrygroupanditsdisbursementsbyclassesofexpenditures.

Incasetheactualcollectionexceedsorfallsshortoftargetassetintheannualnationalbudgetbyfifteenpercent(15%)ormore,theCommissionershallexplainthereasonforsuchexcessorshortfall.

SEC.20.SubmissionofReportandPertinentInformationbytheCommissioner.

(A)SubmissionofPertinentInformationtoCongress.‐TheprovisionofSection270ofthisCodetothecontrarynotwithstanding,theCommissionershall,uponrequestofCongressandinaidoflegislation,furnishitsappropriateCommitteepertinentinformationincludingbutnotlimitedto:industryaudits,collectionperformancedata,statusreportsincriminalactionsinitiatedagainstpersonsandtaxpayer'sreturns:Provided,however,Thatanyreturnorreturninformationwhichcanbeassociatedwith,orotherwiseidentify,directlyorindirectly,aparticulartaxpayershallbefurnishedtheappropriateCommitteeofCongressonlywhensittinginExecutiveSessionUnlesssuchtaxpayerotherwiseconsentsinwritingtosuchdisclosure.

(B)ReporttoOversightCommittee.‐TheCommissionershall,withreferencetoSection204ofthisCode,submittotheOversightCommitteereferredtoinSection290hereof,throughtheChairmenoftheCommitteeonWaysandMeansoftheSenateandHouseofRepresentatives,areportontheexerciseofhispowerspursuanttothesaidsection,everysix(6)monthsofeachcalendaryear.

SEC.21.SourcesofRevenue.‐Thefollowingtaxes,feesandchargesaredeemedtobenationalinternalrevenuetaxes:

(a)Incometax;

(b)Estateanddonor'staxes;

(c)Value‐addedtax;

(d)Otherpercentagetaxes;

(e)Excisetaxes;

(f)Documentarystamptaxes;and

(g)SuchothertaxesasareorhereaftermaybeimposedandcollectedbytheBureauofInternalRevenue.

TITLEII

TAXONINCOME

CHAPTERI

DEFINITIONS

SEC.22.Definitions‐WhenusedinthisTitle:

(A)Theterm"person"meansanindividual,atrust,estateorcorporation.

(B)Theterm"corporation"shallincludepartnerships,nomatterhowcreatedororganized,joint‐stockcompanies,jointaccounts(cuentasenparticipacion),association,orinsurancecompanies,butdoesnotincludegeneralprofessionalpartnershipsandajointventureorconsortiumformedforthepurposeofundertakingconstructionprojectsorengaginginpetroleum,coal,geothermalandotherenergyoperationspursuanttoanoperatingconsortiumagreementunderaservicecontractwiththeGovernment."Generalprofessionalpartnerships"arepartnershipsformedbypersonsforthesolepurposeofexercisingtheircommonprofession,nopartoftheincomeofwhichisderivedfromengaginginanytradeorbusiness.

(C)Theterm"domestic",whenappliedtoacorporation,meanscreatedororganizedinthePhilippinesorunderitslaws.

(D)Theterm"foreign",whenappliedtoacorporation,meansacorporationwhichisnotdomestic.

(E)Theterm"nonresidentcitizen"means:

(1)AcitizenofthePhilippineswhoestablishestothesatisfactionoftheCommissionerthefactofhisphysicalpresenceabroadwithadefiniteintentiontoresidetherein.

(2)AcitizenofthePhilippineswholeavesthePhilippinesduringthetaxableyeartoresideabroad,eitherasanimmigrantorforemploymentonapermanentbasis.

(3)AcitizenofthePhilippineswhoworksandderivesincomefromabroadandwhoseemploymentthereatrequireshimtobephysicallypresentabroadmostofthetimeduringthetaxableyear.

(4)AcitizenwhohasbeenpreviouslyconsideredasnonresidentcitizenandwhoarrivesinthePhilippinesatanytimeduringthetaxableyeartoresidepermanentlyinthePhilippinesshalllikewisebetreatedasanonresidentcitizenforthetaxableyearinwhichhearrivesinthePhilippineswithrespecttohisincomederivedfromsourcesabroaduntilthedateofhisarrivalinthePhilippines.

(5)ThetaxpayershallsubmitprooftotheCommissionertoshowhisintentionofleavingthePhilippinestoresidepermanentlyabroadortoreturntoandresideinthePhilippinesasthecasemaybeforpurposeofthisSection.

(F)Theterm"residentalien"meansanindividualwhoseresidenceiswithinthePhilippinesandwhoisnotacitizenthereof.

(G)Theterm"nonresidentalien"meansanindividualwhoseresidenceisnotwithinthePhilippinesandwhoisnotacitizenthereof.

(H)Theterm"residentforeigncorporation"appliestoaforeigncorporationengagedintradeorbusinesswithinthePhilippines.

(I)Theterm'nonresidentforeigncorporation'appliestoaforeigncorporationnotengagedintradeorbusinesswithinthePhilippines.

(J)Theterm"fiduciary"meansaguardian,trustee,executor,administrator,receiver,conservatororanypersonactinginanyfiduciarycapacityforanyperson.

(K)Theterm"withholdingagent"meansanypersonrequiredtodeductandwithholdanytaxundertheprovisionsofSection57.

(L)Theterm"sharesofstock"shallincludesharesofstockofacorporation,warrantsand/oroptionstopurchasesharesofstock,aswellasunitsofparticipationinapartnership(exceptgeneralprofessionalpartnerships),jointstockcompanies,jointaccounts,jointventurestaxableascorporations,associationsandrecreationoramusementclubs(suchasgolf,poloorsimilarclubs),andmutualfundcertificates.

(M)Theterm"shareholder"shallincludeholdersofashare/sofstock,warrant/sand/oroption/stopurchasesharesofstockofacorporation,aswellasaholderofaunitofparticipationinapartnership(exceptgeneralprofessionalpartnerships)inajointstockcompany,ajointaccount,ataxablejointventure,amemberofanassociation,recreationoramusementclub(suchasgolf,poloorsimilarclubs)andaholderofamutualfundcertificate,amemberinanassociation,joint‐stockcompany,orinsurancecompany.

(N)Theterm"taxpayer"meansanypersonsubjecttotaximposedbythisTitle.

(O)Theterms"including"and"includes",whenusedinadefinitioncontainedinthisTitle,shallnotbedeemedtoexcludeotherthingsotherwisewithinthemeaningofthetermdefined.

(P)Theterm"taxableyear"meansthecalendaryear,orthefiscalyearendingduringsuchcalendaryear,uponthebasisofwhichthenetincomeiscomputedunderthisTitle.'Taxableyear'includes,inthecaseofareturnmadeforafractionalpartofayearundertheprovisionsofthisTitleorunderrulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationofthecommissioner,theperiodforwhichsuchreturnismade.

(Q)Theterm"fiscalyear"meansanaccountingperiodoftwelve(12)monthsendingonthelastdayofanymonthotherthanDecember.

(R)Theterms"paidorincurred"and'paidoraccrued'shallbeconstruedaccordingtothemethodofaccountinguponthebasisofwhichthenetincomeiscomputedunderthisTitle.

(S)Theterm"tradeorbusiness"includestheperformanceofthefunctionsofapublicoffice.

(T)Theterm"securities"meanssharesofstockinacorporationandrightstosubscribeforortoreceivesuchshares.Thetermincludesbonds,debentures,notesorcertificates,orotherevidenceorindebtedness,issuedbyanycorporation,includingthoseissuedbyagovernmentorpoliticalsubdivisionthereof,withinterestcouponsorinregisteredform.

(U)Theterm"dealerinsecurities"meansamerchantofstocksorsecurities,whetheranindividual,partnershiporcorporation,withanestablishedplaceofbusiness,regularlyengagedinthepurchaseofsecuritiesandtheresalethereoftocustomers;thatis,onewho,asamerchant,buyssecuritiesandre‐sellsthemtocustomerswithaviewtothegainsandprofitsthatmaybederivedtherefrom.

(V)Theterm"bank"meanseverybankinginstitution,asdefinedinSection2ofRepublicActNo.337,asamended,otherwiseknownastheGeneralbankingAct.Abankmayeitherbeacommercialbank,athriftbank,adevelopmentbank,aruralbankorspecializedgovernmentbank.

(W)Theterm"non‐bankfinancialintermediary"meansafinancialintermediary,asdefinedinSection2(D)(C)ofRepublicActNo.337,asamended,otherwiseknownastheGeneralBankingAct,authorizedbytheBangkoSentralngPilipinas(BSP)toperformquasi‐bankingactivities.

(X)Theterm"quasi‐bankingactivities"meansborrowingfundsfromtwenty(20)ormorepersonalorcorporatelendersatanyonetime,throughtheissuance,

endorsement,oracceptanceofdebtinstrumentsofanykindotherthandepositsfortheborrower'sownaccount,orthroughtheissuanceofcertificatesofassignmentorsimilarinstruments,withrecourse,orofrepurchaseagreementsforpurposesofrelendingorpurchasingreceivablesandothersimilarobligations:Provided,however,Thatcommercial,industrialandothernon‐financialcompanies,whichborrowfundsthroughanyofthesemeansforthelimitedpurposeoffinancingtheirownneedsortheneedsoftheiragentsordealers,shallnotbeconsideredasperformingquasi‐bankingfunctions.

(Y)Theterm"depositsubstitutes"shallmeananalternativefromofobtainingfundsfromthepublic(theterm'public'meansborrowingfromtwenty(20)ormoreindividualorcorporatelendersatanyonetime)otherthandeposits,throughtheissuance,endorsement,oracceptanceofdebtinstrumentsfortheborrowersownaccount,forthepurposeofrelendingorpurchasingofreceivablesandotherobligations,orfinancingtheirownneedsortheneedsoftheiragentordealer.Theseinstrumentsmayinclude,butneednotbelimitedtobankers'acceptances,promissorynotes,repurchaseagreements,includingreverserepurchaseagreementsenteredintobyandbetweentheBangkoSentralngPilipinas(BSP)andanyauthorizedagentbank,certificatesofassignmentorparticipationandsimilarinstrumentswithrecourse:Provided,however,Thatdebtinstrumentsissuedforinterbankcallloanswithmaturityofnotmorethanfive(5)daystocoverdeficiencyinreservesagainstdepositliabilities,includingthosebetweenoramongbanksandquasi‐banks,shallnotbeconsideredasdepositsubstitutedebtinstruments.

(Z)Theterm"ordinaryincome"includesanygainfromthesaleorexchangeofpropertywhichisnotacapitalassetorpropertydescribedinSection39(A)(1).Anygainfromthesaleorexchangeofpropertywhichistreatedorconsidered,underotherprovisionsofthisTitle,as'ordinaryincome'shallbetreatedasgainfromthesaleorexchangeofpropertywhichisnotacapitalassetasdefinedinSection39(A)(1).Theterm'ordinaryloss'includesanylossfromthesaleorexchangeofpropertywhichisnotacapitalasset.Anylossfromthesaleorexchangeofpropertywhichistreatedorconsidered,underotherprovisionsofthisTitle,as'ordinaryloss'shallbetreatedaslossfromthesaleorexchangeofpropertywhichisnotacapitalasset.

(AA)Theterm"rankandfileemployees"shallmeanallemployeeswhoareholdingneithermanagerialnorsupervisorypositionasdefinedunderexistingprovisionsoftheLaborCodeofthePhilippines,asamended.

(BB)Theterm"mutualfundcompany"shallmeananopen‐endandclose‐endinvestmentcompanyasdefinedundertheInvestmentCompanyAct.

(CC)Theterm"trade,businessorprofession"shallnotincludeperformanceofservicesbythetaxpayerasanemployee.

(DD)Theterm"regionalorareaheadquarters"shallmeanabranchestablishedinthePhilippinesbymultinationalcompaniesandwhichheadquartersdonotearnorderiveincomefromthePhilippinesandwhichactassupervisory,communicationsandcoordinatingcenterfortheiraffiliates,subsidiaries,orbranchesintheAsia‐PacificRegionandotherforeignmarkets.

(EE)Theterm"regionaloperatingheadquarters"shallmeanabranchestablishedinthePhilippinesbymultinationalcompanieswhichareengagedinanyofthefollowingservices:generaladministrationandplanning;businessplanningandcoordination;sourcingandprocurementofrawmaterialsandcomponents;corporatefinanceadvisoryservices;marketingcontrolandsalespromotion;trainingandpersonnelmanagement;logisticservices;researchanddevelopmentservicesandproductdevelopment;technicalsupportandmaintenance;dataprocessingandcommunications;andbusinessdevelopment.

(FF)Theterm"long‐termdepositorinvestmentcertificates"shallrefertocertificateoftimedepositorinvestmentintheformofsavings,commonorindividualtrustfunds,depositsubstitutes,investmentmanagementaccountsandotherinvestmentswithamaturityperiodofnotlessthanfive(5)years,theformofwhichshallbeprescribedbytheBangkoSentralngPilipinas(BSP)andissuedbybanksonly(notbynonbankfinancialintermediariesandfinancecompanies)toindividualsindenominationsofTenthousandpesos(P10,000)andotherdenominationsasmaybeprescribedbytheBS.

CHAPTERII

GENERALPRINCIPLES

SEC.23.GeneralPrinciplesofIncomeTaxationinthePhilippines.‐ExceptwhenotherwiseprovidedinthisCode:

(A)AcitizenofthePhilippinesresidingthereinistaxableonallincomederivedfromsourceswithinandwithoutthePhilippines;

(B)AnonresidentcitizenistaxableonlyonincomederivedfromsourceswithinthePhilippines;

(C)AnindividualcitizenofthePhilippineswhoisworkingandderivingincomefromabroadasanoverseascontractworkeristaxableonlyonincomederivedfromsourceswithinthePhilippines:Provided,ThataseamanwhoisacitizenofthePhilippinesandwhoreceivescompensationforservicesrenderedabroadasamemberofthecomplementofavesselengagedexclusivelyininternationaltradeshallbetreatedasanoverseascontractworker;

(D)Analienindividual,whetheraresidentornotofthePhilippines,istaxableonlyonincomederivedfromsourceswithinthePhilippines;

(E)AdomesticcorporationistaxableonallincomederivedfromsourceswithinandwithoutthePhilippines;and

(F)Aforeigncorporation,whetherengagedornotintradeorbusinessinthePhilippines,istaxableonlyonincomederivedfromsourceswithinthePhilippines.

CHAPTERIII

TAXONINDIVIDUALS

SEC.24.IncomeTaxRates.‐

(A)RatesofIncomeTaxonIndividualCitizenandIndividualResidentAlienofthePhilippines.

(1)Anincometaxisherebyimposed:

(a)OnthetaxableincomedefinedinSection31ofthisCode,otherthanincomesubjecttotaxunderSubsections(B),(C)and(D)ofthisSection,derivedforeachtaxableyearfromallsourceswithinandwithoutthePhilippinesbeeveryindividualcitizenofthePhilippinesresidingtherein;

(b)OnthetaxableincomedefinedinSection31ofthisCode,otherthanincomesubjecttotaxunderSubsections(B),(C)and(D)ofthisSection,derivedforeachtaxableyearfromallsourceswithinthePhilippinesbyanindividualcitizenofthePhilippineswhoisresidingoutsideofthePhilippinesincludingoverseascontractworkersreferredtoinSubsection(C)ofSection23hereof;and

(c)OnthetaxableincomedefinedinSection31ofthisCode,otherthanincomesubjecttotaxunderSubsections(b),(C)and(D)ofthisSection,derivedforeachtaxableyearfromallsourceswithinthePhilippinesbyanindividualalienwhoisaresidentofthePhilippines.

Thetaxshallbecomputedinaccordancewithandattheratesestablishedinthefollowingschedule:

NotoverP10,000…………………………………....5%

OverP10,000butnotoverP30,000………………P500+10%oftheexcessoverP10,000

OverP30,000butnotoverP70,000………………P2,500+15%oftheexcessoverP30,000

OverP70,000butnotoverP140,000……..………P8,500+20%oftheexcessoverP70,000

OverP140,000butnotoverP250,000……………P22,500+25%oftheexcessoverP140,000

OverP250,000butnotoverP500,000……………P50,000+30%oftheexcessoverP250,000

OverP500,000………………………….....P125,000+34%oftheexcessoverP500,000in1998.

Provided,ThateffectiveJanuary1,1999,thetopmarginalrateshallbethirty‐threepercent(33%)andeffectiveJanuary1,2000,thesaidrateshallbethirty‐twopercent(32%).

Formarriedindividuals,thehusbandandwife,subjecttotheprovisionofSection51(D)hereof,shallcomputeseparatelytheirindividualincometaxbasedontheirrespectivetotaltaxableincome:Provided,Thatifanyincomecannotbedefinitelyattributedtooridentifiedasincomeexclusivelyearnedorrealizedbyeitherofthespouses,thesameshallbedividedequallybetweenthespousesforthepurposeofdeterminingtheirrespectivetaxableincome.

(B)RateofTaxonCertainPassiveIncome.

(1)Interests,Royalties,Prizes,andOtherWinnings.‐Afinaltaxattherateoftwentypercent(20%)isherebyimposedupontheamountofinterestfromanycurrencybankdepositandyieldoranyothermonetarybenefitfromdepositsubstitutesandfromtrustfundsandsimilararrangements;royalties,exceptonbooks,aswellasotherliteraryworksandmusicalcompositions,whichshallbeimposedafinaltaxoftenpercent(10%);prizes(exceptprizesamountingtoTenthousandpesos(P10,000)orlesswhichshallbesubjecttotaxunderSubsection(A)ofSection24;andotherwinnings(exceptPhilippineCharitySweepstakesandLottowinnings),derivedfromsourceswithinthePhilippines:Provided,however,Thatinterestincomereceivedbyanindividualtaxpayer(exceptanonresidentindividual)fromadepositorybankundertheexpandedforeigncurrencydeposit

systemshallbesubjecttoafinalincometaxattherateofsevenandone‐halfpercent(71/2%)ofsuchinterestincome:Provided,further,Thatinterestincomefromlong‐termdepositorinvestmentintheformofsavings,commonorindividualtrustfunds,depositsubstitutes,investmentmanagementaccountsandotherinvestmentsevidencedbycertificatesinsuchformprescribedbytheBangkoSentralngPilipinas(BSP)shallbeexemptfromthetaximposedunderthisSubsection:Provided,finally,Thatshouldtheholderofthecertificatepre‐terminatethedepositorinvestmentbeforethefifth(5th)year,afinaltaxshallbeimposedontheentireincomeandshallbedeductedandwithheldbythedepositorybankfromtheproceedsofthelong‐termdepositorinvestmentcertificatebasedontheremainingmaturitythereof:

Four(4)yearstolessthanfive(5)years‐5%;

Three(3)yearstolessthan(4)years‐12%;and

Lessthanthree(3)years‐20%

(2)Cashand/orPropertyDividends‐Afinaltaxatthefollowingratesshallbeimposeduponthecashand/orpropertydividendsactuallyorconstructivelyreceivedbyanindividualfromadomesticcorporationorfromajointstockcompany,insuranceormutualfundcompaniesandregionaloperatingheadquartersofmultinationalcompanies,orontheshareofanindividualinthedistributablenetincomeaftertaxofapartnership(exceptageneralprofessionalpartnership)ofwhichheisapartner,orontheshareofanindividualinthenetincomeaftertaxofanassociation,ajointaccount,orajointventureorconsortiumtaxableasacorporationofwhichheisamemberorco‐venturer:

Sixpercent(6%)beginningJanuary1,1998;

Eightpercent(8%)beginningJanuary1,1999;and

Tenpercent(10%beginningJanuary1,2000.

Provided,however,ThatthetaxondividendsshallapplyonlyonincomeearnedonorafterJanuary1,1998.IncomeformingpartofretainedearningsasofDecember31,1997shallnot,evenifdeclaredordistributedonorafterJanuary1,1998,besubjecttothistax.

(C)CapitalGainsfromSaleofSharesofStocknotTradedintheStockExchange.‐TheprovisionsofSection39(B)notwithstanding,afinaltaxattheratesprescribedbelowisherebyimposeduponthenetcapitalgainsrealizedduringthetaxableyearfromthesale,barter,exchangeorotherdispositionofsharesofstockinadomesticcorporation,exceptsharessold,ordisposedofthroughthestockexchange.

NotoverP100,000……………………………........5%

OnanyamountinexcessofP100,000…………10%

(D)CapitalGainsfromSaleofRealProperty.‐

(1)InGeneral.‐TheprovisionsofSection39(B)notwithstanding,afinaltaxofsixpercent(6%)basedonthegrosssellingpriceorcurrentfairmarketvalueasdeterminedinaccordancewithSection6(E)ofthisCode,whicheverishigher,isherebyimposeduponcapitalgainspresumedtohavebeenrealizedfromthesale,exchange,orotherdispositionofrealpropertylocatedinthePhilippines,classifiedascapitalassets,includingpactoderetrosalesandotherformsofconditionalsales,byindividuals,includingestatesandtrusts:Provided,Thatthetaxliability,ifany,ongainsfromsalesorotherdispositionsofrealpropertytothegovernmentoranyofitspoliticalsubdivisionsoragenciesortogovernment‐ownedorcontrolledcorporationsshallbedeterminedeitherunderSection24(A)orunderthisSubsection,attheoptionofthetaxpayer.

(2)Exception.‐Theprovisionsofparagraph(1)ofthisSubsectiontothecontrarynotwithstanding,capitalgainspresumedtohavebeenrealizedfromthesaleordispositionoftheirprincipalresidencebynaturalpersons,theproceedsofwhichisfullyutilizedinacquiringorconstructinganewprincipalresidencewithineighteen(18)calendarmonthsfromthedateofsaleordisposition,shallbeexemptfromthecapitalgainstaximposedunderthisSubsection:Provided,Thatthehistoricalcostoradjustedbasisoftherealpropertysoldordisposedshallbecarriedovertothenewprincipalresidencebuiltoracquired:Provided,further,Thatthe

Commissionershallhavebeendulynotifiedbythetaxpayerwithinthirty(30)daysfromthedateofsaleordispositionthroughaprescribedreturnofhisintentiontoavailofthetaxexemptionhereinmentioned:Provided,stillfurther,Thatthesaidtaxexemptioncanonlybeavailedofonceeveryten(10)years:Provided,finally,thatifthereisnofullutilizationoftheproceedsofsaleordisposition,theportionofthegainpresumedtohavebeenrealizedfromthesaleordispositionshallbesubjecttocapitalgainstax.Forthispurpose,thegrosssellingpriceorfairmarketvalueatthetimeofsale,whicheverishigher,shallbemultipliedbyafractionwhichtheunutilizedamountbearstothegrosssellingpriceinordertodeterminethetaxableportionandthetaxprescribedunderparagraph(1)ofthisSubsectionshallbeimposedthereon.

SEC.25.TaxonNonresidentAlienIndividual.‐

(A)NonresidentAlienEngagedintradeorBusinessWithinthePhilippines.‐

(1)InGeneral.‐AnonresidentalienindividualengagedintradeorbusinessinthePhilippinesshallbesubjecttoanincometaxinthesamemannerasanindividualcitizenandaresidentalienindividual,ontaxableincomereceivedfromallsourceswithinthePhilippines.AnonresidentalienindividualwhoshallcometothePhilippinesandstaythereinforanaggregateperiodofmorethanonehundredeighty(180)daysduringanycalendaryearshallbedeemeda'nonresidentaliendoingbusinessinthePhilippines'.Section22(G)ofthisCodenotwithstanding.

(2)Cashand/orPropertyDividendsfromaDomesticCorporationorJointStockCompany,orInsuranceorMutualFundCompanyorRegionalOperatingHeadquartersorMultinationalCompany,orShareintheDistributableNetIncomeofaPartnership(ExceptaGeneralProfessionalPartnership),JointAccount,JointVentureTaxableasaCorporationorAssociation.,Interests,Royalties,Prizes,andOtherWinnings.‐Cashand/orpropertydividendsfromadomesticcorporation,orfromajointstockcompany,orfromaninsuranceormutualfundcompanyorfromaregionaloperatingheadquartersofmultinationalcompany,ortheshareofanonresidentalienindividualinthedistributablenetincomeaftertaxofapartnership(exceptageneralprofessionalpartnership)ofwhichheisapartner,ortheshareofanonresidentalienindividualinthenetincomeaftertaxofanassociation,ajointaccount,orajointventuretaxableasacorporationofwhichheisamemberoraco‐venturer;interests;royalties(inanyform);andprizes(exceptprizesamountingtoTenthousandpesos(P10,000)orlesswhichshallbesubjecttotaxunderSubsection(B)(1)ofSection24)andotherwinnings(exceptPhilippineCharitySweepstakesandLottowinnings);shallbesubjecttoanincometaxof

twentypercent(20%)onthetotalamountthereof:Provided,however,thatroyaltiesonbooksaswellasotherliteraryworks,androyaltiesonmusicalcompositionsshallbesubjecttoafinaltaxoftenpercent(10%)onthetotalamountthereof:Provided,further,ThatcinematographicfilmsandsimilarworksshallbesubjecttothetaxprovidedunderSection28ofthisCode:Provided,furthermore,Thatinterestincomefromlong‐termdepositorinvestmentintheformofsavings,commonorindividualtrustfunds,depositsubstitutes,investmentmanagementaccountsandotherinvestmentsevidencedbycertificatesinsuchformprescribedbytheBangkoSentralngPilipinas(BSP)shallbeexemptfromthetaximposedunderthisSubsection:Provided,finally,thatshouldtheholderofthecertificatepre‐terminatethedepositorinvestmentbeforethefifth(5th)year,afinaltaxshallbeimposedontheentireincomeandshallbedeductedandwithheldbythedepositorybankfromtheproceedsofthelong‐termdepositorinvestmentcertificatebasedontheremainingmaturitythereof:

Four(4)yearstolessthanfive(5)years‐5%;

Three(3)yearstolessthanfour(4)years‐12%;and

Lessthanthree(3)years‐20%.

(3)CapitalGains.‐Capitalgainsrealizedfromsale,barterorexchangeofsharesofstockindomesticcorporationsnottradedthroughthelocalstockexchange,andrealpropertiesshallbesubjecttothetaxprescribedunderSubsections(C)and(D)ofSection24.

(B)NonresidentAlienIndividualNotEngagedinTradeorBusinessWithinthePhilippines.‐Thereshallbelevied,collectedandpaidforeachtaxableyearupontheentireincomereceivedfromallsourceswithinthePhilippinesbyeverynonresidentalienindividualnotengagedintradeorbusinesswithinthePhilippinesasinterest,cashand/orpropertydividends,rents,salaries,wages,premiums,annuities,compensation,remuneration,emoluments,orotherfixedordeterminableannualorperiodicorcasualgains,profits,andincome,andcapitalgains,ataxequaltotwenty‐fivepercent(25%)ofsuchincome.CapitalgainsrealizedbyanonresidentalienindividualnotengagedintradeorbusinessinthePhilippinesfromthesaleofsharesofstockinanydomesticcorporationandrealpropertyshallbesubjecttotheincometaxprescribedunderSubsections(C)and(D)ofSection24.

(C)AlienIndividualEmployedbyRegionalorAreaHeadquartersandRegionalOperatingHeadquartersofMultinationalCompanies.‐Thereshallbelevied,collectedandpaidforeachtaxableyearuponthegrossincomereceivedbyeveryalienindividualemployedbyregionalorareaheadquartersandregionaloperatingheadquartersestablishedinthePhilippinesbymultinationalcompaniesassalaries,wages,annuities,compensation,remunerationandotheremoluments,suchashonorariaandallowances,fromsuchregionalorareaheadquartersandregionaloperatingheadquarters,ataxequaltofifteenpercent(15%)ofsuchgrossincome:Provided,however,ThatthesametaxtreatmentshallapplytoFilipinosemployedandoccupyingthesamepositionasthoseofaliensemployedbythesemultinationalcompanies.ForpurposesofthisChapter,theterm'multinationalcompany'meansaforeignfirmorentityengagedininternationaltradewithaffiliatesorsubsidiariesorbranchofficesintheAsia‐PacificRegionandotherforeignmarkets.

(D)AlienIndividualEmployedbyOffshoreBankingUnits.‐Thereshallbelevied,collectedandpaidforeachtaxableyearuponthegrossincomereceivedbyeveryalienindividualemployedbyoffshorebankingunitsestablishedinthePhilippinesassalaries,wages,annuities,compensation,remunerationandotheremoluments,suchashonorariaandallowances,fromsuchoff‐shorebankingunits,ataxequaltofifteenpercent(15%)ofsuchgrossincome:Provided,however,ThatthesametaxtreatmentshallapplytoFilipinosemployedandoccupyingthesamepositionsasthoseofaliensemployedbytheseoffshorebankingunits.

(E)AlienIndividualEmployedbyPetroleumServiceContractorandSubcontractor.‐AnAlienindividualwhoisapermanentresidentofaforeigncountrybutwhoisemployedandassignedinthePhilippinesbyaforeignservicecontractororbyaforeignservicesubcontractorengagedinpetroleumoperationsinthePhilippinesshallbeliabletoataxoffifteenpercent(15%)ofthesalaries,wages,annuities,compensation,remunerationandotheremoluments,suchashonorariaandallowances,receivedfromsuchcontractororsubcontractor:Provided,however,ThatthesametaxtreatmentshallapplytoaFilipinoemployedandoccupyingthesamepositionasanalienemployedbypetroleumservicecontractorandsubcontractor.

AnyincomeearnedfromallothersourceswithinthePhilippinesbythealienemployeesreferredtounderSubsections(C),(D)and(E)hereofshallbesubjecttothepertinentincometax,asthecasemaybe,imposedunderthisCode.

SEC.26.TaxLiabilityofMembersofGeneralProfessionalPartnerships.‐Ageneralprofessionalpartnershipassuchshallnotbesubjecttotheincometaximposed

underthisChapter.Personsengaginginbusinessaspartnersinageneralprofessionalpartnershipshallbeliableforincometaxonlyintheirseparateandindividualcapacities.

Forpurposesofcomputingthedistributiveshareofthepartners,thenetincomeofthepartnershipshallbecomputedinthesamemannerasacorporation.

Eachpartnershallreportasgrossincomehisdistributiveshare,actuallyorconstructivelyreceived,inthenetincomeofthepartnership.

CHAPTERIV

TAXONCORPORATIONS

SEC.27.RatesofIncometaxonDomesticCorporations.‐

(A)InGeneral.‐ExceptasotherwiseprovidedinthisCode,anincometaxofthirty‐fivepercent(35%)isherebyimposeduponthetaxableincomederivedduringeachtaxableyearfromallsourceswithinandwithoutthePhilippinesbyeverycorporation,asdefinedinSection22(B)ofthisCodeandtaxableunderthisTitleasacorporation,organizedin,orexistingunderthelawsofthePhilippines:Provided,ThateffectiveJanuary1,1998,therateofincometaxshallbethirty‐fourpercent(34%);effectiveJanuary1,1999,therateshallbethirty‐threepercent(33%);andeffectiveJanuary1,2000andthereafter,therateshallbethirty‐twopercent(32%).

Inthecaseofcorporationsadoptingthefiscal‐yearaccountingperiod,thetaxableincomeshallbecomputedwithoutregardtothespecificdatewhenspecificsales,purchasesandothertransactionsoccur.Theirincomeandexpensesforthefiscalyearshallbedeemedtohavebeenearnedandspentequallyforeachmonthoftheperiod.

Thereducedcorporateincometaxratesshallbeappliedontheamountcomputedbymultiplyingthenumberofmonthscoveredbythenewrateswithinthefiscalyearbythetaxableincomeofthecorporationfortheperiod,dividedbytwelve.

Provided,further,ThatthePresident,upontherecommendationoftheSecretaryofFinance,mayeffectiveJanuary1,2000,allowcorporationstheoptiontobetaxedatfifteenpercent(15%)ofgrossincomeasdefinedherein,afterthefollowingconditionshavebeensatisfied:

(1)Ataxeffortratiooftwentypercent(20%)ofGrossNationalProduct(GNP);

(2)Aratiooffortypercent(40%)ofincometaxcollectiontototaltaxrevenues;

(3)AVATtaxeffortoffourpercent(4%)ofGNP;and

(4)A0.9percent(0.9%)ratiooftheConsolidatedPublicSectorFinancialPosition(CPSFP)toGNP.

Theoptiontobetaxedbasedongrossincomeshallbeavailableonlytofirmswhoseratioofcostofsalestogrosssalesorreceiptsfromallsourcesdoesnotexceedfifty‐fivepercent(55%).

Theelectionofthegrossincometaxoptionbythecorporationshallbeirrevocableforthree(3)consecutivetaxableyearsduringwhichthecorporationisqualifiedunderthescheme.

ForpurposesofthisSection,theterm'grossincome'derivedfrombusinessshallbeequivalenttogrosssaleslesssalesreturns,discountsandallowancesandcostofgoodssold."Costofgoodssold"shallincludeallbusinessexpensesdirectlyincurredtoproducethemerchandisetobringthemtotheirpresentlocationanduse.

Foratradingormerchandisingconcern,"costofgoods"soldshallincludetheinvoicecostofthegoodssold,plusimportduties,freightintransportingthegoodstotheplacewherethegoodsareactuallysold,includinginsurancewhilethegoodsareintransit.

Foramanufacturingconcern,"costofgoodsmanufacturedandsold"shallincludeallcostsofproductionoffinishedgoods,suchasrawmaterialsused,directlaborandmanufacturingoverhead,freightcost,insurancepremiumsandothercostsincurredtobringtherawmaterialstothefactoryorwarehouse.

Inthecaseoftaxpayersengagedinthesaleofservice,'grossincome'meansgrossreceiptslesssalesreturns,allowancesanddiscounts.

(B)ProprietaryEducationalInstitutionsandHospitals.‐Proprietaryeducationalinstitutionsandhospitalswhicharenonprofitshallpayataxoftenpercent(10%)ontheirtaxableincomeexceptthosecoveredbySubsection(D)hereof:Provided,thatifthegrossincomefromunrelatedtrade,businessorotheractivityexceedsfiftypercent(50%)ofthetotalgrossincomederivedbysucheducationalinstitutionsorhospitalsfromallsources,thetaxprescribedinSubsection(A)hereofshallbeimposedontheentiretaxableincome.ForpurposesofthisSubsection,theterm'unrelatedtrade,businessorotheractivity'meansanytrade,businessorotheractivity,theconductofwhichisnotsubstantiallyrelatedtotheexerciseorperformancebysucheducationalinstitutionorhospitalofitsprimarypurposeorfunction.A"Proprietaryeducationalinstitution"isanyprivateschoolmaintainedandadministeredbyprivateindividualsorgroupswithanissuedpermittooperatefromtheDepartmentofEducation,CultureandSports(DECS),ortheCommissiononHigherEducation(CHED),ortheTechnicalEducationandSkillsDevelopmentAuthority(TESDA),asthecasemaybe,inaccordancewithexistinglawsandregulations.

(C)Government‐ownedorControlled‐Corporations,AgenciesorInstrumentalities.‐Theprovisionsofexistingspecialorgenerallawstothecontrarynotwithstanding,allcorporations,agencies,orinstrumentalitiesownedorcontrolledbytheGovernment,excepttheGovernmentServiceInsuranceSystem(GSIS),theSocialSecuritySystem(SSS),thePhilippineHealthInsuranceCorporation(PHIC),thePhilippineCharitySweepstakesOffice(PCSO)andthePhilippineAmusementandGamingCorporation(PAGCOR),shallpaysuchrateoftaxupontheirtaxableincomeasareimposedbythisSectionuponcorporationsorassociationsengagedinssimilarbusiness,industry,oractivity.

(D)RatesofTaxonCertainPassiveIncomes.‐

(1)InterestfromDepositsandYieldoranyotherMonetaryBenefitfromDepositSubstitutesandfromTrustFundsandSimilarArrangements,andRoyalties.‐Afinaltaxattherateoftwentypercent(20%)isherebyimposedupontheamountofinterestoncurrencybankdepositandyieldoranyothermonetarybenefitfromdepositsubstitutesandfromtrustfundsandsimilararrangementsreceivedbydomesticcorporations,androyalties,derivedfromsourceswithinthePhilippines:Provided,however,Thatinterestincomederivedbyadomesticcorporationfromadepositorybankundertheexpandedforeigncurrencydepositsystemshallbesubjecttoafinalincometaxattherateofsevenandone‐halfpercent(71/2%)ofsuchinterestincome.

(2)CapitalGainsfromtheSaleofSharesofStockNotTradedintheStockExchange.‐Afinaltaxattheratesprescribedbelowshallbeimposedonnetcapitalgains

realizedduringthetaxableyearfromthesale,exchangeorotherdispositionofsharesofstockinadomesticcorporationexceptsharessoldordisposedofthroughthestockexchange:

NotoverP100,000………………………….....5%

AmountinexcessofP100,000……………..10%

(3)TaxonIncomeDerivedundertheExpandedForeignCurrencyDepositSystem.‐Incomederivedbyadepositorybankundertheexpandedforeigncurrencydepositsystemfromforeigncurrencytransactionswithlocalcommercialbanks,includingbranchesofforeignbanksthatmaybeauthorizedbytheBangkoSentralngPilipinas(BSP)totransactbusinesswithforeigncurrencydepositorysystemunitsandotherdepositorybanksundertheexpandedforeigncurrencydepositsystem,includinginterestincomefromforeigncurrencyloansgrantedbysuchdepositorybanksundersaidexpandedforeigncurrencydepositsystemtoresidents,shallbesubjecttoafinalincometaxattherateoftenpercent(10%)ofsuchincome.

Anyincomeofnonresidents,whetherindividualsorcorporations,fromtransactionswithdepositorybanksundertheexpandedsystemshallbeexemptfromincometax.

(4)IntercorporateDividends.‐Dividendsreceivedbyadomesticcorporationfromanotherdomesticcorporationshallnotbesubjecttotax.

(5)CapitalGainsRealizedfromtheSale,ExchangeorDispositionofLandsand/orBuildings.‐Afinaltaxofsixpercent(6%)isherebyimposedonthegainpresumedtohavebeenrealizedonthesale,exchangeordispositionoflandsand/orbuildingswhicharenotactuallyusedinthebusinessofacorporationandaretreatedascapitalassets,basedonthegrosssellingpriceoffairmarketvalueasdeterminedinaccordancewithSection6(E)ofthisCode,whicheverishigher,ofsuchlandsand/orbuildings.

(E)MinimumCorporateIncomeTaxonDomesticCorporations.‐

(1)ImpositionofTax.‐Aminimumcorporateincometaxoftwopercent(2%0ofthegrossincomeasoftheendofthetaxableyear,asdefinedherein,isherebyimposedonacorporationtaxableunderthisTitle,beginningonthefourthtaxableyearimmediatelyfollowingtheyearinwhichsuchcorporationcommenceditsbusinessoperations,whentheminimumincometaxisgreaterthanthetaxcomputedunderSubsection(A)ofthisSectionforthetaxableyear.

(2)CarryForwardofExcessMinimumTax.‐AnyexcessoftheminimumcorporateincometaxoverthenormalincometaxascomputedunderSubsection(A)ofthisSectionshallbecarriedforwardandcreditedagainstthenormalincometaxforthethree(3)immediatelysucceedingtaxableyears.

(3)RelieffromtheMinimumCorporateIncomeTaxUnderCertainConditions.‐TheSecretaryofFinanceisherebyauthorizedtosuspendtheimpositionoftheminimumcorporateincometaxonanycorporationwhichsufferslossesonaccountofprolongedlabordispute,orbecauseofforcemajeure,orbecauseoflegitimatebusinessreverses.

TheSecretaryofFinanceisherebyauthorizedtopromulgate,uponrecommendationoftheCommissioner,thenecessaryrulesandregulationthatshalldefinethetermsandconditionsunderwhichhemaysuspendtheimpositionoftheminimumcorporateincometaxinameritoriouscase.

(4)GrossIncomeDefined.‐ForpurposesofapplyingtheminimumcorporateincometaxprovidedunderSubsection(E)hereof,theterm'grossincome'shallmeangrosssaleslesssalesreturns,discountsandallowancesandcostofgoodssold."Costofgoodssold'shallincludeallbusinessexpensesdirectlyincurredtoproducethemerchandisetobringthemtotheirpresentlocationanduse.

Foratradingormerchandisingconcern,"costofgoodssold'shallincludetheinvoicecostofthegoodssold,plusimportduties,freightintransportingthegoodstotheplacewherethegoodsareactuallysoldincludinginsurancewhilethegoodsareintransit.

Foramanufacturingconcern,costof"goodsmanufacturedandsold"shallincludeallcostsofproductionoffinishedgoods,suchasrawmaterialsused,directlaborandmanufacturingoverhead,freightcost,insurancepremiumsandothercostsincurredtobringtherawmaterialstothefactoryorwarehouse.

Inthecaseoftaxpayersengagedinthesaleofservice,'grossincome'meansgrossreceiptslesssalesreturns,allowances,discountsandcostofservices."Costofservices"shallmeanalldirectcostsandexpensesnecessarilyincurredtoprovidetheservicesrequiredbythecustomersandclientsincluding(A)salariesandemployeebenefitsofpersonnel,consultantsandspecialistsdirectlyrenderingtheserviceand(B)costoffacilitiesdirectlyutilizedinprovidingtheservicesuchasdepreciationorrentalofequipmentusedandcostofsupplies:Provided,however,Thatinthecaseofbanks,"costofservices"shallincludeinterestexpense.

SEC.28.RatesofIncomeTaxonForeignCorporations.‐

(A)TaxonResidentForeignCorporations.‐

(1)InGeneral.‐ExceptasotherwiseprovidedinthisCode,acorporationorganized,authorized,orexistingunderthelawsofanyforeigncountry,engagedintradeorbusinesswithinthePhilippines,shallbesubjecttoanincometaxequivalent

tothirty‐fivepercent(35%)ofthetaxableincomederivedintheprecedingtaxableyearfromallsourceswithinthePhilippines:Provided,ThateffectiveJanuary1,1998,therateofincometaxshallbethirty‐fourpercent(34%);effectiveJanuary1,1999,therateshallbethirty‐threepercent(33%),andeffectiveJanuary1,2000andthereafter,therateshallbethirty‐twopercent(32%).

Inthecaseofcorporationsadoptingthefiscal‐yearaccountingperiod,thetaxableincomeshallbecomputedwithoutregardtothespecificdatewhensales,purchasesandothertransactionsoccur.Theirincomeandexpensesforthefiscalyearshallbedeemedtohavebeenearnedandspentequallyforeachmonthoftheperiod.

Thereducedcorporateincometaxratesshallbeappliedontheamountcomputedbymultiplyingthenumberofmonthscoveredbythenewrateswithinthefiscalyearbythetaxableincomeofthecorporationfortheperiod,dividedbytwelve.

Provided,however,Thataresidentforeigncorporationshallbegrantedtheoptiontobetaxedatfifteenpercent(15%)ongrossincomeunderthesameconditions,asprovidedinSection27(A).

(2)MinimumCorporateIncomeTaxonResidentForeignCorporations.‐Aminimumcorporateincometaxoftwopercent(2%)ofgrossincome,asprescribedunderSection27(E)ofthisCode,shallbeimposed,underthesameconditions,onaresidentforeigncorporationtaxableunderparagraph(1)ofthisSubsection.

(3)InternationalCarrier.‐AninternationalcarrierdoingbusinessinthePhilippinesshallpayataxoftwoandone‐halfpercent(21/2%)onits"GrossPhilippineBillings"asdefinedhereunder:

(a)InternationalAirCarrier.‐"GrossPhilippineBillings"referstotheamountofgrossrevenuederivedfromcarriageofpersons,excessbaggage,cargoandmailoriginatingfromthePhilippinesinacontinuousanduninterruptedflight,irrespectiveoftheplaceofsaleorissueandtheplaceofpaymentoftheticketorpassagedocument:Provided,Thatticketsrevalidated,exchangedand/orindorsedtoanotherinternationalairlineformpartoftheGrossPhilippineBillingsifthepassengerboardsaplaneinaportorpointinthePhilippines:Provided,further,ThatforaflightwhichoriginatesfromthePhilippines,buttransshipmentofpassengertakesplaceatanyportoutsidethePhilippinesonanotherairline,onlythealiquotportionofthecostoftheticketcorrespondingtothelegflownfromthePhilippinestothepointoftransshipmentshallformpartofGrossPhilippineBillings.

(b)InternationalShipping.‐"GrossPhilippineBillings"meansgrossrevenuewhetherforpassenger,cargoormailoriginatingfromthePhilippinesuptofinaldestination,regardlessoftheplaceofsaleorpaymentsofthepassageorfreightdocuments.

(4)OffshoreBankingUnits.‐Theprovisionsofanylawtothecontrarynotwithstanding,incomederivedbyoffshorebankingunitsauthorizedbytheBangkoSentralngPilipinas(BSP)totransactbusinesswithoffshorebankingunits,includinganyinterestincomederivedfromforeigncurrencyloansgrantedtoresidents,shallbesubjecttoafinalincometaxattherateoftenpercent(10%)ofsuchincome.

Anyincomeofnonresidents,whetherindividualsorcorporations,fromtransactionswithsaidoffshorebankingunitsshallbeexemptfromincometax.

(5)TaxonBranchProfitsRemittances.‐Anyprofitremittedbyabranchtoitsheadofficeshallbesubjecttoataxoffifteen(15%)whichshallbebasedonthetotalprofitsappliedorearmarkedforremittancewithoutanydeductionforthetaxcomponentthereof(exceptthoseactivitieswhichareregisteredwiththePhilippineEconomicZoneAuthority).ThetaxshallbecollectedandpaidinthesamemannerasprovidedinSections57and58ofthisCode:provided,thatinterests,dividends,rents,royalties,includingremunerationfortechnicalservices,salaries,wagespremiums,annuities,emolumentsorotherfixedordeterminableannual,periodicorcasualgains,profits,incomeandcapitalgainsreceivedbyaforeigncorporationduringeachtaxableyearfromallsourceswithinthePhilippinesshallnotbetreatedasbranchprofitsunlessthesameareeffectivelyconnectedwiththeconductofitstradeorbusinessinthePhilippines.

(6)RegionalorAreaHeadquartersandRegionalOperatingHeadquartersofMultinationalCompanies.‐

(a)RegionalorareaheadquartersasdefinedinSection22(DD)shallnotbesubjecttoincometax.

(b)RegionaloperatingheadquartersasdefinedinSection22(EE)shallpayataxoftenpercent(10%)oftheirtaxableincome.

(7)TaxonCertainIncomesReceivedbyaResidentForeignCorporation.‐

(a)InterestfromDepositsandYieldoranyotherMonetaryBenefitfromDepositSubstitutes,TrustFundsandSimilarArrangementsandRoyalties.‐InterestfromanycurrencybankdepositandyieldoranyothermonetarybenefitfromdepositsubstitutesandfromtrustfundsandsimilararrangementsandroyaltiesderivedfromsourceswithinthePhilippinesshallbesubjecttoafinalincometaxattherateoftwentypercent(20%)ofsuchinterest:Provided,however,Thatinterestincomederivedbyaresidentforeigncorporationfromadepositorybankundertheexpandedforeigncurrencydepositsystemshallbesubjecttoafinalincometaxattherateofsevenandone‐halfpercent(71/2%)ofsuchinterestincome.

(b)IncomeDerivedundertheExpandedForeignCurrencyDepositSystem.‐IncomederivedbyadepositorybankundertheexpandedforeigncurrencydepositsystemfromforeigncurrencytransactionswithlocalcommercialbanksincludingbranchesofforeignbanksthatmaybeauthorizedbytheBangkoSentralngPilipinas(BSP)to

transactbusinesswithforeigncurrencydepositsystemunits,includinginterestincomefromforeigncurrencyloansgrantedbysuchdepositorybanksundersaidexpandedforeigncurrencydepositsystemtoresidents,shallbesubjecttoafinalincometaxattherateoftenpercent(10%)ofsuchincome.

Anyincomeofnonresidents,whetherindividualsorcorporations,fromtransactionswithdepositorybanksundertheexpandedsystemshallbeexemptfromincometax.

(c)CapitalGainsfromSaleofSharesofStockNotTradedintheStockExchange.‐Afinaltaxattheratesprescribedbelowisherebyimposeduponthenetcapitalgainsrealizedduringthetaxableyearfromthesale,barter,exchangeorotherdispositionofsharesofstockinadomesticcorporationexceptsharessoldordisposedofthroughthestockexchange:

NotoverP100,000………………………......…5%

OnanyamountinexcessofP100,000…….10%

(d)IntercorporateDividends.‐DividendsreceivedbyaresidentforeigncorporationfromadomesticcorporationliabletotaxunderthisCodeshallnotbesubjecttotaxunderthisTitle.

(B)TaxonNonresidentForeignCorporation.‐

(1)InGeneral.‐ExceptasotherwiseprovidedinthisCode,aforeigncorporationnotengagedintradeorbusinessinthePhilippinesshallpayataxequaltothirty‐fivepercent(35%)ofthegrossincomereceivedduringeachtaxableyearfromallsourceswithinthePhilippines,suchasinterests,dividends,rents,royalties,salaries,premiums(exceptreinsurancepremiums),annuities,emolumentsorotherfixedordeterminableannual,periodicorcasualgains,profitsandincome,andcapitalgains,exceptcapitalgainssubjecttotaxundersubparagraphs(C)and(d):Provided,Thateffective1,1998,therateofincometaxshallbethirty‐fourpercent(34%);effectiveJanuary1,1999,therateshallbethirty‐threepercent(33%);and,effectiveJanuary1,2000andthereafter,therateshallbethirty‐twopercent(32%).

(2)NonresidentCinematographicFilmOwner,LessororDistributor.‐Acinematographicfilmowner,lessor,ordistributorshallpayataxoftwenty‐fivepercent(25%)ofitsgrossincomefromallsourceswithinthePhilippines.

(3)NonresidentOwnerorLessorofVesselsCharteredbyPhilippineNationals.‐Anonresidentownerorlessorofvesselsshallbesubjecttoataxoffourandone‐halfpercent(41/2%)ofgrossrentals,leaseorcharterfeesfromleasesorcharterstoFilipinocitizensorcorporations,asapprovedbytheMaritimeIndustryAuthority.

(4)NonresidentOwnerorLessorofAircraft,MachineriesandOtherEquipment.‐Rentals,chartersandotherfeesderivedbyanonresidentlessorofaircraft,machineriesandotherequipmentshallbesubjecttoataxofsevenandone‐halfpercent(71/2%)ofgrossrentalsorfees.

(5)TaxonCertainIncomesReceivedbyaNonresidentForeignCorporation.‐

(a)InterestonForeignLoans.‐Afinalwithholdingtaxattherateoftwentypercent(20%)isherebyimposedontheamountofinterestonforeignloanscontractedonorafterAugust1,1986;

(b)IntercorporateDividends.‐Afinalwithholdingtaxattherateoffifteenpercent(15%)isherebyimposedontheamountofcashand/orpropertydividendsreceivedfromadomesticcorporation,whichshallbecollectedandpaidasprovidedinSection57(A)ofthisCode,subjecttotheconditionthatthecountryinwhichthenonresidentforeigncorporationisdomiciled,shallallowacreditagainstthetaxduefromthenonresidentforeigncorporationtaxesdeemedtohavebeenpaidinthePhilippinesequivalenttotwentypercent(20%)for1997,nineteenpercent(19%)for1998,eighteenpercent(18%)for1999,andseventeenpercent(17%)thereafter,whichrepresentsthedifferencebetweentheregularincometaxofthirty‐fivepercent(35%)in1997,thirty‐fourpercent(34%)in1998,andthirty‐threepercent(33%)in1999,andthirty‐twopercent(32%)thereafteroncorporationsandthefifteenpercent(15%)taxondividendsasprovidedinthissubparagraph;

(c)CapitalGainsfromSaleofSharesofStocknotTradedintheStockExchange.‐Afinaltaxattheratesprescribedbelowisherebyimposeduponthenetcapitalgainsrealizedduringthetaxableyearfromthesale,barter,exchangeorotherdispositionofsharesofstockinadomesticcorporation,exceptsharessold,ordisposedofthroughthestockexchange:

NotoverP100,000…………..………………..........5%

OnanyamountinexcessofP100,000…………10%

SEC.29.ImpositionofImproperlyAccumulatedEarningsTax.‐

(A)InGeneral.‐InadditiontoothertaxesimposedbythisTitle,thereisherebyimposedforeachtaxableyearontheimproperlyaccumulatedtaxableincomeofeachcorporationdescribedinSubsectionBhereof,animproperlyaccumulatedearningstaxequaltotenpercent(10%)oftheimproperlyaccumulatedtaxableincome.

(B)TaxonCorporationsSubjecttoImproperlyAccumulatedEarningsTax.‐

(1)InGeneral.‐TheimproperlyaccumulatedearningstaximposedintheprecedingSectionshallapplytoeverycorporationformedoravailedforthepurposeofavoidingtheincometaxwithrespecttoitsshareholdersortheshareholdersofany

othercorporation,bypermittingearningsandprofitstoaccumulateinsteadofbeingdividedordistributed.

(2)Exceptions.‐TheimproperlyaccumulatedearningstaxasprovidedforunderthisSectionshallnotapplyto:

(a)Publicly‐heldcorporations;

(b)Banksandothernonbankfinancialintermediaries;and

(c)Insurancecompanies.

(C)EvidenceofPurposetoAvoidIncomeTax.‐

(1)PrimaFacieEvidence.‐thefactthatanycorporationisamereholdingcompanyorinvestmentcompanyshallbeprimafacieevidenceofapurposetoavoidthetaxuponitsshareholdersormembers.

(2)EvidenceDeterminativeofPurpose.‐Thefactthattheearningsorprofitsofacorporationarepermittedtoaccumulatebeyondthereasonableneedsofthebusinessshallbedeterminativeofthepurposetoavoidthetaxuponitsshareholdersormembersunlessthecorporation,bytheclearpreponderanceofevidence,shallprovetothecontrary.

(D)ImproperlyAccumulatedTaxableIncome.‐ForpurposesofthisSection,theterm'improperlyaccumulatedtaxableincome'meanstaxableincome'adjustedby:

(1)Incomeexemptfromtax;

(2)Incomeexcludedfromgrossincome;

(3)Incomesubjecttofinaltax;and

(4)Theamountofnetoperatinglosscarry‐overdeducted;

Andreducedbythesumof:

(1)Dividendsactuallyorconstructivelypaid;and

(2)Incometaxpaidforthetaxableyear.

Provided,however,Thatforcorporationsusingthecalendaryearbasis,theaccumulatedearningsundertaxshallnotapplyonimproperlyaccumulatedincomeasofDecember31,1997.Inthecaseofcorporationsadoptingthefiscalyearaccountingperiod,theimproperlyaccumulatedincomenotsubjecttothistax,shallbereckoned,asoftheendofthemonthcomprisingthetwelve(12)‐monthperiodoffiscalyear1997‐1998.

(E)ReasonableNeedsoftheBusiness.‐ForpurposesofthisSection,theterm'reasonableneedsofthebusiness'includesthereasonablyanticipatedneedsofthebusiness.

SEC.30.ExemptionsfromTaxonCorporations.‐ThefollowingorganizationsshallnotbetaxedunderthisTitleinrespecttoincomereceivedbythemassuch:

(A)Labor,agriculturalorhorticulturalorganizationnotorganizedprincipallyforprofit;

(B)Mutualsavingsbanknothavingacapitalstockrepresentedbyshares,andcooperativebankwithoutcapitalstockorganizedandoperatedformutualpurposesandwithoutprofit;

(C)Abeneficiarysociety,orderorassociation,operatingfortheexclusivebenefitofthememberssuchasafraternalorganizationoperatingunderthelodgesystem,ormutualaidassociationoranonstockcorporationorganizedbyemployeesprovidingforthepaymentoflife,sickness,accident,orotherbenefitsexclusivelytothemembersofsuchsociety,order,orassociation,ornonstockcorporationortheirdependents;

(D)Cemeterycompanyownedandoperatedexclusivelyforthebenefitofitsmembers;

(E)Nonstockcorporationorassociationorganizedandoperatedexclusivelyforreligious,charitable,scientific,athletic,orculturalpurposes,orfortherehabilitationofveterans,nopartofitsnetincomeorassetshallbelongtoorinurestothebenefitofanymember,organizer,officeroranyspecificperson;

(F)Businessleaguechamberofcommerce,orboardoftrade,notorganizedforprofitandnopartofthenetincomeofwhichinurestothebenefitofanyprivatestock‐holder,orindividual;

(G)Civicleagueororganizationnotorganizedforprofitbutoperatedexclusivelyforthepromotionofsocialwelfare;

(H)Anonstockandnonprofiteducationalinstitution;

(I)Governmenteducationalinstitution;

(J)Farmers'orothermutualtyphoonorfireinsurancecompany,mutualditchorirrigationcompany,mutualorcooperativetelephonecompany,orlikeorganizationofapurelylocalcharacter,theincomeofwhichconsistssolelyofassessments,dues,andfeescollectedfrommembersforthesolepurposeofmeetingitsexpenses;and

(K)Farmers',fruitgrowers',orlikeassociationorganizedandoperatedasasalesagentforthepurposeofmarketingtheproductsofitsmembersandturningbacktothemtheproceedsofsales,lessthenecessarysellingexpensesonthebasisofthequantityofproducefinishedbythem;

Notwithstandingtheprovisionsintheprecedingparagraphs,theincomeofwhateverkindandcharacteroftheforegoingorganizationsfromanyoftheirproperties,realorpersonal,orfromanyoftheiractivitiesconductedforprofitregardlessofthedispositionmadeofsuchincome,shallbesubjecttotaximposedunderthisCode.

CHAPTERV

COMPUTATIONOFTAXABLEINCOME

SEC.31.TaxableIncomeDefined.‐ThetermtaxableincomemeansthepertinentitemsofgrossincomespecifiedinthisCode,lessthedeductionsand/orpersonalandadditionalexemptions,ifany,authorizedforsuchtypesofincomebythisCodeorotherspeciallaws.

CHAPTERVI

COMPUTATIONOFGROSSINCOME

SEC.32.GrossIncome.‐

(A)GeneralDefinition.‐ExceptwhenotherwiseprovidedinthisTitle,grossincomemeansallincomederivedfromwhateversource,including(butnotlimitedto)thefollowingitems:

(1)Compensationforservicesinwhateverformpaid,including,butnotlimitedtofees,salaries,wages,commissions,andsimilaritems;

(2)Grossincomederivedfromtheconductoftradeorbusinessortheexerciseofaprofession;

(3)Gainsderivedfromdealingsinproperty;

(4)Interests;

(5)Rents;

(6)Royalties;

(7)Dividends;

(8)Annuities;

(9)Prizesandwinnings;

(10)Pensions;and

(11)Partner'sdistributivesharefromthenetincomeofthegeneralprofessionalpartnership.

(B)ExclusionsfromGrossIncome.‐Thefollowingitemsshallnotbeincludedingrossincomeandshallbeexemptfromtaxationunderthistitle:

(1)LifeInsurance.‐Theproceedsoflifeinsurancepoliciespaidtotheheirsorbeneficiariesuponthedeathoftheinsured,whetherinasinglesumorotherwise,butifsuchamountsareheldbytheinsurerunderanagreementtopayinterestthereon,theinterestpaymentsshallbeincludedingrossincome.

(2)AmountReceivedbyInsuredasReturnofPremium.‐Theamountreceivedbytheinsured,asareturnofpremiumspaidbyhimunderlifeinsurance,endowment,orannuitycontracts,eitherduringthetermoratthematurityofthetermmentionedinthecontractoruponsurrenderofthecontract.

(3)Gifts,Bequests,andDevises.‐Thevalueofpropertyacquiredbygift,bequest,devise,ordescent:Provided,however,Thatincomefromsuchproperty,aswellasgift,bequest,deviseordescentofincomefromanyproperty,incasesoftransfersofdividedinterest,shallbeincludedingrossincome.

(4)CompensationforInjuriesorSickness.‐amountsreceived,throughAccidentorHealthInsuranceorunderWorkmen'sCompensationActs,ascompensationforpersonalinjuriesorsickness,plustheamountsofanydamagesreceived,whetherbysuitoragreement,onaccountofsuchinjuriesorsickness.

(5)IncomeExemptunderTreaty.‐Incomeofanykind,totheextentrequiredbyanytreatyobligationbindingupontheGovernmentofthePhilippines.

(6)RetirementBenefits,Pensions,Gratuities,etc.‐

(a)RetirementbenefitsreceivedunderRepublicActNo.7641andthosereceivedbyofficialsandemployeesofprivatefirms,whetherindividualorcorporate,inaccordancewithareasonableprivatebenefitplanmaintainedbytheemployer:Provided,Thattheretiringofficialoremployeehasbeenintheserviceofthesameemployerforatleastten(10)yearsandisnotlessthanfifty(50)yearsofageatthetimeofhisretirement:Provided,further,Thatthebenefitsgrantedunderthissubparagraphshallbeavailedofbyanofficialoremployeeonlyonce.ForpurposesofthisSubsection,theterm'reasonableprivatebenefitplan'meansapension,gratuity,stockbonusorprofit‐sharingplanmaintainedbyanemployerforthebenefitofsomeorallofhisofficialsoremployees,whereincontributionsaremadebysuchemployerfortheofficialsoremployees,orboth,forthepurposeofdistributingtosuchofficialsandemployeestheearningsandprincipalofthefundthusaccumulated,andwhereinitsisprovidedinsaidplanthatatnotimeshallanypartofthecorpusorincomeofthefundbeusedfor,orbedivertedto,anypurposeotherthanfortheexclusivebenefitofthesaidofficialsandemployees.

(b)Anyamountreceivedbyanofficialoremployeeorbyhisheirsfromtheemployerasaconsequenceofseparationofsuchofficialoremployeefromtheserviceoftheemployerbecauseofdeathsicknessorotherphysicaldisabilityorforanycausebeyondthecontrolofthesaidofficialoremployee.

(c)Theprovisionsofanyexistinglawtothecontrarynotwithstanding,socialsecuritybenefits,retirementgratuities,pensionsandothersimilarbenefitsreceivedbyresidentornonresidentcitizensofthePhilippinesoralienswhocometoresidepermanentlyinthePhilippinesfromforeigngovernmentagenciesandotherinstitutions,privateorpublic.

(d)PaymentsofbenefitsdueortobecomeduetoanypersonresidinginthePhilippinesunderthelawsoftheUnitedStatesadministeredbytheUnitedStatesVeteransAdministration.

(e)BenefitsreceivedfromorenjoyedundertheSocialSecuritySysteminaccordancewiththeprovisionsofRepublicActNo.8282.

