Presidential Decree No. 1158

PHILIPPINE LAWS, STATUTES, CODES & ISSUANCES


PHILIPPINE LAWS, STATUTES AND CODES - CHAN ROBLES VIRTUAL LAW LIBRARY

PRESIDENTIAL DECREES





PRESIDENTIAL DECREE NO. 1158


PRESIDENTIAL DECREE NO. 1158 - A DECREE TO CONSOLIDATE AND CODIFY ALL THE INTERNAL REVENUE LAWS OF THE PHILIPPINES




WHEREAS, the present National Internal Revenue Code is the result of the first codification of our tax laws dating back to the year 1939;

WHEREAS, there exists in the said Code a substantial number of provisions which were rendered obsolete by recent amendments introduced by various laws and presidential decrees;

WHEREAS, there are not innumerable tax laws enacted since the Code's inception up to the present by various Republic Acts and Presidential Decree that need consolidation and codification;

WHEREAS, it is imperative to adopt a consolidated tax code to integrate such amendatory laws and decrees and to harmonize their provisions not only for the proper guidance of the taxpayers but also for the efficient administration thereof:

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby order and decree as follows:

Section 1.chanroblesnad Codification of all internal revenue laws. All internal revenue laws embodied in the present National Internal Revenue Code and various laws and presidential decrees are hereby consolidated and codified into a single tax code to be known as the National Internal Revenue Code of 1977, which shall form an integral part of this Decree.

Sec. 2.chanroblesnad Effectivity. The provisions of the National Internal Revenue Code of 1977 shall take effect immediately without prejudice, however, to the effectivity dates of the various laws and decrees which have so far amended the provisions of National Internal Revenue Code of 1939, as well as new revenue laws, as consolidated with the National Internal Revenue Code of 1977.

Done in the City of Manila, this 3rd day of June, in the year of Our Lord, nineteen hundred and seventy-seven.

THE NATIONAL INTERNAL REVENUE CODE OF THE PHILIPPINES AS AMENDED by RA Nos. 7496, 7497 & 7499, and other issuances

TITLE OF CODE
Section 1.chanroblesnad Title of Code. This Code shall be known as National Internal Revenue Code of 1977.

TITLE I. ORGANIZATION AND FUNCTION OF BUREAU
Sec. 2.chanroblesnad Chief Officials of the Bureau of Internal Revenue. The Bureau of Internal Revenue shall have a chief to be known as Commissioner of Internal Revenue, and two assistant chiefs to be known as Deputy Commissioner.

Sec. 3.chanroblesnad Powers and Duties of Bureau. The powers and duties of the Bureau of Internal Revenue shall comprehend the assessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of all forfeitures, penalties, and fines connected therewith including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. Said Bureau shall also give effect to and administer the supervisory and police power conferred to it this Code or other laws.

Sec. 4.chanroblesnad Specific Provisions to be Continued in Regulations. The regulations of the Bureau of Internal Revenue shall, among other things, contain provisions specifying prescribing, or defining:

(a) chanroblesnad The time and manner in which Revenue Regional Directors shall canvass their respective revenue regions for the purpose of discovering persons and property liable to national internal revenue taxes, and the manner in which their lists and records of taxable persons and taxable objects shall be made kept.

(b) chanroblesnad The forms of labels, brands, or marks to be required in goods subject to a specific tax, and the manner in which the labeling, branding, or marking shall be effected.

(c) chanroblesnad The conditions under which and the manner in which goods intended for export, which if not exported would be subject to a specific tax, shall be labelled, branded, or marked.

(d) chanroblesnad The conditions to be observed by revenue officers, provincial fiscal and other officials respecting the institution and conduct of legal actions and proceedings.

(e) chanroblesnad The conditions under which goods intended for storage in bonded warehouses shall be conveyed thither, manner of storage, and the method of keeping the entires and records in connection therewith, also the books to be kept by Revenue Inspectors and the reports to be made by them in connection with their supervision of such warehouses.

(f) chanroblesnad The condition under which denatured alcohol may be removed and dealt in, the character and quantity of the denaturing material to be used, the manner in which the process of denaturing shall be effected, so as to render the alcohol suitably denatured and unfit for oral intake, the bonds to be given, the books and records to be kept, the entries to be made therein, the reports to be made to the Commissioner of Internal Revenue, and the signs to be displayed in the business or by the person for whom such denaturing is done or by whom, such alcohol is dealt in.

(g) chanroblesnad The manner in which revenue shall be collected and paid, the instrument, document, or object to which revenue stamps shall be affixed, any provision of Republic Act No. 5448 to the contrary notwithstanding, the mode of cancellation of the same, the manner in which the proper books, records, invoices, and other papers shall be kept and entries therein made by the person subject to the tax, as well as the manner in which licenses and stamps shall be gathered up and returned after serving their purposes.

(h) chanroblesnad The conditions to be observed by revenue officers, provincial fiscals, and other officials respecting the enforcement of Title III imposing a tax on estate of a decedent, and other transfers mortis causa as well as on gifts and such other rules and prohibitions which the Commissioner of Internal Revenue may consider suitable for the enforcement of the said Title III.

(i) chanroblesnad The manner in which tax returns, information, and reports shall be prepared and reported and the tax collected and paid, as well as the conditions under which evidence of payment shall be furnished the taxpayer, and the preparation and publication of tax statistics.

(j) chanroblesnad The manner in which internal revenue taxes such as income tax, estate and gift taxes, specific taxes, percentage taxes, documentary stamp taxes, mining taxes, taxes on banks, finance companies, insurance companies, public utilities, taxes on amusements, charges on forest products and such other taxes as may be added thereto shall be paid through the collection agents of the Bureau of Internal Revenue or through authorized agent commercial banks which are hereby deputized to receive payments of such taxes and the returns, papers and statements that may be filed by the taxpayers in connection with the payment of the tax.

Sec. 5.chanroblesnad Forms, Receipts, Certificates, and Appliances. (a) Provision and Distribution to Proper Officials. It shall be the duty of the Commissioner, among other things, to prescribe, provide, and distribute to the proper officials the requisite licenses, internal revenue stamps, labels, all other forms, certificates, bonds, records, invoices, books, receipts, instruments, appliances and apparatus used in administering the laws falling within the jurisdiction of the Bureau. For this purpose, internal revenue stamps, strip stamps and labels shall be caused by the Commissioner to be printed with adequate security features.

(b) chanroblesnad Receipts for Payments Made. It shall be the duty of the Commissioner or his duly authorized representative to whom any payment of any taxes is made under the provisions of this Code, to issue to the person marking such payment a receipt, expressing the amount paid and the particular account for which such payment was made. (As amended by PD No. 1994)

Sec. 6.chanroblesnad Agents and Deputies for Collection of National Internal Revenue Taxes. The following are hereby constituted agents of the Commissioner of Internal Revenue:

(a) chanroblesnad The Commissioner of Customs and his subordinates with respect to the collection of national internal revenue taxes on imported goods;

(b) chanroblesnad The Commissioner of Land Transportation and his subordinates with respect to the collection of energy tax; and

(c) chanroblesnad Banks duly accredited by the Commissioner with respect to receipt of payments of internal revenue taxes authorized to be made thru banks.

Any officer or employee of a duly accredited bank assigned to receive internal revenue tax payments and transmit tax returns or documents to the Bureau of Internal Revenue shall be subject to the same sanctions and penalties prescribed in Sections 268 and 269 of this Code. (As amended by E.O. No. 273)

Sec. 7.chanroblesnad Power of the Commissioner to Obtain Information, Examine, Summon and Take Testimony. For the purpose of ascertaining the correctness of any return, making a return where none has been made, determining the liability of any person for any internal revenue tax, or collecting any such liability, the Commissioner is authorized:

(1) chanroblesnad To examine any book, paper, record or other data which may be relevant or material to such inquiry;

(2) chanroblesnad To obtain information from any office or officer of the national and local governments, government agencies or its instrumentalities including the Central Bank of the Philippines and government owned or controlled corporations;

(3) chanroblesnad To summon the person liable for tax or required to file a return, or any officer or employee of such person, or any person having possession, custody, or care of the books of accounts and other accounting records containing entries relating to the business of the person liable for tax, or any other person, to appear before the Commissioner or his duly authorized representative at a time and place specified in the summons and to produce such books, papers, records, or other data, and to give testimony;

(4) chanroblesnad To take such testimony of the person concerned, under oath, as may be relevant or material to such inquiry; and

(5) chanroblesnad To cause revenue officers and employees to make a canvass from time to time of any revenue district or region and inquire after and concerning all persons therein who may be liable to pay any internal revenue tax, and all persons owning or having the care, management or possession of any object with respect to which a tax is imposed. (As amended by PD No. 1994)

Sec. 8.chanroblesnad Internal Revenue districts. With the approval of the Secretary of Finance, the Commissioner of Internal Revenue shall divide the Philippines into such number of revenue districts as may from time to time be required for administrative purposes. Each of these districts shall be under the supervision of a Revenue District Officer.

Sec. 9.chanroblesnad Revenue Regional Director. Under rules and regulations, policies and standards formulated by the Commissioner of Internal Revenue, the Revenue Regional Director shall, within the region and district offices under his jurisdiction, among others:

(1) chanroblesnad Implement laws, policies, plans, programs, rules and regulations of the department or agencies in the regional area;

(2) chanroblesnad Administer and enforce internal revenue laws and regulations, including the assessment and collection of all internal revenue taxes, charges and fees;

(3) chanroblesnad Provide economical, efficient and effective service to the people in the area;

(4) chanroblesnad Coordinate with regional offices or other departments, bureaus and agencies in the area;

(5) chanroblesnad Exercise control and supervision over the officers and employees within the region; and

(6) chanroblesnad Perform such other function as may be provided by law and as may be delegated by the Commissioner.

Section 10. chanroblesnad Duties of Revenue District Officers and other internal revenue officers. It shall be the duty of every Revenue District Officer or other internal revenue officers and employees to see that all laws and regulations affecting national internal revenue are faithfully executed and complied with, and tod in the prevention, detection and punishment of frauds or delinquencies in connection therewith.

It shall be the duty of every Revenue District Officer to examine into the efficiency of all officers and employees of the Bureau of Internal Revenue under his supervision, and to report in writing to the Commissioner of Internal Revenue, through the Regional Director, any neglect of duty, incompetency, delinquency, or malfeasance in office of any internal revenue officer of which he may obtain knowledge, with a statement of all the facts and any evidence sustaining each case.

Section 11. chanroblesnad Authority of Revenue Examiner. A revenue examiner in any district may, in the name of the Revenue District Officer in charge of such district and under the control of such officer as his immediate superior, exercise any power or perform any act which might be exercised or performed by such Revenue District Officer himself.

Section 12. chanroblesnad Assignment of internal revenue officers to establishments where articles subject to specific tax are produced. The Commissioner of Internal Revenue shall employ and assign internal revenue officers to regional offices and the Regional Director shall assign them to establishments or places where articles subject to specific tax are produced or kept.

Section 13. chanroblesnad Assignment of internal revenue officers and other employees to other duties. The Commissioner of Internal Revenue may, with the approval of the Secretary of Finance assign internal revenue officers and other employees of the Bureau of Internal Revenue without change in their official character or salary to such special duties connected with the administration of the revenue laws as the best interests of the service may require.

Section 14. chanroblesnad Reports of violation of laws. When an internal revenue officer discovers evidence of a violation of this Code or of any law or regulation administered by the Bureau of Internal Revenue, of such character as to warrant the institution of criminal proceedings, he shall immediately report the facts to the Commissioner of Internal Revenue, through his immediate superior giving the name and address of the offender and the names of the witnesses, if possible: Provided, That in urgent cases, the Revenue Regional Director or Revenue District Officer, as the case may be, may send the report to the corresponding prosecuting officer. In the latter case, a copy of his report shall be sent to the Commissioner of Internal Revenue.

It shall also be the duty of any officer or employee of the Bureau of Internal Revenue to report to the Bureau of Forest Development any violation of the Forestry Reform Code of the Philippines within his knowledge. A duplicate of each such report shall be furnished the Commissioner of Internal Revenue.

Section 15. chanroblesnad Authority of internal revenue officers to make arrests and seizures. The Commissioner of Internal Revenue, the Deputy Commissioners of Internal Revenue, the Revenue Regional Directors, the Revenue District Officers and other internal revenue officers shall have authority to make arrests and seizures for the violation of any penal law or regulation administered by the Bureau of Internal Revenue. Any person so arrested shall be forthwith brought before a court, there to be dealt with according to law.

Section 16. chanroblesnad Power of the Commissioner to make assessments. (a) Examination of returns and determination of tax. After a return is filed as required under the provisions of this Code, the Commissioner shall examine it and assess the correct amount of the tax. The tax or deficiency tax so assessed shall be paid upon notice and demand from the Commissioner. Any return, statement or declaration filed in any office authorized to receive the same shall not be withdrawn: Provided, that the same may be modified or changed by filing another amended return, statement or declaration.

(b) chanroblesnad Failure to submit required returns, statements, reports and other documents. When a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law or regulation or when there is reason to believe that any such report is false, incomplete or erroneous, the Commissioner shall assess the proper tax on the evidence obtainable.

In case a person fails to file a required return or other document at the time prescribed by law, or willfully or otherwise, files a false or fraudulent return or other documents, the Commissioner shall make or amend the return from his own knowledge and from such information as he can obtain through testimony or otherwise, which shall be prima facie correct and sufficient for all legal purposes.

(c)chanroblesnad Authority to conduct inventory taking, surveillance and to prescribe presumptive gross sales and receipts. The Commissioner may at any time during the taxable year, order inventory taking of goods of any taxpayer as a basis for determining his internal revenue tax liabilities or may place the business operations of any person, natural or juridical, under observation or surveillance if there is reason to believe that such person is not declaring his correct income, sale, or receipts for internal revenue tax purposes. The findings may be used as a basis for assessing the taxes for the other months or quarters of the same or different taxable years and such assessment shall be deemed prima facie correct.

When it is found that a person has failed to issue receipt and invoices in violation of the requirements of Sections 108 and 238 of this Code, or when there is reason to believe that the books of accounts or other records do not correctly reflect the declarations made or to be made in a return required to be filed under the provisions of this Code, the Commissioner, after taking into account the sales, receipts, income or other taxable base of other persons engaged in similar business under similar situations or circumstances or after considering other relevant information, may prescribe a minimum amount of such gross receipts, sales and taxable base, and such amount so prescribed shall be prima facie correct for purposes of determining the correct internal revenue tax liabilities of such person.

(d)chanroblesnad Authority to terminate taxable period. When it shall come to the knowledge of the Commissioner that a taxpayer is retiring from the business subject to tax or intends to leave the Philippines, or remove his property therefrom, or hide or conceal his property, or perform any act tending to obstruct the proceedings for the collection of the tax for the past or current quarter or year, or render the same totally or partly ineffective unless such proceedings are begun immediately, the Commissioner shall declare the tax period of such taxpayer terminated at any time and shall send the taxpayer a notice of such decision, together with a request for the immediate payment of the tax for the period so declared terminated and the tax for the preceding year or quarter, or such portion thereof as may be unpaid, and said taxes shall be due and payable immediately and shall be subject to all the penalties hereafter prescribed, unless paid within the time, fixed in the demand made by the Commissioner.

(e) chanroblesnad Authority of the Commissioner to prescribe real property values. The Commissioner is hereby authorized to divide the Philippines into different zones or areas and shall, upon consultation with competent appraisers both from private and public sectors, determine the fair market value of real properties located in each zone or area. For purposes of computing any internal revenue tax the value of the property shall be whichever is the higher of:

(1) chanroblesnad The fair market value determined by the Commissioner; or

(2)chanroblesnad The fair market value as shown in the schedule of values of the Provincial and City Assessors.

(f) chanroblesnad Authority of the Commissioner to inquire into bank deposit accounts. The provisions of Republic Act No. 1405 to the contrary notwithstanding, the Commissioner is hereby authorized to inquire into the bank deposits of a decedent for the purpose of determining the gross estate of such decedent.

In case a taxpayer offers to compromise the payment of his tax liabilities on the ground that his financial position demonstrates a clear inability to pay the tax assessed, his offer shall not be considered unless he waives his privilege under the said law and such waiver shall serve as authority of the Commissioner to inquire into the bank deposits of said taxpayer.

(g) chanroblesnad Authority to accredit and register tax agents. The Commissioner may require prior accreditation and registration, based on competence and moral fitness, of person and general professional partnerships or their representatives in the preparation and filing of required tax returns, statements, reports, memoranda, or in appearing or in filing protests or papers with the Bureau for taxpayers. For this purpose, the Commissioner is empowered to create national and regional accreditation boards and to designate from among the ranks of senior officials of the Bureau, one chairman and two members in each board and issue the necessary rules and regulations subject to the approval of the Secretary of Finance.

(h)chanroblesnad Authority of the Commissioner to prescribe additional procedural or documentary requirements. The Commissioner may prescribe the manner of compliance with any documentary or procedural requirements in connection with the submission or preparation of financial statements accompanying the tax returns. (As amended by E.O. No. 273)

Section 17. chanroblesnad Authority of officers to administer oaths and take testimony. The Commissioner of Internal Revenue, Deputy Commissioners, Service Chiefs, Assistant Service Chiefs, Revenue Regional Directors, Assistant Revenue Regional Directors, Chiefs and Assistant Chiefs of Division, Revenue District Officers, special deputies of the Commissioner, internal revenue officers and any other employee of the Bureau thereunto especially deputized by the Commissioner shall have power to administer oaths and to take testimony in any official matter or investigation conducted by them touching any matter within the jurisdiction of the Bureau.

Section 18. chanroblesnad Contents of Commissioner's annual report. The annual report of the Commissioner of Internal Revenue shall contain a detailed statement of the collections and disbursements of the Bureau with specifications of the sources of revenue and classes of disbursements.

Section 19. chanroblesnad Sources of revenue. The following taxes, fees and charges are deemed to be national internal revenue taxes:

(a)chanroblesnad Income tax;

(b)chanroblesnad Estate and gift taxes;

(c)chanroblesnad Excise taxes;

(d)chanroblesnad Taxes on business;

(e)chanroblesnad Documentary stamp taxes;

(f)chanroblesnad Mining taxes; and

(g)chanroblesnad Miscellaneous taxes, fees and charges, namely: taxes on banks, finance companies, insurance companies, franchise taxes, taxes on amusements, and charges on forest products, tobacco inspection fees and such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue. (As amended by PD. No. 1994)

TITLE II. TAX ON INCOME

CHAPTER I
DEFINITIONS

Sec. 20. chanroblesnad Definitions. When used in this Title

(a)chanroblesnad The term "person" means an individual, a trust, estate, or corporation.

(b)chanroblesnad The term "corporation" includes partnership, no matter how created or organized, joint stock companies, joint accounts (cuentas en participacion), associations or insurance companies, but does not include general professional partnerships and a joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operations pursuant to an operating or consortium agreement under a service contract with the Government. General professional partnerships are partnerships formed by persons for the sole purpose of exercising their common profession, no part of the income of which is derived from engaging in any trade or business.

(c)chanroblesnad The term "domestic", when applied to a corporation, means created or organized in the Philippines or under its laws.

(d)chanroblesnad The term "foreign" when applied to a corporation, means a corporation which is not domestic.

(e) (1) chanroblesnad The term "non-resident citizen" means one who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside thereto.

(2)chanroblesnad A citizen leaving the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a more or less permanent basis and contract workers whose contract of employment are renewed from time to time within or during the taxable year under such circumstances as to require them to be physically present abroad most of the time during the taxable year, shall be considered as a nonresident for such taxable year with respect to the income he derived from foreign sources from the date he actually departed from the Philippines.

(3)chanroblesnad A citizen who has been previously considered as non-resident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a non-resident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines.

(4) chanroblesnad The taxpayer shall submit proof to the Commissioner of Internal Revenue to show his intention of leaving the Philippines to reside permanently abroad or to return to and reside in the Philippines as the case may be for purposes of this section.

(f)chanroblesnad The term "resident alien" means an individual whose resident is within the Philippines and who is not a citizen thereof.

(g)chanroblesnad The term "non-resident alien" means an individual whose residence is not within the Philippines and who is not a citizen thereof.

(h)chanroblesnad The term "resident foreign corporation" applies to a foreign corporation engaged in trade or business within the Philippines.

(i)chanroblesnad The term "non-resident foreign corporation" applies to a foreign corporation not engaged in trade or business within the Philippines.

(j) chanroblesnad The term "fiduciary" means a guardian trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person.

(k)chanroblesnad The term "withholding agent" means any person required to deduct and withhold any tax under the provision of section fifty-one.

(l)chanroblesnad The term "stock" includes the share in an association, joint-stock company, or insurance company.

(m) chanroblesnad The term "shareholder" includes a member in an association, joint-stock company, or insurance company.

(n) chanroblesnad The term "taxpayer" means any person subject to tax imposed by this Title.

(o) chanroblesnad The terms "including, when used in a definition contained in this Title, shall not be deemed to exclude other things otherwise within the meaning of the term defined.

(p) chanroblesnad The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the net income is computed under this Title. "Taxable year" includes, in the case of a return made for a fractional part of a year under the provisions of this Title or under regulations prescribed by the Department of Finance, the period for which such return is made.

(q)chanroblesnad The term "fiscal year" means an accounting period for twelve months ending on the last day of any months other than December.

(r)chanroblesnad The term "paid or incurred" and "paid or accrued" shall be construed according to the method of accounting upon the basis of which the net income is computed under this Title.

(s)chanroblesnad The term "trade or business" includes the performance of the functions of a public office.

(t)chanroblesnad The term "securities" means shares of stock in a corporation and rights to subscribe for or to receive such shares. The term includes bonds, debentures, notes, or certificates, or other evidence of indebtedness, issued by any corporation, including those issued by a government or political subdivision thereof, with interest coupons or in registered form.

(u)chanroblesnad The term "dealer in securities" means a merchant of stocks or securities, whether an individual, partnership or corporation, with an established place of business, regularly engaged in the purchase of securities and their resale to customers; that is, one who as a merchant buys securities and sells them to customers with a view to the gains and profits that may be derived therefrom.

(v)chanroblesnad The term "bank" means every banking institution as defined in Sec. 2 of the General Banking Act, Republic Act 337, as amended. A bank may either be a commercial bank, a thrift bank, a development bank, a rural bank or a specialized government bank.

(w)chanroblesnad The term "non-bank financial intermediary" means financial intermediary as defined in Sec. 2-D (c) of the General Banking Act, R.A. No. 337, as amended, authorized by the Central Bank of the Philippines to perform quasi-banking activities.

(x)chanroblesnad The term "quasi-banking activities" means borrowing funds from twenty or more personal or corporate lenders at any one time, through the issuance, endorsement or acceptance of debt instruments of any kind other than deposits for the borrowers' own account, or through the issuance of certificates of assignment or similar instruments, with recourse, or of repurchase agreements for purposes of relending or purchasing receivables and other similar obligations; Provided, however, That commercial, industrial and other non-financial companies, which borrow funds through any of these means for the limited purpose of financial their own needs or the needs of their agents or dealers, shall not be considered as performing quasi-banking functions.

(y)chanroblesnad "deposit substitutes" shall mean an alternative form of obtaining funds from the public, other than deposit, through the issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for the purpose of relending or purchasing of receivables and other obligations, or financing their own needs or the needs of their agent or dealer. These instruments may include but need not be limited to banker's acceptances, promissory notes, repurchase agreement, certificates of assignment or participation and similar instruments with recourse as may be authorized by the Central Bank of the Philippines, for banks and non-bank financial intermediaries or by the Securities and Exchange Commission of the Philippines for commercial, industrial, finance companies and other non-financial companies: Provided, however, That only debt instruments issued for inter-bank call loans to cover deficiency in reserves considered those between or among banks and quasi-banks shall not be considered as deposit substitute debt instruments. (As added by PD No. 1959)

(z)chanroblesnad The term "ordinary income" includes any gain from the sale or exchange of property which is not a capital asset or property described in Sec. 34 (a). Any gain from the sale or exchange of property which is treated or considered, under other provisions of this Title, as "ordinary income" shall be treated as gain from the sale or exchange of property which is not a capital asset as defined in Sec. 34 (a). The term "ordinary loss" includes any loss from the sale or exchange of property which is not a capital asset. Any loss from the sale or exchange of property which is treated or considered, under other provision of this Title, as "ordinary loss" shall be treated as loss from the sale or exchange of property which is not a capital asset. (As added by Executive Order No. 37, July 31, 1986)

CHAPTER II
TAX ON INDIVIDUALS

Sec. 21.chanroblesnad Tax on citizens or residents. (a) Taxable compensation income. A tax is hereby imposed upon the taxable compensation income as defined in Sec. 27, other than the incomes subject to tax under paragraphs (b), (c), (d), (e) and (f) of this section, received during each taxable year from all sources determined in accordance with the following schedule:

Not over P2,500chanroblesnad 0%
Over P2,500 but not over P5,000chanroblesnad 1%
Over P5,000 but not over P10,000chanroblesnad P25 +chanroblesnad 3% of excess over P5,000
Over P10,000 but not over P20,000chanroblesnad P175 +chanroblesnad 7% of excess over P10,000
Over P20,000 but not over P40,000chanroblesnad P875 + 11% of excess over P20,000
Over P40,000 but not over P60,000chanroblesnad P3,075+ 15% of excess over P40,000
Over P60,000 but not over P100,000chanroblesnad P6,075+ 19% of excess over P60,000
Over P100,000 but not over P250,000chanroblesnad P13,675+24% of excess over 100,000
Over P250,000 but not over P500,000chanroblesnad P49,675+29% of excess over 250,000
Over P500,000chanroblesnad P122,175+35% of excess over P500,000

(As amended by R.A. 7496, May 18, 1992)

In the case of married individuals, the husband and wife, subject to the provision of Sec. 44 (d) hereof, shall compute separately their individual income tax based on their respective total taxable incomes; Provided, That if any income can not be definitely attributable to, or identifiable as income exclusively earned or realized by either of the spouses, the same shall be divided equally between the spouses for the purpose of computing their respective taxable income. (As amended by R.A. 7497)

(b)chanroblesnad Foreign source gross income derived by a non-resident citizen. A tax is hereby imposed upon the taxable income derived by a non-resident citizen from all sources without the Philippines during each taxable year computed in accordance with the following schedule: If the amount subject to tax is:

Not over U.S. $6,000.00chanroblesnad 1%

Over U.S. $6,000.00 but not over
chanroblesnad U.S. $20,000.00chanroblesnad U.S. $60 plus 2%
chanroblesnad of excess over
chanroblesnad U.S. $6,000

Over U.S. $20,000.00chanroblesnad U.S. $340 plus 3%
chanroblesnad of excess over
chanroblesnad U.S. $20,000

(c)chanroblesnad Certain passive incomes. A tax at the rate prescribed below is hereby imposed upon the amount of the following items of gross income received by a citizen or resident alien from sources within the Philippines:

(1)chanroblesnad Interest from any Philippine currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements; royalties, prizes (except prizes amounting to P3,000 or less which shall be subject to tax under paragraph (a) and other winnings (except Philippine Charity Sweepstakes winnings) 20% and

(2)chanroblesnad Dividends received from a domestic corporation and the share of an individual partner in a partnership subject to tax under Sec. 24 (a) at the rate of 15% in 1986; 10% effective January 1, 1987; 5% effective January 1, 1988; and 0% effective January 1, 1989.

(d)chanroblesnad Capital gains from sales of shares of stock. The provisions of Sec. 33 (b) notwithstanding, capital gains realized from the sale, exchanges or disposition of shares of stocks in any domestic corporation shall be taxed as follows:

(1)chanroblesnad Net capital gain as defined in Sec. 33 (a) (2) realized during each taxable year from the sale, exchange or other disposition of shares of stock not traded through a local stock exchange:

Not over P100,000chanroblesnad 10%
Over P100,000chanroblesnad 20%

(2)chanroblesnad Capital gains presumed to have been realized from the sale, exchange or disposition of shares of stock listed and traded through a local stock exchange 1/4 of 1% based on the gross selling price of the share or shares of stock.

(e)chanroblesnad Capital gains from sales of real property. The provisions of Sec. 33 (b) notwithstanding, capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales, by individuals, including estate and trust, shall be taxed at the rate of 5% based on the gross selling price or the fair market value prevailing at the time of sale, whichever is higher. Provided, That the tax liability, if any, on gains from sales or other dispositions of real property to the government or any of its political subdivisions or agencies or to government-owned or controlled corporations shall be determined either under Sec. 21 (a) or under this sub-section, at the option of the taxpayer.

(f)chanroblesnad Simplified Net Income tax for the Self-Employed and for Professionals Engaged in the Practice of Profession. A tax is hereby imposed upon the taxable net income as determined in Sec. 27 received during each taxable year from all sources, other than income covered by paragraph (b), (c), (d) and (e) of this section by every individual whether a citizen of the Philippines or an alien residing in the Philippines who is self-employed or practices his profession herein determine in accordance with the following schedule:

Not over P100,000chanroblesnad 3%
Over P10,000 but not over P30,000chanroblesnad P300+9%of excess over P10,000
Over P30,000 but not over P120,000chanroblesnad P2,100 + 15% of excess over P30,000
Over P120,000 but not over P350,000chanroblesnad P15,600+20% of excess over P120,000
Over P350,000chanroblesnad P61,600+30% of excess over P350,000

(As added by Republic Act No. 7496, May 18, 1992)

Sec. 22.chanroblesnad Tax on non-resident alien individuals.

(a)chanroblesnad Non-resident alien engaged in trade or business within the Philippines: (1) In general. Non-resident aliens engaged in trade or business in the Philippines shall be subject to tax in the same manner as resident citizens and aliens on taxable income received from all sources within the Philippines, except capital gains realized from buying and/or selling shares of stock of Philippine corporations listed in the dollar or any foreign currency board of stock exchange: Provided, That for purposes of this Title, a non-resident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during any calendar year shall be deemed a non-resident alien doing business in the Philippines, Sec. 20 (g) of this Code notwithstanding.

(2)chanroblesnad Dividends, share in the net profits of a taxable partnership, interest, royalties, prizes and other winnings. Dividends from a domestic corporation, share in the net profits of a partnership taxable under Sec. 24 (a) interest, royalties (in any form) and prizes (except prizes amounting to P3,000 or less which shall be subject to tax under paragraph (a) of Sec. 21) and other winnings (except Philippine Charity Sweepstakes winnings), shall be subject to a tax of thirty percent (30%) on the total amount thereof.

(3)chanroblesnad Capital gains. Capital gains realized sales of shares of stock in domestic corporations and real properties shall be subject to the tax prescribed under Sub-sections (d) and (e) of Sec. 21.

(b)chanroblesnad Non-resident aliens not engaged in trade or business within the Philippines. There shall be levied, collected and paid for each taxable year upon the entire income received from all sources within the Philippines by every non-resident alien individual not engaged in trade or business within the Philippines as interest, dividends, rents, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual or periodical or casual gains, profits, and income, and capital gains (except capital gains realized from buying and/or selling shares of stock of Philippine corporation listed in the dollar or any acceptable foreign currency board of any stock exchange), a tax equal to 30% of such income: Provided, That capital gains realized from sales of shares of stocks in any domestic corporation and real property shall be subject to the tax prescribed under Sub-sections (d) and (e) of Sec. 21.

(c)chanroblesnad Aliens employed by regional or area headquarters of multinational corporations. There shall be levied, collected and paid for each taxable year upon the gross income received by every alien individual employed by regional or area, headquarter established in the Philippines, by multinational corporations as salaries, wages, annuities, compensation, remuneration and other emoluments, such as honoraria and allowances, from such regional or area headquarters, a tax equal to 15% of such gross income: Provided, That the activities of the said regional headquarters or area headquarters shall be limited to acting as supervisory, communications and coordinating center for their affiliates, subsidiaries or branches of such multi-national corporations. For purposes of this chapter, the term "multinational corporation" means a foreign firm or entity, engaged in international trade with affiliates or subsidiaries or branch office in the Asia Pacific Region.