(f)BenefitsreceivedfromtheGSISunderRepublicActNo.8291,includingretirementgratuityreceivedbygovernmentofficialsandemployees.

(7)MiscellaneousItems.‐

(a)IncomeDerivedbyForeignGovernment.‐IncomederivedfrominvestmentsinthePhilippinesinloans,stocks,bondsorotherdomesticsecurities,orfrominterestondepositsinbanksinthePhilippinesby(i)foreigngovernments,(ii)financinginstitutionsowned,controlled,orenjoyingrefinancingfromforeigngovernments,and(iii)internationalorregionalfinancialinstitutionsestablishedbyforeigngovernments.

(b)IncomeDerivedbytheGovernmentoritsPoliticalSubdivisions.‐IncomederivedfromanypublicutilityorfromtheexerciseofanyessentialgovernmentalfunctionaccruingtotheGovernmentofthePhilippinesortoanypoliticalsubdivisionthereof.

(c)PrizesandAwards.‐Prizesandawardsmadeprimarilyinrecognitionofreligious,charitable,scientific,educational,artistic,literary,orcivicachievementbutonlyif:

(i)Therecipientwasselectedwithoutanyactiononhisparttoenterthecontestorproceeding;and

(ii)Therecipientisnotrequiredtorendersubstantialfutureservicesasaconditiontoreceivingtheprizeoraward.

(d)PrizesandAwardsinSportsCompetition.‐AllprizesandawardsgrantedtoathletesinlocalandinternationalsportscompetitionsandtournamentswhetherheldinthePhilippinesorabroadandsanctionedbytheirnationalsportsassociations.

(e)13thMonthPayandOtherBenefits.‐Grossbenefitsreceivedbyofficialsandemployeesofpublicandprivateentities:Provided,however,ThatthetotalexclusionunderthissubparagraphshallnotexceedThirtythousandpesos(P30,000)whichshallcover:

(i)BenefitsreceivedbyofficialsandemployeesofthenationalandlocalgovernmentpursuanttoRepublicActNo.6686;

(ii)BenefitsreceivedbyemployeespursuanttoPresidentialDecreeNo.851,asamendedbyMemorandumOrderNo.28,datedAugust13,1986;

(iii)BenefitsreceivedbyofficialsandemployeesnotcoveredbyPresidentialdecreeNo.851,asamendedbyMemorandumOrderNo.28,datedAugust13,1986;and

(iv)OtherbenefitssuchasproductivityincentivesandChristmasbonus:Provided,further,ThattheceilingofThirtythousandpesos(P30,000)maybeincreasedthroughrulesandregulationsissuedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,afterconsideringamongothers,theeffectonthesameoftheinflationrateattheendofthetaxableyear.

(f)GSIS,SSS,MedicareandOtherContributions.‐GSIS,SSS,MedicareandPag‐ibigcontributions,andunionduesofindividuals.

(g)GainsfromtheSaleofBonds,DebenturesorotherCertificateofIndebtedness.‐Gainsrealizedfromthesameorexchangeorretirementofbonds,debenturesorothercertificateofindebtednesswithamaturityofmorethanfive(5)years.

(h)GainsfromRedemptionofSharesinMutualFund.‐GainsrealizedbytheinvestoruponredemptionofsharesofstockinamutualfundcompanyasdefinedinSection22(BB)ofthisCode.

SEC.33.SpecialTreatmentofFringeBenefit.‐

(A)ImpositionofTax.‐Afinaltaxofthirty‐fourpercent(34%)effectiveJanuary1,1998;thirty‐threepercent(33%)effectiveJanuary1,1999;andthirty‐twopercent(32%)effectiveJanuary1,2000andthereafter,isherebyimposedonthegrossed‐upmonetaryvalueoffringebenefitfurnishedorgrantedtotheemployee(exceptrankandfileemployeesasdefinedherein)bytheemployer,whetheranindividualoracorporation(unlessthefringebenefitisrequiredbythenatureof,ornecessarytothetrade,businessorprofessionoftheemployer,orwhenthefringebenefitisfortheconvenienceoradvantageoftheemployer).ThetaxhereinimposedispayablebytheemployerwhichtaxshallbepaidinthesamemannerasprovidedforunderSection57(A)ofthisCode.Thegrossed‐upmonetaryvalueofthefringebenefitshallbedeterminedbydividingtheactualmonetaryvalueofthefringebenefitbysixty‐sixpercent(66%)effectiveJanuary1,1998;sixty‐sevenpercent(67%)effectiveJanuary1,1999;andsixty‐eightpercent(68%)effectiveJanuary1,2000andthereafter:Provided,however,ThatfringebenefitfurnishedtoemployeesandtaxableunderSubsections(B),(C),(D)and(E)ofSection25shallbetaxedattheapplicableratesimposedthereat:Provided,further,Thatthegrossed‐Upvalueofthefringebenefitshallbedeterminedbydividingtheactualmonetaryvalueofthefringebenefitbythedifferencebetweenonehundredpercent(100%)andtheapplicableratesofincometaxunderSubsections(B),(C),(D),and(E)ofSection25.

(B)FringeBenefitdefined.‐ForpurposesofthisSection,theterm"fringebenefit"meansanygood,serviceorotherbenefitfurnishedorgrantedincashorinkindbyanemployertoanindividualemployee(exceptrankandfileemployeesasdefinedherein)suchas,butnotlimitedto,thefollowing:

(1)Housing;

(2)Expenseaccount;

(3)Vehicleofanykind;

(4)Householdpersonnel,suchasmaid,driverandothers;

(5)Interestonloanatlessthanmarketratetotheextentofthedifferencebetweenthemarketrateandactualrategranted;

(6)Membershipfees,duesandotherexpensesbornebytheemployerfortheemployeeinsocialandathleticclubsorothersimilarorganizations;

(7)Expensesforforeigntravel;

(8)Holidayandvacationexpenses;

(9)Educationalassistancetotheemployeeorhisdependents;and

(10)Lifeorhealthinsuranceandothernon‐lifeinsurancepremiumsorsimilaramountsinexcessofwhatthelawallows.

(C)FringeBenefitsNotTaxable.‐ThefollowingfringebenefitsarenottaxableunderthisSection:

(1)fringebenefitswhichareauthorizedandexemptedfromtaxunderspeciallaws;

(2)Contributionsoftheemployerforthebenefitoftheemployeetoretirement,insuranceandhospitalizationbenefitplans;

(3)Benefitsgiventotherankandfileemployees,whethergrantedunderacollectivebargainingagreementornot;and

(4)DeminimisbenefitsasdefinedintherulesandregulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

TheSecretaryofFinanceisherebyauthorizedtopromulgate,uponrecommendationoftheCommissioner,suchrulesandregulationsasarenecessarytocarryoutefficientlyandfairlytheprovisionsofthisSection,takingintoaccountthepeculiarnatureandspecialneedofthetrade,businessorprofessionoftheemployer.

CHAPTERVII

ALLOWABLEDEDUCTIONS

SEC.34.DeductionsfromGrossIncome.‐Exceptfortaxpayersearningcompensationincomearisingfrompersonalservicesrenderedunderanemployer‐employeerelationshipwherenodeductionsshallbeallowedunderthisSectionotherthanundersubsection(M)hereof,incomputingtaxableincomesubjecttoincometaxunderSections24(A);25(A);26;27(A),(B)and(C);and28(A)(1),thereshallbeallowedthefollowingdeductionsfromgrossincome;

(A)Expenses.‐

(1)OrdinaryandNecessaryTrade,BusinessorProfessionalExpenses.‐

(a)InGeneral.‐Thereshallbeallowedasdeductionfromgrossincomealltheordinaryandnecessaryexpensespaidorincurredduringthetaxableyearincarryingonorwhicharedirectlyattributableto,thedevelopment,management,operationand/orconductofthetrade,businessorexerciseofaprofession,including:

(i)Areasonableallowanceforsalaries,wages,andotherformsofcompensationforpersonalservicesactuallyrendered,includingthegrossed‐upmonetaryvalueoffringebenefitfurnishedorgrantedbytheemployertotheemployee:Provided,ThatthefinaltaximposedunderSection33hereofhasbeenpaid;

(ii)Areasonableallowancefortravelexpenses,hereandabroad,whileawayfromhomeinthepursuitoftrade,businessorprofession;

(iii)Areasonableallowanceforrentalsand/orotherpaymentswhicharerequiredasaconditionforthecontinueduseorpossession,forpurposesofthetrade,businessorprofession,ofpropertytowhichthetaxpayerhasnottakenorisnottakingtitleorinwhichhehasnoequityotherthanthatofalessee,userorpossessor;

(iv)Areasonableallowanceforentertainment,amusementandrecreationexpensesduringthetaxableyear,thataredirectlyconnectedtothedevelopment,managementandoperationofthetrade,businessorprofessionofthetaxpayer,orthataredirectlyrelatedtoorinfurtheranceoftheconductofhisoritstrade,businessorexerciseofaprofessionnottoexceedsuchceilingsastheSecretaryofFinancemay,byrulesandregulationsprescribe,uponrecommendationoftheCommissioner,takingintoaccounttheneedsaswellasthespecialcircumstances,natureandcharacteroftheindustry,trade,business,orprofessionofthetaxpayer:

Provided,Thatanyexpenseincurredforentertainment,amusementorrecreationthatiscontrarytolaw,moralspublicpolicyorpublicordershallinnocasebeallowedasadeduction.

(b)SubstantiationRequirements.‐NodeductionfromgrossincomeshallbeallowedunderSubsection(A)hereofunlessthetaxpayershallsubstantiatewithsufficientevidence,suchasofficialreceiptsorotheradequaterecords:(i)theamountoftheexpensebeingdeducted,and(ii)thedirectconnectionorrelationoftheexpensebeingdeductedtothedevelopment,management,operationand/orconductofthetrade,businessorprofessionofthetaxpayer.

(c)Bribes,KickbacksandOtherSimilarPayments.‐NodeductionfromgrossincomeshallbeallowedunderSubsection(A)hereofforanypaymentmade,directlyorindirectly,toanofficialoremployeeofthenationalgovernment,ortoanofficialoremployeeofanylocalgovernmentunit,ortoanofficialoremployeeofagovernment‐ownedor‐controlledcorporation,ortoanofficialoremployeeorrepresentativeofaforeigngovernment,ortoaprivatecorporation,generalprofessionalpartnership,orasimilarentity,ifthepaymentconstitutesabribeorkickback.

(2)ExpensesAllowabletoPrivateEducationalInstitutions.‐InadditiontotheexpensesallowableasdeductionsunderthisChapter,aprivateeducationalinstitution,referredtounderSection27(B)ofthisCode,mayatitsoptionelecteither:(a)todeductexpendituresotherwiseconsideredascapitaloutlaysofdepreciableassetsincurredduringthetaxableyearfortheexpansionofschoolfacilitiesor(b)todeductallowancefordepreciationthereofunderSubsection(F)hereof.

(B)Interest.‐

(1)InGeneral.‐Theamountofinterestpaidorincurredwithinataxableyearonindebtednessinconnectionwiththetaxpayer'sprofession,tradeorbusinessshallbeallowedasdeductionfromgrossincome:Provided,however,Thatthetaxpayer'sotherwiseallowabledeductionforinterestexpenseshallbereducedbyanamountequaltothefollowingpercentagesoftheinterestincomesubjectedtofinaltax:

Forty‐onepercent(41%)beginningJanuary1,1998;

Thirty‐ninepercent(39%)beginningJanuary1,1999;and

Thirty‐eightpercent(38%)beginningJanuary1,2000;

(2)Exceptions.‐Nodeductionshallbeallowedinrespectofinterestunderthesucceedingsubparagraphs:

(a)Ifwithinthetaxableyearanindividualtaxpayerreportingincomeonthecashbasisincursanindebtednessonwhichaninterestispaidinadvancethroughdiscountorotherwise:Provided,Thatsuchinterestshallbeallowedaadeductionin

theyeartheindebtednessispaid:Provided,further,Thatiftheindebtednessispayableinperiodicamortizations,theamountofinterestwhichcorrespondstotheamountoftheprincipalamortizedorpaidduringtheyearshallbeallowedasdeductioninsuchtaxableyear;

(b)IfboththetaxpayerandthepersontowhomthepaymenthasbeenmadeoristobemadearepersonsspecifiedunderSection36(B);or

(c)Iftheindebtednessisincurredtofinancepetroleumexploration.

(3)OptionalTreatmentofInterestExpense.‐Attheoptionofthetaxpayer,interestincurredtoacquirepropertyusedintradebusinessorexerciseofaprofessionmaybeallowedasadeductionortreatedasacapitalexpenditure.

(C)Taxes.‐

(1)InGeneral.‐Taxespaidorincurredwithinthetaxableyearinconnectionwiththetaxpayer'sprofession,tradeorbusiness,shallbeallowedasdeduction,except

(a)TheincometaxprovidedforunderthisTitle;

(b)Incometaxesimposedbyauthorityofanyforeigncountry;butthisdeductionshallbeallowedinthecaseofataxpayerwhodoesnotsignifyinhisreturnhisdesiretohavetoanyextentthebenefitsofparagraph(3)ofthissubsection(relatingtocreditsfortaxesofforeigncountries);

(c)Estateanddonor'staxes;and

(d)Taxesassessedagainstlocalbenefitsofakindtendingtoincreasethevalueofthepropertyassessed.

Provided,ThattaxesallowedunderthisSubsection,whenrefundedorcredited,shallbeincludedaspartofgrossincomeintheyearofreceipttotheextentoftheincometaxbenefitofsaiddeduction.

(2)LimitationsonDeductions.‐InthecaseofanonresidentalienindividualengagedintradeorbusinessinthePhilippinesandaresidentforeigncorporation,thedeductionsfortaxesprovidedinparagraph(1)ofthisSubsection(C)shallbeallowedonlyifandtotheextentthattheyareconnectedwithincomefromsourceswithinthePhilippines.

(3)CreditAgainstTaxforTaxesofForeignCountries.‐Ifthetaxpayersignifiesinhisreturnhisdesiretohavethebenefitsofthisparagraph,thetaximposedbythisTitleshallbecreditedwith:

(a)CitizenandDomesticCorporation.‐InthecaseofacitizenofthePhilippinesandofadomesticcorporation,theamountofincometaxespaidorincurredduringthetaxableyeartoanyforeigncountry;and

(b)PartnershipsandEstates.‐Inthecaseofanysuchindividualwhoisamemberofageneralprofessionalpartnershiporabeneficiaryofanestateortrust,hisproportionateshareofsuchtaxesofthegeneralprofessionalpartnershiportheestateortrustpaidorincurredduringthetaxableyeartoaforeigncountry,ifhisdistributiveshareoftheincomeofsuchpartnershiportrustisreportedfortaxationunderthisTitle.

Analienindividualandaforeigncorporationshallnotbeallowedthecreditsagainstthetaxforthetaxesofforeigncountriesallowedunderthisparagraph.

(4)LimitationsonCredit.‐TheamountofthecredittakenunderthisSectionshallbesubjecttoeachofthefollowinglimitations:

(a)Theamountofthecreditinrespecttothetaxpaidorincurredtoanycountryshallnotexceedthesameproportionofthetaxagainstwhichsuchcreditistaken,whichthetaxpayer'staxableincomefromsourceswithinsuchcountryunderthisTitlebearstohisentiretaxableincomeforthesametaxableyear;and

(b)Thetotalamountofthecreditshallnotexceedthesameproportionofthetaxagainstwhichsuchcreditistaken,whichthetaxpayer'staxableincomefromsourceswithoutthePhilippinestaxableunderthisTitlebearstohisentiretaxableincomeforthesametaxableyear.

(5)AdjustmentsonPaymentofIncurredTaxes.‐Ifaccruedtaxeswhenpaiddifferfromtheamountsclaimedascreditsbythetaxpayer,orifanytaxpaidisrefundedinwholeorinpart,thetaxpayershallnotifytheCommissioner;whoshallredeterminetheamountofthetaxfortheyearoryearsaffected,andtheamountoftaxdueuponsuchredetermination,ifany,shallbepaidbythetaxpayeruponnoticeanddemandbytheCommissioner,ortheamountoftaxoverpaid,ifany,shallbecreditedorrefundedtothetaxpayer.Inthecaseofsuchataxincurredbutnotpaid,theCommissionerasaconditionprecedenttotheallowanceofthiscreditmayrequirethetaxpayertogiveabondwithsuretiessatisfactorytoandtobeapprovedbytheCommissionerinsuchsumashemayrequire,conditioneduponthepaymentbythetaxpayerofanyamountoftaxfounddueuponanysuchredetermination.ThebondhereinprescribedshallcontainsuchfurtherconditionsastheCommissionermayrequire.

(6)YearinWhichCreditTaken.‐ThecreditsprovidedforinSubsection(C)(3)ofthisSectionmay,attheoptionofthetaxpayerandirrespectiveofthemethodofaccountingemployedinkeepinghisbooks,betakenintheyearwhichthetaxesoftheforeigncountrywereincurred,subject,however,totheconditionsprescribedinSubsection(C)(5)ofthisSection.Ifthetaxpayerelectstotakesuchcreditsintheyearinwhichthetaxesoftheforeigncountryaccrued,thecreditsforallsubsequent

yearsshallbetakenuponthesamebasisandnoportionofanysuchtaxesshallbeallowedasadeductioninthesameoranysucceedingyear.

(7)ProofofCredits.‐ThecreditsprovidedinSubsection(C)(3)hereofshallbeallowedonlyifthetaxpayerestablishestothesatisfactionoftheCommissionerthefollowing:

(a)ThetotalamountofincomederivedfromsourceswithoutthePhilippines;

(b)Theamountofincomederivedfromeachcountry,thetaxpaidorincurredtowhichisclaimedasacreditundersaidparagraph,suchamounttobedeterminedunderrulesandregulationsprescribedbytheSecretaryofFinance;and

(c)Allotherinformationnecessaryfortheverificationandcomputationofsuchcredits.

(D)Losses.‐

(1)InGeneral.‐Lossesactuallysustainedduringthetaxableyearandnotcompensatedforbyinsuranceorotherformsofindemnityshallbeallowedasdeductions:

(a)Ifincurredintrade,professionorbusiness;

(b)Ofpropertyconnectedwiththetrade,businessorprofession,ifthelossarisesfromfires,storms,shipwreck,orothercasualties,orfromrobbery,theftorembezzlement.

TheSecretaryofFinance,uponrecommendationoftheCommissioner,isherebyauthorizedtopromulgaterulesandregulationsprescribing,amongotherthings,thetimeandmannerbywhichthetaxpayershallsubmitadeclarationoflosssustainedfromcasualtyorfromrobbery,theftorembezzlementduringthetaxableyear:Provided,however,Thatthetimelimittobesoprescribedintherulesandregulationsshallnotbelessthanthirty(30)daysnormorethanninety(90)daysfromthedateofdiscoveryofthecasualtyorrobbery,theftorembezzlementgivingrisetotheloss.

(c)NolossshallbeallowedasadeductionunderthisSubsectionifatthetimeofthefilingofthereturn,suchlosshasbeenclaimedasadeductionforestatetaxpurposesintheestatetaxreturn.

(2)ProofofLoss.‐Inthecaseofanonresidentalienindividualorforeigncorporation,thelossesdeductibleshallbethoseactuallysustainedduringtheyearincurredinbusiness,tradeorexerciseofaprofessionconductedwithinthePhilippines,whensuchlossesarenotcompensatedforbyinsuranceorotherformsofindemnity.TheSecretaryofFinance,uponrecommendationoftheCommissioner,isherebyauthorizedtopromulgaterulesandregulationsprescribing,amongotherthings,thetimeandmannerbywhichthetaxpayershallsubmitadeclarationoflosssustainedfromcasualtyorfromrobbery,theftorembezzlementduringthetaxable

year:Provided,Thatthetimetobesoprescribedintherulesandregulationsshallnotbelessthanthirty(30)daysnormorethanninety(90)daysfromthedateofdiscoveryofthecasualtyorrobbery,theftorembezzlementgivingrisetotheloss;and

(3)NetOperatingLossCarry‐Over.‐Thenetoperatinglossofthebusinessorenterpriseforanytaxableyearimmediatelyprecedingthecurrenttaxableyear,whichhadnotbeenpreviouslyoffsetasdeductionfromgrossincomeshallbecarriedoverasadeductionfromgrossincomeforthenextthree(3)consecutivetaxableyearsimmediatelyfollowingtheyearofsuchloss:Provided,however,ThatanynetlossincurredinataxableyearduringwhichthetaxpayerwasexemptfromincometaxshallnotbeallowedasadeductionunderthisSubsection:Provided,further,Thatanetoperatinglosscarry‐overshallbeallowedonlyiftherehasbeennosubstantialchangeintheownershipofthebusinessorenterpriseinthat‐

(i)Notlessthanseventy‐fivepercent(75%)innominalvalueofoutstandingissuedshares.,ifthebusinessisinthenameofacorporation,isheldbyoronbehalfofthesamepersons;or

(ii)Notlessthanseventy‐fivepercent(75%)ofthepaidupcapitalofthecorporation,ifthebusinessisinthenameofacorporation,isheldbyoronbehalfofthesamepersons.

Forpurposesofthissubsection,theterm"notoperatingloss"shallmeantheexcessofallowabledeductionovergrossincomeofthebusinessinataxableyear.

Provided,Thatforminesotherthanoilandgaswells,anetoperatinglosswithoutthebenefitofincentivesprovidedforunderExecutiveOrderNo.226,asamended,otherwiseknownastheOmnibusInvestmentsCodeof1987,incurredinanyofthefirstten(10)yearsofoperationmaybecarriedoverasadeductionfromtaxableincomeforthenextfive(5)yearsimmediatelyfollowingtheyearofsuchloss.Theentireamountofthelossshallbecarriedovertothefirstofthefive(5)taxableyearsfollowingtheloss,andanyportionofsuchlosswhichexceeds,thetaxableincomeofsuchfirstyearshallbedeductedinlikemannerformthetaxableincomeofthenextremainingfour(4)years.

(4)CapitalLosses.‐

(a)Limitation.‐LossfromsalesorExchangesofcapitalassetsshallbeallowedonlytotheextentprovidedinSection39.

(b)SecuritiesBecomingWorthless.‐IfsecuritiesasdefinedinSection22(T)becomeworthlessduringthetaxableyearandarecapitalassets,thelossresultingtherefromshall,forpurposesofthisTitle,beconsideredasalossfromthesaleorexchange,onthelastdayofsuchtaxableyear,ofcapitalassets.

(5)LossesFromWashSalesofStockorSecurities.‐Lossesfrom"washsales"ofstockorsecuritiesasprovidedinSection38.

(6)WageringLosses.‐Lossesfromwageringtransactionsshallballowedonlytotheextentofthegainsfromsuchtransactions.

(7)AbandonmentLosses.‐

(a)Intheeventacontractareawherepetroleumoperationsareundertakenispartiallyorwhollyabandoned,allaccumulatedexplorationanddevelopmentexpenditurespertainingtheretoshallbeallowedasadeduction:Provided,ThataccumulatedexpendituresincurredinthatareapriortoJanuary1,1979shallbeallowedasadeductiononlyfromanyincomederivedfromthesamecontractarea.Inallcases,noticesofabandonmentshallbefiledwiththeCommissioner.

(b)Incaseaproducingwellissubsequentlyabandoned,theunamortizedcoststhereof,aswellastheundepreciatedcostsofequipmentdirectlyusedtherein,shallbeallowedasadeductionintheyearsuchwell,equipmentorfacilityisabandonedbythecontractor:Provided,Thatifsuchabandonedwellisreenteredandproductionisresumed,orifsuchequipmentorfacilityisrestoredintoservice,thesaidcostsshallbeincludedaspartofgrossincomeintheyearofresumptionorrestorationandshallbeamortizedordepreciated,asthecasemaybe.

(E)BadDebts.‐

(1)InGeneral.‐Debtsduetothetaxpayeractuallyascertainedtobeworthlessandchargedoffwithinthetaxableyearexceptthosenotconnectedwithprofession,tradeorbusinessandthosesustainedinatransactionenteredintobetweenpartiesmentionedunderSection36(B)ofthisCode:Provided,Thatrecoveryofbaddebtspreviouslyallowedasdeductionintheprecedingyearsshallbeincludedaspartofthegrossincomeintheyearofrecoverytotheextentoftheincometaxbenefitofsaiddeduction.

(2)SecuritiesBecomingWorthless.‐Ifsecurities,asdefinedinSection22(T),areascertainedtobeworthlessandchargedoffwithinthetaxableyearandarecapitalassets,thelossresultingtherefromshall,inthecaseofataxpayerotherthanabankortrustcompanyincorporatedunderthelawsofthePhilippinesasubstantialpartofwhosebusinessisthereceiptofdeposits,forthepurposeofthisTitle,beconsideredasalossfromthesaleorexchange,onthelastdayofsuchtaxableyear,ofcapitalassets.

(F)Depreciation.‐

(1)GeneralRule.‐Thereshallbeallowedasadepreciationdeductionareasonableallowancefortheexhaustion,wearandtear(includingreasonableallowanceforobsolescence)ofpropertyusedinthetradeorbusiness.Inthecaseofpropertyheldbyonepersonforlifewithremaindertoanotherperson,thedeductionshallbecomputedasifthelifetenantweretheabsoluteownerofthepropertyandshallbeallowedtothelifetenant.Inthecaseofpropertyheldintrust,theallowabledeductionshallbeapportionedbetweentheincomebeneficiariesandthetrustees

inaccordancewiththepertinentprovisionsoftheinstrumentcreatingthetrust,orintheabsenceofsuchprovisions,onthebasisofthetrustincomeallowabletoeach.

(2)UseofCertainMethodsandRates.‐Theterm"reasonableallowance"asusedintheprecedingparagraphshallinclude,butnotlimitedto,anallowancecomputedinaccordancewithrulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,underanyofthefollowingmethods:

(a)Thestraight‐linemethod;

(b)Declining‐balancemethod,usingaratenotexceedingtwicetheratewhichwouldhavebeenusedhadtheannualallowancebeencomputedunderthemethoddescribedinSubsection(F)(1);

(c)Thesum‐of‐the‐years‐digitmethod;and

(d)anyothermethodwhichmaybeprescribedbytheSecretaryofFinanceuponrecommendationoftheCommissioner.

(3)AgreementastoUsefulLifeonWhichDepreciationRateisBased.‐WhereunderrulesandregulationsprescribedbytheSecretaryofFinanceuponrecommendationoftheCommissioner,thetaxpayerandtheCommissionerhaveenteredintoanagreementinwritingspecificallydealingwiththeusefullifeandrateofdepreciationofanyproperty,theratesoagreeduponshallbebindingonboththetaxpayerandthenationalGovernmentintheabsenceoffactsandcircumstancesnottakenintoconsiderationduringtheadoptionofsuchagreement.Theresponsibilityofestablishingtheexistenceofsuchfactsandcircumstancesshallrestwiththepartyinitiatingthemodification.Anychangeintheagreedrateandusefullifeofthedepreciablepropertyasspecifiedintheagreementshallnotbeeffectivefortaxableyearspriortothetaxableyearinwhichnoticeinwritingbycertifiedmailorregisteredmailisservedbythepartyinitiatingsuchchangetotheotherpartytotheagreement:

Provided,however,thatwherethetaxpayerhasadoptedsuchusefullifeanddepreciationrateforanydepreciableandclaimedthedepreciationexpensesasdeductionfromhisgrossincome,withoutanywrittenobjectiononthepartoftheCommissionerorhisdulyauthorizedrepresentatives,theaforesaidusefullifeanddepreciationratesoadoptedbythetaxpayerfortheaforesaiddepreciableassetshallbeconsideredbindingforpurposesofthisSubsection.

(4)DepreciationofPropertiesUsedinPetroleumOperations.‐Anallowancefordepreciationinrespectofallpropertiesdirectlyrelatedtoproductionofpetroleuminitiallyplacedinserviceinataxableyearshallbeallowedunderthestraight‐lineordeclining‐balancemethodofdepreciationattheoptionoftheservicecontractor.

However,iftheservicecontractorinitiallyelectsthedeclining‐balancemethod,itmayatanysubsequentdate,shifttothestraight‐linemethod.

Theusefullifeofpropertiesusedinorrelatedtoproductionofpetroleumshallbeten(10)yearsofsuchshorterlifeasmaybepermittedbytheCommissioner.

Propertiesnotuseddirectlyintheproductionofpetroleumshallbedepreciatedunderthestraight‐linemethodonthebasisofanestimatedusefullifeoffive(5)years.

(5)DepreciationofPropertiesUsedinMiningOperations.‐anallowancefordepreciationinrespectofallpropertiesusedinminingoperationsotherthanpetroleumoperations,shallbecomputedasfollows:

(a)Atthenormalrateofdepreciationiftheexpectedlifeisten(10)yearsorless;or

(b)Depreciatedoveranynumberofyearsbetweenfive(5)yearsandtheexpectedlifeifthelatterismorethanten(10)years,andthedepreciationthereonallowedasdeductionfromtaxableincome:Provided,ThatthecontractornotifiestheCommissioneratthebeginningofthedepreciationperiodwhichdepreciationrateallowedbythisSectionwillbeused.

(6)DepreciationDeductiblebyNonresidentAliensEngagedinTradeorBusinessorResidentForeignCorporations.‐Inthecaseofanonresidentalienindividualengagedintradeorbusinessorresidentforeigncorporation,areasonableallowanceforthedeteriorationofPropertyarisingoutofitsuseoremploymentoritsnon‐useinthebusinesstradeorprofessionshallbepermittedonlywhensuchpropertyislocatedinthePhilippines.

(G)DepletionofOilandGasWellsandMines.‐

(1)InGeneral.‐Inthecaseofoilandgaswellsormines,areasonableallowancefordepletionoramortizationcomputedinaccordancewiththecost‐depletionmethodshallbegrantedunderrulesandregulationstobeprescribedbytheSecretaryoffinance,uponrecommendationoftheCommissioner.Provided,Thatwhentheallowancefordepletionshallequalthecapitalinvestednofurtherallowanceshallbegranted:Provided,further,Thatafterproductionincommercialquantitieshascommenced,certainintangibleexplorationanddevelopmentdrillingcosts:(a)shallbedeductibleintheyearincurredifsuchexpendituresareincurredfornon‐producingwellsand/ormines,or(b)shallbedeductibleinfullintheyearpaidorincurredorattheelectionofthetaxpayer,maybecapitalizedandamortizedifsuchexpendituresincurredareforproducingwellsand/orminesinthesamecontractarea.

"Intangiblecostsinpetroleumoperations"referstoanycostincurredinpetroleumoperationswhichinitselfhasnosalvagevalueandwhichisincidentaltoandnecessaryforthedrillingofwellsandpreparationofwellsfortheproductionofpetroleum:Provided,ThatsaidcostsshallnotpertaintotheacquisitionorimprovementofpropertyofacharactersubjecttotheallowancefordepreciationexceptthattheallowancesfordepreciationonsuchpropertyshallbedeductibleunderthisSubsection.

Anyintangibleexploration,drillinganddevelopmentexpensesallowedasadeductionincomputingtaxableincomeduringtheyearshallnotbetakenintoconsiderationincomputingtheadjustedcostbasisforthepurposeofcomputingallowablecostdepletion.

(2)ElectiontoDeductExplorationandDevelopmentExpenditures.‐Incomputingtaxableincomefromminingoperations,thetaxpayermayathisoption,deductexplorationanddevelopmentexpendituresaccumulatedascostoradjustedbasisforcostdepletionasofdateofprospecting,aswellasexplorationanddevelopmentexpenditurespaidorincurredduringthetaxableyear:Provided,Thattheamountdeductibleforexplorationanddevelopmentexpendituresshallnotexceedtwenty‐fivepercent(25%)ofthenetincomefromminingoperationscomputedwithoutthebenefitofanytaxincentivesunderexistinglaws.Theactualexplorationanddevelopmentexpendituresminustwenty‐fivepercent(25%)ofthenetincomefromminingshallbecarriedforwardtothesucceedingyearsuntilfullydeducted.

Theelectionbythetaxpayertodeducttheexplorationanddevelopmentexpendituresisirrevocableandshallbebindinginsucceedingtaxableyears.

"Netincomefromminingoperations",asusedinthisSubsection,shallmeangrossincomefromoperationsless"allowabledeductions"whicharenecessaryorrelatedtominingoperations."Allowabledeductions"shallincludemining,millingandmarketingexpenses,anddepreciationofpropertiesdirectlyusedintheminingoperations.Thisparagraphshallnotapplytoexpendituresfortheacquisitionorimprovementofpropertyofacharacterwhichissubjecttotheallowancefordepreciation.

Innocaseshallthisparagraphapplywithrespecttoamountspaidorincurredfortheexplorationanddevelopmentofoilandgas.

Theterm"explorationexpenditures"meansexpenditurespaidorincurredforthepurposeofascertainingtheexistence,location,extentorqualityofanydepositoforeorothermineral,andpaidorincurredbeforethebeginningofthedevelopmentstageofthemineordeposit.

Theterm"developmentexpenditures"meansexpenditurespaidorincurredduringthedevelopmentstageofthemineorothernaturaldeposits.Thedevelopmentstageofamineorothernaturaldepositshallbeginatthetimewhendepositsoforeorothermineralsareshowntoexistinsufficientcommercialquantityandqualityandshallenduponcommencementofactualcommercialextraction.

(3)DepletionofOilandGasWellsandMinesDeductiblebyaNonresidentAlienindividualorForeignCorporation.‐InthecaseofanonresidentalienindividualengagedintradeorbusinessinthePhilippinesoraresidentforeigncorporation,allowancefordepletionofoilandgaswellsorminesunderparagraph(1)ofthisSubsectionshallbeauthorizedonlyinrespecttooilandgaswellsormineslocatedwithinthePhilippines.

(H)CharitableandOtherContributions.‐

(1)InGeneral.‐Contributionsorgiftsactuallypaidormadewithinthetaxableyearto,orfortheuseoftheGovernmentofthePhilippinesoranyofitsagenciesoranypoliticalsubdivisionthereofexclusivelyforpublicpurposes,ortoaccrediteddomesticcorporationorassociationsorganizedandoperatedexclusivelyforreligious,charitable,scientific,youthandsportsdevelopment,culturaloreducationalpurposesorfortherehabilitationofveterans,ortosocialwelfareinstitutions,ortonon‐governmentorganizations,inaccordancewithrulesandregulationspromulgatedbytheSecretaryoffinance,uponrecommendationoftheCommissioner,nopartofthenetincomeofwhichinurestothebenefitofanyprivatestockholderorindividualinanamountnotinexcessoftenpercent(10%)inthecaseofanindividual,andfivepercent(%)inthecaseofacorporation,ofthetaxpayer'staxableincomederivedfromtrade,businessorprofessionascomputedwithoutthebenefitofthisandthefollowingsubparagraphs.

(2)ContributionsDeductibleinFull.‐Notwithstandingtheprovisionsoftheprecedingsubparagraph,donationstothefollowinginstitutionsorentitiesshallbedeductibleinfull;

(a)DonationstotheGovernment.‐DonationstotheGovernmentofthePhilippinesortoanyofitsagenciesorpoliticalsubdivisions,includingfully‐ownedgovernmentcorporations,exclusivelytofinance,toprovidefor,ortobeusedinundertakingpriorityactivitiesineducation,health,youthandsportsdevelopment,humansettlements,scienceandculture,andineconomicdevelopmentaccordingtoaNationalPriorityPlandeterminedbytheNationalEconomicandDevelopmentAuthority(NEDA),Inconsultationwithappropriategovernmentagencies,includingitsregionaldevelopmentcouncilsandprivatephilantrophicpersonsandinstitutions:Provided,ThatanydonationwhichismadetotheGovernmentortoanyofitsagenciesorpoliticalsubdivisionsnotinaccordancewiththesaidannualpriorityplanshallbesubjecttothelimitationsprescribedinparagraph(1)ofthisSubsection;

(b)DonationstoCertainForeignInstitutionsorInternationalOrganizations.‐Donationstoforeigninstitutionsorinternationalorganizationswhicharefullydeductibleinpursuanceoforincompliancewithagreements,treaties,orcommitmentsenteredintobytheGovernmentofthePhilippinesandtheforeigninstitutionsorinternationalorganizationsorinpursuanceofspeciallaws;

(c)DonationstoAccreditedNongovernmentOrganizations.‐Theterm"nongovernmentorganization"meansanonprofitdomesticcorporation:

(1)Organizedandoperatedexclusivelyforscientific,research,educational,character‐buildingandyouthandsportsdevelopment,health,socialwelfare,culturalorcharitablepurposes,oracombinationthereof,nopartofthenetincomeofwhichinurestothebenefitofanyprivateindividual;

(2)Which,notlaterthanthe15thdayofthethirdmonthafterthecloseoftheaccreditednongovernmentorganizationstaxableyearinwhichcontributionsarereceived,makesutilizationdirectlyfortheactiveconductoftheactivitiesconstitutingthepurposeorfunctionforwhichitisorganizedandoperated,unlessanextendedperiodisgrantedbytheSecretaryofFinanceinaccordancewiththerulesandregulationstobepromulgated,uponrecommendationoftheCommissioner;

(3)Thelevelofadministrativeexpenseofwhichshall,onanannualbasis,conformwiththerulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,butinnocasetoexceedthirtypercent(30%)ofthetotalexpenses;and

(4)Theassetsofwhich,intheevenofdissolution,wouldbedistributedtoanothernonprofitdomesticcorporationorganizedforsimilarpurposeorpurposes,ortothestateforpublicpurpose,orwouldbedistributedbyacourttoanotherorganizationtobeusedinsuchmannerasinthejudgmentofsaidcourtshallbestaccomplishthegeneralpurposeforwhichthedissolvedorganizationwasorganized.

SubjecttosuchtermsandconditionsasmaybeprescribedbytheSecretaryofFinance,theterm"utilization"means:

(i)Anyamountincashorinkind(includingadministrativeexpenses)paidorutilizedtoaccomplishoneormorepurposesforwhichtheaccreditednongovernmentorganizationwascreatedororganized.

(ii)Anyamountpaidtoacquireanassetused(orheldforuse)directlyincarryingoutoneormorepurposesforwhichtheaccreditednongovernmentorganizationwascreatedororganized.

Anamountsetasideforaspecificprojectwhichcomeswithinoneormorepurposesoftheaccreditednongovernmentorganizationmaybetreatedasautilization,butonlyifatthetimesuchamountissetaside,theaccreditednongovernmentorganizationhasestablishedtothesatisfactionoftheCommissionerthattheamountwillbepaidforthespecificprojectwithinaperiodtobeprescribedinrulesandregulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,butnottoexceedfive(5)years,andtheprojectisonewhichcanbebetteraccomplishedbysettingasidesuchamountthanbyimmediatepaymentoffunds.

(3)Valuation.‐Theamountofanycharitablecontributionofpropertyotherthanmoneyshallbebasedontheacquisitioncostofsaidproperty.

(4)ProofofDeductions.‐ContributionsorgiftsshallbeallowableasdeductionsonlyifverifiedundertherulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

(I)ResearchandDevelopment.‐

(1)InGeneral.‐ataxpayermaytreatresearchordevelopmentexpenditureswhicharepaidorincurredbyhimduringthetaxableyearinconnectionwithhistrade,businessorprofessionasordinaryandnecessaryexpenseswhicharenotchargeabletocapitalaccount.Theexpendituressotreatedshallbeallowedasdeductionduringthetaxableyearwhenpaidorincurred.

(2)AmortizationofCertainResearchandDevelopmentExpenditures.‐AttheelectionofthetaxpayerandinaccordancewiththerulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,thefollowingresearchanddevelopmentexpendituresmaybetreatedasdeferredexpenses:

(a)Paidorincurredbythetaxpayerinconnectionwithhistrade,businessorprofession;

(b)Nottreatedasexpensesunderparagraph91)hereof;and

(c)Chargeabletocapitalaccountbutnotchargeabletopropertyofacharacterwhichissubjecttodepreciationordepletion.

Incomputingtaxableincome,suchdeferredexpensesshallbeallowedasdeductionratablydistributedoveraperiodofnotlessthansixty(60)monthsasmaybeelectedbythetaxpayer(beginningwiththemonthinwhichthetaxpayerfirstrealizesbenefitsfromsuchexpenditures).

Theelectionprovidedbyparagraph(2)hereofmaybemadeforanytaxableyearbeginningaftertheeffectivityofthisCode,butonlyifmadenotlaterthanthetimeprescribedbylawforfilingthereturnforsuchtaxableyear.Themethodsoelected,andtheperiodselectedbythetaxpayer,shallbeadheredtoincomputingtaxableincomeforthetaxableyearforwhichtheelectionismadeandforallsubsequenttaxableyearsunlesswiththeapprovaloftheCommissioner,achangetoadifferentmethodisauthorizedwithrespecttoapartorallofsuchexpenditures.Theelectionshallnotapplytoanyexpenditurepaidorincurredduringanytaxableyearforwhichthetaxpayermakestheelection.

(3)LimitationsonDeduction.‐ThisSubsectionshallnotapplyto:

(a)Anyexpenditurefortheacquisitionorimprovementofland,orfortheimprovementofpropertytobeusedinconnectionwithresearchanddevelopmentofacharacterwhichissubjecttodepreciationanddepletion;and

(b)Anyexpenditurepaidorincurredforthepurposeofascertainingtheexistence,location,extent,orqualityofanydepositoforeorothermineral,includingoilorgas.

(J)PensionTrusts.‐Anemployerestablishingormaintainingapensiontrusttoprovideforthepaymentofreasonablepensionstohisemployeesshallbeallowedasadeduction(inadditiontothecontributionstosuchtrustduringthetaxableyear

tocoverthepensionliabilityaccruingduringtheyear,allowedasadeductionunderSubsection(A)(1)ofthisSection)areasonableamounttransferredorpaidintosuchtrustduringthetaxableyearinexcessofsuchcontributions,butonlyifsuchamount(1)hasnottheretoforebeenallowedasadeduction,and(2)isapportionedinequalpartsoveraperiodoften(10)consecutiveyearsbeginningwiththeyearinwhichthetransferorpaymentismade.

(K)AdditionalRequirementsforDeductibilityofCertainPayments.‐Anyamountpaidorpayablewhichisotherwisedeductiblefrom,ortakenintoaccountincomputinggrossincomeorforwhichdepreciationoramortizationmaybeallowedunderthisSection,shallbeallowedasadeductiononlyifitisshownthatthetaxrequiredtobedeductedandwithheldtherefromhasbeenpaidtotheBureauofInternalRevenueinaccordancewiththisSection58and81ofthisCode.

(L)OptionalStandardDeduction.‐InlieuofthedeductionsallowedundertheprecedingSubsections,anindividualsubjecttotaxunderSection24,otherthananonresidentalien,mayelectastandarddeductioninanamountnotexceedingtenpercent(10%)ofhisgrossincome.Unlessthetaxpayersignifiesinhisreturnhisintentiontoelecttheoptionalstandarddeduction,heshallbeconsideredashavingavailedhimselfofthedeductionsallowedintheprecedingSubsections.Suchelectionwhenmadeinthereturnshallbeirrevocableforthetaxableyearforwhichthereturnismade:Provided,ThatanindividualwhoisentitledtoandclaimedfortheoptionalstandarddeductionshallnotberequiredtosubmitwithhistaxreturnsuchfinancialstatementsotherwiserequiredunderthisCode:Provided,further,ThatexceptwhentheCommissionerotherwisepermits,thesaidindividualshallkeepsuchrecordspertainingtohisgrossincomeduringthetaxableyear,asmayberequiredbytherulesandregulationspromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

(M)PremiumPaymentsonHealthand/orHospitalizationInsuranceofanIndividualTaxpayer.‐TheamountofpremiumsnottoexceedTwothousandfourhundredpesos(P2,400)perfamilyorTwohundredpesos(P200)amonthpaidduringthetaxableyearforhealthand/orhospitalizationinsurancetakenbythetaxpayerforhimself,includinghisfamily,shallbeallowedasadeductionfromhisgrossincome:Provided,ThatsaidfamilyhasagrossincomeofnotmorethanTwohundredfiftythousandpesos(P250,000)forthetaxableyear:Provided,finally,Thatinthecaseofmarriedtaxpayers,onlythespouseclaimingtheadditionalexemptionfordependentsshallbeentitledtothisdeduction.

NotwithstandingtheprovisionoftheprecedingSubsections,TheSecretaryofFinance,uponrecommendationoftheCommissioner,afterapublichearingshallhavebeenheldforthispurpose,mayprescribebyrulesandregulations,limitationsorceilingsforanyoftheitemizeddeductionsunderSubsections(A)to(J)ofthisSection:Provided,Thatforpurposesofdeterminingsuchceilingsorlimitations,theSecretaryofFinanceshallconsiderthefollowingfactors:(1)adequacyoftheprescribedlimitsontheactualexpenditurerequirementsofeachparticularindustry;and(2)effectsofinflationonexpenditurelevels:Provided,further,Thatnoceilingsshallfurtherbeimposedonitemsofexpensealreadysubjecttoceilingsunderpresentlaw.

SEC.35.AllowanceofPersonalExemptionforIndividualTaxpayer.‐

(A)InGeneral.‐ForpurposesofdeterminingthetaxprovidedinSection24(A)ofthisTitle,thereshallbeallowedabasicpersonalexemptionasfollows:

Forsingleindividualormarriedindividualjudiciallydecreedaslegally

separatedwithnoqualifieddependentsP20,000

ForHeadofFamilyP25,000

ForeachmarriedindividualP32,000

Inthecaseofmarriedindividualswhereonlyoneofthespousesisderivinggrossincome,onlysuchspouseshallbeallowedthepersonalexemption.

Forpurposesofthisparagraph,theterm"headoffamily"meansanunmarriedorlegallyseparatedmanorwomanwithoneorbothparents,orwithoneormorebrothersorsisters,orwithoneormorelegitimate,recognizednaturalorlegallyadoptedchildrenlivingwithanddependentuponhimfortheirchiefsupport,wheresuchbrothersorsistersorchildrenarenotmorethantwenty‐one(21)yearsofage,unmarriedandnotgainfullyemployedorwheresuchchildren,brothersorsisters,regardlessofageareincapableofself‐supportbecauseofmentalorphysicaldefect.

(B)AdditionalExemptionforDependents.‐ThereshallbeallowedanadditionalexemptionofEightthousandpesos(P8,000)foreachdependentnotexceedingfour(4).

Theadditionalexemptionfordependentshallbeclaimedbyonlyoneofthespousesinthecaseofmarriedindividuals.

Inthecaseoflegallyseparatedspouses,additionalexemptionsmaybeclaimedonlybythespousewhohascustodyofthechildorchildren:Provided,Thatthetotalamountofadditionalexemptionsthatmaybeclaimedbybothshallnotexceedthemaximumadditionalexemptionshereinallowed.

ForpurposesofthisSubsection,a"dependent"meansalegitimate,illegitimateorlegallyadoptedchildchieflydependentuponandlivingwiththetaxpayerifsuchdependentisnotmorethantwenty‐one(21)yearsofage,unmarriedandnotgainfullyemployedorifsuchdependent,regardlessofage,isincapableofself‐supportbecauseofmentalorphysicaldefect.

(C)ChangeofStatus.‐Ifthetaxpayermarriesorshouldhaveadditionaldependent(s)asdefinedaboveduringthetaxableyear,thetaxpayermayclaimthecorrespondingadditionalexemption,asthecasemaybe,infullforsuchyear.

Ifthetaxpayerdiesduringthetaxableyear,hisestatemaystillclaimthepersonalandadditionalexemptionsforhimselfandhisdependent(s)asifhediedatthecloseofsuchyear.

Ifthespouseoranyofthedependentsdiesorifanyofsuchdependentsmarries,becomestwenty‐one(21)yearsoldorbecomesgainfullyemployedduringthetaxableyear,thetaxpayermaystillclaimthesameexemptionsasifthespouseoranyofthedependentsdied,orasifsuchdependentsmarried,becametwenty‐one(21)yearsoldorbecamegainfullyemployedatthecloseofsuchyear.

(D)PersonalExemptionAllowabletoNonresidentAlienIndividual.‐Anonresidentalienindividualengagedintrade,businessorintheexerciseofaprofessioninthePhilippinesshallbeentitledtoapersonalexemptionintheamountequaltotheexemptionsallowedintheincometaxlawinthecountryofwhichheisasubject‐orcitizen,tocitizensofthePhilippinesnotresidinginsuchcountry,nottoexceedtheamountfixedinthisSectionasexemptionforcitizensorresidentofthePhilippines:Provided,ThatsaidnonresidentalienshouldfileatrueandaccuratereturnofthetotalincomereceivedbyhimfromallsourcesinthePhilippines,asrequiredbythisTitle.

SEC.36.ItemsNotDeductible.‐

(A)GeneralRule.‐Incomputingnetincome,nodeductionshallinanycasebeallowedinrespectto‐

(1)Personal,livingorfamilyexpenses;

(2)Anyamountpaidoutfornewbuildingsorforpermanentimprovements,orbettermentsmadetoincreasethevalueofanypropertyorestate;

ThisSubsectionshallnotapplytointangibledrillinganddevelopmentcostsincurredinpetroleumoperationswhicharedeductibleunderSubsection(G)(1)ofSection34ofthisCode.

(3)Anyamountexpendedinrestoringpropertyorinmakinggoodtheexhaustionthereofforwhichanallowanceisorhasbeenmade;or

(4)Premiumspaidonanylifeinsurancepolicycoveringthelifeofanyofficeroremployee,orofanypersonfinanciallyinterestedinanytradeorbusinesscarriedonbythetaxpayer,individualorcorporate,whenthetaxpayerisdirectlyorindirectlyabeneficiaryundersuchpolicy.

(B)LossesfromSalesorExchangesofProperty.‐Incomputingnetincome,nodeductionsshallinanycasebeallowedinrespectoflossesfromsalesorexchangesofpropertydirectlyorindirectly‐

(1)Betweenmembersofafamily.Forpurposesofthisparagraph,thefamilyofanindividualshallincludeonlyhisbrothersandsisters(whetherbythewholeorhalf‐blood),spouse,ancestors,andlinealdescendants;or

(2)Exceptinthecaseofdistributionsinliquidation,betweenanindividualandcorporationmorethanfiftypercent(50%)invalueoftheoutstandingstockofwhichisowned,directlyorindirectly,byorforsuchindividual;or

(3)Exceptinthecaseofdistributionsinliquidation,betweentwocorporationsmorethanfiftypercent(50%)invalueoftheoutstandingstockofwhichisowned,directlyorindirectly,byorforthesameindividualifeitheroneofsuchcorporations,withrespecttothetaxableyearofthecorporationprecedingthedateofthesaleofexchangewasunderthelawapplicabletosuchtaxableyear,apersonalholdingcompanyoraforeignpersonalholdingcompany;

(4)Betweenthegrantorandafiduciaryofanytrust;or

(5)Betweenthefiduciaryofandthefiduciaryofatrustandthefiduciaryofanothertrustifthesamepersonisagrantorwithrespecttoeachtrust;or

(6)Betweenafiduciaryofatrustandbeneficiaryofsuchtrust.

SEC.37.SpecialProvisionsRegardingIncomeandDeductionsofInsuranceCompanies,WhetherDomesticorForeign.‐

(A)SpecialDeductionAllowedtoInsuranceCompanies.‐Inthecaseofinsurancecompanies,whetherdomesticorforeigndoingbusinessinthePhilippines,thenetadditions,ifany,requiredbylawtobemadewithintheyeartoreservefundsandthesumsotherthandividendspaidwithintheyearonpolicyandannuitycontractsmaybedeductedfromtheirgrossincome:Provided,however,Thatthereleasedreservebetreatedasincomefortheyearofrelease.

(B)MutualInsuranceCompanies.‐Inthecaseofmutualfireandmutualemployers'liabilityandmutualworkmen'scompensationandmutualcasualtyinsurancecompaniesrequiringtheirmemberstomakepremiumdepositstoprovideforlossesandexpenses,saidcompaniesshallnotreturnasincomeanyportionofthepremiumdepositsreturnedtotheirpolicyholders,butshallreturnastaxableincomeallincomereceivedbythemfromallothersourcesplussuchportionofthepremiumdepositsasareretainedbythecompaniesforpurposesotherthanthepaymentoflossesandexpensesandreinsurancereserves.

(C)MutualMarineInsuranceCompanies.‐Mutualmarineinsurancecompaniesshallincludeintheirreturnofgrossincome,grosspremiumscollectedandreceivedbythemlessamountspaidtopolicyholdersonaccountofpremiumspreviouslypaidbythemandinterestpaiduponthoseamountsbetweentheascertainmentandpaymentthereof.

(D)AssessmentInsuranceCompanies.‐Assessmentinsurancecompanies,whetherdomesticorforeign,maydeductfromtheirgrossincometheactualdepositofsumswiththeofficersoftheGovernmentofthePhilippinespursuanttolaw,asadditionstoguaranteeorreservefunds.

SEC.38.LossesfromWashSalesofStockorSecurities.‐

(A)Inthecaseofanylossclaimedtohavebeensustainedfromanysaleorotherdispositionofsharesofstockorsecuritieswhereitappearsthatwithinaperiodbeginningthirty(30)daysbeforethedateofsuchsaleordispositionandending

thirty(30)daysaftersuchdate,thetaxpayerhasacquired(bypurchaseorbyexchangeuponwhichtheentireamountofgainorlosswasrecognizedbylaw),orhasenteredintoacontactoroptionsotoacquire,substantiallyidenticalstockorsecurities,thennodeductionforthelossshallbeallowedunderSection34unlesstheclaimismadebyadealerinstockorsecuritiesandwithrespecttoatransactionmadeintheordinarycourseofthebusinessofsuchdealer.

(B)Iftheamountofstockorsecuritiesacquired(orcoveredbythecontractoroptiontoacquire)islessthantheamountofstockorsecuritiessoldorotherwisedisposedof,thentheparticularsharesofstockorsecurities,thelossformthesaleorotherdispositionofwhichisnotdeductible,shallbedeterminedunderrulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

(C)Iftheamountofstockorsecuritiesacquired(orcoveredbythecontractoroptiontoacquirewhich)resultedinthenon‐deductibilityoftheloss,shallbedeterminedunderrulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

SEC.39.CapitalGainsandLosses.‐

(A)Definitions.‐AsusedinthisTitle‐

(1)CapitalAssets.‐Theterm"capitalassets"meanspropertyheldbythetaxpayer(whetherornotconnectedwithhistradeorbusiness),butdoesnotincludestockintradeofthetaxpayerorotherpropertyofakindwhichwouldproperlybeincludedintheinventoryofthetaxpayerifonhandatthecloseofthetaxableyear,orpropertyheldbythetaxpayerprimarilyforsaletocustomersintheordinarycourseofhistradeorbusiness,orpropertyusedinthetradeorbusiness,ofacharacterwhichissubjecttotheallowancefordepreciationprovidedinSubsection(F)ofSection34;orrealpropertyusedintradeorbusinessofthetaxpayer.

(2)NetCapitalGain.‐Theterm"netcapitalgain"meanstheexcessofthegainsfromsalesorexchangesofcapitalassetsoverthelossesfromsuchsalesorexchanges.

(3)NetCapitalLoss.‐Theterm"netcapitalloss"meanstheexcessofthelossesfromsalesorexchangesofcapitalassetsoverthegainsfromsuchsalesorexchanges.

(B)PercentageTakenIntoAccount.‐Inthecaseofataxpayer,otherthanacorporation,onlythefollowingpercentagesofthegainorlossrecognizeduponthe

saleorexchangeofacapitalassetshallbetakenintoaccountincomputingnetcapitalgain,netcapitalloss,andnetincome:

(1)Onehundredpercent(100%)ifthecapitalassethasbeenheldfornotmorethantwelve(12)months;and

(2)Fiftypercent(50%)ifthecapitalassethasbeenheldformorethantwelve(12)months;

(C)LimitationonCapitalLosses.‐Lossesfromsalesorexchangesofcapitalassetsshallbeallowedonlytotheextentofthegainsfromsuchsalesorexchanges.IfabankortrustcompanyincorporatedunderthelawsofthePhilippines,asubstantialpartofwhosebusinessisthereceiptofdeposits,sellsanybond,debenture,note,orcertificateorotherevidenceofindebtednessissuedbyanycorporation(includingoneissuedbyagovernmentorpoliticalsubdivisionthereof),withinterestcouponsorinregisteredform,anylossresultingfromsuchsaleshallnotbesubjecttotheforegoinglimitationandshallnotbeincludedindeterminingtheapplicabilityofsuchlimitationtootherlosses.

(D)NetCapitalLossCarry‐over.‐Ifanytaxpayer,otherthanacorporation,sustainsinanytaxableyearanetcapitalloss,suchloss(inanamountnotinexcessofthenetincomeforsuchyear)shallbetreatedinthesucceedingtaxableyearasalossfromthesaleorexchangeofacapitalassetheldfornotmorethantwelve(12)months.

(E)RetirementofBonds,Etc.‐ForpurposesofthisTitle,amountsreceivedbytheholderupontheretirementofbonds,debentures,notesorcertificatesorotherevidencesofindebtednessissuedbyanycorporation(includingthoseissuedbyagovernmentorpoliticalsubdivisionthereof)withinterestcouponsorinregisteredform,shallbeconsideredasamountsreceivedinexchangetherefor.

(F)GainsorLossesFromShortSales,Etc.‐ForpurposesofthisTitle‐

(1)Gainsorlossesfromshortsalesofpropertyshallbeconsideredasgainsorlossesfromsalesorexchangesofcapitalassets;and

(2)Gainsorlossesattributabletothefailuretoexerciseprivilegesoroptionstobuyorsellpropertyshallbeconsideredascapitalgainsorlosses.

SEC.40.DeterminationofAmountandRecognitionofGainorLoss.‐

(A)ComputationofGainorLoss.‐Thegainfromthesaleorotherdispositionofpropertyshallbetheexcessoftheamountrealizedtherefromoverthebasisor

adjustedbasisfordetermininggain,andthelossshallbetheexcessofthebasisoradjustedbasisfordetermininglossovertheamountrealized.Theamountrealizedfromthesaleorotherdispositionofpropertyshallbethesumofmoneyreceivedplusthefairmarketvalueoftheproperty(otherthanmoney)received;

(B)BasisforDeterminingGainorLossfromSaleorDispositionofProperty.‐Thebasisofpropertyshallbe‐

(1)ThecostthereofinthecaseofpropertyacquiredonorafterMarch1,1913,ifsuchpropertywasacquiredbypurchase;or

(2)Thefairmarketpriceorvalueasofthedateofacquisition,ifthesamewasacquiredbyinheritance;or

(3)Ifthepropertywasacquiredbygift,thebasisshallbethesameasifitwouldbeinthehandsofthedonororthelastprecedingownerbywhomitwasnotacquiredbygift,exceptthatifsuchbasisisgreaterthanthefairmarketvalueofthepropertyatthetimeofthegiftthen,forthepurposeofdeterminingloss,thebasisshallbesuchfairmarketvalue;or

(4)Ifthepropertywasacquiredforlessthananadequateconsiderationinmoneyormoney'sworth,thebasisofsuchpropertyistheamountpaidbythetransfereefortheproperty;or

(5)Thebasisasdefinedinparagraph(C)(5)ofthisSection,ifthepropertywasacquiredinatransactionwheregainorlossisnotrecognizedunderparagraph(C)(2)ofthisSection.

(C)ExchangeofProperty.‐

(1)GeneralRule.‐Exceptashereinprovided,uponthesaleorexchangeorproperty,theentireamountofthegainorloss,asthecasemaybe,shallberecognized.

(2)Exception.‐Nogainorlossshallberecognizedifinpursuanceofaplanofmergerorconsolidation‐

(a)Acorporation,whichisapartytoamergerorconsolidation,exchangespropertysolelyforstockinacorporation,whichisapartytothemergerorconsolidation;or

(b)Ashareholderexchangesstockinacorporation,whichisapartytothemergerorconsolidation,solelyforthestockofanothercorporationalsoapartytothemergerorconsolidation;or

(c)Asecurityholderofacorporation,whichisapartytothemergerorconsolidation,exchangeshissecuritiesinsuchcorporation,solelyforstockorsecuritiesinsuchcorporation,apartytothemergerorconsolidation.

Nogainorlossshallalsoberecognizedifpropertyistransferredtoacorporationbyapersoninexchangeforstockorunitofparticipationinsuchacorporationofwhichasaresultofsuchexchangesaidperson,aloneortogetherwithothers,notexceedingfour(4)persons,gainscontrolofsaidcorporation:Provided,Thatstocksissuedforservicesshallnotbeconsideredasissuedinreturnforproperty.

(3)ExchangeNotSolelyinKind.‐

(a)If,inconnectionwithanexchangedescribedintheaboveexceptions,anindividual,ashareholder,asecurityholderoracorporationreceivesnotonlystockorsecuritiespermittedtobereceivedwithouttherecognitionofgainorloss,butalsomoneyand/orproperty,thegain,ifany,butnottheloss,shallberecognizedbutinanamountnotinexcessofthesumofthemoneyandfairmarketvalueofsuchotherpropertyreceived:Provided,Thatastotheshareholder,ifthemoneyand/orotherpropertyreceivedhastheeffectofadistributionofataxabledividend,thereshallbetaxedasdividendtotheshareholderanamountofthegainrecognizednotinexcessofhisproportionateshareoftheundistributedearningsandprofitsofthecorporation;theremainder,ifany,ofthegainrecognizedshallbetreatedasacapitalgain.

(b)If,inconnectionwiththeexchangedescribedintheaboveexceptions,thetransferorcorporationreceivesnotonlystockpermittedtobereceivedwithouttherecognitionofgainorlossbutalsomoneyand/orotherproperty,then(i)ifthecorporationreceivingsuchmoneyand/orotherpropertydistributesitinpursuanceoftheplanofmergerorconsolidation,nogaintothecorporationshallberecognizedfromtheexchange,but(ii)ifthecorporationreceivingsuchotherpropertyand/ormoneydoesnotdistributeitinpursuanceoftheplanofmergerorconsolidation,thegain,ifany,butnotthelosstothecorporationshallberecognizedbutinanamountnotinexcessofthesumofsuchmoneyandthefairmarketvalueofsuchotherpropertysoreceived,whichisnotdistributed.