(d)chanroblesnad Aliens employed by offshore banking units. There shall be levied, collected and paid for each taxable year upon the gross income recovered by every alien individual employed by offshore banking units established in the Philippines as salaries, wages, annuities, compensation, remuneration and other emoluments, such as honoraria and allowances, from such offshore banking units, a tax equal to 15% of such gross income.

(e)chanroblesnad Aliens employed by petroleum service contractors and subcontractors. Aliens who are permanent residents of a foreign country but who are employed and assigned in the Philippines by service contractors or by subcontractors engaged in petroleum operations in the Philippines shall be liable to a tax of 15% of the salaries, wages, annuities, compensation, remuneration and other emoluments, such as honoraria and allowances, received from such contractors or subcontractors.

Any income earned from all other sources within the Philippines by the alien employees referred to under subsections (c), (d) and (e) hereof shall be subject to the pertinent income tax, as the case may be, imposed under the National Internal Revenue Code, as amended.

Sec. 23.chanroblesnad Tax liability of members of general professional partnership. (a) Persons exercising a common profession in general partnership shall be liable for income tax only in their individual capacity, and the share in the net profits of the general professional partnership to which any taxable partner would be entitled whether distributed or otherwise, shall be returned for taxation and the tax paid in accordance with the provisions of this Title.

(b)chanroblesnad In determining his distributive share in the net income of the partnership, each partner

(1)chanroblesnad Shall take into account separately his distributive share of the partnership's income, gain, loss, deduction, or credit to the extent provided by the pertinent provisions of this Code, and

(2)chanroblesnad Shall be deemed to have elected the itemized deductions, unless he declares his distributive share of the gross income undiminished by his share of the deductions.

CHAPTER III
TAX ON CORPORATIONS

Sec. 24.chanroblesnad Rates of tax on domestic corporations.

(a)chanroblesnad In general. Unless otherwise provided, a tax of 35% is hereby imposed upon the taxable income received during each taxable year from all sources within and without the Philippines by every corporation organized in, or existing under the laws of the Philippines, and partnership, no matter how created or organized, but not including general professional partnerships.

(b)chanroblesnad Private Educational Institutions. Private educational institutions, whether stock or non-stock, shall pay a tax of 10% on their taxable income except those covered by paragraph (e) hereof: Provided, That if the gross income from unrelated trade, business or other activity exceeds 50% of the total gross income derived by any educational institution from all sources, the tax prescribed in paragraph (a) hereof shall be imposed on the entire taxable income of the educational institution. For purposes of this paragraph, the term, "unrelated trade, business or other activity" means any trade, business or other activity, the conduct of which is not substantially related to the exercise or performance by such educational institution of its educational purpose or function. A private educational institution is any "private school" maintained and administered by private individuals or group issued a permit to operate by the Department of Education, Culture and Sports (DECS) in accordance with existing laws and regulations.

(c)chanroblesnad Government-owned or controlled corporations agencies on instrumentalities. The provisions of existing special or general laws to the contrary notwithstanding, all corporate taxpayers not specifically exempt under Sec. 26 of this Code shall pay the rates provided in this Section. All corporations, agencies, or instrumentalities owned or controlled by the Government, including the Government Service Insurance System and the Social Security System, shall pay such rate of tax upon their taxable income as are imposed by this section upon associations or corporations engaged in a similar business, industry, or activity.

(d)chanroblesnad Mutual life insurance companies. Mutual life insurance companies organized in and existing under the laws of the Philippines shall pay a tax of 10% of their gross investment income consisting of interest, dividends, rents, net capital gains, and income from any other business than life insurance derived from all sources, except those covered by paragraph (e) hereof.

(e)chanroblesnad Tax on certain incomes derived by domestic corporations. (1) Interest from deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements, and royalties. Interest on Philippine currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements received by domestic corporations; and royalties, derived from sources within the Philippines, shall be subject to a 20% tax.

(2)chanroblesnad Capital gains from sales of shares of stock. Capital gains realized from sale, exchange or disposition of shares of stocks in any domestic corporation shall be taxed as follows:

(A)chanroblesnad Net capital gains as defined in Sec. 33 (a) (2) realized during each taxable year from sale or exchange or other disposition of shares of stock not traded through a local stock exchange:

Not over P100,000chanroblesnad 10%
Over P100,000chanroblesnad 20%

(B)chanroblesnad Capital gains presumed to have been realized from the sale, exchange or disposition of share of stock listed and traded through a local stock exchange 1/4 of 1% based on the gross selling price of the share or shares of stock.

(3)chanroblesnad Tax on income derived under the Expanded Foreign Currency Deposits System. Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with non-residents, off-shore banking units in the Philippines, local commercial banks including branches of foreign banks that may be authorized by the Central Bank to transact business with foreign currency depository system units and other depository bank under the expanded foreign currency deposit system shall be exempts from all taxes, except taxable income from such transactions as may be specified by the Secretary of Finance, upon recommendation of the Monetary Board to be subject to the used income tax payable by banks: Provided, That interest income from foreign currency loans granted by such depository banks under said expanded system to residents (other than off-shore banking units in the Philippines or other depository banks under the expanded system) shall be subject to a 10% tax.

Any income of non-residents from transactions with depository banks under the expanded system shall be exempt from income tax.

(4)chanroblesnad Intercorporate dividends. Dividends received by a domestic corporation from another domestic corporation shall not be subject to tax.

Sec. 25.chanroblesnad Rates of tax on foreign corporation.

(a)chanroblesnad Tax on resident foreign corporations (1) In general. Unless otherwise provided, a corporation organized, or existing under the laws of any foreign country, engaged in trade or business within the Philippines, shall be subject to a tax equivalent to 35% of the taxable income derived in the preceding taxable year from all sources within the Philippines.

(2)chanroblesnad International carriers. International carries doing business in the Philippines shall pay a tax of two and one-half percent (2 %) on their "Gross Philippine Billings" as defined hereunder:

(A)chanroblesnad Internationalr carrier. "Gross Philippine Billings" means gross revenue realized from uplifts of passengers anywhere in the world and excess baggage, cargo and mail originating from the Philippines, covered by passage documents sold in the Philippines: Provided, That documents sold outside the Philippines under a "prepaid ticket advice" scheme for passengers originating from the Philippines shall be considered as documents sold in the Philippines. Gross revenue from chartered flights originating from the Philippines shall likewise form part of the "Gross Philippine Billings" regardless of the place of sale or payment of the passage documents. For purposes of determining the taxability of revenue from chartered flights, the term "originating from the Philippines" shall include flights of passengers who stay in the Philippines for more than forty-eight (48) hours prior to embarkation.

(B)chanroblesnad International Shipping. "Gross Philippine Billings" means gross revenue whether for passenger, cargo or mail originating from the Philippines up to final destination, regardless of the place of sale or payments of the passage or freight documents.

(3)chanroblesnad Foreign mutual life insurance companies. Foreign mutual life insurance companies authorized to carry business in the Philippines shall pay a tax of 10% on their gross investment income derived from sources within the Philippines except those covered by subsection (6) hereof.

(4)chanroblesnad Offshore banking units. The provisions of any law to the contrary notwithstanding, income derived by off-shore banking units authorized by the Central Bank of the Philippines from foreign currency transactions with non-residents, other offshore banking units, local commercial banks, including branches of foreign banks that may be authorized by the Central Bank to transact business with offshore banking units shall be exempt from all taxes except taxable income from such transactions as may be specified by the Secretary of Finance, upon recommendation of the Monetary Board, to be subject to the normal income tax payable by banks: Provided, That any interest income derived from foreign currency loans granted to residents other than offshore banking units or local branches of foreign banks that may be authorized by the Central Bank of the Philippines to transact business with offshore banking units, shall be subject only to a 10% tax.

Any income of non-residents from transactions with said offshore banking units shall be exempt from income tax.

(5)chanroblesnad Tax on branch profits remittances. Any profit remitted by a branch to its head office shall be subject to a tax of 15% (except those registered with the Export Processing Zone Authority): Provided, That any profit remitted by a branch to its head office authorized to engage in petroleum operations in the Philippines shall be subject to tax at 71/2%. In both cases, the tax shall be collected and paid in the same manner as provided in Sections 51 and 52 of this Code: and Provided, further, That interests, dividends, rents, royalties, including remuneration, for technical services, salaries, wages, premiums, annuities, emoluments or other fixed or determinable annual, periodical or casual gains, profits, income and capital gains received by a foreign corporation during each taxable year from all sources within the Philippines shall not be considered as branch profits unless the same are effectively connected with the conduct of its trade or business in the Philippines.

(6)chanroblesnad Tax on certain incomes received by resident foreign corporations. (A) Interest from deposits and yield or any other monetary benefits from deposit substitutes, trust funds and similar arrangements and royalties. Interest on Philippine currency bank deposits and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements and royalties derived from sources within the Philippines shall be subject to a 20% tax.

(B)chanroblesnad Income derived under the Expanded Foreign Currency Deposit System. Income derived by a depository bank under the expanded foreign currency deposit system from foreign currency transactions with non-residents, offshore banking units in the Philippines, local commercial banks including branches of foreign banks that may be authorized by the Central Bank of the Philippines to transact business with foreign currency depository system units and other depository banks under the expanded foreign currency deposit system shall be exempt from all taxes, except taxable income from such transactions as may be specified by the Secretary of Finance, upon recommendation of the Monetary Board to be subject to the usual income tax payable by banks: Provided, That interest income from foreign currency loans granted by such depository banks under said expanded system to residents (other than offshore banking units in the Philippines or other depository banks under the expanded system) shall be subject to a 10% tax.

Any income of non-residents from transactions with depository banks under the expanded system shall be exempt from income tax.

(C)chanroblesnad Capital gains from sales shares of stock. capital gains realized from sale, exchange or disposition of shares of stock in any domestic corporation shall be taxed as follows:

(i)chanroblesnad Net capital gains as defined in Sec. 33 (a) (2) realized during each taxable year from sale or exchange or other disposition of shares of stocks not traded through a local stock exchange shall be taxes as follows:

Not over P100,000chanroblesnad 10%
Over P100,000chanroblesnad 20%

(ii)chanroblesnad Capital gains presumed to have been realized from the sale, exchange or disposition of shares stock listed and traded through a local stock exchange 1/4 of 1% based on the gross selling price of the share or shares of stock.

(D)chanroblesnad Intercorporate Dividends. Dividends received by a resident foreign corporation from a domestic corporation liable to tax under this Code shall not be subject to tax under this Title.

(b)chanroblesnad Non-resident foreign corporations. (1) In general. Unless otherwise provided, a foreign corporation not engaged in trade or business in the Philippines shall pay a tax equal to 35% of the gross income received during each taxable year from all sources within the Philippines such as interest, dividends, rents, royalties, salaries, premiums (except reinsurance premiums), annuities, emoluments or other fixed or determinable annual, periodical or casual gains, profits and income, and capital gains, except capital gains subject to tax under subparagraph 5 (C).

(2)chanroblesnad Non-resident cinematographic films owners, lessors or distributors. Cinematographic film owners, lessors, or distributors shall pay a tax of 25% of their gross income from all sources within the Philippines.

(3)chanroblesnad Non-resident owners of vessels chartered by Philippine nationals. Rentals, charter fees derived by non-resident owners of vessels chartered by Philippine nationals and which charter or lease has been duly approved by the Maritime Industry Authority shall be subject to a 4.5% tax.

(4)chanroblesnad Non-resident lessors ofrcrafts, machineries and other equipment. Rentals, charter and other fees derived by non-resident lessors ofrcrafts, machineries and other equipment shall be subject to a tax of not less than 5% but not more than 10% to be fixed and determined by the President upon recommendation of the Secretary of Finance: Provided, That the rate of 7 % shall be imposed on such rentals, charter and other fees until such time as the President shall have prescribed the rates appropriate for each category of property.

(5)chanroblesnad Tax on certain incomes received by non-resident foreign corporations. (A) Interest on foreign loans contracted on or after August 1, 1986 shall be subject to a 20% tax;

(B)chanroblesnad On dividends received from a domestic corporation liable to tax under this Chapter, the tax shall be 15% of the dividends received, which shall be collected and paid as provided in Sec. 50 (a) of the National Internal Revenue Code, as amended, subject to the condition that the country in which the non-resident foreign corporation is domiciled shall allow a credit against the tax due from the non-resident foreign corporation, taxes deemed to have been paid in the Philippines equivalent to 20% which represents the different between the regular tax (35%) on corporations and the tax (15%) on dividends as provided in this subparagraph;

(C)chanroblesnad Capital gains realized from sale, exchange or disposition of shares of stock in any domestic corporation shall be subject to tax as follows:

(i)chanroblesnad Net capital gains as defined in Sec. 33 (a) (2) realized during each taxable year from sale or exchange or other disposition of shares of stocks not traded through a local stock exchange:

Not over P100,000chanroblesnad 10%
Over P100,000chanroblesnad 20%

(ii)chanroblesnad Capital gains presumed to have been realized from the sale, exchange or disposition of shares of stock listed and traded through a local stock exchange 1/4 1% based on the gross selling price of the share or shares of stock. (As amended by E.O. No. 37).

Sec. 26.chanroblesnad Exemptions from tax on corporations. The following organizations shall not be taxed under this Title in respect to income received by them as such

(1)chanroblesnad Government educational institution. (As added by E.O. No. 37)

(a)chanroblesnad Labor, agriculture, or horticultural organization not organized principally for profit;

(b)chanroblesnad Mutual savings bank not having a capital stock represented by shares, and cooperative bank without capital stock organized and operated for mutual purposes and without profit;

(c)chanroblesnad Fraternal beneficiary society, order or association, operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system and providing for the payment of life, sickness, accident, or other benefits to the members of such society, order, or association, or their dependents;

(d)chanroblesnad Cemetery company owned and operated exclusively for the benefit of its members;

(e)chanroblesnad Corporation or association organized and operated exclusively for religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of the net income of which inures to the benefit of any private stockholder or individual;

(f)chanroblesnad Business league, chamber of commerce, or board of trade, not organized for profits and no part of the net income of which inures to the benefit of any private stockholder or individual:

(g)chanroblesnad Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare;

(h)chanroblesnad Club organized and operated exclusively for pleasure, for recreation, and other non-profitable purposes, no part of the net income of which inures to the benefit of any private stockholder or member;

(i)chanroblesnad Farmers' or other mutual typhoon or fire insurance company, mutual ditch or irrigation company, mutual or cooperative telephone company, or like organization of a purely local character, the income of which consists solely of assessments, dues, and fees collected from members for the sole purpose of meeting its expenses;

(j)chanroblesnad Farmers,' fruit growers', or like associations organized and operated as a sales agent for the purpose of marketing the products of its members and turning back to them the proceeds of sales, less the necessary selling expenses, on the basis of the quantity of produced finished by them;

(k)chanroblesnad Corporation or association organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof less expenses, to an organization which is itself exempt from the tax imposed by this Title.

Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profits, regardless of the disposition made of such income, shall be subject to tax imposed under this Code.

CHAPTER IV
COMPUTATION OF TAXABLE COMPENSATION INCOME AND NET INCOME

Sec. 27.chanroblesnad Taxable Income. The term "taxable income" means the pertinent items of gross income specified in this Code less the deductions, if any, authorized by such type of income by this Code or other special laws: Provided, That for purposes of Sec. 21 (b) "taxable income" means gross income from all sources without the Philippines less the deductions allowed in Sec. 29 (m). (As amended by E.O. No. 37)

Sec. 28.chanroblesnad Gross Income. (a) General definition. Gross income means all income from whatever source derived, including (but not limited to) the following items:

(1)chanroblesnad Compensation for services, including fees, commissions, and similar items;

(2)chanroblesnad Gross income derived from business;

(3)chanroblesnad Gains derived from dealing in property;

(4)chanroblesnad Interest;

(5)chanroblesnad Rents;

(6)chanroblesnad Royalties;

(7)chanroblesnad Dividends;

(8)chanroblesnad Annuities;

(9)chanroblesnad Prizes and winnings;

(10)chanroblesnad Pensions; and

(11)chanroblesnad Partner's distributive share of the gross income of general professional partnership.

(b)chanroblesnad Exclusions from gross income. The following items shall not be included in gross income and shall be exempt from taxation under this Title:

(1)chanroblesnad Life insurance. The proceeds of life insurance policies paid to the heirs or beneficiaries upon death of the insured, whether in a single sum or otherwise, but if such amount are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income.

(2)chanroblesnad Amount received by insured as return of premium. The amount received by the insured, as a return of premiums paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract.

(3)chanroblesnad Gifts, bequests, and devises. The value of property acquired by gift, bequest, devise, or descent; but the income from such property shall be included in gross income.

(4)chanroblesnad Interest on Government securities. Interest upon the obligations of the Government of the Republic of the Philippines or any political subdivisions thereof, but in the case of such obligations issued after the approval of this Code, only to the extent provided in the Act authorized the issue thereof.

(5)chanroblesnad Compensation for injuries or sickness. Amount received through Accident or Health Insurance or under Workmen's Compensation Acts, as compensation for personal injuries or sickness, plus the amount of any damage received whether by suit or agreement on account of such injuries or sickness.

(6)chanroblesnad Income exempt under treaty. Income of any kind, to the extent required by any treaty obligation binding upon the Government of the Philippines.

(7)chanroblesnad Retirement benefits, pensions, gratuities, etc. (A) Retirement benefits received by officials and employees of private firms whether individuals or corporate, in accordance with a reasonable private benefit plan maintained by the employer: Provided, That the retiring official or employee has been in the service of the same employer for at least 10 years and is not less than 50 year of age at the time of his retirement: Provided, further, That the benefits granted under this subparagraph shall be availed of by an official or employee only one. For purposes of this subsection, the term "reasonable private benefit plan" means a pension, gratuity, stock bonus or profit-sharing plan maintained by an employer for the benefit of some or all of his officials or employees, where contributions are made by such employer for officials or employees, or both, for the purpose of distributing to such officials and employees the earnings and principal of the fund thus accumulated, and wherein it is provided in said plan that at no time shall any part of the corpus or income of the fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said official and employees.

(B)chanroblesnad Any amount received by an official or employee or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee.

(C)chanroblesnad The provisions of any existing law to the contrary notwithstanding, social security benefits, retirement gratuities, pensions and other similar benefits received by resident or non-resident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public.

(D)chanroblesnad Payments of benefits due to any person residing in the Philippines under the laws of the United States administered by the United States Veterans Administration.

(E)chanroblesnad Payments of benefits made under the Social Security Act of 1954, as amended.

(F)chanroblesnad Benefits received from the GSIS and the retirement gratuity received by government officials and employees.

(8)chanroblesnad Miscellaneous items.

(A)chanroblesnad Income received from their investments in the Philippines in loans stocks, bonds or other domestic securities, or from interest on their deposits in banks in the Philippines by (i) foreign governments, (ii) financing institutions owned, controlled, or enjoying refinancing from them, and (iii) international or regional financing institutions established by governments.

(B)chanroblesnad Income derived from any public utility or from the exercise of any essential government function accruing to the Government of the Philippines or to any political subdivision thereof.

(C)chanroblesnad Income derived as rewards under Sec. 316 (now 281) of this Code, as amended.

(D)chanroblesnad Interest earned from deposits maintained with a bank under the expanded foreign currency deposit system.

(E)chanroblesnad Prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement but only if:

(i)chanroblesnad The recipient was selected without any action on his part to enter the contest or proceeding; and

(ii)chanroblesnad The recipient is not required to render substantial future services as a condition to receiving the prize or award.

Sec. 29.chanroblesnad Deductions from gross income. In computing taxable income subject to tax under Sections 21 (a), 24(a), (b) and (c); and 25 (a) (1), there shall be allowed as deductions the items specified in paragraphs (a) to (i) of this section; Provided, however, That in computing taxable income subject to tax under Sec. 21 (f) in the case of individuals engaged in business or practice of profession, only the following direct costs shall be allowed as deductions:

(a)chanroblesnad Raw materials, supplies and direct labor;

(b)chanroblesnad Salaries of employees directly engaged in activities in the course of or pursuant to the business or practice of their profession;

(c)chanroblesnad Telecommunications, electricity, fuel, light and water;

(d)chanroblesnad Business rentals;

(e)chanroblesnad Depreciation;

(f)chanroblesnad Contributions made to the Government and accredited relief organizations for the rehabilitation of calamity stricken areas declared by the President; and

(g)chanroblesnad Interest paid or accrued within a taxable year on loans contracted from accredited financial institutions which must be proven to have been incurred in connection with the conduct of a taxpayer's profession, trade or business.

For individuals whose cost of goods sold and direct costs are difficult to determine, a maximum of forty per cent (40%) of their gross receipts shall be allowed as deductions to answer for business or professional expenses as the case may be. (As amended by Republic Act No. 7496, May 18, 1992)

In the case of an individual, the optional standard deduction under paragraph (k) shall be allowed in lieu of itemized deductions under said paragraphs (a) to (i). In addition, the appropriate personal and additional exemptions allowed under paragraph (l) may be claimed by an individual whose income is subject to tax under Sec. 21 (a): Provided, That no deductions other than the deduction provided in paragraph (l) may be allowed from compensation income arising from personal services rendered under an employer-employee relationship.

(a)chanroblesnad Expenses. (1) Business expenses. (A) In general. All ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; travelling expenses while away from home in the pursuit of a trade profession or business, rentals or other payments required to be made as a condition to the continued use or possession, for the purpose of the trade, profession or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity.

(2)chanroblesnad Expenses allowable to private educational institutions. In addition to the expenses allowable as deductions under subparagraph (a) (1) (A) above, a private educational institution, referred to under Sec. 24 (b) of this Code, may at its option elect either (A) to deduct expenditures otherwise considered as capital outlays of depreciable assets incurred during the taxable year for the expansion of school facilities or (B) to deduct allowance for depreciation thereof under paragraph (f) of this section.

(b)chanroblesnad Interest. (1) In general. The amount of interest paid or accrued within a taxable year on indebtedness in connection with the taxpayer's profession, trade or business, except on indebtedness incurred or continued to purchase or carry obligation the interest upon which is exempt from taxation as income under this Title.

(2)chanroblesnad No deduction shall be allowed in respect of interest under the succeeding sub-paragraphs:

(i)chanroblesnad If within the taxable year an individual taxpayer reporting income on the case basis incurs an indebtedness on which an interest is paid in advance through discount or otherwise: Provided, That such interest shall be allowed as a deduction in the year the indebtedness is paid: and Provided, further, That if the indebtedness is payable in periodic amortizations, the amount of interest which corresponds to the amount of the principal amortized or paid during the year shall be allowed as deduction in such taxable year.

(ii)chanroblesnad If both the taxpayer and the person to whom the payment has been made or is to be made are persons specified Sec. 30 (b).

(iii)chanroblesnad If the indebtedness is incurred to finance petroleum exploration.

(c)chanroblesnad Taxes. (1) In general. Taxesd or accrued within the taxable year in connection with the taxpayer's profession, trade or business, except:

(A)chanroblesnad The income tax provided for under this Title;

(B)chanroblesnad Income war profits, and excess profits taxes imposed by authority of any foreign country; but this deduction shall be allowed in the case of a taxpayer who does not signify in his return his desire to have to any extent the benefits of paragraph (3) of this subsection (relating to credits for taxes of foreign countries);

(C)chanroblesnad Estate and gift taxes;

(D)chanroblesnad Taxes assessed against local benefits of a kind tending to increase the value of the property assessed; and

(E)chanroblesnad Electric energy consumption tax imposed by Batas Pambansa Blg. 36

(2)chanroblesnad Limitations on deductions. (A) In the case of a non-resident alien individual and a foreign corporation, the deductions for taxes provided in paragraph (1) of this subsection (c) shall be allowed only if and to the extent that they are connected with income from sources within the Philippines; and

(B)chanroblesnad In the case of a citizen of a foreign country residing in the Philippines whose income from sources within such foreign country is not taxable under this Title, only that portion of the taxes paid to such foreign country which corresponds to his taxable income under this Title shall be allowed as deduction.

(3)chanroblesnad Credit against tax for taxes of foreign countries. If the taxpayer signifies in his return his desire to have the benefits of this paragraph, the tax imposed by this Title shall be credited with.

(A)chanroblesnad Citizen and domestic corporation. In the case of a citizen of the Philippines and of a domestic corporation, the amount of any income, war profits, and excess profits taxes paid or accrued during the taxable year to any foreign country;

(B)chanroblesnad Alien resident of the Philippines. In the case of an alien resident of the Philippines, the amount of any such taxes paid or accrued during the taxable year to any foreign country, if the foreign country of which such alien resident is a citizen or subject, in imposing such taxes allows a similar credit to citizens of the Philippines residing in such country; and

(C)chanroblesnad Partnership and estates. In the case of any such individual who is a member of a general professional partnership or a beneficiary of an estate or trust, his proportionate share of such taxes of the general professional partnership or the estate or trust paid or accrued during the taxable year to a foreign country, if his distributive share of the income of such partnership or trust is reported for taxation under this Title.

Non-resident alien individuals and foreign corporations shall not be allowed the credits against the tax for the taxes of foreign countries allowed under this paragraph.

(4)chanroblesnad Limitations on credit. The amount of the credit taken under this section shall be subject to each of the following limitations:

(A)chanroblesnad The amount of the credit in respect to the tax paid or accrued to any country shall not exceed the same proportion of the tax against which such credit is taken, which the taxpayer's taxable income from sources within such country under this Title bears to his entire taxable income for the same taxable year; and

(B)chanroblesnad The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the taxpayer's taxable income from source without the Philippines taxable under this Title bears to his entire taxable income for the same taxable year.

(5)chanroblesnad Adjustment on payment of accrued taxes. If accrued taxes when paid differ from the amounts claimed as credits by the taxpayer, or if any tax paid is refunded in whole or in part, the taxpayer shall notify the Commissioner, who shall redetermine the amount of the tax for the year or years affected, and the amount of tax due upon such redetermination, if any, shall be paid by the taxpayer upon notice and demand by the Commissioner, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer. In the case of such a tax accrued but not paid, the Commissioner as a condition precedent to the allowance of this credit may require the taxpayer to give a bond with sureties satisfactory to and to be approved by the Commissioner in such sum as he may require, conditioned upon the payment by the taxpayer of any amount of tax found due upon any such redetermination. The bond herein prescribed shall contain such further conditions as the Commissioner may require.

(6)chanroblesnad Year in which credit taken. The credit provided for in paragraph (c) (3) may, at the option of the taxpayer and irrespective of the method of accounting employed in keeping his books, be taken in the year in which the taxes of the foreign country accrued, subject, however, to the conditions prescribed in paragraph (c) (5). If the taxpayer elects to take such credit in the year in which the taxes of the foreign country accrued, the credits for all subsequent years shall be taken upon the same basis, and no portion of any such taxes shall be allowed as a deduction in the same or any succeeding year.

(7)chanroblesnad Proof of credits. The credits provided in paragraph (c) (3) shall be allowed only if the taxpayer establishes to the satisfaction of the Commissioner (A) the total amounts of income derived from sources without the Philippines, (B) the amount on income derived from each country, the tax paid or accrued to which is claimed as a credit under said paragraph, such amount to be determined under rules and regulations prescribed by the Secretary of Finance, and (C) all other informations necessary for the verification and computation of such credits.

(8)chanroblesnad Taxes of foreign subsidiary. For purposes of this subsection a domestic corporation, which owns a majority of the voting stock of a foreign corporation from which it receives dividends in any taxable year shall be deemed to have paid the same proportion of any income, war profits or excess profits taxes paid by such foreign corporation to any foreign country, upon or with respect to the accumulated profits of such foreign corporation from which such dividends were paid which the amount of such dividend bears to the amount of such accumulated profits: Provided, That the amount of tax deemed to have been paid under this subsection shall in no case exceed the same proportion of the tax against which credit is taken which the amount of such dividends bears to the amount of the entire taxable income of the domestic corporation in which such dividends are included. The term "accumulated profits" when used in this subsection in reference to a foreign corporation, means the amount of its gains, profits, or income in excess of the income, war profits, and excess profits taxes imposed upon or with respect to such profits or income; and the Commissioner shall have full power to determine from the accumulated profits of what year or years such dividends were paid, treating dividends paid in the first 60 days of any year as having been paid from the accumulated profits of the preceding year or years (unless to his satisfaction shown otherwise), and in other respect treating dividends as having been paid from the most recently accumulated gains, profits, or earnings. In the case of a foreign corporation, the income, war profits, and excess profits taxes of which are determined on the basis of an accounting period of less than one year, the word "year" as used in this subsection shall be construed to mean such accounting period.

(9)chanroblesnad Taxes of shareholder paid by corporation. The deduction for taxes allowed by paragraph (c) shall be allowed to a corporation in the case of taxes imposed upon a shareholder of the corporation upon his interest as shareholder which are paid by the corporation without reimbursement from the shareholder, but in such cases no deduction shall be allowed the shareholder for the amount of such taxes.

(d)chanroblesnad Losses. (1) By individuals. In the case of an individual, losses actually sustained during the taxable year and not compensated for by insurance or otherwise:

(A)chanroblesnad If incurred in trade, profession, or business;

(B)chanroblesnad If incurred in any transaction entered into for profit, though not connected with the trade or business;

(C)chanroblesnad Of property connected with the trade or business, if the loss arises from fires storm, shipwreck, or other casualties, or from robbery, theft, or embezzlement. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, is hereby authorized to promulgate, rules and regulations prescribing, among other things, the time and manner by which the taxpayer shall submit a declaration of loss sustained from casualty or from robbery, theft, or embezzlement during the taxable year: Provided, however, That the time limit to be so prescribed in the regulations shall not be less than 30 days nor more than 90 days from the date of the occurrence of the casualty or robbery, theft, or embezzlement giving rise to the loss.

(D)chanroblesnad No loss shall be allowed as a deduction under this paragraph if at the time of the filing of the return, such loss has been claimed as a deduction for estate tax purposes in the estate tax return.

(2)chanroblesnad By corporation. In the case of a corporation, all losses actually sustained and charged off within the taxable year and not compensated for by insurance or otherwise.

(3)chanroblesnad Proof of loss. In the case of a non-resident alien individual or foreign corporation, the losses deductible are those actually sustained during the year incurred in business or trade conducted within the Philippines, and losses actually sustained during the year in transactions entered into for in the Philippines although not connected with their business or trade, when such losses are not compensated for by insurance or otherwise. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, is hereby authorized to promulgate rules and regulations prescribing, among other things, the time and manner by which the taxpayer shall submit a declaration of loss sustained from casualty or from robbery, theft, or embezzlement during the taxable year: Provided, That the time to be so prescribed in the regulations shall not be less than 30 days nor more than 90 days from the date of the occurrence of the casualty or robbery, theft, or embezzlement giving rise to the loss.

(4)chanroblesnad Capital losses. (A) Limitation. Losses from sales or exchanges of capital assets shall be allowed only to the extent provided in Sec. 34.

(B)chanroblesnad Securities becoming worthless. If securities as defined in Sec. 20 become worthless during the taxable year and are capital assets, the loss resulting therefrom shall, for the purposes of this Title, be considered as a loss from the sale or exchanges, on the last day of such taxable year, of capital assets.

(5)chanroblesnad Losses on wash sales of stock or securities Losses on "wash sales" of stock or securities as provided in Sec. 32.

(6)chanroblesnad Wagering losses. Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions.

(7)chanroblesnad Abandonment losses. (A) In the event a contract area where petroleum operations are undertaken is partially or wholly abandoned, all accumulated exploration and development expenditures pertaining thereto shall be allowed as a deduction: Provided, That accumulated expenditures incurred in that area prior to January 1, 1979, shall be allowed as a deduction only from any income derived from the same contract area. In all cases, notices of abandonment shall be filed with the Commissioner of Internal Revenue.

(B)chanroblesnad In case a producing well is subsequently abandoned, the unamortized costs thereof, as well as the undepreciated costs of equipment directly used therein shall be allowed as a deduction in the year such well, equipment or facility is abandoned by the contractor: Provided, That if such abandoned well is reentered and production is resumed, or if such equipment or facility is restored into service, the said costs shall be included as part of gross income in the year of resumption or restoration and shall be amortized or depreciated, as the case may be.