(4)AssumptionofLiability.‐

(a)Ifthetaxpayer,inconnectionwiththeexchangesdescribedintheforegoingexceptions,receivesstockorsecuritieswhichwouldbepermittedtobereceivedwithouttherecognitionofthegainifitwerethesoleconsideration,andaspartoftheconsideration,anotherpartytotheexchangeassumesaliabilityofthetaxpayer,oracquiresfromthetaxpayerproperty,subjecttoaliability,thensuchassumptionoracquisitionshallnotbetreatedasmoneyand/orotherproperty,andshallnotpreventtheexchangefrombeingwithintheexceptions.

(b)Iftheamountoftheliabilitiesassumedplustheamountoftheliabilitiestowhichthepropertyissubjectexceedthetotaloftheadjustedbasisofthepropertytransferredpursuanttosuchexchange,thensuchexcessshallbeconsideredasagainfromthesaleorexchangeofacapitalassetorofpropertywhichisnotacapitalasset,asthecasemaybe.

(5)Basis‐

(a)Thebasisofthestockorsecuritiesreceivedbythetransferorupontheexchangespecifiedintheaboveexceptionshallbethesameasthebasisoftheproperty,stockorsecuritiesexchanged,decreasedby(1)themoneyreceived,and(2)thefairmarketvalueoftheotherpropertyreceived,andincreasedby(a)theamounttreatedasdividendoftheshareholderand(b)theamountofanygainthatwasrecognizedontheexchange:Provided,Thatthepropertyreceivedas"boot"shallhaveasbasisitsfairmarketvalue:Provided,further,Thatifaspartoftheconsiderationtothetransferor,thetransfereeofpropertyassumesaliabilityofthetransferororacquiresformthelatterpropertysubjecttoaliability,suchassumptionoracquisition(intheamountoftheliability)shall,forpurposesofthisparagraph,betreatedasmoneyreceivedbythetransferorontheexchange:Provided,finally,Thatifthetransferorreceivesseveralkindsofstockorsecurities,theCommissionerisherebyauthorizedtoallocatethebasisamongtheseveralclassesofstocksorsecurities.

(b)Thebasisofthepropertytransferredinthehandsofthetransfereeshallbethesameasitwouldbeinthehandsofthetransferorincreasedbytheamountofthegainrecognizedtothetransferoronthetransfer.

(6)Definitions.‐

(a)Theterm"securities"meansbondsanddebenturesbutnot"notes"ofwhateverclassorduration.

(b)Theterm"merger"or"consolidation",whenusedinthisSection,shallbeunderstoodtomean:(i)theordinarymergerorconsolidation,or(ii)theacquisitionbyonecorporationofallorsubstantiallyallthepropertiesofanothercorporationsolelyforstock:Provided,ThatforatransactiontoberegardedasamergerorconsolidationwithinthepurviewofthisSection,itmustbeundertakenforabonafidebusinesspurposeandnotsolelyforthepurposeofescapingtheburdenoftaxation:Provided,further,Thatindeterminingwhetherabonafidebusinesspurposeexists,eachandeverystepofthetransactionshallbeconsideredandthewholetransactionorseriesoftransactionshallbetreatedasasingleunit:Provided,finally,Thatindeterminingwhetherthepropertytransferredconstitutesasubstantialportionofthepropertyofthetransferor,theterm'property'shallbetakentoincludethecashassetsofthetransferor.

(c)Theterm"control",whenusedinthisSection,shallmeanownershipofstocksinacorporationpossessingatleastfifty‐onepercent(51%)ofthetotalvotingpowerofallclassesofstocksentitledtovote.

(d)TheSecretaryofFinance,uponrecommendationoftheCommissioner,isherebyauthorizedtoissuerulesandregulationsforthepurpose"substantiallyall"andfortheproperimplementationofthisSection.

SEC.41.Inventories.‐WheneverinthejudgmentoftheCommissioner,theuseofinventoriesisnecessaryinordertodetermineclearlytheincomeofanytaxpayer,inventoriesshallbetakenbysuchtaxpayeruponsuchbasisastheSecretaryofFinance,uponrecommendationoftheCommissioner,may,byrulesandregulations,prescribeasconformingasnearlyasmaybetothebestaccountingpracticeinthetradeorbusinessandasmostclearlyreflectingtheincome.

Ifataxpayer,afterhavingcompliedwiththetermsandaconditionsprescribedbytheCommissioner,usesaparticularmethodofvaluingitsinventoryforanytaxableyear,thensuchmethodshallbeusedinallsubsequenttaxableyearsunless:

(i)withtheapprovaloftheCommissioner,achangetoadifferentmethodisauthorized;or

(ii)theCommissionerfindsthatthenatureofthestockonhand(e.g.,itsscarcity,liquidity,marketabilityandpricemovements)issuchthatinventorygainsshouldbeconsideredrealizedfortaxpurposesand,therefore,itisnecessarytomodifythevaluationmethodforpurposesofascertainingtheincome,profit,orlossinamorerealisticmanner:Provided,however,ThattheCommissionershallnotexercisehisauthoritytorequireachangeininventorymethodmoreoftenthanonceeverythree(3)years:Provided,further,ThatanychangeinaninventoryvaluationmethodmustbesubjecttoapprovalbytheSecretaryofFinance.

SEC.42.IncomefromSourcesWithinthePhilippines.‐

(A)GrossIncomeFromSourcesWithinthePhilippines.‐ThefollowingitemsofgrossincomeshallbetreatedasgrossincomefromsourceswithinthePhilippines:

(1)Interests.‐InterestsderivedfromsourceswithinthePhilippines,andinterestsonbonds,notesorotherinterest‐bearingobligationofresidents,corporateorotherwise;

(2)Dividends.‐Theamountreceivedasdividends:

(a)fromadomesticcorporation;and

(b)fromaforeigncorporation,unlesslessthanfiftypercent(50%)ofthegrossincomeofsuchforeigncorporationforthethree‐yearperiodendingwiththecloseofitstaxableyearprecedingthedeclarationofsuchdividendsorforsuchpartofsuchperiodasthecorporationhasbeeninexistence)wasderivedfromsourceswithinthePhilippinesasdeterminedundertheprovisionsofthisSection;butonlyinanamountwhichbearsthesamerationtosuchdividendsasthegrossincomeof

thecorporationforsuchperiodderivedfromsourceswithinthePhilippinesbearstoitsgrossincomefromallsources.

(3)Services.‐CompensationforlabororpersonalservicesperformedinthePhilippines;

(4)RentalsandRoyalties.‐RentalsandroyaltiesfrompropertylocatedinthePhilippinesorfromanyinterestinsuchproperty,includingrentalsorroyaltiesfor‐

(a)TheuseofortherightorprivilegetouseinthePhilippinesanycopyright,patent,designormodel,plan,secretformulaorprocess,goodwill,trademark,tradebrandorotherlikepropertyorright;

(b)Theuseof,ortherighttouseinthePhilippinesanyindustrial,commercialorscientificequipment;

(c)Thesupplyofscientific,technical,industrialorcommercialknowledgeorinformation;

(d)Thesupplyofanyassistancethatisancillaryandsubsidiaryto,andisfurnishedasameansofenablingtheapplicationorenjoymentof,anysuchpropertyorrightasismentionedinparagraph(a),anysuchequipmentasismentionedinparagraph(b)oranysuchknowledgeorinformationasismentionedinparagraph(c);

(e)Thesupplyofservicesbyanonresidentpersonorhisemployeeinconnectionwiththeuseofpropertyorrightsbelongingto,ortheinstallationoroperationofanybrand,machineryorotherapparatuspurchasedfromsuchnonresidentperson;

(f)Technicaladvice,assistanceorservicesrenderedinconnectionwithtechnicalmanagementoradministrationofanyscientific,industrialorcommercialundertaking,venture,projectorscheme;and

(g)Theuseofortherighttouse:

(i)Motionpicturefilms;

(ii)Filmsorvideotapesforuseinconnectionwithtelevision;and

(iii)Tapesforuseinconnectionwithradiobroadcasting.

(5)SaleofRealProperty.‐Gains,profitsandincomefromthesaleofrealpropertylocatedinthePhilippines;and

(6)SaleofPersonalProperty.‐Gains;profitsandincomefromthesaleofpersonalproperty,asdeterminedinSubsection(E)ofthisSection.

(B)TaxableIncomeFromSourcesWithinthePhilippines.‐

(1)GeneralRule.‐FromtheitemsofgrossincomespecifiedinSubsection(A)ofthisSection,thereshallbedeductedtheexpenses,lossesandotherdeductionsproperly

allocatedtheretoandaratablepartofexpenses,interests,lossesandotherdeductionseffectivelyconnectedwiththebusinessortradeconductedexclusivelywithinthePhilippineswhichcannotdefinitelybeallocatedtosomeitemsorclassofgrossincome:Provided,Thatsuchitemsofdeductionsshallbeallowedonlyiffullysubstantiatedbyalltheinformationnecessaryforitscalculation.Theremainder,ifany,shallbetreatedinfullastaxableincomefromsourceswithinthePhilippines.

(2)Exception.‐Nodeductionsforinterestpaidorincurredabroadshallbeallowedfromtheitemofgrossincomespecifiedinsubsection(A)unlessindebtednesswasactuallyincurredtoprovidefundsforuseinconnectionwiththeconductoroperationoftradeorbusinessinthePhilippines.

(C)GrossIncomeFromSourcesWithoutthePhilippines.‐ThefollowingitemsofgrossincomeshallbetreatedasincomefromsourceswithoutthePhilippines:

(1)InterestsotherthanthosederivedfromsourceswithinthePhilippinesasprovidedin

paragraph(1)ofSubsection(A)ofthisSection;

(2)DividendsotherthanthosederivedfromsourceswithinthePhilippinesasprovidedin

paragraph(2)ofSubsection(A)ofthisSection;

(3)CompensationforlabororpersonalservicesperformedwithoutthePhilippines;

(4)RentalsorroyaltiesfrompropertylocatedwithoutthePhilippinesorfromanyinterestin

suchpropertyincludingrentalsorroyaltiesfortheuseoforfortheprivilegeofusing

withoutthePhilippines,patents,copyrights,secretprocessesandformulas,goodwill,

trademarks,tradebrands,franchisesandotherlikeproperties;and

(5)Gains,profitsandincomefromthesaleofrealpropertylocatedwithoutthePhilippines.

(D)TaxableIncomeFromSourcesWithoutthePhilippines.‐FromtheitemsofgrossincomespecifiedinSubsection(C)ofthisSectionthereshallbedeductedtheexpenses,losses,andotherdeductionsproperlyapportionedorallocatedtheretoandaratablepartofanyexpense,lossorotherdeductionwhichcannotdefinitelybeallocatedtosomeitemsorclassesofgrossincome.Theremainder,ifany,shallbetreatedinfullastaxableincomefromsourceswithoutthePhilippines.

(E)IncomeFromSourcesPartlyWithinandPartlyWithoutthePhilippines.‐Itemsofgrossincome,expenses,lossesanddeductions,otherthanthosespecifiedinSubsections(A)and(C)ofthisSection,shallbeallocatedorapportionedtosourceswithinorwithoutthePhilippines,undertherulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.WhereitemsofgrossincomeareseparatelyallocatedtosourceswithinthePhilippines,thereshallbededucted(forthepurposeofcomputingthetaxableincometherefrom)theexpenses,lossesandotherdeductionsproperlyapportionedorallocatedtheretoandaratablepartofotherexpenses,lossesorotherdeductionswhichcannotdefinitelybeallocatedtosomeitemsorclassesofgrossincome.Theremainder,ifany,shallbeincludedinfullastaxableincomefromsourceswithinthePhilippines.InthecaseofgrossincomederivedfromsourcespartlywithinandpartlywithoutthePhilippines,thetaxableincomemayfirstbecomputedbydeductingtheexpenses,lossesorotherdeductionsapportionedorallocatedtheretoandaratablepartofanyexpense,lossorotherdeductionwhichcannotdefinitelybeallocatedtosomeitemsorclassesofgrossincome;andtheportionofsuchtaxableincomeattributabletosourceswithinthePhilippinesmaybedeterminedbyprocessesorformulasofgeneralapportionmentprescribedbytheSecretaryofFinance.Gains,profitsandincomefromthesaleofpersonalpropertyproduced(inwholeorinpart)bythetaxpayerwithinandsoldwithoutthePhilippines,orproduced(inwholeorinpart)bythetaxpayerwithoutandsoldwithinthePhilippines,shallbetreatedasderivedpartlyfromsourceswithinandpartlyfromsourceswithoutthePhilippines.

Gains,profitsandincomederivedfromthepurchaseofpersonalpropertywithinanditssalewithoutthePhilippines,orfromthepurchaseofpersonalpropertywithoutanditssalewithinthePhilippinesshallbetreatedasderivedentirelyformsourceswithinthecountryinwhichsold:Provided,however,ThatgainfromthesaleofsharesofstockinadomesticcorporationshallbetreatedasderivedentirelyformsourceswithinthePhilippinesregardlessofwherethesaidsharesaresold.Thetransferbyanonresidentalienoraforeigncorporationtoanyoneofanyshareofstockissuedbyadomesticcorporationshallnotbeeffectedormadeinitsbookunless:(1)thetransferorhasfiledwiththeCommissionerabondconditioneduponthefuturepaymentbyhimofanyincometaxthatmaybedueonthegainsderivedfromsuchtransfer,or(2)theCommissionerhascertifiedthatthetaxes,ifany,imposedinthisTitleanddueonthegainrealizedfromsuchsaleortransferhavebeenpaid.Itshallbethedutyofthetransferorandthecorporationthesharesofwhicharesoldortransferred,toadvisethetransfereeofthisrequirement.

(F)Definitions.‐AsusedinthisSectionthewords"sale"or"sold"include"exchange"or"exchanged";andtheword"produced"includes"created","fabricated","manufactured","extracted","processed","cured"or"aged".

CHAPTERVIII

ACCOUNTINGPERIODS

ANDMETHODSOFACCOUNTING

SEC.43.GeneralRule.‐Thetaxableincomeshallbecomputeduponthebasisofthetaxpayer'sannualaccountingperiod(fiscalyearorcalendaryear,asthecasemaybe)inaccordancewiththemethodofaccountingregularlyemployedinkeepingthebooksofsuchtaxpayer,butifnosuchmethodofaccountinghasbeensoemployed,orifthemethodemployeddoesnotclearlyreflecttheincome,thecomputationshallbemadeinaccordancewithsuchmethodasintheopinionoftheCommissionerclearlyreflectstheincome.Ifthetaxpayer'sannualaccountingperiodisotherthanafiscalyear,asdefinedinSection22(Q),orifthetaxpayerhasnoannualaccountingperiod,ordoesnotkeepbooks,orifthetaxpayerisanindividual,thetaxableincomeshallbecomputedonthebasisofthecalendaryear.

SEC.44.PeriodinwhichItemsofGrossIncomeIncluded.‐Theamountofallitemsofgrossincomeshallbeincludedinthegrossincomeforthetaxableyearinwhichreceivedbythetaxpayer,unless,undermethodsofaccountingpermittedunderSection43,anysuchamountsaretobeproperlyaccountedforasofadifferentperiod.Inthecaseofthedeathofataxpayer,thereshallbeincludedincomputingtaxableincomeforthetaxableperiodinwhichfallsthedateofhisdeath,amountsaccrueduptothedateofhisdeathifnototherwiseproperlyincludibleinrespectofsuchperiodorapriorperiod.

SEC.45.PeriodforwhichDeductionsandCreditsTaken.‐ThedeductionsprovidedforinthisTitleshallbetakenforthetaxableyearinwhich"paidoraccrued"or"paidorincurred",dependentuponthemethodofaccountingthebasisofwhichthenetincomeiscomputed,unlessinordertoclearlyreflecttheincome,thedeductionsshouldbetakenasofadifferentperiod.Inthecaseofthedeathofataxpayer,thereshallbeallowedasdeductionsforthetaxableperiodinwhichfallsthedateofhisdeath,amountsaccrueduptothedateofhisdeathifnototherwiseproperlyallowableinrespectofsuchperiodorapriorperiod.

SEC.46.ChangeofAccountingPeriod.Ifataxpayer,otherthananindividual,changeshisaccountingperiodfromfiscalyeartocalendaryear,fromcalendaryeartofiscalyear,orfromonefiscalyeartoanother,thenetincomeshall,withthe

approvaloftheCommissioner,becomputedonthebasisofsuchnewaccountingperiod,subjecttotheprovisionsofSection47.

SEC.47.FinalorAdjustmentReturnsforaPeriodofLessthanTwelve(12)Months.‐

(A)ReturnsforShortPeriodResultingfromChangeofAccountingPeriod.‐Ifataxpayer,otherthananindividual,withtheapprovaloftheCommissioner,changesthebasisofcomputingnetincomefromfiscalyeartocalendaryear,aseparatefinaloradjustmentreturnshallbemadefortheperiodbetweenthecloseofthelastfiscalyearforwhichreturnwasmadeandthefollowingDecember31.Ifthechangeisfromcalendaryeartofiscalyear,aseparatefinaloradjustmentreturnshallbemadefortheperiodbetweenthecloseofthelastcalendaryearforwhichreturnwasmadeandthedatedesignatedasthecloseofthefiscalyear.Ifthechangeisfromonefiscalyeartoanotherfiscalyear,aseparatefinaloradjustmentreturnshallbemadefortheperiodbetweenthecloseoftheformerfiscalyearandthedatedesignatedasthecloseofthenewfiscalyear.

(B)IncomeComputedonBasisofShortPeriod.‐WhereaseparatefinaloradjustmentreturnismadeunderSubsection(A)onaccountofachangeintheaccountingperiod,andinallothercaseswhereaseparatefinaloradjustmentreturnisrequiredorpermittedbyrulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,tobemadeforafractionalpartofayear,thentheincomeshallbecomputedonthebasisoftheperiodforwhichseparatefinaloradjustmentreturnismade.

SEC.48.AccountingforLong‐TermContracts.‐Incomefromlong‐termcontractsshallbereportedfortaxpurposesinthemannerasprovidedinthisSection.Asusedherein,theterm'long‐termcontracts'meansbuilding,installationorconstructioncontractscoveringaperiodinexcessofone(1)year.Personswhosegrossincomeisderivedinwholeorinpartfromsuchcontractsshallreportsuchincomeuponthebasisofpercentageofcompletion.Thereturnshouldbeaccompaniedbyareturncertificateofarchitectsorengineersshowingthepercentageofcompletionduringthetaxableyearoftheentireworkperformedundercontract.Thereshouldbedeductedfromsuchgrossincomeallexpendituresmadeduringthetaxableyearonaccountofthecontract,accountbeingtakenofthematerialandsuppliesonhandatthebeginningandendofthetaxableperiodforuseinconnectionwiththeworkunderthecontractbutnotyetsoapplied.Ifuponcompletionofacontract,itisfoundthatthetaxablenetincomearisingthereunderhasnotbeenclearlyreflectedforanyyearoryears,theCommissionermaypermitorrequireanamendedreturn.

SEC.49.InstallmentBasis.‐

(A)SalesofDealersinPersonalProperty.‐UnderrulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,apersonwhoregularlysellsorotherwisedisposesofpersonalpropertyontheinstallmentplanmayreturnasincometherefrominanytaxableyearthatproportionoftheinstallmentpaymentsactuallyreceivedinthatyear,whichthegrossprofitrealizedortoberealizedwhenpaymentiscompleted,bearstothetotalcontractprice.

(B)SalesofRealtyandCasualSalesofPersonality.‐Inthecase(1)ofacasualsaleorothercasualdispositionofpersonalproperty(otherthanpropertyofakindwhichwouldproperlybeincludedintheinventoryofthetaxpayerifonhandatthecloseofthetaxableyear),forapriceexceedingOnethousandpesos(P1,000),or(2)ofasaleorotherdispositionofrealproperty,ifineithercasetheinitialpaymentsdonotexceedtwenty‐fivepercent(25%)ofthesellingprice,theincomemay,undertherulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,bereturnedonthebasisandinthemanneraboveprescribedinthisSection.AsusedinthisSection,theterm"initialpayments"meansthepaymentsreceivedincashorpropertyotherthanevidencesofindebtednessofthepurchaserduringthetaxableperiodinwhichthesaleorotherdispositionismade.

(C)SalesofRealPropertyConsideredasCapitalAssetbyIndividuals.‐Anindividualwhosellsordisposesofrealproperty,consideredascapitalasset,andisotherwisequalifiedtoreportthegaintherefromunderSubsection(B)maypaythecapitalgainstaxininstallmentsunderrulesandregulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

(D)ChangefromAccrualtoInstallmentBasis.‐IfataxpayerentitledtothebenefitsofSubsection(A)electsforanytaxableyeartoreporthistaxableincomeontheinstallmentbasis,thenincomputinghisincomefortheyearofchangeoranysubsequentyear,amountsactuallyreceivedduringanysuchyearonaccountofsalesorotherdispositionsofpropertymadeinanyprioryearshallnotbeexcluded.

SEC.50.AllocationofIncomeandDeductions.‐Inthecaseoftwoormoreorganizations,tradesorbusinesses(whetherornotincorporatedandwhetherornotorganizedinthePhilippines)ownedorcontrolleddirectlyorindirectlybythesameinterests,theCommissionerisauthorizedtodistribute,apportionorallocategrossincomeordeductionsbetweenoramongsuchorganization,tradeorbusiness,

ifhedeterminedthatsuchdistribution,apportionmentorallocationisnecessaryinordertopreventevasionoftaxesorclearlytoreflecttheincomeofanysuchorganization,tradeorbusiness.

CHAPTERIX

RETURNSANDPAYMENTOFTAX

SEC.51.IndividualReturn.‐

(A)Requirements.‐

(1)Exceptasprovidedinparagraph(2)ofthisSubsection,thefollowingindividualsarerequiredtofileanincometaxreturn:

(a)EveryFilipinocitizenresidinginthePhilippines;

(b)EveryFilipinocitizenresidingoutsidethePhilippines,onhisincomefromsourceswithinthePhilippines;

(c)EveryalienresidinginthePhilippines,onincomederivedfromsourceswithinthePhilippines;and

(d)EverynonresidentalienengagedintradeorbusinessorintheexerciseofprofessioninthePhilippines.

(2)Thefollowingindividualsshallnotberequiredtofileanincometaxreturn;

(a)AnindividualwhosegrossincomedoesnotexceedhistotalpersonalandadditionalexemptionsfordependentsunderSection35:Provided,ThatacitizenofthePhilippinesandanyalienindividualengagedinbusinessorpracticeofprofessionwithinthePhilippineshallfileanincometaxreturn,regardlessoftheamountofgrossincome;

(b)Anindividualwithrespecttopurecompensationincome,asdefinedinSection32(A)(1),derivedfromsourceswithinthePhilippines,theincometaxonwhichhasbeencorrectlywithheldundertheprovisionsofSection79ofthisCode:Provided,Thatanindividualderivingcompensationconcurrentlyfromtwoormoreemployersatanytimeduringthetaxableyearshallfileanincometaxreturn:Provided,further,Thatanindividualwhosecompensationincomederivedfrom

sourceswithinthePhilippinesexceedsSixtythousandpesos(P60,000)shallalsofileanincometaxreturn;

(c)AnindividualwhosesoleincomehasbeensubjectedtofinalwithholdingtaxpursuanttoSection57(A)ofthisCode;and

(d)AnindividualwhoisexemptfromincometaxpursuanttotheprovisionsofthisCodeandotherlaws,generalorspecial.

(3)Theforgoingnotwithstanding,anyindividualnotrequiredtofileanincometaxreturnmayneverthelessberequiredtofileaninformationreturnpursuanttorulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

(4)Theincometaxreturnshallbefiledinduplicatebythefollowingpersons:

(a)Aresidentcitizen‐onhisincomefromallsources;

(b)Anonresidentcitizen‐onhisincomederivedfromsourceswithinthePhilippines;

(c)Aresidentalien‐onhisincomederivedfromsourceswithinthePhilippines;and

(d)AnonresidentalienengagedintradeorbusinessinthePhilippines‐onhisincomederivedfromsourceswithinthePhilippines.

(B)WheretoFile.‐ExceptincaseswheretheCommissionerotherwisepermits,thereturnshallbefiledwithanauthorizedagentbank,RevenueDistrictOfficer,CollectionAgentordulyauthorizedTreasurerofthecityormunicipalityinwhichsuchpersonhashislegalresidenceorprincipalplaceofbusinessinthePhilippines,oriftherebenolegalresidenceorplaceofbusinessinthePhilippines,withtheOfficeoftheCommissioner.

(C)WhentoFile.‐

(1)Thereturnofanyindividualspecifiedaboveshallbefiledonorbeforethefifteenth(15th)dayofAprilofeachyearcoveringincomefortheprecedingtaxableyear.

(2)Individualssubjecttotaxoncapitalgains;

(a)FromthesaleorexchangeofsharesofstocknottradedthrualocalstockexchangeasprescribedunderSection24(c)shallfileareturnwithinthirty(30)daysaftereachtransactionandafinalconsolidatedreturnonorbeforeApril15ofeachyearcoveringallstocktransactionsoftheprecedingtaxableyear;and

(b)FromthesaleordispositionofrealpropertyunderSection24(D)shallfileareturnwithinthirty(30)daysfollowingeachsaleorotherdisposition.

(D)HusbandandWife.‐Marriedindividuals,whethercitizens,residentornonresidentaliens,whodonotderiveincomepurelyfromcompensation,shallfileareturnforthetaxableyeartoincludetheincomeofbothspouses,butwhereitisimpracticableforthespousestofileonereturn,eachspousemayfileaseparatereturnofincomebutthereturnssofiledshallbeconsolidatedbytheBureauforpurposesofverificationforthetaxableyear.

(E)ReturnofParenttoIncludeIncomeofChildren.‐Theincomeofunmarriedminorsderivedfromproperlyreceivedfromalivingparentshallbeincludedinthereturnoftheparent,except(1)whenthedonor'staxhasbeenpaidonsuchproperty,or(2)whenthetransferofsuchpropertyisexemptfromdonor'stax.

(F)PersonsUnderDisability.‐Ifthetaxpayerisunabletomakehisownreturn,thereturnmaybemadebyhisdulyauthorizedagentorrepresentativeorbytheguardianorotherpersonchargedwiththecareofhispersonorproperty,theprincipalandhisrepresentativeorguardianassumingtheresponsibilityofmakingthereturnandincurringpenaltiesprovidedforerroneous,falseorfraudulentreturns.

(G)SignaturePresumedCorrect.‐Thefactthatanindividual'snameissignedtoafiledreturnshallbeprimafacieevidenceforallpurposesthatthereturnwasactuallysignedbyhim.

SEC.52.CorporationReturns.‐

(A)Requirements.‐Everycorporationsubjecttothetaxhereinimposed,exceptforeigncorporationsnotengagedintradeorbusinessinthePhilippines,shallrender,induplicate,atrueandaccuratequarterlyincometaxreturnandfinalor

adjustmentreturninaccordancewiththeprovisionsofChapterXIIofthisTitle.Thereturnshallbefiledbythepresident,vice‐presidentorotherprincipalofficer,andshallbesworntobysuchofficerandbythetreasurerorassistanttreasurer.

(B)TaxableYearofCorporation.‐Acorporationmayemployeithercalendaryearorfiscalyearasabasisforfilingitsannualincometaxreturn:Provided,ThatthecorporationshallnotchangetheaccountingperiodemployedwithoutpriorapprovalfromtheCommissionerinaccordancewiththeprovisionsofSection47ofthisCode.

(C)ReturnofCorporationContemplatingDissolutionorReorganization.‐Everycorporationshall,withinthirty(30)daysaftertheadoptionbythecorporationofaresolutionorplanforitsdissolution,orfortheliquidationofthewholeoranypartofitscapitalstock,includingacorporationwhichhasbeennotifiedofpossibleinvoluntarydissolutionbytheSecuritiesandExchangeCommission,orforitsreorganization,renderacorrectreturntotheCommissioner,verifiedunderoath,settingforththetermsofsuchresolutionorplanandsuchotherinformationastheSecretaryofFinance,uponrecommendationofthecommissioner,shall,byrulesandregulations,prescribe.

Thedissolvingorreorganizingcorporationshall,priortotheissuancebytheSecuritiesandExchangeCommissionoftheCertificateofDissolutionorReorganization,asmaybedefinedbyrulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,secureacertificateoftaxclearancefromtheBureauofInternalRevenuewhichcertificateshallbesubmittedtotheSecuritiesandExchangeCommission.

(D)ReturnonCapitalGainsRealizedfromSaleofSharesofStocknotTradedintheLocalStockExchange.‐EverycorporationderivingcapitalgainsfromthesaleorexchangeofsharesofstocknottradedthrualocalstockexchangeasprescribedunderSections24(c),25(A)(3),27(E)(2),28(A)(8)(c)and28(B)(5)(c),shallfileareturnwithinthirty(30)daysaftereachtransactionsandafinalconsolidatedreturnofalltransactionsduringthetaxableyearonorbeforethefifteenth(15th)dayofthefourth(4th)monthfollowingthecloseofthetaxableyear.

SEC.53.ExtensionofTimetoFileReturns.‐TheCommissionermay,inmeritoriouscases,grantareasonableextensionoftimeforfilingreturnsofincome(orfinaland

adjustmentreturnsincaseofcorporations),subjecttotheprovisionsofSection56ofthisCode.

SEC.54.ReturnsofReceivers,TrusteesinBankruptcyorAssignees.‐Incaseswhereinreceivers,trusteesinbankruptcyorassigneesareoperatingthepropertyorbusinessofacorporation,subjecttothetaximposedbythisTitle,suchreceivers,trusteesorassigneesshallmakereturnsofnetincomeasandforsuchcorporation,inthesamemannerandformassuchorganizationishereinbeforerequiredtomakereturns,andanytaxdueontheincomeasreturnedbyreceivers,trusteesorassigneesshallbeassessedandcollectedinthesamemannerasifassesseddirectlyagainsttheorganizationsofwhosebusinessesorpropertiestheyhavecustodyorcontrol.

SEC.55.ReturnsofGeneralProfessionalPartnerships.‐Everygeneralprofessionalpartnershipshallfile,induplicate,areturnofitsincome,exceptincomeexemptunderSection32(B)ofthisTitle,settingforththeitemsofgrossincomeandofdeductionsallowedbythisTitle,andthenames,TaxpayerIdentificationNumbers(TIN),addressesandsharesofeachofthepartners.

SEC.56.PaymentandAssessmentofIncomeTaxforIndividualsandCorporation.‐

(A)PaymentofTax.‐

(1)InGeneral.‐ThetotalamountoftaximposedbythisTitleshallbepaidbythepersonsubjecttheretoatthetimethereturnisfiled.Inthecaseoftrampvessels,theshippingagentsand/orthehusbandingagents,andintheirabsence,thecaptainsthereofarerequiredtofilethereturnhereinprovidedandpaythetaxduethereonbeforetheirdeparture.Uponfailureofthesaidagentsorcaptainstofilethereturnandpaythetax,theBureauofCustomsisherebyauthorizedtoholdthevesselandpreventitsdepartureuntilproofofpaymentofthetaxispresentedorasufficientbondisfiledtoanswerforthetaxdue.

(2)InstallmentofPayment.‐WhenthetaxdueisinexcessofTwothousandpesos(P2,000),thetaxpayerotherthanacorporationmayelecttopaythetaxintwo(2)equalinstallmentsinwhichcase,thefirstinstallmentshallbepaidatthetimethereturnisfiledandthesecondinstallment,onorbeforeJuly15followingthecloseofthecalendaryear.Ifanyinstallmentisnotpaidonorbeforethedatefixed

foritspayment,thewholeamountofthetaxunpaidbecomesdueandpayable,togetherwiththedelinquencypenalties.

(3)PaymentofCapitalGainsTax.‐ThetotalamountoftaximposedandprescribedunderSection24(c),24(D),27(E)(2),28(A)(8)(c)and28(B)(5)(c)shallbepaidonthedatethereturnprescribedthereforisfiledbythepersonliablethereto:Provided,Thatifthesellersubmitsproofofhisintentiontoavailhimselfofthebenefitofexemptionofcapitalgainsunderexistingspeciallaws,nosuchpaymentsshallberequired:Provided,further,Thatincaseoffailuretoqualifyforexemptionundersuchspeciallawsandimplementingrulesandregulations,thetaxdueonthegainsrealizedfromtheoriginaltransactionshallimmediatelybecomedueandpayable,subjecttothepenaltiesprescribedunderapplicableprovisionsofthisCode:Provided,finally,Thatiftheseller,havingpaidthetax,submitssuchproofofintentwithinsix(6)monthsfromtheregistrationofthedocumenttransferringtherealproperty,heshallbeentitledtoarefundofsuchtaxuponverificationofhiscompliancewiththerequirementsforsuchexemption.

IncasethetaxpayerelectsandisqualifiedtoreportthegainbyinstallmentsunderSection49ofthisCode,thetaxduefromeachinstallmentpaymentshallbepaidwithin(30)daysfromthereceiptofsuchpayments.

NoregistrationofanydocumenttransferringrealpropertyshallbeeffectedbytheRegisterofDeedsunlesstheCommissionerorhisdulyauthorizedrepresentativehascertifiedthatsuchtransferhasbeenreported,andthetaxhereinimposed,ifany,hasbeenpaid.

(B)AssessmentandPaymentofDeficiencyTax.‐Afterthereturnisfiled,theCommissionershallexamineitandassessthecorrectamountofthetax.ThetaxordeficiencyincometaxsodiscoveredshallbepaiduponnoticeanddemandfromtheCommissioner.

AsusedinthisChapter,inrespectofataximposedbythisTitle,theterm"deficiency"means:

(1)TheamountbywhichthetaximposedbythisTitleexceedstheamountshownasthetaxbythetaxpayeruponhisreturn;buttheamountsoshownonthereturnshallbeincreasedbytheamountspreviouslyassessed(orcollectedwithout

assessment)asadeficiency,anddecreasedbytheamountpreviouslyabated,credited,returnedorotherwiserepaidinrespectofsuchtax;or

(2)Ifnoamountisshownasthetaxbythetaxpayeruponthisreturn,orifnoreturnismadebythetaxpayer,thentheamountbywhichthetaxexceedstheamountspreviouslyassessed(orcollectedwithoutassessment)asadeficiency;butsuchamountspreviouslyassessedorcollectedwithoutassessmentshallfirstbedecreasedbytheamountspreviouslyabated,creditedreturnedorotherwiserepaidinrespectofsuchtax.

SEC.57.WithholdingofTaxatSource.‐

(A)WithholdingofFinalTaxonCertainIncomes.‐SubjecttorulesandregulationstheSecretaryofFinancemaypromulgate,upontherecommendationoftheCommissioner,requiringthefilingofincometaxreturnbycertainincomepayees,thetaximposedorprescribedbySections24(B)(1),24(B)(2),24(C),24(D)(1);25(A)(2),25(A)(3),25(B),25(C),25(D),25(E),27(D)(!),27(D)(2),27(D)(3),27(D)(5),28(A)(4),28(A)(5),28(A)(7)(a),28(A)(7)(b),28(A)(7)(c),28(B)(1),28(B)(2),28(B)(3),28(B)(4),28(B)(5)(a),28(B)(5)(b),28(B)(5)(c);33;and282ofthisCodeonspecifieditemsofincomeshallbewithheldbypayor‐corporationand/orpersonandpaidinthesamemannerandsubjecttothesameconditionsasprovidedinSection58ofthisCode.

(B)WithholdingofCreditableTaxatSource.‐TheSecretaryofFinancemay,upontherecommendationoftheCommissioner,requirethewithholdingofataxontheitemsofincomepayabletonaturalorjuridicalpersons,residinginthePhilippines,bypayor‐corporation/personsasprovidedforbylaw,attherateofnotlessthanonepercent(1%)butnotmorethanthirty‐twopercent(32%)thereof,whichshallbecreditedagainsttheincometaxliabilityofthetaxpayerforthetaxableyear.

(C)Tax‐freeCovenantBonds.Inanycasewherebonds,mortgages,deedsoftrustorothersimilarobligationsofdomesticorresidentforeigncorporations,containacontractorprovisionsbywhichtheobligoragreestopayanyportionofthetaximposedinthisTitleupontheobligeeortoreimbursetheobligeeforanyportionofthetaxortopaytheinterestwithoutdeductionforanytaxwhichtheobligormayberequiredorpermittedtopaythereonortoretaintherefromunderanylawofthePhilippines,oranystateorcountry,theobligorshalldeductbonds,mortgages,deedsoftrustorotherobligations,whethertheinterestorotherpaymentsare

payableannuallyoratshorterorlongerperiods,andwhetherthebonds,securitiesorobligationshadbeenorwillbeissuedormarketed,andtheinterestorotherpaymentthereonpaid,withinorwithoutthePhilippines,iftheinterestorotherpaymentispayabletoanonresidentalienortoacitizenorresidentofthePhilippines.

SEC.58.ReturnsandPaymentofTaxesWithheldatSource.‐

(A)QuarterlyReturnsandPaymentsofTaxesWithheld.‐TaxesdeductedandwithheldunderSection57bywithholdingagentsshallbecoveredbyareturnandpaidto,exceptincaseswheretheCommissionerotherwisepermits,anauthorizedTreasurerofthecityormunicipalitywherethewithholdingagenthashislegalresidenceorprincipalplaceofbusiness,orwherethewithholdingagentisacorporation,wheretheprincipalofficeislocated.

Thetaxesdeductedandwithheldbythewithholdingagentshallbeheldasaspecialfundintrustforthegovernmentuntilpaidtothecollectingofficers.

Thereturnforfinalwithholdingtaxshallbefiledandthepaymentmadewithintwenty‐five(25)daysfromthecloseofeachcalendarquarter,whilethereturnforcreditablewithholdingtaxesshallbefiledandthepaymentmadenotlaterthanthelastdayofthemonthfollowingthecloseofthequarterduringwhichwithholdingwasmade:Provided,ThattheCommissioner,withtheapprovaloftheSecretaryofFinance,mayrequirethesewithholdingagentstopayordepositthetaxesdeductedorwithheldatmorefrequentintervalswhennecessarytoprotecttheinterestofthegovernment.

(B)StatementofIncomePaymentsMadeandTaxesWithheld.‐EverywithholdingagentrequiredtodeductandwithholdtaxesunderSection57shallfurnisheachrecipient,inrespecttohisoritsreceiptsduringthecalendarquarteroryear,awrittenstatementshowingtheincomeorotherpaymentsmadebythewithholdingagentduringsuchquarteroryear,andtheamountofthetaxdeductedandwithheldtherefrom,simultaneouslyuponpaymentattherequestofthepayee,butnotlatethanthetwentieth(20th)dayfollowingthecloseofthequarterinthecaseofcorporatepayee,ornotlaterthanMarch1ofthefollowingyearinthecaseofindividualpayeeforcreditablewithholdingtaxes.Forfinalwithholdingtaxes,thestatementshouldbegiventothepayeeonorbeforeJanuary31ofthesucceedingyear.

(C)AnnualInformationReturn.‐EverywithholdingagentrequiredtodeductandwithholdtaxesunderSection57shallsubmittotheCommissioneranannualinformationreturncontainingthelistofpayeesandincomepayments,amountoftaxeswithheldfromeachpayeeandsuchotherpertinentinformationasmayberequiredbytheCommissioner.Inthecaseoffinalwithholdingtaxes,thereturnshallbefiledonorbeforeJanuary31ofthesucceedingyear,andforcreditablewithholdingtaxes,notlaterthanMarch1oftheyearfollowingtheyearforwhichtheannualreportisbeingsubmitted.Thisreturn,ifmadeandfiledinaccordancewiththerulesandregulationsapprovedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,shallbesufficientcompliancewiththerequirementsofSection68ofthisTitleinrespecttotheincomepayments.

TheCommissionermay,byrulesandregulations,granttoanywithholdingagentareasonableextensionoftimetofurnishandsubmitthereturnrequiredinthisSubsection.

(D)IncomeofRecipient.‐IncomeuponwhichanycreditabletaxisrequiredtobewithheldatsourceunderSection57shallbeincludedinthereturnofitsrecipientbuttheexcessoftheamountoftaxsowithheldoverthetaxdueonhisreturnshallberefundedtohimsubjecttotheprovisionsofSection204;iftheincometaxcollectedatsourceislessthanthetaxdueonhisreturn,thedifferenceshallbepaidinaccordancewiththeprovisionsofSection56.

AlltaxeswithheldpursuanttotheprovisionsofthisCodeanditsimplementingrulesandregulationsareherebyconsideredtrustfundsandshallbemaintainedinaseparateaccountandnotcommingledwithanyotherfundsofthewithholdingagent.

(E)RegistrationwithRegisterofDeeds.‐NoregistrationofanydocumenttransferringrealpropertyshallbeeffectedbytheRegisterofDeedsunlesstheCommissionerorhisdulyauthorizedrepresentativehascertifiedthatsuchtransferhasbeenreported,andthecapitalgainsorcreditablewithholdingtax,ifany,hasbeenpaid:Provided,however,ThattheinformationasmayberequiredbyrulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,shallbeannotatedbytheRegisterofDeedsintheTransferCertificateofTitleorCondominiumCertificateofTitle:Provided,further,Thatincasesoftransferofpropertytoacorporation,pursuanttoamerger,consolidationorreorganization,andwherethelawallowsdeferredrecognitionofincomeinaccordancewithSection40,theinformationasmayberequiredbyrulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationof

theCommissioner,shallbeannotatedbytheRegisterofDeedsatthebackoftheTransferCertificateofTitleorCondominiumCertificateofTitleoftherealpropertyinvolved:Provided,finally,ThatanyviolationofthisprovisionbytheRegisterofDeedsshallbesubjecttothepenaltiesimposedunderSection269ofthisCode.

SEC.59.TaxonProfitsCollectiblefromOwnerorOtherPersons.‐ThetaximposedunderthisTitleupongains,profits,andincomenotfallingundertheforegoingandnotreturnedandpaidbyvirtueoftheforegoingorasotherwiseprovidedbylawshallbeassessedbypersonalreturnunderrulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.TheintentandpurposeoftheTitleisthatallgains,profitsandincomeofataxableclass,asdefinedinthisTitle,shallbechargedandassessedwiththecorrespondingtaxprescribedbythisTitle,andsaidtaxshallbepaidbytheownersofsuchgains,profitsandincome,ortheproperpersonhavingthereceipt,custody,controlordisposalofthesame.ForpurposesofthisTitle,ownershipofsuchgains,profitsandincomeorliabilitytopaythetaxshallbedeterminedasoftheyearforwhichareturnisrequiredtoberendered.

CHAPTERX

ESTATESANDTRUSTS

SEC.60.ImpositionofTax.‐

(A)ApplicationofTax.‐ThetaximposedbythisTitleuponindividualsshallapplytotheincomeofestatesorofanykindofpropertyheldintrust,including:

(1)Incomeaccumulatedintrustforthebenefitofunbornorunascertainedpersonorpersonswithcontingentinterests,andincomeaccumulatedorheldforfuturedistributionunderthetermsofthewillortrust;

(2)Incomewhichistobedistributedcurrentlybythefiduciarytothebeneficiaries,andincomecollectedbyaguardianofaninfantwhichistobeheldordistributedasthecourtmaydirect;

(3)Incomereceivedbyestatesofdeceasedpersonsduringtheperiodofadministrationorsettlementoftheestate;and

(4)Incomewhich,inthediscretionofthefiduciary,maybeeitherdistributedtothebeneficiariesoraccumulated.

(B)Exception.‐ThetaximposedbythisTitleshallnotapplytoemployee'strustwhichformspartofapension,stockbonusorprofit‐sharingplanofanemployerforthebenefitofsomeorallofhisemployees(1)ifcontributionsaremadetothetrustbysuchemployer,oremployees,orbothforthepurposeofdistributingtosuchemployeestheearningsandprincipalofthefundaccumulatedbythetrustinaccordancewithsuchplan,and(2)ifunderthetrustinstrumentitisimpossible,atanytimepriortothesatisfactionofallliabilitieswithrespecttoemployeesunderthetrust,foranypartofthecorpusorincometobe(withinthetaxableyearorthereafter)usedfor,ordivertedto,purposesotherthanfortheexclusivebenefitofhisemployees:Provided,Thatanyamountactuallydistributedtoanyemployeeordistributeeshallbetaxabletohimintheyearinwhichsodistributedtotheextentthatitexceedstheamountcontributedbysuchemployeeordistributee.

(C)ComputationandPayment.‐

(1)InGeneral.‐Thetaxshallbecomputeduponthetaxableincomeoftheestateortrustandshallbepaidbythefiduciary,exceptasprovidedinSection63(relatingtorevocabletrusts)andSection64(relatingtoincomeforthebenefitofthegrantor).

(2)ConsolidationofIncomeofTwoorMoreTrusts.‐Where,inthecaseoftwoormoretrusts,thecreatorofthetrustineachinstanceisthesameperson,andthebeneficiaryineachinstanceisthesame,thetaxableincomeofallthetrustsshallbeconsolidatedandthetaxprovidedinthisSectioncomputedonsuchconsolidatedincome,andsuchproportionofsaidtaxshallbeassessedandcollectedfromeachtrusteewhichthetaxableincomeofthetrustadministeredbyhimbearstotheconsolidatedincomeoftheseveraltrusts.

SEC.61.TaxableIncome.‐Thetaxableincomeoftheestateortrustshallbecomputedinthesamemannerandonthesamebasisasinthecaseofanindividual,exceptthat:

(A)Thereshallbeallowedasadeductionincomputingthetaxableincomeoftheestateortrusttheamountoftheincomeoftheestateortrustforthetaxableyearwhichistobedistributedcurrentlybythefiduciarytothebeneficiaries,andtheamountoftheincomecollectedbyaguardianofaninfantwhichistobeheldordistributedasthecourtmaydirect,buttheamountsoallowedasadeductionshallbeincludedincomputingthetaxableincomeofthebeneficiaries,whetherdistributedtothemornot.AnyamountallowedasadeductionunderthisSubsectionshallnotbeallowedasadeductionunderSubsection(B)ofthisSectioninthesameoranysucceedingtaxableyear.

(B)Inthecaseofincomereceivedbyestatesofdeceasedpersonsduringtheperiodofadministrationorsettlementoftheestate,andinthecaseofincomewhich,inthediscretionofthefiduciary,maybeeitherdistributedtothebeneficiaryoraccumulated,thereshallbeallowedasanadditionaldeductionincomputingthetaxableincomeoftheestateortrusttheamountoftheincomeoftheestateortrustforitstaxableyear,whichisproperlypaidorcreditedduringsuchyeartoanylegatee,heirorbeneficiarybuttheamountsoallowedasadeductionshallbeincludedincomputingthetaxableincomeofthelegatee,heirorbeneficiary.

(C)Inthecaseofatrustadministeredinaforeigncountry,thedeductionsmentionedinSubsections(A)and(B)ofthisSectionshallnotbeallowed:Provided,Thattheamountofanyincomeincludedinthereturnofsaidtrustshallnotbeincludedincomputingtheincomeofthebeneficiaries.

SEC.62.ExemptionAllowedtoEstatesandTrusts.‐ForthepurposeofthetaxprovidedforinthisTitle,thereshallbeallowedanexemptionofTwentythousandpesos(P20,000)fromtheincomeoftheestateortrust.

SEC.63.RevocableTrusts.‐Whereatanytimethepowertorevestinthegrantortitletoanypartofthecorpusofthetrustisvested(1)inthegrantoreitheraloneorinconjunctionwithanypersonnothavingasubstantialadverseinterestinthedispositionofsuchpartofthecorpusortheincometherefrom,or(2)inanypersonnothavingasubstantialadverseinterestinthedispositionofsuchpartofthecorpusortheincometherefrom,theincomeofsuchpartofthetrustshallbeincludedincomputingthetaxableincomeofthegrantor.

SEC.64.IncomeforBenefitofGrantor.‐

(A)Whereanypartoftheincomeofatrust(1)is,orinthediscretionofthegrantororofanypersonnothavingasubstantialadverseinterestinthedispositionofsuchpartoftheincomemaybeheldoraccumulatedforfuturedistributiontothegrantor,or(2)may,orinthediscretionofthegrantororofanypersonnothavingasubstantialadverseinterestinthedispositionofsuchpartoftheincome,bedistributedtothegrantor,or(3)is,orinthediscretionofthegrantororofanypersonnothavingasubstantialadverseinterestinthedispositionofsuchpartoftheincomemaybeappliedtothepaymentofpremiumsuponpoliciesofinsuranceonthelifeofthegrantor,suchpartoftheincomeofthetrustshallbeincludedincomputingthetaxableincomeofthegrantor.

(B)AsusedinthisSection,theterm'inthediscretionofthegrantor'meansinthediscretionofthegrantor,eitheraloneorinconjunctionwithanypersonnothavingasubstantialadverseinterestinthedispositionofthepartoftheincomeinquestion.

SEC.65.FiduciaryReturns.‐Guardians,trustees,executors,administrators,receivers,conservatorsandallpersonsorcorporations,actinginanyfiduciarycapacity,shallrender,induplicate,areturnoftheincomeoftheperson,trustorestateforwhomorwhichtheyact,andbesubjecttoalltheprovisionsofthisTitle,whichapplytoindividualsincasesuchperson,estateortrusthasagrossincomeofTwentythousandpesos(P20,000)oroverduringthetaxableyear.Suchfiduciaryorpersonfilingthereturnforhimorit,shalltakeoaththathehassufficientknowledgeoftheaffairsofsuchperson,trustorestatetoenablehimtomakesuchreturnandthatthesameis,tothebestofhisknowledgeandbelief,trueandcorrect,andbesubjecttoalltheprovisionsofthisTitlewhichapplytoindividuals:Provided,Thatareturnmadebyorforoneortwoormorejointfiduciariesfiledintheprovincewheresuchfiduciariesreside;undersuchrulesandregulationsastheSecretaryofFinance,uponrecommendationoftheCommissioner,shallprescribe,shallbeasufficientcompliancewiththerequirementsofthisSection.

SEC.66.FiduciariesIndemnifiedAgainstClaimsforTaxesPaid.‐Trustees,executors,administratorsandotherfiduciariesareindemnifiedagainsttheclaimsordemandsofeverybeneficiaryforallpaymentsoftaxeswhichtheyshallberequiredtomakeundertheprovisionsofthisTitle,andtheyshallhavecreditfortheamountofsuchpaymentsagainstthebeneficiaryorprincipalinanyaccountingwhichtheymakeassuchtrusteesorotherfiduciaries.

CHAPTERXI

OTHERINCOMETAXREQUIREMENTS

SEC.67.CollectionofForeignPayments.‐Allpersons,corporations,dulyregisteredgeneralco‐partnerships(companiascolectivas)undertakingforprofitorotherwisethecollectionofforeignpaymentsofinterestsordividendsbymeansofcoupons,checksorbillsofexchangeshallobtainalicensefromtheCommissioner,andshallbesubjecttosuchrulesandregulationsenablingthegovernmenttoobtaintheinformationrequiredunderthisTitle,astheSecretaryofFinance,uponrecommendationoftheCommissioner,shallprescribe.

SEC.68.InformationatSourceastoIncomePayments.‐allpersons,corporationsordulyregisteredco‐partnerships(companiascolectivas),inwhatevercapacityacting,includinglesseesormortgagorsofrealorpersonalproperty,trustees,actinginanytrustcapacity,executors,administrators,receivers,conservatorsandemployeesmakingpaymenttoanotherperson,corporationordulyregisteredgeneralco‐partnership(companiacolectiva),ofinterests,rents,salaries,wages,premiums,annuities,compensations,remunerations,emolumentsorotherfixedordeterminablegains,profitsandincome,otherthanpaymentdescribedinSection69,inanytaxableyear,orinthecaseofsuchpaymentsmadebytheGovernmentofthePhilippines,theofficersoremployeesoftheGovernmenthavinginformationastosuchpaymentsandrequiredtomakereturnsinregardthereto,areauthorizedandrequiredtorenderatrueandaccuratereturntotheCommissioner,undersuchrulesandregulations,andinsuchformandmannerasmaybeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,settingforththeamountofsuchgains,profitsandincomeandthenameandaddressoftherecipientofsuchpayments:Provided,Thatsuchreturnsshallberequired,inthecaseofpaymentsofinterestuponbondsandmortgagesordeedsoftrustorothersimilarobligationsofcorporations,andinthecaseofcollectionsofitems,notpayableinthePhilippines,ofinterestuponthebondsofforeigncountriesandinterestfromthebondsanddividendsfromthestockofforeigncorporationsbypersons,corporationsordulyregisteredgeneralco‐partnerships(companiascolectivas),undertakingasamatterofbusinessorforprofitorotherwisethecollectionofforeignpaymentsofsuchinterestsordividendsbymeansofcouponsorbillsofexchange.

SEC.69.ReturnofInformationofBrokers.‐Everyperson,corporationordulyregisteredgeneralco‐partnership(companiacolectiva),doingbusinessasabrokerinanyexchangeorboardorothersimilarplaceofbusiness,shall,whenrequiredbytheCommissioner,renderacorrectreturndulyverifiedunderoathundersuchrulesandregulationsastheSecretaryofFinance,uponrecommendationoftheCommissioner,mayprescribe,showingthenamesofcustomersforwhomsuch

person,corporationordulyregisteredgeneralco‐partnership(companiacolectiva)hastransactedanybusiness,withsuchdetailsastotheprofits,lossesorotherinformationwhichtheCommissioner,mayrequireastoeachofsuchcustomersaswillenabletheCommissionertodeterminewhetherallincometaxdueonprofitsorgainsofsuchcustomershasbeenpaid.

SEC.70.ReturnsofForeignCorporations.‐

(A)Requirements.‐UnderrulesandregulationsprescribedbytheSecretaryoffinance,upontherecommendationoftheCommissioner,anyattorney,accountant,fiduciary,bank,trustcompany,financialinstitutionorotherperson,whoaids,assists,counselsoradvisesin,owithrespectto;theformation,organizationorreorganizationofanyforeigncorporation,shall,withinthirty(30)daysthereafter,filewiththeCommissionerareturn.

(B)FormandContentsofReturn.‐Suchreturnshallbeinsuchformandshallsetforth;underoath,inrespectofeachsuchcorporation,tothefullextentoftheinformationwithinthepossessionorknowledgeorunderthecontrolofthepersonrequiredtofilethereturn,suchinformationastheSecretaryofFinance,uponrecommendationoftheCommissioner,shallprescribebyrulesandregulationsasnecessaryforcarryingouttheprovisionsofthisTitle.NothinginthisSectionshallbeconstruedtorequirethedivulgingofprivilegedcommunicationsbetweenattorneyandclient.

SEC.71.DispositionofIncomeTaxReturns,PublicationofListsofTaxpayersandFilers.‐Aftertheassessmentshallhavebeenmade,asprovidedinthisTitle,thereturns,togetherwithanycorrectionsthereofwhichmayhavebeenmadebytheCommissioner,shallbefiledintheOfficeoftheCommissionerandshallconstitutepublicrecordsandbeopentoinspectionassuchupontheorderofthePresidentofthePhilippines,underrulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

TheCommissionermay,ineachyear,causetobepreparedandpublishedinanynewspaperthelistscontainingthenamesandaddressesofpersonswhohavefiledincometaxreturns.

SEC.72.SuittoRecoverTaxBasedonFalseorFraudulentReturns.‐Whenanassessmentismadeincaseofanylist,statementorreturn,whichintheopinionoftheCommissionerwasfalseorfraudulentorcontainedanyunderstatementorundervaluation,notaxcollectedundersuchassessmentshallberecoveredbyanysuit,unlessitisprovedthatthesaidlist,statementorreturnwasnotfalsenorfraudulentanddidnotcontainanyunderstatementorundervaluation;butthisprovisionshallnotapplytostatementsorreturnsmadeortobemadeingoodfaithregardingannualdepreciationofoilorgaswellsandmines.

SEC.73.DistributionofdividendsorAssetsbyCorporations.‐

(A)DefinitionofDividends.‐Theterm"dividends"whenusedinthisTitlemeansanydistributionmadebyacorporationtoitsshareholdersoutofitsearningsorprofitsandpayabletoitsshareholders,whetherinmoneyorinotherproperty.

Whereacorporationdistributesallofitsassetsincompleteliquidationordissolution,thegainrealizedorlosssustainedbythestockholder,whetherindividualorcorporate,isataxableincomeoradeductibleloss,asthecasemaybe.

(B)StockDividend.‐Astockdividendrepresentingthetransferofsurplustocapitalaccountshallnotbesubjecttotax.However,ifacorporationcancelsorredeemsstockissuedasadividendatsuchtimeandinsuchmannerastomakethedistributionandcancellationorredemption,inwholeorinpart,essentiallyequivalenttothedistributionofataxabledividend,theamountsodistributedinredemptionorcancellationofthestockshallbeconsideredastaxableincometotheextentthatitrepresentsadistributionofearningsorprofits.

(C)DividendsDistributedareDeemedMadefromMostRecentlyAccumulatedProfits.‐Anydistributionmadetotheshareholdersormembersofacorporationshallbedeemedtohavebeenmadeformthemostrecentlyaccumulatedprofitsorsurplus,andshallconstituteapartoftheannualincomeofthedistributeefortheyearinwhichreceived.

(D)NetIncomeofaPartnershipDeemedConstructivelyReceivedbyPartners.‐ThetaxableincomedeclaredbyapartnershipforataxableyearwhichissubjecttotaxunderSection27(A)ofthisCode,afterdeductingthecorporateincometaximposedtherein,shallbedeemedtohavebeenactuallyorconstructivelyreceived

bythepartnersinthesametaxableyearandshallbetaxedtothemintheirindividualcapacity,whetheractuallydistributedornot.

CHAPTERXII

QUARTERLYCORPORATEINCOMETAX,ANNUALDECLARATION

ANDQUARTERLYPAYMENTSOFINCOMETAXES

SEC.74.DeclarationofIncomeTaxforIndividuals.‐

(A)InGeneral.‐ExceptasotherwiseprovidedinthisSection,everyindividualsubjecttoincometaxunderSections24and25(A)ofthisTitle,whoisreceivingself‐employmentincome,whetheritconstitutesthesolesourceofhisincomeorincombinationwithsalaries,wagesandotherfixedordeterminableincome,shallmakeandfileadeclarationofhisestimatedincomeforthecurrenttaxableyearonorbeforeApril15ofthesametaxableyear.Ingeneral,self‐employmentincomeconsistsoftheearningsderivedbytheindividualfromthepracticeofprofessionorconductoftradeorbusinesscarriedonbyhimasasoleproprietororbyapartnershipofwhichheisamember.NonresidentFilipinocitizens,withrespecttoincomefromwithoutthePhilippines,andnonresidentaliensnotengagedintradeorbusinessinthePhilippines,arenotrequiredtorenderadeclarationofestimatedincometax.ThedeclarationshallcontainsuchpertinentinformationastheSecretaryofFinance,uponrecommendationoftheCommissioner,may,byrulesandregulationsprescribe.AnindividualmaymakeamendmentsofadeclarationfiledduringthetaxableyearundertherulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

(B)ReturnandPaymentofEstimatedIncomeTaxbyIndividuals.‐TheamountofestimatedincomeasdefinedinSubsection(C)withrespecttowhichadeclarationisrequiredunderSubsection(A)shallbepaidinfour(4)installments.ThefirstinstallmentshallbepaidatthetimeofthedeclarationandthesecondandthirdshallbepaidonAugust15andNovember15ofthecurrentyear,respectively.ThefourthinstallmentshallbepaidonorbeforeApril15ofthefollowingcalendaryearwhenthefinaladjustedincometaxreturnisduetobefiled.

(C)DefinitionofEstimatedTax.‐Inthecaseofanindividual,theterm"estimatedtax"meanstheamountwhichtheindividualdeclaredasincometaxinhisfinaladjustedandannualincometaxreturnfortheprecedingtaxableyearminusthesumofthecreditsallowedunderthisTitleagainstthesaidtax.If,duringthecurrenttaxableyear,thetaxpayerreasonableexpectstopayabiggerincometax,heshallfileanamendeddeclarationduringanyintervalofinstallmentpaymentdates.

SEC.75.DeclarationofQuarterlyCorporateIncomeTax.‐Everycorporationshallfileinduplicateaquarterlysummarydeclarationofitsgrossincomeanddeductionsonacumulativebasisfortheprecedingquarterorquartersuponwhichtheincometax,asprovidedinTitleIIofthisCode,shallbelevied,collectedandpaid.Thetaxsocomputedshallbedecreasedbytheamountoftaxpreviouslypaidorassessedduringtheprecedingquartersandshallbepaidnotlaterthansixty(60)daysfromthecloseofeachofthefirstthree(3)quartersofthetaxableyear,whethercalendarorfiscalyear.

SEC.76.FinalAdjustmentReturn.‐EverycorporationliabletotaxunderSection27shallfileafinaladjustmentreturncoveringthetotaltaxableincomefortheprecedingcalendarorfiscalyear.Ifthesumofthequarterlytaxpaymentsmadeduringthesaidtaxableyearisnotequaltothetotaltaxdueontheentiretaxableincomeofthatyear,thecorporationshalleither:

(A)Paythebalanceoftaxstilldue;or

(B)Carry‐overtheexcesscredit;or

(C)Becreditedorrefundedwiththeexcessamountpaid,asthecasemaybe.

Incasethecorporationisentitledtoataxcreditorrefundoftheexcessestimatedquarterlyincometaxespaid,theexcessamountshownonitsfinaladjustmentreturnmaybecarriedoverandcreditedagainsttheestimatedquarterlyincometaxliabilitiesforthetaxablequartersofthesucceedingtaxableyears.Oncetheoptiontocarry‐overandapplytheexcessquarterlyincometaxagainstincometaxdueforthetaxablequartersofthesucceedingtaxableyearshasbeenmade,suchoptionshallbeconsideredirrevocableforthattaxableperiodandnoapplicationforcashrefundorissuanceofataxcreditcertificateshallbeallowedtherefor.

SEC.77.PlaceandTimeofFilingandPaymentofQuarterlyCorporateIncomeTax.‐

(A)PlaceofFiling.‐ExceptastheCommissionerotherwisepermits,thequarterlyincometaxdeclarationrequiredinSection75andthefinaladjustmentreturnrequiredinSection76shallbefiledwiththeauthorizedagentbanksorRevenueDistrictOfficerorCollectionAgentordulyauthorizedTreasurerofthecityormunicipalityhavingjurisdictionoverthelocationoftheprincipalofficeofthecorporationfilingthereturnorplacewhereitsmainbooksofaccountsandotherdatafromwhichthereturnispreparedarekept.