(e)chanroblesnad Bad Debts. (1) In general. Debts due to the taxpayer actually ascertained to be worthless and charged off within the taxable year except those not connected with profession, trade or business and those sustained in a transaction entered into between parties mentioned under Sec. 30 (b) of this Code.

(2)chanroblesnad Securities becoming worthless. If securities as defined in Sec. 20 are ascertained to be worthless and charged off within the taxable year and are capital assets, the loss resulting therefrom shall, in the case of a taxpayer other than a bank or trust company incorporated under the laws of the Philippines a substantial part of whose business is the receipt of deposits, for the purpose of this Title, be considered as a loss from the sale or exchange, on the last day of such taxable year of capital assets.

(f)chanroblesnad Depreciation. (1) General rule. There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear (including reasonable allowance for obsolescence) of property used in the trade or business. In the case of property held by one person for life with remainder to another person, the deduction shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant. In the case of property held in trust, the allowable deduction shall be apportioned between the income beneficiaries and the trustees in accordance with the pertinent provisions of the instrument creating the trust, or in the absence of such provisions, on the basis of the trust income allowable to each.

(2)chanroblesnad Use of certain methods and rates. The term "reasonable allowance" as used in the preceding paragraph shall include (but not limited to) an allowance computed in accordance with regulations prescribed by the Secretary of Finance, under any of the following methods:

(A)chanroblesnad The straight line method.

(B)chanroblesnad Declining balance method, using a rate not exceeding twice the rate which would have been used had the annual allowance been computed under the method described in paragraph (f) (1).

(C)chanroblesnad The sum of the year-digits method, and

(D)chanroblesnad Any other method which may be prescribed by the Secretary of Finance upon recommendation of the Commissioner of Internal Revenue.

(3)chanroblesnad Agreement as to useful life on which depreciation rate is based. Where under regulations prescribed by the Secretary of Finance, the taxpayer and the Commissioner of Internal Revenue have entered into an agreement in writing a specifically dealing with the useful life and rate of depreciation of any property, the rate so agreed upon shall be binding on both the taxpayer and the Secretary of Finance in the absence of facts and circumstances not taken into consideration in the adoption of such agreement. The responsibility of establishing the existence of such facts and circumstances shall rest with the party initiating the modification. Any change in the agreed rate and useful life specified in the agreement shall not be effective for taxable year before the taxable year in which notice in writing by certified mail or registered mail is served by the party to the agreement initiating such change.

(4)chanroblesnad Depreciation of properties used in petroleum operations. An allowance for depreciation in respect to all properties directly related to production of petroleum initially placed in service in a taxable year under the straight-line or double-declining balance method of depreciation at the option of the service contractor. However, if the service contractor initially elects the double declining method, it may at any subsequent date, shift to the straight-line method. The useful life of properties used in or related to production of petroleum shall be 10 years or such shorter life as may be permitted by the Commissioner of Internal Revenue.

Properties not used directly in the production of petroleum shall be depreciated under the straight-line method on the basis of an estimated useful life of 5 years.

(5)chanroblesnad Depreciation deductible by non-resident aliens or foreign corporations. In the case of a non-resident alien individual or foreign corporation, a reasonable allowance for the deterioration of property arising out of its use or employment or its non-use in the business or trade shall be permitted only when such property is located within the Philippines.

(g)chanroblesnad Depletion of oil and gas wells and mines. (1) In general. In the case of oil and gas wells and mines, a reasonable allowance for depletion or amortization computed in accordance with the cost depletion method shall be granted under rules and regulations to be prescribed by the Secretary of Finance: Provided, That when the allowance shall equal the capital invested on further allowance shall be granted: Provided, further, That after production in commercial quantities has commenced, certain intangible exploration and development drilling costs (A) shall be deductible in the year incurred if such expenditures are incurred for non-producing wells or (B) shall be deductible in full in the year paid or incurred or at the election of the taxpayer, may be capitalized and amortized if such expenditures incurred are for producing wells in the same contract area.

Intangible costs in petroleum operations refer to any costs incurred in petroleum operations which in itself has no salvage value and which is incidental to and necessary for the drilling of wells and preparation of wells for the production of petroleum: Provided, That said cost shall not pertain to the acquisition or improvement of property of a character subject to the allowance for depreciation except that the allowances for depreciation on such property, shall be deductible under this subsection.

Any intangible exploration, drilling and development expenses allowed as a deduction in computing taxable income during the year shall not be taken into consideration in computing the adjusted cost basis for the purpose of computing allowable cost depletion.

(2)chanroblesnad Election to deduct exploration and development expenditures. In computing taxable income, the taxpayer may, at his option, deduct exploration and development expenditures accumulated as cost or adjusted basis for cost depletion as of January 1, 1978, as well as exploration and development expenditures paid or incurred during the taxable year: Provided, That the total amount deductible for exploration and development expenditures shall not exceed twenty-five percent (25%) of the taxable income from mining operations computed without the benefit of any tax incentive under existing laws. This subparagraph shall not apply to expenditures for the acquisition or improvement of property of a character which is subject to the allowance for depreciation under Sec. 29 (f) (1) of this Code but the allowance for depreciation thereon shall be treated as expenditure.

The election by the taxpayer to deduct the exploration and development expenditures is irrevocable and shall be binding in succeeding taxable years.

In no case shall this paragraph apply with respect to amounts paid or, incurred for the exploration and development of oil and gas. The term "exploration expenditures" means expenditures paid or incurred for the purpose of ascertaining the existence, location, extent, or quality of any deposit of ore or other mineral, and paid or incurred before the "development expenditures" means expenditures paid or incurred during the development stage of the mine or other natural deposits. The development stage of a mine or other natural deposit shall begin at the time when deposits of one other minerals are shown to exist in sufficient commercial quantity and quality and shall end upon commencement of actual commercial extraction.

(3)chanroblesnad Depletion of oil and gas wells and mines deductible by a non-resident alien individual or foreign corporation. In the case of a non-resident alien individual or a foreign corporation, allowance for depletion of oil and gas wells or mines under subparagraph (1) shall be authorized only in respect to oil and gas wells or mines located within the Philippines.

(h)chanroblesnad Charitable and other contributions. (1) In general. Contributions or gifts actually paid or made within the taxable year to, or for the use of the Government of the Philippines or any of its agencies or any political subdivision thereof for exclusively public purposes, or to domestic-corporations or associations organized and operated exclusively for religious, charitable, scientific, youth and sports development, cultural or educational purposes or for the rehabilitation of veterans, or to social welfare institutions, no part of the net income of which inures to the benefit of any private stockholder or individual in an amount not in excess of 6% in the case of an individual, and 3% in the case of a corporation, of the taxpayer's income derived from business as computed without the benefit of this and the following subparagraphs.

(2)chanroblesnad Contributions deductible in full. Notwithstanding the provisions of the preceding subparagraph, donations to the following institutions or entities shall be deductible in full:

(A)chanroblesnad Donations to the Government. Donations to the Government of the Philippines or to any of its agencies or political subdivisions including fully-owned government corporations exclusively to finance, to provide for, or to be used in undertaking priority activities in education, health, youth and sports development, human settlements, science and culture, and in economic development according to a national priority plan to be determined by the NEDA, in consultation with appropriate government agencies, including its regional development councils and private philanthropic persons and institutions: Provided, That any donation which is made to the Government or to any of its agencies or political subdivisions not in accordance with the said annual priority plan shall be subject to the limitations prescribed in subparagraph (1) of this section.

(B)chanroblesnad Donations to certain foreign-institutions or international organizations. Donations to foreign institutions or international organizations which are fully deductible in pursuance of or in compliance with agreements, treaties, or commitments entered into by the Government of the Philippines and the foreign institutions or international organizations or in pursuance of special laws.

(C)chanroblesnad Donations to certain private foundations. The term "private foundation" means a non-profit domestic corporation:

(i)chanroblesnad Organized and operated exclusively for scientific, research, educational, character-building and youth and sports development, health, social welfare, cultural or charitable purposes, or a combination thereof, no part of the net income of which inures to the benefit of any private individual;

(ii)chanroblesnad Which, not later than the 15th day of the third month after the close of the foundation's taxable year in which contributions are received, makes utilization directly for the active conduct of the activities constituting the purpose or function for which it is organized and operated, unless an extended period is granted by the Secretary of Finance in accordance with the rules and regulation to be promulgated;

(iii)chanroblesnad The level of administrative expense of which, shall on an annual basis conform with the rules and regulations to be prescribed by the Secretary of Finance but in no case to exceed thirty percent (30) of total expenses; and

(iv)chanroblesnad The assets of which in the event of dissolution would be distributed to another non-profit domestic corporation organized for similar purpose or purposes, or to the State for public purpose, or would be distributed by a court to another organization to be used in such manner as in the judgment of said court shall best accomplish the general purpose for which the dissolved organization was organized.

Subject to such terms and conditions as may be prescribed by the Secretary of Finance, the term "utilization" means:

(i)chanroblesnad Any amount in cash or in kind (including administrative expenses) paid or utilized to accomplish one or more purposes for which the private foundation was created or organized.

(ii)chanroblesnad Any amount paid to acquire an asset used (or held for use) directly in carrying out one or more purposes for which the foundation was created or organized.

An amount set aside for a specific project which comes within one or more purposes of the foundation may be treated as a utilization, but only if at the time such amount is set aside, the private foundation establishes to the satisfaction of the Commissioner of Internal Revenue that the amount will be paid for the specific project within a period to be prescribed in regulations to be promulgated by the Secretary of Finance, but not to exceed 5 years, and the project is one which can be better accomplished by setting aside such amount than by immediate payment of funds.

(3)chanroblesnad Valuation. Properties other than cash donated shall be valued in accordance with the rules and regulations prescribed by the Secretary of Finance in consultation with appropriate government agencies.

(4)chanroblesnad Proof of deductions. Contributions or gifts shall be allowable as deduction only if verified under the regulations prescribed only if verified under the regulation prescribed by the Secretary of Finance.

(i)chanroblesnad Pension trusts. An employer establishing or maintaining a pension trust to provide for the payment of reasonable pensions to his employees shall be allowed as a deduction (in addition to the contributions to such trust during the taxable year to cover the pension liability accruing during the year, allowed as a deduction under subsection (a) (1) of this section) a reasonable amount transferred or paid into such trust during the taxable year in excess of such contributions, but only if such amount (1) has not theretofore been allowable as a deduction, and (2) is apportioned in equal parts over a period of 10 consecutive years beginning with the year which the transfer or payment is made.

(j)chanroblesnad Additional requirement for deductibility of certain payments. Any amount paid or payable which is otherwise deductible from, or taken into account in computing gross income or for which depreciation or amortization may be allowed under this section, shall be allowed as a deduction only if it is shown that the tax required to be deducted and withheld therefrom has been paid to the Bureau of Internal Revenue in accordance with this section, Sec. 51 and 74 of this Code.

(k)chanroblesnad Optional standard deduction. In lieu of the deductions allowed under the preceding paragraph of this section an individual subject to tax under Sec. 21 (a) other than a non-resident alien, may elect a standard deduction in an amount not exceeding ten percent (10%) of his gross income. Unless the taxpayer signifies, in his return his intention to elect the optional standard deduction, he shall be considered as having availed himself of the deductions allowed in the preceding subsection. The Secretary of Finance shall prescribe the manner of the election. Such election when made in the return shall be irrevocable for taxable year for which the return is made.

Notwithstanding the provisions of the preceding paragraphs, the Secretary of Finance upon recommendation of the Commissioner, after a public hearing shall have been held for this purpose may prescribe by regulations, limitations or ceilings for any of the itemized deductions under paragraphs (a) to (i) of this section: Provided, That for purposes of determining such ceiling or limitations, the Secretary of Finance shall consider the following factors: (1) adequacy of the prescribed limits on the actual expenditure requirements of each particular industry; and (2) effects of inflation on expenditure levels: Provided, further, That no ceilings shall further be imposed on items of expense already subject to ceiling under present law.

(1)chanroblesnad Personal exemptions allowable to individuals. (1) Basic personal exemption. For the purpose of determining the tax provided in Sec. 21 (a) of this Title, there shall be allowed a basic personal exemption as follows:

For single individual or married individual judicially

decreed as legally separated with no qualified dependentschanroblesnad P9,000

For head of a familychanroblesnad P12,000

For each married individualchanroblesnad P18,000

Provided, That in case one of the spouses is deriving taxable income, only said spouse shall be allowed to avail of the aforesaid basic personal exemption for married individual. (As amended by R.A. 7497)

For purposes of this paragraph, the term "Head of Family" means an unmarried or legally separated man or woman with one or both parents, or with one or more brothers or sisters, or with one or more legitimate, recognized natural or legally adopted children living with and dependent upon him for their chief support, where such brothers or sisters or children are not more than twenty-one (21) years of age, unmarried and not gainfully employed or where such children, brothers or sisters, regardless of age are incapable of self-support because of mental or physical defect.

(2)chanroblesnad Additional exemption

(A)chanroblesnad Taxpayers with dependents. A married individual or a head of a family shall be allowed an additional exemption of five thousand pesos (P5,000) for each dependent: Provided, That the total number of dependents for which additional exemptions may be claimed shall not exceed four dependents: Provided, further, That the additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals. (As amended by R.A. 7497)

In case of legally separated spouses, additional exemptions may be claimed only by the spouse who was awarded custody of the child or children: Provided, That the total amount of addition exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed.

For purposes of this paragraph, a dependent means a legitimate, recognized natural or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect.

(B)chanroblesnad Taxpayers with gross compensation income not exceeding P20,000. A special additional exemption of Four thousand pesos (P4,000) shall be allowed if the gross income of a single, married or legally separated individual, or head of family does not exceed the aggregate amount of P20,000: Provided, That in case married individual elect to compute their income tax separately, the spouse claiming the additional exemption for dependent children shall be entitled to the special additional exemption of P4,000.

(3)chanroblesnad Change of status. If the taxpayer married or should have additional dependents as defined above during the taxable year, the taxpayer may claim the corresponding personal and additional exemptions, as the case may be, in full for such year.

If the taxpayer should die during the taxable year, his estate may still claim the personal and additional exemptions for himself and his dependents as if he died at the close of such year.

If the spouse or any of the dependents should die or if any of such dependents becomes twenty-one years old during the taxable year, the taxpayer may still claim the same exemptions as if they died, or if such dependents become twenty-one years old at the closed of such year.

(4)chanroblesnad Allowances for adjustment. Upon the recommendation of the Secretary of Finance, the President shall automatically adjust not more often than once every three years, the personal and additional exemptions taking into account, among others, the movement in consumer price indices, levels of minimum wages, and bare subsistence levels.

(5)chanroblesnad Personal exemptions allowable to nonresident-alien individuals. A non-resident alien individual engaged in trade or business in the Philippines shall be entitled to personal exemption in the amount equal to the exemptions allowed by the income tax law of the country of which he is a subject or citizen to citizens of the Philippines not residing in such country, but not to exceed the amount fixed in this section as exemption for citizen or residents of the Philippines: Provided, That said non-resident alien should file a true and accurate return of the total income received by him from all sources in the Philippines, as required by this Title.

(m)chanroblesnad Exemption and deduction allowable from foreign source income derived by non-resident citizens. In computing the taxable income subject to tax under Sec. 21 (b) the following deductions shall be allowed from gross income derived by a non-resident citizen from all sources without the Philippines:

(1)chanroblesnad An allowance for personal exemption in the amount of two thousand dollars (U.S. $2,000), if the person making the return is a single or a married person legally separated from his or her spouse; or four thousand dollars (U.S. $4,000), if the person making the return is married or head of the family, as defined in Sec. 29 of this Code; and

(2)chanroblesnad The total amount of the national income tax actually paid to the government of the foreign country of his residence. For thus purpose, every non-resident citizen availing of this deduction shall attach to his Philippines income tax return a copy of the income tax return he has filed with the government of the foreign country of his residence. (As amended by E.O. No. 37)

Sec. 30.chanroblesnad Items not deductible. (a) General rule. In computing net income no deduction shall in any case be allowed in respect of

(1)chanroblesnad Personal, living, or family expenses;

(2)chanroblesnad Any amount paid out for new building or for permanent improvements, or betterment made to increase the value of any property or estate;

This subsection shall not apply to intangible drilling and development cost incurred in petroleum operations which are deductible under subsection (g) (1) of Sec. 29 of this Code. (As added by PD No. 1682.)

(3)chanroblesnad Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made; or

(4)chanroblesnad Premium paid on any life insurance policy covering the life of any officer or employee, or of any person financial interested in any trade or business carried on by the taxpayer, individual or corporate, when the taxpayer is directly or indirectly a beneficiary under such policy.

(b)chanroblesnad Losses from sales or exchanges of property. In computing net income no deduction shall in any case be allowed in respect of losses from sales or exchanges of property directly or indirectly

(1)chanroblesnad Between members of a family. For the purpose of this paragraph, the family of an individual shall include only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants;

(2)chanroblesnad Except in the case of distributions in liquidation, between an individual and a corporation more than fifty per centum in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual;

(3)chanroblesnad Except in the case of distributions in liquidation, between two corporations more than fifty per centum in value of the outstanding stock of each of which is owned, directly or indirectly, by or for the same individual, if either one of such corporations, with respect to the taxable year of the corporation preceding the date of the sale or exchange was under the law applicable to such taxable year, a personal holding company or a foreign personal holding company;

(4)chanroblesnad Between the grantor and a fiduciary of any trust;

(5)chanroblesnad Between the fiduciary of a trust and the fiduciary of another trust, if the same person is a grantor with respect to each trust; or

(6)chanroblesnad Between a fiduciary of a trust and a beneficiary of such trust.

Sec. 31.chanroblesnad Special provisions regarding income and deductions of insurance companies, whether domestic or foreign. (a) Special deductions allowed to insurance companies. In case of insurance companies, whether domestic or foreign doing business in the Philippines, the net additions, if any, required by law to be made within the year to reserve funds and the sums other than dividends paid within the year on policy and annuity contracts may be deducted from their gross income: Provided, however, That the released reserve be treated as income for the year of release.

(b)chanroblesnad Mutual insurance companies. In the case of mutual fire and mutual employer's liability and mutual workmen's compensation and mutual casualty insurance companies requiring their members to make premium deposits to provide for losses and expenses, said companies shall not return as income any portion of the premium deposits returned to their policy holders, but shall return as taxable income all income received by them from all other sources plus portion of the premium deposits as are retained by the companies for purposes other than the payment of losses and expenses and reinsurance reserves.

(c)chanroblesnad Mutual marine insurance companies. Mutual marine insurance companies shall include in their return of gross income, gross premiums collected and received by them less amounts paid for reinsurance, but shall be entitled to include in deductions from gross income amounts repaid to policy holders on account of premiums previously paid by them and interest paid upon those amount between the ascertainment and payment thereof.

(d)chanroblesnad Assessment insurance companies. Assessment insurance companies, whether domestic or foreign, may deduct from their gross income the actual deposit of sums with the officers of the Government of the Philippines pursuant to law, as additions to guarantee or reserve funds.

Sec. 32.chanroblesnad Losses from wash sales of stock or securities. (a) In the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning thirty days before the date of such sale or disposition and ending thirty days after such date, the taxpayer has acquired (by purchase or by exchange upon which the entire amount of gain or loss was recognized by law), or has entered into a contract or option so to acquire, substantially identical stock or securities, then no deduction for the loss shall be allowed under section thirty unless the claim is made by a dealer in stock or securities, and with respect to a transaction made in the ordinary course of the business of such dealer.

(b)chanroblesnad If the amount of stock or securities acquired (or covered by the contract or option to acquire) is less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the loss from the sale or other disposition of which is not deductible shall be determined under rules and regulations prescribed by the Secretary of Finance.

(c)chanroblesnad If the amount of stock or securities acquired (or covered by the contract or option to acquire) is not less than the amount of stock or securities sold or otherwise disposed of, then the particular shares of stock or securities the acquisition of which (or the contract or option to acquire which) resulted in the non-deductibility of the loss shall be determined under rules and regulations prescribed by the Secretary of Finance.

Sec. 33.chanroblesnad Capital gains and losses. (a) Definitions. As used in this Title.

(1)chanroblesnad Capital assets. The "capital assets" means property held by the taxpayer (whether or not connected with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property used in the trade or business, of a character which is subject to the allowance for depreciation provided in subsection (f) of section twenty-nine; or real property used in the trade or business of the taxpayer.

(2)chanroblesnad Net capital gain. The term "net capital gain" means the excess of the gains from sales or exchanges of capital assets over the losses from such sales or exchanges.

(3)chanroblesnad Net capital loss.- The term "net capital loss" means the excess of the losses from sales or exchanges of capital assets over the gains from such sales or exchanges.

(b)chanroblesnad Percentage taken into account. In the case of a taxpayer, other than a corporation, only the following percentages of the gain or loss recognized upon the sale or exchanges of a capital asset shall be taken into account in computing net capital gain, net capital loss, and net income:

(1)chanroblesnad One hundred per centum if the capital asset has been held for not more than twelve months;

(2)chanroblesnad Fifty per centum if the capital asset has been held for more than twelve months.

(c)chanroblesnad Limitation on capital losses. Losses from sales or exchange of capital assets shall be allowed only to the extent of the gains from such sales or exchanges. If a bank or trust company incorporated under the laws of the Philippines, a substantial part of whose business is the receipt of deposits, sells any bond, debenture, note, or certificate or other evidence of indebtedness issued by any corporation (including one issued by a government or political subdivision thereof), with interest coupons or in registered form, any loss resulting from such sale shall not be subject to the foregoing limitation and shall not be included in determining the applicability of such limitation to other losses.

(d)chanroblesnad Net capital loss carry over. If any taxpayer, other than a corporation, sustains in any taxable year a net capital loss, such loss (in an amount not in excess of the net income for such year) shall be treated in the succeeding taxable year as a loss from the sale or exchange of a capital asset held for not more than twelve months.

(e)chanroblesnad Retirement of bonds, etc. For the purposes of this Title, amounts received by the holder upon the retirement of bonds, debentures, notes or certificates or other evidences of indebtedness issued by any corporation (including those issued by a government or political subdivision thereof) with the interest coupons or in registered form, shall be considered as amounts received in exchange therefor.

(f)chanroblesnad Gains and losses from short sales, etc. For the purpose of this Title

(1)chanroblesnad Gains or losses from short sales of property shall be considered as gains or losses from sales or exchanges of capital assets; and

(2)chanroblesnad Gains or losses attributable to the failure to exercise privileges or options to buy or sell property shall be considered as capital gains or losses. (As amended by E.O. No. 37)

Sec. 34.chanroblesnad Determination of amount of and recognition of gain or loss.

(a)chanroblesnad Computation of gain or loss. The gain from the sale or other disposition of property shall be the excess of the amount realized therefrom over the basis or adjusted basis for determining gain and the loss shall be the excess of the basis or adjusted basis for determining loss over the amount realized. The amount realized from the sale or other disposition of property shall be the sum of money received plus the fair market value of the property (other than money) received. (As amended by E.O. No. 37)

(b)chanroblesnad Basis for determining gain or loss from sale or disposition of property. The basis of property shall be (1) The cost thereof in the cases of property acquired on or before March 1, 1913, if such property was acquired by purchase; or

(2)chanroblesnad The fair market price or value as of the date of acquisition if the same was acquired by inheritance; or

(3)chanroblesnad If the property was acquired by gift the basis shall be the same as if it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift, except that if such basis is greater than the fair market value of the property at the time of the gift, then for the purpose of determining loss the basis shall be such fair market value; or

(4)chanroblesnad If the property, other than capital asset referred to in Sec. 21 (e), was acquired for less than an adequate consideration in money or money's worth, the basis of such property is (i) the amount paid by the transferee for the property or (i) the transferor's adjusted basis at the time of the transfer whichever is greater.

(5)chanroblesnad The basis as defined in paragraph (c) (5) of this section if the property was acquired in a transaction where gain or loss is not recognized under paragraph (c) (2) of this section. (As amended by E.O. No. 37)

(c)chanroblesnad Exchange of property.

(1)chanroblesnad General rule. Except as herein provided, upon the sale or exchange of property, the entire amount of the gain or loss, as the case may be, shall be recognized.

(2)chanroblesnad Exception. No gain or loss shall be recognized if in pursuance of a plan of merger or consolidation (a) a corporation which is a party to a merger or consolidation exchanges property solely for stock in a corporation which is a party to the merger or consolidation, (b) a shareholder exchanges stock in a corporation which is a party to the merger or consolidation solely for the stock of another corporation also a party to the merger or consolidation, or (c) a security holder of a corporation which is a party to the merger or consolidation exchanges his securities in such corporation solely for stock or securities in another corporation, a party to the merger or consolidation.

No gain or loss shall also be recognized of property is transferred to a corporation by a person in exchange for stock in such corporation of which as a result of such exchange said person, alone or together with others, not exceeding four persons, gains, control of said corporation: Provided, That stocks issued for services shall not be considered as issued in return of property.

(3)chanroblesnad Exchange not solely in kind

(a)chanroblesnad If, in connection with a exchange described in the above exception, an individual, a shareholder, security holder or corporation receives not only stock or securities permitted to be received without recognition of gain or loss, but also money and/or other property, the gain if any, but not the loss shall be recognized but in an amount not in excess of the sum of the money and the fair market value of such other property received: Provided, That as to the shareholder, if the money and or other property received has the effect of a distribution of a taxable dividend, there shall be taxed as dividend to the shareholder an amount of the gain recognized not in excess of his proportionate share of the undistributed earning and profits of the corporation; the remainder, if any, of the gain recognized shall be treated as a capital gain.

(b)chanroblesnad If, in connection with the exchange described in the above exceptions, the transferor corporation received not only stock permitted to be received without the recognition of gain or loss but also money and/or other property, then (1) if the corporation receiving such money and/or other property distributed it in pursuance of the plan of merger or consolidation, no gain to the corporation shall be recognized from the exchange, but (2) if the corporation receiving such other property and/or money does not distribute it in pursuance of the plan of merger or consolidation, the gain if any, but not the loss to the corporation shall be recognized but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not distributed.

(4)chanroblesnad Assumption of liability. (a) If the taxpayer, in connection with the exchanges described in the foregoing exception, receives stock or securities which would be permitted, to be received without the recognition of the gain if it were the sole consideration, and as a part of the consideration, another party to the exchange assumes a liability of the taxpayer, or acquired from the taxpayer property, subject to a liability, then such assumption or acquisition shall not be treated as money and or other property, and shall not prevent the exchange from being within the exceptions.

(b)chanroblesnad If the amount of the liabilities assumed plus the amount of the liabilities to which the property is subject, exceed the total of the adjusted basis of the property transferred pursuant to such exchange, then such excess shall be considered as a gain from the sale or exchange of a capital asset or of property which is not a capital asset, as the case may be.

(5)chanroblesnad Basis. (a) The basis of the stock or securities received by the transferor upon the exchange specified in the above exception shall be the same as the basis of the property, stock or securities exchanged, decreased by (1) the money received, and (2) the fair market value of the other property received, and increased by (a) the amount treated as dividend of the shareholder and (b) the amount of any gain that was recognized on the exchange: Provided, That the property received as "boot" shall have as basis its fair market value: Provided, further, That if as part of the consideration to the transferor, the transferee of property assumes a liability of the transferor or acquires from the latter property subject to a liability, such assumption or acquisition (in the amount of the liability) shall, for purposes of this paragraph be treated as money received by the transferor on the exchange: Provided, finally, That if the transferor received several kinds of stock or securities, the Commissioner of Internal Revenue is hereby authorized to allocate the basis among the several classes of stocks or securities.

(b)chanroblesnad The basis of the property transferred in the hands of the transferee shall be the same as it would be in the hands of the transferor increased by the amount of the gain recognized to the transferor on the transfer.

(6)chanroblesnad Definitions. (a) The term "securities" means bonds and debentures but not "notes" of whatever class or duration.

(b)chanroblesnad The term "merger" or "consolidation", when used in this section shall be understood to mean: (1) the ordinary merger or consolidation or (2) the acquisition by one corporation of all or substantially all the properties of another corporation solely for stock: Provided, That for a transaction to be regarded as merger or consolidation within the purview of this section, it must be undertaken for a bona fide business purpose and not solely for the purpose of escaping the burden of taxation: Provided, further, That in determining whether a bona fide business purpose exists each and every step of transaction shall be considered and the whole transaction or series of the transactions shall be treated as a single unit: Provided, finally, That in determining whether the property transferred constitutes a substantial portion of the property of the transferor the term "property" shall be taken to include the cash assets of the transferor.

(c)chanroblesnad The term "control" when used in this section shall mean ownership of stocks in a corporation possessing at least fifty-one percent of the total voting power of all classes of stocks entitled to vote.

(d)chanroblesnad The Secretary of Finance upon recommendation of the Commissioner of Internal Revenue is hereby authorized to issue rules and regulations for the purpose of determining the proper amount of transferred assets which meet the standard of the phrase "substantially all" and for the proper implementation of this section.

Sec. 35.chanroblesnad Inventories. Whenever in the judgment of the Commissioner of Internal Revenue, the use of inventories is necessary in order to determine clearly the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as the Secretary of Finance may, by regulations, prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income.

If a taxpayer, after having complied with the terms and conditions prescribed by the Commissioner, uses a particular method of valuing its inventory for any taxable year, then such method shall be used in all subsequent taxable years unless:

(i)chanroblesnad With the approval of the Commissioner, a change to a different method is authorized; or

(ii)chanroblesnad The Commissioner finds that the nature of the stock on hand (e.g. its scarcity, liquidity, marketability and price movements) is such that inventory gains should be considered realized for tax purposes and, therefore it is necessary to modify the valuation method for purposes of ascertaining the income, profits or loss in a more realistic manner: Provided, however, That a Commissioner shall not exercise his authority to require a change in inventory method more often than once every three years: and Provided, further, That any change in an inventory, valuation method must be subject to approval by the Secretary of Finance.

Sec. 36.chanroblesnad Income from sources within the Philippines. (a) Gross income from sources within the Philippines. The following items of gross income shall be treated as gross income from sources within the Philippines:

(1)chanroblesnad Interest. Interest derived from sources within the Philippines, and interest on bonds, notes, or other interest bearing obligations of residents, corporate or otherwise;

(2)chanroblesnad Dividends. The amount received as dividends:

(A)chanroblesnad From a domestic corporation;

(B)chanroblesnad From a foreign corporation unless less than fifty per centum of the gross income of such foreign corporation for the three-year period ending with the close of its taxable year preceding the declaration of such dividends (or for such part of such period as the corporation has been in existence) was derived from sources within the Philippines as determined under the provisions of this section; but only in an amount which bear the same ratio to such dividends as the gross come of the corporation for such period derived from sources within the Philippines bear to its gross income from all sources;

(3)chanroblesnad Services. Compensation for labor or personal services performed in the Philippines;

(4)chanroblesnad Rentals and royalties. Rentals and royalties from property located in the Philippines or from any interest on such property, including rentals or royalties for

(A)chanroblesnad The use of or the right or privilege to use in the Philippines any copyright, patent, design or model, plant, secret formula or process, goodwill, trademark, trade brand or other like property or right;

(B)chanroblesnad The use of, or the right to use in the Philippines of any industrial, commercial or scientific equipment;

(C)chanroblesnad The supply of scientific, technical, industrial or commercial knowledge or information;

(D)chanroblesnad The supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling the application or enjoyment of, any such property, or right as is mentioned paragraph (b) or any such knowledge or information as is mentioned in paragraph (c); or

(E)chanroblesnad The supply of services by a non-resident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such non-resident person;

(F)chanroblesnad Technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme;

(G)chanroblesnad The use of or right to use

(i)chanroblesnad motion picture films;

(ii)chanroblesnad films or video tapes for the use in connection with television;

(iii)chanroblesnad tapes for use in connection with radio broadcasting.

(5)chanroblesnad Sale of real property. Gains, profits, and income from the sale of real property, as determined in subsection (e) of this section.

(6)chanroblesnad Sale of personal property. Gains, profits and income from the sale of personal property, as determined in subsection (e) of this section.