(B)TimeofFilingtheIncomeTaxReturn.‐Thecorporatequarterlydeclarationshallbefiledwithinsixty(60)daysfollowingthecloseofeachofthefirstthree(3)quartersofthetaxableyear.Thefinaladjustmentreturnshallbefiledonorbeforethefifteenth(15th)dayofApril,oronorbeforethefifteenth(15th)dayofthefourth(4th)monthfollowingthecloseofthefiscalyear,asthecasemaybe.

(C)TimeofPaymentoftheIncomeTax.‐TheincometaxdueonthecorporatequarterlyreturnsandthefinaladjustmentincometaxreturnscomputedinaccordancewithSections75and76shallbepaidatthetimethedeclarationorreturnisfiledinamannerprescribedbytheCommissioner.

CHAPTERXIII

WITHHOLDINGONWAGES

SEC.78.Definitions.‐AsusedinthisChapter:

(A)Wages.‐Theterm'wages'meansallremuneration(otherthanfeespaidtoapublicofficial)forservicesperformedbyanemployeeforhisemployer,includingthecashvalueofallremunerationpaidinanymediumotherthancash,exceptthatsuchtermshallnotincluderemunerationpaid:

(1)Foragriculturallaborpaidentirelyinproductsofthefarmwherethelaborisperformed,or

(2)Fordomesticserviceinaprivatehome,or

(3)Forcasuallabornotinthecourseoftheemployer'stradeorbusiness,or

(4)ForservicesbyacitizenorresidentofthePhilippinesforaforeigngovernmentoraninternationalorganization.

Iftheremunerationpaidbyanemployertoanemployeeforservicesperformedduringone‐half(1/2)ormoreofanypayrollperiodofnotmorethanthirty‐one(31)consecutivedaysconstituteswages,alltheremunerationpaidbysuchemployertosuchemployeeforsuchperiodshallbedeemedtobewages;butiftheremunerationpaidbyanemployertoanemployeeforservicesperformedduringmorethanone‐half(1/2)ofanysuchpayrollperioddoesnotconstitutewages,thennoneoftheremunerationpaidbysuchemployertosuchemployeeforsuchperiodshallbedeemedtobewages.

(B)PayrollPeriod.‐Theterm'payrollperiod'meansaperiodforwhichpaymentofwagesisordinarilymadetotheemployeebyhisemployer,andtheterm"miscellaneouspayrollperiod"meansapayrollperiodotherthan,adaily,weekly,biweekly,semi‐monthly,monthly,quarterly,semi‐annual,orannualperiod.

(C)Employee.‐Theterm'employee'referstoanyindividualwhoistherecipientofwagesandincludesanofficer,employeeorelectedofficialoftheGovernmentofthePhilippinesoranypoliticalsubdivision,agencyorinstrumentalitythereof.Theterm"employee"alsoincludesanofficerofacorporation.

(D)Employer.‐Theterm"employer"meansthepersonforwhomanindividualperformsorperformedanyservice,ofwhatevernature,astheemployeeofsuchperson,exceptthat:

(1)Ifthepersonforwhomtheindividualperformsorperformedanyservicedoesnothavecontrolofthepaymentofthewagesforsuchservices,theterm"employer"(exceptforthepurposeofSubsection(A)meansthepersonhavingcontrolofthepaymentofsuchwages;and

(2)Inthecaseofapersonpayingwagesonbehalfofanonresidentalienindividual,foreignpartnershiporforeigncorporationnotengagedintradeorbusinesswithinthePhilippines,theterm"employer"(exceptforthepurposeofSubsection(A)meanssuchperson.

SEC.79.IncomeTaxCollectedatSource.‐

(A)RequirementofWithholding.‐EveryemployermakingpaymentofwagesshalldeductandwithholduponsuchwagesataxdeterminedinaccordancewiththerulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner:Provided,however,Thatnowithholdingofataxshallberequiredwherethetotalcompensationincomeofanindividualdoesnotexceedthestatutoryminimumwage,orfivethousandpesos(P5,000.00)permonth,whicheverishigher.

(B)TaxPaidbyRecipient.‐Iftheemployer,inviolationoftheprovisionsofthisChapter,failstodeductandwithholdthetaxasrequiredunderthisChapter,andthereafterthetaxagainstwhichsuchtaxmaybecreditedispaid,thetaxsorequiredtobedeductedandwithheldshallnotbecollectedfromtheemployer;butthisSubsectionshallinnocaserelievetheemployerfromliabilityforanypenaltyoradditiontothetaxotherwiseapplicableinrespectofsuchfailuretodeductandwithhold.

(C)RefundsorCredits.‐

(1)Employer.‐WhentherehasbeenanoverpaymentoftaxunderthisSection,refundorcreditshallbemadetotheemployeronlytotheextentthattheamountofsuchoverpaymentwasnotdeductedandwithheldhereunderbytheemployer.

(2)Employees.‐TheamountdeductedandwithheldunderthisChapterduringanycalendaryearshallbeallowedasacredittotherecipientofsuchincomeagainstthetaximposedunderSection24(A)ofthisTitle.RefundsandcreditsincasesofexcessivewithholdingshallbegrantedunderrulesandregulationspromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

Anyexcessofthetaxeswithheldoverthetaxduefromthetaxpayershallbereturnedorcreditedwithinthree(3)monthsfromthefifteenth(15th)dayofApril.Refundsorcreditsmadeaftersuchtimeshallearninterestattherateofsixpercent(6%)perannum,startingafterthelapseofthethree‐monthperiodtothedatetherefundofcreditismade.

RefundsshallbemadeuponwarrantsdrawnbytheCommissionerorbyhisdulyauthorizedrepresentativewithoutthenecessityofcounter‐signaturebytheChairman,CommissiononAuditorthelatter'sdulyauthorizedrepresentativeasanexceptiontotherequirementprescribedbySection49,Chapter8,SubtitleB,Title1ofBookVofExecutiveOrderNo.292,otherwiseknownastheAdministrativeCodeof1987.

(D)PersonalExemptions.‐

(1)InGeneral.‐UnlessotherwiseprovidedbythisChapter,thepersonalandadditionalexemptionsapplicableunderthisChaptershallbedeterminedinaccordancewiththemainprovisionsofthisTitle.

(2)ExemptionCertificate.‐

(a)WhentoFile.‐Onorbeforethedateofcommencementofemploymentwithanemployer,theemployeeshallfurnishtheemployerwithasignedwithholdingexemptioncertificaterelatingtothepersonalandadditionalexemptionstowhichheisentitled.

(b)ChangeofStatus.‐Incaseofchangeofstatusofanemployeeasaresultofwhichhewouldbeentitledtoalesserorgreateramountofexemption,theemployeeshall,withinten(10)daysfromsuchchange,filewiththeemployeranewwithholdingexemptioncertificatereflectingthechange.

(c)UseofCertificates.‐Thecertificatesfiledhereundershallbeusedbytheemployerinthedeterminationoftheamountoftaxestobewithheld.

(d)FailuretoFurnishCertificate.‐Whereanemployee,inviolationofthisChapter,eitherfailsorrefusestofileawithholdingexemptioncertificate,theemployershallwithholdthetaxesprescribedunderthescheduleforzeroexemptionofthewithholdingtaxtabledeterminedpursuanttoSubsection(A)hereof.

(E)WithholdingonBasisofAverageWages.‐TheCommissionermay,underrulesandregulationspromulgatedbytheSecretaryofFinance,authorizeemployersto:

(1)estimatethewageswhichwillbepaidtoanemployeeinanyquarterofthecalendaryear;

(2)determinetheamounttobedeductedandwithhelduponeachpaymentofwagestosuchemployeeduringsuchquarterasiftheappropriateaverageofthewagessoestimatedconstitutedtheactualwagespaid;and

(3)deductandwithholduponanypaymentofwagestosuchemployeeduring;suchquartersuchamountasmayberequiredtobedeductedandwithheldduringsuchquarterwithoutregardtothisSubsection.

(F)HusbandandWife.‐Whenahusbandandwifeeacharerecipientsofwages,whetherfromthesameorfromdifferentemployers,taxestobewithheldshallbedeterminedonthefollowingbases:

(1)Thehusbandshallbedeemedtheheadofthefamilyandproperclaimantoftheadditionalexemptioninrespecttoanydependentchildren,unlessheexplicitlywaiveshisrightinfavorofhiswifeinthewithholdingexemptioncertificate.

(2)TaxesshallbewithheldfromthewagesofthewifeinaccordancewiththescheduleforzeroexemptionofthewithholdingtaxtableprescribedinSubsection(D)(2)(d)hereof.

(G)NonresidentAliens.‐WagespaidtononresidentalienindividualsengagedintradeorbusinessinthePhilippinesshallbesubjecttotheprovisionsofthisChapter.

(H)Year‐EndAdjustment.‐Onorbeforetheendofthecalendaryearbutpriortothepaymentofthecompensationforthelastpayrollperiod,theemployershalldeterminethetaxduefromeachemployeeontaxablecompensationincomefortheentiretaxableyearinaccordancewithSection24(A).Thedifferencebetweenthetax

duefromtheemployeefortheentireyearandthesumoftaxeswithheldfromJanuarytoNovembershalleitherbewithheldfromhissalaryinDecemberofthecurrentcalendaryearorrefundedtotheemployeenotlaterthanJanuary25ofthesucceedingyear.

SEC.80.LiabilityforTax.‐

(A)Employer.‐TheemployershallbeliableforthewithholdingandremittanceofthecorrectamountoftaxrequiredtobedeductedandwithheldunderthisChapter.IftheemployerfailstowithholdandremitthecorrectamountoftaxasrequiredtobewithheldundertheprovisionofthisChapter,suchtaxshallbecollectedfromtheemployertogetherwiththepenaltiesoradditionstothetaxotherwiseapplicableinrespecttosuchfailuretowithholdandremit.

(B)Employee.‐Whereanemployeefailsorrefusestofilethewithholdingexemptioncertificateorwillfullysuppliesfalseorinaccurateinformationthereunder,thetaxotherwiserequiredtobewithheldbytheemployershallbecollectedfromhimincludingpenaltiesoradditionstothetaxfromtheduedateofremittanceuntilthedateofpayment.Ontheotherhand,excesstaxeswithheldmadebytheemployerdueto:

(1)failureorrefusaltofilethewithholdingexemptioncertificate;or

(2)falseandinaccurateinformationshallnotberefundedtotheemployeebutshallbeforfeitedinfavoroftheGovernment.

SEC.81.FilingofReturnandPaymentofTaxesWithheld.‐ExceptastheCommissionerotherwisepermits,taxesdeductedandwithheldbytheemployeronwagesofemployeesshallbecoveredbyareturnandpaidtoanauthorizedagentbank;CollectionAgent,orthedulyauthorizedTreasurerofthecityormunicipalitywheretheemployerhashislegalresidenceorprincipalplaceofbusiness,orincasetheemployerisacorporation,wheretheprincipalofficeislocated.

Thereturnshallbefiledandthepaymentmadewithintwenty‐five(25)daysfromthecloseofeachcalendarquarter:Provided,however,ThattheCommissionermay,withtheapprovaloftheSecretaryofFinance,requiretheemployerstopayordepositthetaxesdeductedandwithheldatmorefrequentintervals,incaseswheresuchrequirementisdeemednecessarytoprotecttheinterestoftheGovernment.

ThetaxesdeductedandwithheldbyemployersshallbeheldinaspecialfundintrustfortheGovernmentuntilthesamearepaidtothesaidcollectingofficers.

SEC.82.ReturnandPaymentinCaseofGovernmentEmployees.‐IftheemployeristheGovernmentofthePhilippinesoranypoliticalsubdivision,agencyorinstrumentalitythereof,thereturnoftheamountdeductedandwithhelduponanywageshallbemadebytheofficeroremployeehavingcontrolofthepaymentofsuchwage,orbyanyofficeroremployeedulydesignatedforthepurpose.

SEC.83.StatementsandReturns.‐

(A)Requirements.‐Everyemployerrequiredtodeductandwithholdataxshallfurnishtoeachsuchemployeeinrespectofhisemploymentduringthecalendaryear,onorbeforeJanuarythirty‐first(31st)ofthesucceedingyear,orifhisemploymentisterminatedbeforethecloseofsuchcalendaryear,onthesamedayofwhichthelastpaymentofwagesismade,awrittenstatementconfirmingthewagespaidbytheemployertosuchemployeeduringthecalendaryear,andtheamountoftaxdeductedandwithheldunderthisChapterinrespectofsuchwages.ThestatementrequiredtobefurnishedbythisSectioninrespectofanywageshallcontainsuchotherinformation,andshallbefurnishedatsuchothertimeandinsuchformastheSecretaryofFinance,upontherecommendationoftheCommissioner,may,byrulesandregulation,prescribe.

(B)AnnualInformationReturns.‐Everyemployerrequiredtodeductandwithholdthetaxesinrespectofthewagesofhisemployeesshall,onorbeforeJanuarythirty‐first(31st)ofthesucceedingyear,submittotheCommissioneranannualinformationreturncontainingalistofemployees,thetotalamountofcompensationincomeofeachemployee,thetotalamountoftaxeswithheldtherefromduringtheyear,accompaniedbycopiesofthestatementreferredtointheprecedingparagraph,andsuchotherinformationasmaybedeemednecessary.Thisreturn,ifmadeandfiledinaccordancewithrulesandregulationspromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,shallbesufficientcompliancewiththerequirementsofSection68ofthisTitleinrespectofsuchwages.

(C)Extensionoftime.‐TheCommissioner,undersuchrulesandregulationsasmaybepromulgatedbytheSecretaryofFinance,maygranttoanyemployera

reasonableextensionoftimetofurnishandsubmitthestatementsandreturnsrequiredunderthisSection.

TITLEIII

CHAPTERI

ESTATETAX

SEC.84.RatesofEstateTax.‐Thereshallbelevied,assessed,collectedandpaiduponthetransferofthenetestateasdeterminedinaccordancewithSections85and86ofeverydecedent,whetherresidentornonresidentofthePhilippines,ataxbasedonthevalueofsuchnetestate,ascomputedinaccordancewiththefollowingschedule:

Ifthenetestateis:

OVER

BUTNOTOVER

THETAXSHALLBE

PLUS

OFTHEEXCESSOVER

P200,000 Exempt

P200,000

550,000

0

5%

P200,000

500,000

2,000,000

P15,000

8%

500,000

2,000,000

5,000,000

135,000

11%

2,000,000

5,000,000

10,000,000

465,000

15%

5,000,000

10,000,000

AndOver

1,215,000

20%

10,000,000

SEC.85.GrossEstate.‐thevalueofthegrossestateofthedecedentshallbedeterminedbyincludingthevalueatthetimeofhisdeathofallproperty,realorpersonal,tangibleorintangible,whereversituated:Provided,however,thatinthecaseofanonresidentdecedentwhoatthetimeofhisdeathwasnotacitizenofthePhilippines,onlythatpartoftheentiregrossestatewhichissituatedinthePhilippinesshallbeincludedinhistaxableestate.

(A)Decedent'sInterest.‐Totheextentoftheinterestthereinofthedecedentatthetimeofhisdeath;

(B)TransferinContemplationofDeath.‐Totheextentofanyinterestthereinofwhichthedecedenthasatanytimemadeatransfer,bytrustorotherwise,incontemplationoforintendedtotakeeffectinpossessionorenjoymentatorafterdeath,orofwhichhehasatanytimemadeatransfer,bytrustorotherwise,under

whichhehasretainedforhislifeorforanyperiodwhichdoesnotinfactendbeforehisdeath(1)thepossessionorenjoymentof,ortherighttotheincomefromtheproperty,or(2)theright,eitheraloneorinconjunctionwithanyperson,todesignatethepersonwhoshallpossessorenjoythepropertyortheincometherefrom;exceptincaseofabonafidesaleforanadequateandfullconsiderationinmoneyormoney'sworth.

(C)RevocableTransfer.‐

(1)Totheextentofanyinteresttherein,ofwhichthedecedenthasatanytimemadeatransfer(exceptincaseofabonafidesaleforanadequateandfullconsiderationinmoneyormoney'sworth)bytrustorotherwise,wheretheenjoymentthereofwassubjectatthedateofhisdeathtoanychangethroughtheexerciseofapower(inwhatevercapacityexerciseable)bythedecedentaloneorbythedecedentinconjunctionwithanyotherperson(withoutregardtowhenorfromwhatsourcethedecedentacquiredsuchpower),toalter,amend,revoke,orterminate,orwhereanysuchpowerisrelinquishedincontemplationofthedecedent'sdeath.

(2)ForthepurposeofthisSubsection,thepowertoalter,amendorrevokeshallbeconsideredtoexistonthedateofthedecedent'sdeatheventhoughtheexerciseofthepowerissubjecttoaprecedentgivingofnoticeoreventhoughthealteration,amendmentorrevocationtakeseffectonlyontheexpirationofastatedperiodaftertheexerciseofthepower,whetherornotonorbeforethedateofthedecedent'sdeathnoticehasbeengivenorthepowerhasbeenexercised.Insuchcases,properadjustmentshallbemaderepresentingtheinterestswhichwouldhavebeenexcludedfromthepowerifthedecedenthadlived,andforsuchpurposeifthenoticehasnotbeengivenorthepowerhasnotbeenexercisedonorbeforethedateofhis

death,suchnoticeshallbeconsideredtohavebeengiven,orthepowerexercised,onthedateofhisdeath.

(D)PropertyPassingUnderGeneralPowerofAppointment.‐Totheextentofanypropertypassingunderageneralpowerofappointmentexercisedbythedecedent:(1)bywill,or(2)bydeedexecutedincontemplationof,orintendedtotakeeffectinpossessionorenjoymentat,orafterhisdeath,or(3)bydeedunderwhichhehasretainedforhislifeoranyperiodnotascertainablewithoutreferencetohisdeathorforanyperiodwhichdoesnotinfactendbeforehisdeath(a)thepossessionorenjoymentof,ortherighttotheincomefrom,theproperty,or(b)theright,either

aloneorinconjunctionwithanyperson,todesignatethepersonswhoshallpossessorenjoythepropertyortheincometherefrom;exceptincaseofabonafidesaleforanadequateandfullconsiderationinmoneyormoney'sworth.

(E)ProceedsofLifeInsurance.‐Totheextentoftheamountreceivablebytheestateofthedeceased,hisexecutor,oradministrator,asinsuranceunderpoliciestakenoutbythedecedentuponhisownlife,irrespectiveofwhetherornottheinsuredretainedthepowerofrevocation,ortotheextentoftheamountreceivablebyanybeneficiarydesignatedinthepolicyofinsurance,exceptwhenitisexpresslystipulatedthatthedesignationofthebeneficiaryisirrevocable.

(F)PriorInterests.‐Exceptasotherwisespecificallyprovidedtherein,Subsections(B),(C)and(E)ofthisSectionshallapplytothetransfers,trusts,estates,interests,rights,powersandrelinquishmentofpowers,asseverallyenumeratedanddescribedtherein,whethermade,created,arising,existing,exercisedorrelinquishedbeforeoraftertheeffectivityofthisCode.

(G)TransfersofInsufficientConsideration.‐Ifanyoneofthetransfers,trusts,interests,rightsorpowersenumeratedanddescribedinSubsections(B),(C)and(D)ofthisSectionismade,created,exercisedorrelinquishedforaconsiderationinmoneyormoney'sworth,butisnotabonafidesaleforanadequateandfullconsiderationinmoneyormoney'sworth,thereshallbeincludedinthegrossestateonlytheexcessofthefairmarketvalue,atthetimeofdeath,ofthepropertyotherwisetobeincludedonaccountofsuchtransaction,overthevalueoftheconsiderationreceivedthereforbythedecedent.

(H)CapitaloftheSurvivingSpouse.‐Thecapitalofthesurvivingspouseofadecedentshallnot,forthepurposeofthisChapter,bedeemedapartofhisorhergrossestate.

SEC.86.ComputationofNetEstate.‐ForthepurposeofthetaximposedinthisChapter,thevalueofthenetestateshallbedetermined:

(A)DeductionsAllowedtotheEstateofCitizenoraResident.‐InthecaseofacitizenorresidentofthePhilippines,bydeductingfromthevalueofthegrossestate‐

(1)Expenses,Losses,Indebtedness,andtaxes.‐Suchamounts:

(a)Foractualfuneralexpensesorinanamountequaltofivepercent(5%)ofthegrossestate,whicheverislower,butinnocasetoexceedTwohundredthousandpesos(P200,000);

(b)Forjudicialexpensesofthetestamentaryorintestateproceedings;

(c)Forclaimsagainsttheestate:Provided,Thatatthetimetheindebtednesswasincurredthedebtinstrumentwasdulynotarizedand,iftheloanwascontractedwithinthree(3)yearsbeforethedeathofthedecedent,theadministratororexecutorshallsubmitastatementshowingthedispositionoftheproceedsoftheloan;

(d)Forclaimsofthedeceasedagainstinsolventpersonswherethevalueofdecedent'sinterestthereinisincludedinthevalueofthegrossestate;and

(e)Forunpaidmortgagesupon,oranyindebtednessinrespectto,propertywherethevalueofdecedent'sinteresttherein,undiminishedbysuchmortgageorindebtedness,isincludedinthevalueofthegrossestate,butnotincludinganyincometaxuponincomereceivedafterthedeathofthedecedent,orpropertytaxesnotaccruedbeforehisdeath,oranyestatetax.Thedeductionhereinallowedinthecaseofclaimsagainsttheestate,unpaidmortgagesoranyindebtednessshall,whenfoundeduponapromiseoragreement,belimitedtotheextentthattheywerecontractedbonafideandforanadequateandfullconsiderationinmoneyormoney'sworth.Thereshallalsobedeductedlossesincurredduringthesettlementoftheestatearisingfromfires,storms,shipwreck,orothercasualties,orfromrobbery,theftorembezzlement,whensuchlossesarenotcompensatedforbyinsuranceorotherwise,andifatthetimeofthefilingofthereturnsuchlosseshavenotbeenclaimedasadeductionfortheincometaxpurposesinanincometaxreturn,andprovidedthatsuchlosseswereincurrednotlaterthanthelastdayforthepaymentoftheestatetaxasprescribedinSubsection(A)ofSection91.

(2)PropertyPreviouslyTaxed.‐AnamountequaltothevaluespecifiedbelowofanypropertyformingapartofthegrossestatesituatedinthePhilippinesofany

personwhodiedwithinfive(5)yearspriortothedeathofthedecedent,ortransferredtothedecedentbygiftwithinfive(5)yearspriortohisdeath,wheresuchpropertycanbeidentifiedashavingbeenreceivedbythedecedentfromthedonorbygift,orfromsuchpriordecedentbygift,bequest,deviseorinheritance,orwhichcanbeidentifiedashavingbeenacquiredinexchangeforpropertysoreceived:

Onehundredpercent(100%)ofthevalue,ifthepriordecedentdiedwithinone(1)yearpriortothedeathofthedecedent,orifthepropertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath;

Eightypercent(80%)ofthevalue,ifthepriordecedentdiedmorethanone(1)yearbutnotmorethantwo(2)yearspriortothedeathofthedecedent,orifthepropertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath;

Sixtypercent(60%)ofthevalue,ifthepriordecedentdiedmorethantwo(2)yearsbutnotmorethanthree(3)yearspriortothedeathofthedecedent,orifthepropertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath;

Fortypercent(40%)ofthevalue,ifthepriordecedentdiedmorethanthree(3)yearsbutnotmorethanfour(4)yearspriortothedeathofthedecedent,orifthepropertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath;

Twentypercent(20%)ofthevalue,ifthepriordecedentdiedmorethanfour(4)yearsbutnotmorethanfive(5)yearspriortothedeathofthedecedent,orifthepropertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath;

Thesedeductionsshallbeallowedonlywhereadonor'staxorestatetaximposedunderthisTitlewasfinallydeterminedandpaidbyoronbehalfofsuchdonor,ortheestateofsuchpriordecedent,asthecasemaybe,andonlyintheamountfinallydeterminedasthevalueofsuchpropertyindeterminingthevalueofthegift,orthegrossestateofsuchpriordecedent,andonlytotheextentthatthevalueofsuchpropertyisincludedinthedecedent'sgrossestate,andonlyifindeterminingthevalueoftheestateofthepriordecedent,nodeductionwasallowableunderparagraph(2)inrespectofthepropertyorpropertiesgiveninexchangetherefor.Whereadeductionwasallowedofanymortgageorotherlienindeterminingthedonor'stax,ortheestatetaxofthepriordecedent,whichwaspaid

inwholeorinpartpriortothedecedent'sdeath,thenthedeductionallowableundersaidSubsectionshallbereducedbytheamountsopaid.Suchdeductionallowableshallbereducedbyanamountwhichbearsthesameratiototheamountsallowedasdeductionsunderparagraphs(1)and(3)ofthisSubsectionastheamountotherwisedeductibleundersaidparagraph(2)bearstothevalueofthedecedent'sestate.Wherethepropertyreferredtoconsistsoftwoormoreitems,theaggregatevalueofsuchitemsshallbeusedforthepurposeofcomputingthededuction.

(3)TransfersforPublicUse.‐Theamountofallthebequests,legacies,devisesortransferstoorfortheuseoftheGovernmentoftheRepublicofthePhilippines,oranypoliticalsubdivisionthereof,forexclusivelypublicpurposes.

(4)TheFamilyHome.‐Anamountequivalenttothecurrentfairmarketvalueofthedecedent'sfamilyhome:Provided,however,ThatifthesaidcurrentfairmarketvalueexceedsOnemillionpesos(P1,000,000),theexcessshallbesubjecttoestatetax.Asasinequanonconditionfortheexemptionordeduction,saidfamilyhomemusthavebeenthedecedent'sfamilyhomeascertifiedbythebarangaycaptainofthelocality.

(5)StandardDeduction.‐AnamountequivalenttoOnemillionpesos(P1,000,000).

(6)MedicalExpenses.‐MedicalExpensesincurredbythedecedentwithinone(1)yearpriortohisdeathwhichshallbedulysubstantiatedwithreceipts:Provided,ThatinnocaseshallthedeductiblemedicalexpensesexceedFiveHundredThousandPesos(P500,000).

(7)AmountReceivedbyHeirsUnderRepublicActNo.4917.‐Anyamountreceivedbytheheirsfromthedecedent‐employeeasaconsequenceofthedeathofthedecedent‐employeeinaccordancewithRepublicActNo.4917:Provided,Thatsuchamountisincludedinthegrossestateofthedecedent.

(B)DeductionsAllowedtoNonresidentEstates.‐InthecaseofanonresidentnotacitizenofthePhilippines,bydeductingfromthevalueofthatpartofhisgrossestatewhichatthetimeofhisdeathissituatedinthePhilippines:

(1)Expenses,Losses,IndebtednessandTaxes.‐Thatproportionofthedeductionsspecifiedinparagraph(1)ofSubsection(A)ofthisSectionwhichthevalueofsuchpartbearstothevalueofhisentiregrossestatewhereversituated;

(2)PropertyPreviouslyTaxed.‐AnamountequaltothevaluespecifiedbelowofanypropertyformingpartofthegrossestatesituatedinthePhilippinesofanypersonwhodiedwithinfive(5)yearspriortothedeathofthedecedent,ortransferredtothedecedentbygiftwithinfive(5)yearspriortohisdeath,wheresuchpropertycanbeidentifiedashavingbeenreceivedbythedecedentfromthedonorbygift,orfromsuchpriordecedentbygift,bequest,deviseorinheritance,orwhichcanbeidentifiedashavingbeenacquiredinexchangeforpropertysoreceived:

Onehundredpercent(100%)ofthevalueifthepriordecedentdiedwithinone(1)yearpriortothedeathofthedecedent,orifthepropertywastransferredtohimbygift,withinthesameperiodpriortohisdeath;

Eightypercent(80%)ofthevalue,ifthepriordecedentdiedmorethanone(1)yearbutnotmorethantwo(2)yearspriortothedeathofthedecedent,orifthepropertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath;

Sixtypercent(60%)ofthevalue,ifthepriordecedentdiedmorethantwo(2)yearsbutnotmorethanthree(3)yearspriortothedeathofthedecedent,orifthepropertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath;

Fortypercent(40%)ofthevalue,ifthepriordecedentdiedmorethanthree(3)yearsbutnotmorethanfour(4)yearspriortothedeathofthedecedent,orifthepropertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath;and

Twentypercent(20%)ofthevalue,ifthepriordecedentdiedmorethanfour(4)yearsbutnotmorethanfive(5)yearspriortothedeathofthedecedent,orifthepropertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath.

Thesedeductionsshallbeallowedonlywhereadonor'stax,orestatetaximposedunderthisTitleisfinallydeterminedandpaidbyoronbehalfofsuchdonor,ortheestateofsuchpriordecedent,asthecasemaybe,andonlyintheamountfinallydeterminedasthevalueofsuchpropertyindeterminingthevalueofthegift,orthegrossestateofsuchpriordecedent,andonlytotheextentthatthevalueofsuchpropertyisincludedinthatpartofthedecedent'sgrossestatewhichatthetimeofhisdeathissituatedinthePhilippines;andonlyif,indeterminingthevalueofthenetestateofthepriordecedent,nodeductionisallowableunderparagraph(2)ofSubsection(B)ofthisSection,inrespectofthepropertyorpropertiesgiveninexchangetherefore.Whereadeductionwasallowedofanymortgageorotherlienindeterminingthedonor'stax,ortheestatetaxofthepriordecedent,whichwaspaidinwholeorinpartpriortothedecedent'sdeath,thenthedeductionallowableundersaidparagraphshallbereducedbytheamountsopaid.Suchdeductionallowableshallbereducedbyanamountwhichbearsthesameratiototheamountsallowedasdeductionsunderparagraphs(1)and(3)ofthisSubsectionastheamountotherwisedeductibleunderparagraph(2)bearstothevalueofthatpartofthedecedent'sgrossestatewhichatthetimeofhisdeathissituatedinthePhilippines.Wherethepropertyreferredtoconsistsoftwo(2)ormoreitems,theaggregatevalueofsuchitemsshallbeusedforthepurposeofcomputingthededuction.

(3)TransfersforPublicUse.‐Theamountofallbequests,legacies,devisesortransferstoorfortheuseoftheGovernmentoftheRepublicofthePhilippinesoranypoliticalsubdivisionthereof,forexclusivelypublicpurposes.

(C)ShareintheConjugalProperty.‐thenetshareofthesurvivingspouseintheconjugalpartnershippropertyasdiminishedbytheobligationsproperlychargeabletosuchpropertyshall,forthepurposeofthisSection,bedeductedfromthenetestateofthedecedent.

(D)MiscellaneousProvisions.‐NodeductionshallbeallowedinthecaseofanonresidentnotacitizenofthePhilippines,unlesstheexecutor,administrator,oranyoneoftheheirs,asthecasemaybe,includesinthereturnrequiredtobefiledunderSection90thevalueatthetimeofhisdeathofthatpartofthegrossestateofthenonresidentnotsituatedinthePhilippines.

(E)TaxCreditforEstateTaxespaidtoaForeignCountry.‐

(1)InGeneral.‐ThetaximposedbythisTitleshallbecreditedwiththeamountsofanyestatetaximposedbytheauthorityofaforeigncountry.

(2)LimitationsonCredit.‐TheamountofthecredittakenunderthisSectionshallbesubjecttoeachofthefollowinglimitations:

(a)Theamountofthecreditinrespecttothetaxpaidtoanycountryshallnotexceedthesameproportionofthetaxagainstwhichsuchcreditistaken,whichthedecedent'snetestatesituatedwithinsuchcountrytaxableunderthisTitlebearstohisentirenetestate;and

(b)Thetotalamountofthecreditshallnotexceedthesameproportionofthetaxagainstwhichsuchcreditistaken,whichthedecedent'snetestatesituatedoutsidethePhilippinestaxableunderthisTitlebearstohisentirenetestate.

SEC.87.ExemptionofCertainAcquisitionsandTransmissions.‐Thefollowingshallnotbetaxed:

(A)Themergerofusufructintheownerofthenakedtitle;

(B)Thetransmissionordeliveryoftheinheritanceorlegacybythefiduciaryheirorlegateetothefideicommissary;

(C)Thetransmissionfromthefirstheir,legateeordoneeinfavorofanotherbeneficiary,inaccordancewiththedesireofthepredecessor;and

(D)Allbequests,devises,legaciesortransferstosocialwelfare,culturalandcharitableinstitutions,nopartofthenetincomeofwhichinsurestothebenefitofanyindividual:Provided,however,Thatnotmorethanthirtypercent(30%)ofthesaidbequests,devises,legaciesortransfersshallbeusedbysuchinstitutionsforadministrationpurposes.

SEC.88.DeterminationoftheValueoftheEstate.‐

(A)Usufruct.‐Todeterminethevalueoftherightofusufruct,useorhabitation,aswellasthatofannuity,thereshallbetakenintoaccounttheprobablelifeofthebeneficiaryinaccordancewiththelatestBasicStandardMortalityTable,tobeapprovedbytheSecretaryofFinance,uponrecommendationoftheInsuranceCommissioner.

(B)Properties.‐Theestateshallbeappraisedatitsfairmarketvalueasofthetimeofdeath.However,theappraisedvalueofrealpropertyasofthetimeofdeathshallbe,whicheverishigherof:

(1)ThefairmarketvalueasdeterminedbytheCommissioner,or

(2)ThefairmarketvalueasshowninthescheduleofvaluesfixedbytheProvincialandCityAssessors.

SEC.89.NoticeofDeathtobeFiled.‐Inallcasesoftransferssubjecttotax,orwhere,thoughexemptfromtax,thegrossvalueoftheestateexceedsTwentythousandpesos(P20,000),theexecutor,administratororanyofthelegalheirs,asthecasemaybe,withintwo(2)monthsafterthedecedent'sdeath,orwithinalikeperiodafterqualifyingassuchexecutororadministrator,shallgiveawrittennoticethereoftotheCommissioner.

SEC.90.EstateTaxReturns.‐

(A)Requirements.‐Inallcasesoftransferssubjecttothetaximposedherein,orwhere,thoughexemptfromtax,thegrossvalueoftheestateexceedsTwohundredthousandpesos(P200,000),orregardlessofthegrossvalueoftheestate,wherethesaidestateconsistsofregisteredorregistrablepropertysuchasrealproperty,motorvehicle,sharesofstockorothersimilarpropertyforwhichaclearancefromtheBureauofInternalRevenueisrequiredasaconditionprecedentforthetransferofownershipthereofinthenameofthetransferee,theexecutor,ortheadministrator,oranyofthelegalheirs,asthecasemaybe,shallfileareturnunderoathinduplicate,settingforth:

(1)Thevalueofthegrossestateofthedecedentatthetimeofhisdeath,orincaseofanonresident,notacitizenofthePhilippines,ofthatpartofhisgrossestatesituatedinthePhilippines;

(2)ThedeductionsallowedfromgrossestateindeterminingtheestateasdefinedinSection86;and

(3)Suchpartofsuchinformationasmayatthetimebeascertainableandsuchsupplementaldataasmaybenecessarytoestablishthecorrecttaxes.

Provided,however,ThatestatetaxreturnsshowingagrossvalueexceedingTwomillionpesos(P2,000,000)shallbesupportedwithastatementdulycertifiedtobyaCertifiedPublicAccountantcontainingthefollowing:

(a)Itemizedassetsofthedecedentwiththeircorrespondinggrossvalueatthetimeofhisdeath,orinthecaseofanonresident,notacitizenofthePhilippines,ofthatpartofhisgrossestatesituatedinthePhilippines;

(b)ItemizeddeductionsfromgrossestateallowedinSection86;and

(c)Theamountoftaxduewhetherpaidorstilldueandoutstanding.

(B)TimeforFiling.‐ForthepurposeofdeterminingtheestatetaxprovidedforinSection84ofthisCode,theestatetaxreturnrequiredundertheprecedingSubsection(A)shallbefiledwithinsix(6)monthsfromthedecedent'sdeath.

AcertifiedcopyofthescheduleofpartitionandtheorderofthecourtapprovingthesameshallbefurnishedtheCommissionerwithinthirty(30)afterthepromulgationofsuchorder.

(C)ExtensionofTime.‐TheCommissionershallhaveauthoritytogrant,inmeritoriouscases,areasonableextensionnotexceedingthirty(30)daysforfilingthereturn.

(D)PlaceofFiling.‐ExceptincaseswheretheCommissionerotherwisepermits,thereturnrequiredunderSubsection(A)shallbefiledwithanauthorizedagentbank,orRevenueDistrictOfficer,CollectionOfficer,ordulyauthorizedTreasurerofthecityormunicipalityinwhichthedecedentwasdomiciledatthetimeofhisdeathoriftherebenolegalresidenceinthePhilippines,withtheOfficeoftheCommissioner.

SEC.91.PaymentofTax.‐

(A)TimeofPayment.‐TheestatetaximposedbySection84shallbepaidatthetimethereturnisfiledbytheexecutor,administratorortheheirs.

(B)ExtensionofTime.‐WhentheCommissionerfindsthatthepaymentontheduedateoftheestatetaxorofanypartthereofwouldimposeunduehardshipupontheestateoranyoftheheirs,hemayextendthetimeforpaymentofsuchtaxoranypartthereofnottoexceedfive(5)years,incasetheestateissettledthroughthecourts,ortwo(2)yearsincasetheestateissettledextrajudicially.Insuchcase,theamountinrespectofwhichtheextensionisgrantedshallbepaidonorbeforethedateoftheexpirationoftheperiodoftheextension,andtherunningoftheStatuteofLimitationsforassessmentasprovidedinSection203ofthisCodeshallbesuspendedfortheperiodofanysuchextension.

Wherethetaxesareassessedbyreasonofnegligence,intentionaldisregardofrulesandregulations,orfraudonthepartofthetaxpayer,noextensionwillbegrantedbytheCommissioner.

Ifanextensionisgranted,theCommissionermayrequiretheexecutor,oradministrator,orbeneficiary,asthecasemaybe,tofurnishabondinsuchamount,notexceedingdoubletheamountofthetaxandwithsuchsuretiesastheCommissionerdeemsnecessary,conditioneduponthepaymentofthesaidtaxinaccordancewiththetermsoftheextension.

(C)LiabilityforPayment.‐TheestatetaximposedbySection84shallbepaidbytheexecutororadministratorbeforedeliverytoanybeneficiaryofhisdistributiveshareoftheestate.Suchbeneficiaryshalltotheextentofhisdistributiveshareofthe

estate,besubsidiarilyliableforthepaymentofsuchportionoftheestatetaxashisdistributivesharebearstothevalueofthetotalnetestate.

ForthepurposeofthisChapter,theterm"executor"or"administrator"meanstheexecutororadministratorofthedecedent,orifthereisnoexecutororadministratorappointed,qualified,andactingwithinthePhilippines,thenanypersoninactualorconstructivepossessionofanypropertyofthedecedent.

SEC.92.DischargeofExecutororAdministratorfromPersonalLiability.‐IftheexecutororadministratormakesawrittenapplicationtotheCommissionerfordeterminationoftheamountoftheestatetaxanddischargefrompersonalliabilitytherefore,theCommissioner(assoonaspossible,andinanyeventwithinone(1)yearafterthemakingofsuchapplication,oriftheapplicationismadebeforethereturnisfiled,thenwithinone(1)yearafterthereturnisfiled,butnotaftertheexpirationoftheperiodprescribedfortheassessmentofthetaxinSection203shallnotnotifytheexecutororadministratoroftheamountofthetax.Theexecutororadministrator,uponpaymentoftheamountofwhichheisnotified,shallbedischargedfrompersonalliabilityforanydeficiencyinthetaxthereafterfoundtobedueandshallbeentitledtoareceiptorwritingshowingsuchdischarge.

SEC.93.DefinitionofDeficiency.‐AsusedinthisChapter,theterm"deficiency"means:

(a)TheamountbywhichthetaximposedbythisChapterexceedstheamountshownasthetaxbytheexecutor,administratororanyoftheheirsuponhisreturn;buttheamountssoshownonthereturnshallfirstbeincreasedbytheamountspreviouslyassessed(orcollectedwithoutassessment)asadeficiencyanddecreasedbytheamountpreviouslyabated,refundedorotherwiserepaidinrespectofsuchtax;or

(b)Ifnoamountisshownasthetaxbytheexecutor,administratororanyoftheheirsuponhisreturn,orifnoreturnismadebytheexecutor,administrator,oranyheir,thentheamountbywhichthetaxexceedstheamountspreviouslyassessed(orcollectedwithoutassessment)asadeficiency;butsuchamountspreviouslyassessedorcollectedwithoutassessmentshallfirstbedecreasedbytheamountspreviouslyabated,refundedorotherwiserepaidinrespectofsuchtax.

SEC.94.PaymentBeforeDeliverybyExecutororAdministrator.‐NojudgeshallauthorizetheexecutororjudicialadministratortodeliveradistributivesharetoanypartyinterestedintheestateunlessacertificationfromtheCommissionerthattheestatetaxhasbeenpaidisshown.

SEC.95.DutiesofCertainOfficersandDebtors.‐RegistersofDeedsshallnotregisterintheRegistryofPropertyanydocumenttransferringrealpropertyorrealrightsthereinoranychattelmortgage,bywayofgiftsintervivosormortiscausa,legacyorinheritance,unlessacertificationfromtheCommissionerthatthetaxfixedinthisTitleandactuallyduethereonhadbeenpaidisshow,andtheyshallimmediatelynotifytheCommissioner,RegionalDirector,RevenueDistrictOfficer,orRevenueCollectionOfficerorTreasurerofthecityormunicipalitywheretheirofficesarelocated,ofthenonpaymentofthetaxdiscoveredbythem.Anylawyer,notarypublic,oranygovernmentofficerwho,byreasonofhisofficialduties,intervenesinthepreparationoracknowledgmentofdocumentsregardingpartitionordisposalofdonationintervivosormortiscausa,legacyorinheritance,shallhavethedutyoffurnishingtheCommissioner,RegionalDirector,RevenueDistrictOfficerorRevenueCollectionOfficeroftheplacewherehemayhavehisprincipaloffice,withcopiesofsuchdocumentsandanyinformationwhatsoeverwhichmayfacilitatethecollectionoftheaforementionedtax.Neithershalladebtorofthedeceasedpayhisdebtstotheheirs,legatee,executororadministratorofhiscreditor,unlessthecertificationoftheCommissionerthatthetaxfixedinthisChapterhadbeenpaidisshown;buthemaypaytheexecutororjudicialadministratorwithoutsaidcertificationifthecreditisincludedintheinventoryoftheestateofthedeceased.

SEC.96.RestitutionofTaxUponSatisfactionofOutstandingObligations.‐Ifafterthepaymentoftheestatetax,newobligationsofthedecedentshallappear,andthepersonsinterestedshallhavesatisfiedthembyorderofthecourt,theyshallhavearighttotherestitutionoftheproportionalpartofthetaxpaid.

SEC.97.PaymentofTaxAntecedenttotheTransferofShares,BondsorRights.‐Thereshallnotbetransferredtoanynewownerinthebooksofanycorporation,sociedadanonima,partnership,business,orindustryorganizedorestablishedinthePhilippinesanyshare,obligation,bondorrightbywayofgiftintervivosormortiscausa,legacyorinheritance,unlessacertificationfromtheCommissionerthatthetaxesfixedinthisTitleandduethereonhavebeenpaidisshown.

Ifabankhasknowledgeofthedeathofaperson,whomaintainedabankdepositaccountalone,orjointlywithanother,itshallnotallowanywithdrawalfromthesaiddepositaccount,unlesstheCommissionerhascertifiedthatthetaxesimposedthereonbythisTitlehavebeenpaid:Provided,however,Thattheadministratorof

theestateoranyone(1)oftheheirsofthedecedentmay,uponauthorizationbytheCommissioner,withdrawanamountnotexceedingTwentythousandpesos(P20,000)withoutthesaidcertification.Forthispurpose,allwithdrawalslipsshallcontainastatementtotheeffectthatallofthejointdepositorsarestilllivingatthetimeofwithdrawalbyanyoneofthejointdepositorsandsuchstatementshallbeunderoathbythesaiddepositors.

CHAPTERII

DONOR'STAX

SEC.98.ImpositionofTax.‐

(A)Thereshallbelevied,assessed,collectedandpaiduponthetransferbyanyperson,residentornonresident,ofthepropertybygift,atax,computedasprovidedinSection99.

(B)Thetaxshallapplywhetherthetransferisintrustorotherwise,whetherthegiftisdirectorindirect,andwhetherthepropertyisrealorpersonal,tangibleorintangible.

SEC.99.RatesofTaxPayablebyDonor.‐

(A)InGeneral.‐Thetaxforeachcalendaryearshallbecomputedonthebasisofthetotalnetgiftsmadeduringthecalendaryearinaccordancewiththefollowingschedule:

Ifthenetgiftis:

OVER

BUTNOTOVER

THETAXSHALLBE

PLUS

OFTHEEXCESSOVER

P100,000

Exempt

P100,000

200,000

0

2%

P100,000

200,000

500,000

2,000

4%

200,000

500,000

1,000,000

14,000

6%

500,000

1,000,000

3,000,000

44,000

8%

1,000,000

3,000,000

5,000,000

204,000

10%

3,000,000

5,000,000

10,000,000

404,000

12%

5,000,000

10,000,000

1,004,000

15%

10,000,000

(B)TaxPayablebyDonorifDoneeisaStranger.‐Whenthedoneeorbeneficiaryisstranger,thetaxpayablebythedonorshallbethirtypercent(30%)ofthenetgifts.Forthepurposeofthistax,a"stranger",isapersonwhoisnota:

(1)Brother,sister(whetherbywholeorhalf‐blood),spouse,ancestorandlinealdescendant;or

(2)Relativebyconsanguinityinthecollaterallinewithinthefourthdegreeofrelationship.

(C)Anycontributionincashorinkindtoanycandidate,politicalpartyorcoalitionofpartiesforcampaignpurposesshallbegovernedbytheElectionCode,asamended.

SEC.100.TransferforLessThanAdequateandFullConsideration.‐Whereproperty,otherthanrealpropertyreferredtoinSection24(D),istransferredforlessthananadequateandfullconsiderationinmoneyormoney'sworth,thentheamountbywhichthefairmarketvalueofthepropertyexceededthevalueoftheconsiderationshall,forthepurposeofthetaximposedbythisChapter,bedeemedagift,andshallbeincludedincomputingtheamountofgiftsmadeduringthecalendaryear.

SEC.101.ExemptionofCertainGifts.‐ThefollowinggiftsordonationsshallbeexemptfromthetaxprovidedforinthisChapter:

(A)IntheCaseofGiftsMadebyaResident.‐

(1)Dowriesorgiftsmadeonaccountofmarriageandbeforeitscelebrationorwithinoneyearthereafterbyparentstoeachoftheirlegitimate,recognizednatural,oradoptedchildrentotheextentofthefirstTenthousandpesos(P10,000):

(2)GiftsmadetoorfortheuseoftheNationalGovernmentoranyentitycreatedbyanyofitsagencieswhichisnotconductedforprofit,ortoanypoliticalsubdivisionofthesaidGovernment;and

(3)Giftsinfavorofaneducationaland/orcharitable,religious,culturalorsocialwelfarecorporation,institution,accreditednongovernmentorganization,trustorphilanthropicorganizationorresearchinstitutionororganization:Provided,however,Thatnotmorethanthirtypercent(30%)ofsaidgiftsshallbeusedbysuchdoneeforadministrationpurposes.Forthepurposeoftheexemption,a'non‐profiteducationaland/orcharitablecorporation,institution,accreditednongovernmentorganization,trustorphilanthropicorganizationand/orresearchinstitutionororganization'isaschool,collegeoruniversityand/orcharitablecorporation,accreditednongovernmentorganization,trustorphilanthropicorganizationand/orresearchinstitutionororganization,incorporatedasanonstockentity,payingnodividends,governedbytrusteeswhoreceivenocompensation,anddevotingallitsincome,whetherstudents'feesorgifts,donation,subsidiesorotherformsofphilanthropy,totheaccomplishmentandpromotionofthepurposesenumeratedinitsArticlesofIncorporation.

(B)IntheCaseofGiftsMadebyaNonresidentNotaCitizenofthePhilippines.‐

(1)GiftsmadetoorfortheuseoftheNationalGovernmentoranyentitycreatedbyanyofitsagencieswhichisnotconductedforprofit,ortoanypoliticalsubdivisionofthesaidGovernment.

(2)Giftsinfavorofaneducationaland/orcharitable,religious,culturalorsocialwelfarecorporation,institution,foundation,trustorphilanthropicorganizationorresearchinstitutionororganization:Provided,however,Thatnotmorethanthirtypercent(30%)ofsaidgiftsshallbeusedbysuchdoneeforadministrationpurposes.

(C)TaxCreditforDonor'sTaxesPaidtoaForeignCountry.‐

(1)InGeneral.‐ThetaximposedbythisTitleuponadonorwhowasacitizenoraresidentatthetimeofdonationshallbecreditedwiththeamountofanydonor'staxofanycharacteranddescriptionimposedbytheauthorityofaforeigncountry.

(2)LimitationsonCredit.‐TheamountofthecredittakenunderthisSectionshallbesubjecttoeachofthefollowinglimitations:

(a)Theamountofthecreditinrespecttothetaxpaidtoanycountryshallnotexceedthesameproportionofthetaxagainstwhichsuchcreditistaken,whichthenetgiftssituatedwithinsuchcountrytaxableunderthisTitlebearstohisentirenetgifts;and

(b)Thetotalamountofthecreditshallnotexceedthesameproportionofthetaxagainstwhichsuchcreditistaken,whichthedonor'snetgiftssituatedoutsidethePhilippinestaxableunderthistitlebearstohisentirenetgifts.

SEC.102.ValuationofGiftsMadeinProperty.‐Ifthegiftismadeinproperty,thefairmarketvaluethereofatthetimeofthegiftshallbeconsideredtheamountofthegift.Incaseofrealproperty,theprovisionsofSection88(B)shallapplytothevaluationthereof.

SEC.103.FilingofReturnandPaymentofTax.‐

(A)Requirements.‐anyindividualwhomakesanytransferbygift(exceptthosewhich,underSection101,areexemptfromthetaxprovidedforinthisChapter)shall,forthepurposeofthesaidtax,makeareturnunderoathinduplicate.Thereturnshallseforth:

(1)Eachgiftmadeduringthecalendaryearwhichistobeincludedincomputingnetgifts;

(2)Thedeductionsclaimedandallowable;

(3)Anypreviousnetgiftsmadeduringthesamecalendaryear;

(4)Thenameofthedonee;and

(5)Suchfurtherinformationasmayberequiredbyrulesandregulationsmadepursuanttolaw.

(B)TimeandPlaceofFilingandPayment.‐ThereturnofthedonorrequiredinthisSectionshallbefiledwithinthirty(30)daysafterthedatethegiftismadeandthetaxduethereonshallbepaidatthetimeoffiling.ExceptincaseswheretheCommissionerotherwisepermits,thereturnshallbefiledandthetaxpaidtoanauthorizedagentbank,theRevenueDistrictOfficer,RevenueCollectionOfficerordulyauthorizedTreasurerofthecityormunicipalitywherethedonorwasdomiciledatthetimeofthetransfer,oriftherebenolegalresidenceinthePhilippines,withtheOfficeoftheCommissioner.Inthecaseofgiftsmadebyanonresident,thereturnmaybefiledwiththePhilippineEmbassyorConsulateinthecountrywhereheisdomiciledatthetimeofthetransfer,ordirectlywiththeOfficeoftheCommissioner.

SEC.104.Definitions.‐ForpurposesofthisTitle,theterms"grossestate"and"gifts"includerealandpersonalproperty,whethertangibleorintangible,ormixed,whereversituated:Provided,however,Thatwherethedecedentordonorwasanonresidentalienatthetimeofhisdeathordonation,asthecasemaybe,hisrealandpersonalpropertysotransferredbutwhicharesituatedoutsidethePhilippinesshallnotbeincludedaspartofhis"grossestate"or"grossgift":Provided,further,ThatfranchisewhichmustbeexercisedinthePhilippines;shares,obligationsorbondsissuedbyanycorporationorsociedadanonimaorganizedorconstitutedinthePhilippinesinaccordancewithitslaws;shares,obligationsorbondsbyanyforeigncorporationeighty‐fivepercent(85%)ofthebusinessofwhichislocatedinthePhilippines;shares,obligationsorbondsissuedbyanyforeigncorporationifsuchshares,obligationsorbondshaveacquiredabusinesssitusinthePhilippines;sharesorrightsinanypartnership,businessorindustryestablishedinthePhilippines,shallbeconsideredassituatedinthePhilippines:Provided,stillfurther,thatnotaxshallbecollectedunderthisTitleinrespectofintangiblepersonalproperty:(a)ifthedecedentatthetimeofhisdeathorthedonoratthetimeofthedonationwasacitizenandresidentofaforeigncountrywhichatthetimeofhisdeathordonationdidnotimposeatransfertaxofanycharacter,inrespectofintangiblepersonalpropertyofcitizensofthePhilippinesnotresidinginthatforeigncountry,or(b)ifthelawsoftheforeigncountryofwhichthedecedentordonorwasacitizenandresidentatthetimeofhisdeathordonationallowsasimilarexemptionfromtransferordeathtaxesofeverycharacterordescriptioninrespectofintangiblepersonalpropertyownedbycitizensofthePhilippinesnotresidinginthatforeigncountry.

Theterm"deficiency"means:(a)theamountbywhichtaximposedbythisChapterexceedstheamountshownasthetaxbythedonoruponhisreturn;buttheamountsoshownonthereturnshallfirstbeincreasedbytheamountpreviouslyassessed(orcollectedwithoutassessment)asadeficiency,anddecreasedbytheamounts

previouslyabated,refundedorotherwiserepaidinrespectofsuchtax,or(b)ifnoamountisshownasthetaxbythedonor,thentheamountbywhichthetaxexceedstheamountspreviouslyassessed,(orcollectedwithoutassessment)asadeficiency,butsuchamountspreviouslyassessed,orcollectedwithoutassessment,shallfirstbedecreasedbytheamountpreviouslyabated,refundedorotherwiserepaidinrespectofsuchtax.

TITLEIV

VALUE‐ADDEDTAX

CHAPTERI

IMPOSITIONOFTAX

SEC.105.PersonsLiable.‐Anypersonwho,inthecourseoftradeorbusiness,sellsbarters,exchanges,leasesgoodsorproperties,rendersservices,andanypersonwhoimportsgoodsshallbesubjecttothevalue‐addedtax(VAT)imposedinSections106to108ofthisCode.

Thevalue‐addedtaxisanindirecttaxandtheamountoftaxmaybeshiftedorpassedontothebuyer,transfereeorlesseeofthegoods,propertiesorservices.Thisruleshalllikewiseapplytoexistingcontractsofsaleorleaseofgoods,propertiesorservicesatthetimeoftheeffectivityofRepublicActNo.7716.

Thephrase"inthecourseoftradeorbusiness"meanstheregularconductorpursuitofacommercialoraneconomicactivity,includingtransactionsincidentalthereto,byanypersonregardlessofwhetherornotthepersonengagedthereinisanonstock,nonprofitprivateorganization(irrespectiveofthedispositionofitsnetincomeandwhetherornotitsellsexclusivelytomembersortheirguests),orgovernmententity.

Theruleofregularity,tothecontrarynotwithstanding,servicesasdefinedinthisCoderenderedinthePhilippinesbynonresidentforeignpersonsshallbeconsideredasbeingcourseoftradeorbusiness.

SEC.106.Value‐AddedTaxonSaleofGoodsorProperties.‐

(A)RateandBaseofTax.‐Thereshallbelevied,assessedandcollectedoneverysale,barterorexchangeofgoodsorproperties,value‐addedtaxequivalenttotenpercent(10%)ofthegrosssellingpriceorgrossvalueinmoneyofthegoodsorpropertiessold,barteredorexchanged,suchtaxtobepaidbythesellerortransferor.

(1)Theterm"goods"or"properties"shallmeanalltangibleandintangibleobjectswhicharecapableofpecuniaryestimationandshallinclude:

(a)Realpropertiesheldprimarilyforsaletocustomersorheldforleaseintheordinarycourseoftradeorbusiness;

(b)Therightortheprivilegetousepatent,copyright,designormodel,plan,secretformulaorprocess,goodwill,trademark,tradebrandorotherlikepropertyorright;

(c)TherightortheprivilegetouseinthePhilippinesofanyindustrial,commercialorscientificequipment;

(d)Therightortheprivilegetousemotionpicturefilms,tapesanddiscs;and

(e)Radio,television,satellitetransmissionandcabletelevisiontime.

Theterm"grosssellingprice"meansthetotalamountofmoneyoritsequivalentwhichthepurchaserpaysorisobligatedtopaytothesellerinconsiderationofthesale,barterorexchangeofthegoodsorproperties,excludingthevalue‐addedtax.Theexcisetax,ifany,onsuchgoodsorpropertiesshallformpartofthegrosssellingprice.

(2)ThefollowingsalesbyVAT‐registeredpersonsshallbesubjecttozeropercent(0%)rate:

(a)ExportSales.‐Theterm"exportsales"means:

(1)ThesaleandactualshipmentofgoodsfromthePhilippinestoaforeigncountry,irrespectiveofanyshippingarrangementthatmaybeagreeduponwhichmayinfluenceordeterminethetransferofownershipofthegoodssoexportedandpaidforinacceptableforeigncurrencyoritsequivalentingoodsorservices,andaccountedforinaccordancewiththerulesandregulationsoftheBangkoSentralngPilipinas(BSP);

(2)Saleofrawmaterialsorpackagingmaterialstoanonresidentbuyerfordeliverytoaresidentlocalexport‐orientedenterprisetobeusedinmanufacturing,processing,packingorrepackinginthePhilippinesofthesaidbuyer'sgoodsandpaidforinacceptableforeigncurrencyandaccountedforinaccordancewiththerulesandregulationsoftheBangkoSentralngPilipinas(BSP);

(3)Saleofrawmaterialsorpackagingmaterialstoexport‐orientedenterprisewhoseexportsalesexceedseventypercent(70%)oftotalannualproduction;

(4)SaleofgoldtotheBangkoSentralngPilipinas(BSP);and

(5)ThoseconsideredexportsalesunderExecutiveOrderNO.226,otherwiseknownastheOmnibusInvestmentCodeof1987,andotherspeciallaws.

(b)ForeignCurrencyDenominatedSale.‐Thephrase"foreigncurrencydenominatedsale"meanssaletoanonresidentofgoods,exceptthosementionedinSections149and150,assembledormanufacturedinthePhilippinesfordeliverytoaresidentinthePhilippines,paidforinacceptableforeigncurrencyandaccountedforinaccordancewiththerulesandregulationsoftheBangkoSentralngPilipinas(BSP).

(c)SalestopersonsorentitieswhoseexemptionunderspeciallawsorinternationalagreementstowhichthePhilippinesisasignatoryeffectivelysubjectssuchsalestozerorate.

(B)TransactionsDeemedSale.‐Thefollowingtransactionsshallbedeemedsale:

(1)Transfer,useorconsumptionnotinthecourseofbusinessofgoodsorpropertiesoriginallyintendedforsaleorforuseinthecourseofbusiness;

(2)Distributionortransferto:

(a)ShareholdersorinvestorsasshareintheprofitsoftheVAT‐registeredpersons;or

(b)Creditorsinpaymentofdebt;

(3)Consignmentofgoodsifactualsaleisnotmadewithinsixty(60)daysfollowingthedatesuchgoodswereconsigned;and

(4)Retirementfromorcessationofbusiness,withrespecttoinventoriesoftaxablegoodsexistingasofsuchretirementorcessation.

(C)ChangesinorCessationofStatusofaVAT‐registeredPerson.‐ThetaximposedinSubsection(A)ofthisSectionshallalsoapplytogoodsdisposedoforexistingasofacertaindateifundercircumstancestobeprescribedinrulesandregulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,thestatusofapersonasaVAT‐registeredpersonchangesoristerminated.

(D)DeterminationoftheTax.‐

(1)Thetaxshallbecomputedbymultiplyingthetotalamountindicatedintheinvoicebyone‐eleventh(1/11).

(2)SalesReturns,AllowancesandSalesDiscounts.‐ThevalueofgoodsorpropertiessoldandsubsequentlyreturnedorforwhichallowancesweregrantedbyaVAT‐registeredpersonmaybedeductedfromthegrosssalesorreceiptsforthequarterinwhicharefundismadeoracreditmemorandumorrefundisissued.Salesdiscountgrantedandindicatedintheinvoiceatthetimeofsaleandthegrantofwhichdoesnotdependuponthehappeningofafutureeventmaybeexcludedfromthegrosssaleswithinthesamequarteritwasgiven.

(3)AuthorityoftheCommissionertoDeterminetheAppropriateTaxBase.‐TheCommissionershall,byrulesandregulationsprescribedbytheSecretaryofFinance,determinetheappropriatetaxbaseincaseswhereatransactionisdeemedasale,barterorexchangeofgoodsorpropertiesunderSubsection(B)hereof,orwherethegrosssellingpriceisunreasonablylowerthantheactualmarketvalue.

SEC.107.Value‐AddedTaxonImportationofGoods.‐

(A)InGeneral.‐Thereshallbelevied,assessedandcollectedoneveryimportationofgoodsavalue‐addedtaxequivalenttotenpercent(10%)basedonthetotalvalueusedbytheBureauofCustomsindeterminingtariffandcustomsdutiespluscustomsduties,excisetaxes,ifany,andothercharges,suchtaxtobepaidbytheimporterpriortothereleaseofsuchgoodsfromcustomscustody:Provided,Thatwherethecustomsdutiesaredeterminedonthebasisofthequantityorvolumeofthegoods,thevalue‐addedtaxshallbebasedonthelandedcostplusexcisetaxes,Ifany.

(B)TransferofGoodsbyTax‐ExemptPersons.‐Inthecaseoftax‐freeimportationofgoodsintothePhilippinesbypersons,entitiesoragenciesexemptfromtaxwheresuchgoodsaresubsequentlysold,transferredorexchangedinthePhilippinestonon‐exemptpersonsorentities,thepurchasers,transfereesorrecipientsshallbeconsideredtheimportersthereof,whoshallbeliableforanyinternalrevenuetaxonsuchimportation.Thetaxdueonsuchimportationshallconstitutealienonthegoodssuperiortoallchargesorliensonthegoods,irrespectiveofthepossessorthereof.

SEC.108.Value‐addedTaxonSaleofServicesandUseorLeaseofProperties.‐

(A)RateandBaseofTax.‐Thereshallbelevied,assessedandcollected,avalue‐addedtaxequivalenttotenpercent(10%)ofgrossreceiptsderivedfromthesaleorexchangeofservices,includingtheuseorleaseofproperties.

Thephrase"saleorexchangeofservices"meanstheperformanceofallkindsorservicesinthePhilippinesforothersforafee,remunerationorconsideration,includingthoseperformedorrenderedbyconstructionandservicecontractors;stock,realestate,commercial,customsandimmigrationbrokers;lessorsofproperty,whetherpersonalorreal;warehousingservices;lessorsordistributorsofcinematographicfilms;personsengagedinmillingprocessing,manufacturingorrepackinggoodsforothers;proprietors,operatorsorkeepersofhotels,motels,resthouses,pensionhouses,inns,resorts;proprietorsoroperatorsofrestaurants,refreshmentparlors,cafesandothereatingplaces,includingclubsandcaterers;dealersinsecurities;lendinginvestors;transportationcontractorsontheirtransportofgoodsorcargoes,includingpersonswhotransportgoodsorcargoesforhireanotherdomesticcommoncarriersbyland,airandwaterrelativetotheirtransportofgoodsorcargoes;servicesoffranchisegranteesoftelephoneandtelegraph,radioandtelevisionbroadcastingandallotherfranchisegranteesexceptthoseunderSection119ofthisCode;servicesofbanks,non‐bankfinancialintermediariesandfinancecompanies;andnon‐lifeinsurancecompanies(excepttheircropinsurances),includingsurety,fidelity,indemnityandbondingcompanies;andsimilarservicesregardlessofwhetherornottheperformancethereofcallsfortheexerciseoruseofthephysicalormentalfaculties.Thephrase'saleorexchangeofservices'shalllikewiseinclude:

(1)Theleaseortheuseofortherightorprivilegetouseanycopyright,patent,designormodel,plansecretformulaorprocess,goodwill,trademark,tradebrandorotherlikepropertyorright;

(2)Theleaseoftheuseof,ortherighttouseofanyindustrial,commercialorscientificequipment;

(3)Thesupplyofscientific,technical,industrialorcommercialknowledgeorinformation;

(4)Thesupplyofanyassistancethatisancillaryandsubsidiarytoandisfurnishedasameansofenablingtheapplicationorenjoymentofanysuchproperty,orrightasismentionedinsubparagraph(2)oranysuchknowledgeorinformationasismentionedinsubparagraph(3);

(5)Thesupplyofservicesbyanonresidentpersonorhisemployeeinconnectionwiththeuseofpropertyorrightsbelongingto,ortheinstallationoroperationofanybrand,machineryorotherapparatuspurchasedfromsuchnonresidentperson.

(6)Thesupplyoftechnicaladvice,assistanceorservicesrenderedinconnectionwithtechnicalmanagementoradministrationofanyscientific,industrialorcommercialundertaking,venture,projectorscheme;

(7)Theleaseofmotionpicturefilms,films,tapesanddiscs;and

(8)Theleaseortheuseofortherighttouseradio,television,satellitetransmissionandcabletelevisiontime.

LeaseofpropertiesshallbesubjecttothetaxhereinimposedirrespectiveoftheplacewherethecontractofleaseorlicensingagreementwasexecutedifthepropertyisleasedorusedinthePhilippines.

Theterm"grossreceipts"meansthetotalamountofmoneyoritsequivalentrepresentingthecontractprice,compensation,servicefee,rentalorroyalty,includingtheamountchargedformaterialssuppliedwiththeservicesanddepositsandadvancedpaymentsactuallyorconstructivelyreceivedduringthetaxablequarterfortheservicesperformedortobeperformedforanotherperson,excludingvalue‐addedtax.

(B)TransactionsSubjecttoZeroPercent(0%)Rate.‐ThefollowingservicesperformedinthePhilippinesbyVAT‐registeredpersonsshallbesubjecttozeropercent(0%)rate.

(1)Processing,manufacturingorrepackinggoodsforotherpersonsdoingbusinessoutsidethePhilippineswhichgoodsaresubsequentlyexported,wheretheservicesarepaidforinacceptableforeigncurrencyandaccountedforinaccordancewiththerulesandregulationsoftheBangkoSentralngPilipinas(BSP);

(2)Servicesotherthanthosementionedintheprecedingparagraph,theconsiderationforwhichispaidforinacceptableforeigncurrencyandaccountedforinaccordancewiththerulesandregulationsoftheBangkoSentralngPilipinas(BSP);

(3)ServicesrenderedtopersonsorentitieswhoseexemptionunderspeciallawsorinternationalagreementstowhichthePhilippinesisasignatoryeffectivelysubjectsthesupplyofsuchservicestozeropercent(0%)rate;

(4)Servicesrenderedtovesselsengagedexclusivelyininternationalshipping;and

(5)Servicesperformedbysubcontractorsand/orcontractorsinprocessing,converting,ofmanufacturinggoodsforanenterprisewhoseexportsalesexceedseventypercent(70%)oftotalannualproduction.

(C)DeterminationoftheTax.‐Thetaxshallbecomputedbymultiplyingthetotalamountindicatedintheofficialreceiptbyone‐eleventh(1/11).

SEC.109.ExemptTransactions.‐Thefollowingshallbeexemptfromthevalue‐addedtax:

(a)Saleofnonfoodagriculturalproducts;marineandforestproductsintheiroriginalstatebytheprimaryproducerortheownerofthelandwherethesameareproduced;

(b)Saleofcottonseedsintheiroriginalstate;andcopra;

(c)Saleorimportationofagriculturalandmarinefoodproductsintheiroriginalstate,livestockandpoultryoforkinggenerallyusedas,oryieldingorproducingfoodsforhumanconsumption;andbreedingstockandgeneticmaterialstherefor.

Productsclassifiedunderthisparagraphandparagraph(a)shallbeconsideredintheiroriginalstateeveniftheyhaveundergonethesimpleprocessesofpreparationorpreservationforthemarket,suchasfreezing,drying,salting,broiling,roasting,smokingorstripping.

Polishedand/orhuskedrice,corngrits,rawcanesugarandmolasses,andordinarysaltshallbeconsideredintheiroriginalstate;

(d)Saleorimportationoffertilizers;seeds,seedlingsandfingerlings;fish,prawn,livestockandpoultryfeeds,includingingredients,whetherlocallyproducedorimported,usedinthemanufactureoffinishedfeeds(exceptspecialtyfeedsforracehorses,fightingcocks,aquariumfish,zooanimalsandotheranimalsgenerallyconsideredaspets);

(e)Saleorimportationofcoalandnaturalgas,inwhateverformorstate,andpetroleumproducts(exceptlubricatingoil,processedgas,grease,waxandpetrolatum)subjecttoexcisetaximposedunderTitleVI;

(f)Saleorimportationofrawmaterialstobeusedbythebuyerorimporterhimselfinthemanufactureofpetroleumproductssubjecttoexcisetax,exceptlubricatingoil,processedgas,grease,waxandpetrolatum;

(g)Importationofpassengerand/orcargovesselsofmorethanfivethousandtons(5,000)whethercoastwiseorocean‐going,includingengineandsparepartsofsaidvesseltobeusedbytheimporterhimselfasoperatorthereof;

(h)ImportationofpersonalandhouseholdeffectsbelongingtotheresidentsofthePhilippinesreturningfromabroadandnonresidentcitizenscomingtoresettleinthePhilippines:Provided,ThatsuchgoodsareexemptfromcustomsdutiesundertheTariffandCustomsCodeofthePhilippines;

(i)Importationofprofessionalinstrumentsandimplements,wearingapparel,domesticanimals,andpersonalhouseholdeffects(exceptanyvehicle,vessel,aircraft,machineryothergoodsforuseinthemanufactureandmerchandiseofanykindincommercialquantity)belongingtopersonscomingtosettleinthePhilippines,fortheirownuseandnotforsale,barterorexchange,accompanyingsuchpersons,orarrivingwithinninety(90)daysbeforeoraftertheirarrival,upontheproductionofevidencesatisfactorytotheCommissioner,thatsuchpersonsareactuallycomingtosettleinthePhilippinesandthatthechangeofresidenceisbonafide;

(j)ServicessubjecttopercentagetaxunderTitleV;

(k)Servicesbyagriculturalcontractgrowersandmillingforothersofpalayintorice,cornintogritsandsugarcaneintorawsugar;

(l)Medical,dental,hospitalandveterinaryservicessubjecttotheprovisionsofSection17ofRepublicActNo.7716,asamended:

(m)Educationalservicesrenderedbyprivateeducationalinstitutions,dulyaccreditedbytheDepartmentofEducation,CultureandSports(DECS)andtheCommissiononHigherEducation(CHED),andthoserenderedbygovernmenteducationalinstitutions;

(n)Salebytheartisthimselfofhisworksofart,literaryworks,musicalcompositionsandsimilarcreations,orhisservicesperformedfortheproductionofsuchworks;

(o)Servicesrenderedbyindividualspursuanttoanemployer‐employeerelationship;

(p)ServicesrenderedbyregionalorareaheadquartersestablishedinthePhilippinesbymultinationalcorporationswhichactassupervisory,communicationsandcoordinatingcentersfortheiraffiliates,subsidiariesorbranchesintheAsia‐PacificRegionanddonotearnorderiveincomefromthePhilippines;

(q)TransactionswhichareexemptunderinternationalagreementstowhichthePhilippinesisasignatoryorunderspeciallaws,exceptthoseunderPresidentialDecreeNos.66,529and1590;

(r)SalesbyagriculturalcooperativesdulyregisteredwiththeCooperativeDevelopmentAuthoritytotheirmembersaswellassaleoftheirproduce,whetherinitsoriginalstateorprocessedform,tonon‐members;theirimportationofdirectfarminputs,machineriesandequipment,includingsparepartsthereof,tobeuseddirectlyandexclusivelyintheproductionand/orprocessingoftheirproduce;

(s)SalesbyelectriccooperativesdulyregisteredwiththeCooperativeDevelopmentauthorityorNationalElectrificationAdministration,relativetothegenerationanddistributionofelectricityaswellastheirimportationofmachineriesandequipment,includingspareparts,whichshallbedirectlyusedinthegenerationanddistributionofelectricity;

(t)Grossreceiptsfromlendingactivitiesbycreditormulti‐purposecooperativesdulyregisteredwiththeCooperativeDevelopmentAuthoritywhoselendingoperationislimitedtotheirmembers;

(u)Salesbynon‐agricultural,non‐electricandnon‐creditcooperativesdulyregisteredwiththeCooperativeDevelopmentAuthority:Provided,ThatthesharecapitalcontributionofeachmemberdoesnotexceedFifteenthousandpesos(P15,000)andregardlessoftheaggregatecapitalandnetsurplusratablydistributedamongthemembers;

(v)ExportsalesbypersonswhoarenotVAT‐registered;

(w)Saleofrealpropertiesnotprimarilyheldforsaletocustomersorheldforleaseintheordinarycourseoftradeorbusinessorrealpropertyutilizedforlow‐costandsocializedhousingasdefinedbyRepublicActNo.7279,otherwiseknownastheUrbanDevelopmentandHousingActof1992,andotherrelatedlaws,houseandlotandotherresidentialdwellingsvaluedatOnemillionpesos(P1,000,000)andbelow:Provided,ThatnotlaterthanJanuary31stofthecalendaryearsubsequenttotheeffectivityofthisActandeachcalendaryearthereafter,the

amountofOnemillionpesos(P1,000,000)shallbeadjustedtoitspresentvalueusingtheConsumerPriceIndex,aspublishedbythenationalStatisticsOffice(NSO);

(x)LeaseofaresidentialunitwithamonthlyrentalnotexceedingEightthousandpesos(P8,000);Provided,ThatnotlaterthanJanuary31stofthecalendaryearsubsequenttotheeffectivityofRepublicActNo.8241andeachcalendaryearthereafter,theamountofEightthousandpesos(P8,000)shallbeadjustedtoitspresentvalueusingtheConsumerPriceIndexaspublishedbytheNationalStatisticsOffice(NS0);

(y)Sale,importation,printingorpublicationofbooksandanynewspaper,magazinerevieworbulletinwhichappearsatregularintervalswithfixedpricesforsubscriptionandsaleandwhichisnotdevotedprincipallytothepublicationofpaidadvertisements;and

(z)Saleorleaseofgoodsorpropertiesortheperformanceofservicesotherthanthetransactionsmentionedintheprecedingparagraphs,thegrossannualsalesand/orreceiptsdonotexceedtheamountofFivehundredfiftythousandpesos(P550,000):Provided,ThatnotlaterthanJanuary31stofthecalendaryearsubsequenttotheeffectivityofRepublicActNo.8241andeachcalendaryearthereafter,theamountofFivehundredfiftythousandpesos(550,000)shallbeadjustedtoitspresentvalueusingtheConsumerPriceIndex,aspublishedbytheNationalStatisticsOffice(NSO).

Theforegoingexemptionstothecontrarynotwithstanding,anypersonwhosesaleofgoodsorpropertiesorserviceswhichareotherwisenotsubjecttoVAT,butwhoissuesaVATinvoiceorreceiptthereforshall,inadditiontohisliabilitytootherapplicablepercentagetax,ifany,beliabletothetaximposedinSection106or108withoutthebenefitofinputtaxcredit,andsuchtaxshallalsoberecognizedasinputtaxcredittothepurchaserunderSection110,allofthisCode.

SEC.110.TaxCredits.‐

(A)CreditableInputTax.‐

(1)AnyinputtaxevidencedbyaVATinvoiceorofficialreceiptissuedinaccordancewithSection113hereofonthefollowingtransactionsshallbecreditableagainsttheoutputtax:

(a)Purchaseorimportationofgoods:

(i)Forsale;or

(ii)Forconversionintoorintendedtoformpartofafinishedproductforsaleincludingpackagingmaterials;or

(iii)Foruseassuppliesinthecourseofbusiness;or

(iv)Foruseasmaterialssuppliedinthesaleofservice;or

(v)ForuseintradeorbusinessforwhichdeductionfordepreciationoramortizationisallowedunderthisCode,exceptautomobiles,aircraftandyachts.

(b)Purchaseofservicesonwhichavalue‐addedtaxhasbeenactuallypaid.

(2)Theinputtaxondomesticpurchaseofgoodsorpropertiesshallbecreditable:

(a)Tothepurchaseruponconsummationofsaleandonimportationofgoodsorproperties;and

(b)Totheimporteruponpaymentofthevalue‐addedtaxpriortothereleaseofthegoodsfromthecustodyoftheBureauofCustoms.

However,inthecaseofpurchaseofservices,leaseoruseofproperties,theinputtaxshallbecreditabletothepurchaser,lesseeorlicenseeuponpaymentofthecompensation,rental,royaltyorfee.

(3)AVAT‐registeredpersonwhoisalsoengagedintransactionsnotsubjecttothevalue‐addedtaxshallbeallowedtaxcreditasfollows:

(a)Totalinputtaxwhichcanbedirectlyattributedtotransactionssubjecttovalue‐addedtax;and

(b)Aratableportionofanyinputtaxwhichcannotbedirectlyattributedtoeitheractivity.

Theterm"inputtax"meansthevalue‐addedtaxduefromorpaidbyaVAT‐registeredpersoninthecourseofhistradeorbusinessonimportationofgoodsorlocalpurchaseofgoodsorservices,includingleaseoruseofproperty,fromaVAT‐registeredperson.ItshallalsoincludethetransitionalinputtaxdeterminedinaccordancewithSection111ofthisCode.

Theterm"outputtax"meansthevalue‐addedtaxdueonthesaleorleaseoftaxablegoodsorpropertiesorservicesbyanypersonregisteredorrequiredtoregisterunderSection236ofthisCode.

(B)ExcessOutputorInputTax.‐Ifattheendofanytaxablequartertheoutputtaxexceedstheinputtax,theexcessshallbepaidbytheVAT‐registeredperson.Iftheinputtaxexceedstheoutputtax,theexcessshallbecarriedovertothesucceedingquarterorquarters.anyinputtaxattributabletothepurchaseofcapitalgoodsortozero‐ratedsalesbyaVAT‐registeredpersonmayathisoptionberefundedorcreditedagainstotherinternalrevenuetaxes,subjecttotheprovisionsofSection112.

(C)DeterminationofCreditableInputTax.‐ThesumoftheexcessinputtaxcarriedoverfromtheprecedingmonthorquarterandtheinputtaxcreditabletoaVAT‐registeredpersonduringthetaxablemonthorquartershallbereducedbytheamountofclaimforrefundortaxcreditforvalue‐addedtaxandotheradjustments,suchaspurchasereturnsorallowancesandinputtaxattributabletoexemptsale.

TheclaimfortaxcreditreferredtointheforegoingparagraphshallincludenotonlythosefiledwiththeBureauofInternalRevenuebutalsothosefiledwithothergovernmentagencies,suchastheBoardofInvestmentstheBureauofCustoms.

SEC.111.Transitional/PresumptiveInputTaxCredits.‐

(A)TransitionalInputTaxCredits.‐Apersonwhobecomesliabletovalue‐addedtaxoranypersonwhoelectstobeaVAT‐registeredpersonshall,subjecttothefilingofaninventoryaccordingtorulesandregulationsprescribedbytheSecretaryoffinance,uponrecommendationoftheCommissioner,beallowedinputtaxonhisbeginninginventoryofgoods,materialsandsuppliesequivalentforeightpercent(8%)ofthevalueofsuchinventoryortheactualvalue‐addedtaxpaidonsuchgoods,materialsandsupplies,whicheverishigher,whichshallbecreditableagainsttheoutputtax.

(B)PresumptiveInputTaxCredits.‐

(1)Personsorfirmsengagedintheprocessingofsardines,mackerelandmilk,andinmanufacturingrefinedsugarandcookingoil,shallbeallowedapresumptiveinputtax,creditableagainsttheoutputtax,equivalenttooneandone‐halfpercent(11/2%)ofthegrossvalueinmoneyoftheirpurchasesofprimaryagriculturalproductswhichareusedasinputstotheirproduction.

AsusedinthisSubsection,theterm"processing"shallmeanpasteurization,canningandactivitieswhichthroughphysicalorchemicalprocessaltertheexteriortextureorformorinnersubstanceofaproductinsuchmannerastoprepareitforspecialusetowhichitcouldnothavebeenputinitsoriginalformorcondition.

(2)Publicworkscontractorsshallbeallowedapresumptiveinputtaxequivalenttooneandone‐halfpercent(11/2%)ofthecontractpricewithrespecttogovernmentcontractsonlyinlieuofactualinputtaxestherefrom.

SEC.112.RefundsorTaxCreditsofInputTax.‐

(A)Zero‐RatedorEffectivelyZero‐RatedSales.‐anyVAT‐registeredperson,whosesalesarezero‐ratedoreffectivelyzero‐ratedmay,withintwo(2)yearsafterthecloseofthetaxablequarterwhenthesalesweremade,applyfortheissuanceofataxcreditcertificateorrefundofcreditableinputtaxdueorpaidattributabletosuchsales,excepttransitionalinputtax,totheextentthatsuchinputtaxhasnotbeenappliedagainstoutputtax:Provided,however,Thatinthecaseofzero‐ratedsalesunderSection106(A)(2)(a)(1),(2)and(B)andSection108(B)(1)and(2),the

acceptableforeigncurrencyexchangeproceedsthereofhadbeendulyaccountedforinaccordancewiththerulesandregulationsoftheBangkoSentralngPilipinas(BSP):Provided,further,Thatwherethetaxpayerisengagedinzero‐ratedoreffectivelyzero‐ratedsaleandalsointaxableorexemptsaleofgoodsofpropertiesorservices,andtheamountofcreditableinputtaxdueorpaidcannotbedirectlyandentirelyattributedtoanyoneofthetransactions,itshallbeallocatedproportionatelyonthebasisofthevolumeofsales.

(B)CapitalGoods.‐AVAT‐registeredpersonmayapplyfortheissuanceofataxcreditcertificateorrefundofinputtaxespaidoncapitalgoodsimportedorlocallypurchased,totheextentthatsuchinputtaxeshavenotbeenappliedagainstoutputtaxes.Theapplicationmaybemadeonlywithintwo(2)yearsafterthecloseofthetaxablequarterwhentheimportationorpurchasewasmade.

(C)CancellationofVATRegistration.‐Apersonwhoseregistrationhasbeencancelledduetoretirementfromorcessationofbusiness,orduetochangesinorcessationofstatusunderSection106(C)ofthisCodemay,withintwo(2)yearsfromthedateofcancellation,applyfortheissuanceofataxcreditcertificateforanyunusedinputtaxwhichmaybeusedinpaymentofhisotherinternalrevenuetaxes.

(D)PeriodWithinWhichRefundorTaxCreditofInputTaxesShallbeMade.‐Inpropercases,theCommissionershallgrantarefundorissuethetaxcreditcertificateforcreditableinputtaxeswithinonehundredtwenty(120)daysfromthedateofsubmissionofcompetedocumentsinsupportoftheapplicationfiledinaccordancewithSubsections(A)and(B)hereof.

Incaseoffullorpartialdenialoftheclaimfortaxrefundortaxcredit,orthefailureonthepartoftheCommissionertoactontheapplicationwithintheperiodprescribedabove,thetaxpayeraffectedmay,withinthirty(30)daysfromthereceiptofthedecisiondenyingtheclaimoraftertheexpirationoftheonehundredtwentyday‐period,appealthedecisionortheunactedclaimwiththeCourtofTaxAppeals.‐

(E)MannerofGivingRefund.‐RefundsshallbemadeuponwarrantsdrawnbytheCommissionerorbyhisdulyauthorizedrepresentativewithoutthenecessityofbeingcountersignedbytheChairman,Commissiononaudit,theprovisionsoftheAdministrativeCodeof1987tothecontrarynotwithstanding:Provided,ThatrefundsunderthisparagraphshallbesubjecttopostauditbytheCommissiononAudit.

CHAPTERII

COMPLIANCEREQUIREMENTS

SEC.113.InvoicingandAccountingRequirementsforVAT‐RegisteredPersons.‐

(A)InvoicingRequirements.‐AVAT‐registeredpersonshall,foreverysale,issueaninvoiceorreceipt.InadditiontotheinformationrequiredunderSection237,thefollowinginformationshallbeindicatedintheinvoiceorreceipt:

(1)AstatementthatthesellerisaVAT‐registeredperson,followedbyhistaxpayer'sidentificationnumber(TIN);and

(2)Thetotalamountwhichthepurchaserpaysorisobligatedtopaytothesellerwiththeindicationthatsuchamountincludesthevalue‐addedtax.

(B)AccountingRequirements.‐NotwithstandingtheprovisionsofSection233,allpersonssubjecttothevalue‐addedtaxunderSections106and108shall,inadditiontotheregularaccountingrecordsrequired,maintainasubsidiarysalesjournalandsubsidiarypurchasejournalonwhichthedailysalesandpurchasesarerecorded.ThesubsidiaryjournalsshallcontainsuchinformationasmayberequiredbytheSecretaryofFinance.

SEC.114.ReturnandPaymentofValue‐AddedTax.‐

(A)InGeneral.‐Everypersonliabletopaythevalue‐addedtaximposedunderthisTitleshallfileaquarterlyreturnoftheamountofhisgrosssalesorreceiptswithintwenty‐five(25)daysfollowingthecloseofeachtaxablequarterprescribedforeachtaxpayer:Provided,however,ThatVAT‐registeredpersonsshallpaythevalue‐addedtaxonamonthlybasis.

Anyperson,whoseregistrationhasbeencancelledinaccordancewithSection236,shallfileareturnandpaythetaxduethereonwithintwenty‐five(25)daysfromthedateofcancellationofregistration:Provided,Thatonlyoneconsolidatedreturnshallbefiledbythetaxpayerforhisprincipalplaceofbusinessorheadofficeandallbranches.

(B)WheretoFiletheReturnandPaytheTax.‐ExceptastheCommissionerotherwisepermits,thereturnshallbefiledwithandthetaxpaidtoanauthorizedagentbank,RevenueCollectionOfficerordulyauthorizedcityormunicipalTreasurerinthePhilippineslocatedwithintherevenuedistrictwherethetaxpayerisregisteredorrequiredtoregister.

(C)WithholdingofCreditableValue‐AddedTax.‐TheGovernmentoranyofitspoliticalsubdivisions,instrumentalitiesoragencies,includinggovernment‐ownedor‐controlledcorporations(GOCCs)shall,beforemakingpaymentonaccountofeachpurchaseofgoodsfromsellersandservicesrenderedbycontractorswhicharesubjecttothevalue‐addedtaximposedinSections106and108ofthisCode,deductandwithholdthevalue‐addedtaxdueattherateofthreepercent(3%)ofthegrosspaymentforthepurchaseofgoodsandsixpercent(6%)ongrossreceiptsforservicesrenderedbycontractorsoneverysaleorinstallmentpaymentwhichshallbecreditableagainstthevalue‐addedtaxliabilityofthesellerorcontractor:Provided,however,Thatinthecaseofgovernmentpublicworkscontractors,thewithholdingrateshallbeeightandone‐halfpercent(8.5%):Provided,further,Thatthepaymentforleaseoruseofpropertiesorpropertyrightstononresidentownersshallbesubjecttotenpercent(10%)withholdingtaxatthetimeofpayment.Forthispurpose,thepayororpersonincontrolofthepaymentshallbeconsideredasthewithholdingagent.

Thevalue‐addedtaxwithheldunderthisSectionshallberemittedwithinten(10)daysfollowingtheendofthemonththewithholdingwasmade.

SEC.115.PoweroftheCommissionertoSuspendtheBusinessOperationsofaTaxpayer.‐TheCommissionerorhisauthorizedrepresentativeisherebyempoweredtosuspendthebusinessoperationsandtemporarilyclosethebusinessestablishmentofanypersonforanyofthefollowingviolations:

(a)InthecaseofaVAT‐registeredPerson.‐

(1)Failuretoissuereceiptsorinvoices;

(2)Failuretofileavalue‐addedtaxreturnasrequiredunderSection114;or

(3)Understatementoftaxablesalesorreceiptsbythirtypercent(30%)ormoreofhiscorrecttaxablesalesorreceiptsforthetaxablequarter.

(b)FailureofanyPersontoRegisterasRequiredunderSection236.‐

Thetemporaryclosureoftheestablishmentshallbeforthedurationofnotlessthanfive(5)daysandshallbeliftedonlyuponcompliancewithwhateverrequirementsprescribedbytheCommissionerintheclosureorder.

TITLEV

OTHERPERCENTAGETAXES

SEC.116.TaxonPersonsExemptFromValue‐AddedTax(VAT).‐AnypersonwhosesalesorreceiptsareexemptunderSection109(z)ofthisCodefromthepaymentofvalue‐addedtaxandwhoisnotaVAT‐registeredpersonshallpayataxequivalenttothreepercent(3%)ofhisgrossquarterlysalesorreceipts:Provided,Thatcooperativesshallbeexemptfromthethreepercent(3%)grossreceiptstaxhereinimposed.

SEC.117.PercentageTaxonDomesticCarriersandKeepersofGarages.‐Carsforrentorhiredrivenbythelessee,transportationcontractors,includingpersonswhotransportpassengersforhire,andotherdomesticcarriersbyland,airorwater,forthetransportofpassengers,exceptownersofbancasandownerofanimal‐drawntwowheeledvehicle,andkeepersofgaragesshallpayataxequivalenttothreepercent(3%)oftheirquarterlygrossreceipts.

ThegrossreceiptsofcommoncarriersderivedfromtheirincomingandoutgoingfreightshallnotbesubjectedtothelocaltaxesimposedunderRepublicActNo.7160,otherwiseknownastheLocalGovernmentCodeof1991.

IncomputingthepercentagetaxprovidedinthisSection,thefollowingshallbeconsideredtheminimumquarterlygrossreceiptsineachparticularcase:

Jeepneyforhire‐

1.ManilaandothercitiesP2,400

2.Provincial1,200

Publicutilitybus‐

Notexceeding30passengers3,600

Exceeding30butnotexceeding50passengers6,000

Exceeding50passengers7,200

Taxis‐

1.ManilaandothercitiesP3,600

2.Provincial2,400

Carforhire(withchauffer)3,000

Carforhire(withoutchauffer)1,800

SEC.118.PercentageTaxonInternationalCarriers.‐

(A)InternationalaircarriersdoingbusinessinthePhilippinesshallpayataxofthreepercent(3%)oftheirquarterlygrossreceipts.

(B)InternationalshippingcarriersdoingbusinessinthePhilippinesshallpayataxequivalenttothreepercent(3%)oftheirquarterlygrossreceipts.

SEC.119.TaxonFranchises.‐Anyprovisionofgeneralorspeciallawtothecontrarynotwithstanding,thereshallbelevied,assessedandcollectedinrespecttoallfranchisesonradioand/ortelevisionbroadcastingcompanieswhoseannualgrossreceiptsoftheprecedingyeardoesnotexceedTenmillionpesos(P10,000.00),subjecttoSection236ofthisCode,ataxofthreepercent(3%)andonelectric,gasandwaterutilities,ataxoftwopercent(2%)onthegrossreceiptsderivedfromthebusinesscoveredbythelawgrantingthefranchise:Provided,however,ThatradioandtelevisionbroadcastingcompaniesreferredtointhisSectionshallhaveanoptiontoberegisteredasavalue‐addedtaxpayerandpaythetaxduethereon:Provided,further,Thatoncetheoptionisexercised,itshallnotberevoked.

Thegranteeshallfilethereturnwith,andpaythetaxduethereontotheCommissionerorhisdulyauthorizedrepresentative,inaccordancewiththeprovisionsofSection128ofthisCode,andthereturnshallbesubjecttoauditbytheBureauofInternalRevenue,anyprovisionofanyexistinglawtothecontrarynotwithstanding.

SEC.120.TaxonOverseasDispatch,MessageorConversationOriginatingfromthePhilippines.‐

(A)PersonsLiable.‐Thereshallbecollecteduponeveryoverseasdispatch,messageorconversationtransmittedfromthePhilippinesbytelephone,telegraph,telewriterexchange,wirelessandothercommunicationequipmentservice,ataxoftenpercent(10%)ontheamountpaidforsuchservices.ThetaximposedinthisSectionshallbepayablebythepersonpayingfortheservicesrenderedandshallbepaidtothepersonrenderingtheserviceswhoisrequiredtocollectandpaythetaxwithintwenty(20)daysaftertheendofeachquarter.

(B)Exemptions.‐ThetaximposedbythisSectionshallnotapplyto:

(1)Government.‐AmountspaidformessagestransmittedbytheGovernmentoftheRepublicofthePhilippinesoranyofitspoliticalsubdivisionsorinstrumentalities;

(2)DiplomaticServices.‐Amountspaidformessagestransmittedbyanyembassyandconsularofficesofaforeigngovernment;

(3)InternationalOrganizations.‐AmountspaidformessagestransmittedbyapublicinternationalorganizationoranyofitsagenciesbasedinthePhilippinesenjoyingprivileges,exemptionsandimmunitieswhichtheGovernmentofthePhilippinesiscommittedtorecognizepursuanttoaninternationalagreement;and

(4)NewsServices.‐Amountspaidformessagesfromanynewspaper,pressassociation,radioortelevisionnewspaper,broadcastingagency,ornewstickersservices,toanyothernewspaper,pressassociation,radioortelevisionnewspaperbroadcastingagency,ornewstickerserviceortoabonafidecorrespondent,whichmessagesdealexclusivelywiththecollectionofnewsitemsfor,orthedisseminationofnewsitemthrough,publicpress,radioortelevisionbroadcastingoranewstickerservicefurnishingageneralnewsservicesimilartothatofthepublicpress.

SEC.121.TaxonBanksandNon‐BankFinancialIntermediaries.‐ThereshallbeacollectedtaxongrossreceiptsderivedfromsourceswithinthePhilippinesbyallbanksandnon‐bankfinancialintermediariesinaccordancewiththefollowingschedule:

(a)Oninterest,commissionsanddiscountsfromlendingactivitiesaswellasincomefromfinancialleasing,onthebasisofremainingmaturitiesofinstrumentsfromwhichsuchreceiptsarederived:

Short‐termmaturity(noninexcessoftwo(2)years)5%

Medium‐termmaturity(overtwo(2)yearsbut

notexceedingfour(4)years)3%

Long‐termmaturity‐

(1)Overfour(4)yearsbutnotexceedingseven(7)years1%

(2)Overseven(7)years0%

(b)Ondividends0%

(c)Onroyalties,rentalsofproperty,realorpersonal,profits,

fromexchangeandallotheritemstreatedasgrossincome

underSection32ofthisCode5%

Provided,however,Thatincasethematurityperiodreferredtoinparagraph(a)isshortenedthrupretermination,thenthematurityperiodshallbereckonedtoendasofthedateofpreterminationforpurposesofclassifyingthetransactionasshort,mediumorlong‐termandthecorrectrateoftaxshallbeappliedaccordingly.

NothinginthisCodeshallprecludetheCommissionerfromimposingthesametaxhereinprovidedonpersonsperformingsimilarbankingactivities.

SEC.122.TaxonFinanceCompanies.‐Thereshallbecollectedataxoffivepercent(5%)onthegrossreceiptsderivedbyallfinancecompanies,aswellasbyotherfinancialintermediariesnotperformingquasi‐bankingfunctionsdongbusinessinthePhilippines,frominterest,discountsandallotheritemstreatedasgrossincomeunderthisCode:Provided,Thatinterests,commissionsanddiscountsfromlendingactivities,aswellasincomefromfinancialleasing,shallbetaxedonthebasisoftheremainingmaturitiesoftheinstrumentsfromwhichsuchreceiptsarederived,inaccordancewiththefollowingschedule:

Short‐termmaturity(noninexcessoftwo(2)years)5%

Medium‐termmaturity(overtwo(2)years

butnotexceedingfour(4)years)3%

Long‐termmaturity‐

(1)Overfour(4)yearsbutnotexceedingseven(7)1%

(2)Overseven(7)years0%

Provided,however,Thatincasethematurityperiodisshortenedthrupretermination,thenthematurityperiodshallbereckonedtoendasofthedateofpreterminationforpurposesofclassifyingthetransactionasshort,mediumorlong‐termandthecorrectrateoftaxshallbeappliedaccordingly.

NothinginthisCodeshallprecludetheCommissionerfromimposingthesametaxhereinprovidedonpersonsperformingsimilarfinancingactivities.

SEC.123.TaxonLifeInsurancePremiums.‐Thereshallbecollectedfromeveryperson,companyorcorporation(exceptpurelycooperativecompaniesorassociations)doinglifeinsurancebusinessofanysortinthePhilippinesataxoffivepercent(5%)ofthetotalpremiumcollected,whethersuchpremiumsarepaidinmoney,notes,creditsoranysubstituteformoney;butpremiumsrefundedwithinsix(6)monthsafterpaymentonaccountofrejectionofriskorreturnedforotherreasontoapersoninsuredshallnotbeincludedinthetaxablereceipts;norshallanytaxbepaiduponreinsurancebyacompanythathasalreadypaidthetax;norupondoingbusinessoutsidethePhilippinesonaccountofanylifeinsuranceoftheinsuredwhoisanonresident,ifanytaxonsuchpremiumisimposedbytheforeigncountrywherethebranchisestablishednoruponpremiumscollectedorreceived

onaccountofanyreinsurance,iftheinsured,incaseofpersonalinsurance,residesoutsidethePhilippines,ifanytaxonsuchpremiumsisimposedbytheforeigncountrywheretheoriginalinsurancehasbeenissuedorperfected;noruponthatportionofthepremiumscollectedorreceivedbytheinsurancecompaniesonvariablecontracts(asdefinedinsection232(2)ofPresidentialDecreeNo.612),inexcessoftheamountsnecessarytoinsurethelivesofthevariablecontractworkers.

Cooperativecompaniesorassociationsaresuchasareconductedbythemembersthereofwiththemoneycollectedfromamongthemselvesandsolelyfortheirownprotectionandnotforprofit.

SEC.124.TaxonAgentsofForeignInsuranceCompanies.‐Everyfire,marineormiscellaneousinsuranceagentauthorizedundertheInsuranceCodetoprocurepoliciesofinsuranceashemayhavepreviouslybeenlegallyauthorizedtotransactonriskslocatedinthePhilippinesforcompaniesnotauthorizedtotransactbusinessinthePhilippinesshallpayataxequaltotwicethetaximposedinSection123:Provided,ThattheprovisionofthisSectionshallnotapplytoreinsurance:Provided,however,ThattheprovisionsofthisSectionshallnotaffecttherightofanownerofpropertytoapplyforandobtainforhimselfpoliciesinforeigncompaniesincaseswheresaidownerdoesnotmakeuseoftheservicesofanyagent,companyorcorporationresidingordoingbusinessinthePhilippines.Inallcaseswhereownersofpropertyobtaininsurancedirectlywithforeigncompanies,itshallbethedutyofsaidownerstoreporttotheInsuranceCommissionerandtotheCommissionereachcasewhereinsurancehasbeensoeffected,andshallpaythetaxoffivepercent(5%)onpremiumspaid,inthemannerrequiredbySection123.

SEC.125.AmusementTaxes.‐Thereshallbecollectedfromtheproprietor,lesseeoroperatorofcockpits,cabarets,nightordayclubs,boxingexhibitions,professionalbasketballgames,Jai‐Alaiandracetracks,ataxequivalentto:

(a)Eighteenpercent(18%)inthecaseofcockpits;

(b)Eighteenpercent(18%)inthecaseofcabarets,nightordayclubs;

(c)Tenpercent(10%)inthecaseofboxingexhibitions:Provided,however,ThatboxingexhibitionswhereinWorldorOrientalChampionshipsinanydivisionisatstakeshallbeexemptfromamusementtax:Provided,further,Thatatleastoneof

thecontendersforWorldorOrientalChampionshipisacitizenofthePhilippinesandsaidexhibitionsarepromotedbyacitizen/softhePhilippinesorbyacorporationorassociationatleastsixtypercent(60%)ofthecapitalofwhichisownedbysuchcitizens;

(d)Fifteenpercent(15%)inthecaseofprofessionalbasketballgamesasenvisionedinPresidentialDecreeNo.871:Provided,however,Thatthetaxhereinshallbeinlieuofallotherpercentagetaxesofwhatevernatureanddescription;and

(e)Thirtypercent(30%)inthecaseofJai‐Alaiandracetracksoftheirgrossreceipts,irrespective,ofwhetherornotanyamountischargedforadmission.

Forthepurposeoftheamusementtax,theterm"grossreceipts"embracesallthereceiptsoftheproprietor,lesseeoroperatoroftheamusementplace.Saidgrossreceiptsalsoincludeincomefromtelevision,radioandmotionpicturerights,ifany.Apersonorentityorassociationconductinganyactivitysubjecttothetaxhereinimposedshallbesimilarlyliableforsaidtaxwithrespecttosuchportionofthereceiptsderivedbyhimorit.

Thetaxesimposedhereinshallbepayableattheendofeachquarteranditshallbethedutyoftheproprietor,lesseeoroperatorconcerned,aswellasanypartyliable,withintwenty(20)daysaftertheendofeachquarter,tomakeatrueandcompletereturnoftheamountofthegrossreceiptsderivedduringtheprecedingquarterandpaythetaxduethereon.

SEC.126.TaxonWinnings.‐Everypersonwhowinsinhorseracesshallpayataxequivalenttotenpercent(10%)ofhiswinningsor'dividends',thetaxtobebasedontheactualamountpaidtohimforeverywinningticketafterdeductingthecostoftheticket:Provided,Thatinthecaseofwinningsfromdouble,forecast/quinellaandtrifectabets,thetaxshallbefourpercent(4%).Inthecaseofownersofwinningracehorses,thetaxshallbetenpercent(10%)oftheprizes.

Thetaxhereinprescribedshallbedeductedfromthe'dividends'correspondingtoeachwinningticketorthe"prize"ofeachwinningracehorseownerandwithheldbytheoperator,managerorpersoninchargeofthehorseracesbeforepayingthedividendsorprizestothepersonsentitledthereto.

Theoperator,managerorpersoninchargeofhorseracesshall,withintwenty(20)daysfromthedatethetaxwasdeductedandwithheldinaccordancewiththesecondparagraphhereof,fileatrueandcorrectreturnwiththeCommissionerinthemannerorformtobeprescribedbytheSecretaryofFinance,andpaywithinthesameperiodthetotalamountoftaxsodeductedandwithheld.

SEC.127.TaxonSale,BarterorExchangeofSharesofStockListedandTradedThroughtheLocalStockExchangeorThroughInitialPublicOffering.‐

(A)TaxonSale,BarterorExchangeofSharesofStockListedandTradedThroughtheLocalStockExchange.‐Thereshallbelevied,assessedandcollectedoneverysale,barter,exchange,orotherdispositionofsharesofstocklistedandtradedthroughthelocalstockexchangeotherthanthesalebyadealerinsecurities,ataxattherateofone‐halfofonepercent(1/2of1%)ofthegrosssellingpriceorgrossvalueinmoneyofthesharesofstocksold,bartered,exchangedorotherwisedisposedwhichshallbepaidbythesellerortransferor.

(B)TaxonSharesofStockSoldorExchangedThroughInitialPublicOffering.‐Thereshallbelevied,assessedandcollectedoneverysale,barter,exchangeorotherdispositionthroughinitialpublicofferingofsharesofstockincloselyheldcorporations,asdefinedherein,ataxattheratesprovidedhereunderbasedonthegrosssellingpriceorgrossvalueinmoneyofthesharesofstocksold,bartered,exchangedorotherwisedisposedinaccordancewiththeproportionofsharesofstocksold,bartered,exchangedorotherwisedisposedtothetotaloutstandingsharesofstockafterthelistinginthelocalstockexchange:

Uptotwenty‐fivepercent(25%)4%

Overtwenty‐fivepercent(25%)butnotoverthirty‐three

andonethirdpercent(331/3%)2%

Overthirty‐threeandonethirdpercent(331/3%)1%

Thetaxhereinimposedshallbepaidbytheissuingcorporationinprimaryofferingorbythesellerinsecondaryoffering.

ForpurposesofthisSection,theterm"closelyheldcorporation"meansanycorporationatleastfiftypercent(50%)invalueofoutstandingcapitalstockoratleastfiftypercent(505)ofthetotalcombinedvotingpowerofallclassesofstock

entitledtovoteisowneddirectlyorindirectlybyorfornotmorethantwenty(20)individuals.

Forpurposesofdeterminingwhetherthecorporationisacloselyheldcorporation,insofarassuchdeterminationisbasedonstockownership,thefollowingrulesshallbeapplied:

(1)StockNotOwnedbyIndividuals.‐Stockowneddirectlyorindirectlybyorforacorporation,partnership,estateortrustshallbeconsideredasbeingownedproportionatelybyitsshareholders,partnersorbeneficiaries.

(2)FamilyandPartnershipOwnerships.‐Anindividualshallbeconsideredasowningthestockowned,directlyorindirectly,byorforhisfamily,orbyorforhispartner.Forpurposesoftheparagraph,the'familyofanindividual'includesonlyhisbrothersandsisters(whetherbywholeorhalf‐blood),spouse,ancestorsandlinealdescendants.

(3)Option.‐Ifanypersonhasanoptionacquirestock,suchstockshallbeconsideredasownedbysuchperson.Forpurposesofthisparagraph,anoptiontoacquiresuchanoptionandeachoneofaseriesofoptionsshallbeconsideredasanoptiontoacquiresuchstock.

(4)ConstructiveOwnershipasActualOwnership.‐Stockconstructivelyownedbyreasonoftheapplicationofparagraph(1)or(3)hereofshall,forpurposesofapplyingparagraph(1)or(2),betreatedasactuallyownedbysuchperson;butstockconstructivelyownedbytheindividualbyreasonoftheapplicationofparagraph(2)hereofshallnotbetreatedasownedbyhimforpurposesofagainapplyingsuchparagraphinordertomakeanothertheconstructiveownerofsuchstock.

(C)ReturnonCapitalGainsRealizedfromSaleofSharesofStocks.‐

(1)ReturnonCapitalGainsRealizedfromSaleofSharesofStockListedandTradedintheLocalStockExchange.‐ItshallbethedutyofeverystockbrokerwhoeffectedthesalesubjecttothetaximposedhereintocollectthetaxandremitthesametotheBureauofInternalRevenuewithinfive(5)bankingdaysfromthedateofcollectionthereofandtosubmitonMondaysofeachweektothesecretaryofthestockexchange,ofwhichheisamember,atrueandcompletereturnwhichshallcontainadeclarationofallthetransactionseffectedthroughhimduringtheprecedingweekandoftaxescollectedbyhimandturnedovertotheBureauOfInternalRevenue.

(2)ReturnonPublicOfferingsofShareStock.‐Incaseofprimaryoffering,thecorporateissuershallfilethereturnandpaythecorrespondingtaxwithinthirty

(30)daysfromthedateoflistingofthesharesofstockinthelocalstockexchange.Inthecaseofsecondaryoffering,theprovisionofSubsection(C)(1)ofthisSectionshallapplyastothetimeandmannerofthepaymentofthetax.

(D)CommonProvisions.‐Anygainderivedfromthesale,barter,exchangeorotherdispositionofsharesofstockunderthisSectionshallbeexemptfromthetaximposedinSections24(C),27(D)(2),28(A)(8)(c),and28(B)(5)(c)ofthisCodeandfromtheregularindividualorcorporateincometax.TaxpaidunderthisSectionshallnotbedeductibleforincometaxpurposes.

SEC.128.ReturnsandPaymentofPercentageTaxes.‐

(A)ReturnsofGrossSales,ReceiptsorEarningsandPaymentofTax.‐

(1)PersonsLiabletoPayPercentageTaxes.‐EverypersonsubjecttothepercentagetaxesimposedunderthisTitleshallfileaquarterlyreturnoftheamountofhisgrosssales,receiptsorearningsandpaythetaxduethereonwithintwenty‐five(25)daysaftertheendofeachtaxablequarter:Provided,ThatinthecaseofapersonwhoseVATregistrationiscancelledandwhobecomesliabletothetaximposedinSection116ofthisCode,thetaxshallaccruefromthedateofcancellationandshallbepaidinaccordancewiththeprovisionsofthisSection.

(2)PersonRetiringfromBusiness.‐Anypersonretiringfromabusinesssubjecttopercentagetaxshallnotifythenearestinternalrevenueofficer,filehisreturnandpaythetaxduethereonwithintwenty(20)daysafterclosinghisbusiness.

(3)Exceptions.‐TheCommissionermay,byrulesandregulations,prescribe:

(a)Thetimeforfilingthereturnatintervalsotherthanthetimeprescribedintheprecedingparagraphsforaparticularclassorclassesoftaxpayersafterconsideringsuchfactorsasvolumeofsales,financialcondition,adequatemeasuresofsecurity,andsuchotherrelevantinformationrequiredtobesubmittedunderthepertinentprovisionsofthisCode;and

(b)Themannerandtimeofpaymentofpercentagetaxesotherthanashereinaboveprescribed,includingaschemeoftaxprepayment.

(4)DeterminationofCorrectSalesorReceipts.‐Whenitisfoundthatapersonhasfailedtoissuereceiptsorinvoices,orwhennoreturnisfiled,orwhenthereisreasontobelievethatthebooksofaccountsorotherrecordsdonotcorrectlyreflectthedeclarationsmadeortobemadeinareturnrequiredtobefiledundertheprovisionsofthisCode,theCommissioner,aftertakingintoaccountthesales,receiptsorothertaxablebaseofotherpersonsengagedinsimilarbusinessesundersimilarsituationsorcircumstances,orafterconsideringotherrelevantinformationmayprescribeaminimumamountofsuchgrossreceipts,salesandtaxablebaseandsuchamountsoprescribedshallbeprimafaciecorrectforpurposesofdeterminingtheinternalrevenuetaxliabilitiesofsuchperson.

(B)WheretoFile.‐ExceptastheCommissionerotherwisepermits,everypersonliabletothepercentagetaxunderthisTitlemay,athisoption,fileaseparatereturnforeachbranchorplaceofbusiness,oraconsolidatedreturnforallbranchesorplacesofbusinesswiththeauthorizedagentbank,RevenueDistrictOfficer,CollectionAgentordulyauthorizedTreasurerofthecityormunicipalitywheresaidbusinessorprincipalplaceofbusinessislocated,asthecasemaybe.

TITLEVI

EXCISETAXESONCERTAINGOODS

CHAPTERI

GENERALPROVISIONS

SEC.129.GoodsSubjecttoExciseTaxes.‐ExcisetaxesapplytogoodsmanufacturedorproducedinthePhilippinesfordomesticsalesorconsumptionorforanyotherdispositionandtothingsimported.Theexcisetaximposedhereinshallbeinadditiontothevalue‐addedtaximposedunderTitleIV.

ForpurposesofthisTitle,excisetaxeshereinimposedandbasedonweightorvolumecapacityoranyotherphysicalunitormeasurementshallbereferredtoas"specifictax"andanexcisetaxhereinimposedandbasedonsellingpriceorotherspecifiedvalueofthegoodshallbereferredtoas"advaloremtax".

SEC.130.FilingofReturnandPaymentofExciseTaxonDomesticProducts.‐

(A)PersonsLiabletoFileaReturn,FilingofReturnonRemovalandPaymentofTax.‐

(1)PersonsLiabletoFileaReturn.‐EverypersonliabletopayexcisetaximposedunderthisTitleshallfileaseparatereturnforeachplaceofproductionsettingforth,amongothers,thedescriptionandquantityorvolumeofproductstoberemoved,theapplicabletaxbaseandtheamountoftaxduethereon:Provided,however,Thatinthecaseofindigenouspetroleum,naturalgasorliquefiednaturalgas,theexcisetaxshallbepaidbythefirstbuyer,purchaserortransfereeforlocalsale,barterortransfer,whiletheexcisetaxonexportedproductsshallbepaidbytheowner,lessee,concessionaireoroperatoroftheminingclaim.

Shoulddomesticproductsberemovedfromtheplaceofproductionwithoutthepaymentofthetax,theownerorpersonhavingpossessionthereofshallbeliableforthetaxduethereon.

(2)TimeforFilingofReturnandPaymentoftheTax.‐Unlessotherwisespecificallyallowed,thereturnshallbefiledandtheexcisetaxpaidbythemanufacturerorproducerbeforeremovalofdomesticproductsformplaceofproduction:Provided,ThattheexcisetaxonlocallymanufacturedpetroleumproductsandindigenouspetroleumleviedunderSections148and151(A)(4),respectively,ofthisTitleshallbepaidwithinten(10)daysfromthedateofremovalofsuchproductsfortheperiodfromJanuary1,1998toJune30,1998;withinfive(5)daysfromthedateofremovalofsuchproductsfortheperiodfromJuly1,1998toDecember31,1998;and,beforeremovalfromtheplaceofproductionofsuchproductsfromJanuary1,1999andthereafter:Provided,further,Thattheexcisetaxonnonmetallicmineralormineralproducts,orquarryresourcesshallbedueandpayableuponremovalofsuchproductsfromthelocalitywhereminedorextracted,butwithrespecttotheexcisetaxonlocallyproducedorextractedmetallicmineralormineralproducts,thepersonliableshallfileareturnandpaythetaxwithinfifteen(15)daysaftertheendofthecalendarquarterwhensuchproductswereremovedsubjecttosuchconditionsasmaybeprescribedbyrulesandregulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.Forthispurpose,thetaxpayershallfileabondinanamountwhichapproximatestheamountofexcisetaxdueontheremovalsforthesaidquarter.Theforegoingrulesnotwithstanding,forimportedmineralormineralproducts,whethermetallicornonmetallic,theexcisetaxduethereonshallbepaidbeforetheirremovalfromcustomscustody.

(3)PlaceofFilingofReturnandPaymentoftheTax.‐ExceptastheCommissionerotherwisepermits,thereturnshallbefiledwithandthetaxpaidtoanyauthorizedagentbankorRevenueCollectionOfficer,ordulyauthorizedCityorMunicipalTreasurerinthePhilippines.

(4)Exceptions.‐TheSecretaryofFinance,uponrecommendationoftheCommissionermay,byrulesandregulations,prescribe:

(a)Thetimeforfilingthereturnatintervalsotherthanthetimeprescribedintheprecedingparagraphsforaparticularclassorclassesoftaxpayersafterconsideringfactorssuchasvolumeofremovals,adequatemeasuresofsecurityandsuchotherrelevantinformationrequiredtobesubmittedunderthepertinentprovisionsofthisCode;and

(b)Themannerandtimeofpaymentofexcisetaxesotherthanashereinprescribed,underataxprepayment,advancedepositorsimilarschemes.Inthecaseoflocallyproducedofextractedmineralsandmineralproductsorquarryresourceswheretheminesiteorplaceofextractionisnotthesameastheplaceofprocessingorproduction,thereturnshallbefiledwithandthetaxpaidtotheRevenueDistrictOfficehavingjurisdictionoverthelocalitywherethesamearemined,extractedorquarried:Provided,however,Thatformetallicmineralsprocessedabroad,thereturnshallbefiledandthetaxduethereonpaidtotheRevenueDistrictOfficehavingjurisdictionoverthelocalitywherethesamearemined,extractedorquarried.

(B)DeterminationofGrossSellingPriceofGoodsSubjecttoAdValoremTax.‐Unlessotherwiseprovided,theprice,excludingthevalue‐addedtax,atwhichthegoodsaresoldatwholesaleintheplaceofproductionorthroughtheirsalesagentstothepublicshallconstitutethegrosssellingprice.Ifthemanufactureralsosellsorallowssuchgoodstobesoldatwholesaleinanotherestablishmentofwhichheistheownerorintheprofitsofwhichhehasaninterest,thewholesalepriceinsuchestablishmentshallconstitutethegrosssellingprice.Shouldsuchpricebelessthanthecostofmanufactureplusexpensesincurreduntilthegoodsarefinallysold,thenaproportionatemarginofprofit,notlessthantenpercent(10%)ofsuchmanufacturingcostandexpenses,shallbeaddedtoconstitutethegrosssellingprice.

(C)Manufacturer'sorProducer'sSwornStatement.‐EverymanufacturerorproducerofgoodsorproductssubjecttoexcisetaxesshallfilewiththeCommissioneronthedateordatesdesignatedbythelatter,andasoftenasmayberequired,aswornstatementshowing,amongotherinformation,thedifferentgoodsorproductsmanufacturedorproducedandtheircorrespondinggrosssellingpriceormarketvalue,togetherwiththecostofmanufactureorproductionplusexpensesincurredortobeincurreduntilthegoodsorproductsarefinallysold.

(D)CreditforExciseTaxonGoodsActuallyExported.‐WhengoodslocallyproducedormanufacturedareremovedandactuallyexportedwithoutreturningtothePhilippines,whethersoexportedintheiroriginalstateorasingredientsorpartsofanymanufacturedgoodsorproducts,anyexcisetaxpaidthereonshallbecreditedorrefundeduponsubmissionoftheproofofactualexportationanduponreceiptofthecorrespondingforeignexchangepayment:Provided,Thattheexcisetaxonmineralproducts,exceptcoalandcoke,imposedunderSection151shallnotbecreditableorrefundableevenifthemineralproductsareactuallyexported.

SEC.131.PaymentofExciseTaxesonImporterArticles.‐

(A)PersonsLiable.‐ExcisetaxesonimportedarticlesshallbepaidbytheownerorimportertotheCustomsOfficers,conformablywiththeregulationsoftheDepartmentofFinanceandbeforethereleaseofsucharticlesfromthecustomshouse,orbythepersonwhoisfoundinpossessionofarticleswhichareexemptfromexcisetaxesotherthanthoselegallyentitledtoexemption.

Inthecaseoftax‐freearticlesbroughtorimportedintothePhilippinesbypersons,entitles,oragenciesexemptfromtaxwhicharesubsequentlysold,transferredorexchangedinthePhilippinestonon‐exemptpersonsorentitles,thepurchasersorrecipientsshallbeconsideredtheimportersthereof,andshallbeliableforthedutyandinternalrevenuetaxdueonsuchimportation.

Theprovisionofanyspecialorgenerallawtothecontrarynotwithstanding,theimportationofcigarsandcigarettes,distilledspiritsandwinesintothePhilippines,evenifdestinedfortaxanddutyfreeshops,shallbesubjecttoallapplicabletaxes,duties,charges,includingexcisetaxesduethereon:Provided,however,Thatthisshallnotapplytocigarsandcigarettes,distilledspiritsandwinesbroughtdirectlyintothedulycharteredorlegislatedfreeportsoftheSubicSpecialEconomicandFreeportZone,cratedunderRepublicActNo.7227;theCagayanSpecialEconomic

ZoneandFreeport,createdunderRepublicActNo.7922;andtheZamboangaCitySpecialEconomicZone,createdunderRepublicActNo.7903,andarenottransshippedtoanyotherportinthePhilippines:Provided,further,Thatimportationsofcigarsandcigarettes,distilledspiritsandwinesbyagovernment‐ownedandoperatedduty‐freeshop,liketheDuty‐FreePhilippines(DFP),shallbeexemptedfromallapplicabletaxes,duties,charges,includingexcisetaxduethereon:Provided,stillfurther,Thatifsucharticlesdirectlyimportedbyagovernment‐ownedandoperatedduty‐freeshopliketheDuty‐FreePhilippines,shallbelabeled"taxandduty‐free"and"notforresale":Provided,stillfurther,ThatissucharticlesbroughtintothedulycharteredorlegislatedfreeportsunderRepublicActsNo.7227,7922and7903aresubsequentlyintroducedintothePhilippinecustomsterritory,thensucharticlesshall,uponsuchintroduction,bedeemedimportedintothePhilippinesandshallbesubjecttoallimpostsandexcisetaxesprovidedhereinandotherstatutes:Provided,finally,Thattheremovalandtransferoftaxandduty‐freegoods,products,machinery,equipmentandothersimilararticles,fromonefreeporttoanotherfreeport,shallnotbedeemedanintroductionintothePhilippinecustomsterritory.

ArticlesconfiscatedshallbedisposedofinaccordancewiththerulesandregulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissionerofCustomsandInternalRevenue,uponconsultationwiththeSecretaryofTourismandtheGeneralmanagerofthePhilippineTourismAuthority.

Thetaxdueonanysuchgoods,products,machinery,equipmentorothersimilararticlesshallconstitutealienonthearticleitself,andsuchlienshallbesuperiortoallotherchargesorliens,irrespectiveofthepossessorthereof.

(B)RateandBasisoftheExciseTaxonImportedArticles.‐Unlessotherwisespecifiedimportedarticlesshallbesubjecttothesameratesandbasisofexcisetaxesapplicabletolocallymanufacturedarticles.

SEC.132.ModeofComputingContentsofCaskorPackage.‐Everyfractionalpartofaproofliterequaltoorgreaterthanahalfliterinacaskorpackagecontainingmorethanonelitershallbetaxedasaliter,andanysmallerfractionalpartshallbeexempt;butanypackageofspirits,thetotalcontentofwhicharelessthanaproofliter,shallbetaxedasoneliter.

CHAPTERII

EXEMPTIONORCONDITIONALTAX‐FREEREMOVALOFCERTAINARTICLES

SEC.133.RemovalofWinesandDistilledSpiritsforTreatmentofTobaccoLeaf.‐UponissuanceofapermitfromtheCommissionerandsubjecttotherulesandregulationsprescribedbytheSecretaryofFinance,manufacturersofcigarsandcigarettesmaywithdrawfrombond,freeofexciselocalandimportedwinesanddistilledspiritsinspecificquantitiesandgradesforuseinthetreatmentoftobaccoleaftobeusedinthemanufactureofcigarsandcigarettes;butsuchwinesanddistilledspiritsmustfirstbesuitablydenatured.

SEC.134.DomesticDenaturedAlcohol.‐Domesticalcoholofnotlessthanonehundredeightydegrees(180O)proof(ninetypercent[90%]absolutealcohol)shall,whensuitablydenaturedandrenderedunfitfororalintake,beexemptfromtheexcisetaxprescribedinSection141:Provided,however,ThatsuchdenaturedalcoholshallbesubjecttotaxunderSection106(A)ofthisCode:Provided,further,Thatifsuchalcoholistobeusedforautomotivepower,itshallbetaxedunderSection148(d)ofthisCode:Provided,finally,Thatanyalcohol,previouslyrenderedunfitfororalintakeafterdenaturingbutsubsequentlyrenderedfitfororalintakeafterundergoingfermentation,dilution,purification,mixtureoranyothersimilarprocessshallbetaxedunderSection141ofthisCodeandsuchtaxshallbepaidbythepersoninpossessionofsuchreprocessedspirits.

SEC.135.PetroleumProductsSoldtoInternationalCarriersandExemptEntitiesorAgencies.‐Petroleumproductssoldtothefollowingareexemptfromexcisetax:

(a)InternationalcarriersofPhilippineorforeignregistryontheiruseorconsumptionoutsidethePhilippines:Provided,ThatthepetroleumproductssoldtotheseinternationalcarriersshallbestoredinabondedstoragetankandmaybedisposedofonlyinaccordancewiththerulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner;

(b)Exemptentitiesoragenciescoveredbytaxtreaties,conventionsandotherinternationalagreementsfortheiruseorconsumption:Provided,however,ThatthecountryofsaidforeigninternationalcarrierorexemptentitiesoragenciesexemptsfromsimilartaxespetroleumproductssoldtoPhilippinecarriers,entitiesoragencies;and

(c)Entitieswhicharebylawexemptfromdirectandindirecttaxes.

SEC.136.Denaturation,WithdrawalandUseofDenaturedAlcohol.‐Anypersonwhoproduces,withdraws,sells,transportsorknowinglyuses,orisinpossessionof

denaturedalcohol,orarticlescontainingdenaturedalcoholinviolationoflawsorregulationsnoworhereafterinforcepertainingtheretoshallberequiredtopaythecorrespondingtax,inadditiontothepenaltiesprovidedforunderTitleXofthisCode.

SEC.137.RemovalofSpiritsUnderBondforRectification.‐Spiritsrequiringrectificationmayberemovedfromtheplaceofproductiontoanotherestablishmentforthepurposeofrectificationwithoutprepaymentoftheexcisetax:Provided,ThatthedistillerremovingsuchspiritsandtherectifierreceivingthemshallfilewiththeCommissionertheirjointbondconditioneduponthepaymentbytherectifieroftheexcisetaxdueontherectifiedalcohol:Provided,further,Thatincaseswherealcoholhasalreadybeenrectifiedeitherbyoriginalandcontinuousdistillationorbyredistillation,nolossforrectificationandhandlingshallbeallowedandtherectifierthereofshallpaytheexcisetaxdueonsuchlosses:Provided,finally,Thatwherearectifiermakesuseofspiritsuponwhichtheexcisetaxhasnotbeenpaid,heshallbeliableforthepaymentofthetaxotherwiseduethereon.