(b)chanroblesnad Taxable income from sources within the Philippines. (1) General rule. From the items of gross income specified in subsection (a) of this section, there shall be deducted the expenses, losses, and other deductions properly allocated thereto and a ratable part of expenses, interest, losses, and other deductions effectively connected, with the business or trade conducted exclusively within the Philippines which cannot definitely be allocated to some items or class of gross income: Provided, That such items of deductions shall be allowed only if fully substantiated by all the information necessary for its calculation. The remainder, if any, shall be treated in full as taxable income from sources within the Philippines. (As amended by E.O. No. 37)

(2)chanroblesnad Exception. No deductions for interest paid or incurred abroad shall be allowed from the item of gross income specified in subsection (a) unless indebtedness was actually incurred to provide funds for use in connection with the conduct or operation of trade or business in the Philippines. (As amended by E.O. No. 37)

(c)chanroblesnad Gross income from sources without the Philippines. The following items of gross income shall be treated as income from sources without the Philippines:

(1)chanroblesnad Interest other than that derived from sources within the Philippines as provided in paragraph (1) of subsection (a) of this section;

(2)chanroblesnad Dividends other than those derived from sources within the Philippines as provided in paragraph (2) of subsection (a) of this section;

(3)chanroblesnad Compensation for labor or personal service performed without the Philippines;

(4)chanroblesnad Rentals or royalties from property located without the Philippines or from any interest in such property including rentals or royalties for the use of or for the privilege of using without the Philippines, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises and other like properties; and

(5)chanroblesnad Gains, profits, and income from the sale of real property located without the Philippines.

(d)chanroblesnad Net income from sources without the Philippines. From the items of gross income specified in subsection (c) of this section there shall be deducted the expenses, losses, and other deductions properly apportioned or allocated thereto and a ratable part of any expenses, losses or other deductions which cannot definitely be allocated to some item or class of gross income. The remainder, if any, shall be treated in full as net income from sources without the Philippines.

(e)chanroblesnad Income from sources partly within and partly without the Philippines. Items of gross income, expenses, losses and deductions, other than those specified in subsection (a) and (c) of this section shall be allocated or apportioned to source within or without the Philippines, under the rules and regulations prescribed by the Secretary of Finance. Where items or gross income are separately allocated to sources within the Philippines, there shall be deducted (for the purpose of computing the net income therefrom) the expenses, losses, and other deductions properly apportioned or allocated thereto and a ratable part of other expenses, losses or other deductions which cannot definitely be allocated to some item or class of gross income. The remainder, if any, shall be included in full as net income from sources within the Philippines. In the case of gross income derived from sources partly within and partly without the Philippines, the net income may first be computed by deducting the expenses, losses, or other deductions apportioned or allocated thereto and a ratable part of any expenses, losses or other deductions which cannot definitely be allocated to some items or class of gross income; and the portion of such net income attributable to sources within the Philippines may be determined by processes or formulas of general apportionment prescribed by the Secretary of Finance. Gains, profits, and income from the sale of personal property produced (in whole or in part) by the taxpayer without and sold within the Philippines, or produced (in whole or in part) by the taxpayer without and sold within the Philippines, shall be treated as derived partly from sources within and partly from sources without the Philippines. Gains, profits, and income derived from the purchase of personal property within and its sale without the Philippines or from the purchase of personal property without and its sale within the Philippines shall be treated as derived entirely from sources within the country in which sold: Provided, however, That gain from the sale of shares of stock in a domestic corporation shall be treated as derived entirely from sources within the Philippines regardless of where the said shares are sold. The transfer by a non-resident alien or a foreign corporation to anyone of any share of stock issued by a domestic corporation shall not be effected or made in its book unless: (1) the transferor has filed with the Commissioner a bond conditioned upon the future payment by him of any income tax that may be due on the gains derived from such transfer or, (2) the Commissioner has certified that the taxes, if any, imposed in this Title and due on the gain realized from such sale or transfer have been paid. It shall be the duty of the transferor and the corporation the shares, of which are sold or transferred to advise the transferee of this requirement.

(f)chanroblesnad Definitions. As used in this section the words "sale" or "sold" include "exchange" or "exchanged"; and the word "produced" includes "created"; "fabricated", "manufactured", "extracted", "processed", "cured", or "aged".

CHAPTER V
ACCOUNTING PERIOD AND METHODS OF ACCOUNTING

Sec. 37.chanroblesnad General rule. The net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in accordance with the method of accounting regularly employed in keeping the books of such taxpayer; but if no such method of accounting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made in accordance with such method as in the opinion of the Commissioner of Internal Revenue does clearly reflect the income. If the taxpayer's annual accounting period is other than a fiscal year, as defined in section twenty or if the taxpayer has no annual accounting period, or does not keep books, or if the taxpayer is an individual, the net income shall be computed on the basis of the calendar year.

Sec. 38.chanroblesnad Period in which items of gross income included. The amount of all items of gross income shall be included in the gross income for the taxable year in which received by the taxpayer, unless, under methods of accounting permitted under section thirty eight, any such amounts are to be properly accounted for as of a different period. In the case of the death of a taxpayer there shall be included in computing net income for the taxable period in which falls the date of his death, amounts accrued up to the date of his death if not otherwise properly includible in respect of such period or a prior period.

Sec. 39.chanroblesnad Period for which deductions and credits taken. The deductions provided for in this Title shall be taken for the taxable year in which "paid or accrued" or "paid or incurred", dependent upon the method of accounting upon the basis of which the net income is computed, unless in order to clearly reflect the income the deductions should be taken as of a different period. In the case of the death of a taxpayer there shall be allowed as deductions for the taxable period in which falls the date of his death, amounts accrued up to the date of his death if not otherwise properly allowable in respect of such period or a prior period.

Sec. 40.chanroblesnad Change of accounting period. If a taxpayer, other than an individual, changes his accounting period from fiscal year to calendar year from calendar year to fiscal year, or from one fiscal year to another, the net income shall, with the approval of the Commissioner of Internal Revenue, be computed on the basis of such new accounting period, subject to the provisions of Section forty-two.

Sec. 41.chanroblesnad Final or adjustment returns for a period of less than twelve months. (a) Return for short period resulting from change of accounting period. If a taxpayer, other than an individual, with the approval of the Commissioner of Internal Revenue, changes the basis of computing net income from fiscal year to calendar year, a separate final or adjustment return shall be made for the period between the close of the last fiscal year for which return was made and the following December 31. If the change is from calendar year to fiscal year, a separate final or adjustment return shall be made for the period between the close of the last calendar year for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year a separate final or adjustment return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year.

(b)chanroblesnad Income computed on basis of short period. Where a separate final or adjustment return is made under subsection (a) on account of a change in the accounting period, and in all other cases where a separate final or adjustment return is required or permitted by regulations prescribed by the Secretary of Finance, to be made for a fractional part of a year, then the income shall be computed on the basis of the period for which separate final or adjustment return is made.

Sec. 42.chanroblesnad Installment basis. (a) Sales of dealers in personal property. Under regulations prescribed by the Secretary of Finance, a person who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the gross profit realized or to be realized when payment is completed, bears to the total contract price.

(b)chanroblesnad Sales of realty and casual sales of personality. In the case (1) of a casual sale or other casual disposition of personal property (other than property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year), for a price exceeding one thousand pesos, or 92) of a sale or other disposition of real property, if in either case the initial payments do not exceed twenty-five percent of the selling price, the income may under regulations prescribed by the Secretary of Finance, be returned on the basis and in the manner above prescribed in this section. As used in this section the term "initial payments" means the payment received in cash or property other than evidence of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made.

(c)chanroblesnad Sales of real property considered as capital asset by individuals. An individual who sells or disposes of real property, considered as capital asset, and is otherwise qualified to report the gain therefrom under paragraph (b) may pay the capital gains tax in installments under regulations to be promulgated by the Secretary of Finance.

(d)chanroblesnad Change from accrual to installment basis. If a taxpayer entitled to the benefits of subsection (a) elects for any taxable year to report his taxable income on the installment basis, then in computing his income for the year of change or any subsequent year, amounts actually received during any such year on account of sale or other dispositions of property made in any prior year shall not be excluded.

Sec. 43.chanroblesnad Allocation of income and deductions. In any case of two or more organizations, trades, or businesses (whether or not incorporated and whether or not organized in the Philippines) owned or controlled directly or indirectly by the same interests, the Commissioner of Internal Revenue is authorized to distribute, apportion, or allocate gross income or deductions between or among such organization, trades, or businesses, if he determines that such distribution, apportionment, or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any such organizations, trades or businesses.

CHAPTER VI
RETURN AND PAYMENT OF TAX

Sec. 44.chanroblesnad Individual returns. (a) Requirements. (1) Except as provided in paragraph (2) of this Section, the following individuals are required to file an income tax return.

(A)chanroblesnad Every Filipino citizen, whether residing in the Philippines or abroad,

(B)chanroblesnad Every alien residing in the Philippines, regardless of whether the gross income was derived from sources within or without the Philippines, and

(C)chanroblesnad Every non-resident alien engaged in trade or business in the Philippines.

(2)chanroblesnad The following individuals shall not be required to file an income tax return:

(A)chanroblesnad Individuals whose gross income does not exceed his total personal and additional exemptions for dependents under Sec. 29: Provided, That a citizen of the Philippines engaged in business or practice of profession within or without the Philippines and any alien individual engaged in business or practice of profession within the Philippines, shall file an income tax return, regardless of the amount of gross income.

(B)chanroblesnad Regardless of the amount of income, the following individuals shall not also be required to file an income tax return:

(i)chanroblesnad Individuals whose income consists solely of interest, prizes, winnings, royalties, dividends, share of an individual person in a partnership referred to under Sec. 21 (c);

(ii)chanroblesnad Alien employees of regional or area headquarters of multinational corporations with respect to income referred to under Sec. 22 (c);

(iii)chanroblesnad Alien employed by offshore banking units with respect to income under Sec. 22 (d);

(iv)chanroblesnad Alien employees of service contractors and subcontractors engaged in petroleum exploration in the Philippines with respect to income referred to under Sec. 22 (e); and

(v)chanroblesnad Other individuals not required to file an income tax return, pursuant to other provisions of this Code and other laws, general or special.

(C)chanroblesnad Individuals with respect to pure compensation income, as defined in Sec. 28 (a) (1), derived from sources within the Philippines, the income tax on which has been withheld under the provisions of Sec. 72 of this Code: Provided, That an individual deriving compensation concurrently from two or more employers at any time during the taxable year shall file an income tax return: Provided, further, That an individual whose pure compensation income exceeds sixty thousand pesos (P60,000) shall also file an income tax return. (As added by R.A. 7497)

(3)chanroblesnad The income tax return shall be filed in duplicate, and shall set forth specifically the gross amount of income from all sources, except that of non-resident aliens engaged in trade or business in the Philippines which shall contain only such income derived from sources within the Philippines.

(b)chanroblesnad Where to file. Except in cases where the Commissioner of Internal Revenue otherwise permits, the return shall be filed with the Revenue District Officer, Collection Agent, or duly authorized Treasurer of the Municipality in which such person has his legal residence or principal place of business in the Philippines, or if there be no legal residence or place of business in the Philippines, then with the Office of the Commissioner of Internal Revenue.

(c)chanroblesnad When to file. (1) The return of any individual specified above shall be filed on or before the fifteenth day of April of each year covering income for the preceding taxable year.

(2)chanroblesnad Individuals subject to tax on capital gains:

(i)chanroblesnad From the sale or exchange of shares of stock not traded thru a local stock exchange as prescribed under Sec. 21 (d) (1) shall file a return within thirty days after each transaction and a final consolidated return on or before April 15 of each year covering all stock transactions of the preceding taxable year.

(ii)chanroblesnad From the sale or disposition of real property under Sec. 21 (e) shall file a return within thirty days following each sale or other disposition.

(d)chanroblesnad Husband and wife. Married individuals, whether citizens, resident or non-resident aliens who do not derive income purely from compensation, shall file a return for the taxable year to include the income of both spouses, but where it is impracticable for the spouses to file one return, each spouse may file a separate return of income but the returns so filed shall be consolidated by the Bureau for purposes of verification for the taxable year. (As amended by R.A. 7497)

(e)chanroblesnad Return of parent to include income of children. The income of unmarried minors derived from property received from a living parent shall be included in the return of the parent, except (1) when the gift tax has been paid on such property, or (2) when the transfer of such property is exempt from gift tax.

(f)chanroblesnad Persons under disability. If the taxpayer is unable to make his own return, the return may be made by his duly authorized agent or representative or by the guardian or other person charged with the care of his person or property, the principal and his representative or guardian assuming the responsibility of making the return and incurring penalties provided for erroneous, false or fraudulent returns.

(g)chanroblesnad Signature presumed correct. The fact that an individual's name is signed to a filed return shall be prima facie evidence for all purposes that the return was actually signed by him. (As amended by E.O. No. 37)

Sec. 45.chanroblesnad Corporation returns. (a) Requirements. Every corporation, subject to the tax herein imposed, except foreign corporations not engaged in trade or business in the Philippines shall render, in duplicate, a true and accurate quarterly income tax return and final or adjustment return in accordance with the provisions of Chapter IX of this Title. The return shall be filed by the president, vice-president or other principal assistant treasurer.

(b)chanroblesnad Taxable year of corporation. A corporation may employ either calendar year or fiscal year as a basis for filing its annual income tax return: Provided, That the corporation shall not change the accounting period employed without prior approval from the Commissioner of Internal Revenue in accordance with the provisions of Sec. 41 of this Code.

(c)chanroblesnad Return of corporation contemplating dissolution. Every corporation shall within thirty days after the adoption by the corporation of a resolution or plan for the dissolution of the corporation or for the liquidation of the whole or any part of its capital stock, including corporations which have been notified of possible involuntary dissolution by the Securities and Exchange Commission, render a correct return to the Commissioner of Internal Revenue, verified under oath, setting forth the terms of such resolution or plan and such other information as the Secretary of Finance shall, by regulations, prescribe. The dissolving corporation prior to the insurance of the Certificate of Dissolution by the Securities and Exchange Commission shall secure a certificate of tax clearance from the Bureau of Internal Revenue which certificate shall be submitted to the Securities and Exchange Commission.

(d)chanroblesnad Return on capital gains realized from sale of shares of stocks. Every corporation deriving capital gains from the sale or exchange of shares of stock not traded thru a local stock exchange as prescribed under Sections 24 (e) (2) (A), 25 (a) (6) (C) (i) and 25 (b) (5) (C) (i), shall file a return within thirty days after each transaction and a final consolidated return of all transactions during the taxable year on or before the fifteenth day of the fourth month following the close of the taxable year. (As amended by E.O. No. 37)

Sec. 46.chanroblesnad Extension of time of file returns. The Commissioner of Internal Revenue may, in meritorious cases, grant a reasonable extension of time for filing returns of income (or final and adjustment returns in the case of corporations), subject to the provisions of Section fifty of the Code.

Sec. 47.chanroblesnad Return of receivers, trustees in bankruptcy or assignees. In cases wherein receivers, trustees in bankruptcy, or assignees are operating the property or business of a corporation, subject to the tax imposed by this Title, such receivers, trustees, or assignees shall make returns of net income as and for such corporation, in the same manner and form as such organization is hereinbefore required to make returns, and any tax due on the income as returned by receivers, trustees, or assignees shall be assessed and collected in the same manner as if assessed directly against the organizations of whose business or properties they have custody and control.

Sec. 48.chanroblesnad Returns of general professional partnerships. Every general professional partnership shall file, in duplicate, a return of its income, except income exempt under Section twenty-eight (b) of this Title, setting forth the items of the gross income and the deductions allowed by this Title, and the names and addresses and shares of the partners.

Sec. 49.chanroblesnad Payment and assessment of income tax for individuals and corporations.

(a)chanroblesnad Payment of Tax. (1) In general. The total amount of tax imposed by this Title shall be paid by the person subject thereto at the time the return is filed. In the case tramp vessels, the shipping agents and/or the husbanding agents, and in their absence, the captains thereof are required to file the return herein provided and pay the tax due thereon before their departure. Upon failure of the said agents or captains to file the return and pay the tax, the Bureau of Customs is hereby authorized to hold the vessel and prevent its departure until proof of payment of the tax is presented or a sufficient bond is filed to answer for the tax due.

(2)chanroblesnad Installment payment. When the tax due is in excess of P2,000, the taxpayer other than a corporation may elect to pay the tax in 2 equal installments in which case, the first installment shall be paid at the time the return is filed and the second installment, on or before July 15 following the close of the calendar year. If any installment is not paid on or before the date fixed for its payment, the whole amount of the tax unpaid becomes due and payable, together with the delinquency penalties.

(3)chanroblesnad Installment payment for non-resident citizens. When the tax due from a non-resident citizen is in excess of U.S. $200, the taxpayer may elect to pay the tax in 2 equal installments in which case, the first installment shall be paid at the time the return is filed and the second installment, on or before July 15 following the close of the calendar year. If any installment is not paid on or before the date fixed for its payment the whole amount of the tax unpaid becomes due and payable together with the delinquency penalties.

(4)chanroblesnad Payment of capital gains tax. The total amount of tax imposed and prescribed under Sections 21 (d) (1), 21 (e), 24 (e) (2) (A), 25 (a) (6) (C) (i) and 25 (b) (5) (C) (i) shall be paid on the date the return prescribed thereof is filed by the person liable thereto: Provided, That if the seller submits proof of his intention to avail himself of the benefit of exemption of capital gains under existing special laws, no such payments shall be required: Provided, further, That in case of failure to qualify for exemption under such special laws and implementing rules, the tax due on the gains realized from the original transaction shall immediately become due and payable, and subject to the penalties prescribed under applicable provisions of this Code: and Provided, finally, That if the seller, having paid the tax, submits such proof of intent within 6 months from the registration of the document transferring real property, he shall be entitled to a refund of such tax upon verification of his compliance with the requirements for such exemption.

In case the taxpayer elects and is qualified to report the gain by installments under Sec. 43 of this Code, the tax due from each installment payment shall be paid within 30 days from the receipt of such payments.

No registration of any document transferring real property shall be effected by the Register of Deeds unless the Commissioner of Internal Revenue or his duly authorized representative has certified that such transfer has been reported, and the tax herein imposed, if any, has been paid.

(b)chanroblesnad Assessment and payment of deficiency tax. After the return is filed, the Commissioner of Inter Revenue shall examine it and assess the correct amount of the tax. The tax or deficiency income tax so discovered shall be paid upon notice and demand from the Commissioner.

As used in this Chapter, in respect of a tax imposed by this title, the term "deficiency" means:

(1)chanroblesnad The amount by which the tax imposed by this Title exceeds the amount shown as the tax by the taxpayer upon his return; but the amount so shown on the return shall first be increased by the amounts previously assessed (or collected without assessment) as a deficiency, and decreased by the amount previously abated, credited, returned, or otherwise repaid in respect of such tax; or

(2)chanroblesnad If no amount is shown as the tax by the taxpayer upon his return, or if no return is made by the taxpayer, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a deficiency; but such amounts previously assessed or collected without assessment shall first be decreased by the amounts previously abated, credited, returned, or otherwise repaid in respect of such tax. (As amended by E.O. No. 37)

Sec. 50.chanroblesnad Withholding of tax at source.

(a)chanroblesnad Withholding of final tax on certain incomes. The tax imposed or prescribed by Sections 21 (c), 21 (d) (2); 22 (a) (2), (b), (c), (d), (e); 24 (e) (1), (e) (2) (B), (e) (3); and 25 (a) (4), (a) (5), (a) (6) (A), (a) (6) (B), (C) (ii), (b) (1), (b) (2), (b) (3), (b) (4), (b) (5) (A), (b) (5) (B), (b) (5) (C) (ii) of this Code on specified items of income shall be withheld by payor-corporation and/or person and paid in the same manner and subject to the same conditions as provided in Sec. 51 of the National Internal Revenue Code, as amended.

(b)chanroblesnad Withholding of creditable tax at source. The Secretary of Finance may upon the recommendation of the Commissioner of Internal Revenue, require also the withholding of a tax on the items of income payable to persons (natural or juridical) residing in the Philippines by payor-corporation/persons as provided for by law at the rate of not less than 2 % but not more than 35% thereof which shall be credited against the income tax liability of the taxpayer for the taxable year.

(c)chanroblesnad Tax-free covenant bonds. In any case where bonds, mortgages, deeds of trust, or other similar obligations of domestic or resident foreign corporations, contain a contract or provision by which the obligor agrees to pay any portion of the tax imposed in this Title upon the obligee or to reimburse the obligee for any portion of the tax or to pay the interest without deduction for any tax which the obligor may be required or permitted to pay thereon or to retain therefrom under any law of the Philippines, or any state or country, the obligor shall deduct and withhold a tax equal to 30% of the interest or other payments upon those bonds, mortgages, a deeds of trust, or other obligations, whether the interest or other payments are payable annually or at shorter or longer periods, and whether the bonds, securities or obligations had been or will be issued or marketed, and the interest or other payment thereon paid, within or without the Philippines, if the interest or other payment is payable to a non-resident alien or to a citizen or resident of the Philippines. (As amended by E.O. No. 37)

Sec. 51.chanroblesnad Returns and payment of taxes withheld at source. (a) Quarterly returns and payment of taxes withheld. Taxes deducted and withheld under Section fifty-three (now 50) shall be covered by a return and paid to the Revenue District Officer, Collection Agent, or duly authorized Treasurer of the city, or municipality where the withholding agent has his legal residence or principal place of business or where the withholding agent is a corporation, where the principal office is located. The taxes deducted and withheld by the withholding agent shall be held as a special fund in trust for the Government until paid to the collecting officers. The Commissioner of Internal Revenue may, with the approval of the Secretary of Finance, require these withholding agents to pay or deposit the taxes deducted or withheld at more frequent intervals when necessary to protect the interest of the Government. The return for final withholding tax shall be filed and the payment made within 25 days from the close of each calendar quarter, while the return for creditable withholding taxes shall be filed and the payment made not later than the last day of the month following the close of the quarter during which withholding was made.

[(b)chanroblesnad Penalties for failure to render returns; for rendering false or fraudulent returns; and for non-payment of taxes withheld. The surcharges and the penalties imposed in Sections Seventy-two and Seventy-three, respectively, of this Title shall apply to failure to file returns, to filing false or fraudulent returns or failure to pay the tax required under this Section.

In case the taxes deducted and withheld are not paid within the time prescribed, there shall be added to the amount of the unpaid tax a surcharge of twenty-five per centum plus interest at the rate of twenty per centum per annum from the date the same become due until paid.

If the withholding agent is the government or any of its agencies, political subdivisions, or instrumentalities, or a government-owned or controlled corporations, the employee responsible for the withholding and remittance of the tax shall be personally liable for the surcharge and interest imposed herein.]

(c)chanroblesnad Statement of income payments made and taxes withheld. Every withholding agent required to deduct and withhold taxes under Section fifty-three (now 50) shall furnish each recipient, in respect to his or its receipts during the calendar quarter or year a written statement showing the income or other payments made by the withholding agent during such quarter or year, and the amount of the tax deducted and withheld therefrom, simultaneously upon payment at the request of the payee, but not later than the 20th day following the close of the quarter in the case of corporate payee or not later than March 1 of the following year in the case of individual payee for creditable withholding taxes. For final withholding taxes the statement should be given to the payee on or before January 31 of the succeeding year.

(d)chanroblesnad Annual returns. Every withholding agent required to deduct and withhold taxes under Section fifty-three (now 50) shall submit to the Commissioner of Internal Revenue a reconciliation statement of quarterly payments and list of payees and income payments. In the case of final withholding taxes, the return shall be filed on or before January 31 of the succeeding year, and for creditable withholding taxes, not later than March 1 of the year following the year for which the annual report is being submitted. This return, if made and filed in accordance with regulations approved by the Secretary of Finance, shall be sufficient compliance with the requirements of Section seventy-seven (now 61) of this Title in respect to the income payments.

The Commissioner may, by regulations, grant to any withholding agent a reasonable extension of time to furnish and submit the return requires in this subsection.

[(e)chanroblesnad Surcharge and interest for failure to deduct and withhold. If the withholding agent, in violation of the provisions of the preceding section and implementing regulations thereunder, fails to deduct and withhold the amount of tax required under said section and regulations, he shall be liable to pay in addition to the tax required to be deducted and withheld, a surcharge of fifty per centum if the failure is due to willful neglect or with intent to defraud the Government, or twenty-five per centum if the failure is not due to such causes, plus interest at the rate of fourteen per centum per annum from the time the tax is required to be withheld until the date of assessment.]

(f)chanroblesnad Income of recipient. Income upon which any creditable tax is required to be withheld at the source under Sec. 53 (now 50) shall be included in the return of its recipient but the excess of the amount of tax so withheld over the tax due on his return shall be refunded to him subject to the provisions of Sec. 295 (now 204); if the income tax collected at source is less than the tax due on his return, the difference shall be paid in accordance with the provisions of Sec. 50.

(g)chanroblesnad All taxes withheld pursuant to the provisions of this Code and its implementing regulations are hereby considered trust funds and shall be maintained in a separate account and not commingled with any other funds of the withholding agent.

[Any violation of this provisions shall be subject to the surcharges and penalties prescribed in paragraph (b) of this Section.] (As added by PD No. 1959)

Sec. 52.chanroblesnad Tax on profits collectible from owner or other persons. The tax imposed under this Title upon gains, profits, and income not falling under the foregoing and not returned and paid by virtue of the foregoing or as otherwise provided by law shall be assessed by personal return under rules and regulations to be prescribed by the Secretary of Finance. The intent and purpose of the Title is that all gains, profits, and income of a taxable class, as defined in this Title, shall be charged and assessed with the corresponding tax prescribed by this Title, and said tax shall be paid by the owners of such gains, profits, and income, or the proper person having the receipt, custody, control, or disposal of the same. For the purpose of this Title, ownership of such gains, profits and income or liability to pay the tax shall be determined as of the year for which a return is required to be rendered.

CHAPTER VII
ESTATES AND TRUSTS

Sec. 53.chanroblesnad Imposition of Tax. (a) Application of tax. The tax imposed by this Title upon individuals shall apply to the income of estates or of any kind of property held in trust, including

(1)chanroblesnad Income accumulated in trust for the benefit of unborn or unascertained person or persons with contingent interests, and income accumulated or held for future distribution under the terms of the will or trust;

(2)chanroblesnad Income which is to be distributed currently by the fiduciary to the beneficiaries, and income collected by a guardian of an infant which is to be held or distributed as the court may direct;

(3)chanroblesnad Income received by estates of deceased persons during the period of administration or settlement of the estate, and

(4)chanroblesnad Income which, in the discretion of the fiduciary, may be either distributed to the beneficiaries or accumulated.

(b)chanroblesnad Exception. The tax imposed by this Title shall not apply to employee's trust which forms part of a pension, stock bonus or profit-sharing plan of an employer for the benefit of some or all of his employees (1) if contributions are made to the trust by such employees, or employees, or both for the purpose of distributing to such employees the earnings and principal of the fund accumulated by the trust in accordance with such plan, and (2) if under the trust instrument it is impossible, at any time prior to satisfaction of all liabilities with respect to employees under the trust, for any part of the corpus on income to be (within the taxable year or thereafter) used for, or diverted to, purposes other than for the exclusive benefit of his employees: Provided, That any amount actually distributed to any employee or distributee shall be taxable to him in the year in which so distributed to the extent that it exceeds the amount contributed by such employee or distributee.

(c)chanroblesnad Computation and payment.

(1)chanroblesnad In general. The tax shall be computed upon the net income of the estate or trust and shall be paid by the fiduciary, except as provided in Section fifty-seven (relating to revocable trust) and Section fifty-eight (relating to income for the benefit of the grantor);

(2)chanroblesnad Consolidation of income of two or more trusts. Where, in the case of two or more trusts the creator of the trust in each instance is the same person and the beneficiary in each instance is the same, the net income of all the trust shall be consolidated and the tax provided in this section computed on such consolidated income, and such proportion of said tax shall be assessed and collected from each trustee which the net income of the trust administered by him bears to the consolidated income of the several trusts.

Sec. 54.chanroblesnad Net Income. The net income of the estate or trust shall be computed in the same manner and on the same basis as in the case of an individual, except that

(a)chanroblesnad There shall be allowed as a deduction in computing the net income of the estate or trust the amount of the income of the estate or trust for the taxable year which is to be distributed currently by the fiduciary to the beneficiaries, and the amount of the income collected by a guardian of an infant which is to be held or distributed as the court may direct, but the amount so allowed as a deduction shall be included in computing the net income of the beneficiaries whether distributed to them or not. Any amount allowed as a deduction under this subsection shall not be allowed as a deduction under subsection (b) of this section in the same or any succeeding taxable year.

(b)chanroblesnad In the case of income received by estate of deceased persons during the period of administration or settlement of the estate, and in the case of income which, in the discretion of the fiduciary, may be either distributed to the beneficiary or accumulated, there shall be allowed as additional deduction in computing the net income of the estate or trust the amount of the income of the estate or trust for its taxable year, which is properly paid or credited during such year to any legatee, heir or beneficiary but the amount so allowed as a deduction shall be included in computing the net income of the legatee, heir, or beneficiary.

(c)chanroblesnad In the case of a trust administered in a foreign country, the deductions mentioned in subsections (a) and (b) of this section shall not be allowed: Provided, That the amount of any income included in the return of said trust shall not be included in computing the income of the beneficiaries.

Sec. 55.chanroblesnad Exemption allowed to estates and trusts. For the purpose of the tax provided for in this Title, there shall be allowed an exemption of Six thousand pesos from the income of the estate or trust. (As amended by E.O. No. 37)

Sec. 56.chanroblesnad Revocable trusts. Where at any time the power to revest in the grantor title to any part of the corpus of the trust is vested (1) in the grantor either alone or in conjunction with any person not having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom, or (2) in any person not having a substantial adverse interest in the disposition of such part of the corpus or the income therefrom, the income of such part of the trust shall be included in computing the net income of the grantor.

Sec. 57.chanroblesnad Income for benefit of grantor. (a) Where any part of the income of a trust (1), is, or in the discretion of the grantor or of any person not having a substantial adverse interest in the disposition of such part of the income may be held or accumulated for future distribution to the grantor; or (2) may, in the discretion of the grantor or of any person not having a substantial adverse interest in the disposition of such part of income, be distributed to the grantor, or (3) is, or in the discretion of the grantor or of any person not having a substantial adverse interest in the disposition of such part of the income may be applied to the payment of premiums upon policies of insurance on the life of the grantor, such part of the income of the trust shall be included in computing the net income of the grantor.

(b)chanroblesnad As used in this section, the term "in the discretion of the grantor" means in the discretion of the grantor, either alone or in conjunction with any person not having a substantial adverse interest in the disposition of the part of the income in question.

Sec. 58.chanroblesnad Fiduciary returns. Guardians, trustees, executors, administrators, receivers, conservators, and all persons or corporations, acting in any fiduciary capacity, shall render, in duplicate, a return of the income of the person, trust or estate for whom or which they act, and be subject to all the provisions of this Title, which apply to individuals in case such person, estate, or trust has a gross income of Three thousand pesos or over during the taxable year. Such fiduciary or person filing the return for him or it, shall take oath that he has sufficient knowledge of the affairs of such person, trust, or estate to enable him to make such return and that the same, is, to the best of his knowledge and belief, true and correct, and be subject to all the provisions of this Title which apply to individuals: Provided, That a return made by or for one or two or more joint fiduciaries filed in the province where such fiduciary resides, under such regulations as the Secretary of Finance may prescribe shall be a sufficient compliance with the requirements of this section.

Sec. 59.chanroblesnad Fiduciaries indemnified against claims for taxes paid. Trustees, executors, administrators, and other fiduciaries are indemnified against the claims or demands of every beneficiary for all payments of taxes which they shall be required to make under the provisions of this Title, and they shall have credit for the amount of such payments against the beneficiary or principal in any accounting which they make as such trustees or other fiduciaries.

CHAPTER VIII
[PERSONAL HOLDING COMPANIES]

Sec. 60.chanroblesnad Collection of foreign items. All persons, corporations, duly registered general co-partnerships (compania colectivas) undertaking for profit or otherwise the collection of foreign payments of interest or dividends by means of coupons, checks, or bills of exchange shall obtain license from the Commissioner of Internal Revenue, and shall be subject to such regulations enabling the Government to obtain the information required under this Title, as the Secretary of Finance shall prescribe; and whoever knowingly undertakes to collect such payments as aforesaid without having obtained a license therefor, or without complying with such regulations, shall, for each offense, be fined in a sum not exceeding ten thousand pesos or imprisoned for a term not exceeding one year, or both.

Sec. 61.chanroblesnad Information at source as to income payments. All persons, corporations or duly registered co-partnerships (companias colectivas), in whatever capacity acting, lessees or mortgagors of real or personal property, trustees, acting in any trust capacity, executors, administrators, receivers, conservators, and employees making payment to another person, corporation, or duly registered general co-partnership (compania colectiva) of interest, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income, other than payment described in Sec. 75 (deleted and transferred) and 62, in any taxable year, or, in the case of such payments made by the Government of the Philippines, the officers or employees of the Government having information as to such payments and required to make returns in regard thereto, are authorized and required to render a true and accurate return to the Commissioner of Internal Revenue, under such rules and regulations and in such form and manner as may be prescribed by the Secretary of Finance, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payments: Provided, That such return shall be required, in the case of payments of interest upon bonds and mortgages or deeds of trust or other similar obligations of corporations, and in the case of collection of items, not payable in the Philippines, or interest upon the bonds of foreign countries and interest from the bonds and dividends from the stock of foreign corporations by persons, corporations, or duly registered general co-partnership (companias colectivas), undertaking as a matter of business or for profit or otherwise the collection of foreign payments of such interest or dividends by means of coupons or bills of exchange.

Sec. 62.chanroblesnad Return of information of brokers. Every person, corporation, or duly registered general co-partnership (compania colectivas), doing business as a broker in any exchange or board or other similar place of business shall, when required by the Commissioner of Internal Revenue, render a correct return duly verified under oath, under such regulations as the Secretary of Finance may prescribe, showing the names of customers for whom such person, corporation, or duly registered general co-partnership (compania colectiva), has transacted any business, with such details as to the profits, losses, or other information which the Commissioner may required as to each of such customers as will enable the Commissioner of Internal Revenue to determine whether all income tax due on profits or gains of such customers has been paid.

Sec. 63.chanroblesnad Returns as to formation, etc., of foreign corporations.

(a)chanroblesnad Requirements. Under regulations prescribed by the Secretary of Finance, any attorney, accountant, fiduciary, bank, trust company, financial institution, or other person, who, after the date of the enactment of this Code,ds, assists, counsels, or advises in, or with respect to, the formation, organization or reorganization of any foreign corporation, shall, within thirty days thereafter, file with the Commissioner of Internal Revenue a return.

(b)chanroblesnad Form and contents of return. Such return shall be in such form and shall set forth, under oath, in respect of each such corporation, to the full extent of the information within the possession or knowledge or under the control of the person required to file the return, such information as the Secretary of Finance shall prescribe by regulations as necessary for carrying out the provisions of this Title. Nothing in this section shall be construed to require the divulging of privileged communication between attorney and client.

Sec. 64.chanroblesnad Disposition of income tax returns; publication of lists of persons filing returns and paying taxes. After the assessment shall have been made, as provided in this Title, the return, together with any corrections thereof which may have been made by the Commissioner, shall be filed in the office of the Commissioner of Internal Revenue and shall constitute public records and be open to inspection as such upon the order of the President of the Philippines under rules and regulations to be prescribed within sixty days from the date of effectivity of this Code by the Secretary of Finance.

The Commissioner of Internal Revenue may in each year cause to be prepared and published in any newspaper and otherwise make available to public inspection upon written request and pursuant to regulations to be prescribed by the Secretary of Finance, lists containing the names and addresses of persons who have filed income tax returns with the amount of income declared and the income tax paid by each. The list of taxpayers for the preceding taxable year in each municipality or city shall be posted at the main entrance of the respective municipal building or city hall.

Sec. 65.chanroblesnad Suit to recover tax based on false or fraudulent returns. When an assessment is made in case of any list, statement, or return, which in the opinion of the Commissioner of Internal Revenue was false or fraudulent, or contained any understatement or undervaluation, no tax collected under such assessment shall be recovered by any suits unless it is proved that the said list, statement, or return was not false or fraudulent and did not contain any understatement or undervaluation; but this provision shall not apply to statements or returns made or to be made in good faith regarding annual depreciation of oil or gas wells and mines.

Sec. 66.chanroblesnad Distribution of dividends or assets by corporations. (a) Definition of dividends. The term "dividends" when used in this Title means any distribution made by a corporation to its shareholders out of its earning or profits accrued since March first, nineteen hundred and thirteen, and payable to its shareholders, whether in money or in other property.

Where a corporation distributes all of its assets incomplete liquidation or dissolution, the gain realized or loss sustained by the stockholder, whether individual or corporate, is taxable income or a deductible loss, as the case may be.

(b)chanroblesnad Stock dividend. A stock dividend representing the transfer of surplus to capital account shall not be subject to tax. However, if a corporation cancels or redeems stock issued as a dividend at such time and in such manner as to make the distribution and cancellation or redemption, in whole or in part, essentially equivalent to the distribution of a taxable dividend, the amount so distributed in redemption or cancellation of the stock shall be considered as taxable income to the extent that it represents a distribution of earnings or profits accumulated after March first, nineteen hundred and thirteen.

(c)chanroblesnad Dividends distributed are deemed made from most recently accumulated profits. Any distribution made to the shareholders or members of a corporation in the year nineteen hundred and thirty-nine or subsequent tax years, shall be deemed to have been made from the most recently accumulated profits or surplus, and shall constitute a part of the annual income of the distributee for the year in which received: Provided, That nothing herein shall be construed as taxing any earnings or profits accrued prior to March first, nineteen hundred and thirteen, but such earnings or profits may be distributed in stock dividends or otherwise, exempt from the tax, after the distribution of earnings and profits accrued since March first, nineteen hundred and thirteen, has been made.

(d)chanroblesnad Net income or a partnership deemed constructively received by partners. The income declared by a partnership for a taxable year which is subject to tax under Sec. 24 (a) of this Code, after deducting the corporate income tax imposed therein, shall be deemed to have been actually or constructively received by the partners in the same taxable year and shall be taxed to them in their individual capacity, whether actually distributed or not.

CHAPTER IX
QUARTERLY CORPORATE INCOME TAX

Annual Declaration and Quarterly Payments of Income Taxes.

Sec. 67.chanroblesnad Declaration of income tax for individuals. (a) In General. Except as otherwise provided in this Section, every individual subject to income tax under Sections 21 and 22 (a) of this Title, receiving self-employment income whether it constitutes the sole source of his income or in combination with salaries, wages and other fixed or determinable income shall make and file a declaration of his estimated income for the current taxable year on or before April 15 of the same taxable year. In general self-employment income consists of the earnings derived by the individual from the practice of profession or conduct of trade or business carried on by him as a sole proprietor or by a partnership of which he is a member. Non-resident Filipino citizens, with respect to income from without the Philippines, and non-resident aliens not engaged in trade, or business in the Philippines, are not required to render a declaration of estimated income tax. The declaration shall contain such pertinent information as the Secretary of Finance may by rules and/or regulations prescribe. An individual may make amendments of a declaration filed during the taxable year under the regulations prescribed by the Secretary of Finance.

(b)chanroblesnad Return and payment of estimated income tax by individuals. The amount of estimated income tax as defined in paragraph (c) with respect to which a declaration is required under paragraph (a) shall be paid in four installments. The first installment shall be paid at the time of the declaration and the second and third shall be paid on August 15 and November 15 of the current year, respectively. The forty installment shall be paid on or before April 15 of the following calendar year when the final income tax return is due to be filed.

(c)chanroblesnad Definition of Estimated Tax. In the case of an individual, the term "Estimated Tax" means the amount which the individual declared as income tax in his final and income tax return for the preceding taxable year, minus the sum of the credits allowed under this title, against the said tax. If, during the current taxable year, the taxpayer reasonably expects to pay a bigger income tax, he shall file an amended declaration during any interval of installment payment dates.

Sec. 68.chanroblesnad Declaration of Corporate Quarterly Income Tax. Every corporation shall file in duplicate a quarterly summary declaration of its gross income and deductions on a cumulative basis for the preceding quarter or quarters upon which the income tax, as provided in Title II of this Code shall be levied, collected and paid. The tax so computed shall be decreased by the amount of tax previously paid or assessed during the preceding quarters and shall be paid not later than sixty (60) days from the close of each of the first three (3) quarters of the taxable year, whether calendar or fiscal year.

Sec. 69.chanroblesnad Final Adjustment Return. Every corporation liable to tax under Sec. 24 shall file a final adjustment return covering the total net income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shall either:

(a)chanroblesnad Pay the excess tax still due; or

(b)chanroblesnad Be refunded the excess amount paid, as the case may be.

In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year.

Sec. 70.chanroblesnad (a) Place of filing. The quarter income tax declaration required in Sec. 68 and the final adjustment return required in Sec. 69 shall be filed with the Revenue District Officer, or the Collection Agent or duly authorized treasurer of the city or municipality having jurisdiction over the location of the principal office of the corporation filing the return or place where its main books of accounts and other data from which the return is prepared are kept.

(b)chanroblesnad Time of filing the income tax return. The corporate quarterly declaration shall be filed within (60) days following the close of each of the first three quarter of the taxable year. The final adjustment return shall be filed on or before the 15th day of April or on or before the 15th day of the 4th month following the close of the fiscal year, as the case may be.

(c)chanroblesnad Time of payment of the income tax. The income tax due on the corporate quarterly returns and the final income tax returns computed in accordance with Sec. 68 and 69 shall be paid at the time the declaration or return is filed in a manner prescribed by the Commissioner of Internal Revenue.

CHAPTER X
WITHHOLDING ON WAGES

Sec. 71.chanroblesnad Definitions. As used in this Chapter. (a) Wages. The term "wages" means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash, except that such term shall not include remuneration paid

(1)chanroblesnad For agricultural labor paid entirely in products of the farm where the labor is performed, or

(2)chanroblesnad For domestic service in a private home, or

(3)chanroblesnad For casual labor not in the course of the employer's trade or business, or

(4)chanroblesnad For services by a citizen or resident of the Philippines for a foreign government or an international organization.

If the remuneration paid by an employer to an employee for services performed during one-half or more of any payroll period of not more than thirty-one consecutive days constitutes wages, all the remuneration paid by such employer to such employee for such period shall be deemed to be wages; but if the remuneration paid by an employer to an employee for services performed during more than one-half of any such payroll period does not constitute wages, then none of the remuneration paid by such employer to such employee for such period shall be deemed to be wages.

(b)chanroblesnad Payroll period. The term "payroll period" means a period for which a payment of wages is ordinarily made to the employee by his employer, and the term "miscellaneous payroll period" means a payroll period other than a daily, weekly biweekly, semi-monthly, monthly, quarterly, semi-annual, or annual period.

(c)chanroblesnad Employee. The term, "employee" refers to any individual who is the recipient of wages and includes an officer, employee, or elected official of the Government of the Philippines or any political subdivision, agency or instrumentality thereof. The term "employee" also includes an officer of a corporation.

(d)chanroblesnad Employer. The term "employer" means the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that:

(1)chanroblesnad If the person for whom the individual performs or performed any services does not have control of the payment of the wages for such services, the term" employer" [(except for the purposes of subsection (a)] means the person having control of the payment of such wages; and

(2)chanroblesnad In the case of a person paying wages on behalf of a non-resident alien individual, foreign partnership or foreign corporation, not engaged in trade or business within the Philippines, the term "employer" [(except for the purposes of subsection (a)] means such person.

Sec. 72.chanroblesnad Income tax collected at source. (a) Requirement of withholding. Every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with regulations to be prepared by the Secretary of Finance. (As amended by E.O. No. 37)

(b)chanroblesnad Tax paid by recipient. If the employer, in violation of the provisions of this chapter, fails to deduct and withhold the tax as required under this chapter, and thereafter the tax against which such tax may be credited is paid, the tax so required to be deducted and withheld shall not be collected from the employer; but this subsection shall in no case relieve the employer from liability for any penalties or additions to the tax otherwise applicable in respect of such failure to deduct and withhold.


(c)chanroblesnad Refunds or credits. (1) Employer. When there has been an overpayment of tax under this section, refund or credit shall be made to the employer only to the extent that the amount of such overpayment was not deducted and withheld hereunder by the employer.

(2)chanroblesnad Employees. The amount deducted and withheld under this Chapter during any calendar year shall be allowed as a credit to the recipient of such income against the tax imposed under Sec. 21 (a) of this Title. Refunds and credits in cases of excessive withholding shall be granted under rules and regulations promulgated by the Secretary of Finance.

Any excess of the taxes withheld over the tax due from the taxpayer shall be returned or credited within three months from the fifteenth day of April. Refunds or credits made after such time shall earn interest at the rate of six per cent (6%) per annum starting after the lapse of the three-month period to the date the refund or credit is made.

Refunds shall be made upon warrants drawn by the Commissioner of Internal Revenue or by his duly authorized representative without the necessity of counter-signature by the Chairman, Commission on Audit or the latter's duly authorized representative as an exception to the requirement prescribed by Sec. 621 of the Revised Administrative Code. (As amended by E.O. No. 37)

(d)chanroblesnad Personal exemptions. (1) In general. Unless otherwise provided by this chapter, the personal and additional exemptions applicable under this chapter shall be determined in accordance with the main provisions of this Title.

(2)chanroblesnad Exemption certificates.

(A)chanroblesnad When to be filed. On or before the date of commencement of employment with an employer, or within ten days, from the effectivity of this Code in case of persons already employed, the employee shall furnish the employer with a signed withholding exemption certificate relating to the personal and additional exemptions to which he is entitled.

(B)chanroblesnad Change of status. In case of change of status of an employee as a result of which he would be entitled to a lesser or greater amount of exemption, the employee shall, within ten days from such change, file with the employer a new withholding exemption certificate reflecting the change. (As amended by R.A. 7497)

(C)chanroblesnad Use of certificates. The certificates filed hereunder shall be used by the employer in the determination of the amount of taxes to be withheld.

(D)chanroblesnad Failure to furnish certificate. Where an employee, in violation of this chapter, either fails or refuses to file a withholding exemption certificate the employer shall withhold the taxes prescribed under the schedule for zero exemption of the withholding tax table in subsection (a).

(e)chanroblesnad Withholding on basis of average wages. The Commissioner of Internal Revenue may, under regulations promulgated by the Secretary of Finance, authorize employers (1) to estimate the wages which will be paid to an employee in any quarter of the calendar year, (2) to determine the amount to be deducted and withheld upon each payment of wages to such employee during such quarter as if the appropriate average of the wages so estimated constituted the actual wages paid, and (3) to deduct and withhold upon any payment of wages to such employee during such quarter amount as may be required to be deducted and withheld during such quarter without regard to his subsection.

(f)chanroblesnad Husband and wife. When a husband and wife each are recipients of wages, whether from the same or from different employers, taxes to be withheld shall be determined on the following bases;

(1)chanroblesnad The husband shall be deemed the head of the family and proper claimant of the additional exemption in respect to any dependent children, unless he explicitly waives his right in favor of his wife in the withholding exemption certificate. (As amended by R.A. 7479)

(2)chanroblesnad Taxes shall be withheld from the wages of the wife in accordance with the schedule for zero exemption of the withholding tax table in subsection (a).

(g)chanroblesnad Non-resident aliens. Wages paid to non-resident alien individuals engaged in trade or business in the Philippines shall be subject to the provisions of this chapter.

(h)chanroblesnad Year-end adjustment. On or before the end of the calendar year but prior to the payment of the compensation for the last payroll period, the employer shall determine the tax due from each employee on taxable compensation income for the entire taxable year in accordance with Sec. 21(a). The different between the tax due from the employee for the entire year and the sum of taxes withheld from January to November shall either be withheld from his salary in December of the current calendar year or refunded to the employee, not later than January 25 of the succeeding year. (As added by R.A. 7497)

Sec. 73.chanroblesnad Liability for tax. (a) Employer. The employer shall be liable for the withholding and remittance of the correct amount of tax required to be deducted and withheld under this Chapter. If the employer fails to withhold and remit the correct amount of tax as required to be withheld under the provision of this Chapter, such tax shall be collected from the employer together with the penalties or additions to the tax otherwise applicable in respect of such failure to withhold and remit.

(b)chanroblesnad Employee. Where an employee fails or refused to file the withholding exemption certificate or willfully supplies false or inaccurate information thereunder, the tax otherwise to be withheld by the employer shall be collected from him including penalties or additions to the tax from the due date of remittance until the date of payment. On the other hand, excess taxes withheld made by the employer due to: (a) failure or refusal to file the withholding exemption certificate; or (b) false and inaccurate information shall not be refunded to the employee but shall be forfeited in favor of the Government. (As amended by R.A. 7497)

Sec. 74.chanroblesnad Return and payment to the Government of taxes withheld. Taxes deducted and withheld hereunder by the employer on wages of employees shall be covered by a return and paid to the collection agent of the city or municipality in which the employer has his legal residence or principal place of business, or, in case the employer is a corporation, in which the principal office is located. The return shall be filed and the payment made within twenty-five days from the close of each calendar quarter. The taxes deducted and withheld by employers shall be held in special fund in trust for the Government until the same are paid to the said collecting officers. The Commissioner of Internal Revenue may with the approval of the Secretary of Finance, require employers to pay or deposit the taxes deducted and withheld at more frequent intervals, in cases where such requirement is deemed necessary to protect the interest of the Government.

Sec. 75.chanroblesnad Return and payment in case of Government employees. If the employer is the Government of the Philippines or any political subdivision, agency or instrumentality thereof, the return of the amount deducted and withheld upon any wages shall be made by the officer or employee having control of the payment of such wages, or by any officer or employee duly designated for that purpose.

Sec. 76.chanroblesnad Statements and returns. (a) Requirements. Every employer required to deduct and withhold a tax in respect of the wages of an employee shall furnish to each such employee in respect of his employment during the calendar year, on or before January thirty-first of the succeeding year, on the day of which the last payment of wages is made, a written statement showing the wages paid by the employer to such employee during the calendar year, and the amount of the tax deducted and withheld under this Chapter in respect of such wages. The statement required to be furnished by this section in respect of any wages shall be furnished at such other times, shall contain such other information, and shall be in such form as the Secretary of Finance, may, by regulations prescribe.

(b)chanroblesnad Returns. Every employer required to deduct and withhold the taxes in respect of the wages of his employees shall, on or before January thirty-first of the succeeding year, submit to the Commissioner of Internal Revenue a return of the total amount withheld during the year accompanied by copies of the statement referred to in the preceding paragraph. This return, if made and filed in accordance with regulations with the requirements of Section seventy-one (now sixty-one) of this Title in respect of such wages.

(c)chanroblesnad Extension of time. The Commissioner of Internal Revenue, under such regulations as may be promulgated by the Secretary of Finance, may grant to any employer a reasonable extension of time to furnish and submit the statement and returns required under this section.

TITLE III. ESTATE AND DONOR'S TAXES

Sec. 77.chanroblesnad Rates of estate tax. There shall be levied assessed, collected and paid upon the transfer of the net estate as determined in accordance with Sec. 78 and 79 of every decedent, whether resident or non-resident of the Philippines, a tax based on the value of such net estate, as computed in accordance with the following schedules:

If the net estate is:
chanroblesnad Overchanroblesnad But Not chanroblesnad The Taxchanroblesnad Pluschanroblesnad Of Excess
chanroblesnad Overchanroblesnad Shall bechanroblesnad Over
chanroblesnad P200,000chanroblesnad Exempt
chanroblesnad P200,000chanroblesnad 500,000 chanroblesnad 5%chanroblesnad P200,000
chanroblesnad 500,000chanroblesnad 2,000,000chanroblesnad P15,000chanroblesnad 8%chanroblesnad 500,000
chanroblesnad 2,000,000chanroblesnad 5,000,000chanroblesnad 135,000chanroblesnad 12%chanroblesnad 2,000,000
chanroblesnad 5,000,000chanroblesnad 10,000,000chanroblesnad 495,000chanroblesnad 21%chanroblesnad 5,000,000
chanroblesnad 10,000,000chanroblesnad And Overchanroblesnad 1,545,000 chanroblesnad 35%chanroblesnad 10,000,000

(As amended by Republic Act No. 7499.)

Sec. 78.chanroblesnad Gross estate. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, whether situated; Provided, however, That in the case of a non-resident decedent who at the time of his death, was not a citizen of the Philippines, only that part of the entire gross estate which is situated in the Philippines, shall be included in his taxable estate.

(a)chanroblesnad Decedent's interest. To the extent of the interest therein of the decedent at the time of his death;

(b)chanroblesnad Transfer in contemplation of death. To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from the property, or (2) the right either alone or in conjunction with any person, to designate the person who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth.

(c)chanroblesnad Revocable transfer. (1) To the extent of any interest therein, of which the decedent has at any time made a transfer (except in case of bona fide sale for an adequate and full consideration in money or money's worth) by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (in whatever capacity exerciseable) by the decedent alone or by the decedent in conjunction with any other person (without regard to when or from what source the decedent acquired such power), to alter, amend, revoke, or terminate, or where any such power is relinquished in contemplation of the decedent's death.

(2)chanroblesnad For the purposes of this subsection the power to alter, amend or revoke shall be considered to exist on the date of the decedent's death even through the exercise of the power is subject to a precedent giving of notice or even though the alteration, amendment, or revocation takes effect only on the expiration of a stated period after the exercise of the power, whether or not on or before the date of the decedent's death notice has been given or the power has been exercised. In such cases, proper adjustment shall be made representing the interests which would have been excluded from the power if the decedent had lived, and for such purpose if the notice has not been given or the power has not been exercised on or before the date of his death, such notice shall be considered to have been given, or the power exercised, on the date of his death.

(3)chanroblesnad [The relinquishment of any such power, nor admitted or shown to have been in contemplation of the decedent's death, made within three year prior to his death without such a consideration and affecting the interest or interest (whether arising from one or more transfers or the creation of one or more trusts) of a value or aggregate value, at the time of such death, in excess of two thousand pesos, then to the extent of such excess, such relinquishment or relinquishments shall, unless shown on the contrary, be deemed to have been made in contemplation of death within the meaning of this Chapter.]

(d)chanroblesnad Property passing under general power of appointment. To the extent of any property passing under a general power of appointment exercised by the decedent (1) by will, or (2) by deed executed in contemplation of or intended to take effect in possession or enjoyment at or after his death, or (3) by deed under which he has retained for his life or any period not ascertainable without reference to his death or for any period which does not in fact end before his death (a) the possession or enjoyment of, or the right to the income from, the property, or (b) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth.

(e)chanroblesnad Proceeds of life insurance. To the extent of the amount receivable by the estate of the deceased, his executor, or administrator, as insurance under policies taken out by the decedent upon his own life, irrespective of whether or not insured retained the power of revocation, or to the extent of the amount receivable by any beneficiary designated in the policy of insurance, except when it is expressly stipulated that the designation of the beneficiary is irrevocable.

(f)chanroblesnad Prior interests. Except as other specifically provided therein, subsections (b), (c), and (e) of this section shall apply to the transfers, trusts, estate, interests, rights, powers and relinquishment of powers, as severally enumerated and described therein, whether, made, created, arising, existing, exercised, or relinquished before or after the enactment of this Code.

(g)chanroblesnad Transfers for insufficient consideration. If any one of the transfers, trusts, interests, rights, or powers enumerated and described in subsections (b), (c), and (d) of this section is made, created, exercised, or relinquished for a consideration in money or money's worth, but is not a bona fide sale for an adequate and full consideration in money or money's worth, there shall be included in the gross estate only the excess of the fair market value, at the time of death, of the property otherwise to be included on account of such transaction, over the value of the consideration received therefor by the decedent.

(h)chanroblesnad Capital of the surviving spouse. The capital of the surviving spouse of a decedent shall not for the purpose of this Chapter, be deemed a part of his or her gross estate.

Sec. 79.chanroblesnad Computation of net estate and estate tax. For the purpose of the tax imposed in this Chapter, the value of the net estate shall be determined:

(a)chanroblesnad In the case of a citizen or resident of the Philippines, by deducting from the value of the gross estate

(1)chanroblesnad Expenses, losses, indebtedness, and taxes. Such amounts

(A)chanroblesnad For actual funeral expenses or in an amount equal to five per centum of the estate, whichever is lower, but in no case to exceed P100,000;

(B)chanroblesnad For judicial expenses of the testamentary or intestate proceedings;

(C)chanroblesnad For claims against the estate: Provided, That at the time the indebtedness was incurred the debt instrument was duly notarized and, if the loan was contracted within three year before the death of the decedent, the administrator or executive shall submit a statement showing the disposition of the proceeds of the loan;

(D)chanroblesnad For the claims of the deceased against insolvent persons where the value of decedent's interest therein is included in the value of the gross estate; and

(E)chanroblesnad For unpaid mortgages upon, or any indebtedness in respect to property, where the value of decedent's interest therein, undiminished by such mortgage or indebtedness, is included in the value of the gross estate, but not including any income taxes upon income received after the death of the decedent, or property taxes not accrues before his death, or any estate tax. The deduction herein allowed in the case of claims against the estate, unpaid mortgages, or any indebtedness, shall when founded upon a promise or agreement, be limited to the extent that they were contracted bona fide and for an adequate and full consideration in money or money's worth. There shall also be deducted losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualties, or from robbery, theft, or embezzlement, when such losses are not compensated for by insurance or otherwise, and if at the time of the filing of the return such losses have not been claimed as a deduction for income tax purposes in an income tax return, and provided that such losses were incurred not later than last day for the payment of the estate tax as prescribed in subsection (a) of Sec. 84.

(2)chanroblesnad Property previously taxed. An amount equal to the value specified be low of any property forming a part of the gross estate situated in the Philippines of any person who died within five years prior to the death of the decedent, or transferred to the decedent by gift within five years prior to his death; where such property can be identified as having been received by the decedent from the donor by gift, or from such prior decedent by gift, bequest, devise, or inheritance, or which can be identified as having been acquired in exchange for property so received.

On hundred per centum of the value if the prior decedent died within one year prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death;

Eighty per centum of the value if the prior decedent died more than one year but not more than two years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death;

Sixty per cent of the value if the prior decedent died more than two years but not more than three years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death; and

Forty per centum of the value if the prior decedent died more than three years but not more than four years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death; and

Twenty per centum of the value if the prior decedent died more than four years but not more than five years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death.

These deductions shall be allowed only where a gift tax, or estate tax imposed under this Title were finally determined and paid by or on behalf of such donor, or the estate of such prior decedent, as the case may be and only in the amount finally determined as the value of such property in determining the value of the gift, or, the gross estate of such prior decedent, and only to the extent that the value of such property is included in the decedent's gross estate, and only if in determining the value of the estate of the prior decedent no deduction was allowable under paragraph (2) in respect of the property or properties given in exchange therefor. Where a deduction was allowed of any mortgage or other lien in determining the gift tax, or the estate tax of the prior decedent, which were paid in whole or in part to the decedent's death then the deduction allowable under said paragraph shall be reduced by the amount so paid. Such deduction allowable shall be reduced by an amount which bears the same ratio to the amounts allowed as deductions under paragraphs (1) and (3) of this subsection as the amount otherwise deductible under said paragraph (2) bear to the value of the decedent's estate. Where the property referred to consists of two or more items the aggregate value of such items shall be used for the purpose of computing the deduction.

(3)chanroblesnad Transfers for public use. The amount of all bequests, legacies, devises, or transfers to or for the use of the Government of the Republic of the Philippines, or any political subdivision thereof, for exclusively public purposes.

(4)chanroblesnad The family home. An amount equivalent to the current or fair market value or zonal value of the decedent's family home, whichever is higher: Provided, however, That, if the said current or fair market value or zonal value exceeds One million pesos (P1,000,000), the excess shall be subject to estate tax. As a sine qua non condition for the exemption or deduction, said family home must have been the decedent's family home as certified by the barangay captain of the locality. (As amended by Republic Act No. 7499)

(b)chanroblesnad Deductions allowed to non-resident estates. In the case of a non-resident not a citizen of the Philippines, by deducting from the value of that part of his gross estate which at the time of his death is situated in the Philippines

(1)chanroblesnad Expenses, losses, indebtedness, and taxes. That proportion of the deductions specified in paragraph (1) of subsection (a) of his section which the value of such part bears to the value of his entire gross estate wherever situated;

(2)chanroblesnad Property previously taxed. An amount equal to the value specified below of any property forming part of the gross estate situated in the Philippines of any person who died within five years prior to the death of the decedent, or transferred to the decedent by gift within five years prior to his death, where such property can be identified as having been received by the decedent from the donor by gift, or from such prior decedent by gift, bequest, devise, or inheritance, or which can be identified as having been acquired in exchange for property so received:

One hundred per centum of the value if the prior decedent died within one year prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death;

Eighty per centum of the value if the prior decedent died more than one year but not more than two years prior to the death of the decedent, or if the property was transferred to him gift within the same period prior to his death;

Sixty per centum of the value if the prior decedent died more than two years but not more than three years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death;

Forty per centum of the value if the prior decedent died more than three years but not more than four years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death; and

Twenty per centum of the value if the prior decedent died more than four years but not more than five years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death.

These deductions shall be allowed only where a gift tax, or estate tax imposed under this Title was finally determined and paid by or on behalf of such donor, or the estate of such prior decedent, as the case may be, and only in the amount finally determined as the value of such property in determining the value of the gift, or the gross estate of such prior decedent, and only to the extent that the value of such property is included in that part of the decedent's gross estate which at the time of his death is situated in the Philippines, and only if in determining the value of the net estate of the prior decedent no deduction was allowable under paragraph (2) of subsection (b) of this section, in respect of the property or properties given in exchange therefor. Where a deduction was allowed of any mortgage or other lien in determining the gift tax, or the estate tax of the prior decedent, which were paid in whole or in part prior to the decedent's death, then the deduction allowable under said paragraph shall be reduced by the amount so paid. Such deduction allowable shall be reduced by an amount which bears the same ratio to the amounts allowed as deductions under paragraphs (1) and (3) of this subsection as the amount otherwise deductible under paragraph (2) bears to the value of that part of the decedent's gross estate which at the time of his death is situated in the Philippines. Where the property referred to consists of two or more items the aggregate value of such item shall be used for the purpose of computing the deduction.

(3)chanroblesnad Transfer for public use. The amount of all bequests, legacies, devises, or transfers to or for the use of the Government of the Republic of the Philippines, or any political subdivision thereof, for exclusively public purposes.

(c)chanroblesnad Share in the conjugal property. The net share of the surviving spouse in the conjugal partnership property as diminished by the obligations properly chargeable to such property shall, for the purpose of this section, be deducted from the net estate of the decedent.

(d)chanroblesnad Miscellaneous provisions. No deduction shall be allowed in the case of a non-resident not a citizen of the Philippines unless the executor, administrator, or anyone of the heirs, as the case may be, included in the return required to be filed under Sec. 83 the value at the time of his death of that part of the gross estate of the non-resident not situated in the Philippines.

(e)chanroblesnad Tax credit for estate taxes paid to a foreign country. (1) In general. The tax imposed by this Title shall be credited with the amounts of any estate tax imposed by the authority of a foreign country.

(2)chanroblesnad Limitations on credit. The amount of the credit taken under this section shall be subject to each of the following limitations:

(A)chanroblesnad The amount of the credit in respect to the tax paid to any country shall not exceed the same proportion of the tax against which such credit is taken, which the decedent's net estate situated within such country taxable under this Title bears to his entire net estate; and

(B)chanroblesnad The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the decedent's net estate situated outside the Philippines taxable under this Title bears to his entire net estate.

Sec. 80.chanroblesnad Exemption of certain acquisitions and transmissions. The following shall not be taxed:

(a)chanroblesnad The merger of usufruct in the owner of the naked title.

(b)chanroblesnad The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicommissary.

(c)chanroblesnad The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance with the desire of the predecessor.

(d)chanroblesnad All bequests, devises, legacies or transfer to social welfare, cultural and charitable institutions, no part of the net income of which inures to the benefit of any individual: Provided, however, That not more than 30% of the said bequests, devises, legacies or transfers shall be used by such institutions for administration purposes.