SEC.138.RemovalofFermentedLiquorstoBondedWarehouse.‐Anybrewermayremoveortransportfromhisbreweryorotherplaceofmanufacturetoabondedwarehouseusedbyhimexclusivelyforthestorageorsaleinbulkoffermentedliquorsofhisownmanufacture,anyquantityofsuchfermentedliquors,notlessthanonethousand(1,000)litersatoneremoval,withoutprepaymentofthetaxthereonunderapermitwhichshallbegrantedbytheCommissioner.SuchpermitshallbeaffixedtoeverypackagesoremovedandshallbecancelledordestroyedinsuchmannerastheCommissionermayprescribe.Thereafter,themanufacturerofsuchfermentedliquorsshallpaythetaxinthesamemannerandunderthesamepenaltyandliabilityaswhenpaidatthebrewery.

SEC.139.RemovalofDamagedLiquorsFreeofTax.‐Whenanyfermentedliquorhasbecomesourorotherwisedamagedsoastobeunfitforuseassuch,brewersmaysellandaftersecuringaspecialpermitfromtheCommissioner,undersuchconditionsasmaybeprescribedintherulesandregulationsprescribedbytheSecretaryofFinance,removethesamewithoutthepaymentoftaxthereonincaskorotherpackages,distinctfromthoseordinarilyusedforfermentedliquors,eachcontainingnotlessthanonehundredseventy‐five(175)literswithanoteoftheircontentspermanentlyaffixedthereon.

SEC.140.RemovalofTobaccoProductsWithoutPrepaymentofTax.‐Productsoftobaccoentirelyunfitforchewingorsmokingmayberemovedfreeoftaxforagriculturalorindustrialuse,undersuchconditionsasmaybeprescribedinthe

rulesandregulationsprescribedbytheSecretaryofFinance.Stemmedleaftobacco,fine‐cutshorts,therefuseoffine‐cutchewingtobacco,scraps,cuttings,clippings,stems,ormidribs,andsweepingsoftobaccomaybesoldinbulkasrawmaterialbyonemanufacturerdirectlytoanotherwithoutpaymentofthetax,undersuchconditionsasmaybeprescribedintherulesandregulationsprescribedbytheSecretaryofFinance.

"Stemmedleaftobacco",ashereinused,meansleaftobaccowhichhashadthestemormidribremoved.Thetermdoesnotincludebrokenleaftobacco.

CHAPTERIII

EXCISETAXONALCOHOLPRODUCTS

SEC.141.DistilledSpirits.‐Ondistilledspirits,thereshallbecollected,subjecttotheprovisionsofSection133ofthisCode,excisetaxesasfollows:

(a)Ifproducedfromthesapofnipa,coconut,cassava,camote,orburipalmorfromthejuice,syruporsugarofthecane,providedsuchmaterialsareproducedcommerciallyinthecountrywheretheyareprocessedintodistilledspirits,perproofliter,Eightpesos(P8.00):Provided,Thatifproducedinapotstillorothersimilarprimarydistillingapparatusbyadistillerproducingnotmorethanonehundred(100)litersaday,containingnotmorethanfiftypercent(50%)ofalcoholbyvolume,perproofliter,Fourpesos(P4.00);

(b)Ifproducedfromrawmaterialsotherthanthoseenumeratedintheprecedingparagraph,thetaxshallbeinaccordancewiththenetretailpriceperbottleofsevenhundredfiftymilliliter(750ml.)volumecapacity(excludingtheexcisetaxandthevalue‐addedtax)asfollows:

(1)LessthanTwohundredandfiftypesos(P250)‐Seventy‐fivepesos(P75),perproofliter;

(2)Twohundredandfiftypesos(P250)uptoSixhundredandSeventy‐Fivepesos(P675)‐Onehundredandfiftypesos(P150),perproofliter;and

(3)MorethanSixhundredandseventy‐fivepesos(P675)‐Threehundredpesos(P300),perproofliter.

(c)Medicinalpreparations,flavoringextracts,andallotherpreparations,excepttoiletpreparations,ofwhich,excludingwater,distilledspiritsforthechiefingredient,shallbesubjecttothesametaxassuchchiefingredient.

Thistaxshallbeproportionallyincreasedforanystrengthofthespiritstaxedoverproofspirits,andthetaxshallattachtothissubstanceassoonasitisinexistenceassuch,whetheritbesubsequentlyseparatedaspureorimpurespirits,ortransformedintoanyothersubstanceeitherintheprocessoforiginalproductionorbyanysubsequentprocess.

"Spiritsordistilledspirits"isthesubstanceknownasethylalcohol,ethanolorspiritsofwine,includingalldilutions,purificationsandmixturesthereof,fromwhateversource,bywhateverprocessproduced,andshallincludewhisky,brandy,rum,ginandvodka,andothersimilarproductsormixtures.

"Proofspirits"isliquorcontainingone‐half(1/2)ofitsvolumeofalcoholofaspecificgravityofseventhousandninehundredandthirty‐ninethousandths(0.7939)atfifteendegreescentigrade(15OC).A"proofliter"meansaliterofproofspirits.

TheratesoftaximposedunderthisSectionshallbeincreasedbytwelvepercent(12%)onJanuary1,2000.

Newbrandsshallbeclassifiedaccordingtotheircurrent"netretailprice".

Fortheabovepurpose,"netretailprice"shallmeanthepriceatwhichthedistilledspiritissoldonretailinten(10)majorsupermarketsinMetroManila,excludingthe

amountintendedtocovertheapplicableexcisetaxandthevalue‐addedtaxasofOctober1,1996.

TheclassificationofeachbrandofdistilledspiritsbasedontheaveragenetretailpriceasofOctober1,1996,assetforthinAnnex"A",shallremaininforceuntilrevisedbyCongress.

SEC.142.Wines.‐Onwines,thereshallbecollectedperliterofvolumecapacity,thefollowingtaxes:

(a)Sparklingwines/champagnesregardlessofproof,ifthenetretailpriceperbottle(excludingtheexcisetaxandvalue‐addedtax)is:

(1)Fivehundredpesos(P500)orless‐Onehundredpesos(P100);and

(2)MorethanFivehundredpesos(P500)‐Threehundredpesos(P300).

(b)Stillwinescontainingfourteenpercent(14%)ofalcoholbyvolumeorless,Twelvepesos(P12.00);and

(c)Stillwinescontainingmorethanfourteenpercent(14%)butnotmorethantwenty‐fivepercent(25%)ofalcoholbyvolume,Twenty‐fourpesos(P24.00).

Fortifiedwinescontainingmorethantwenty‐fivepercentofalcoholbyvolumeshallbetaxedasdistilledspirits."Fortifiedwines"shallmeannaturalwinestowhichdistilledspiritsareaddedtoincreasetheiralcoholicstrength.

TheratesoftaximposedunderthisSectionshallbeincreasedbytwelvepercent(12%)onJanuary1,2000.

Newbrandsshallbeclassifiedaccordingtotheircurrentnetretailprice.

Fortheabovepurpose,"netretailprice"shallmeanthepriceatwhichwineissoldonretailinten(10)majorsupermarketsinMetroManila,excludingtheamountintendedtocovertheapplicableexcisetaxandthevalue‐addedtaxasofOctober1,1996.

TheclassificationofeachbrandofwinesbasedonitsaveragenetretailpriceasofOctober1,1996,assetforthinAnnex"B",shallremaininforceuntilrevisedbyCongress.

SEC.143.FermentedLiquor.‐Thereshallbelevied,assessedandcollectedanexcisetaxonbeer,lagerbeer,ale,porterandotherfermentedliquorsexcepttuba,basi,tapuyandsimilardomesticfermentedliquorsinaccordancewiththefollowingschedule:

(a)Ifthenetretailprice(excludingtheexcisetaxandvalue‐addedtax)perliterofvolumecapacityislessthanFourteenpesosandfiftycentavos(P14.50),thetaxshallbeSixpesosandfifteencentavos(P6.15)perliter;

(b)Ifthenetretailprice(excludingtheexcisetaxandthevalue‐addedtax)theperliterofvolumecapacityisFourteenpesosandfiftycentavos(P14.50)uptoTwenty‐twopesos(P22.00),thetaxshallbeNinepesosandfifteencentavos(P9.15)perliter;

(c)Ifthenetretailprice(excludingtheexcisetaxandthevalue‐addedtax)perliterofvolumecapacityismorethanTwenty‐twopesos(P22.00),thetaxshallbeTwelvepesosandfifteencentavos(P12.15)perliter.

VariantsofexistingbrandswhichareintroducedinthedomesticmarketaftertheeffectivityofRepublicActNo.8240shallbetaxedunderthehighestclassificationofanyvariantofthatbrand.

Fermentedliquorwhicharebrewedandsoldatmicro‐breweriesorsmallestablishmentssuchaspubsandrestaurantsshallbesubjecttotherateinparagraph(c)hereof.

Theexcisetaxfromanybrandoffermentedliquorwithinthenextthree(3)yearsfromtheeffectivityofRepublicActNo.8240shallnotbelowerthanthetaxwhichwasduefromeachbrandonOctober1,1996.

Theratesofexcisetaxonfermentedliquorunderparagraphs(a),(b)and(c)hereofshallbeincreasedbytwelvepercent(12%)onJanuary1,2000.

Newbrandsshallbeclassifiedaccordingtotheircurrentnetretailprice.

Fortheabovepurpose,"netretailprice"shallmeanthepriceatwhichthefermentedliquorissoldonretailintwenty(20)majorsupermarketsinMetroManila(forbrandsoffermentedliquormarketednationally)excludingtheamountintendedtocovertheapplicableexcisetaxandthevalue‐addedtax.ForbrandswhicharemarketedonlyoutsideMetroManila,the"netretailprice"shallmeanthepriceatthewhichthefermentedliquorissoldinfive(5)majorsupermarketsintheregionexcludingtheamountintendedtocovertheapplicableexcisetaxandthevalue‐addedtax.

TheclassificationofeachbrandoffermentedliquorbasedonitsaveragenetretailpriceasofOctober1,1996,assetforthinAnnex"C",shallremaininforceuntilrevisedbyCongress.

"Avariantofbrand"shallrefertoabrandonwhichamodifierisprefixedand/orsuffixedtotherootnameofthebrandand/oradifferentbrandwhichcarriesthesamelogoordesignoftheexistingbrand.

Everybrewerorimporteroffermentedliquorshall,withinthirty(30)daysfromtheeffectivityofR.A.No.8240,andwithinthefirstfive(5)daysofeverymonththereafter,submittotheCommissioneraswornstatementofthevolumeofsalesforeachparticularbrandoffermentedliquorsoldathisestablishmentforthethree‐monthperiodimmediatelypreceding.

Anybrewerorimporterwho,inviolationofthisSection,knowinglymisdeclaresormisrepresentsinhisoritsswornstatementhereinrequiredanypertinentdataorinformationshallbepenalizedbyasummarycancellationorwithdrawalofhisoritspermittoengageinbusinessasbrewerorimporteroffermentedliquor.

Anycorporation,associationorpartnershipliableforanyoftheactsoromissionsinviolationofthisSectionshallbefinedtrebletheamountofdeficiencytaxes,surcharge,andinterestwhichmaybeassessedpursuanttothisSection.

AnypersonliableforanyoftheactsoromissionsprohibitedunderthisSectionshallbecriminallyliableandpenalizedunderSection254ofthisCode.Anypersonwhowillfullyaidsorabetsinthecommissionofanysuchactoromissionshallbecriminallyliableinthesamemannerastheprincipal.

IftheoffenderisnotacitizenofthePhilippines,heshallbedeportedimmediatelyafterservingthesentence,withoutfurtherproceedingsfordeportation.

CHAPTERIV

EXCISETAXONTOBACCOPRODUCTS

SEC.144.TobaccoProducts.‐Thereshallbecollectedataxofseventy‐fivecentavos(P0.75)oneachkilogramofthefollowingproductsoftobacco:

(a)Tobaccotwistedbyhandorreducedintoaconditiontobeconsumedinanymannerotherthantheordinarymodeofdryingandcuring;

(b)Tobaccopreparedorpartiallypreparedwithorwithouttheuseofanymachineorinstrumentsorwithoutbeingpressedorsweetened;and

(c)Fine‐cutshortsandrefuse,scraps,clippings,cuttings,stemsandsweepingsoftobacco.

Fine‐cutshortsandrefuse,scraps,clippings,cuttings,stemsandsweepingsoftobaccoresultingfromthehandlingorstrippingofwholeleaftobaccomaybetransferred,disposedof,orotherwisesold,withoutprepaymentoftheexcisetax

hereinprovidedforundersuchconditionsasmaybeprescribedintherulesandregulationspromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,ifthesamearetobeexportedortobeusedinthemanufactureofothertobaccoproductsonwhichtheexcisetaxwilleventuallybepaidonthefinishedproduct.

Ontobaccospeciallypreparedforchewingsoastobeunsuitableforuseinanyothermanner,oneachkilogram,Sixtycentavos(P0.60).

SEC.145.CigarsandCigarettes.‐

(A)Cigars.‐Thereshallbelevied,assessedandcollectedoncigarsataxofOnepeso(P1.00)percigar.

(B)CigarettesPackedbyHand.‐Thereshallbelevied,assessedandcollectedoncigarettespackedbyhandataxofFortycentavos(P0.40)perpack.

(C)CigarettesPackedbyMachine.‐Thereshallbelevied,assessedandcollectedoncigarettespackedbymachineataxattheratesprescribedbelow:

(1)Ifthenetretailprice(excludingtheexcisetaxandthevalue‐addedtax)isaboveTen

pesos(P10.00)perpack,thetaxshallbeTwelvepesos(P12.00)perpack;

(2)Ifthenetretailprice(excludingtheexcisetaxandthevalue‐addedtax)exceedsSix

pesosandfiftycentavos(P6.50)butdoesnotexceedTenpesos(P10.00)perpack,

thetaxshallbeEightpesos(8.00)perpack;

(3)Ifthenetretailprice(excludingtheexcisetaxandthevalue‐addedtax)isFivepesos

(P5.00)butdoesnotexceedSixpesosandfiftycentavos(P6.50)perpack,thetax

shallbeFivepesos(P5.00)perpack;

(4)Ifthenetretailprice(excludingtheexcisetaxandthevalue‐addedtaxisbelowFive

pesos(P5.00)perpack,thetaxshallbeOnepeso(P1.00)perpack;

VariantsofexistingbrandsofcigaretteswhichareintroducedinthedomesticmarketaftertheeffectivityofR.A.No.8240shallbetaxedunderthehighestclassificationofanyvariantofthatbrand.

Theexcisetaxfromanybrandofcigaretteswithinthenextthree(3)yearsfromtheeffectivityofR.A.No.8240shallnotbelowerthanthetax,whichisduefromeachbrandonOctober1,1996:Provided,however,Thatincaseswheretheexcisetaxratesimposedinparagraphs(1),(2),(3)and(4)hereinabovewillresultinanincreaseinexcisetaxofmorethanseventypercent(70%);forabrandofcigarette,theincreaseshalltakeeffectintwotranches:fiftypercent(50%)oftheincreaseshallbeeffectivein1997andonehundredpercent(100%)oftheincreaseshallbeeffectivein1998.

Dulyregisteredorexistingbrandsofcigarettesornewbrandsthereofpackedbymachineshallonlybepackedintwenties.

Theratesofexcisetaxoncigarsandcigarettesunderparagraphs(1),(2),(3)and(4)hereof,shallbeincreasedbytwelvepercent(12%)onJanuary1,2000.

Newbrandsshallbeclassifiedaccordingtotheircurrentnetretailprice.

Fortheabovepurpose,"netretailprice"shallmeanthepriceatwhichthecigaretteissoldonretailintwenty(20)majorsupermarketsinMetroManila(forbrandsofcigarettesmarketednationally),excludingtheamountintendedtocovertheapplicableexcisetaxandthevalue‐addedtax.ForbrandswhicharemarketedonlyoutsideMetroManila,the"netretailprice"shallmeanthepriceatwhichthe

cigaretteissoldinfive(5)majorsupermarketsintheregionexcludingtheamountintendedtocovertheapplicableexcisetaxandthevalue‐addedtax.

TheclassificationofeachbrandofcigarettesbasedonitsaveragenetretailpriceasofOctober1,1996,assetforthinAnnex"D",shallremaininforceuntilrevisedbyCongress.

"Variantofabrand"shallrefertoabrandonwhichamodifierisprefixedand/orsuffixedtotherootnameofthebrandand/oradifferentbrandwhichcarriesthesamelogoordesignoftheexistingbrand.

Manufacturesandimportersofcigarsandcigarettesshall,withinthirty(30)daysfromtheeffectivityofR.A.No.8240andwithinthefirstfive(5)daysofeverymonththereaftersubmittotheCommissioneraswornstatementofthevolumeofsalesforeachparticularbrandofcigarsand/orcigarettessoldathisestablishmentforthethree‐monthperiodimmediatelypreceding.

Anymanufacturerorimporterwho,inviolationofthisSection,knowinglymisdeclaresormisrepresentsinhisoritsswornstatementhereinrequiredanypertinentdataorinformationshall,upondiscovery,bepenalizedbyasummarycancellationorwithdrawalofhisoritspermittoengageinbusinessasmanufacturerorimporterofcigarsorcigarettes.

Anycorporation,associationorpartnershipliableforanyoftheactsoromissionsinviolationofthisSectionshallbefinedtrebletheamountofdeficiencytaxes,surchargesandinterestwhichmaybeassessedpursuanttothisSection.

AnypersonliableforanyoftheactsoromissionsprohibitedunderthisSectionshallbecriminallyliableandpenalizedunderSection254ofthisCode.Anypersonwhowillfullyaidsorabetsinthecommissionofanysuchactoromissionshallbecriminallyliableinthesamemannerastheprincipal.

IftheoffenderisnotacitizenofthePhilippines,heshallbedeportedimmediatelyafterservingthesentencewithoutfurtherproceedingsfordeportation.

SEC.146.InspectionFee.‐ForinspectionmadeinaccordancewiththisChapter,thereshallbecollectedafeeofFiftycentavos(P0.50)foreachthousandcigarsorfractionthereof;Tencentavos(P0.10)foreachthousandcigarettesoffractionthereof;Twocentavos(P0.02)foreachkilogramofleaftobaccoorfractionthereof;andThreecentavos(P0.03)foreachkilogramorfractionthereof,ofscrapandothermanufacturedtobacco.

Theinspectionfeeonleaftobacco,scrap,cigars,cigarettesandothertobaccoproductsasdefinedinSection147ofthisCodeshallbepaidbythewholesaler,manufacturer,producer,owneroroperatorofredryingplant,asthecasemaybe,immediatelybeforeremovalthereoffromtheestablishmentofthewholesaler,manufacturer,owneroroperatoroftheredryingplant.Incaseofimportedleaftobaccoandproductsthereof,theinspectionfeeshallbepaidbytheimporterbeforeremovalfromcustoms'custody.

Fiftypercent(50%)ofthetobaccoinspectionfeeshallaccruetotheTobaccoInspectionFundcreatedbySection12ofActNo.2613,asamendedbyActNo.3179,andfiftypercent(50%)shallaccruetotheCulturalCenterofthePhilippines.

SEC.147.DefinitionofTerms.‐Whenusedhereinandinstatementsorofficialformsprescribedhereunder,thefollowingtermsshallhavethemeaningindicated:

(a)"Cigars"meanallrollsoftobaccooranysubstitutethereof,wrappedinleaftobacco.

(b)"Cigarettes"meanallrollsoffinely‐cutleaftobacco,oranysubstitutetherefor,wrappedinpaperorinanyothermaterial.

(c)"Wholesaleprice"shallmeantheamountofmoneyorpricepaidforcigarsorcigarettespurchasedforthepurposeofresale,regardlessofquantity.

(d)"Retailprice"shallmeantheamountofmoneyorpricewhichanultimateconsumerorend‐userpaysforcigarsorcigarettespurchased.

CHAPTERV

EXCISETAXONPETROLEUMPRODUCTS

SEC.148.ManufacturedOilsandOtherFuels.‐Thereshallbecollectedonrefinedandmanufacturedmineraloilsandmotorfuels,thefollowingexcisetaxeswhichshallattachtothegoodshereunderenumeratedassoonastheyareinexistenceassuch:

(a)Lubricatingoilsandgreases,includingbutnotlimitedto,basestockforlubeoilsandgreases,highvacuumdistillates,aromaticextracts,andothersimilarpreparations,andadditivesforlubricatingoilsandgreases,whethersuchadditivesarepetroleumbasedornot,perliterandkilogramrespectively,ofvolumecapacityorweight,Fourpesosandfiftycentavos(P4.50):Provided,however,Thattheexcisetaxespaidonthepurchasedfeedstock(bunker)usedinthemanufactureofexcisablearticlesandformingpartthereofshallbecreditedagainsttheexcisetaxduetherefrom:Provided,further,Thatlubricatingoilsandgreasesproducedfrombasestocksandadditivesonwhichtheexcisetaxhasalreadybeenpaidshallnolongerbesubjecttoexcisetax:Provided,finally,Thatlocallyproducedorimportedoilspreviouslytaxedassuchbutaresubsequentlyreprocessed,rerefinedorrecycledshalllikewisebesubjecttothetaximposedunderthisSection.

(b)Processedgas,perliterofvolumecapacity,Fivecentavos(P0.05);

(c)Waxesandpetrolatum,perkilogram,Threepesosandfiftycentavos(P3.50);

(d)Ondenaturedalcoholtobeusedformotivepower,perliterofvolumecapacity,Fivecentavos(P0.05):Provided,Thatunlessotherwiseprovidedbyspeciallaws,ifthedenaturedalcoholismixedwithgasoline,theexcisetaxonwhichhasalreadybeenpaid,onlythealcoholcontentshallbesubjecttothetaxhereinprescribed.ForpurposesofthisSubsection,theremovalofdenaturedalcoholofnotlessthanonehundredeightydegrees(180o)proof(ninetypercent(90%)absolutealcohol)shallbedeemedtohavebeenremovedformotivepower,unlessshownotherwise;

(e)Naphtha,regulargasolineandothersimilarproductsofdistillation,perliterofvolumecapacity,Fourpesosandeightycentavos(P4.80):Provided,however,Thatnaphtha,whenusedasarawmaterialintheproductionofpetrochemicalproductsorasreplacementfuelfornatural‐gas‐fired‐combinedcyclepowerplant,inlieuoflocally‐extractednaturalgasduringthenon‐availabilitythereof,subjecttotherulesandregulationstobepromulgatedbytheSecretaryofEnergy,inconsultationwiththeSecretaryofFinance,perliterofvolumecapacity,Zero(P0.00):Provided,further,Thattheby‐productincludingfueloil,dieselfuel,kerosene,pyrolysisgasoline,liquefiedpetroleumgasesandsimilaroilshavingmoreorlessthesamegeneratingpower,whichareproducedintheprocessingofnaphthaintopetrochemicalproductsshallbesubjecttotheapplicableexcisetaxspecifiedinthisSection,exceptwhensuchby‐productsaretransferredtoanyofthelocaloilrefineriesthroughsale,barterorexchange,forthepurposeoffurtherprocessingorblendingintofinishedproductswhicharesubjecttoexcisetaxunderthisSection;

(f)Leadedpremiumgasoline,perliterofvolumecapacity,Fivepesosandthirty‐fivecentavos(P5.35);unleadedpremiumgasoline,perliterofvolumecapacity,Fourpesosandthirty‐fivecentavos(P4.35);

(g)Aviationturbojetfuel,perliterofvolumecapacity,Threepesosandsixty‐sevencentavos(P3.67);

(h)Kerosene,perliterofvolumecapacity,Sixtycentavos(0.60):Provided,Thatkerosene,whenusedasaviationfuel,shallbesubjecttothesametaxonaviationturbojetfuelundertheprecedingparagraph(g),suchtaxtobeassessedontheuserthereof;

(i)Dieselfueloil,anonsimilarfueloilshavingmoreorlessthesamegeneratingpower,perliterofvolumecapacity,Onepesoandsixty‐threecentavos(P1.63);

(j)Liquefiedpetroleumgas,perliter,Zero(P0.00):Provided,Thatliquefiedpetroleumgasusedformotivepowershallbetaxedattheequivalentrateastheexcisetaxondieselfueloil;

(k)Asphalts,perkilogram,Fifty‐sixcentavos(P0.56);and

(l)Bunkerfueloil,andonsimilarfueloilshavingmoreorlessthesamegeneratingpower,perliterofvolumecapacity,Thirtycentavos(P0.30).

CHAPTERVI

EXCISETAXONMISCELLANEOUSARTICLES

SEC.149.Automobiles.‐Thereshallbelevied,assessedandcollectedanadvaloremtaxonautomobilesbasedonthemanufacturer’sorimporter’ssellingprice,netofexciseandvalue‐addedtax,inaccordancewiththefollowingschedule:

ENGINEDISPLACEMENT[incc.]

GASOLINEDIESEL TAXRATE

Upto1600

Upto1800

15%

1601to2000

1801to2300

35%

2001to2700

2301to3000

50%

2701orover

3001toover

100%

Provided,Thatinthecaseofimportedautomobilesnotforsale,thetaximposedhereinshallbebasedonthetotalvalueusedbytheBureauofCustomsindeterminingtariffandcustomsduties,includingcustomsdutyandallothercharges,plustenpercent(10%)ofthetotalthereof.

Automobilesacquiredforusebypersonsorentitiesoperatingwithinthefreeportzoneshallbeexemptfromexcisetax:Provided,Thatutilityvehiclesofregisteredzoneenterprises,whichareindispensableintheconductandoperationsoftheirbusiness,suchasdeliverytrucksandcargovanswithgrossvehicleweightabovethree(3)metrictonsmaybeallowedunrestricteduseoutsidethefreeportzone:Provided,further,Thatvehiclesownedbytourist‐orientedenterprises,suchastouristbusesandcarswithyellowplates,color‐coded,andutilizedexclusivelyforthepurposeoftransportingtouristsintourism‐relatedactivities,andservicevehiclesoffreeportregisteredenterprisesandexecutives,suchascompanyservicecarsandexpatriates’andinvestors’automobilesbroughtinthenameofsuchenterprises,maybeusedoutsidethefreeportzoneforsuchperiodsasmaybeprescribedbytheDepartmentsofFinance,andTradeandIndustry,theBureauofCustomsandtheFreeportauthoritiesconcerned,whichinnocaseshallexceedfourteen(14)dayspermonth.

Incasesuchtouristbusesandcars,servicevehiclesofregisteredfreeportenterprisesandcompanyservicecarsareusedformorethananaggregateperiodoffourteen(14)dayspermonthoutsideofthefreeportzone,theownerorimportershallpaythecorrespondingcustomsduties,taxesandcharges.

Inthecaseofpersonally‐ownedvehiclesofresidents,includingleaseholdersofresidencesinsidethefreeportzone,theuseofsuchvehiclesoutsideofthefreeportzoneshallbedeemedanintroductionintothePhilippinecustomsterritory,andsuchintroductionshallbedeemedanimportationintothePhilippinesandshallsubjectsuchvehiclestoCustomsdutiestaxesandcharges,includingexcisetaxdueonsuchvehicle.

TheSecretariesofFinance,andTradeandIndustry,togetherwiththeCommissionerofCustomsandtheadministratorsofthefreeportsconcerned,shallpromulgaterulesandregulationsfortheproperidentificationandcontrolofsaidautomobiles.

SEC.150.Non‐EssentialGoods.‐Thereshallbelevied,assessedandcollectedataxequivalenttotwentypercent(20%)basedonthewholesalepriceorthevalueofimportationusedbytheBureauofCustomsindeterminingtariffandcustomsduties,netofexcisetaxandvalue‐addedtax,ofthefollowinggoods:

(a)Allgoodscommonlyorcommerciallyknownasjewelry,whetherrealorimitation,pearls,preciousandsemi‐preciousstonesandimitationsthereof;goodsmadeof,orornamented,mountedorfittedwith,preciousmetalsorimitationsthereoforivory(notincludingsurgicalanddentalinstruments,silver‐platedwares,framesormountingsforspectaclesoreyeglasses,anddentalgoldorgoldalloysandotherpreciousmetalsusedinfilling,mountingorfittingtheteeth);operaglassesandlorgnettes.Theterm"preciousmetals"shallincludeplatinum,gold,silverandothermetalsofsimilarorgreatervalue.Theterm‘imitationsthereofshallincludeplatingsandalloysofsuchmetals;

(b)Perfumesandtoiletwaters;

(c)Yachtsandothervesselsintendedforpleasureorsports.

CHAPTERVII

EXCISETAXONMINERALPRODUCTS

SEC.151.MineralProducts.‐

(A)RatesofTax.‐Thereshallbelevied,assessedandcollectedonminerals,mineralproductsandquarryresources,excisetaxasfollows:

(1)Oncoalandcoke,ataxofTenpesos(P10.00)permetricton;

(2)Onallnonmetallicmineralsandquarryresources,ataxoftwopercent(2%)basedon

theactualmarketvalueofthegrossoutputthereofatthetimeofremoval,inthecase

ofthoselocallyextractedorproduced;orthevalueusedbytheBureauofCustomsin

determiningtariffandcustomsduties,netofexcisetaxandvalue‐addedtax,inthecase

ofimportation.

Notwithstandingtheprovisionofparagraph(4)ofSubsection(A)ofSection151,locallyextractednaturalgasandliquefiednaturalgasshallbetaxedattherateoftwopercent(2%);

(3)Onallmetallicminerals,ataxbasedontheactualmarketvalueofthegrossoutputthereof

atthetimeofremoval,inthecaseofthoselocallyextractedorproduced;orthevalueused

bytheBureauofCustomsindeterminingtariffandcustomsduties,netofexcisetaxand

value‐addedtax,inthecaseofimportation,inaccordancewiththefollowingschedule:

(a)Copperandothermetallicminerals;

(i)Onthefirstthree(3)yearsupontheeffectivityofRepublicActNo.7729,

onepercent(1%);

(ii)Onthefourthandthefifthyears,oneandahalfpercent(1½%);and

(iii)Onthesixthyearandthereafter,twopercent(2%);

(b)Goldandchromite,twopercent(2%).

(4)Onindigenouspetroleum,ataxofthreepercent(3%)ofthefairinternationalmarketprice

thereof,onthefirsttaxablesale,barter,exchangeorsuchsimilartransaction,suchtax

tobepaidbythebuyerorpurchaserbeforeremovalfromtheplaceofproduction.The

phrase"firsttaxablesale,barter,exchangeorsimilartransaction"meansthetransfer

ofindigenouspetroleuminitsoriginalstatetoafirsttaxabletransferee.Thefair

internationalmarketpriceshallbedeterminedinconsultationwithanappropriate

governmentagency.

ForthepurposeofthisSubsection,"indigenouspetroleum"shallincludelocally‐extractedmineraloil,hydrocarbongas,bitumen,crudeasphalt,mineralgasandallothersimilarornaturallyassociatedsubstanceswiththeexceptionofcoal,peat,bituminousshaleand/orstratifiedmineraldeposits.

(B)ForPurposesofThisSection,theTerm:

(1)"Grossoutput"shallbeinterpretedastheactualmarketvalueofmineralsormineralproductsorofbullionfromeachmineorminerallandoperatedasaseparateentity,withoutanydeductionfrommining,milling,refining(includingallexpensesincurredtopreparethesaidmineralsormineralproductsinamarketablestate),aswellastransporting,handling,marketingoranyotherexpenses:Provided,ThatifthemineralsormineralproductsaresoldorconsignedabroadbythelesseeorownerofthemineunderC.I.F.terms,theactualcostofoceanfreightandinsuranceshallbededucted:Provided,however,Thatinthecaseofmineralconcentrate,nottradedincommodityexchangesinthePhilippinesorabroad,suchascopperconcentrate,theactualmarketvalueshallbetheworldpricequotationsoftherefinedmineralproductscontentthereofprevailinginthesaidcommodityexchanges,afterdeductingthesmelting,refiningandotherchargesincurredintheprocessofconvertingthemineralconcentratesintorefinedmetaltradedinthosecommodityexchanges.

(2)"Minerals"shallmeanallnaturallyoccurringinorganicsubstances(foundinnature)whetherinsolid,liquid,gaseousoranyintermediatestate.

(3)"Mineralproducts"shallmeanthingsproducedandpreparedinamarketablestatebysimpletreatmentprocessessuchaswashingordrying,butwithoutundergoinganychemicalchangeorprocessormanufacturingbythelessee,concessionaireorownerofminerallands.

(4)"Quarryresources"shallmeananycommonstoneorothercommonmineralsubstancesastheDirectoroftheBureauofMinesandGeo‐Sciencesmaydeclaretobequarryresourcessuchas,butnotrestrictedto,marl,marble,granite,volcaniccinders,basalt,tuffandrockphosphate:Provided,Thattheycontainnometalorothervaluablemineralsineconomicallyworkablequantities.

CHAPTERVIII

ADMINISTRATIVEPROVISIONSREGULATINGBUSINESS

ORPERSONSDEALINGINARTICLESSUBJECTTOEXCISETAX

SEC.152.ExtentofSupervisionOverEstablishmentsProducingTaxableOutput.‐TheBureauofInternalRevenuehasauthoritytosuperviseestablishmentswherearticlessubjecttoexcisetaxaremadeorkept.TheSecretaryofFinanceshallprescriberulesandregulationsastothemodeinwhichtheprocessofproductionshallbeconductedinsofarasmaybenecessarytosecureasanitaryoutputandtosafeguardtherevenue.

SEC.153.RecordstobeKeptbyManufacturers;AssessmentBasedThereon.‐ManufacturersofarticlessubjecttoexcisetaxshallkeepsuchrecordsasrequiredbyrulesandregulationsrecommendedbytheCommissionerandapprovedbytheSecretaryofFinance,andsuchrecords,whetherofrawmaterialsreceivedintothefactoryorofarticlesproducedtherein,shallbedeemedpublicandofficialdocumentsforallpurposes.

Therecordsofrawmaterialskeptbysuchmanufacturersmaybeusedasevidencebywhichtodeterminetheamountofexcisetaxesduefromthem,andwhenevertheamountsofrawmaterialreceivedintoanyfactoryexceedstheamountofmanufacturedorpartiallymanufacturedproductsonhandandlawfullyremovedfromthefactory,pluswasteremovedordestroyed,andareasonableallowanceforunavoidablelossinmanufacture,theCommissionermayassessandcollectthetaxdueontheproductswhichshouldhavebeenproducedfromtheexcess.

TheexcisetaxdueontheproductsasdeterminedandassessedinaccordancewiththisSectionshallbepayableupondemandorwithintheperiodspecifiedtherein.

SEC.154.PremisesSubjecttoApprovalbyCommissioner.‐NopersonshallengageinbusinessasamanufacturerofordealerinarticlessubjecttoexcisetaxunlessthepremisesuponwhichthebusinessistoconductedshallhavebeenapprovedbytheCommissioner.

SEC.155.ManufacturerstoProvideThemselveswithCountingorMeteringDevicestoDetermineProduction.‐Manufacturersofcigarettes,alcoholicproducts,oilproductsandotherarticlessubjecttoexcisetaxthatcanbesimilarlymeasuredshallprovidethemselveswithsuchnecessarynumberofsuitablecountingormeteringdevicestodetermineasaccuratelyaspossiblethevolume,quantityornumberofthearticlesproducedbythemunderrulesandregulationspromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

Thisrequirementshallbecompliedwithbeforecommencementofoperations.

SEC.156.LabelsandFormofPackages.‐Allarticlesofdomesticmanufacturesubjecttoexcisetaxandallleaftobaccoshallbeputupandpreparedbythemanufacturerorproducer,whenremovedforsaleorconsumption,insuchpackagesonlyandbearingsuchmarksorbrandasshallbeprescribedintherulesandregulationspromulgatedbytheSecretaryofFinance;andgoodsofsimilarcharacterimportedintothePhilippinesshalllikewisebepackedandmarkedinsuchamannerasmayberequired.

SEC.157.RemovalofArticlesAfterthePaymentofTax.‐Whenthetaxhasbeenpaidonarticlesorproductssubjecttoexcisetax,thesameshallnotthereafterbestoredorpermittedtoremaininthedistillery,distillerywarehouse,bondedwarehouse,orotherfactoryorplacewhereproduced.However,uponpriorpermitfromtheCommissioner,oilrefineriesand/orcompaniesmaystoreordeposittax‐paidpetroleumproductsandcomminglethesamewithitsownmanufacturedproductsnotyetsubjectedtoexcisetax.Importedpetroleumproductsmaybeallowedtobewithdrawnfromcustomscustodywithouttheprepaymentofexcisetax,whichproductsmaybecommingledwiththetax‐paidorbondedproductsoftheimporterhimselfaftersecuringapriorpermitfromtheCommissioner:Provided,Thatwithdrawalsshallbetaxedandaccountedforona"first‐in,first‐out"basis.

SEC.158.StorageofGoodsinInternal‐RevenueBondedWarehouses.‐Aninternal‐revenuebondedwarehousemaybemaintainedinanyportofentryforthestoringofimportedormanufacturedgoodswhicharesubjecttoexcisetax.Thetaxesonsuchgoodsshallbepayableonlyuponremovalfromsuchwarehouseandareasonablechargeshallbemadefortheirstoragetherein.TheCommissioner,may,inhisdiscretion,exactabondtosecurethepaymentofthetaxonanygoodssostored.

SEC.159.ProofofExportation;Exporter'sBond.‐Exportersofgoodsthatwouldbesubjecttoexcisetax,ifsoldorremovedforconsumptioninthePhilippines,shallsubmitproofofexportationsatisfactorytotheCommissionerand,whenthesameisdeemednecessary,shallberequiredtogiveabondpriortotheremovalofthegoodsforshipment,conditionedupontheexportationofthesameingoodfaith.

SEC.160.Manufacturers'andImporters'Bond.‐Manufacturersandimportersofarticlessubjecttoexcisetaxshallpostabondsubjecttothefollowingconditions:

(A)InitialBond.‐Incaseofinitialbond,theamountshallbeequaltoOneHundredthousandpesos(P100,000):Provided,Thatifaftersix(6)monthsofoperation,theamountofinitialbondislessthantheamountofthetotalexcisetaxpaidduringtheperiod,theamountofthebondshallbeadjustedtotwicethetaxactuallypaidfortheperiod.

(B)BondfortheSucceedingYearsofOperation.‐Thebondsforthesucceedingyearsofoperationshallbebasedontheactualtotalexcisetaxpaidduringtheperiodtheyearimmediatelyprecedingtheyearofoperation.

Suchbondshallbeconditioneduponfaithfulcompliance,duringthetimesuchbusinessisfollowed,withlawsandrulesandregulationsrelatingtosuchbusinessandforthesatisfactionofallfinesandpenaltiesimposedbythisCode.

SEC.161.RecordstobeKeptbyWholesaleDealers.‐Wholesaledealersshallkeeprecordsoftheirpurchasesandsalesordeliveriesofarticlessubjecttoexcisetax,insuchformasshallbeprescribedintherulesandregulationsbytheSecretaryofFinance.Theserecordsandtheentirestockofgoodssubjecttotaxshallbesubjectatalltimestoinspectionofinternalrevenueofficers.

SEC.162.RecordstobeKeptbyDealersinLeafTobacco.‐DealersinleaftobaccoshallkeeprecordsoftheproductssoldordeliveredbythemtootherpersonsinsuchmannerasmaybeprescribedintherulesandregulationsbytheSecretaryofFinance,suchrecordstobeatalltimessubjecttoinspectionofinternalrevenueofficers.

SEC.163.PreservationofInvoicesandStamps.‐Alldealerswhosoevershallpreserve,fortheperiodprescribedinSection235,allofficialinvoicesreceivedbythemfromotherdealersorfrommanufacturers,togetherwiththefractionalpartsofstampsaffixedthereto,ifany,andupondemand,shalldeliverortransmitthesametoanyintervalrevenueofficer.

SEC.164.InformationtobeGivenbyManufacturers,Importers,Indentors,andWholesalersofanyApparatusorMechanicalContrivanceSpeciallyfortheManufactureofArticlesSubjecttoExciseTaxandImporters,Indentors,

ManufacturersorSellersofCigarettePaperinBobbins,CigaretteTippingPaperorCigaretteFilterTips.‐Manufacturers,indentors,wholesalersandimportersofanyapparatusormechanicalcontrivancespeciallyforthemanufactureofarticlessubjecttotaxshall,beforeanysuchapparatusormechanicalcontrivanceisremovedfromtheplaceofmanufactureorfromthecustomshouse,givewritteninformationtotheCommissionerastothenatureandcapacityofthesame,thetimewhenitistoberemoved,andtheplaceforwhichitisdestined,aswellasthenameofthepersonbywhomitistobeused;andsuchapparatusormechanicalcontrivanceshallnotbesetupnordismantledortransferredwithoutapermitinwritingfromtheCommissioner.

AwrittenpermitfromtheCommissionerforimporting,manufacturingorsellingofcigarettepaperinbobbinsorrolls,cigarettetippingpaperorcigarettefiltertipsisrequiredbeforeanypersonshallengageintheimportation,manufactureorsaleofthesaidarticles.NopermittosellsaidarticlesshallbegrantedunlessthenameandaddressoftheprospectivebuyerisfirstsubmittedtotheCommissionerandapprovedbyhim.Records,showingthestockofthesaidarticlesandthedisposalthereofbysaleofpersonswiththeirrespectiveaddressesasapprovedbytheCommissioner,shallbekeptbytheseller,andrecords,showingstockofsaidarticlesandconsumptionthereof,shallbekeptbythebuyer,subjecttoinspectionbyinternalrevenueofficers.

SEC.165.EstablishmentofDistilleryWarehouse.‐Everydistiller,whensorequiredbytheCommissioner,shallprovideathisownexpenseawarehouse,andshallbesituatedinandconstituteapartofhisdistillerypremisesandtobeusedonlyforthestorageofdistilledspiritsofhisownmanufactureuntilthetaxthereonshallhavebeenpaid;butnodwellinghouseshallbeusedforsuchpurpose.Suchwarehouse,whenapprovedbytheCommissioner,isdeclaredtobeabondedwarehouse,andshallbeknownasadistillerywarehouse.

SEC.166.CustodyofDistilleryorDistilleryWarehouse.‐Everydistilleryordistillerywarehouseshallbeinthejointcustodyoftherevenueinspector,ifoneisassignedthereto,andoftheproprietorthereof.Itshallbekeptsecurelylocked,andshallatnotimebeunlockedoropenedorremainunlockedoropenedunlessinthepresenceofsuchrevenueinspectororotherpersonwhomaybedesignatedtoactforhimasprovidedbylaw.

SEC.167.LimitationonQuantityofSpiritsRemovedfromWarehouse.‐Nodistilledspiritsshallberemovedfromanydistillery,distillerywarehouse,orbondedwarehouseinquantitiesoflessthanfifteen(15)gaugelitersatanyonetime,except

bottledgoods,whichmayberemovedbythecaseofnotlessthantwelve(12)bottles.

SEC.168.DenaturingWithinPremises.‐ForpurposesofthisTitle,theprocessofdenaturingalcoholshallbeeffectedonlywithinthedistillerypremiseswherethealcoholtobedenaturedisproducedinaccordancewithformulasdulyapprovedbytheBureauofInternalRevenueandonlyinthepresenceofdulydesignatedrepresentativesofsaidBureau.

SEC.169.RecoveryofAlcoholforUseinArtsandIndustries.‐Manufacturersemployingprocessesinwhichdenaturedalcoholusedinartsandindustriesisexpressedorevaporatedfromthearticlesmanufacturedmay,underrulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,bepermittedtorecoverthealcoholsousedandrestoreitagaintoaconditionsuitablesolelyforuseinmanufacturingprocesses.

SEC.170.RequirementsGoverningRectificationandCompoundingofLiquors.‐Personsengagedintherectificationorcompoundingofliquorsshall,astothemodeofconductingtheirbusinessandsupervisionoverthesame,besubjecttoalltherequirementsoflawapplicabletodistilleries:Provided,Thatwherearectifiermakesuseofspiritsuponwhichtheexcisetaxhasbeenpaid,nofurthertaxshallbecollectedonanyrectifiedspiritsproducedexclusivelytherefrom:Provided,further,Thatcompoundersinthemanufactureofanyintoxicatingbeveragewhatever,shallnotbeallowedtomakeuseofspiritsuponwhichtheexcisetaxhasnotbeenpreviouslypaid.

SEC.171.AuthorityofInternalRevenueOfficerinSearchingforTaxableArticles.‐Anyinternalrevenueofficermay,inthedischargeofhisofficialduties,enteranyhouse,buildingorplacewherearticlessubjecttotaxunderthisTitleareproducedorkept,orarebelievedbyhimuponreasonablegroundstobeproducedorkept,sofarasmaybenecessarytoexamine,discoverorseizethesame.

Hemayalsostopandsearchanyvehicleorothermeansoftransportationwhenuponreasonablegroundshebelievesthatthesamecarriesanyarticleonwhichtheexcisetaxhasnotbeenpaid.

SEC.172.DetentionofPackageContainingTaxableArticles.‐Anyrevenueofficermaydetainanypackagecontainingorsupposedtocontainarticlessubjecttoexcisetaxwhenhehasgoodreasontobelievethatthelawfultaxhasnotbeenpaidorthat

thepackagehasbeenorisbeingremovedinviolationoflaw,andeverysuchpackageshallbeheldbysuchofficerinasafeplaceuntilitshallbedeterminedwhetherthepropertysodetainedisliablebylawtobeproceededagainstforforfeiture;butsuchsummarydetentionshallnotcontinueinanycaselongerthanseven(7)dayswithoutdueprocessoflaworinterventionoftheofficertowhomsuchdetentionistobereported.

TITLEVII

DOCUMENTARYSTAMPTAX

SEC.173.StampTaxesUponDocuments,LoanAgreements,InstrumentsandPapers.‐Upondocuments,instruments,loanagreementsandpapers,anduponacceptances,assignments,salesandtransfersoftheobligation,rightorpropertyincidentthereto,thereshallbelevied,collectedandpaidfor,andinrespectofthetransactionsohadoraccomplished,thecorrespondingdocumentarystamptaxesprescribedinthefollowingSectionsofthisTitle,bythepersonmaking,signing,issuing,accepting,ortransferringthesamewhereverthedocumentismade,signed,issued,acceptedortransferredwhentheobligationorrightarisesfromPhilippinesourcesorthepropertyissituatedinthePhilippines,andthesametimesuchactisdoneortransactionhad:Provided,Thatwheneveronepartytothetaxabledocumentenjoysexemptionfromthetaxhereinimposed,theotherpartywhoisnotexemptshallbetheonedirectlyliableforthetax.

SEC.174.StampTaxonDebenturesandCertificatesofIndebtedness.‐Onalldebenturesandcertificatesofindebtednessissuedbyanyassociation,companyorcorporation,thereshallbecollectedadocumentarystamptaxofOnepesoandfiftycentavos(P1.50)oneachTwohundredpesos(P200),orfractionalpartthereof,ofthefacevalueofsuchdocuments.

SEC.175.StampTaxonOriginalIssueofSharesofStock.‐Oneveryoriginalissue,whetheronorganization,reorganizationorforanylawfulpurpose,ofsharesofstockbyanyassociation,companyorcorporation,thereshallbecollectedadocumentarystamptaxofTwopesos(P2.00)oneachTwohundredpesos(P200),orfractionalpartthereof,oftheparvalue,ofsuchsharesofstock:Provided,Thatinthecaseoftheoriginalissueofsharesofstockwithoutparvaluetheamountofthedocumentarystamptaxhereinprescribedshallbebasedupontheactual

considerationfortheissuanceofsuchsharesofstock:Provided,further,Thatinthecaseofstockdividends,ontheactualvaluerepresentedbyeachshare.

SEC.176.StampTaxonSales,AgreementstoSell,MemorandaofSales,DeliveriesorTransferofDue‐bills,CertificatesofObligation,orSharesofCertificatesofStock.‐Onallsales,oragreementstosell,ormemorandaofsale,ordeliveries,ortransferofdue‐bills,certificatesofobligation,orsharesofcertificatesofstockinanyassociation,company,orcorporation,ortransferofsuchsecuritiesbyassignmentinblank,orbydelivery,orbyanypaperoragreement,ormemorandumorotherevidencesoftransferorsalewhetherentitlingtheholderinanymannertothebenefitofsuchdue‐bills,certificatesofobligationorstock,ortosecurethefuturepaymentofmoney,orforthefuturetransferofanydue‐bill,certificateofobligationorstock,thereshallbecollectedadocumentarystamptaxofOnepesoandfiftycentavos(P1.50)oneachTwohundredpesos(P200)orfractionalpartthereof,oftheparvalueofsuchdue‐bill,certificateofobligationorstock;Provided,Thatonlyonetaxshallbecollectedoneachsaleortransferofstockorsecuritiesfromonepersontoanother,regardlessofwhetherornotacertificateofstockorobligationisissued,indorsed,ordeliveredinpursuanceofsuchsaleortransfer:and,Provided,further,Thatinthecaseofstockwithoutparvaluetheamountofdocumentarystamptaxhereinprescribedshallbeequivalenttotwenty‐fivepercent(25%)ofthedocumentarystamptaxpaidupontheoriginalissueofsaidstock.

SEC.177.StampTaxonBonds,Debentures,CertificateofStockorIndebtednessIssuedinForeignCountries.‐Onallbonds,debentures,certificatesofstock,orcertificatesofindebtednessissuedinanyforeigncountry,thereshallbecollectedfromthepersonsellingortransferringthesameinthePhilippines,suchastaxasisrequiredbylawonsimilarinstrumentswhenissued,soldortransferredinthePhilippines.

SEC.178.StampTaxonCertificatesofProfitsorInterestinPropertyorAccumulations.‐Onallcertificatesofprofits,oranycertificateormemorandumshowinginterestinthepropertyoraccumulationsofanyassociation,companyorcorporation,andonalltransfersofsuchcertificatesormemoranda,thereshallbecollectedadocumentarystamptaxofFiftycentavos(P0.50)oneachTwohundredpesos(P200),orfractionalpartthereof,ofthefacevalueofsuchcertificateormemorandum.

SEC.179.StampTaxonBankChecks,Drafts,CertificatesofDepositnotBearingInterest,andOtherInstruments.‐Oneachbankcheck,draft,orcertificateofdepositnotdrawinginterest,ororderforthepaymentofanysumofmoneydrawnuponor

issuedbyanybank,trustcompany,oranypersonorpersons,companiesorcorporations,atsightorondemand,thereshallbecollectedadocumentarystamptaxofOnepesoandfiftycentavos(P1.50).

SEC.180.StampTaxonAllBonds,LoanAgreements,promissoryNotes,BillsofExchange,Drafts,InstrumentsandSecuritiesIssuedbytheGovernmentorAnyofitsInstrumentalities,DepositSubstituteDebtInstruments,CertificatesofDepositsBearingInterestandOthersNotPayableonSightorDemand.‐Onallbonds,loanagreements,includingthosesignedabroad,whereintheobjectofthecontractislocatedorusedinthePhilippines,billsofexchange(betweenpointswithinthePhilippines),drafts,instrumentsandsecuritiesissuedbytheGovernmentoranyofitsinstrumentalities,depositsubstitutedebtinstruments,certificatesofdepositsdrawinginterest,ordersforthepaymentofanysumofmoneyotherwisethanatsightorondemand,onallpromissorynotes,whethernegotiableornon‐negotiable,exceptbanknotesissuedforcirculation,andoneachrenewalofanysuchnote,thereshallbecollectedadocumentarystamptaxofThirtycentavos(P0.30)oneachTwohundredpesos(P200),orfractionalpartthereof,ofthefacevalueofanysuchagreement,billofexchange,draft,certificateofdeposit,ornote:Provided,Thatonlyonedocumentarystamptaxshallbeimposedoneitherloanagreement,orpromissorynotesissuedtosecuresuchloan,whicheverwillyieldahighertax:Provided,however,ThatloanagreementsorpromissorynotestheaggregateofwhichdoesnotexceedTwohundredfiftythousandpesos(P250,000)executedbyanindividualforhispurchaseoninstallmentforhispersonaluseorthatofhisfamilyandnotforbusiness,resale,barterorhireofahouse,lot,motorvehicle,applianceorfurnitureshallbeexemptfromthepaymentofthedocumentarystamptaxprovidedunderthisSection.

SEC.181.StampTaxUponAcceptanceofBillsofExchangeandOthers.‐UponanyacceptanceorpaymentofanybillofexchangeororderforthepaymentofmoneypurportingtobedrawninaforeigncountrybutpayableinthePhilippines,thereshallbecollectedadocumentarystamptaxofThirtycentavos(P0.30)oneachTwohundredpesos(P200),orfractionalpartthereof,ofthefacevalueofanysuchbillofexchange,ororder,orthePhilippineequivalenttosuchvalue,ifexpressedinforeigncurrency.

SEC.182.StampTaxonForeignBillsofExchangeandLettersofCredit.‐Onallforeignbillsofexchangeandlettersofcredit(includingorders,bytelegraphorotherwise,forthepaymentofmoneyissuedbyexpressorsteamshipcompaniesorbyanypersonorpersons)drawninbutpayableoutofthePhilippinesinasetofthree(3)ormoreaccordingtothecustomofmerchantsandbankers,thereshallbecollectedadocumentarystamptaxofThirtycentavos(P0.30)oneachTwohundred

pesos(P200),orfractionalpartthereof,ofthefacevalueofanysuchbillofexchangeorletterofcredit,orthePhilippineequivalentofsuchfacevalue,ifexpressedinforeigncurrency.

SEC.183.StampTaxonLifeInsurancePolicies.‐Onallpoliciesofinsuranceorotherinstrumentsbywhatevernamethesamemaybecalled,wherebyanyinsuranceshallbemadeorreneweduponanylifeorlives,thereshallbecollectedadocumentarystamptaxofFiftycentavos(P0.50)oneachTwohundredpesos(P200),orfractionalpartthereof,oftheamountinsuredbyanysuchpolicy.

SEC.184.StampTaxonPoliciesofInsuranceUponProperty.‐Onallpoliciesofinsuranceorotherinstrumentsbywhatevernamethesamemaybecalled,bywhichinsuranceshallbemadeorreneweduponpropertyofanydescription,includingrentsorprofits,againstperilbyseaoroninlandwaters,orbyfireorlightning,thereshallbecollectedadocumentarystamptaxofFiftycentavos(P0.50)oneachFourpesos(P4.00),orfractionalpartthereof,oftheamountofpremiumcharged:Provided,however,Thatnodocumentarystamptaxshallbecollectedonreinsurancecontractsoronanyinstrumentbywhichcessionoracceptanceofinsurancerisksunderanyreinsuranceagreementiseffectedorrecorded.

SEC.185.StampTaxonFidelityBondsandOtherInsurancePolicies.‐Onallpoliciesofinsuranceorbondsorobligationsofthenatureofindemnityforloss,damageorliabilitymadeorrenewedbyanyperson,association,companyorcorporationtransactingthebusinessofaccident,fidelity,employer’sliability,plate,glass,steam,boiler,burglar,elevator,automaticsprinkler,orotherbranchofinsurance(exceptlife,marine,inland,andfireinsurance),andallbonds,undertakings,orrecognizances,conditionedfortheperformanceofthedutiesofanyofficeorposition,forthedoingornotdoingofanythingthereinspecified,andonallobligationsguaranteeingthevalidityorlegalityofanybondorotherobligationsissuedbyanyprovince,city,municipality,orotherpublicbodyororganization,andonallobligationsguaranteeingthetitletoanyrealestate,orguaranteeinganymercantilecredits,whichmaybemadeorrenewedbyanysuchperson,companyorcorporation,thereshallbecollectedadocumentarystamptaxofFiftycentavos(P0.50)oneachFourpesos(P4.00),orfractionalpartthereof,ofthepremiumcharged.

SEC.186.StampTaxonPoliciesofAnnuitiesandPre‐NeedPlans.‐Onallpoliciesofannuities,orotherinstrumentsbywhatevernamethesamemaybecalled,wherebyanannuitymaybemade,transferredorredeemed,thereshallbecollectedadocumentarystamptaxofOnepesoandfiftycentavos(P1.50)oneachTwohundred

pesos(P200)orfractionalpartthereof,ofthecapitaloftheannuity,orshouldthisbeunknown,thenoneachTwohundred(P200)pesos,orfractionalpartthereof,ofthirty‐threeandone‐third(331/3)timestheannualincome.Onpre‐needplans,thedocumentarystamptaxshallbeFiftycentavos(P0.50)oneachFivehundredpesos(P500),orfractionalpartthereof,ofthevalueoramountoftheplan.

SEC.187.StampTaxonIndemnityBonds.‐Onallbondsforindemnifyinganyperson,firmorcorporationwhoshallbecomeboundorengagedassuretyforthepaymentofanysumofmoneyorforthedueexecutionorperformanceofthedutiesofanyofficeorpositionortoaccountformoneyreceivedbyvirtuethereof,andonallotherbondsofanydescription,exceptsuchasmayberequiredinlegalproceedings,orareotherwiseprovidedforherein,thereshallbecollectedadocumentarystamptaxofThirtycentavos(P0.30)oneachFourpesos(P4.00),orfractionalpartthereof,ofthepremiumcharged.

SEC.188.StampTaxonCertificates.‐Oneachcertificateofdamagesorotherwise,andoneverycertificateordocumentissuedbyanycustomsofficer,marinesurveyor,orotherpersonactingassuch,andoneachcertificateissuedbyanotarypublic,andoneachcertificateofanydescriptionrequiredbylaworbyrulesorregulationsofapublicoffice,orwhichisissuedforthepurposeofgivinginformation,orestablishingproofofafact,andnototherwisespecifiedherein,thereshallbecollectedadocumentarystamptaxofFifteenpesos(P15.00).

SEC.189.StampTaxonWarehouseReceipts.‐Oneachwarehousereceiptforpropertyheldinstorageinapublicorprivatewarehouseoryardforanypersonotherthantheproprietorofsuchwarehouseoryard,thereshallbecollectedadocumentarystamptaxofFifteenpesos(P15.00):Provided,ThatnotaxshallbecollectedoneachwarehousereceiptissuedtoanyonepersoninanyonecalendarmonthcoveringpropertythevalueofwhichdoesnotexceedTwohundredpesos(P200).

SEC.190.StampTaxonJai‐Alai,HorseRacingTickets,lottoorOtherAuthorizedNumbersGames.‐Oneachjai‐alai,horseraceticket,lotto,orotherauthorizednumbergames,thereshallbecollectedadocumentarystamptaxofTencentavos(P0.10):Provided,ThatifthecostoftheticketexceedsOnepeso(P1.00),anadditionaltaxofTencentavos(P0.10)oneveryOnepeso(P1.00,orfractionalpartthereof,shallbecollected.

SEC.191.StampTaxonBillsofLadingorReceipts.‐Oneachsetofbillsofladingorreceipts(exceptcharterparty)foranygoods,merchandiseoreffectsshippedfromoneportorplaceinthePhilippinestoanotherportorplaceinthePhilippines(exceptonferriesacrossrivers),ortoanyforeignport,thereshallbecollecteddocumentarystamptaxofOnepeso(P1.00),ifthevalueofsuchgoodsexceedsOnehundredpesos(P100)anddoesnotexceedOneThousandpesos(P1,000);Tenpesos(P10),ifthevalueexceedsOnethousandpesos(P1,000):Provided,however,Thatfreightticketscoveringgoods,merchandiseoreffectscarriedasaccompaniedbaggageofpassengersonlandandwatercarriersprimarilyengagedinthetransportationofpassengersareherebyexempt.

SEC.192.StampTaxonProxies.‐Oneachproxyforvotingatanyelectionforofficersofanycompanyorassociation,orforanyotherpurpose,exceptproxiesissuedaffectingtheaffairsofassociationsorcorporationsorganizedforreligious,charitableorliterarypurposes,thereshallbecollectedadocumentarystamptaxofFifteenpesos(P15.00).

SEC.193.StampTaxonPowersofAttorney.‐Oneachpowerofattorneytoperformanyactwhatsoever,exceptactsconnectedwiththecollectionofclaimsduefromoraccruingtotheGovernmentoftheRepublicofthePhilippines,orthegovernmentofanyprovince,cityormunicipality,thereshallbecollectedadocumentarystamptaxofFivepesos(P5.00).

SEC.194.StampTaxonLeasesandOtherHiringAgreements.‐Oneachlease,agreement,memorandum,orcontractforhire,useorrentofanylandsortenements,orportionsthereof,thereshallbecollectedadocumentarystamptaxofThreepesos(P3.00)forthefirstTwothousandpesos(P2,000),orfractionalpartthereof,andanadditionalOnepeso(P1.00)foreveryOneThousandpesos(P1,000)orfractionalpartthereof,inexcessofthefirstTwothousandpesos(P2,000)foreachyearofthetermofsaidcontractoragreement.

SEC.195.StampTaxonMortgages,PledgesandDeedsofTrust.‐Oneverymortgageorpledgeoflands,estate,orproperty,realorpersonal,heritableormovable,whatsoever,wherethesameshallbemadeasasecurityforthepaymentofanydefiniteandcertainsumofmoneylentatthetimeorpreviouslydueandowingofforbornetobepaid,beingpayableandonanyconveyanceofland,estate,orpropertywhatsoever,intrustortobesold,orotherwiseconvertedintomoneywhichshallbeandintendedonlyassecurity,eitherbyexpressstipulationorotherwise,thereshallbecollectedadocumentarystamptaxatthefollowingrates:

(a)WhentheamountsecureddoesnotexceedFivethousandpesos(P5,000),Twentypesos(P20.00).

(b)OneachFivethousandpesos(P5,000),orfractionalpartthereofinexcessofFivethousandpesos(P5,000),anadditionaltaxofTenpesos(P10.00).

Onanymortgage,pledge,ordeedoftrust,wherethesameshallbemadeasasecurityforthepaymentofafluctuatingaccountorfutureadvanceswithoutfixedlimit,thedocumentarystamptaxonsuchmortgage,pledgeordeedoftrustshallbecomputedontheamountactuallyloanedorgivenatthetimeoftheexecutionofthemortgage,pledgeordeedoftrust,additionaldocumentarystamptaxshallbepaidwhichshallbecomputedonthebasisoftheamountadvancedorloanedattheratesspecifiedabove:Provided,however,Thatifthefullamountoftheloanorcredit,grantedunderthemortgage,pledgeordeedoftrustshallbecomputedontheamountactuallyloanedorgivenatthetimeoftheexecutionofthemortgage,pledgeordeedoftrust.However,ifsubsequentadvancesaremadeonsuchmortgage,pledgeordeedoftrust,additionaldocumentarystamptaxshallbepaidwhichshallbecomputedonthebasisoftheamountadvancedorloanedattheratesspecifiedabove:Provided,however,Thatifthefullamountoftheloanorcredit,grantedunderthemortgage,pledgeordeedoftrustisspecifiedinsuchmortgage,pledgeordeedoftrust,thedocumentarystamptaxprescribedinthisSectionshallbepaidandcomputedonthefullamountoftheloanorcreditgranted.