Sec. 81.chanroblesnad Determination of value of the estate. (a) Usufruct. To determine the value of the right of usufruct, use or habitation, as well as that of annuity, there shall be taken into account the probable life of the beneficiary in accordance with the latest American Tropical Experience Table.

(b)chanroblesnad Properties. The estate shall be appraised at its fair market value as of the time of death. However, the appraised value of real property as of the time of death shall be whichever is the higher of

(1)chanroblesnad The fair market value as determined by the Commissioner, or

(2)chanroblesnad The fair market value as shown in the schedule of values fixed by the Provincial and City Assessors. (As amended by PD No. 1994)

Sec. 82.chanroblesnad Notice of death to be filed. In all cases of transfers subject to tax, or where, though exempt from tax, the gross value of the estate exceeds three thousand pesos, the executor, administrator, or any of the legal heirs as the case may be, within two months after the decedent's death, or within a like period after qualifying as such executor or administrator, shall give a written notice thereof to the Commissioner of Internal Revenue.

Sec. 83.chanroblesnad Return. (a) Requirements. In all cases of transfer subject to tax, or where, though exempt from tax, the gross value of the estate exceeds three thousand pesos, the executor, or administrator, or any of the legal heirs, as the case may be shall file a return under oath in duplicate, setting forth: (1) the value of the gross estate of the decedent at the time of his death, or in case of a non-resident not a citizen of the Philippines, of the part of his gross estate situated in the Philippines: (2) the deductions allowed from gross estate in determining the estate as defined in Sec. 79, (3) such part of such information as may at the time be ascertainable and such supplemental data as may be necessary to establish the correct taxes; Provided, however, That estate returns showing a gross value of fifty thousand pesos or more shall be accompanied with a statement of (1) itemized assets of the decedent with their corresponding gross value at the time of his death, or in the case of a non-resident not a citizen of the Philippines, of that part of his gross estate situated in the Philippines; (2) itemized deductions from gross estate allowed in section 79; and (3) the amount of tax due whether paid or still due and outstanding duly certified to by a certified public accountant.

(b)chanroblesnad Time for filing. For the purpose of determining the estate tax provided for in Sec. 77 of this Code, the estate tax return required under the preceding subsection (a) shall be filed within six months from the decedent's death.

A certified copy of the schedule of partition and the order of the court approving the same shall be furnished the Commissioner within thirty days after the promulgation of such order. (As amended by Republic Act No. 7499).

(c)chanroblesnad Extension of time. The Commissioner of Internal Revenue shall have authority to grant, in meritorious cases, a reasonable extension not exceeding thirty days for filing the return.

(d)chanroblesnad Place of filing. Except in cases where the Commissioner of Internal Revenue permits, the return required under subsection (a) shall be filed with the Revenue District Officer, Collection Agent or duly authorized treasurer of the city or municipality in which the decedent was domiciled at the time of his death or if there be no legal residence in the Philippines, then with the Office of the Commissioner of Internal Revenue.

Sec. 84.chanroblesnad Payment of tax. (a) Time of payment. The estate tax imposed by Sec. 77 shall be paid at the time the return is filed by the executor, administrator or the heirs.

(b)chanroblesnad Extension of time. When the Commissioner of Internal Revenue finds that the payment on the due date of the estate tax or of any part thereof would impose undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five years, in case the estate is settled though the courts or two years in case the estate is settled extrajudicially. In such case, the amount in respect of which the extension is granted shall be paid on or before the date of the expiration of the period of the extension, and the running of the statute of the limitation for assessment as provided in Sec. 203 of this Code shall be suspended for the period of any such extension.

Where the taxes are assessed by reason of negligence, intentional disregard of rules and regulations, or fraud on the part of the taxpayer, no extension will be granted by the Commissioner.

If an extension is granted, the Commissioner of Internal Revenue may require the executor, or administrator, or beneficiary, as the case may be, to furnish a bond in such amount, not exceeding double the amount of the tax and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance with the terms of the extension.

(c)chanroblesnad Liability for payment. The estate tax imposed by Sec. 77 shall be paid by the executor or administrator before delivery to any beneficiary of his distributive share of the estate. Such beneficiary shall, to the extent of his distributive share of the estate, be subsidiarily liable for the payment of such portion of the estate tax as his distributive share bears to the value of the total net estate.

For the purpose of this Chapter, the term "executor" or "administrator" means the executor or administrator of the decedent, or, if there is no executor or administrator appointed, qualified, and acting within the Philippines, then any person in actual or constructive possession of any property of the decedent.

Sec. 85.chanroblesnad Discharge of executor or administrator from personal liability. If the executor or administrator makes a written application to the Commissioner of Internal Revenue for determination of the amount of the estate tax and discharge from personal liability therefor, the Commissioner of Internal Revenue (as soon as possible, and in any event within one year after the making of such application, or, if the application is made before the return is filed, then within one year after the return is filed, but not after the expiration of the period prescribed for the assessment of the tax in Sec. 203) shall notify the executor or administrator of the amount of the tax. The executor or administrator, upon payment of the amount of which he is notified, shall be discharged from personal liability for any deficiency in the tax thereafter found to be due and shall be entitled to a receipt or writing showing such discharge.

Sec. 86.chanroblesnad Definition of deficiency. As used in this Chapter, the term "deficiency" means:

(a)chanroblesnad The amount by which the tax imposed by this Chapter exceeds the amount shown as the tax by the executor, administrator or any of the heirs upon his return; but the amount so shown on the return shall first be increased by the amounts previously assessed (or collected without assessment) as a deficiency and decreased by the amounts previously abated, refunded, or otherwise repaid in respect of such tax; or

(b)chanroblesnad If no amount is shown as the tax by executor, administrator or any of the heirs upon his return, or if no return is made by executor, administrator, or any heir, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a deficiency; but such amounts previously assessed or collected without assessment, shall first be decreased by the amounts previously abated, refunded, or otherwise repaid in respect of such tax.

Sec. 87.chanroblesnad Payment before delivery by executor or administrator. No judge shall authorize the executor or judicial administrator to deliver a distributive share to any party interested in the estate unless a certification from the Commissioner that the estate tax has been paid is shown.

Sec. 88.chanroblesnad Duties of certain officers and debtors. Registers of deeds shall not register in the registry of property and document transferring real property or real rights therein or any chattel mortgage, by way of gifts inter vivos or mortis causa, legacy or inheritance, unless a certification from the Commissioner that the tax fixed in this Title and actually due thereon had been paid is shown, and they shall immediately notify the Commissioner, Regional Director, Revenue District Officer or Collection Agent of the city or municipality where their offices are located, of the nonpayment of the tax discovered by them. Any lawyer, notary public, or any Government officer who, by reason of his ,official duties, intervene in the preparation or acknowledgment of documents regarding partition or disposal of donation inter vivos or mortis causa, legacy or inheritance, shall have the duty of furnishing the Commissioner, Regional Director, Revenue District Officer or Collection Agent of the place where he may have his principal office, with copies of such documents and any information whatsoever which may facilitate the collection of the aforementioned tax. Neither shall a debtor of the deceased pay his debts to the heirs, legatee, executor, or administrator of his creditor, unless the certification of the Commissioner that the tax fixed in this Chapter had been paid is shown; but he may pay the executor or judicial administrator without said certification if the credit is included in the inventory of the estate of the deceased.

Sec. 89.chanroblesnad Restitution of tax upon satisfaction of outstanding obligations. If, after the payment of the estate tax, new obligations of the decedent shall appear, and the persons interested shall have satisfied them by order of the court, they shall have a right to the restitution of the proportional part of the tax paid.

Sec. 90.chanroblesnad Payment of tax antecedent to the transfer of shares, bonds, or rights. There shall not be transferred to any new owner in the books of any corporation, sociedad anonima, partnership, business, or industry organized or established in the Philippines, any shares; obligations, bonds, or rights by way of gift inter vivos or mortis causa, legacy, or inheritance unless a certification from the Commissioner that the taxes fixed in this Title and due thereon have been paid is shown.

If a bank has knowledge of the death of a person who maintained a bank deposit account alone, or jointly with another, it shall not allow any withdrawal from the said deposit account, unless the Commissioner has certified that the taxes imposed thereon by this Title have been paid; Provided, however, That the administrator of the estate or any one of the heirs of the decedent may upon authorization by the Commissioner of Internal Revenue, withdraw an amount not exceeding P10,000 without the said certification. For this purpose, all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors.

CHAPTER II
DONOR'S (GIFT) TAX

Sec. 91.chanroblesnad Imposition of tax. (a) There shall be levied, assessed, collected, and paid upon the transfer by any person, resident or non-resident, of the property by gift, a tax, computed as provided in Sec. 92.

(b)chanroblesnad The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible.

Sec. 92.chanroblesnad Rates of tax payable by donor. (a) In general. The tax for each calendar year shall be computed on the basis of the total net gifts made during the calendar year in accordance with the following schedule:

If the gift is:

DONOR'S TAX
chanroblesnad Overchanroblesnad But Not chanroblesnad The tax chanroblesnad Pluschanroblesnad Of Excess
chanroblesnad Overchanroblesnad Shall Bechanroblesnad Over
chanroblesnad P50,000chanroblesnad Exempt
chanroblesnad P50,000 chanroblesnad 100,000chanroblesnad 1.5%chanroblesnad P50,000
chanroblesnad 100,000chanroblesnad 200,000chanroblesnad 750chanroblesnad 3%chanroblesnad 100,000
chanroblesnad 200,000chanroblesnad 500,000chanroblesnad 3,750chanroblesnad 5%chanroblesnad 200,000
chanroblesnad 500,000chanroblesnad 1,000,000chanroblesnad 18,750chanroblesnad 8%chanroblesnad 500,000
chanroblesnad 1,000,000chanroblesnad 3,000,000chanroblesnad 58,750chanroblesnad 10%chanroblesnad 1,000,000
chanroblesnad 3,000,000chanroblesnad 5,000,000chanroblesnad 285,750chanroblesnad 15%chanroblesnad 3,000,000
chanroblesnad 5,000,000chanroblesnad 558,750chanroblesnad 20%chanroblesnad 5,000,000

(b)chanroblesnad Tax payable by donor if donees is a stranger. When the donee or beneficiary is a stranger, the tax payable by the donor shall be ten percent (10%) of the net gifts. For the purpose of this tax, a stranger is a person who is not a:

(i)chanroblesnad Brother, sister (whether by whole or half blood), spouse, ancestor, and lineal descendant; or

(ii)chanroblesnad Relative by consanguinity in the collateral line within the fourth degree of relationship.

(c)chanroblesnad Any contribution in cash or in kind to any candidate, political party or coalition of parties for campaign purposes, shall be governed by the Election Code, as amended. (As amended by R.A. 7499)

Sec. 93.chanroblesnad Transfer for less than adequate and full consideration. Where property, other than real property referred to in Sec. 21 (e), is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the fair market value of the property exceed the value of the consideration shall, for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year. (As amended by E.O. No. 37, July 31, 1986)

Sec. 94.chanroblesnad Exemption of certain gifts. The following gifts or donations shall be exempt from the tax provided for in this Chapter:

(a)chanroblesnad In the case of gifts made by a resident:

(1)chanroblesnad Dowries or gifts made on account of marriage and before its celebration or within one year thereafter by parents to each of their legitimate, recognized natural, or adopted children to the extend of the first ten thousand pesos;

(2)chanroblesnad Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profits, or to any political subdivisions of the said Government; and

(3)chanroblesnad Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization: Provided, however, That not more than thirty per centum of said gifts shall be used by such donee for administration purposes.

For the purpose of this exemption, a non-profit educational and/or charitable corporation, institution, foundation, trust or philanthropic organization and/or research institution or organization is a school, college or university and/or charitable corporation, foundation, trust or philanthropic organization and/or research institution, or organization, incorporated as a non-stock entity, paying no dividends governed by trustees who received no compensation, and devoting all its income, whether student's fees, or gifts, donations, subsidies or other forms of philanthropy, to the accomplishment and promotion of the purposes enumerated in its articles of incorporation.

(b)chanroblesnad In the case of gifts made by a non-resident not a citizen of the Philippines:

(1)chanroblesnad Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government.

(2)chanroblesnad Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization: Provided, however, That not more than thirty per centum of said gifts shall be used by such donee for administration purposes.

(c)chanroblesnad Tax credit for donor's taxes paid to a foreign country. (1) In general. The tax imposed by this Title upon a donor who was a citizen or a resident at the time of donation shall be credited with the amount of any donor's taxes of any character and description imposed by the authority of a foreign country.

(2)chanroblesnad Limitations on credit. The amount of the credit taken under this section shall be subject to each of the following limitations:

(A)chanroblesnad The amount of the credit in respect to the tax paid to any country shall not exceed the same proportion of the tax against which such credit is taken, which the net gifts situated within such country taxable under this Title bears to his entire net gifts; and

(B)chanroblesnad The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the donor's net gifts situated outside the Philippines taxable under this Title bears to his entire net gifts.

Sec. 95.chanroblesnad Valuation of gifts made in property. If the gift is made in property, the fair market value thereof at the time of the gift shall be considered the amount of the gift. In case of real property, the provisions of paragraph two, Sec. 81 shall apply to the valuation thereof.

Sec. 96.chanroblesnad Returns. (a) Requirements. Any individual who makes any transfer by gift (except those which, under Sec. 94, are exempt from the tax provided for in this Chapter) shall, for the purpose of the said tax, make a return under oath in duplicate. The return shall set forth (1) each gift made during the calendar year which is to be included in computing net gifts; (2) the deductions claimed and allowable; (3) any previous net gifts made during the same calendar year; (4) the name of the donee; and (5) such further information as may be required by regulations made pursuant to the law.

(b)chanroblesnad Time and place of filing. The return of the donor required in this section shall be filed within thirty days after the date the gift is made and, except in cases where the Commissioner permits, the return shall be filed with the Revenue District Officer, Collection Agent or duly authorized Treasurer of the City or municipality in which the donor was domiciled at the time of the transfer or if there be no legal residence in the Philippines, then with the Office of the Commissioner of Internal Revenue.

(c)chanroblesnad Extension of time for filing. The Commissioner shall have authority to grant, in meritorious cases, a reasonable extension not exceeding thirty days for filing the return required under this section.

Sec. 97.chanroblesnad Payment of Tax. (a) Time and place of payment of tax. The donor's tax imposed by Sec. 92, shall be paid at the time the return is filed. The tax shall be paid by the donor to the Revenue District Officer, Collection Agent or duly authorized treasurer of the city or municipal in which the donor was domiciled at the time of the transfer or if there is no legal residence in the Philippines, with the Office of the Commissioner of Internal Revenue.

(b)chanroblesnad Extension of time. When the Commissioner of Internal Revenue finds that the payment on the due date of the tax or of any part of the said amount, would impose undue hardship upon the donor, the Commissioner of Internal Revenue may extend the time for payment thereof not to exceed six months from the date prescribed for the payment of the tax. In such case the amount in respect of which the extension is granted shall be paid on or before the date of the expiration of the period of the extension.

Where the tax is assessed by reason of negligence international disregard of rules and regulations, or fraud on the part of the taxpayer, no extension will be granted by the Commissioner.

If an extension is granted, the Commissioner of Internal Revenue may require the donor to furnish a bond in such amount not exceeding double the amount of the tax and with such sureties as the Commissioner deems necessary, conditioned upon the payment of the said tax in accordance with the terms of the extension.

Sec. 98.chanroblesnad Definitions. For the purposes of this Title, the terms "gross estate" and "gifts" include real and personal property, whether tangible or intangible, or mixed wherever situated: Provided, however, That where the decedent or donor was a non-resident alien at the time of his death or donation, as the case may be, his real and personal property so transferred but which are situated outside the Philippines shall not be included as part of his "gross estate" or "gross gift": Provided, further, That franchise which must be exercised in the Philippines; shares, obligations, or bonds issued by any corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws; shares, obligations, or bonds issued by any foreign corporation eighty-five per centum of the business of which is located in the Philippines; shares, obligations, or bonds issued by any foreign corporation if such shares, obligations, or bonds have acquired a business situs in the Philippines; shares or rights in any partnership business or industry established in the Philippines, shall be considered as situated in the Philippines; and Provided still further, That no tax shall be collected under this Title in respect of intangible personal property (a) if the decedent at the time of his death or the donor at the time of the donation was a citizen and resident of a foreign country which at the time of his death or donation did not impose a transfer tax of any character in respect of intangible personal property of citizens of the Philippines not residing in that foreign country or (b) if the laws of the foreign country of which the decedent or donor was a citizen and resident at the time of his death or donation allows a similar exemption from transfer or death taxes of every character or description in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country.

The term "deficiency" means (1) the amount by which the tax imposed by this Chapter exceeds the amount shown as the tax by the donor upon his return; but the amount so shown on the return shall first be increased by the amount previously assessed (or collected without assessment) as a deficiency, and decreased by the amounts previously abated, refunded, or otherwise repaid in respect of such tax; or (2) if no amount is shown as the tax by the donor, then the amount by which the tax exceeds the amounts previously assessed (or collected without assessment) as a deficiency, but such amounts previously assessed, or collected without assessment, shall first be decreased by the amounts previously abated, refunded, or otherwise repaid in respect of such tax.

TITLE IV. VALUE-ADDED TAX
CHAPTER I
IMPOSITION OF TAX

Sec. 99.chanroblesnad Persons liable. Any person who, in the course of trade or business, sells, barters or exchanges goods, renders services, or engages in similar transactions and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 100 to 102 of this Code.

Section 100.chanroblesnad Value-added tax on sale of goods. (a) Rate and base of tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods, a value-added tax equivalent to 10% of the gross selling price or gross value in money of the goods sold, bartered or exchanged such tax to be paid by the seller or transferor: Provided, That the following sales by VAT-registered persons shall be subject to 0%:

(1)chanroblesnad Export sales; and

(2)chanroblesnad Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate.

"Export Sales" means the sale and shipment or exportation of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported, or foreign currency denominated sales. "Foreign currency denominated sales", means sales to non-residents of goods assembled or manufactured in the Philippines, for delivery to residents in the Philippines and paid for in convertible foreign currency remitted through the banking system in the Philippines.

(b)chanroblesnad Transaction deemed sale. The following transactions shall be deemed sale:

(1)chanroblesnad Transfer, use, or consumption not in the course of business of goods originally intended for sale or for use in the course of business.

(2)chanroblesnad Distribution or transfer to:

(A)chanroblesnad Shareholders or investors as share in the profits of the VAT-registered person; or

(B)chanroblesnad Creditors in payment of debt.

(3)chanroblesnad Consignment of goods if actual sale is not made within 60 days following the date such goods were consigned.

(4)chanroblesnad Retirement from or cessation of business, with respect to inventories of taxable goods existing as of such retirement or cessation.

(c)chanroblesnad Changes in or cessation of status of a VAT-registered person. The tax imposed in paragraph (a) of this Section shall also apply to goods disposed of or existing as of a certain date if under circumstances to be prescribed in Regulations to be promulgated by the Secretary of Finance, the status of a person as a VAT-registered person changes or is terminated.

(d)chanroblesnad Determination of the tax. (1) Tax billed as a separate item in the invoice. If the tax is billed as a separate item in the invoice, the tax shall be based on the gross selling price, excluding the tax. "Gross selling price" means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods, excluding the value-added tax. The excise tax, if any, on such goods shall form part of the gross selling price.

(2)chanroblesnad Tax not billed separately or is billed erroneously in the invoice. In case the tax is not billed separately or is billed erroneously in the invoice, the tax shall be determined by multiplying the gross selling price, including the amount intended by the seller to cover the tax or the tax billed erroneously, by the factor 1/11 or such factor as may be prescribed by regulations in case of persons partially exempt under special laws.

(3)chanroblesnad Sales returns, allowances and sales discounts. The value of goods sold and subsequently returned or for which allowances were granted by a VAT-registered person may be deducted from the gross sales or receipts for the quarter in which a refund is made or a credit memorandum or refund is issued. Sales discounts granted and indicated in the invoice at the time of sale may be excluded from the gross sales within the same quarter.

(4)chanroblesnad Authority of the Commissioner to determine the appropriate tax base. The Commissioner shall, by regulations, determine the appropriate tax base in cases where a transaction is deemed a sale, barter or exchange of goods under paragraph (b) hereof, or where the gross selling price is unreasonably lower than the actual market value.

Section 101.chanroblesnad Value-added tax on importation of goods. (a) In general There shall be levied, assessed and collected on every importation of goods a value-added tax equipment to 10% based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, suchchanroblesnad tax to be paid by the importer prior to the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if any.

(b)chanroblesnad Transfer of goods into the Philippines by persons, entities, or agencies exempt from tax where such goods are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers, transferees or recipients shall be considered the importers thereof who shall be liable for any internal revenue tax on such importation. The tax due on such importation shall constitute a lien on the goods superior to all charges or liens on the goods, irrespective of the possessor thereof.

Section 102.chanroblesnad Value-added tax on sale of services. (a) Rate and base of tax. There shall be levied, assessed and collected, a value-added tax equivalent to 10% percent of gross receipts derived by any person engaged in the sale of services. The phrase "sale of services" means the performance of all kinds of services for other for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of personal property; lessors or distributors of cinematographic films; persons engaged in milling, processing, manufacturing or repacking goods for others; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties: Provided That the following services performed in the Philippines by VAT-registered persons shall be subject to 0%:

(1)chanroblesnad Processing manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency, inwardly remitted to the Philippines and accounted for in accordance with the rules and regulations of the Central Bank of the Philippines.

(2)chanroblesnad Services other than those mentioned in the preceding sub-paragraph, the consideration for which is paid for in acceptable foreign currency which is remitted inwardly to the Philippines and accounted for in accordance with the rules and regulations of the Central Bank of the Philippines.

(3)chanroblesnad Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero rate.

"Gross receipts" means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the service performed or to be performed for another person, excluding value-added tax.

(b)chanroblesnad Determination of the tax. (1) Tax billed as a separate item in the invoice. If the tax is billed as a separate item in the invoice, the tax shall be based on the gross receipts, excluding the tax.

(2)chanroblesnad Tax not billed separately or is billed erroneously in the invoice. If the tax is not billed separately or is billed erroneously in the invoice, the tax shall be determined by multiplying the gross receipts (including the amount intended to cover the tax or the tax billed erroneously) by 1/11.

Section 103.chanroblesnad Exempt Transactions. The following shall be exempt from the value-added tax:

(a)chanroblesnad Sale of nonfood agricultural; marine and forest products in their original state by the primary producer or the owner of the land where the same are produced.

(b)chanroblesnad Sale or importation in their original state of agricultural and marine food products; livestock and poultry of a kind generally used as, or yielding or producing food for human consumption; and breeding stock and genetic materials therefor.

Products classified under this paragraph and paragraph (a) shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing, drying, salting, smoking or stripping. Polished and/or husked rice, corn grits and raw cane sugar shall be considered in their original state for purposes of this paragraph.

(c)chanroblesnad Sale or importation of fertilizers, pesticides and herbicides; chemicals for the formulation of pesticides; seeds, seedlings and fingerlings; fish animal and poultry feeds; and soya bean and fish meals;

(d)chanroblesnad Sale or importance of petroleum products (except lubricating oil, processed gas, grease, wax and petrolatum) subject to excise tax imposed under Title VI;

(e)chanroblesnad Sale or importation of raw materials to be used by the buyer or importer himself in the manufacture of petroleum products (except lubricating oil and grease) subject to excise tax;

(f)chanroblesnad Printing, publication, importation or sale of books and any newspaper, magazine, review, or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of advertisements;

(g)chanroblesnad Importation of passenger and/or cargo vessel of more than ten thousand tons, whether coastwise or ocean-going, including engine and spare parts of said vessel, to be used by the importer himself as operator thereof;

(h)chanroblesnad Importation of personal and household effects belonging to residents of the Philippines returning from abroad and non-resident citizens coming to resettle in the Philippines: Provided, That such goods are exempt from customs duty under the Tariff and Customs Code of the Philippines;

(i)chanroblesnad Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects (except any vehicle, vessel,rcraft, machinery, other goods for use in manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle for the first time in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety days before or after their arrival, upon the production of evidence satisfactory to the Commissioner of Internal Revenue, that such persons are actually coming to settle in the Philippines and that the change of residence is bona fide;

(i)chanroblesnad Services rendered by persons subject to percentage tax under Title V;

(k)chanroblesnad Services by agricultural contract growers and milling for others of palay into rice, corn into grits and sugar cane into raw sugar;

(l)chanroblesnad Medical, dental hospital and veterinary services;

(m)chanroblesnad Educational services rendered by private educational institutions, duly accredited by the Department of Education, Culture and Sports, and those rendered by government educational institutions;

(n)chanroblesnad Sale by the artist himself of his works of art, literary works, musical compositions and similar creations, or his services performed for the production of such works;

(o)chanroblesnad Services performed as actors or actresses, talents, singers and emcees; radio and television broadcasters, choreographers; musical, radio, movie, television and stage directors;

(p)chanroblesnad Services performed as professional athletes;

(q)chanroblesnad Leasing of real property;

(r)chanroblesnad Services performed in the exercise of profession or calling (except customs brokers) subject to the occupation tax under the Local Tax Code, and professional services performed by registered general professional partnerships;

(s)chanroblesnad Services rendered by individual pursuant to an employer-employee relationship;

(t)chanroblesnad Services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia-Pacific region and do not earn or derive income from the Philippines;

(u)chanroblesnad Transactions which are exempt under special laws or international agreements to which the Philippines is a signatory;

(v)chanroblesnad Export sales by persons who are not VAT-registered; and

(w)chanroblesnad Sales and/or services performed by persons other than those mentioned in the preceding paragraphs where annual gross sales and/or receipts do not exceed the amount prescribed in regulations to be promulgated by the Secretary of Finance which shall not be less than P100,000 or higher than P500,000.

Section 104.chanroblesnad Tax Credits. (a) Creditable input tax. Any input tax on the:

(1)chanroblesnad Purchase or importation of goods:

(A)chanroblesnad For sale or for conversion into or intended to form part of a finished product for sale or for use in the course of business; or

(B)chanroblesnad For use as supplies in the course of business; or

(C)chanroblesnad For use as materials supplied in the sale of service; or

(D)chanroblesnad For use in trade or business for which deduction for depreciation is allowed under Sec. 29 (f) of this Code;

and

(2)chanroblesnad Service performed by a VAT-registered person shall be credited against the output tax payable by the VAT-registered person: Provided, That in the case of domestic purchase of goods or services, the invoice or receipt was issued therefor by a VAT-registered person in a manner prescribed in Section 108.

A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall be allowed tax credit as follows:

(A)chanroblesnad Total input tax which can be directly attributed to transactions subject to value-added tax; and

(B)chanroblesnad A ratable portion of any input tax which cannot be directly attributed to either activity.

"Input tax" means the value-added tax paid by a VAT registered person in the course of his trade or business on importation of goods or local purchases of goods or services from a VAT-registered person. It shall also include the transitional input tax determined in accordance with Section 105 of this Code and other transitional input taxes as prescribed by regulations.

In case tax exempt products of a pioneer enterprise registered with the BOI as of August 1, 1986 are sold domestically to Value-added tax registered person, the value-added tax otherwise due on such products shall also be considered as input tax creditable against his output tax payable.

The term "output tax" means the value-added tax due on the sale of taxable goods or services by any person registered or required to register under Section 107 of this Code.

(b)chanroblesnad Excess output or input tax. If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax, exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 106.

Section 105.chanroblesnad Transitional input tax credits. A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall, subject to the filing of an inventory as prescribed by regulations, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to 8% of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax.

Section 106.chanroblesnad Refunds or tax credits of input tax. (a) Export Sales. An exported who is a VAT-registered person may within two years from the date of exportation, apply for the issuance of a tax credit certificate or refund of the input tax attributable to the goods exported, to the extent that such input tax has not been applied to output tax and upon presentation of proof that the foreign exchange proceeds has been accounted for in accordance with the regulations of the Central Bank of the Philippines.

(b)chanroblesnad Zero-rated or effectively zero-rated sales. Any person, except those covered by paragraph (a) above, whose sales are zero-rated or are effectively zero-rated may, within two years after the close of the quarter when such sales were made, apply for the issuance of a tax credit certificate or refund of the input taxes attributable to such sales to the extent that such input tax has not been applied against output tax.

(c)chanroblesnad Capital goods. A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application for refund may be made only after the expiration of 2 succeeding quarters following the quarter in which the importation or local purchase was made: Provided, That a VAT-registered person who is just commencing business may apply for refund of input taxes under this paragraph not earlier than 180 days from the date of registration or actual start of business operations, whichever comes later: Provided, however, That the application is filed not later than 2 years from the dates herein prescribed.

(d)chanroblesnad Cancellation of VAT-registration. A person whose registration has been cancelled due to retirement from or cessation of business, or due to changes in or cessation of status under Section 100 (c) of this Code may, within 2 years from the date of cancellation, apply for the issuance of a tax credit certificate for any unused input tax which he may use in payment of his other internal revenue taxes.

(e)chanroblesnad Period within which refund of input taxes may be made by the Commissioner. The Commissioner shall refund input taxes within 60 days from the date the application for refund of input taxes shall be allowed unless the VAT-registered person files an application for refund within the period prescribed in paragraph (a), (b) and (c) as the case may be.

(f)chanroblesnad Manner of giving refund. Refunds shall be made upon warrants drawn by the Commissioner or by his duly authorized representative without the necessity of being counter-signed by the Chairman, Commission on Audit, the provisions of the Revised Administrative Code to the contrary notwithstanding: Provided, That refunds under this paragraph shall be subject to post audit by the Commission on Audit.

CHAPTER II
COMPLIANCE REQUIREMENTS

Section 107.chanroblesnad Registration of value added taxpayers. (a) In general. Any person subject to a value-added tax under Sections 100 and 102 of this Code shall register with the appropriate Revenue District Officer. A person who maintains a head or main office and branches in different places shall register with the revenue district office which has jurisdiction over the place where the main or head office is located.

(b)chanroblesnad Persons commencing a business. Any person who expects to realize gross sales or receipts subject to value-added tax in excess of the amount prescribed by the Secretary of Finance for the next 12-month period from the commencement of the business shall, within 30 days before the start of the said business, register with the Revenue District Officer who has jurisdiction over his principal place of business.

(c)chanroblesnad Persons becoming liable to value-added tax. Any person whose gross sales or receipts in any 12-months period exceeds the amount prescribed by regulations for exemption from value-added tax shall register within 30 days after the end of the last month of that period, and shall be liable to the value-added tax commencing from the first day of the month following his registration.

(d)chanroblesnad Optional registration of exempt person. Any person whose transactions are exempt from value-added tax under Section 103 (a), (b), (c), (f), and (w) of this Code, may apply for registration as a VAT-registered person not later than 10 days before the beginning of a taxable quarter.

A VAT-registered person who is, at same time, engaged in activities exempted under Section 103 (a), (b), (c) and (f) of this Code may register any or all of his exempt activities within the same period provided for in this paragraph.

In any case, the Commissioner may, for administrative reasons, deny any application for registration.

For purposes of this Title, any person registered in accordance with the provisions of this section shall be referred to as "VAT-registered person." Each VAT-registered person shall be assigned only one registration number.

(e)chanroblesnad Cancellation of Registration. The registration of any person who ceases to be liable to the value-added tax shall be cancelled by the Commissioner upon filing of an application for cancellation of registration. Any person who opted to be registered under paragraph (d) of this section may, under regulations of the Secretary of Finance, apply for cancellation of such registration.

Section 108.chanroblesnad Invoicing and accounting requirements for VAT-Registered persons. (a) Invoicing requirements. A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Sec. 238, the following information shall be indicated in the invoice or receipt:

(1)chanroblesnad The VAT registration number.

(2)chanroblesnad If the seller bills the tax as a separate item in the invoice:

(A)chanroblesnad The amount of gross selling price or gross receipts on which the value-added tax is based;

(B)chanroblesnad The amount of value-added tax determined by multiplying the amount of gross selling price or gross receipts by the rate of tax; and

(C)chanroblesnad The sum of (i) the gross selling price or gross receipts and (ii) the value-added tax which the purchaser pays or is obligated to pay to the vendor.

(3)chanroblesnad If the seller elects not to bill the tax as a separate item in the invoice or receipt the total amount charged against the buyer.

(b)chanroblesnad Accounting requirements. Notwithstanding the provisions of Sec. 233, all persons subject to the value-added tax under Sections 100 and 102 shall, in addition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance.

Section 109.chanroblesnad Notification requirements. (a) Change of place of business. It shall be the duty of every VAT-registered person to file a notice of change of his principal place of business or any of his branches or office. Such notification shall be filed within 15 days from the date of such change with the Revenue District Officers who have jurisdiction of his former and new place of business.

(b)chanroblesnad Other changes. Any person registered in accordance with Section 107 shall notify the Revenue District Officer of the change or termination of his status as a VAT-registered person.

Section 110.chanroblesnad Return and payment of value-added tax. (a) Where to file the return and pay the tax. Every person subject to value-added tax shall file a quarterly return of his gross sales or receipts and pay the tax due thereon to a bank duly accredited by the Commissioner located in the revenue district where such person is registered or required to be registered. However, in cases where there are no duly accredited agent banks within the city or municipality, the return shall be filed and any amount due shall be paid to any duly accredited bank within the district, or to the Revenue District Officer, Collection Agent or duly authorized Treasurer of the city or municipality where such taxpayer has his principal place of business. Only one consolidated return shall be filed by the taxpayer for all the branches and lines of business subject to value-added tax. If no tax is payable because the amount of input tax and any amount authorized to be offset against the output tax is equal to or is in excess of the output tax due on the return, the taxpayer shall file the return with the Revenue District Officer, Collection Agent or authorized municipal treasurer where the taxpayer's principal place of business is located.

(b)chanroblesnad Time for filing of return and payment of tax. The return shall be filed and the tax paid within 20 days following the end of each quarter specifically prescribed for a VAT-registered person under regulations to be promulgated by the Secretary of Finance: Provided, however, That any person whose registration is cancelled in accordance with paragraph (e) of Section 107 shall file a return within 20 days from the cancellation of such registration.

(c)chanroblesnad Initial returns. The Commissioner may prescribe an initial taxable period for any VAT-registered person for his first return, which in no case shall exceed 5 months.

Section 111.chanroblesnad Power of the Commissioner to suspend the business operations of a taxpayer. The Commissioner or his authorized representative is hereby empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations:

(a)chanroblesnad In the case of a VAT-registered person

(1)chanroblesnad Failure to issue receipts or invoices.

(2)chanroblesnad Failure to file a value-added tax return as required under Section 110.

(3)chanroblesnad Understatement of taxable sales or receipts by 30% or more of his correct taxable sales or receipt for the taxable quarter.

(b)chanroblesnad Failure of any person to register as required under Section 107.

The temporary closure of the establishment shall be for a duration of not less than five (5) days and shall be filed only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.

TITLE V. OTHER PERCENTAGE TAXES

Section 112.chanroblesnad Tax on persons exempt from value-added tax (VAT). Any person whose sales or receipts are exempt under Section 103 (w) of this Code from payment of the value-added tax and who is not a VAT-registered person shall pay a tax equivalent to two (2) percent of his gross quarterly sales ore receipts.

Section 113.chanroblesnad Hotels, motels and others. There is hereby imposed on proprietors, operators or keepers of hotels, motels, resthouses, pension houses, lodging houses and resorts, a tax equivalent to twelve per cent of their gross receipts derived from room occupancy. (As amended by PD No. 1994)

Section 114.chanroblesnad Caterer's tax. A caterer's tax is hereby imposed as follows:

(1)chanroblesnad On proprietors or operators of restaurants, refreshment parlors, and other eating places, including clubs and caterers, four (4%) per centum of their gross receipts;

(2)chanroblesnad On proprietors or operators of restaurants, bars, cafes and other eating places, including clubs where distilled spirits, fermented liquors or wines are served, four (4%) per centum of their gross receipts from the sale of food or refreshments and eight (8%) per centum of their gross receipts from sale of distilled spirits, fermented liquors or wines. Two sets of commercial invoices or receipts serially numbered in duplicate shall be separately prepared and issued, one for each sale of food or refreshment served and another for each sale of distilled spirits, fermented liquors or wines served, the originals of the invoices or receipts to be issued to the purchaser or customer;

(3)chanroblesnad On proprietors or operators of restaurants, refreshment parlors bars, cafes, and other eating places which are maintained within the premises or compound of a cockpit, cabaret, night or day club, Jai-Alai, race track, or which are accessible to patrons of such cockpit, cabaret, night or day club, Jai-Alai, race track by means of a connecting door or passage twelve (12%) per centum in the case of cockpit, cabaret, night or day club, and twenty-five (25%) per centum in the case of Jai-Alai and race track, of their gross receipts.

Where the establishments enumerated above are operated or maintained by clubs of any kind or nature (irrespective of the disposition of their net income and whether or not they cater exclusively to members or their guests), the keepers of the establishments shall pay the corresponding tax at the rates fixed above. (As amended by P.D. No. 1959)

Section 115.chanroblesnad Percentage tax on carriers and keepers of garages. Keepers of garages, cars for rent or hire driven by the lessee, transportation contractors, persons who transport passenger or freight for hire, and common carriers by land,r or water, except owners of bancas and owners of animal-drawn two wheeled vehicles, shall pay a tax equivalent to three (3%) per centum of their quarterly gross receipts.

In computing the percentage tax provided in this Section, the following shall be considered the minimum quarterly gross receipts in each particular case:

Autocalesa:
1.chanroblesnad Manila and other citieschanroblesnad P1,200,00
2.chanroblesnad Provincialchanroblesnad 600.00

Jeepney for hire
1.chanroblesnad Manila and other citieschanroblesnad P2,400.00
2.chanroblesnad Provincialchanroblesnad 1,200.00

Public utility bus
Not exceeding 30 passengerschanroblesnad P3,600.00

Exceeding 30 but not exceeding 50 passengerschanroblesnad 6,000.00

Exceeding 50 passengerschanroblesnad 7,200.00

Taxis
1.chanroblesnad Manila and other citieschanroblesnad P3,600.00

2.chanroblesnad Provincialchanroblesnad 2,400.00

Car for hire (w/chauffeur)chanroblesnad 3,000.00
Car for hire (w/out chauffeur)chanroblesnad 1,800.00

(As amended by P.D. No. 1959)

Section 116.chanroblesnad Percentage tax on dealers in securities; lending investors. Dealers in securities and lending investors shall pay a tax equivalent to six (6%) per centum of their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent of their gross income. (As amended by PD. No. 1994)

Section 117.chanroblesnad Tax on franchises. Any provision of general or special laws to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchise, upon the gross receipts from the business covered by the law granting the franchise, a tax in accordance with the schedule prescribed hereunder:

(a)chanroblesnad On electric utilities, city gas and water
chanroblesnad supplieschanroblesnad Two (2%) per cent

(b)chanroblesnad On telephone and/or telegraph systems,
chanroblesnad and radio/or broadcasting stationschanroblesnad Three (3%) per cent

(c)chanroblesnad On other franchiseschanroblesnad Five (5%) per cent

The grantee shall file the return with, and pay the tax due thereon to, the Commissioner of Internal Revenue or his duly authorized representative in accordance with the provisions of Section 125 of this Code, and the return shall be subject to audit by the Bureau of Internal Revenue, any provision of any existing law to the contrary notwithstanding. (As amended by Executive Order No. 72, Nov. 25, 1986)

Section 118.chanroblesnad Tax on overseas dispatch, message, or conversation originating from the Philippines. (a) Persons liable. There shall be collected upon every overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless and other communication equipment services, a tax of ten per centum on the amount paid for such services. The tax imposed in this Section shall be payable by the person paying for the services rendered and shall be paid to the person rendering the services who is required to collect and pay the tax within twenty (20) days after the end of each quarter.

(b)chanroblesnad Exemptions. The tax imposed by this section shall not apply to

(i)chanroblesnad Government. Amounts paid for messages transmitted by the Government of the Republic of the Philippines or any of its political subdivisions or instrumentalities.

(ii)chanroblesnad Diplomatic services. Amounts paid for message transmitted by any Embassy and consular offices of a foreign government.

(iii)chanroblesnad International organizations. Amount paid for message transmitted by a public international organization or any of its agencies based in the Philippines enjoying privileges, exemptions and immunities which the Government of the Philippines is committed to recognize pursuant to an international agreement.

(iv)chanroblesnad News services. Amount paid for messages from any newspapers, press association, radio or television newspaper broadcasting agency, or newstickers services, to any other newspaper, press association, radio or television newspaper broadcasting agency, or newsticker service or to a bona fide correspondent, which messages deal exclusively with the collection of news items for, or in dissemination of news through, public press, radio or television broadcasting, or a newsticker service furnishing a general news service similar to that of the public press.

Section 119.chanroblesnad Tax on banks and non-bank financial intermediaries. There shall be collected a tax on gross receipts derived from sources within the Philippines by all banks and non-bank financial intermediaries in accordance with the following schedule:

(a)chanroblesnad On interest, commissions and discounts from lending activities as well as income from financial leasing, on the basis of remaining maturities of instruments from which such receipts are derived.

Short-term maturity not in excess of two (2) yearchanroblesnad 5%

Medium-term maturity over two year but not
exceeding four (4) yearchanroblesnad 3%
chanroblesnadchanroblesnad Long term maturity:

(i)Over four (4) years but not exceeding
chanroblesnad seven (7) yearchanroblesnad 1%

(ii)Over seven (7) yearschanroblesnad 0%
(b)chanroblesnad On dividendschanroblesnad 0%
(c)chanroblesnad On royalties, rentals of property, real or personal,
chanroblesnad profits from exchange and all other items treated
chanroblesnad as gross income under Sec. 28 of this Codechanroblesnad 5%

Provided, however, That in case the maturity period referred to in paragraph (a) is shortened thru pretermination, then the maturity period shall be reckoned to end as of the date of pretermination for purposes of classifying the transaction as short, medium or long term and the correct rate of tax shall be applied accordingly.

Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on persons performing similar banking activities.

Section 120.chanroblesnad Tax on finance companies. There shall be collected a tax of five per centum on the gross receipt derived by all finance companies as well as other financial intermediaries not performing quasi-banking functions doing business in the Philippines from interests, discounts, and all other items treated as gross income under this Code: Provided, That interest, commissions and discounts from lending activities, as well as income from financial shall be taxed, on the basis of remaining maturities of the instruments from which such receipts are derived in accordance with the following schedule:

Short-term maturity not in excess of two (2) yearschanroblesnad 5%
Medium-term maturity over (2) years but not exceeding
chanroblesnad four (4) yearschanroblesnad 3%
Long-term maturity:
chanroblesnad (i)chanroblesnad Over four (4) years but not exceeding seven
chanroblesnadchanroblesnadchanroblesnadchanroblesnadchanroblesnad (7) yearschanroblesnad 1%
chanroblesnad (ii)chanroblesnad Over seven (7) yearschanroblesnad 0%

Provided, however, That in case the maturity period is shortened thru pretermination, then the maturity period shall be reckoned to end as of the date of pretermination for purposes of classifying the transaction as short, medium or long-term and the correct rate of tax shall be applied accordingly.

Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on persons performing similar financing activities.

Section 121.chanroblesnad Tax on insurance premium. There shall be collected from every person, company; or corporation (except purely cooperative companies or associations) doing insurance business of any sort in the Philippines a tax of five per centum (5%) of the total premium collected whether such premiums are paid in money, notes, credits or any substitute for money; but premiums refunded within six months after payment on account of rejection of risk or returned for other reason to a person insured shall not be included in the taxable receipts; nor shall any tax be paid upon reinsurance by a company that has already paid the tax; nor upon premiums collected ore received by any branch of a domestic corporation, firm or association doing business outside the Philippines on account of any life insurance of the insured who is a non-resident, if any tax on such premium is imposed by the foreign country where the branch is established nor upon premiums collected or received on account of any reinsurance, if the risk insured against covers property located outside the Philippines, or the insured, in case of personal insurance, resides outside of the Philippines, if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected; nor upon that portion of the premiums collected or received by the insurance companies on variable contracts (as defined in Sec. 232 (2) of Presidential Decree No. 612), in excess of the amounts necessary to insure the lives of the variable contract workers.

Cooperative companies or associations are such as are conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit. (As amended by PD. No. 1994)

Section 122.chanroblesnad Tax on agents of foreign insurance companies. Every fire, marine, or miscellaneous insurance agent authorized under the Insurance Code to procure policies of insurance as he may have previously been legally authorized to transact on risks located in the Philippines for companies not authorized to transact business in the Philippines shall pay a tax equal to twice the tax imposed in Section 121: Provided, That the provisions of this section shall not apply to reinsurance: Provided, however, That the provisions of this section shall not affect the right of an owner of property to apply for and obtain for himself policies in foreign companies in cases where said owner does not make use of the services of any agent, company, or corporation residing or doing business in the Philippines. In all cases where owners of property obtain insurance directly with foreign companies, it shall be the duty of said owners to report to the Insurance Commissioner and to the Commissioner of Internal Revenue each case where insurance has been so effected, and shall pay the tax of five per cent on premiums paid, in the manner required by Section 121. (As amended by E.O. No. 273)

Section 123.chanroblesnad Amusement taxes. There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-Alai, race tracks and bowling alleys, a tax equipment to:

1.chanroblesnad Eighteen per centum in the case of cockpits;

2.chanroblesnad Eighteen per centum in the case of cabarets, night or day club;

3.chanroblesnad Fifteen per centum in the case of boxing exhibitions;

4.chanroblesnad Fifteen per centum in the case of professional basketball games as envisioned in Presidential Decree No. 871. Provided, however, That the tax herein shall be in lieu of all other percentage taxes of whatever nature and description.

5.chanroblesnad Thirty per centum in the case of Jai-Alai and race tracks; and

6.chanroblesnad Fifteen per centum in the case of bowling alleys of their gross receipts, irrespective of whether or not any amount is charged or paid for admission. For the purpose of the amusement tax, the term "gross receipts" embraces all the receipts of the proprietor, lessor or operator of the amusement place. Said gross receipts also include income from television, radio and motion picture rights, if any. (A person or entity or association conducting any activity subject to the tax herein imposed shall be similarly liable for said tax with respect to such portion of the receipts derived by him or it.)

The taxes imposed herein shall be payable at the end of each quarter and it shall be the duty of the proprietor, lessee, or operator, concerned, as well as any party liable, within twenty days after the end of each quarter, to make a true and complete return of the amount of the gross receipts derived during the preceding quarter and pay the tax due thereon. [If the tax is not paid within the time prescribed above, the amount of the tax shall be increased by twenty-five per centum, the increment to be part of the tax.]

[In case of willful neglect to file the return within the period prescribed herein, or in case a false or fraudulent return is willfully made, there shall be added to the tax or to the deficiency tax, in case any payment has been made on the basis of the return before the discovery of the falsity or fraud, a surcharge of fifty per centum of its amount. The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the falsity or fraud, in which case, the amount so assessed shall be collected in the same manner as the tax.]

Section 124.chanroblesnad Tax on Winning. Every person who wins in horse races shall pay a tax equivalent to ten (10%) per cent of his winnings or "dividends", the tax to be based on the actual amount paid to him for every winning ticket after deducting the cost of the ticket: Provided, That in the case of winnings from double, forecast/quinella and trifecta bets, the tax shall be four (4%) per cent. In the case of owners of winning race horses, the tax shall be ten (10%) per cent of the prizes. (Sec. 3 of Executive Order No. 194; now deemed Sec. 124 of NIRC)

The tax herein prescribed shall be deducted from the "dividends" corresponding to each winning ticket or the "prize" of each winning race horse owner and withheld by the operator, manager, or person in charge of the horse races before paying the dividends or prizes to the persons entitled thereto. (Ibid.)

The operator, manager, or person in charge of horse races shall, within twenty (20) days from the date the tax was deducted and withheld in accordance with the second paragraph hereof, file a true and correct return with the Commission of the Bureau of Internal Revenue in the manner or form to be prescribed by the Secretary of Finance, and pay within the same period the total amount of tax so deducted and withheld. (Ibid.)

Section 125.chanroblesnad Returns and payment of percentage taxes. (a) Return of gross sales, receipts or earnings and payment of tax.

(1)chanroblesnad Persons liable to pay percentage taxes. Every person subject to the percentage taxes imposed under this Title shall file a quarterly return of the amount of his gross sales, receipts or earnings and pay the tax due thereon within 20 days after the end of each taxable quarter; Provided, That in the case a person whose VAT registration is cancelled and who becomes liable to the tax imposed in Section 112 of this Code the tax shall accrue from the date of cancellation and shall be paid in accordance with the provisions of this Section.

(2)chanroblesnad Person retiring from business. Any person retiring from a business subject to percentage tax shall notify the nearest internal revenue officer, file his return and pay the tax due thereon within twenty days after closing his business.

(3)chanroblesnad Exceptions. The Commissioner may, by regulations prescribe:

(A)chanroblesnad The time for filing the return at intervals other than the time prescribed in the preceding paragraphs for a particular class or classes of taxpayers after considering such factors as volume of sales; financial condition, adequate measures of security; and such other relevant information required to be submitted under the pertinent provisions of this Code; and

(B)chanroblesnad The manner and time of payment of percentages taxes other than as hereinabove prescribed, including a scheme of tax prepayment.

(4)chanroblesnad Determination of correct sales or receipts. When it is found that a person has failed to issue receipts or invoices, or when no return is filed, or when there is reason to believe that the books of accounts or other records do not correctly reflect the declarations made or to be made in a return required to be filed under the provisions of this Code, the Commissioner, after taking into account the sales, receipts or other taxable base of other persons engaged in similar businesses under similar situations or circumstances, or after considering other relevant information may prescribe a minimum amount of such gross receipts, sales and taxable base and such amount so prescribed shall be prima facie correct for purposes of determining the internal revenue tax liabilities of such person.

(b)chanroblesnad Where to file. Every person liable to the percentage tax under this Title may, at his option file a separate return for each branch or place of business or a consolidated return for all branches or places of business with the Revenue District Officer, Collection agent or duly authorized Treasurer of the City or Municipality where said business or principal place of business is located, as the case may be. (As amended by E.O. No. 273)

TITLE VI. EXCISE TAXES ON CERTAIN GOODS

CHAPTER I
GENERAL PROVISIONS

Section 126.chanroblesnad Goods subject to excise taxes. Excise taxes apply to goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported. The excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV.

For purposes of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of measurement shall be referred to as "specific tax" and an excise tax herein imposed and based on selling price or other specified value of the goods shall be referred to as "ad valorem tax."

Section 127.chanroblesnad Payment of excise taxes on domestic products. (a) Persons liable; time for payment. Unless otherwise especially allowed, excise taxes on domestic products shall be paid by the manufacturer or producer before removal from the place of production: Provided, That the excise tax on locally manufactured petroleum products and indigenous petroleum levied under Sections 145 and 151 (a) (4), respectively, of this Title shall be paid within 15 days from the date of removal thereof from the place of production. Should domestic products be removed from the place of production without the payment of the tax, the owner or person having possession thereof shall be liable for the tax due thereon.

(b)chanroblesnad Determination of gross selling price of goods subject to ad valorem tax. Unless otherwise provided, the price, excluding the value-added tax, at which the goods are sold at wholesale in the place of production or through their sales agents to the public shall constitute the gross selling price. If the manufacturer also sells or allows such goods to be sold at wholesale in another establishment of which he is the owner or in the profits at which he has an interest, the wholesale price in such establishment shall constitute the gross selling price. Should such price be less than the cost of manufacture plus expenses incurred until the goods are finally sold, then a proportionate margin of profit, not less than 10% of such manufacturing cost and expenses, shall be added to constitute the gross selling price.

(c)chanroblesnad Manufacturer's or producer's sworn statement. Every manufacturer or producer of goods or products subject to excise taxes shall file with the Commissioner on the date or dates designated by the latter, and as often as may be required, a sworn statement showing among other information, the different goods or products manufactured or produced and their corresponding gross selling price or market value, together with the cost of manufacture or production plus expenses incurred or to be incurred until the goods or products are finally sold.

(d)chanroblesnad Credit for excise tax on goods actually exported. When goods locally produced or manufactured are removed and actually exported without returning to the Philippines, whether so exported in their original state or as ingredients or parts of any manufactured goods or products, any excise tax paid thereon shall be credited or refunded upon submission of the proof of actual exportation and upon receipt of the corresponding foreign exchange payment: Provided, That the excise tax on mineral products, except coal and coke, imposed under Section 151, shall not be creditable or refundable even if the mineral products are actually exported. (As amended by E.O. No. 273)

Section 128.chanroblesnad Payment of excise taxes on imported articles. (a) Persons liable. Excise taxes on imported articles shall be paid by the owner or importer to the customs officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customhouse, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption.

In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies exempted from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation. The tax due on such article shall constitute a lien on the article itself, superior to all other charges or liens, irrespective of the possessor thereof.

(b)chanroblesnad Rate and basis of the excise tax on imported articles. Unless otherwise specified, imported articles shall be subject to the same rates and basis of excise taxes applicable to locally manufactured articles.

Section 129.chanroblesnad Mode of computing contents of cask of package. Every fractional part of a proof liter equal to or greater than a half liter in a cask or package containing more than one liter shall be taxed as a liter, and any smaller fractional part shall be exempt; but any package of spirits the total contents of which are less than a proof liter shall be taxed as one liter.

CHAPTER II
EXEMPTION ON CONDITIONAL TAX-FREE REMOVAL OF CERTAIN ARTICLES

Section 130.chanroblesnad Removal of wines and distilled spirits for treatment of tobacco leaf . Upon permit from the Commissioner and subject to the regulations of the Department of Finance, manufacturers of cigars and cigarettes may withdraw from bond, free of excise tax local and imported wines and distilled spirits in specific quantities and grades for use in the treatment of tobacco leaf to be used in the manufacture of cigars and cigarettes; but such wines and distilled spirits must first be suitably denatured.

Section 131.chanroblesnad Domestic denatured alcohol. Domestic alcohol of not less than one hundred eighty degrees proof (ninety percent absolute alcohol) shall when suitably denatured and rendered unfit for oral intake, be exempt from the specific tax prescribed in Section 138: Provided, however, That such denatured alcohol shall be subject to tax under Section 165 of this Code: Provided, further, That if such alcohol is to be used for motive power, it shall be taxed under Section 145 (a) (4) of this Code.

Section 132.chanroblesnad Petroleum products sold to foreign international carriers. Petroleum products sold to an international carrier for its use or consumption outside of the Philippines shall not be subject to excise taxes, Provided: That the country of said carrier exempts from similar taxes petroleum products sold to Philippines carriers.

Section 133.chanroblesnad Denaturation, withdrawal and use of denatured alcohol. Any persons who produces, withdraws, sells, transports or knowingly uses, or is in possession of denatured alcohol, or article containing denatured alcohol in violation of laws or regulations now or hereafter in force pertaining thereto shall be required to pay the corresponding tax, in addition to the penalties provided for under Title X of this Code.

Section 134.chanroblesnad Removal of spirits under bond. Spirits requiring rectification may be removed from the place of production to some other establishment for the purpose of rectification without the prepayment of the excise tax: Provided, the distiller removing such spirits and the rectifier receiving them shall file with the Commissioner their joint bond conditioned upon the payment by the rectifier of the excise tax due on the finished product: Provided, further, That in cases where alcohol has already been rectified either by original and continuous distillation or by redistillation is further re-rectified, no loss for rectification and handling shall be allowed and the rectifier thereof shall pay the specific tax due on such losses. (As amended by E.O. No. 22)

Section 135.chanroblesnad Removal of fermented liquors to bonded warehouse. Any brewer may remove or transport from his brewery or other place of manufacture to a bonded warehouse used by him exclusively for the storage or sale in bulk of fermented liquor of his own manufacture, any quantities of such fermented liquors, not less than one thousand liters at one removal, without payment of the tax thereon under a permit which shall be granted by the Commissioner. Such permit shall be affixed to every package so removed and shall be cancelled or destroyed in such manner as the Commissioner may prescribe. Thereafter, the manufacturer of such fermented liquors shall pay the tax in the same manner and under the same penalty and liability as when paid at the brewery.

Section 136.chanroblesnad Removal of damaged liquors free of tax. When any fermented liquor has become sour or otherwise damaged so as to be unfit for use as such, brewers may sell and, after securing a special permit from the Commissioner, under such conditions as may be prescribed in the regulations of the Department of Finance, remove the same without the payment of tax thereon, in cask or other packages, distinct from those ordinarily used for fermented liquors, each containing not less than one hundred seventy-five liters with a note of their contents permanently affixed thereon.

Section 137.chanroblesnad Removal of tobacco products without prepayment of tax. Products of tobacco entirely unfit for chewing or smoking may be removed free of tax for agricultural or industrial use, under such conditions as may be prescribed in the regulations of the Department of Finance. Stemmed leaf tobacco, fine-cut shorts, the refuse of fine-cut chewing tobacco, scraps, cuttings, clippings, stems or midribs, and sweepings of tobacco may be sold in bulk as raw material by one manufacturer directly to another, without payment of the tax under such conditions as may be prescribed in the regulations of the Department of Finance.

"Stemmed leaf tobacco", as herein used means leaf tobacco which has had the stem or midrib removed. The term does not include broken leaf tobacco.

CHAPTER III
EXCISE TAX ON ALCOHOL PRODUCTS

Section 138.chanroblesnad Distilled spirits. On distilled spirit, there shall be collected, subject to the provisions of Section 130 of this Code, specific taxes as follows:

(a)chanroblesnad If produced from sap of nipa, coconut, cassava, camote or buri palm or from the juice, syrup or sugar of the cane, provided such materials are produced commercially in the country where they are processed into distilled spirits, per proof liter, three pesos and twenty centavos: Provided, That if produced in a pot still or other similar primary distilling apparatus by a distiller producing not more than 100 liters, a day containing not more than fifty percent of alcohol by volume, per proof liter, one peso:

(b)chanroblesnad If produced from raw materials other than those enumerated in the preceding paragraph, per proof liter twenty five pesos; and

(c)chanroblesnad Medical preparations, flavoring extracts, and all other preparations, except toilet preparations, of which, excluding water, distilled spirits form the chief ingredient, shall be subject to the same tax as such chief ingredient.

This tax shall be proportionally increased for any strength of the spirits taxed over proof spirits, and the tax shall attach to his substance as soon as it is in existence as such, whether it be subsequently separated as pure or impure spirits, or transformed into any other substance either in the process of original production or by any subsequent process.

"Spirits or distilled spirits" is the substance known as ethyl alcohol, ethanol or spirits of wine, including all dilutions, purifications and mixtures thereof, from whatever source by whatever process produced and shall include whisky, brandy, rum, gin and vodka, and other similar products or mixtures.

"Proof spirits" is liquor containing 1/2 of its volume of alcohol of a specific gravity of seven thousand nine hundred and thirty nine ten thousands (0.7939) at fifteen degrees centigrade. A proof liter means a liter of proof spirits. (As amended by E.O. No. 273)

Section 139.chanroblesnad Wines. On wines, there shall be collected per liter of volume capacity, the following taxes:

(a)chanroblesnad Sparkling wines regardless of proof, sixteen pesos;

(b)chanroblesnad Still wines containing fourteen percent of alcohol by volume or less, one peso; and

(c)chanroblesnad Still wines containing more than twenty-five percent of alcohol by volume, four pesos;

Fortified wines containing more than twenty-five percent of alcohol by volume shall be taxed as distilled spirits. Fortified wines shall mean natural wines to which distilled spirits are added to increase their alcoholic strength. (As amended by E.O. No. 273)

Section 140.chanroblesnad Fermented liquor. There shall be levied assessed and collected an ad valorem tax equivalent to thirty-seven percent (37%) of the brewer's wholesale price, excluding the ad valorem tax imposed under this section and the value added tax imposed under Title IV, on beer, lager beer, ale, porter and other fermented liquors except tuba, basi, tapuy and similar domestic fermented liquors, but in no case shall the sum total of the ad valorem tax and value-added tax be less than P1.00 per regular 320 ml. bottle. (As amended by E.O. No. 273)

CHAPTER IV
EXCISE TAX ON TOBACCO PRODUCTS

Section 141.chanroblesnad Tobacco Products. There shall be collected a tax of seventy-five centavos on each kilogram of the following products of tobacco:

(a)chanroblesnad Tobacco twisted by hand or reduced into a condition to be consumed in any manner other than ordinary mode of drying and curing;

(b)chanroblesnad Tobacco prepared or partially prepared with or without the use of any machine or instruments or without being pressed or sweetened; and

(c)chanroblesnad Fine-cut shorts and refuse, scraps, clippings, cuttings, stems and sweepings of tobacco.

Fine-cut shorts and refuse, scraps, clippings, cutting, stems and sweepings of tobacco resulting from the handling or stripping of whole leaf tobacco may be transferred, disposed of, or otherwise sold, without prepayment of the specific tax herein provided for under such conditions as may be prescribed in the regulations promulgated by the Secretary of Finance upon recommendation of the Commissioner if the same are to be exported or to be used in the manufacture of other tobacco products on which the excise tax will eventually be paid on the finished products.

On tobacco specially prepared for chewing so as to be unsuitable for use in any other manner, on each kilogram, sixty centavos.

Section 142.chanroblesnad Cigar and cigarettes. (a) Cigars. There shall be levied, assessed and collected on cigars an ad valorem tax of five percent (5%) of the manufacturer's or importer's registered wholesale price.

(b)chanroblesnad Cigarettes packed in thirties. There shall be levied, assessed and collected on cigarettes packed in thirties an ad valorem tax of fifteen percent (15%) of the manufacturer's registered wholesale price.

(c)chanroblesnad Cigarettes packed in twenties. There shall be levied, assessed and collected on cigarette packed in twenties an ad valorem tax at the rates prescribed below based on the manufacturer's registered wholesale price:

(1)chanroblesnad On locally manufactured cigarettes bearing a foreign brand, fifty percent (50%); Provided, That this rate shall apply regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. Whenever it has to be determined whether or not a cigarette bears a foreign brand, the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern.

(2)chanroblesnad On other locally manufactured cigarettes, forty percent (40%).

Duly registered or existing brands of cigarettes packed in twenties shall not be allowed to be packed in thirties.

When the existing registered wholesale price, including tax, of cigarettes packed in twenties does not exceed P3.60 per pack, the rate for the cigarettes packed in thirties shall apply.

(d)chanroblesnad Imported cigarettes. If the cigarettes are of foreign manufacture, regardless of the contents per pack, there shall be levied, assessed and collected an ad valorem tax of sixty-five percent (65%) of the importer's wholesale price.

For purposes of this section, "manufacturer's or importer's registered wholesale price" shall include the ad valorem tax imposed in paragraphs (a), (b), (c) or (d) hereof and the amount intended to cover the value-added tax imposed under Title IV of this Code. (As amended by E.O. No. 273)

Section 143.chanroblesnad Inspection fees. For inspection made in accordance with this Chapter, there shall be collected a fee of fifty centavos for each thousand cigars or fraction thereof; ten centavos for each thousand cigarettes or fraction thereof; two centavos for each kilogram of leaf tobacco or fraction thereof, and three centavos for each kilogram or fraction thereof of scrap and other manufactured tobacco.

The inspection fee on cigars, cigarettes and other tobacco products shall be paid by the manufacturer, producer or owner within ten days after the end of each month while the inspection fee on leaf tobacco, scrap and other manufactured tobacco shall be paid immediately before removal from the establishment of the wholesaler, manufacturer, or redrying plant. In case of imported leaf tobacco and products thereof, the inspection fee shall be paid by the imported before removal from customs' custody.

[If the inspection fee is not paid within the time specified above, the amount of the fee shall be increased by twenty-five per centum, the increment to be a part of the fee.]

Fifty per centum of the tobacco inspection fee shall accrue to the Tobacco Inspection Fund created by Section 12 of Act No. 2416, as amended by Act No. 319 and fifty per centum shall accrue to the Cultural Center of the Philippines.