SEC.196.StamptaxonDeedsofSaleandConveyancesofRealProperty.‐Onallconveyances,deeds,instruments,orwritings,otherthangrants,patentsororiginalcertificatesofadjudicationissuedbytheGovernment,wherebyanyland,tenement,orotherrealtysoldshallbegranted,assigned,transferredorotherwiseconveyedtothepurchaser,orpurchasers,ortoanyotherpersonorpersonsdesignatedbysuchpurchaserorpurchasers,thereshallbecollectedadocumentarystamptax,attherateshereinbelowprescribed,basedontheconsiderationcontractedtobepaidforsuchrealtyoronitsfairmarketvaluedeterminedinaccordancewithSection6(E)ofthisCode,whicheverishigher:Provided,ThatwhenoneofthecontractingpartiesistheGovernmentthetaxhereinimposedshallbebasedontheactualconsideration.

(a)Whentheconsideration,orvaluereceivedorcontractedtobepaidforsuchrealtyaftermakingproperallowanceofanyencumbrance,doesnotexceedOnethousandpesos(P1,000)fifteenpesos(P15.00).

(b)ForeachadditionalOnethousandPesos(P1,000),orfractionalpartthereofinexcessofOnethousandpesos(P1,000)ofsuchconsiderationorvalue,Fifteenpesos(P15.00).

Whenitappearsthattheamountofthedocumentarystamptaxpayablehereunderhasbeenreducedbyanincorrectstatementoftheconsiderationinanyconveyance,deed,instrumentorwritingsubjecttosuchtaxtheCommissioner,provincialorcityTreasurer,orotherrevenueofficershall,fromtheassessmentrollsorotherreliablesourceofinformation,assessthepropertyofitstruemarketvalueandcollectthepropertaxthereon.

SEC.197.StampTaxonCharterPartiesandSimilarInstruments.‐Oneverycharterparty,contractoragreementforthecharterofanyship,vesselorsteamer,oranyletterormemorandumorotherwritingbetweenthecaptain,masterorowner,orotherpersonactingasagentofanyship,vesselorsteamer,andanyotherpersonorpersonsfororrelatingtothecharterofanysuchship,vesselorsteamer,andonanyrenewalortransferofsuchcharter,contract,agreement,letterormemorandum,thereshallbecollectedadocumentarystamptaxatthefollowingrates:

(a)Iftheregisteredgrosstonnageoftheship,vesselorsteamerdoesnotexceedonethousand(1,000)tons,andthedurationofthecharterorcontractdoesnotexceedsix(6)months,Fivehundredpesos(P500);andforeachmonthorfractionofamonthinexcessofsix(6)months,anadditionaltaxofFiftypesos(P50.00)shallbepaid.

(b)Iftheregisteredgrosstonnageexceedsonethousand(1,000)tonsanddoesnotexceedtenthousand(10,000)tons,andthedurationofthecharterorcontractdoesnotexceedsix(6)months,Onethousandpesos(P1,000);andforeachmonthorfractionofamonthinexcessofsix(6)months,anadditionaltaxofOnehundredpesos(P100)shallbepaid.

(c)Iftheregisteredgrosstonnageexceedstenthousand(10,000)tonsandthedurationofthecharterorcontractdoesnotexceedsix(6)months,Onethousandfivehundredpesos(P1,500);andforeachmonthorfractionofamonthinexcessofsix(6)months,anadditionaltaxofOnehundredfiftypesos(P150)shallbepaid.

SEC.198.StampTaxonAssignmentsandRenewalsofCertainInstruments.‐Uponeachandeveryassignmentortransferofanymortgage,leaseorpolicyofinsurance,ortherenewalorcontinuanceofanyagreement,contract,charter,oranyevidenceofobligationorindebtednessbyalteringorotherwise,thereshallbelevied,collectedandpaidadocumentarystamptax,atthesamerateasthatimposedontheoriginalinstrument.

SEC.199.DocumentsandPapersNotSubjecttoStampTax.‐TheprovisionsofSection173tothecontrarynotwithstanding,thefollowinginstruments,documentsandpapersshallbeexemptfromthedocumentarystamptax:

(a)Policiesofinsuranceorannuitiesmadeorgrantedbyafraternalorbeneficiarysociety,order,associationorcooperativecompany,operatedonthelodgesystemorlocalcooperationplanandorganizedandconductedsolelybythemembersthereoffortheexclusivebenefitofeachmemberandnotforprofit.

(b)Certificatesofoathsadministeredtoanygovernmentofficialinhisofficialcapacityorofacknowledgmentbyanygovernmentofficialintheperformanceofhisofficialduties,writtenappearanceinanycourtbyanygovernmentofficial,inhisofficialcapacity;certificatesoftheadministrationofoathstoanypersonastotheauthenticityofanypaperrequiredtobefiledincourtbyanypersonorpartythereto,whethertheproceedingsbecivilorcriminal;papersanddocumentsfiledincourtsbyorforthenational,provincial,cityormunicipalgovernments;affidavitsofpoorpersonsforthepurposeofprovingpoverty;statementsandothercompulsoryinformationrequiredofpersonsorcorporationsbytherulesandregulationsofthenational,provincial,cityormunicipalgovernmentsexclusivelyforstatisticalpurposesandwhicharewhollyfortheuseofthebureauorofficeinwhichtheyarefiled,andnotattheinstanceorfortheuseorbenefitofthepersonfilingthem;certifiedcopiesandothercertificatesplacedupondocuments,instrumentsandpapersforthenational,provincial,city,ormunicipalgovernments,madeattheinstanceandforthesoleuseofsomeotherbranchofthenational,provincial,cityormunicipalgovernments;andcertificatesoftheassessedvalueoflands,notexceedingTwohundredpesos(P200)invalueassessed,furnishedbytheprovincial,cityormunicipalTreasurertoapplicantsforregistrationoftitletoland.

SEC.200.PaymentofDocumentaryStampTax.‐

(A)InGeneral.‐TheprovisionsofPresidentialDecreeNo.1045notwithstanding,anypersonliabletopaydocumentarystamptaxuponanydocumentsubjecttotaxunderTitleVIIofthisCodeshallfileataxreturnandpaythetaxinaccordancewiththerulesandregulationstobeprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

(B)TimeforFilingandPaymentoftheTax.‐ExceptasprovidedbyrulesandregulationspromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,thetaxreturnprescribedinthisSectionshallbefiledwithinten(10)daysafterthecloseofthemonthwhenthetaxabledocumentwasmade,signed,issued,accepted,ortransferred,andthetaxthereonshallbepaidatthesametimetheaforesaidreturnisfiled.

(C)WheretoFile.‐ExceptincaseswheretheCommissionerotherwisepermits,theaforesaidtaxreturnshallbefiledwithandthetaxdueshallbepaidthroughtheauthorizedagentbankwithintheterritorialjurisdictionoftheRevenueDistrictOfficewhichhasjurisdictionovertheresidenceorprincipalplaceofbusinessofthetaxpayer.Inplaceswherethereisnoauthorizedagentbank,thereturnshallbefiledwiththeRevenueDistrictOfficer,collectionagent,ordulyauthorizedTreasurerofthecityormunicipalityinwhichthetaxpayerhashislegalresidenceorprincipalplaceofbusiness.

(D)Exception.‐InlieuoftheforegoingprovisionsofthisSection,thetaxmaybepaideitherthroughpurchaseandactualaffixture;orbyimprintingthestampsthroughadocumentarystampmeteringmachine,onthetaxabledocument,inthemannerasmaybeprescribedbyrulesandregulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

SEC.201.EffectofFailuretoStampTaxableDocument.‐Aninstrument,documentorpaperwhichisrequiredbylawtobestampedandwhichhasbeensigned,issued,acceptedortransferredwithoutbeingdulystamped,shallnotberecorded,norshallitoranycopythereoforanyrecordoftransferofthesamebeadmittedorusedinevidenceinanycourtuntiltherequisitestamporstampsareaffixedtheretoandcancelled.

TITLEVIII

REMEDIES

CHAPTERI

REMEDIESINGENERAL

SEC.202.FinalDeedtoPurchaser.‐IncasethetaxpayershallnotredeemthepropertyashereinprovidedtheRevenueDistrictOfficershall,asgrantor,executeadeedconveyingtothepurchasersomuchofthepropertyashasbeensold,freefromallliensofanykindwhatsoever,andthedeedshallsuccintlyrecitealltheproceedingsuponwhichthevalidityofthesaledepends.

SEC.203.PeriodofLimitationUponAssessmentandCollection.‐ExceptasprovidedinSection222,internalrevenuetaxesshallbeassessedwithinthree(3)yearsafterthelastdayprescribedbylawforthefilingofthereturn,andnoproceedingincourtwithoutassessmentforthecollectionofsuchtaxesshallbebegunaftertheexpirationofsuchperiod:Provided,Thatinacasewhereareturnisfiledbeyondtheperiodprescribedbylaw,thethree(3)‐yearperiodshallbecountedfromthedaythereturnwasfiled.ForpurposesofthisSection,areturnfiledbeforethelastdayprescribedbylawforthefilingthereofshallbeconsideredasfiledonsuchlastday.

SEC.204.AuthorityoftheCommissionertoCompromise,AbateandRefundorCreditTaxes.‐TheCommissionermay‐

(A)CompromisethePaymentofanyInternalRevenueTax,when:

(1)Areasonabledoubtastothevalidityoftheclaimagainstthetaxpayerexists;or

(2)Thefinancialpositionofthetaxpayerdemonstratesaclearinabilitytopaytheassessedtax.

Thecompromisesettlementofanytaxliabilityshallbesubjecttothefollowingminimumamounts:

Forcasesoffinancialincapacity,aminimumcompromiserateequivalenttotenpercent(10%)ofthebasicassessedtax;and

Forothercases,aminimumcompromiserateequivalenttofortypercent(40%)ofthebasicassessedtax.

WherethebasictaxinvolvedexceedsOnemillionpesos(P1,000.000)orwherethesettlementofferedislessthantheprescribedminimumrates,thecompromiseshallbesubjecttotheapprovaloftheEvaluationBoardwhichshallbecomposedoftheCommissionerandthefour(4)DeputyCommissioners.

(B)AbateorCancelaTaxLiability,when:

(1)Thetaxoranyportionthereofappearstobeunjustlyorexcessivelyassessed;or

(2)Theadministrationandcollectioncostsinvolveddonotjustifythecollectionofthe

amountdue.

Allcriminalviolationsmaybecompromisedexcept:(a)thosealreadyfiledincourt,or(b)thoseinvolvingfraud.

(C)Creditorrefundtaxeserroneouslyorillegallyreceivedorpenaltiesimposedwithoutauthority,refundthevalueofinternalrevenuestampswhentheyarereturnedingoodconditionbythepurchaser,and,inhisdiscretion,redeemorchangeunusedstampsthathavebeenrenderedunfitforuseandrefundtheirvalueuponproofofdestruction.NocreditorrefundoftaxesorpenaltiesshallbeallowedunlessthetaxpayerfilesinwritingwiththeCommissioneraclaimforcreditorrefundwithintwo(2)yearsafterthepaymentofthetaxorpenalty:Provided,however,Thatareturnfiledshowinganoverpaymentshallbeconsideredasawrittenclaimforcreditorrefund.

ATaxCreditCertificatevalidlyissuedundertheprovisionsofthisCodemaybeappliedagainstanyinternalrevenuetax,excludingwithholdingtaxes,forwhichthe

taxpayerisdirectlyliable.Anyrequestforconversionintorefundofunutilizedtaxcreditsmaybeallowed,subjecttotheprovisionsofSection230ofthisCode:Provided,ThattheoriginalcopyoftheTaxCreditCertificateshowingacreditablebalanceissurrenderedtotheappropriaterevenueofficerforverificationandcancellation:Provided,further,Thatinnocaseshallataxrefundbegivenresultingfromavailmentofincentivesgrantedpursuanttospeciallawsforwhichnoactualpaymentwasmade.

TheCommissionershallsubmittotheChairmenoftheCommitteeonWaysandMeansofboththeSenateandHouseofRepresentatives,everysix(6)months,areportontheexerciseofhispowersunderthisSection,statingthereinthefollowingfactsandinformation,amongothers:namesandaddressesoftaxpayerswhosecaseshavebeenthesubjectofabatementorcompromise;amountinvolved;amountcompromisedorabated;andreasonsfortheexerciseofpower:Provided,ThatthesaidreportshallbepresentedtotheOversightCommitteeinCongressthatshallbeconstitutedtodeterminethatsaidpowersarereasonablyexercisedandthatthegovernmentisnotundulydeprivedofrevenues.

CHAPTERII

CIVILREMEDIESFORCOLLECTIONOFTAXES

SEC.205.RemediesfortheCollectionofDelinquentTaxes.‐Thecivilremediesforthecollectionofinternalrevenuetaxes,feesorcharges,andanyincrementtheretoresultingfromdelinquencyshallbe:

(a)Bydistraintofgoods,chattels,oreffects,andotherpersonalpropertyofwhatevercharacter,includingstocksandothersecurities,debts,credits,bankaccountsandinterestinandrightstopersonalproperty,andbylevyuponrealpropertyandinterestinrightstorealproperty;and

(b)Bycivilorcriminalaction.

Eitheroftheseremediesorbothsimultaneouslymaybepursuedinthediscretionoftheauthoritieschargedwiththecollectionofsuchtaxes:Provided,however,ThattheremediesofdistraintandlevyshallnotbeavailedofwheretheamountoftaxinvolveisnotmorethanOnehundredpesos(P100).

ThejudgmentinthecriminalcaseshallnotonlyimposethepenaltybutshallalsoorderpaymentofthetaxessubjectofthecriminalcaseasfinallydecidedbytheCommissioner.

TheBureauofInternalRevenueshalladvancetheamountsneededtodefraycostsofcollectionbymeansofcivilorcriminalaction,includingthepreservationortransportationofpersonalpropertydistrainedandtheadvertisementandsalethereof,aswellasofrealpropertyandimprovementsthereon.

SEC.206.ConstructiveDistraintofthePropertyofaTaxpayer.‐TosafeguardtheinterestoftheGovernment,theCommissionermayplaceunderconstructivedistraintthepropertyofadelinquenttaxpayeroranytaxpayerwho,inhisopinion,isretiringfromanybusinesssubjecttotax,orisintendingtoleavethePhilippinesortoremovehispropertytherefromortohideorconcealhispropertyortoperformanyacttendingtoobstructtheproceedingsforcollectingthetaxdueorwhichmaybeduefromhim.

Theconstructivedistraintofpersonalpropertyshallbeaffectedbyrequiringthetaxpayeroranypersonhavingpossessionorcontrolofsuchpropertytosignareceiptcoveringthepropertydistrainedandobligatehimselftopreservethesameintactandunalteredandnottodisposeofthesame;inanymannerwhatever,withouttheexpressauthorityoftheCommissioner.

Incasethetaxpayerorthepersonhavingthepossessionandcontrolofthepropertysoughttobeplacedunderconstructivedistraintrefusesorfailstosignthereceipthereinreferredto,therevenueofficereffectingtheconstructivedistraintshallproceedtopreparealistofsuchpropertyand,inthepresenceoftwo(2)witnessed,leaveacopythereofinthepremiseswherethepropertydistrainedislocated,afterwhichthesaidpropertyshallbedeemedtohavebeenplacedunderconstructivedistraint.

SEC.207.SummaryRemedies.‐

(A)DistraintofPersonalProperty.‐Uponthefailureofthepersonowinganydelinquenttaxordelinquentrevenuetopaythesameatthetimerequired,the

Commissionerorhisdulyauthorizedrepresentative,iftheamountinvolvedisinexcessofOnemillionpesos(P1,000,000),ortheRevenueDistrictOfficer,iftheamountinvolvedisOnemillionpesos(P1,000,000)orless,shallseizeanddistraintanygoods,chattelsoreffects,andthepersonalproperty,includingstocksandothersecurities,debts,credits,bankaccounts,andinterestsinandrightstopersonalpropertyofsuchpersons;insufficientquantitytosatisfythetax,orcharge,togetherwithanyincrementtheretoincidenttodelinquency,andtheexpensesofthedistraintandthecostofthesubsequentsale.

Areportonthedistraintshall,withinten(10)daysfromreceiptofthewarrant,besubmittedbythedistrainingofficertotheRevenueDistrictOfficer,andtotheRevenueRegionalDirector:Provided,ThattheCommissionerorhisdulyauthorizedrepresentativeshall,subjecttorulesandregulationspromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,havethepowertoliftsuchorderofdistraint:Provided,further,ThataconsolidatedreportbytheRevenueRegionalDirectormayberequiredbytheCommissionerasoftenasnecessary.

(B)LevyonRealProperty.‐AftertheexpirationofthetimerequiredtopaythedelinquenttaxordelinquentrevenueasprescribedinthisSection,realpropertymaybeleviedupon,beforesimultaneouslyorafterthedistraintofpersonalpropertybelongingtothedelinquent.Tothisend,anyinternalrevenueofficerdesignatedbytheCommissionerorhisdulyauthorizedrepresentativeshallprepareadulyauthenticatedcertificateshowingthenameofthetaxpayerandtheamountsofthetaxandpenaltyduefromhim.SaidcertificateshalloperatewiththeforceofalegalexecutionthroughoutthePhilippines.

Levyshallbeaffectedbywritinguponsaidcertificateadescriptionofthepropertyuponwhichlevyismade.Atthesametime,writtennoticeofthelevyshallbemailedtoorservedupontheRegisterofDeedsfortheprovinceorcitywherethepropertyislocatedanduponthedelinquenttaxpayer,orifhebeabsentfromthePhilippines,tohisagentorthemanagerofthebusinessinrespecttowhichtheliabilityarose,oriftherebenone,totheoccupantofthepropertyinquestion.

Incasethewarrantoflevyonrealpropertyisnotissuedbeforeorsimultaneouslywiththewarrantofdistraintonpersonalproperty,andthepersonalpropertyofthetaxpayerisnotsufficienttosatisfyhistaxdelinquency,theCommissionerorhisdulyauthorizedrepresentativeshall,withinthirty(30)daysafterexecutionofthedistraint,proceedwiththelevyonthetaxpayer'srealproperty.

Withinten(10)daysafterreceiptofthewarrant,areportonanylevyshallbesubmittedbythelevyingofficertotheCommissionerorhisdulyauthorizedrepresentative:Provided,however,ThataconsolidatedreportbytheRevenueRegionalDirectormayberequiredbytheCommissionerasoftenasnecessary:Provided,further,ThattheCommissionerorhisdulyauthorizedrepresentative,subjecttorulesandregulationspromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,shallhavetheauthoritytoliftwarrantsoflevyissuedinaccordancewiththeprovisionshereof.

SEC.208.ProcedureforDistraintandGarnishment.‐Theofficerservingthewarrantofdistraintshallmakeorcausetobemadeanaccountofthegoods,chattels,effectsorotherpersonalpropertydistrained,acopyofwhich,signedbyhimself,shallbelefteitherwiththeownerorpersonfromwhosepossessionsuchgoods,chattels,oreffectsorotherpersonalpropertyweretaken,oratthedwellingorplaceofbusinessofsuchpersonandwithsomeoneofsuitableageanddiscretion,towhichlistshallbeaddedastatementofthesumdemandedandnoteofthetimeandplaceofsale.

Stocksandothersecuritiesshallbedistrainedbyservingacopyofthewarrantofdistraintuponthetaxpayeranduponthepresident,manager,treasurerorotherresponsibleofficerofthecorporation,companyorassociation,whichissuedthesaidstocksorsecurities.

Debtsandcreditsshallbedistrainedbyleavingwiththepersonowingthedebtsorhavinginhispossessionorunderhiscontrolsuchcredits,orwithhisagent,acopyofthewarrantofdistraint.ThewarrantofdistraintshallbesufficientauthoritytothepersonowningthedebtsorhavinginhispossessionorunderhiscontrolanycreditsbelongingtothetaxpayertopaytotheCommissionertheamountofsuchdebtsorcredits.

Bankaccountsshallbegarnishedbyservingawarrantofgarnishmentuponthetaxpayeranduponthepresident,manager,treasurerorotherresponsibleofficerofthebank.Uponreceiptofthewarrantofgarnishment,thebankshalltunovertotheCommissionersomuchofthebankaccountsasmaybesufficienttosatisfytheclaimoftheGovernment.

SEC.209.SaleofPropertyDistrainedandDispositionofProceeds.‐TheRevenueDistrictOfficerorhisdulyauthorizedrepresentative,otherthantheofficerreferred

toinSection208ofthisCodeshall,accordingtorulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,forthwithcauseanotificationtobeexhibitedinnotlessthantwo(2)publicplacesinthemunicipalityorcitywherethedistraintismade,specifying;thetimeandplaceofsaleandthearticlesdistrained.Thetimeofsaleshallnotbelessthantwenty(20)daysafternotice.OneplaceforthepostingofsuchnoticeshallbeattheOfficeoftheMayorofthecityormunicipalityinwhichthepropertyisdistrained.

Atthetimeandplacefixedinsuchnotice,thesaidrevenueofficershallsellthegoods,chattels,oreffects,orotherpersonalproperty,includingstocksandothersecuritiessodistrained,atpublicauction,tothehighestbidderforcash,orwiththeapprovaloftheCommissioner,throughdulylicensedcommodityorstockexchanges.

InthecaseofStocksandothersecurities,theofficermakingthesaleshallexecuteabillofsalewhichheshalldelivertothebuyer,andacopythereoffurnishedthecorporation,companyorassociationwhichissuedthestocksorothersecurities.Uponreceiptofthecopyofthebillofsale,thecorporation,companyorassociationshallmakethecorrespondingentryinitsbooks,transferthestocksorothersecuritiessoldinthenameofthebuyer,andissue,ifrequiredtodoso,thecorrespondingcertificatesofstockorothersecurities.

Anyresidueoverandabovewhatisrequiredtopaytheentireclaim,includingexpenses,shallbereturnedtotheownerofthepropertysold.Theexpenseschargeableuponeachseizureandsaleshallembraceonlytheactualexpensesofseizureandpreservationofthepropertypending;thesale,andnochargeshallbeimposedfortheservicesofthelocalinternalrevenueofficerorhisdeputy.

SEC.210.ReleaseofDistrainedPropertyUponPaymentPriortoSale.‐Ifatanytimepriortotheconsummationofthesaleallproperchargesarepaidtotheofficerconductingthesale,thegoodsoreffectsdistrainedshallberestoredtotheowner.

SEC.211.ReportofSaletoBureauofInternalRevenue.‐Withintwo(2)daysafterthesale,theofficermakingthesameshallmakeareportofhisproceedingsinwritingtotheCommissionerandshallhimselfpreserveacopyofsuchreportasanofficialrecord.

SEC.212.PurchasebyGovernmentatSaleUponDistraint.‐Whentheamountbidforthepropertyunderdistraintisnotequaltotheamountofthetaxorisverymuchlessthantheactualmarketvalueofthearticlesofferedforsale,theCommissionerorhisdeputymaypurchasethesameinbehalfofthenationalGovernmentfortheamountoftaxes,penaltiesandcostsduethereon.

PropertysopurchasedmayberesoldbytheCommissionerorhisdeputy,subjecttotherulesandregulationsprescribedbytheSecretaryofFinance,thenetproceedstherefromshallberemittedtotheNationalTreasuryandaccountedforasinternalrevenue.

SEC.213.AdvertisementandSale.‐Withintwenty(20)daysafterlevy,theofficerconductingtheproceedingsshallproceedtoadvertisethepropertyorausableportionthereofasmaybenecessarytosatisfytheclaimandcostofsale;andsuchadvertisementshallcoveraperiodofaleastthirty(30)days.Itshallbeeffectuatedbypostinganoticeatthemainentranceofthemunicipalbuildingorcityhallandinpublicandconspicuousplaceinthebarrioordistrictinwhichtherealestateliesand;bypublicationonceaweekforthree(3)weeksinanewspaperofgeneralcirculationinthemunicipalityorcitywherethepropertyislocated.Theadvertisementshallcontainastatementoftheamountoftaxesandpenaltiessodueandthetimeandplaceofsale,thenameofthetaxpayeragainstwhomtaxesarelevied,andashortdescriptionofthepropertytobesold.Atanytimebeforethedayfixedforthesale,thetaxpayermaydiscontinueallproceedingsbypayingthetaxes,penaltiesandinterest.Ifhedoesnotdoso,thesaleshallproceedandshallbeheldeitheratthemainentranceofthemunicipalbuildingorcityhall,oronthepremisestobesold,astheofficerconductingtheproceedingsshalldetermineandasthenoticeofsaleshallspecify.

Withinfive(5)daysafterthesale,areturnbythedistrainingorlevyingofficeroftheproceedingsshallbeenteredupontherecordsoftheRevenueCollectionOfficer,theRevenueDistrictofficerandtheRevenueRegionalDirector.TheRevenueCollectionOfficer,inconsultationwiththeRevenuedistrictOfficer,shallthenmakeoutanddelivertothepurchaseracertificatefromhisrecords,showingtheproceedingsofthesale,describingthepropertysoldstatingthenameofthepurchaserandsettingouttheexactamountofalltaxes,penaltiesandinterest:Provided,however,Thatincasetheproceedsofthesaleexceedstheclaimandcostofsale,theexcessshallbeturnedovertotheowneroftheproperty.

TheRevenueCollectionOfficer,uponapprovalbytheRevenueDistrictOfficermay,outofhiscollection,advanceanamountsufficienttodefraythecostsofcollectionby

meansofthesummaryremediesprovidedforinthisCode,including;thepreservationortransportationincaseofpersonalproperty,andtheadvertisementandsubsequentsale,bothincasesofpersonalandrealpropertyincludingimprovementsfoundonthelatter.Inhismonthlycollectionreports,suchadvancesshallbereflectedandsupportedbyreceipts.

SEC.214.RedemptionofPropertySold.‐Withinone(1)yearfromthedateofsale,thedelinquenttaxpayer,oranyoneforhim,shallhavetherightofpayingtotheRevenueDistrictOfficertheamountofthepublictaxes,penalties,andinterestthereonfromthedateofdelinquencytothedateofsale,togetherwithinterestonsaidpurchasepriceattherateoffifteenpercent(15%)perannumfromthedateofpurchasetothedateofredemption,andsuchpaymentshallentitlethepersonpayingtothedeliveryofthecertificateissuedtothepurchaserandacertificatefromthesaidRevenueDistrictOfficerthathehasthusredeemedtheproperty,andtheRevenueDistrictOfficershallforthwithpayovertothepurchasertheamountbywhichsuchpropertyhasthusbeenredeemed,andsaidpropertythereaftershallbefreeformthelienofsuchtaxesandpenalties.

Theownershallnot,however,bedeprivedofthepossessionofthesaidpropertyandshallbeentitledtotherentsandotherincomethereofuntiltheexpirationofthetimeallowedforitsredemption.

SEC.215.ForfeituretoGovernmentforWantofBidder.‐Incasethereisnobidderforrealpropertyexposedforsaleashereinaboveprovidedorifthehighestbidisforanamountinsufficienttopaythetaxes,penaltiesandcosts,theInternalRevenueOfficerconductingthesaleshalldeclarethepropertyforfeitedtotheGovernmentinsatisfactionoftheclaiminquestionandwithintwo(2)daysthereafter,shallmakeareturnofhisproceedingsandtheforfeiturewhichshallbespreadupontherecordsofhisoffice.ItshallbethedutyoftheRegisterofDeedsconcerned,uponregistrationwithhisofficeofanysuchdeclarationofforfeiture,totransferthetitleofthepropertyforfeitedtotheGovernmentwithoutthenecessityofanorderfromacompetentcourt.

Withinone(1)yearfromthedateofsuchforfeiture,thetaxpayer,oranyoneforhimmayredeemsaidpropertybypayingtotheCommissionerorthelatter'sRevenueCollectionOfficerthefullamountofthetaxesandpenalties,togetherwithinterestthereonandthecostsofsale,butifthepropertybenotthusredeemed,theforfeitureshallbecomeabsolute.

SEC.216.ResaleofRealEstateTakenforTaxes.‐TheCommissionershallhavechargeofanyrealestateobtainedbytheGovernmentofthePhilippinesinpaymentorsatisfactionoftaxes,penaltiesorcostsarisingunderthisCodeorincompromiseoradjustmentofanyclaimtherefore,andsaidCommissionermay,uponthegivingofnotlessthantwenty(20)daysnotice,sellanddisposeofthesameofpublicauctionorwithpriorapprovaloftheSecretaryofFinance,disposeofthesameatprivatesale.Ineithercase,theproceedsofthesaleshallbedepositedwiththeNationalTreasury,andanaccountingofthesameshallrenderedtotheChairmanoftheCommissiononAudit.

SEC.217.FurtherDistraintorLevy.‐Theremedybydistraintofpersonalpropertyandlevyonrealtymayberepeatedifnecessaryuntilthefullamountdue,includingallexpenses,iscollected.

SEC.218.InjunctionnotAvailabletoRestrainCollectionofTax.‐Nocourtshallhavetheauthoritytograntaninjunctiontorestrainthecollectionofanynationalinternalrevenuetax,feeorchargeimposedbythisCode.

SEC.219.NatureandExtentofTaxLien.‐Ifanyperson,corporation,partnership,joint‐account(cuentasenparticipacion),associationorinsurancecompanyliabletopayaninternalrevenuetax,neglectsorrefusestopaythesameafterdemand,theamountshallbealieninfavoroftheGovernmentofthePhilippinesfromthetimewhentheassessmentwasmadebytheCommissioneruntilpaid,withinterests,penalties,andcoststhatmayaccrueinadditiontheretouponallpropertyandrightstopropertybelongingtothetaxpayer:Provided,ThatthislienshallnotbevalidagainstanymortgageepurchaserorjudgmentcreditoruntilnoticeofsuchlienshallbefiledbytheCommissionerintheofficeoftheRegisterofDeedsoftheprovinceorcitywherethepropertyofthetaxpayerissituatedorlocated.

SEC.220.FormandModeofProceedinginActionsArisingunderthisCode.‐CivilandcriminalactionsandproceedingsinstitutedinbehalfoftheGovernmentundertheauthorityofthisCodeorotherlawenforcedbytheBureauofInternalRevenueshallbebroughtinthenameoftheGovernmentofthePhilippinesandshallbeconductedbylegalofficersoftheBureauofInternalRevenuebutnocivilorcriminalactionfortherecoveryoftaxesortheenforcementofanyfine,penaltyorforfeitureunderthisCodeshallbefiledincourtwithouttheapprovaloftheCommissioner.

SEC.221.RemedyforEnforcementofStatutoryPenalProvisions.‐Theremedyforenforcementofstatutorypenaltiesofallsortsshallbebycriminalorcivilaction,astheparticularsituationmayrequire,subjecttotheapprovaloftheCommissioner.

SEC.222.ExceptionsastoPeriodofLimitationofAssessmentandCollectionofTaxes.‐

(a)Inthecaseofafalseorfraudulentreturnwithintenttoevadetaxoroffailuretofileareturn,thetaxmaybeassessed,oraproceedingincourtforthecollectionofsuchtaxmaybefiledwithoutassessment,atanytimewithinten(10)yearsafterthediscoveryofthefalsity,fraudoromission:Provided,Thatinafraudassessmentwhichhasbecomefinalandexecutory,thefactoffraudshallbejudiciallytakencognizanceofinthecivilorcriminalactionforthecollectionthereof.

(b)IfbeforetheexpirationofthetimeprescribedinSection203fortheassessmentofthetax,boththeCommissionerandthetaxpayerhaveagreedinwritingtoitsassessmentaftersuchtime,thetaxmaybeassessedwithintheperiodagreedupon.Theperiodsoagreeduponmaybeextendedbysubsequentwrittenagreementmadebeforetheexpirationoftheperiodpreviouslyagreedupon.

(c)Anyinternalrevenuetaxwhichhasbeenassessedwithintheperiodoflimitationasprescribedinparagraph(a)hereofmaybecollectedbydistraintorlevyorbyaproceedingincourtwithinfive(5)yearsfollowingtheassessmentofthetax.

(d)Anyinternalrevenuetax,whichhasbeenassessedwithintheperiodagreeduponasprovidedinparagraph(b)hereinabove,maybecollectedbydistraintorlevyorbyaproceedingincourtwithintheperiodagreeduponinwritingbeforetheexpirationofthefive(5)‐yearperiod.Theperiodsoagreeduponmaybeextendedbysubsequentwrittenagreementsmadebeforetheexpirationoftheperiodpreviouslyagreedupon.

(e)Provided,however,Thatnothingintheimmediatelyprecedingandparagraph(a)hereofshallbeconstruedtoauthorizetheexaminationandinvestigationorinquiryintoanytaxreturnfiledinaccordancewiththeprovisionsofanytaxamnestylawordecree.

SEC.223.SuspensionofRunningofStatuteofLimitations.‐TherunningoftheStatuteofLimitationsprovidedinSections203and222onthemakingofassessmentandthebeginningofdistraintorlevyaproceedingincourtforcollection,inrespectofanydeficiency,shallbesuspendedfortheperiodduringwhichtheCommissionerisprohibitedfrommakingtheassessmentorbeginningdistraintorlevyoraproceedingincourtandforsixty(60)daysthereafter;whenthetaxpayerrequestsforareinvestigationwhichisgrantedbytheCommissioner;whenthetaxpayercannotbelocatedintheaddressgivenbyhiminthereturnfileduponwhichataxisbeingassessedorcollected:Provided,that,ifthetaxpayerinformstheCommissionerofanychangeinaddress,therunningoftheStatuteofLimitationswillnotbesuspended;whenthewarrantofdistraintorlevyisdulyserveduponthetaxpayer,hisauthorizedrepresentative,oramemberofhishouseholdwithsufficientdiscretion,andnopropertycouldbelocated;andwhenthetaxpayerisoutofthePhilippines.

SEC.224.RemedyforEnforcementofForfeitures.‐Theforfeitureofchattelsandremovablefixturesofanysortshallbeenforcedbytheseizureandsale,ordestruction,ofthespecificforfeitedproperty.Theforfeitureofrealpropertyshallbeenforcedbyajudgmentofcondemnationandsaleinalegalactionorproceeding,civilorcriminal,asthecasemayrequire.

SEC.225.WhenPropertytobeSoldorDestroyed.‐Salesofforfeitedchattelsandremovablefixturesshallbeeffected,sofaraspracticable,inthesamemannerandunderthesameconditionsasthepublicnoticeandthetimeandmannerofsaleasareprescribedforsalesofpersonalpropertydistrainedforthenon‐paymentoftaxes.

Distilledspirits,liquors,cigars,cigarettes,othermanufacturedproductsoftobacco,andallapparatususedIorabouttheillicitproductionofsucharticlesmay,uponforfeiture,bedestroyedbyorderoftheCommissioner,whenthesaleofthesameforconsumptionorusewouldbeinjurioustopublichealthorprejudicialtotheenforcementofthelaw.

Allotherarticlessubjecttoexcisetax,whichhavebeenmanufacturedorremovedinviolationofthisCode,aswellasdiesfortheprintingormakingofinternalrevenuestampsandlabelswhichareinimitationoforpurporttobelawfulstamps,orlabelsmay,uponforfeiture,besoldordestroyedinthediscretionoftheCommissioner.

Forfeitedpropertyshallnotbedestroyeduntilatleasttwenty(20)daysafterseizure.

SEC.226.DispositionoffundsRecoveredinLegalProceedingsorObtainedfromForfeitures.‐alljudgmentsandmoniesrecoveredandreceivedfortaxes,costs,forfeitures,finesandpenaltiesshallbepaidtotheCommissionerorhisauthorizeddeputiesasthetaxesthemselvesarerequiredtobepaid,andexceptasspeciallyprovided,shallbeaccountedforanddealtwiththesameway.

SEC.227.SatisfactionofJudgmentRecoveredAgainstanyInternalRevenueOfficer.‐WhenanactionisbroughtagainstanyInternalRevenueofficertorecoverdamagesbyreasonofanyactdoneintheperformanceofofficialduty,andtheCommissionerisnotifiedofsuchactionintimetomakedefenseagainstthesame,throughtheSolicitorGeneral,anyjudgment,damagesorcostsrecoveredinsuchactionshallbesatisfiedbytheCommissioner,uponapprovaloftheSecretaryofFinance,orifthesamebepaidbythepersonusedshallberepaidorreimbursedtohim.

Nosuchjudgment,damages,orcostsshallbepaidorreimbursedinbehalfofapersonwhohasactednegligentlyorinbadfaith,orwithwillfuloppression.

CHAPTERIII

PROTESTINGANASSESSMENT,REFUND,ETC.

SEC.228.ProtestingofAssessment.‐WhentheCommissionerorhisdulyauthorizedrepresentativefindsthatpropertaxesshouldbeassessed,heshallfirstnotifythetaxpayerofhisfindings:Provided,however,Thatapreassessmentnoticeshallnotberequiredinthefollowingcases:

(a)Whenthefindingforanydeficiencytaxistheresultofmathematicalerrorinthecomputationofthetaxasappearingonthefaceofthereturn;or

(b)Whenadiscrepancyhasbeendeterminedbetweenthetaxwithheldandtheamountactuallyremittedbythewithholdingagent;or

(c)Whenataxpayerwhooptedtoclaimarefundortaxcreditofexcesscreditablewithholdingtaxforataxableperiodwasdeterminedtohavecarriedoverandautomaticallyappliedthesameamountclaimedagainsttheestimatedtaxliabilitiesforthetaxablequarterorquartersofthesucceedingtaxableyear;or

(d)Whentheexcisetaxdueonexciseablearticleshasnotbeenpaid;or

(e)Whenthearticlelocallypurchasedorimportedbyanexemptperson,suchas,butnotlimitedto,vehicles,capitalequipment,machineriesandspareparts,hasbeensold,tradedortransferredtonon‐exemptpersons.

Thetaxpayersshallbeinformedinwritingofthelawandthefactsonwhichtheassessmentismade;otherwise,theassessmentshallbevoid.

Withinaperiodtobeprescribedbyimplementingrulesandregulations,thetaxpayershallberequiredtorespondtosaidnotice.Ifthetaxpayerfailstorespond,theCommissionerorhisdulyauthorizedrepresentativeshallissueanassessmentbasedonhisfindings.

Suchassessmentmaybeprotestedadministrativelybyfilingarequestforreconsiderationorreinvestigationwithinthirty(30)daysfromreceiptoftheassessmentinsuchformandmannerasmaybeprescribedbyimplementingrulesandregulations.

Withinsixty(60)daysfromfilingoftheprotest,allrelevantsupportingdocumentsshallhavebeensubmitted;otherwise,theassessmentshallbecomefinal.

Iftheprotestisdeniedinwholeorinpart,orisnotacteduponwithinonehundredeighty(180)daysfromsubmissionofdocuments,thetaxpayeradverselyaffectedbythedecisionorinactionmayappealtotheCourtofTaxAppealswithinthirty(30)daysfromreceiptofthesaiddecision,orfromthelapseofonehundredeighty(180)‐dayperiod;otherwise,thedecisionshallbecomefinal,executoryanddemandable.

SEC.229.RecoveryofTaxErroneouslyorIllegallyCollected.‐nosuitorproceedingshallbemaintainedinanycourtfortherecoveryofanynationalinternalrevenuetaxhereafterallegedtohavebeenerroneouslyorillegallyassessedorcollected,orofanypenaltyclaimedtohavebeencollectedwithoutauthority,ofanysumallegedtohavebeenexcessivelyorinanymannerwrongfullycollectedwithoutauthority,orofanysumallegedtohavebeenexcessivelyorinanymannerwrongfullycollected,untilaclaimforrefundorcredithasbeendulyfiledwiththeCommissioner;butsuchsuitorproceedingmaybemaintained,whetherornotsuchtax,penalty,orsumhasbeenpaidunderprotestorduress.

Inanycase,nosuchsuitorproceedingshallbefiledaftertheexpirationoftwo(2)yearsfromthedateofpaymentofthetaxorpenaltyregardlessofanysuperveningcausethatmayariseafterpayment:Provided,however,ThattheCommissionermay,evenwithoutawrittenclaimtherefor,refundorcreditanytax,whereonthefaceofthereturnuponwhichpaymentwasmade,suchpaymentappearsclearlytohavebeenerroneouslypaid.

SEC.230.ForfeitureofCashRefundandofTaxCredit.‐

(A)ForfeitureofRefund.‐ArefundcheckorwarrantissuedinaccordancewiththepertinentprovisionsofthisCode,whichshallremainunclaimedoruncashedwithinfive(5)yearsfromthedatethesaidwarrantorcheckwasmailedordelivered,shallbeforfeitedinfavoroftheGovernmentandtheamountthereofshallreverttothegeneralfund.

(B)ForfeitureofTaxCredit.‐AtaxcreditcertificateissuedinaccordancewiththepertinentprovisionsofthisCode,whichshallremainunutilizedafterfive(5)yearsfromthedateofissue,shall,unlessrevalidated,beconsideredinvalid,andshallnotbeallowedaspaymentforinternalrevenuetaxliabilitiesofthetaxpayer,andtheamountcoveredbythecertificateshallreverttothegeneralfund.

(C)TransitoryProvision.‐ForpurposesoftheprecedingSubsection,ataxcreditcertificateissuedbytheCommissionerorhisdulyauthorizedrepresentativepriortoJanuary1,1998,whichremainsunutilizedorhasacreditablebalanceasofsaiddate,shallbepresentedforrevalidationwiththeCommissionerorhisdulyauthorizedrepresentativeoronbeforeJune30,1998.

SEC.231.ActiontoContestForfeitureofChattel.‐Incaseoftheseizureofpersonalpropertyunderclaimofforfeiture,theownerdesiringtocontestthevalidityoftheforfeituremay,atanytimebeforesaleordestructionoftheproperty,bringanactionagainstthepersonseizingthepropertyorhavingpossessionthereoftorecoverthesame,andupongivingproperbond,mayenjointhesale;orafterthesaleandwithinsix(6)months,hemaybringanactiontorecoverthenetproceedsrealizedatthesale.

TITLEIX

COMPLIANCEREQUIREMENTS

CHAPTERI

KEEPINGOFBOOKSOFACCOUNTSANDRECORDS

SEC.232.KeepingofBooksofAccounts.‐

(A)Corporations,Companies,PartnershipsorPersonsRequiredtoKeepBooksofAccounts.‐Allcorporations,companies,partnershipsorpersonsrequiredbylawtopayinternalrevenuetaxesshallkeepajournalandaledgerortheirequivalents:Provided,however,Thatthosewhosequarterlysales,earnings,receipts,oroutputdonotexceedFiftythousandpesos(P50,000)shallkeepandusesimplifiedsetofbookkeepingrecordsdulyauthorizedbytheSecretaryofFinancewhereinalltransactionsandresultsofoperationsareshownandfromwhichalltaxesduetheGovernmentmayreadilyandaccuratelybeascertainedanddeterminedanytimeoftheyear:Provided,further,Thatcorporations,companies,partnershipsorpersonswhosegrossquarterlysales,earnings,receiptsoroutputexceedOnehundredfiftythousandpesos(P150,000)shallhavetheirbooksofaccountsauditedandexaminedyearlybyindependentCertifiedPublicAccountantsandtheirincometaxreturnsaccompaniedwithadulyaccomplishedAccountInformationForm(AIF)whichshallcontain,amongothers,informationliftedfromcertifiedbalancesheets,profitandlossstatements,scheduleslistingincome‐producingpropertiesandthecorrespondingincometherefromandotherrelevantstatements.

(B)IndependentCertifiedPublicAccountantDefined.‐Theterm"IndependentCertifiedPublicAccountant",asusedintheprecedingparagraph,meansan

accountantwhopossessestheindependenceasdefinedintherulesandregulationsoftheBoardofAccountancypromulgatedpursuanttoPresidentialDecreeNo.692,otherwiseknownastheRevisedAccountancyLaw.

SEC.233.SubsidiaryBooks.‐Allcorporations,companies,partnershipsorpersonskeepingthebooksofaccountsmentionedintheprecedingSectionmay,attheiroption,keepsubsidiarybooksastheneedsoftheirbusinessmayrequire:Provided,Thatweresuchsubsidiariesarekept,theyshallformpartoftheaccountingsystemofthetaxpayerandshallbesubjecttothesamerulesandregulationsastotheirkeeping,translation,productionandinspectionasareapplicabletothejournalandtheledger.

SEC.234.LanguageinwhichBooksaretobeKept;Translation.‐Allsuchcorporations,companies,partnershipsorpersonsshallkeepthebooksorrecordsmentionedinSection232hereofinnativelanguage,EnglishorSpanish:Provided,however,Thatifinadditiontosaidbooksorrecordsthetaxpayerkeepsotherbooksorrecordsinalanguageotherthananativelanguage,EnglishorSpanish,heshallmakeatrueandcompletetranslationofalltheentriesinsuckotherbooksorrecordsintoanativelanguage;EnglishorSpanish,andthesaidtranslationmustbemadebythebookkeeper,orsuchtaxpayer,orinhisabsence,byhismanagerandmustbecertifiedunderoathastoitscorrectnessbythesaidbookkeeperormanager,andshallformanintegralpartoftheaforesaidbooksofaccounts.Thekeepingofsuchbooksorrecordsinanylanguageotherthananativelanguage,EnglishorSpanish,isherebyprohibited.

SEC.235.PreservationofBooksandAccountsandOtherAccountingRecords.‐Allthebooksofaccounts,includingthesubsidiarybooksandotheraccountingrecordsofcorporations,partnerships,orpersons,shallbepreservedbythemforaperiodbeginningfromthelastentryineachbookuntilthelastdayprescribedbySection203withinwhichtheCommissionerisauthorizedtomakeanassessment.Thesaidbooksandrecordsshallbesubjecttoexaminationandinspectionbyinternalrevenueofficers:Provided,Thatforincometaxpurposes,suchexaminationandinspectionshallbemadeonlyonceinataxableyear,exceptinthefollowingcases:

(a)Fraud,irregularityormistakes,asdeterminedbytheCommissioner;

(b)Thetaxpayerrequestsreinvestigation;

(c)Verificationofcompliancewithwithholdingtaxlawsandregulations;

(d)Verificationofcapitalgainstaxliabilities;and

(e)IntheexerciseoftheCommissioner'spowerunderSection5(B)toobtaininformationfromotherpersonsinwhichcase,anotherorseparateexaminationandinspectionmaybemade.Examinationandinspectionofbooksofaccountsandotheraccountingrecordsshallbedoneinthetaxpayer'sofficeorplaceofbusinessorintheofficeoftheBureauofInternalRevenue.Allcorporations,partnershipsorpersonsthatretirefrombusinessshall,withinten(10)daysfromthedateofretirementorwithinsuchperiodoftimeasmaybeallowedbytheCommissionerinspecialcases,submittheirbooksofaccounts,includingthesubsidiarybooksandotheraccountingrecordstotheCommissioneroranyofhisdeputiesforexamination,afterwhichtheyshallbereturned.CorporationsandpartnershipscontemplatingdissolutionmustnotifytheCommissionerandshallnotbedissolveduntilclearedofanytaxliability.

Anyprovisionofexistinggeneralorspeciallawtothecontrarynotwithstanding,thebooksofaccountsandotherpertinentrecordsoftax‐exemptorganizationsorgranteesoftaxincentivesshallbesubjecttoexaminationbytheBureauofInternalRevenueforpurposesofascertainingcompliancewiththeconditionsunderwhichtheyhavebeengrantedtaxexemptionsortaxincentives,andtheirtaxliability,ifany.

CHAPTERII

ADMINISTRATIVEPROVISIONS

SEC.236.RegistrationRequirements.‐

(A)Requirements.‐EverypersonsubjecttoanyinternalrevenuetaxshallregisteroncewiththeappropriateRevenueDistrictOfficer:

(1)Withinten(10)daysfromdateofemployment,or

(2)Onorbeforethecommencementofbusiness,or

(3)Beforepaymentofanytaxdue,or

(4)Uponfilingofareturn,statementordeclarationasrequiredinthisCode.

Theregistrationshallcontainthetaxpayer'sname,style,placeofresidence,businessandsuchotherinformationasmayberequiredbytheCommissionerintheformprescribedtherefor.

Apersonmaintainingaheadoffice,branchorfacilityshallregisterwiththeRevenueDistrictOfficerhavingjurisdictionovertheheadoffice,brandorfacility.ForpurposesofthisSection,theterm"facility"mayincludebutnotbelimitedtosalesoutlets,placesofproduction,warehousesorstorageplaces.

(B)AnnualRegistrationFee.‐AnannualregistrationfeeintheamountofFivehundredpesos(P500)foreveryseparateordistinctestablishmentorplaceofbusiness,includingfacilitytypeswheresalestransactionsoccur,shallbepaiduponregistrationandeveryyearthereafteronorbeforethelastdayofJanuary:Provided,however,Thatcooperatives,individualsearningpurelycompensationincome,whetherlocallyorabroad,andoverseasworkersarenotliabletotheregistrationfeehereinimposed.

Theregistrationfeeshallbepaidtoanauthorizedagentbanklocatedwithintherevenuedistrict,ortotheRevenueCollectionOfficer,ordulyauthorizedTreasurerofthecityofmunicipalitywhereeachplaceofbusinessorbranchisregistered.

(C)RegistrationofEachTypeofInternalRevenueTax.‐EverypersonwhoisrequiredtoregisterwiththeBureauofInternalRevenueunderSubsection(A)hereof,shallregistereachtypeofinternalrevenuetaxforwhichheisobligated,shallfileareturnandshallpaysuchtaxes,andshallupdatessuchregistrationofanychangesinaccordancewithSubsection(E)hereof.

(D)TransferofRegistration.‐Incasearegisteredpersondecidestotransferhisplaceofbusinessorhisheadofficeorbranches,itshallbehisdutytoupdatehisregistrationstatusbyfilinganapplicationforregistrationinformationupdateintheformprescribedtherefor.

(E)OtherUpdates.‐AnypersonregisteredinaccordancewiththisSectionshall,wheneverapplicable,updatehisregistrationinformationwiththeRevenueDistrictOfficewhereheisregistered,specifyingthereinanychangeintypeandothertaxpayerdetails.

(F)CancellationofRegistration.‐TheregistrationofanypersonwhoceasestobeliabletoataxtypeshallbecancelleduponfilingwiththeRevenueDistrictOfficewhereheisregisteredanapplicationforregistrationinformationupdateinaformprescribedtherefor.

(G)PersonsCommencingBusiness.‐Anyperson,whoexpectstorealizegrosssalesorreceiptssubjecttovalue‐addedtaxinexcessoftheamountprescribedunderSection109(z)ofthisCodeforthenext12‐monthperiodfromthecommencementofthebusiness,shallregisterwiththeRevenueDistrictOfficewhichhasjurisdictionovertheheadofficeorbranchandshallpaytheannualregistrationfeeprescribedinSubsection(B)hereof.

(H)PersonsBecomingLiabletotheValue‐addedTax.‐Anyperson,whosegrosssalesorreceiptsinany12‐monthperiodexceedstheamountprescribedunderSubsection109(z)ofthisCodeforexemptionfromthevalue‐addedtaxshallregisterinaccordancewithSubsection(A)hereof,andshallpaytheannualregistrationfeeprescribedwithinten(10)daysaftertheendofthelastmonthofthatperiod,andshallbeliabletothevalue‐addedtaxcommencingfromthefirstdayofthemonthfollowinghisregistration.

(I)OptionalRegistrationofExemptPerson.‐Anypersonwhosetransactionsareexemptfromvalue‐addedtaxunderSection109(z)ofthisCode;oranypersonwhosetransactionsareexemptfromthevalue‐addedtaxunderSection109(a),(b),(c),and(d)ofthisCode,whooptstoregisterasaVATtaxpayerwithrespecttohisexportsalesonly,mayupdatehisregistrationinformationinaccordancewithSubsection(E)hereof,notlaterthanten(10)daysbeforethebeginningofthe

taxablequarterandshallpaytheannualregistrationfeeprescribedinSubsection(B)hereof.

Inanycase,theCommissionermay,foradministrativereasons,denyanyapplicationforregistrationincludingupdatesprescribedunderSubsection(E)hereof.

ForpurposesofTitleIVofthisCode,anypersonwhohasregisteredvalue‐addedtaxasataxtypeinaccordancewiththeprovisionsofSubsection(C)hereofshallbereferredtoasVAT‐registeredpersonwhoshallbeassignedonlyoneTaxpayerIdentificationNumber.

(J)SupplyingofTaxpayerIdentificationNumber(TIN).‐AnypersonrequiredundertheauthorityofthisCodetomake,renderorfileareturn,statementorotherdocumentshallbesuppliedwithorassignedaTaxpayerIdentificationNumber(TIN)whichheshallindicateinsuchreturn,statementordocumentfiledwiththeBureauofInternalRevenueforhisproperidentificationfortaxpurposes,andwhichheshallindicateincertaindocuments,suchas,butnotlimitedtothefollowing:

(1)Sugarquedans,refinedsugarreleaseorderorsimilarinstruments;

(2)Domesticbillsoflading;

(3)DocumentstoberegisteredwiththeRegisterofDeedsofAssessor'sOffice;

(4)Registrationcertificateoftransportationequipmentbyland,seaorair;

(5)DocumentstoberegisteredwiththeSecuritiesandExchangeCommission;

(6)Buildingconstructionpermits;

(7)Applicationforloanwithbanks,financialinstitutions,orotherfinancialintermediaries;

(8)Applicationformayor'spermit;

(9)ApplicationforbusinesslicensewiththeDepartmentofTrade&Industry;and

(10)SuchotherdocumentswhichmayhereafterberequiredunderrulesandregulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

Incaseswherearegisteredtaxpayerdies,theadministratororexecutorshallregistertheestateofthedecedentinaccordancewithSubsection(A)hereofandanewTaxpayerIdentificationNumber(TIN)shallbesuppliedinaccordancewiththeprovisionsofthisSection.

Inthecaseofanonresidentdecedent,theexecutororadministratoroftheestateshallregistertheestatewiththeRevenueDistrictOfficewhereheisregistered:Provided,however,Thatincasesuchexecutororadministratorisnotregistered,registrationoftheestateshallbemadewiththeTaxpayerIdentificationNumber(TIN)suppliedbytheRevenueDistrictOfficehavingjurisdictionoverhislegalresidence.

OnlyoneTaxpayeridentificationNumber(TIN)shallbeassignedtoataxpayer.AnypersonwhoshallsecuremorethanoneTaxpayerIdentificationNumbershallbecriminallyliableundertheprovisionofSection275on'ViolationofOtherProvisionsofthisCodeorRegulationsinGeneral'.

SEC.237.IssuanceofReceiptsorSalesorCommercialInvoices.‐Allpersonssubjecttoaninternalrevenuetaxshall,foreachsaleortransferofmerchandiseorforservicesrenderedvaluedatTwenty‐fivepesos(P25.00)ormore,issuedulyregisteredreceiptsorsalesorcommercialinvoices,preparedatleastinduplicate,showingthedateoftransaction,quantity,unitcostanddescriptionofmerchandiseornatureofservice:Provided,however,Thatinthecaseofsales,receiptsortransfersintheamountofOnehundredpesos(P100.00)ormore,orregardlessof

theamount,wherethesaleortransferismadebyapersonliabletovalue‐addedtaxtoanotherpersonalsoliabletovalue‐addedtax;orwherethereceiptisissuedtocoverpaymentmadeasrentals,commissions,compensationsorfees,receiptsorinvoicesshallbeissuedwhichshallshowthename,businessstyle,ifany,andaddressofthepurchaser,customerorclient:Provided,further,ThatwherethepurchaserisaVAT‐registeredperson,inadditiontotheinformationhereinrequired,theinvoiceorreceiptshallfurthershowtheTaxpayerIdentificationNumber(TIN)ofthepurchaser.

Theoriginalofeachreceiptorinvoiceshallbeissuedtothepurchaser,customerorclientatthetimethetransactioniseffected,who,ifengagedinbusinessorintheexerciseofprofession,shallkeepandpreservethesameinhisplaceofbusinessforaperiodofthree(3)yearsfromthecloseofthetaxableyearinwhichsuchinvoiceorreceiptwasissued,whiletheduplicateshallbekeptandpreservedbytheissuer,alsoinhisplaceofbusiness,foralikeperiod.

TheCommissionermay,inmeritoriouscases,exemptanypersonsubjecttointernalrevenuetaxfromcompliancewiththeprovisionsofthisSection.

SEC.238.PrintingofReceiptsorSalesorCommercialInvoices.‐AllpersonswhoareengagedinbusinessshallsecurefromtheBureauofInternalRevenueanauthoritytoprintreceiptsorsalesorcommercialinvoicesbeforeaprintercanprintthesame.

Noauthoritytoprintreceiptsorsalesorcommercialinvoicesshallbegrantedunlessthereceiptsorinvoicestobeprintedareseriallynumberedandshallshow,amongotherthings,thename,businessstyle,TaxpayerIdentificationNumber(TIN)andbusinessaddressofthepersonorentitytousethesame,andsuchotherinformationthatmayberequiredbyrulesandregulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

Allpersonswhoprintreceiptorsalesorcommercialinvoicesshallmaintainalogbook/registeroftaxpayerswhoavailedoftheirprintingservices.Thelogbook/registershallcontainthefollowinginformation:

(1)Names,TaxpayerIdentificationNumbersofthepersonsorentitiesforwhomthereceipts

orsalesorcommercialinvoiceswereprinted;and

(2)Numberofbooklets,numberofsetsperbooklet,numberofcopiespersetandthe

serialnumbersofthereceiptsorinvoicesineachbooklet.

SEC.239.SigntobeExhibitedbyDistiller,Rectifier,Compounder,RepackerandWholesaleLiquorDealer.‐Everypersonengagedindistillingorrectifyingspirits,compoundingliquors,repackingwinesordistilledspirits,andeverywholesaleliquordealershallkeepconspicuouslyontheoutsideofhisplaceofbusinessasignexhibiting,inlettersnotlessthansixcentimeters(6cms.)high,hisnameorfirmstyle,withthewords"RegisteredDistiller","RectifierofSpirits","CompounderofLiquors","RepackerofWinesorDistilledSpirits",or"WholesaleLiquorDealer",asthecasemaybe,andhisassessmentnumber.

SEC.240.SigntobeExhibitedbyManufacturerofProductsofTobacco.‐Everymanufacturerofcigars,cigarettesortobacco,andeverywholesaledealerinleaftobaccoormanufacturedproductsoftobaccoshallplaceandkeeponoutsideofthebuildingwhereinhisbusinessiscarriedon,sothatitcanbedistinctlyseen,asignstatinghisfullnameandbusinessinlettersnotlessthansixcentimeters(6cms.)highandalsogivinghisassessmentnumber.

SEC.241.ExhibitionofCertificateofPaymentatPlaceofBusiness.‐Thecertificateorreceiptsshowingpaymentoftaxesissuedtoapersonengagedinabusinesssubjecttoanannualregistrationfeeshallbekeptconspicuouslyexhibitedinplainviewinorattheplacewherethebusinessisconducted;andincaseofapeddlerorotherpersonsnothavingafixedplaceofbusiness,shallbekeptinthepossessionoftheholderthereof,subjecttoproductionupondemandofanyinternalrevenueofficer.

SEC.242.ContinuationofBusinessofDeceasedPerson.‐Whenanyindividualwhohaspaidtheannualregistrationfeedies,andthesamebusinessiscontinuedbythepersonorpersonsinterestedinhisestate,noadditionalpaymentshallberequiredfortheresidueofthetermwhichthetaxwaspaid:Provided,however,Thatthepersonorpersonsinterestedintheestateshould,withinthirty(30)daysfromthedeathofthedecedent,submittotheBureauofInternalRevenueortheregionalorrevenueDistrictOfficeinventoriesofgoodsorstockshadatthetimeofsuchdeath.

TherequirementunderthisSectionshallalsobeapplicableinthecaseoftransferofownershiporchangeofnameofthebusinessestablishment.

SEC.243.RemovalofBusinesstoOtherLocation.‐Anybusinessforwhichtheannualregistrationfeehasbeenpaidmay,subjecttotherulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,beremovedandcontinuedinanyotherplacewithoutthepaymentofadditionaltaxduringthetermforwhichthepaymentwasmade.

CHAPTERIII

RULESANDREGULATIONS

SEC.244.AuthorityofSecretaryofFinancetoPromulgateRulesandRegulations.‐TheSecretaryofFinance,uponrecommendationoftheCommissioner,shallpromulgateallneedfulrulesandregulationsfortheeffectiveenforcementoftheprovisionsofthisCode.

SEC.245.SpecificProvisionstobeContainedinRulesandRegulations.‐TherulesandregulationsoftheBureauofInternalRevenueshall,amongotherthins,containprovisionsspecifying,prescribingordefining:

(a)ThetimeandmannerinwhichRevenueRegionalDirectorshallcanvasstheirrespectiveRevenueRegionsforthepurposeofdiscoveringpersonsandpropertyliabletonationalinternalrevenuetaxes,andthemannerinwhichtheirlistsandrecordsoftaxablepersonsandtaxableobjectsshallbemadeandkept;

(b)Theformsoflabels,brandsormarkstoberequiredongoodssubjecttoanexcisetax,andthemannerinwhichthelabelling,brandingormarkingshallbeeffected;

(c)Theconditionsunderwhichandthemannerinwhichgoodsintendedforexport,whichifnotexportedwouldbesubjecttoanexcisetax,shallbelabelled,brandedormarked;

(d)Theconditionstobeobservedbyrevenueofficersrespectingtheinstitutionsandconductoflegalactionsandproceedings;

(e)Theconditionsunderwhichgoodsintendedforstorageinbondedwarehousesshallbeconveyedthither,theirmannerofstorageandthemethodofkeepingtheentriesandrecordsinconnectiontherewith,alsothebookstobekeptbyRevenueInspectorsandthereportstobemadebytheminconnectionwiththeirsupervisionofsuchhouses;

(f)Theconditionsunderwhichdenaturedalcoholmayberemovedanddealtin,thecharacterandquantityofthedenaturingmaterialtobeused,themannerinwhichtheprocessofdenaturingshallbeeffected,soastorenderthealcoholsuitablydenaturedandunfitfororalintake,thebondstobegiven,thebooksandrecordstobekept,theentriestobemadetherein,thereportstobemadetotheCommissioner,andthesignstobedisplayedinthebusinessorbythepersonforwhomsuchdenaturingisdoneorbywhom,suchalcoholisdealtin;

(g)Themannerinwhichrevenueshallbecollectedandpaid,theinstrument,documentorobjecttowhichrevenuestampsshallbeaffixed,themodeofcancellationofthesame,themannerinwhichtheproperbooks,records,invoicesandotherpapersshallbekeptandentriesthereinmadebythepersonsubjecttothetax,aswellasthemannerinwhichlicensesandstampsshallbegatheredupandreturnedafterservingtheirpurposes;

(h)TheconditionstobeobservedbyrevenueofficersrespectingtheenforcementofTitleIIIimposingataxonestateofadecedent,andothertransfersmortiscausa,aswellasongiftsandsuchotherrulesandregulationswhichtheCommissionermayconsidersuitablefortheenforcementofthesaidTitleIII;

(i)Themannerinwhichtaxreturns,informationandreportsshallbepreparedandreportedandthetaxcollectedandpaid,aswellastheconditionsunderwhichevidenceofpaymentshallbefurnishedthetaxpayer,andthepreparationandpublicationoftaxstatistics;

(j)Themannerinwhichinternalrevenuetaxes,suchasincometax,includingwithholdingtax,estateanddonor'staxes,value‐addedtax,otherpercentagetaxes,excisetaxesanddocumentarystamptaxesshallbepaidthroughthecollectionofficersoftheBureauofInternalRevenueorthroughdulyauthorizedagentbankswhichareherebydeputizedtoreceivepaymentsofsuchtaxesandthereturns,papersandstatementsthatmaybefiledbythetaxpayersinconnectionwiththepaymentofthetax:Provided,however,ThatnotwithstandingtheotherprovisionsofthisCodeprescribingtheplaceoffilingofreturnsandpaymentoftaxes,theCommissionermay,byrulesandregulations,requirethatthetaxreturns,papersandstatementsthatmaybefiledbythetaxpayersinconnectionwiththepaymentofthetax.Provided,however,ThatnotwithstandingtheotherprovisionsofthisCodeprescribingtheplaceoffilingofreturnsandpaymentoftaxes,theCommissionermay,byrulesandregulationsrequirethatthetaxreturns,papersandstatementsandtaxesoflargetaxpayersbefiledandpaid,respectively,throughcollectionofficersorthroughdulyauthorizedagentbanks:Provided,further,ThattheCommissionercanexercisethispowerwithinsix(6)yearsfromtheapprovalofRepublicActNo.7646orthecompletionofitscomprehensivecomputerizationprogram,whichevercomesearlier:Provided,finally,ThatseparatevenuesfortheLuzon,VisayasandMindanaoareasmaybedesignatedforthefilingoftaxreturnsandpaymentoftaxesbysaidlargetaxpayers.

ForthepurposeofthisSection,"largetaxpayer"meansataxpayerwhosatisfiesanyofthefollowingcriteria;

(1)Value‐AddedTax(VAT).‐BusinessestablishmentwithVATpaidorpayableofatleastOnehundredthousandpesos(P100,000)foranyquarteroftheprecedingtaxableyear;

(2)ExciseTax.‐BusinessestablishmentwithexcisetaxpaidorpayableofatleastOnemillionpesos(P1,000,000)fortheprecedingtaxableyear;

(3)CorporateIncomeTax.‐BusinessestablishmentwithannualincometaxpaidorpayableofatleastOnemillionpesos(P1,000,000)fortheprecedingtaxableyear;and

(4)WithholdingTax.‐BusinessestablishmentwithwithholdingtaxpaymentorremittanceofatleastOnemillionpesos(P1,000,000)fortheprecedingtaxableyear.

Provided,however,ThattheSecretaryofFinance,uponrecommendationoftheCommissioner,maymodifyoraddtotheabovecriteriafordeterminingalargetaxpayerafterconsideringsuchfactorsasinflation,volumeofbusiness,wageandemploymentlevels,andsimilareconomicfactors.

ThepenaltiesprescribedunderSection248ofthisCodeshallbeimposedonanyviolationoftherulesandregulationsissuedbytheSecretaryofFinance,uponrecommendationoftheCommissioner,prescribingtheplaceoffilingofreturnsandpaymentsoftaxesbylargetaxpayers.

SEC.246.Non‐RetroactivityofRulings.‐Anyrevocation,modificationorreversalofanyoftherulesandregulationspromulgatedinaccordancewiththeprecedingSectionsoranyoftherulingsorcircularspromulgatedbytheCommissionershallnotbegivenretroactiveapplicationiftherevocation,modificationorreversalwillbeprejudicialtothetaxpayers,exceptinthefollowingcases:

(a)WherethetaxpayerdeliberatelymisstatesoromitsmaterialfactsfromhisreturnoranydocumentrequiredofhimbytheBureauofInternalRevenue;

(b)WherethefactssubsequentlygatheredbytheBureauofInternalRevenuearemateriallydifferentfromthefactsonwhichtherulingisbased;or

(c)Wherethetaxpayeractedinbadfaith.

TITLEX

STATUTORYOFFENSESANDPENALTIES

CHAPTERI

ADDITIONSTOTAX

SEC.247.GeneralProvisions.‐

(a)TheadditionstothetaxordeficiencytaxprescribedinthisChaptershallapplytoalltaxes,feesandchargesimposedinthisCode.TheAmountsoaddedtothetaxshallbecollectedatthesametime,inthesamemannerandaspartofthetax.

(b)IfthewithholdingagentistheGovernmentoranyofitsagencies,politicalsubdivisionsorinstrumentalities,oragovernment‐ownedorcontrolledcorporation,theemployeethereofresponsibleforthewithholdingandremittanceofthetaxshallbepersonallyliablefortheadditionstothetaxprescribedherein.

(c)theterm"person",asusedinthisChapter,includesanofficeroremployeeofacorporationwhoassuchofficer,employeeormemberisunderadutytoperformtheactinrespectofwhichtheviolationoccurs.

SEC.248.CivilPenalties.‐

(A)Thereshallbeimposed,inadditiontothetaxrequiredtobepaid,apenaltyequivalenttotwenty‐fivepercent(25%)oftheamountdue,inthefollowingcases:

(1)FailuretofileanyreturnandpaythetaxduethereonasrequiredundertheprovisionsofthisCodeorrulesandregulationsonthedateprescribed;or

(2)UnlessotherwiseauthorizedbytheCommissioner,filingareturnwithaninternalrevenueofficerotherthanthosewithwhomthereturnisrequiredtobefiled;or

(3)Failuretopaythedeficiencytaxwithinthetimeprescribedforitspaymentinthenoticeofassessment;or

(4)FailuretopaythefullorpartoftheamountoftaxshownonanyreturnrequiredtobefiledundertheprovisionsofthisCodeorrulesandregulations,orthe

fullamountoftaxdueforwhichnoreturnisrequiredtobefiled,onorbeforethedateprescribedforitspayment.

(B)IncaseofwillfulneglecttofilethereturnwithintheperiodprescribedbythisCodeorbyrulesandregulations,orincaseafalseorfraudulentreturniswillfullymade,thepenaltytobeimposedshallbefiftypercent(50%)ofthetaxorofthedeficiencytax,incase,anypaymenthasbeenmadeonthebasisofsuchreturnbeforethediscoveryofthefalsityorfraud:Provided,Thatasubstantialunderdeclarationoftaxablesales,receiptsorincome,orasubstantialoverstatementofdeductions,asdeterminedbytheCommissionerpursuanttotherulesandregulationstobepromulgatedbytheSecretaryofFinance,shallconstituteprimafacieevidenceofafalseorfraudulentreturn:Provided,further,Thatfailuretoreportsales,receiptsorincomeinanamountexceedingthirtypercent(30%)ofthatdeclaredperreturn,andaclaimofdeductionsinanamountexceeding(30%)ofactualdeductions,shallrenderthetaxpayerliableforsubstantialunderdeclarationofsales,receiptsorincomeorforoverstatementofdeductions,asmentionedherein.

SEC.249.Interest.‐

(A)InGeneral.‐Thereshallbeassessedandcollectedonanyunpaidamountoftax,interestattherateoftwentypercent(20%)perannum,orsuchhigherrateasmaybeprescribedbyrulesandregulations,fromthedateprescribedforpaymentuntiltheamountisfullypaid.

(B)DeficiencyInterest.‐Anydeficiencyinthetaxdue,asthetermisdefinedinthisCode,shallbesubjecttotheinterestprescribedinSubsection(A)hereof,whichinterestshallbeassessedandcollectedfromthedateprescribedforitspaymentuntilthefullpaymentthereof.

(C)DelinquencyInterest.‐Incaseoffailuretopay:

(1)Theamountofthetaxdueonanyreturntobefiled,or

(2)Theamountofthetaxdueforwhichnoreturnisrequired,or

(3)Adeficiencytax,oranysurchargeorinterestthereonontheduedateappearinginthenoticeanddemandoftheCommissioner,thereshallbeassessedandcollectedontheunpaidamount,interestattherateprescribedinSubsection(A)hereofuntiltheamountisfullypaid,whichinterestshallformpartofthetax.

(D)InterestonExtendedPayment.‐IfanypersonrequiredtopaythetaxisqualifiedandelectstopaythetaxoninstallmentundertheprovisionsofthisCode,butfailstopaythetaxoranyinstallmenthereof,oranypartofsuchamountorinstallmentonorbeforethedateprescribedforitspayment,orwheretheCommissionerhasauthorizedanextensionoftimewithinwhichtopayataxoradeficiencytaxoranypartthereof,thereshallbeassessedandcollectedinterestattheratehereinaboveprescribedonthetaxordeficiencytaxoranypartthereofunpaidfromthedateofnoticeanddemanduntilitispaid.

SEC.250.FailuretoFileCertainInformationReturns.‐Inthecaseofeachfailuretofileaninformationreturn,statementorlist,orkeepanyrecord,orsupplyanyinformationrequiredbythisCodeorbytheCommissioneronthedateprescribedtherefor,unlessitisshownthatsuchfailureisduetoreasonablecauseandnottowillfulneglect,thereshall,uponnoticeanddemandbytheCommissioner,bepaidbythepersonfailingtofile,keeporsupplythesame,Onethousandpesos(1,000)foreachfailure:Provided,however,ThattheaggregateamounttobeimposedforallsuchfailuresduringacalendaryearshallnotexceedTwenty‐fivethousandpesos(P25,000).

SEC.251.FailureofaWithholdingAgenttoCollectandRemitTax.‐Anypersonrequiredtowithhold,accountfor,andremitanytaximposedbythisCodeorwhowillfullyfailstowithholdsuchtax,oraccountforandremitsuchtax,oraidsorabetsinanymannertoevadeanysuchtaxorthepaymentthereof,shall,inadditiontootherpenaltiesprovidedforunderthisChapter,beliableuponconvictiontoapenaltyequaltothetotalamountofthetaxnotwithheld,ornotaccountedforandremitted.

SEC.252.FailureofaWithholdingAgenttorefundExcessWithholdingTax.‐Anyemployer/withholdingagentwhofailsorrefusestorefundexcesswithholdingtaxshall,inadditiontothepenaltiesprovidedinthisTitle,beliabletoapenaltytothetotalamountofrefundswhichwasnotrefundedtotheemployeeresultingfromanyexcessoftheamountwithheldoverthetaxactuallydueontheirreturn.

CHAPTERII

CRIMES,OTHEROFFENSESANDFORFEITURES

SEC.253.GeneralProvisions.‐

(a)AnypersonconvictedofacrimepenalizedbythisCodeshall,inadditiontobeingliableforthepaymentofthetax,besubjecttothepenaltiesimposedherein:Provided,ThatpaymentofthetaxdueafterapprehensionshallnotconstituteavaliddefenseinanyprosecutionforviolationofanyprovisionofthisCodeorinanyactionfortheforfeitureofuntaxedarticles.

(b)Anypersonwhowillfullyaidsorabetsinthecommissionofacrimepenalizedhereinorwhocausesthecommissionofanysuchoffensebyanothershallbeliableinthesamemannerastheprincipal.

(c)IftheoffenderisnotacitizenofthePhilippines,heshallbedeportedimmediatelyafterservingthesentencewithoutfurtherproceedingsfordeportation.Ifheisapublicofficeroremployee,themaximumpenaltyprescribedfortheoffenseshallbeimposedand,inaddition,heshallbedismissedfromthepublicserviceandperpetuallydisqualifiedfromholdinganypublicoffice,tovoteandtoparticipateinanyelection.IftheoffenderisaCertifiedPublicAccountant,hiscertificateasaCertifiedPublicAccountantshall,uponconviction,beautomaticallyrevokedorcancelled.

(d)Inthecaseofassociations,partnershipsorcorporations,thepenaltyshallbeimposedonthepartner,president,generalmanager,branchmanager,treasurer,officer‐in‐charge,andtheemployeesresponsiblefortheviolation.

(e)ThefinestobeimposedforanyviolationoftheprovisionsofthisCodeshallnotbelowerthanthefinesimposedhereinortwicetheamountoftaxes,interestandsurchargesduefromthetaxpayer,whicheverishigher.

SEC.254.AttempttoEvadeorDefeatTax.‐AnypersonwhowillfullyattemptsinanymannertoevadeordefeatanytaximposedunderthisCodeorthepaymentthereofshall,inadditiontootherpenaltiesprovidedbylaw,uponconvictionthereof,bepunishedbyafinenotlessthanThirtythousand(P30,000)butnotmorethanOnehunderdthousandpesos(P100,000)andsufferimprisonmentofnotlessthantwo(2)yearsbutnotmorethanfour(4)years:Provided,ThattheconvictionoracquittalobtainedunderthisSectionshallnotbeabartothefilingofacivilsuitforthecollectionoftaxes.

SEC.255.FailuretoFileReturn,SupplyCorrectandAccurateInformation,PayTaxWithholdandRemitTaxandRefundExcessTaxesWithheldonCompensation.‐AnypersonrequiredunderthisCodeorbyrulesandregulationspromulgatedthereundertopayanytaxmakeareturn,keepanyrecord,orsupplycorrecttheaccurateinformation,whowillfullyfailstopaysuchtax,makesuchreturn,keepsuchrecord,orsupplycorrectandaccurateinformation,orwithholdorremittaxeswithheld,orrefundexcesstaxeswithheldoncompensation,atthetimeortimesrequiredbylaworrulesandregulationsshall,inadditiontootherpenaltiesprovidedbylaw,uponconvictionthereof,bepunishedbyafineofnotlessthanTenthousandpesos(P10,000)andsufferimprisonmentofnotlessthanone(1)yearbutnotmorethanten(10)years.

Anypersonwhoattemptstomakeitappearforanyreasonthatheoranotherhasinfactfiledareturnorstatement,oractuallyfilesareturnorstatementandsubsequentlywithdrawsthesamereturnorstatementaftersecuringtheofficialreceivingsealorstampofreceiptofinternalrevenueofficewhereinthesamewasactuallyfiledshall,uponconvictiontherefor,bepunishedbyafineofnotlessthanTenthousandpesos(P10,000)butnotmorethanTwentythousandpesos(P20,000)andsufferimprisonmentofnotlessthanone(1)yearbutnotmorethanthree(3)years.

SEC.256.PenalLiabilityofCorporations.‐Anycorporation,associationorgeneralco‐partnershipliableforanyoftheactsoromissionspenalizedunderthisCode,inadditiontothepenaltiesimposedhereinupontheresponsiblecorporateofficers,partners,oremployeesshall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanFiftythousandpesos(P50,000)butnotmorethanOnehundredthousandpesos(P100,000).

SEC.257.PenalLiabilityforMakingFalseEntries,RecordsorReports,orUsingFalsifiedorFakeAccountableForms.‐

(A)AnyfinancialofficerorindependentCertifiedPublicAccountantengagedtoexamineandauditbooksofaccountsoftaxpayersunderSection232(A)andanypersonunderhisdirectionwho:

(1)Willfullyfalsifiesanyreportorstatementbearingonanyexaminationoraudit,orrendersareport,includingexhibits,statements,schedulesorotherformsofaccountancyworkwhichhasnotbeenverifiedbyhimpersonallyorunderhissupervisionorbyamemberofhisfirmorbyamemberofhisstaffinaccordancewithsoundauditingpractices;or

(2)Certifiesfinancialstatementsofabusinessenterprisecontaininganessentialmisstatementoffactsoromissioninrespectofthetransactions,taxableincome,deductionandexemptionofhisclient;or

(B)Anypersonwho:

(1)NotbeinganindependentCertifiedPublicAccountantaccordingtoSection232(B)orafinancialofficer,examinesandauditsbooksofaccountsoftaxpayers;or

(2)Offerstosignandcertifyfinancialstatementswithoutaudit;or

(3)OffersanytaxpayertheuseofaccountingbookkeepingrecordsforinternalrevenuepurposesnotinconformitywiththerequirementsprescribedinthisCodeorrulesandregulationspromulgatedthereunder;or

(4)Knowinglymakesanyfalseentryorentersanyfalseorfictitiousnameinthebooksofaccountsorrecordmentionedintheprecedingparagraphs;or

(5)Keepstwo(2)ormoresetsofsuchrecordsorbooksofaccounts;or

(6)Inanywaycommitsanactoromission,inviolationoftheprovisionsofthisSection;or

(7)FailstokeepthebooksofaccountsorrecordsmentionedinSection232inanativelanguage,EnglishorSpanish,ortomakeatrueandcompletetranslationasrequiredinSection234ofthisCode,orwhosebooksofaccountsorrecordskeptinanativelanguage,EnglishorSpanish,andfoundtobeatmaterialvariancewithbooksorrecordskeptbyhiminanotherlanguage;or

(8)WillfullyattemptsinanymannertoevadeordefeatanytaximposedunderthisCode,orknowinglyusesfakeorfalsifiedrevenueofficialreceipts,LettersofAuthority,certificatesauthorizingregistration,TaxCreditCertificates,TaxDebitMemorandaandotheraccountableformsshall,uponconvictionforeachactoromission,bepunishedbyafinenotlessthanFiftythousandpesos(P50,000)butnotmorethanOnehundredpesos(P100,000)andsufferimprisonmentofnotlessthantwo(2)yearsbutnotmorethansix(6)years.

IftheoffenderisaCertifiedPublicAccountant,hiscertificateasaCertifiedPublicAccountantshallbeautomaticallyrevokedorcancelleduponconviction.

Inthecaseofforeigners,convictionunderthisCodeshallresultinhisimmediatedeportationafterservingsentence,withoutfurtherproceedingsfordeportation.

SEC.258.UnlawfulPursuitofBusiness.‐Anypersonwhocarriesonanybusinessforwhichanannualregistrationfeeisimposedwithoutpayingthetaxasrequiredbylawshall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanFivethousandpesos(P5,000)butnotmorethanTwentythousandpesos(P20,000)andsufferimprisonmentofnotlessthansix(6)monthsbutnotmorethantwo(2)years:Provided,Thatinthecaseofapersonengagedinthebusinessofdistilling,rectifying,repacking,compoundingormanufacturinganyarticlesubjecttoexcisetax,heshall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanThirtythousandpesos(P30,000)butnotmorethanFiftythousandpesos(P50,000)andsufferimprisonmentofnotlessthantwo(2)yearsbutnotmorethanfour(4)years.

SEC.259.IllegalCollectionofForeignPayments.‐AnypersonwhoknowinglyundertakesthecollectionofforeignpaymentsasprovidedunderSection67ofthis

Codewithouthavingobtainedalicensetherefor,orwithoutcomplyingwithitsimplementingrulesandregulations,shall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanTwentythousandpesos(P20,000)butnotmorethanFiftythousandpesos(P50,000)andsufferimprisonmentofnotlessthanone(1)yearbutnotmorethantwo(2)years.

SEC.260.UnlawfulPossessionofCigarettePaperinBobbinsorRolls,Etc.‐Itshallbeunlawfulforanypersontohaveinhispossessioncigarettepaperinbobbinsorrolls,cigarettetippingpaperorcigarettefiltertips,withoutthecorrespondingauthoritythereforissuedbytheCommissioner.Anyperson,importer,manufacturerofcigarandcigarettes,whohasbeenfoundguiltyunderthisSection,shall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanTwentythousandpesos(P20,000)butnotmorethanOnehundredthousandpesos(P1000,000)andsufferimprisonmentforatermofnotlessthansix(6)yearsandone(1)daybutnotmorethantwelve(12)years.

SEC.261.UnlawfulUseofDenaturedAlcohol.‐Anypersonwhoforthepurposeofmanufacturinganybeverage,usesdenaturedalcoholoralcoholspeciallydenaturedtobeusedformotivepowerorwithdrawnunderbondforindustrialusesoralcoholknowinglymisrepresentedtobedenaturedtobeunfitfororalintakeorwhoknowinglysellsoroffersforsaleanybeveragemadeinwholeorinpartfromsuchalcoholorwhousessuchalcoholforthemanufactureofliquidmedicinalpreparationstakeninternally,orknowinglysellsoroffersforsalesuchpreparationscontainingasaningredientsuchalcohol,shalluponconvictionforeachactoromissionbepunishedbyafineofnotlessthanTwentythousandpesos(P20,000)butnotmorethanOnehundredthousandpesos(P100,000)andsufferimprisonmentforatermofnotlessthansix(6)yearsandone(1)daybutnotmorethantwelve(12)years.

Anypersonwhoshallunlawfullyrecoverorattempttorecoverbydistillationorotherprocessanydenaturedalcoholorwhoknowinglysellsoroffersforsale,concealsorotherwisedisposesofalcoholsorecoveredorredistilledshallbesubjecttothesamepenaltiesimposedunderthisSection.

SEC.262.ShipmentorRemovalofLiquororTobaccoProductsunderFalseNameorBrandorasanImitationofanyExistingorOtherwiseKnownProductNameorBrand.‐Anypersonwhoships,transportsorremovesspirituous,compoundedorfermentedliquors,winesoranymanufacturedproductsoftobaccounderanyotherthanthepropernameorbrandknowntothetradeasdesignatingthekindandqualityofthecontentsofthecask,bottleorpackagecontainingthesameorasan

imitationofanyexistingorotherwiseknownproductnameorbrandorcausessuchacttobedone,shall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanTwentythousandpesos(P20,000)butnotmorethanOnehundredthousandpesos(P1000,000)andsufferimprisonmentofnotlessthansix(6)yearsandone(1)daybutnotmorethantwelve(12)years.

SEC.263.UnlawfulPossessionorRemovalofArticlesSubjecttoExciseTaxwithoutPaymentoftheTax.‐Anypersonwhoownsand/orisfoundinpossessionofimportedarticlessubjecttoexcisetax,thetaxonwhichhasnotbeenpaidinaccordancewithlaw,oranypersonwhoownsand/orisfoundinpossessionofimportedtax‐exemptarticlesotherthanthosetowhomtheyarelegallyissuedshallbepunishedby:

(a)AfineofnotlessthanOnethousandpesos(P1,000)normorethanTwothousandpesos(P2,000)andsufferimprisonmentofnotlessthansixty(60)daysbutnotmorethanonehundred(100)days,iftheappraisedvalue,tobedeterminedinthemannerprescribedintheTariffandCustomsCode,includingdutiesandtaxes,ofthearticlesdoesnotexceedOnethousandpesos(P1,000).

(b)AfineofnotlessthanTenthousandpesos(P10,000)butnotmorethanTwentythousandpesos(P20,000)andsufferimprisonmentofnotlessthantwo(2)yearsbutnotmorethanfour(4)years,iftheappraisedvalue,tobedeterminedinthemannerprescribedintheTariffandCustomsCode,includingdutiesandtaxes,ofthearticlesexceedsOnethousandpesos(P1,000)butdoesnotexceedFiftythousandpesos(P50,000);

(c)AfineofnotlessthanThirtythousandpesos(P30,000)butnotmorethanSixtythousandpesos(P60,000)andsufferimprisonmentofnotlessthanfour(4)yearsbutnotmorethansix(6)years,iftheappraisedvalue,tobedeterminedinthemannerprescribedintheTariffandCustomsCode,includingdutiesandtaxesofthearticlesismorethanFiftythousandpesos(P50,000)butdoesnotexceedOnehundredfiftythousandpesos(P150,000);or

(d)AfineofnotlessthanFiftythousandpesos(P50,000)butnotmorethanOnehundredthousandpesos(P100,000)andsufferimprisonmentofnotlessthanten(10)yearsbutnotmorethantwelve(12)years,iftheappraisedvalue,tobedeterminedinthemannerprescribedintheTariffandCustomsCode,including

dutiesandtaxes,ofthearticlesexceedsOnehundredfiftythousandpesos(P150,000).

Anypersonwhoisfoundinpossessionoflocallymanufacturedarticlessubjecttoexcisetax,thetaxonwhichhasnotbeenpaidinaccordancewithlaw,oranypersonwhoisfoundinpossessionofsucharticleswhichareexemptfromexcisetaxotherthanthosetowhomthesameislawfullyissuedshallbepunishedwithafineofnotlessthan(10)timestheamountofexcisetaxdueonthearticlesfoundbutnotlessthanFivehundredpesos(P500)andsufferimprisonmentofnotlessthantwo(2)yearsbutnotmorethanfour(4)years.

Anymanufacturer,ownerorpersoninchargeofanyarticlesubjecttoexcisetaxwhoremovesorallowsorcausestheunlawfulremovalofanysucharticlesfromtheplaceofproductionorbondedwarehouse,uponwhichtheexcisetaxhasnotbeenpaidatthetimeandinthemannerrequired,andanypersonwhoknowinglyaidsorabetsintheremovalofsucharticlesasaforesaid,orconcealsthesameafterillegalremovalshall,forthefirstoffense,bepunishedwithafineofnotlessthanten(10)timestheamountofexcisetaxdueonthearticlesbutnotlessthanOnethousandpesos(P1,000)andsufferimprisonmentofnotlessthanone(1)yearbutnotmorethantwo(2)years.

Themereunexplainedpossessionofarticlessubjecttoexcisetax,thetaxonwhichhasnotbeenpaidinaccordancewithlaw,shallbepunishableunderthisSection.

Sec.264.FailureorrefusaltoIssueReceiptsorSalesorCommercialInvoices,ViolationsrelatedtothePrintingofsuchReceiptsorInvoicesandOtherViolations.‐

(a)Anypersonwho,beingrequiredunderSection237toissuereceiptsorsalesorcommercialinvoices,failsorrefusestoissuesuchreceiptsofinvoices,issuesreceiptsorinvoicesthatdonottrulyreflectand/orcontainalltheinformationrequiredtobeshowntherein,orusesmultipleordoublereceiptsorinvoices,shall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanOnethousandpesos(P1,000)butnotmorethanFiftythousandpesos(P50,000)andsufferimprisonmentofnotlessthantwo(2)yearsbutnotmorethanfour(4)years.

(b)AnypersonwhocommitsanyoftheactsenumeratedhereundershallbepenalizedinthesamemannerandtothesameextentasprovidedforinthisSection:

(1)PrintingofreceiptsorsalesorcommercialinvoiceswithoutauthorityfromtheBureauofInternalRevenue;or

(2)Printingofdoubleormultiplesetsofinvoicesorreceipts;or

(3)Printingofunnumberedreceiptsorsalesorcommercialinvoices,notbearingthename,businessstyle,TaxpayerIdentificationNumber,andbusinessaddressofthepersonorentity.

SEC.265.OffensesRelatingtoStamps.‐Anypersonwhocommitsanyoftheactsenumeratedhereundershall,uponconvictionthereof,bepunishedbyafineofnotlessthanTwentythousandpesos(P20,000)butnotmorethanFiftythousandpesos(P50,000)andsufferimprisonmentofnotlessthanfour(4)yearsbutnotmorethaneight(8)years:

(a)making,importing,selling,usingorpossessingwithoutexpressauthorityfromtheCommissioner,anydieforprintingormakingstamps,labels,tagsorplayingcards;

(b)Erasingthecancellationmarksofanystamppreviouslyused,oralteringthewrittenfiguresorlettersorcancellationmarksoninternalrevenuestamps;

(c)Possessingfalse,counterfeit,restoredoralteredstamps,labelsortagsorcausingthecommissionofanysuchoffensebyanother;

(d)Sellingorofferingforsaleanyboxorpackagecontainingarticlessubjecttoexcisetaxwithfalse,spuriousorcounterfeitstampsorlabelsorsellingfromanysuchfraudulentbox,packageorcontainerasaforementioned;or

(e)Givingawayoracceptingfromanother,orselling,buyingorusingcontainersonwhichthestampsarenotcompletelydestroyed.

Sec.266.FailuretoObeySummons.‐Anypersonwho,beingdulysummonedtoappeartotestify,ortoappearandproducebooksofaccounts,records,memorandaorotherpapers,ortofurnishinformationasrequiredunderthepertinentprovisionsofthisCode,neglectstoappearortoproducesuchbooksofaccounts,records,memorandaorotherpapers,ortofurnishsuchinformation,shall,uponconviction,bepunishedbyafineofnotlessthanFivethousandpesos(P5,000)butnotmorethantenthousandpesos(P10,000)andsufferimprisonmentofnotlessthanone(1)yearbutnotmorethantwo(2)years.

SEC.267.DeclarationunderPenaltiesofPerjury.‐Anydeclaration,returnandotherstatementrequiredunderthisCode,shall,inlieuofanoath,containawrittenstatementthattheyaremadeunderthepenaltiesofperjury.Anypersonwhowillfullyfilesadeclaration,returnorstatementcontaininginformationwhichisnottrueandcorrectastoeverymaterialmattershall,uponconviction,besubjecttothepenaltiesprescribedforperjuryundertheRevisedPenalCode.

SEC.268.OtherCrimesandOffenses.‐

(A)MisdeclarationorMisrepresentationofManufacturersSubjecttoExciseTax.‐Anymanufacturerwho,inviolationoftheprovisionsofTitleVIofthisCode,misdeclaresintheswornstatementrequiredthereinorinthesalesinvoice,anypertinentdataorinformationshallbepunishedbyasummarycancellationorwithdrawalofthepermittoengageinbusinessasamanufacturerofarticlessubjecttoexcisetax.

(B)ForfeitureofPropertyUsedinUnlicensedBusinessorDiesUsedforPrintingFalseStamps,Etc.‐Allchattels,machinery,andremovablefixturesofanysortusedintheunlicensedproductionofarticlessubjecttoexcisetaxshallbeforfeited.Diesandotherequipmentusedfortheprintingormakingofanyinternalrevenuestamp,labelortagwhichisinimitationoforpurportstobealawfulstamp,labelortagshallalsobeforfeited.

(C)ForfeitureofGoodsIllegallyStoredorRemoved.‐UnlessotherwisespecificallyauthorizedbytheCommissioner,allarticlessubjecttoexcisetaxshouldnotbestoredorallowedtoremaininthedistillerywarehouse,bondedwarehouseorotherplacewheremade,afterthetaxthereonhasbeenpaid;otherwise,allsucharticlesshallbeforfeited.Articleswithdrawnfromanysuchplaceorfromcustomscustody

orimportedintothecountrywithoutthepaymentoftherequiredtaxshalllikewisebeforfeited.

CHAPTERIII

PENALTIESIMPOSEDONPUBLICOFFICERS

SEC.269.ViolationsCommittedbyGovernmentEnforcementOfficers.‐Everyofficial,agent,oremployeeoftheBureauofInternalRevenueoranyotheragencyoftheGovernmentchargedwiththeenforcementoftheprovisionsofthisCode,whoisguiltyofanyoftheoffenseshereinbelowspecifiedshall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanFiftythousandpesos(P50,000)butnotmorethanOnehundredthousandpesos(P100,000)andsufferimprisonmentofnotlessthanten(10)yearsbutnotmorethanfifteen(15)yearsandshalllikewisesufferanadditionalpenaltyofperpetualdisqualificationtoholdpublicoffice,tovote,andtoparticipateinanypublicelection:

(a)Extortionorwillfuloppressionthroughtheuseofhisofficeorwillfuloppressionandharassmentofataxpayerwhorefused,declined,turneddownorrejectedanyofhisoffersspecifiedinparagraph(d)hereof;

(b)Knowinglydemandingorreceivinganyfee,otherorgreatersumsthatareauthorizedbylaworreceivinganyfee,compensationorreward,exceptasbylawprescribed,fortheperformanceofanyduty;

(c)Willfullyneglectingtogivereceipts,asbylawrequired,foranysumcollectedintheperformanceofdutyorwillfullyneglectingtoperformanyotherdutiesenjoinedbylaw;

(d)Offeringorundertakingtoaccomplish,fileorsubmitareportorassessmentonataxpayerwithouttheappropriateexaminationofthebooksofaccountsortaxliability,orofferingorundertakingtosubmitareportorassessmentlessthantheamountduetheGovernmentforanyconsiderationorcompensation,orconspiringorcolludingwithanotherorotherstodefraudtherevenuesorotherwiseviolatetheprovisionsofthisCode;

(e)Neglectingorbydesignpermittingtheviolationofthelawbyanyotherperson;

(f)Makingorsigninganyfalseentryorentriesinanybook,ormakingorsigninganyfalsecertificateorreturn;

(g)Allowingorconspiringorcolludingwithanothertoallowtheunauthorizedretrieval,withdrawalorrecallofanyreturn,statementordeclarationafterthesamehasbeenofficiallyreceivedbytheBureauofInternalRevenue;

(h)HavingknowledgeorinformationofanyviolationofthisCodeorofanyfraudcommittedontherevenuescollectiblebytheBureauofInternalRevenue,failuretoreportsuchknowledgeorinformationtotheirsuperiorofficer,orfailuretoreportasotherwiserequiredbylaw;and

(i)Withouttheauthorityoflaw,demandingoracceptingorattemptingtocollect,directlyorindirectly,aspaymentorotherwiseanysumofmoneyorotherthingofvalueforthecompromise,adjustmentorsettlementofanychargeorcomplaintforanyviolationorallegedviolationofthisCode.

Provided,Thattheprovisionsoftheforegoingparagraphnotwithstanding,anyinternalrevenueofficerforwhichaprimafaciecaseofgravemisconducthasbeenestablishedshall,afterduenoticeandhearingoftheadministrativecaseandsubjecttoCivilServiceLaws,bedismissedfromtherevenueservice:Provided,further,Thattheterm"gravemisconduct",asdefinedinCivilServiceLaw,shallincludetheissuanceoffakelettersofauthorityandreceipts,forgeryofsignature,usurpationofauthorityandhabitualissuanceofunreasonableassessments.

SEC.270.UnlawfulDivulgenceofTradeSecrets.‐ExceptasprovidedinSection71ofthisCodeandSection26ofRepublicActNo.6388,anyofficeroremployeeoftheBureauofInternalRevenuewhodivulgestoanypersonormakesknowninanyothermannerthanmaybeprovidedbylawinformationregardingthebusiness,incomeorestateofanytaxpayer,thesecrets,operation,styleorwork,orapparatusofanymanufacturerorproducer,orconfidentialinformationregardingthebusinessofanytaxpayer,knowledgeofwhichwasacquiredbyhiminthedischargeofhis

officialduties,shalluponconvictionforeachactoromission,bepunishedbyafineofnotlessthanFiftythousandpesos(P50,000)butnotmorethanOnehundredthousandpesos(P100,000),orsufferimprisonmentofnotlessthantwo(2)yearsbutnotmorethanfive(5)years,orboth.

SEC.271.UnlawfulInterestofRevenueLawEnforcersinBusiness.‐Anyinternalrevenueofficerwhoisorshallbecomeinterested,directlyorindirectly,inthemanufacture,saleorimportationofanyarticlesubjecttoexcisetaxunderTitleVIofthisCodeorinthemanufactureorrepairorsale,ofanydieforprinting,ormakingofstamps,orlabelsshalluponconvictionforeachactoromission,bepunishedbyafineofnotlessthanFivethousandpesos(P5,000)butnotmorethanTenthousandpesos(P10,000),orsufferimprisonmentofnotlessthantwo(2)yearsandone(1)daybutnotmorethanfour(4)years,orboth.

SEC.272.ViolationofWithholdingTaxProvision.‐EveryofficeroremployeeoftheGovernmentoftheRepublicofthePhilippinesoranyofitsagenciesandinstrumentalities,itspoliticalsubdivisions,aswellasgovernment‐ownedorcontrolledcorporations,includingtheBangkoSentralngPilipinas(BSP),who,undertheprovisionsofthisCodeorrulesandregulationspromulgatedthereunder,ischargedwiththedutytodeductandwithholdanyinternalrevenuetaxandtoremitthesameinaccordancewiththeprovisionsofthisCodeandotherlawsisguiltyofanyoffensehereinbelowspecifiedshall,uponconvictionforeachactoromissionbepunishedbyafineofnotlessthanFivethousandpesos(P5,000)butnotmorethanFiftythousandpesos(P50,000)orsufferimprisonmentofnotlessthansix(6)monthsandone(1)daybutnotmorethantwo(2)years,orboth:

(a)Failingorcausingthefailuretodeductandwithholdanyinternalrevenuetaxunderanyofthewithholdingtaxlawsandimplementingrulesandregulations;

(b)Failingorcausingthefailuretoremittaxesdeductedandwithheldwithinthetimeprescribedbylaw,andimplementingrulesandregulations;and

(c)Failingorcausingthefailuretofilereturnorstatementwithinthetimeprescribed,orrenderingorfurnishingafalseorfraudulentreturnorstatementrequiredunderthewithholdingtaxlawsandrulesandregulations.

SEC.273.PenaltyforFailuretoIssueandExecuteWarrant.‐Anyofficialwhofailstoissueorexecutethewarrantofdistraintorlevywithinthirty(30)daysaftertheexpirationofthetimeprescribedinSection207orwhoisfoundguiltyofabusingtheexercisethereofbycompetentauthorityshallbeautomaticallydismissedfromtheserviceafterduenoticeandhearing.

CHAPTERIV

OTHERPENALPROVISIONS

SEC.274.PenaltyforSecondandSubsequentOffenses.‐Inthecaseofreincidence,themaximumofthepenaltyprescribedfortheoffenseshallbeimposed.

SEC.275.ViolationofOtherProvisionsofthisCodeorRulesandRegulationsinGeneral.‐AnypersonwhoviolatesanyprovisionofthisCodeoranyruleorregulationpromulgatedbytheDepartmentofFinance,forwhichnospecificpenaltyisprovidedbylaw,shall,uponconvictionforeachactoromission,bepunishedbyafineofnotmorethanOnethousandpesos(P1,000)orsufferimprisonmentofnotmorethansix(6)months,orboth.

SEC.276.PenaltyforSelling,Transferring,EncumberingorinAnyWayDisposingofPropertyPlacedUnderConstructiveDistraint.‐Anytaxpayer,whosepropertyhasbeenplacedunderconstructivedistraint,whosells,transfers,encumbersorinanywaydisposesofsaidproperty,oranypartthereof,withouttheknowledgeandconsentoftheCommissioner,shall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthantwicethevalueofthepropertysosold,encumberedordisposedofbutnotlessthanFiveThousandpesos(P5,000),orsufferimprisonmentofnotlessthantwo(2)yearsandone(1)daybutnotmorethanfour(4)years,ofboth.

SEC.277.FailuretoSurrenderPropertyPlacedUnderDistraintandLevy.‐Anypersonhavinginhispossessionorunderhiscontrolanypropertyorrightstoproperty,uponwhichawarrantofconstructivedistraint,oractualdistraintandlevyhasbeenissuedshall,upondemandbytheCommissioneroranyofhisdeputiesexecutingsuchwarrant,surrendersuchpropertyorrighttopropertytotheCommissioneroranyofhisdeputies,unlesssuchpropertyorrightis,atthetimeofsuchdemand,subjecttoanattachmentorexecutionunderanyjudicialprocess.Any

personwhofailsorrefusestosurrenderanyofsuchpropertyorrightshallbeliableinhisownpersonandestatetotheGovernmentinasumequaltothevalueofthepropertyorrightsnotsosurrenderedbutnotexceedingtheamountofthetaxes(includingpenaltiesandinterest)forthecollectionofwhichsuchwarranthadbeenissued,togetherwithcostandinterestifany,fromthedateofsuchwarrant.Inaddition,suchpersonshall,uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanFivethousandpesos(P5,000),orsufferimprisonmentofnotlessthansix(6)monthsandone(1)daybutnotmorethantwo(2)years,orboth.

SEC.278.ProcuringUnlawfulDivulgenceofTradeSecrets.‐AnypersonwhocausesorprocuresanofficeroremployeeoftheBureauofInternalRevenuetodivulgeanyconfidentialinformationregardingthebusiness,incomeorinheritanceofanytaxpayer,knowledgeofwhichwasacquiredbyhiminthedischargeofhisofficialduties,andwhichitisunlawfulforhimtoreveal,andanypersonwhopublishesorprintsinanymannerwhatever,notprovidedbylaw,anyincome,profit,lossorexpenditureappearinginanyincometaxreturn,shallbepunishedbyafineofnotmorethanTwothousandpesos(P2,000),orsufferimprisonmentofnotlessthansix(6)monthsnormorethanfive(5)years,orboth.

SEC.279.ConfiscationandForfeitureoftheProceedsorInstrumentsofCrime.‐InadditiontothepenaltyImposedfortheviolationoftheprovisionsofTitleXofthisCode,thesameshallcarrywithittheconfiscationandforfeitureinfavorofthegovernmentoftheproceedsofthecrimeorvalueofthegoods,andtheinstrumentsortoolswithwhichthecrimewascommitted:Provided,however,Thatifinthecourseoftheproceedings,itisestablishedthattheinstrumentsortoolsusedintheillicitactbelongtoathirdperson,thesameshallbeconfiscatedandforfeitedafterduenoticeandhearinginaseparateproceedinginfavoroftheGovernmentifsuchthirdpersonleased,let,charteredorotherwiseentrustedthesametotheoffender:Provided,further,Thatincasethelesseesubleased,ortheborrower,charterer,ortrusteeallowedtheuseoftheinstrumentsortoolstotheoffender,suchinstrumentsortoolsshall,likewise,beconfiscatedandforfeited:Provided,finally,Thatpropertyofcommoncarriersshallnotbesubjecttoforfeiturewhenusedinthetransactionoftheirbusinessassuchcommoncarrier,unlesstheowneroroperatorofsaidcommoncarrierwas,atthetimeoftheillegalact,aconsentingpartyorprivythereto,withoutprejudicetotheowner'srightofrecoveryagainsttheoffenderinacivilorcriminalaction.Articleswhicharenotsubjectoflawfulcommerceshallbedestroyed.

SEC.280.SubsidiaryPenalty.‐IfthepersonconvictedforviolationofanyoftheprovisionsofthisCodehasnopropertywithwhichtomeetthefineimposedupon

himbythecourt,orisunabletopaysuchfine,heshallbesubjecttoasubsidiarypersonalliabilityattherateofone(1)dayforeachEightpesosandfiftycentavos(P8.50)subjecttotherulesestablishedinArticle39oftheRevisedPenalCode.

SEC.281.PrescriptionforViolationsofanyProvisionofthisCode.‐AllviolationsofanyprovisionofthisCodeshallprescribeafterFive(5)years.

Prescriptionshallbegintorunfromthedayofthecommissionoftheviolationofthelaw,andifthesamebenotknownatthetime,fromthediscoverythereofandtheinstitutionofjudicialproceedingsforitsinvestigationandpunishment.

Theprescriptionshallbeinterruptedwhenproceedingsareinstitutedagainsttheguiltypersonsandshallbegintorunagainiftheproceedingsaredismissedforreasonsnotconstitutingjeopardy.

ThetermofprescriptionshallnotrunwhentheoffenderisabsentfromthePhilippines.

SEC.282.Informer'sRewardtoPersonsInstrumentalintheDiscoveryofViolationsoftheNationalInternalRevenueCodeandintheDiscoveryandSeizureofSmuggledGoods.‐

(A)ForViolationsoftheNationalInternalRevenueCode.‐Anyperson,exceptaninternalrevenueofficialoremployee,orotherpublicofficialoremployee,orhisrelativewithinthesixthdegreeofconsanguinity,whovoluntarilygivesdefiniteandsworninformation,notyetinthepossessionoftheBureauofInternalRevenue,leadingtothediscoveryoffraudsupontheinternalrevenuelawsorviolationsofanyoftheprovisionsthereof,therebyresultingintherecoveryofrevenues,surchargesandfeesand/ortheconvictionoftheguiltypartyand/ortheimpositionofanyofthefineorpenalty,shallberewardedinasumequivalenttotenpercent(10%)oftherevenues,surchargesorfeesrecoveredand/orfineorpenaltyimposedandcollectedorOneMillionPesos(P1,000,000)percase,whicheverislower.ThesameamountofrewardshallalsobegiventoaninformerwheretheoffenderhasofferedtocompromisetheviolationoflawcommittedbyhimandhisofferhasbeenacceptedbytheCommissionerandcollectedfromtheoffender:Provided,Thatshouldnorevenue,surchargesorfeesbeactuallyrecoveredorcollected,suchpersonshallnotbeentitledtoareward:Provided,further,Thattheinformation

mentionedhereinshallnotrefertoacasealreadypendingorpreviouslyinvestigatedorexaminedbytheCommissioneroranyofhisdeputies,agentsorexaminers,ortheSecretaryofFinanceoranyofhisdeputiesoragents:Provided,finally,ThattherewardprovidedhereinshallbepaidunderrulesandregulationsissuedbytheSecretaryofFinance,uponrecommendationoftheCommissioner.

(B)ForDiscoveryandSeizureofSmuggledGoods.‐Toencouragethepublictoextendfullcooperationineradicatingsmuggling,acashrewardequivalenttotenpercent(10%)ofthefairmarketvalueofthesmuggledandconfiscatedgoodsorOneMillionPesos(P1,000,000)percase,whicheverislower,shallbegiventopersonsinstrumentalinthediscoveryandseizureofsuchsmuggledgoods.

Thecashrewardsofinformersshallbesubjecttoincometax,collectedasafinalwithholdingtax,atarateoftenpercent(10%).

TheprovisionsoftheforegoingSubsectionsnotwithstanding,allpublicofficials,whetherincumbentorretired,whoacquiredtheinformationinthecourseoftheperformanceoftheirdutiesduringtheirincumbency,areprohibitedfromclaiminginformer'sreward.

TITLEXI

ALLOTMENTOFINTERNALREVENUE

CHAPTERI

DISPOSITIONANDALLOTMENTOFNATIONALINTERNALREVENUEINGENERAL

SEC.283.DispositionofNationalInternalRevenue.‐NationalInternalrevenuecollectedandnotappliedashereinaboveprovidedorotherwisespeciallydisposedofbylawshallaccruetotheNationalTreasuryandshallbeavailableforthegeneralpurposesoftheGovernment,withtheexceptionoftheamountssetapartbywayofallotmentasprovidedforunderRepublicActNo.7160,otherwiseknownastheLocalGovernmentCodeof1991.

Inadditiontotheinternalrevenueallotmentasprovidedforintheprecedingparagraph,fiftypercent(50%)ofthenationaltaxescollectedunderSections106,108and116ofthisCodeinexcessoftheincreaseincollectionsfortheimmediatelyprecedingyearshallbedistributedasfollows:

(a)Twentypercent(20%)shallaccruetothecityormunicipalitywheresuchtaxesarecollectedandshallbeallocatedinaccordancewithSection150ofRepublicActNo.7160,otherwiseknownastheLocalGovernmentCodeof1991;and

(b)Eightypercent(80%)shallaccruetotheNationalGovernment.

SEC.284.AllotmentfortheCommissiononAudit.‐One‐halfofonepercent(1/2of1%)ofthecollectionsfromthenationalinternalrevenuetaxesnototherwiseaccruingtospecialaccountsinthegeneralfundofthenationalgovernmentshallaccruetotheCommissiononAuditasafeeforauditingservicesrenderedtolocalgovernmentunits,excludingmaintenance,equipment,andotheroperatingexpensesasprovidedforinSection21ofPresidentialDecreeNo.898.

TheSecretaryofFinanceisherebyauthorizedtodeductfromthemonthlyinternalrevenuetaxcollectionsanamountequivalenttothepercentageashereinfixed,andtoremitthesamedirectlytotheCommissiononAuditundersuchrulesandregulationsasmaybepromulgatedbytheSecretaryofFinanceandtheChairmanoftheCommissiononAudit.

SEC.285.AllotmentfortheBureauofInternalRevenue.‐Anamountequivalenttofivepercent(5%)oftheexcessofactualcollectionsofnationalinternalrevenuetaxesoverthecollectiongoalshallaccruetothespecialfundoftheBureauofInternalRevenueandshallbetreatedasreceiptsautomaticallyappropriated.Saidamountshallbeutilizedasincentivebonusforrevenuepersonnel,purchaseofnecessaryequipmentandfacilitiesfortheimprovementoftaxadministration,asapprovedbytheCommissioner:Provided,ThatthePresidentmay,uponrecommendationoftheCommissioner,directthattheexcessbecreditedtoaSpecialAccountintheNationalTreasurytobeheldinthereserveavailablefordistributionasincentivebonusinthesubsequentyears.

TheSecretaryofFinanceisherebyauthorizedtotransferfromtheTreasuryanamountequivalenttothepercentageashereinfixedandtoremitthesamedirectlytotheBureauofInternalRevenueundersuchrulesandregulationsasmaybepromulgatedbytheSecretaryofFinance.

CHAPTERII

SPECIALDISPOSITIONOFCERTAINNATIONALINTERNALREVENUETAXES

SEC.286.DispositionofProceedsofinsurancePremiumTax.‐Twenty‐fivepercent(25%)ofthepremiumtaxcollectedunderSection123ofthisCodeshallaccruetotheInsuranceFundascontemplatedinSection418ofPresidentialDecreeNo.612whichshallbeusedforthepurposeofdefrayingtheexpensesoftheInsuranceCommission.TheCommissionershallturnoveranddeliverthesaidInsuranceFundtotheInsuranceCommissionerassoonasthecollectionismade.

SEC.287.SharesofLocalGovernmentUnitsintheProceedsfromtheDevelopmentandUtilizationoftheNationalWealth.‐LocalGovernmentunitsshallhaveanequitableshareintheproceedsderivedfromtheutilizationanddevelopmentofthenationalwealth,withintheirrespectiveareas,includingsharingthesamewiththeinhabitantsbywayofdirectbenefits.

(A)AmountofShareofLocalGovernmentUnits.‐Localgovernmentunitsshall,inadditiontotheinternalrevenueallotment,haveashareoffortypercent(40%)ofthegrosscollectionderivedbythenationalgovernmentfromtheprecedingfiscalyearfromexcisetaxesonmineralproducts,royalties,andsuchothertaxes,feesorcharges,includingrelatedsurcharges,interestsorfines,andfromitsshareinanyco‐production,jointventureorproductionsharingagreementintheutilizationanddevelopmentofthenationalwealthwithintheirterritorialjurisdiction.

(B)ShareoftheLocalGovernmentsfromAnyGovernmentAgencyorGovernment‐OwnedorControlledCorporation.‐LocalGovernmentUnitsshallhaveashare,basedontheprecedingfiscalyear,fromtheproceedsderivedbyanygovernmentagencyorgovernment‐ownedorcontrolledcorporationengagedintheutilizationanddevelopmentofthenationalwealthbasedonthefollowingformula,whicheverwillproduceahighershareforthelocalgovernmentunit:

(1)Onepercent(1%)ofthegrosssalesorreceiptsoftheprecedingcalendaryear,or

(2)Fortypercent(40%)oftheexcisetaxesonmineralproducts,royalties,andsuchothertaxes,feesorcharges,includingrelatedsurcharges,interestsorfinesthegovernmentagencyorgovernment‐ownedor‐controlledcorporationswouldhavepaidifitwerenototherwiseexempt.

(C)AllocationofShares.‐TheshareintheprecedingSectionshallbedistributedinthefollowingmanner:

(1)Wherethenaturalresourcesarelocatedintheprovince:

(a)Province‐twentypercent(20%)

(b)Componentcity/municipality‐forty‐fivepercent(45%);and

(c)Barangay‐thirty‐fivepercent(35%)

Provided,however,Thatwherethenaturalresourcesarelocatedintwo(2)ormorecities,theallocationofsharesshallbebasedontheformulaonpopulationandlandareaasspecifiedinsubsection(C)(1)hereof.

(2)Wherethenaturalresourcesarelocatedinahighlyurbanizedorindependentcomponentcity:

(a)City‐sixty‐fivepercent(65%);and

(b)Barangay‐thirty‐fivepercent(35%)

Provided,however,Thatwherethenaturalresourcesarelocatedintwo(2)ormorecities,theallocationofsharesshallbebasedontheformulaonpopulationandlandareaasspecifiedinsubsection(c)(1)hereof.

SEC.288.DispositionofIncrementalRevenues.‐

(A)IncrementalRevenuesfromRepublicActNo.7660.‐TheincrementalrevenuesfromtheincreaseinthedocumentarystamptaxesunderR.A.No.7660shallbesetasideforthefollowingpurposes:

(1)In1994and1995,twentyfivepercent(25%)thereofrespectively,shallaccruetotheUnifiedHome‐LendingProgramunderExecutiveOrderNo.90particularlyformasssocializedhousingprogramtobeallocatedasfollows:fiftypercent(50%)formass‐socializedhousing;thirtypercent(30%)forthecommunitymortgageprogram;andtwentypercent(20%)forlandbankinganddevelopmenttobeadministeredbytheNationalHousingAuthority:Provided,Thatnomorethanonepercent(1%)oftherespectiveallocationshereofshallbeusedforadministrativeexpenses;

(2)In1996,twentyfivepercent(25%)thereoftobeutilizedfortheNationalHealthInsuranceProgramthathereaftermaybemandatedbylaw;

(3)In1994andeveryyearthereafter,twentyfivepercent(25%)thereofshallaccruetoaSpecialEducationFundtobeAdministeredbytheDepartmentofEducation,CultureandSportsfortheconstructionandrepairofschoolfacilities,trainingorteachers,andprocurementorproductionofinstructionalmaterialsandteachingaids;and

(4)In1994andeveryyearthereafter,fiftypercent(50%)thereofshallaccruetoaSpecialInfrastructureFundfortheConstructionandrepairofroads,bridges,damsandirrigation,seaportsandhydroelectricandotherindigenouspowerprojects:however,Thatfortheyears1994and1995,thirtypercent(30%),andfortheyears1996,1997and1998,twentypercent(20%),ofthisfundshallbeallocatedfordepressedprovincesasdeclaredbythePresidentasofthetimeoftheeffectivityofR.A.No.7660:Provided,further,ThatavailmentsunderthisfundshallbedeterminedbythePresidentonthebasisofequity.

Provided,finally,Thatinparagraphs(2),(3),and(4)ofthisSection,notmoreonepercent(1%)oftheallocatedfundsthereofshallbeusedforadministrativeexpensesbytheimplementingagencies.

(B)IncrementalRevenuesfromRepublicActNo.8240.‐Fifteenpercent(15%)oftheincrementalrevenuecollectedfromtheexcisetaxontobaccoproductsunderR.A.No.8240shallbeallocatedanddividedamongtheprovincesproducingburleyandnativetobaccoinaccordancewiththevolumeoftobaccoleafproduction.Thefundshallbeexclusivelyutilizedforprogramsinpursuitofthefollowingobjectives:

(1)Cooperativeprojectsthatwillenhancebetterqualityofagriculturalproductsandincreaseincomeandproductivityoffarmers;

(2)Livelihoodprojects,particularlythedevelopmentofalternativefarmingsystemtoenhancefarmer'sincome;and

(3)Agro‐industrialprojectsthatwillenabletobaccofarmerstobeinvolvedinthemanagementandsubsequentownershipofprojects,suchaspost‐harvestandsecondaryprocessinglikecigarettemanufacturingandby‐productutilization.

TheDepartmentofBudgetandManagement,inconsultationwiththeOversightCommitteecreatedundersaidR.A.No.8240,shallissuethecorrespondingrulesandregulationsgoverningtheallocationanddisbursementofthisfund.

SEC.289.SpecialFinancialSupporttoBeneficiaryProvincesProducingVirginiaTobacco.‐ThefinancialsupportgivenbytheNationalGovernmentforthebeneficiaryprovincesshallbeconstitutedandcollectedfromtheproceedsoffifteenpercent(15%)oftheexcisetaxesonlocallymanufacturedVirginia‐typeofcigarettes.

Thefundsallottedshallbedividedamongthebeneficiaryprovincespro‐rataaccordingtothevolumeofVirginiatobaccoproduction.

ProductionproducingVirginiatobaccoshallbethebeneficiaryprovincesunderRepublicActNo.7171.Provided,however,thattoqualifyasbeneficiaryunderR.A.No.7171,aprovincemusthaveanaverageannualproductionofVirginialeaftobaccoinanamountnotlessthanonemillionkilos:Provided,further,thattheDepartmentofBudgetandManagement(DBM)shalleachyeardeterminethe

beneficiaryprovincesandtheircomputedshareofthefundsunderR.A.No.7171,referringtotheNationalTobaccoAdministration(NTA)recordsoftobaccoacceptances,atthetobaccotradingcentersfortheimmediatepastyear.

TheSecretaryofBudgetandManagementisherebydirectedtoretainannuallythesaidfundsequivalenttofifteenpercent(15%)ofexcisetaxesonlocallymanufacturedVirginiatypecigarettestoberemittedtothebeneficiaryprovincesqualifiedunderR.A.No.7171.

Theprovisionofexistinglawstothecontrarynotwithstanding,thefifteenpercent(15%)sharefromgovernmentrevenuesmentionedinR.A.No.7171andduetotheVirginiatobacco‐producingprovincesshallbedirectlyremittedtotheprovincesconcerned.

Provided,ThatthisSectionshallbeimplementedinaccordancewiththeguidelinesofMemorandumCircularNo.61‐AdatedNovember28,1993,whichamendedMemorandumCircularNo.61,entitled"PrescribingGuidelinesforImplementingRepublicActNo.7171",datedJanuary1,1992.

Provided,further,Thatinadditiontothelocalgovernmentunitsmentionedintheabovecircular,theconcernedofficialsintheprovinceshallbeconsultedasregardstheidentificationofprojectstobefinanced.

TITLEXII

OVERSIGHTCOMMITTEE

SEC.290.CongressionalOversightCommittee.‐

ACongressionalOversightCommittee,hereinafterreferredtoastheCommittee,isherebyconstitutedinaccordancewiththeprovisionsofthisCode.TheCommitteeshallbecomposedoftheChairmenoftheCommitteeonWaysandMeansoftheSenateandHouseRepresentativesandfour(4)additionalmembersfromeachhouse,tobedesignatedbytheSpeakeroftheHouseofRepresentativesandtheSenatePresident,respectively.

TheCommitteeshall,amongothers,inaidoflegislation:

(1)MonitorandensuretheproperimplementationofRepublicActNo.8240;

(2)DeterminethatthepoweroftheCommissionertocompromiseandabateisreasonablyexercised;

(3)ReviewthecollectionperformanceoftheBureauofInternalRevenue;and

(4)ReviewtheimplementationoftheprogramsoftheBureauofInternalRevenue.

Infurtheranceofthehereinabovecitedobjectives,theCommitteeisempoweredtorequireoftheBureauofInternalRevenue,submissionofallpertinentinformation,includingbutnotlimitedto:industryaudits;collectionperformancedata;statusreportoncriminalactionsinitiatedagainstpersons;andsubmissionoftaxpayerreturns:Provided,however,Thatanyreturnorreturninformationwhichcanbeassociatedwith,orotherwiseidentify,directlyorindirectly,aparticulartaxpayershallbefurnishedtheCommitteeonlywhensittinginExecutiveSessionunlesssuchtaxpayerotherwiseconsentsinwritingtosuchdisclosure.

TITLEXIII

REPEALINGPROVISIONS

SEC.291.InGeneral.‐Alllaws,decrees,executiveorders,rulesandregulationsorpartsthereofwhicharecontrarytoorinconsistentwiththisCodeareherebyrepealed,amendedormodifiedaccordingly.

TITLEXIV

FINALPROVISIONS

SEC.292.SeparabilityClause.‐Ifanyclause,sentence,paragraphorpartofthisCodeshallbeadjudgedbyanyCourtofcompetentjurisdictiontobeinvalid,suchjudgmentshallnotaffect,impairorinvalidatetheremainderofsaidCode,butshallbeconfinedinitsoperationtotheclause,sentence,paragraphorpartthereofdirectlyinvolvedinthecontroversy.

SEC.4.TheSecretaryofFinanceshall,uponrecommendationoftheCommissionerofInternalRevenue,promulgateandpublishthenecessaryrulesandregulationsfortheeffectiveimplementationofthisAct.

SEC.5.TransitoryProvisions.‐DefermentoftheEffectivityoftheImpositionofVATonCertainServices.‐Theeffectivityoftheimpositionofthevalue‐addedtaxonservicesasprescribedinSection17(a)and(b)ofRepublicActNo.7616,asamendedbyRepublicAct.8241,isherebyfurtherdeferreduntilDecember31,1999,unlessCongressdeemsotherwise:Provided,ThatthesaidservicesshallcontinuetopaytheapplicabletaxprescribedunderthepresentprovisionsoftheNationalInternalRevenueCode,asamended.

SEC.6.SeparabilityClause.‐IfanyprovisionofthisActissubsequentlydeclaredunconstitutional,thevalidityoftheremainingprovisionshereofshallremaininfullforceandeffect.

SEC.7.RepealingClauses.‐

(A)TheprovisionofSection17ofRepublicActNo.7906,otherwiseknownasthe"ThriftBanksActof1995"shallcontinuetobeinforceandeffectonlyuntilDecember31,1999.

EffectiveJanuary1,2000,allthriftbanks,whetherinoperationasofthatdateorthereafter,shallnolongerenjoytaxexemptionasprovidedunderSection17ofR.A.No.7906,therebysubjectingallthriftbankstotaxes,feesandchargesinthesamemannerandatthesamerateasbanksandotherfinancialintermediaries.

(B)TheprovisionsoftheNationalInternalRevenueCode,asamended,andallotherlaws,includingchartersofgovernment‐ownedorcontrolledcorporations,decrees,orders,orregulationsorpartsthereof,thatareinconsistentwiththisActareherebyrepealedoramendedaccordingly.

SEC.8.Effectivity.‐ThisActshalltakeeffectonJanuary1,1998.