CHAPTER V
EXCISE TAX ON PETROLEUM PRODUCTS

Section 145.chanroblesnad Manufactured oils and other fuels. There shall be collected on refined and manufactured mineral oils and motor fuels, the following specific taxes which shall attach to the goods hereunder enumerated as soon as they are in existence as such:

(1)chanroblesnad Lubricating oils and greases including but not limited to basestock for lube oils and greases, high vacuum distillates, aromatic extracts and other similar preparations, and additives for lubricating oils and greases whether such additives are petroleum based or not per liter of volume capacity, Four pesos and fifty centavos (P4.50): Provided, however, That the specific taxes paid on the purchased feedstock (bunker) used in the manufacture of exciseable articles and forming part thereof shall be credited against the specific tax due therefrom: Provided, further, That lubricating oils and greases produced from basestocks and additives on which the specific tax has already been paid shall no longer be subject to specific tax:

(2)chanroblesnad Processed gas, per liter of volume capacity, Five centavos (P0.05);

(3)chanroblesnad Waxes and petroleum, per kilogram, Three pesos and fifty centavos (P3.50);

(4)chanroblesnad On denatured alcohol to be used for motive power, per liter of volume capacity, Five centavos (P0.05); Provided, That unless otherwise provided by special laws, if the denatured alcohol is mixed with gasoline, the specific tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For purposes of this subsection, the removal of denatured alcohol of not less than one hundred eighty degrees proof (ninety percent absolute alcohol) shall be deemed to have been removed for motive power, unless shown otherwise;

(5)chanroblesnad Naphtha, regular gasoline and other similar products of distillation, per liter of volume capacity, Two pesos and twenty-eight centavos (P2.28);

(6)chanroblesnad Premium gasoline, per liter of volume capacity, Two pesos and fifty-two centavos (2.52);

(7)chanroblesnad Aviation turbo jet fuel, per liter of volume capacity, Two pesos and thirty-eight centavos (P2.38);

(8)chanroblesnad Kerosene, per liter of volume capacity, Fifty centavos (P0.50);

(9)chanroblesnad Diesel fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, Forty-five centavos (P0.45);

(10)chanroblesnad Liquefied petroleum, per liter, zero (P0.00): Provided, that liquefied petroleum gas used for motive power shall be taxed at the equivalent rate as the specific tax on diesel fuel oil;

(11)chanroblesnad Asphalts, pert kilogram, Fifty-six centavos (P0.56);

(12)chanroblesnad Bunker fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, zero (P0.00); and

(13)chanroblesnad Naphtha, when used as a raw material in the production of petrochemical products, per liter of volume capacity, zero (P0.00): Provided, That naphtha processed by domestic refineries, if available as determined by the Energy Regulatory Board, shall be utilized before any naphtha may be imported for this purpose: Provided, further, That the by-product including fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liquified petroleum gases and similar oils having more or less the same generating power, which are produced in the processing of naphtha into petrochemical products shall be subject to the applicable specific tax specified in this section, except when such by-products are transferred to any of the local oil refineries through sale, barter, or exchange, for the purpose of further processing or blending into finished products which are subject to specific tax under this section. (As amended by R.A. 6965)

CHAPTER VI
EXCISE TAX ON MISCELLANEOUS ARTICLES

Section 146.chanroblesnad Fireworks. There shall be collected on all fireworks, a tax of thirty pesos per kilogram. "Fireworks" as herein used shall include firecrackers, sparklers, rockets and similar devices which are exploded or burned to produce noises or brilliant lighting effects.

Section 147.chanroblesnad Cinematographic films. (a) Taxable films. There shall be collected, once only, on cinematographic film, including television films or tapes in reels, regardless of which, a tax of seventy centavos per linear meter.

(b)chanroblesnad Films not subject to tax. (1) Educational films or cinematographic films used for visual education, whether manufactured in the Philippines or imported; and

(2)chanroblesnad Any tax-paid cinematographic films subsequently returned to the Philippines or on any negative film or unprinted positive film, and on any reversal film used in amateur photography of sixteen millimeters or less.

Section 148.chanroblesnad Saccharine. There shall be collected on saccharine, sodium saccharine and all its derivatives on salts of saccharine and other artificial sweetening agents a tax of sixty pesos (P60) per kilogram. (As amended by E.O. No. 273)

Section 149.chanroblesnad Automobiles. There shall be levied, assessed and collected an ad valorem tax on automobiles based on the manufacturer's or importer's selling price net of excise and value-added tax, in accordance with the following schedule:

chanroblesnad Engine displacement (in cc)
Gasolinechanroblesnad Dieselchanroblesnad Tax Rate
up to 1600chanroblesnad up to 1800chanroblesnad 15%
1601 to 2000chanroblesnad 1801 to 2300chanroblesnad 35%
2001 to 2700chanroblesnad 2301 to 3000chanroblesnad 50%
2701 or Overchanroblesnad 3001 or overchanroblesnad 100%

Provided, That in the case of imported automobiles not for sale, the tax imposed herein shall be based on the total value used by the Bureau of Customs in determining tariff and customs duties, including customs duty and all other charges, plus (10%) of the total thereof. (As amended by E.O. No. 273)

Section 150.chanroblesnad Non-essential goods. There shall be levied, assessed and collected a tax equivalent to 20% based on the wholesale price or the value of importation used by the Bureau of Customs in determining tariff and customs duties; net of excise tax and value-added tax, of the following goods:

(a)chanroblesnad All goods commonly or commercially known as jewelry, whether real or imitation pearls, precious and semi-precious stones and imitations thereof; goods made of, or ornamented, mounted or fitted with, precious metals or imitations thereof or ivory (not including surgical and dental instruments, silver-plated wares, frames or mountings for spectacles or eyeglasses, and dental gold or gold alloys and other precious metals used in filling, mounting or fitting of the teeth); opera glasses and lorgnettes. The term "precious metals" shall include platinum, gold, silver, and other metals of similar or greater value. The terms "imitations thereof" shall include platings and alloys of such metals;

(b)chanroblesnad Perfumes and toilet waters;

(c)chanroblesnad Yachts and other vessels intended for pleasure or sports. (As amended by E.O. No. 273)

CHAPTER VII
EXCISE TAX ON MINERAL PRODUCTS

Section 151.chanroblesnad Mineral Products. (a) Rates of Tax. There shall be levied assessed and collected on mineral, mineral products and quarry resources, excise tax as follows:

(1)chanroblesnad On coal and coke, a tax of ten pesos (P10.00) per metric ton.

(2)chanroblesnad On all non-metallic minerals and quarry resources, a tax of three percent (3%) based on the actual market value of the annual gross output thereof at the time of removal, in the case of those locally extracted or produced; or the value used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax in the case of importation.

(3)chanroblesnad On all metallic minerals, a tax of five percent (5%) based on the actual market value of the gross output thereof at the time of removal, in the case of those locally extracted or produced; or the value used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax, in the case of importation.

(4)chanroblesnad On indigenous petroleum, a tax of fifteen percent (15%) of the fair international market price thereof, on the first taxable sale, such tax to be paid by the buyer or purchaser within 15 days from the date of actual or constructive delivery to the said buyer or purchaser. The phrase "first taxable sale, barter, exchange or similar transaction" means the transfer of indigenous petroleum in its original state to a first taxable transferee. The fair international market price shall be determined in consultation with an appropriate government agency. (As amended by E.O. No. 311, Dec. 10, 1987)

For the purpose of this subsection, "indigenous petroleum" shall include locally extracted mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral gas and all other similar or naturally associated substances with the exception of coal, peat, bituminous shale and/or stratified mineral deposits.

(b)chanroblesnad For purposes of this section, the term

(1)chanroblesnad "Gross output" shall be interpreted as the actual market value of minerals or mineral products, or of bullion from each mine or mineral lands operated as a separate entity without any deduction from mining, milling, refining (including all expenses incurred to prepare the said minerals or mineral products in a marketable state) as well as transporting, handling, marketing, or any other expenses: Provided, That if the minerals or mineral products are sold or consigned abroad by the lessee or owner of the mine under C.I.F. terms, the actual cost of ocean freight and insurance shall be deducted: Provided, however, That in the case of mineral concentrate not traded in commodity exchanges in the Philippines or abroad such as copper concentrate, the actual market value shall be the world price quotations of the refined mineral products content thereof prevailing in the said commodity exchanges, after deducting the smelting, refining and other charges incurred in the process of converting the mineral concentrates into refined metal traded in those commodity exchanges.

(2)chanroblesnad "Minerals" shall mean all naturally occurring inorganic substances (found in nature) whether in solid, liquid, gaseous, or any intermediate state.

(3)chanroblesnad "Mineral products" shall mean things produced and prepared in a marketable state by simple treatment processes such as washing or drying, but without undergoing any chemical change or process or manufacturing by the lessee, concessionaire or owner of mineral lands.

(4)chanroblesnad "Quarry resources" shall mean any common stone or other common mineral substances as the Director of the Bureau of Mines and Geo-Sciences may declare to be quarry resources such as but not restricted to marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate: Provided, That they contain no metal or metals or other valuable minerals in economically workable quantities.

(c)chanroblesnad Time, manner and place of payment of excise tax on mineral and mineral products. Unless otherwise provided, the excise tax on minerals and mineral products shall be due and payable upon removal of the minerals or mineral products or quarry resources from the locality where mined or upon removal from customs custody in the case of importations.

Any person liable to pay the excise tax on locally produced or extracted mineral, mineral products or quarry resources shall, before removal of such products file, in duplicate, a return setting forth the quantity and the actual market value of the mineral or mineral products to be removed and pay the excise taxes due thereon to the Collection Agent, or the Treasurer of the city or municipality of the place where the mine is located except as herein below provided.

However, the output of the mine may be removed from such locality without the prepayment of such excise taxes if the lessee, owner, or operator of the mining claim shall file a bond in the form and amount and with such sureties as the Commissioner may require, conditioned upon the payment of such excise taxes. It shall be the duty of every lessee, owner or operator to make a true and complete return in duplicate setting forth the quantity and the actual market value of the minerals or mineral products or quarry resources removed during such calendar quarter, of the balance, if any, in cases where payments are made upon removal, and pay the excise taxes due thereon within 20 days after the end of such quarter to the Collection Agent, or the Treasurer of the city or municipality of the place where the mine is located.

In the case of indigenous petroleum, the tax due thereon shall be paid by the buyer or purchaser within 15 days from the date of actual or constructive delivery to the said buyer or purchaser. (As amended by E.O. No. 273)

CHAPTER VIII
ADMINISTRATIVE PROVISIONS REGULATING BUSINESS OF PERSONS DEALING IN ARTICLES SUBJECT TO EXCISE TAX

Section 152.chanroblesnad Extent of supervision over establishment producing taxable output. The Bureau of Internal Revenue has authorized to supervise establishments where articles subject to a specific tax are made or kept. The Department of Finance shall prescribe regulations as to the mode in which the process of production shall be conducted in so far as may be necessary to secure a sanitary output and to safeguard the revenue.

Section 153.chanroblesnad Records to be kept by manufacturers. Assessment based thereon. Manufacturers of article subject to specific tax shall keep such records, as are required by regulations recommended by the Commissioner and approved by the Secretary of Finance and such records, whether of raw materials received into the factory or of articles produced therein shall be deemed public and official documents for all purposes.

The records of raw materials kept by such manufacturers may be used as evidence by which to determine the amount of specific taxes due from them, and whenever the amounts of raw material received into any factory exceeds the amount of manufactured or partially manufactured products on hand and lawfully removed from the factory, plus waste removed or destroyed, and a reasonable allowance for unavoidable loss in manufacture, the Commissioner may assess and collect the tax due on the products which should have been produced from the excess.

[The specific tax due on the products as determined and assessed in accordance with this Section shall be payable upon demand or within the period specified therein. In case of failure to pay upon demand or within the period specified, the amount of tax due shall be increased by twenty-five per centum, the increment to be part of the tax and the entire amount shall be subject to interest at the rate of fourteen per centum per annum computed from date the demand has been duly served or, received or such specific date until the actual payment is made.]

Section 154.chanroblesnad Premises subject to approval by Commissioner. No person shall engage in business as a manufacturer of or dealer in articles subject to a specific tax unless the premises upon which the business is to be conducted shall have been approved by the Commissioner.

Section 155.chanroblesnad Manufacturers to provide themselves with counting or metering devices to determine production. Manufacturers of cigarettes, alcoholic products, oil products, and other articles subject to specific tax that can be similarly measured shall provide themselves with such necessary number of suitable counting or meeting devices to determine as accurately as possible the volume, quantity or number of the articles produced by them under regulations promulgated by the Secretary of Finance upon the recommendation of the Commissioner.

This requirement shall be complied with twelve months from date of approval of this Code in the case of existing firms and before commencement of operations in the case of new firms.

Section 156.chanroblesnad Labels and form of packages. All articles of domestic manufacture subject to a specific tax and all leaf tobacco shall be put up and prepared by the manufacturer or producer, when removed for sale or consumption, in such packages only and bearing such marks or brands as shall be prescribed in the regulations of the Department of Finance; and goods of similar character imported into the Philippines shall likewise be packaged and marked in such a manner as may be required.

Section 157.chanroblesnad Removal of articles after payment of tax. When the tax has been paid on articles or products subject to excise tax the same shall not thereafter be stored or permitted to remain in the distillery, distillery warehouse, bonded warehouse, or other factory or place where produced. However, upon prior permit from the Commissioner, oil refineries and/or companies may store or deposit tax paid petroleum products and commingle the same with its own products. Imported petroleum products may be allowed to be withdrawn from customs custody without the prepayment of excise tax which products may be commingled with the tax-paid or bonded products of the importer himself after securing a prior permit from the Commissioner of Internal Revenue; Provided, That withdrawals shall be taxed and accounted for on a "first-in, first out" basis. (As amended by E.O. No. 273)

Section 158.chanroblesnad Storage of goods in internal-revenue bonded warehouses. An internal-revenue bonded warehouse may be maintained in any port of entry for the storing of imported or manufactured goods which are subject to a specific tax. The taxes on such goods shall be payable only upon removal from such warehouse, and a reasonable charge shall be made for their storage therein. The Commissioner may, in his discretion, exact a bond to secure the payment of the tax on any goods so stored.

Section 159.chanroblesnad Proof of exportation; Exporters bond. Exporters of goods that would be subject to a specific tax if sold or removed for consumption in the Philippines shall submit proof of exportation satisfactory to the Commissioner, and, when the same is deemed necessary, shall be required to give a bond prior to the removal of the goods for shipment, conditioned upon the exportation of the same in good faith.

Section 160.chanroblesnad Manufacturers' and importers' bond. Manufacturers and importers of articles subject to a specific tax shall give bond in an amount equal, as nearly as can be estimated, to twenty per centum of the taxes payable by them during an average year. Such bond shall be conditioned upon the faithful compliance, during the time such business if followed, with law and regulations relating to such business and for the satisfaction of all fines and penalties imposed by this Code. No such bond shall be required in an amount exceeding five hundred thousand pesos nor be received in a sum less than ten thousand pesos.

Section 161.chanroblesnad Records to be kept by wholesale dealers. Wholesale dealers shall keep records of their purchases and sales or deliveries of articles subject to a specific tax, in such from as shall be prescribed in the regulations of the Department of Finance. These records and the entire stock of goods subject to tax shall be subject at all times to the inspection of internal-revenue officers.

Section 162.chanroblesnad Records to be kept by dealers in leaf tobacco. Dealers in leaf tobacco shall keep records of the products sold or delivered by them to other persons in such manner as may be prescribed in the regulations of the Department of Finance, such records to be at all times subject to the inspection of internal revenue officers.

Section 163.chanroblesnad Preservation of invoices and stamps. All dealers whosoever shall preserve for the period prescribed in Sec. 235 all official invoices received by them from other dealers or from manufacturers, together with the fractional parts of stamps affixed thereto, if any, and upon demand shall deliver or transmit the same to any internal revenue officer.

Section 164.chanroblesnad Information to be given by manufacturers, importers, indentors, and wholesalers of any apparatus or mechanical contrivances specially for the manufacture of articles, subject to tax and importers, indentors, manufacturers or sellers of cigarette paper in bobbins, cigarette tipping paper or cigarette filter tips. Manufacturers, indentors, wholesalers and importers of any apparatus or mechanical contrivance specially for the manufacture of articles subject to tax shall before any such apparatus or mechanical contrivance is removed from the place of manufacture or from the customhouse, give written information to the Commissioner as to the nature and capacity of the same, the time when it is to be removed, and the place for which it is destined as well as the name of the person by whom it is to be used; and such apparatus or mechanical contrivance shall not be set up nor dismantled or transferred without a permit in writing from the Commissioner.

A written permit from the Commissioner for importing, manufacturing or selling of cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette filter tips is required before any person shall engage in the importation, manufacture, or sale of the said articles. No permit to sell said articles shall be granted unless the name and address of the prospective buyer is first submitted to the Commissioner of Internal Revenue and approved by him. Records showing the stock of the said articles and the disposal thereof by sale to persons with their respective addresses as approved by the Commissioner shall be kept by the seller, and records showing stock of said articles and consumption thereof shall be kept by the buyer, subject to inspection by internal-revenue officers.

[It shall be unlawful for any person to have in his possession cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette filter tips, without the corresponding authority therefor issued by the Commissioner. Any person, importer, manufacturer of cigar and cigarette, who has in his or its stock cigarette paper in bobbins or rolls, cigarette tipping paper or cigarette filter tips and which are not supported by permit from the Commissioner shall be fined in an amount of not less than ten thousand pesos and imprisoned for not less than five years.]

Section 165.chanroblesnad Establishment of distillery warehouse. Every distiller, when so required by the Commissioner, shall provide at his own expense a warehouse, to be situated on and to constitute a part of his distillery premises and to be used only for the storage of distilled spirits of his own manufacture until the tax thereon shall have been paid; but no dwelling house shall be used for such purpose. Such warehouse, when approved by the Commissioner, is declared to be a bonded warehouse, to be known as a distillery warehouse.

Section 166.chanroblesnad Custody of distillery warehouse. Every distillery or distillery warehouse shall be in the joint custody of the revenue inspector, if one is assigned thereto, and of the proprietor thereof. It shall be kept securely locked, and shall at no time be unlocked or opened or remain unlocked or opened unless in the presence of such revenue inspector or other person who may be designated to act for him as provided by law.

Section 167.chanroblesnad Limitation on quantity of spirits removed from warehouse. No distilled spirits shall be removed from any distillery, distillery warehouse, or bonded warehouse in quantities of less than fifteen gauge liters at any one time, except bottled goods, which may be removed by the case of not less than twelve bottles.

Section 168.chanroblesnad Denaturing within premises. For purposes of this Title, the process of denaturing alcohol shall be effected only within the distillery premises where the alcohol to be denatured is produced in accordance with formulas duly approved by the Bureau of Internal Revenue and only in the presence of duly designated representatives of said bureau.

Section 169.chanroblesnad Recovery of alcohol for use in arts and industries. Manufacturers employing processes in which denatured alcohol used in arts and industries is expressed or evaporated from the articles manufactured may, under regulations to be prescribed by the Department of Finance, be permitted to recover the alcohol so used and restore it again to a condition suitable solely for use manufacturing processes.

Section 170.chanroblesnad Requirements governing rectification and compounding of liquors. Persons engaged in the rectification or compounding of liquors shall, as to the mode of conducting their business and supervision over the same, be subject to all the requirements of law applicable to distilleries: Provided, That where a rectifier makes use of spirits upon which the specific tax has been paid; no further tax shall be collected on any rectified spirits produced exclusively therefrom: And provided, further, That compounders in the manufacture of any intoxicating beverage whatever, shall not be allowed to make use of spirits upon which the specific tax has not been previously paid.

Section 171.chanroblesnad Authority of internal-revenue officer in searching for taxable articles. Any internal revenue officer may, in the discharge of his official duties enter any house, building, or place where articles subject to tax under this Title are produced or kept, or are believed by him upon reasonable grounds to be produced or kept so far as may be necessary to examine, discover, or seize the same.

He may also stop and search any vehicle or other means of transportation when upon reasonable grounds he believes that the same carries any article on which the specific tax has not been paid.

Section 172.chanroblesnad Detention of package containing taxable articles. Any revenue officer may detain any package containing or supposed to contain articles subject to specific tax when he has good reason to believe that the lawful tax has not been paid or that the package has been or is being removed in violation of law, and every such packages shall be held by such officer in a safe place until it shall be determined whether the property so detained is liable by law to be proceeded against for forfeiture; but such summary detention shall not continue in any case longer than seven days without process of law or intervention of the officer to whom such detention is to be reported.

TITLE VII. DOCUMENTARY STAMP TAX

Section 173.chanroblesnad Stamp taxes upon documents, instruments, and papers. Upon documents, instruments, and papers, and upon acceptances, assignments, sales, and transfers of the obligation, right, or property incident thereto, there shall be levied, collected and paid for, and in respect of the transaction so had or accomplished, the corresponding documentary stamp taxes prescribed in the following sections of this Title, by the person making, signing, issuing, accepting, or transferring the same, and at the same time such act is done or transaction has: Provided, That whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax. (As amended by PD No. 1994.)

Section 174.chanroblesnad Stamp tax on bonds, debentures, and certificates of indebtedness. On all bonds, debentures, and certificates of indebtedness issued by any association, company, or corporation, there shall be collected a documentary stamp tax of one peso on each two hundred pesos, or fractional part thereof, of the face value of such documents.

Section 175.chanroblesnad Stamp tax on original issue of certificates of stock. On every original issue, whether on organization, reorganization or for any lawful purpose, of certificates of stock by any association, company, or corporations, there shall be collected a documentary stamp tax of one peso and seventy centavos on each two hundred pesos, or fractional part thereof, of the par value of such certificates: Provided, That in the case, of the original issue of stock without par value the amount of the documentary stamp tax herein prescribed shall be based upon the actual consideration received by the association, company, or corporation for the issuance of such stock, and in the case of stock dividends on the actual value represented by each share.

Section 176.chanroblesnad Stamp tax on sale, agreements to sell, memoranda of sales, deliveries or transfer of bonds, due-bills, certificates of obligation, or shares or certificates of stock. On all sales, or agreements to sell, or memoranda of sales, or deliveries, or transfer of bonds, due-bills, certificates of obligation, or shares or certificates of stock in any association, company or corporation, or transfer of such securities by assignment in blank, or by delivery, or by any paper or agreement, or memorandum or other evidences of transfer or sale whether entitling the holder in any manner to the benefit of such bonds, due-bills, certificate of obligation or stock, or to secure the future payment of money, or for the future transfer of any bond, due-bill, certificates of obligation or stock, or to secure the future payment of money, or for the future transfer of any bond, due-bill, certificates of obligation or stock, there shall be collected a documentary stamp tax of fifty centavos on each two hundred pesos, or fractional part thereof, of the par value of such bond, due-bill, certificates of obligation or stock: Provided, That only one tax shall be collected on each sale or transfer of stock or securities from one person to another, regardless of whether or not a certificate of stock or obligation is issued, indorsed, or delivered in pursuance of such sale or transfer: and provided, further, That in the case of stock without par value the amount of the documentary stamp tax herein prescribed shall be equivalent to twenty-five per centum of the documentary stamp tax paid upon the original issue of said stock.

Section 177.chanroblesnad Stamp tax on bonds, debentures, certificates of stock or indebtedness issued in foreign countries. On all bonds, debentures, certificates of stock, or certificates of indebtedness issued in any foreign country, there shall be collected from the person selling or transferring the same in the Philippines, such tax as is required by law or similar instruments when issued, sold, or transferred in the Philippines.

Section 178.chanroblesnad Stamp tax on certificates of profits or interests in property or accumulations. On all certificates of profits, or any certificate or memorandum showing interest in the property or accumulations of any association, company, or corporation, and on all transfers of such certificates or memoranda, there shall be collected a documentary stamp tax of twenty centavos on each two hundred pesos, or fractional part thereof, of the face value of such certificate or memorandum.

Section 179.chanroblesnad Stamp tax on bank checks, draft, certificates of deposit not bearing interest, and other instruments. On each bank check, draft, or certificate of deposit not drawing interest, or order for the payment of any sum of money drawn upon or issued by any bank, trust company, or any person or persons, companies or corporations, at sight or on demand,chanroblesnad there shall be collected a documentary stamp tax of twenty centavos.

Section 180.chanroblesnad Stamp tax on promissory notes, bills of exchanges, drafts, certificates of deposit bearing interest and others not payable on sight or demand. On all bills of exchange (between point within the Philippines), draft or certificates of deposits drawing interest, or orders for the payment of any sum of money otherwise than at sight or on demand, or on all promissory notes, whether negotiable or non-negotiable, except bank notes issued for circulation, and on each renewal of any such note, there shall be collected a documentary stamp tax of twenty centavos on each two hundred pesos, or fractional part thereof, of the face value of any such bill of exchange, draft, certificate of deposit, or note.

Section 181.chanroblesnad Stamp tax upon acceptance of bills of exchange and others. Upon any acceptance or payment of any bill of exchange or order for the payment of money purporting to be drawn in a foreign country but payable in the Philippines, there shall be collected a documentary stamp tax of thirty centavos on each two hundred pesos, or fractional part thereof, of the face value of any such bill of exchange, or order, or the Philippine equipment of such value, if expressed in foreign country.

Section 182.chanroblesnad Stamp tax on foreign bills of exchange and letters of credit. On all foreign bills of exchange and letters of credit (including orders, by telegraph or otherwise, for the payment of money issued by express or steamship companies or by person or persons) drawn in but payable out of the Philippines in a set of three or more according to the custom of merchants and bankers, there shall be collected a documentary stamp tax of thirty centavos on each two hundred pesos, or fractional part thereof, of the face value of such bill of exchange or letter of credit, or the Philippine equivalent of such face value, if expressed in foreign country.

Section 183.chanroblesnad Stamp tax on life insurance policies. On all policies of insurance or other instruments by whatever name the same may be called, whereby any insurance shall be made or renewed upon only life or lives there shall be collected a documentary stamp tax of fifty centavos on each two hundred pesos or fractional part thereof, of the amount issued by any such policy.

Section 184.chanroblesnad Stamp tax on policies of insurance upon property. On all policies of insurance or other instruments by whatever name the same may be called, by which insurance shall be made or renewed upon property of any description, including rents or profits, against peril by sea or on inland waters, or by fire or lightning, there shall be collected a documentary stamp tax of thirty centavos on each four pesos, or fractional part thereof, of the amount of premium charged: Provided, however, That no documentary stamp tax shall be collected on reinsurance risks under any reinsurance agreement is effected or recorded.

Section 185.chanroblesnad Stamp tax on fidelity bonds and other insurance policies. On all policies of insurance or bonds or obligations of the nature of indemnity for loss, damage, or liability made or renewed by any person, association, company or corporation transacting the business of accident, fidelity, employer's liability, plate, glass, steam boiler, burglar elevator, automatic sprinkler, or other branch of insurance (except life, marine, inland, and fire insurance), and all bonds, undertakings, or recognizances, conditioned for the performance of the duties of any office or position, for the doing or not doing of anything therein specified, and on all obligations guaranteeing the validity or legality of any bonds or other obligations issued by any province, city, municipality, or other public body or organization, and on all obligations guaranteeing the title to any real estate, or guaranteeing any mercantile credits, which may be made or renewed by any such person, company or corporation, there shall be collected a documentary stamp tax of thirty centavos on each four pesos, or fractional part thereof of the premium charged.

Section 186.chanroblesnad Stamp tax on policies of annuities. On all policies of annuities, or other instruments by whether name the same may be called, whereby an annuity may be made, transferred, or redeemed, there shall be collected a documentary stamp tax of one peso on each two hundred pesos, or fractional part thereof, of the capital of the annuity, or should this be unknown, then on each two hundred pesos, or fractional part thereof, of thirty-three and one-third times the annual income.

Section 187.chanroblesnad Stamp tax on indemnity bonds. On all bonds for indemnifying any person, firm or corporation who shall become bound or engaged as surety for the payment of any sum of money or for the due execution or performance of the duties of any office or position or to account for money received by virtue thereof, and on all other bonds of any description, except such as may be required in legal proceedings, or are otherwise provided for herein, there shall be collected a documentary stamp tax of three pesos and fifty centavos.

Section 188.chanroblesnad Stamp tax on certificates. On each certificates of damage or otherwise, and on every other certificate or document issued by any customs officer, marine surveyor, or other person acting as such, and on each certificate issued by a notary public, and on each certificate of any description required by law or by rules or regulations of a public office, or which is issued for the purpose of giving information, or establishing proof of a fact, and not otherwise specified herein, there shall be collected a documentary stamp tax of three pesos.

Section 189.chanroblesnad Stamp tax on warehouse receipts. On each warehouse receipt for property held in storage in a public or private warehouse or yard for any other persons than the proprietor of such warehouse or yard, there shall be collected a documentary stamp tax of one peso and fifty centavos: Provided, That no tax shall be collected on each warehouse receipt issued to any one person in any one calendar month covering property the value of which does not exceed two hundred pesos. (As amended by P.D. No. 1994)

Section 190.chanroblesnad Stamp tax on Jai-Alai or horse race tickets. On each Jai-Alai or horse race tickets, there shall be collected a documentary stamp tax of twenty centavos: Provided, That if the cost of the tickets exceeds one peso, an additional tax of twenty centavos on every one peso of fractional part thereof shall be collected.

Section 191.chanroblesnad Stamp tax on bills of lading or receipts. On each set of bills of lading or receipt (except charter party) for any goods, merchandise, or effects shipped from one port or plate in the Philippines to another port or place in the Philippines (except on ferries across rivers), or to any foreign port, three shall be collected a documentary stamp tax of fifty centavos, if the value of such goods exceeds P100 and does not exceed P1,000; one peso, if the value exceeds P1,000 and does not exceed P10,000; three pesos if the value exceeds P10,000; Provided however, That freight tickets covering goods, merchandise or effects carried as accompanied baggage of passengers on land and water carriers primarily engaged in the transportation of passengers are hereby exempt.

Section 192.chanroblesnad Stamp tax on proxies. On each proxy for voting at any election for officers of any company or association, or for any other purpose, except proxies issued affecting the affairs of associations or corporations organized for religious, charitable, or literary purposes, there shall be collected a documentary stamp tax of two pesos and fifty centavos.

Section 193.chanroblesnad Stamp tax on powers of attorney. On each power of attorney to perform any act whatsoever, except acts connected with the collection of claims due from or accruing to the Government of the Republic of the Philippines, or the government of any province, city or municipality, there shall be collected a documentary stamp tax of two pesos: Provided, however, That on each power of attorney which authorizes another to administer, sell, lease, or otherwise dispose of the property of a principal, there shall be collected a documentary stamp tax of three pesos.

Section 194.chanroblesnad Stamp tax on leases and other hiring agreements. On each lease, agreement, memorandum, or contract for hire, use or rent of any lands or tenements, or portions thereof, there shall be collected a documentary stamp of three pesos for each year of the term of said contracts or agreement.

Section 195.chanroblesnad Stamp tax on mortgages, pledges, and deeds of trust. On every mortgage or pledge of lands, estate, or property, real or personal, heritable or movable, whatsoever, where the same shall be made as a security for the payment of any definite and certain sum of money lent at the time or previously due and owing or forborne to be paid being payable, and on any conveyance of land, estate, or property whatsoever, in trust or to be sold, or otherwise converted into money which shall be and intended only as security, either by express stipulation or otherwise, there shall be collected a documentary stamp tax the following rates:

(a)chanroblesnad When the amount secured does not exceed five thousand pesos, ten pesos.

(b)chanroblesnad On each five thousand pesos, or fractional part thereof in excess of five thousand pesos, an additional tax of five pesos.

On any mortgage, pledge, or deed of trust, where the same shall be made as a security for the payment of a fluctuating account or future advances without fixed limit, the documentary stamp tax on such mortgage, pledge or deed of trust shall be computed on the amount actually loaned or given at time of the execution of the mortgage, pledge, or deed of trust. However, if subsequent advances are made on such mortgage, pledge or deed of trust, additional documentary stamp tax shall be paid which shall be computed on the basis of the amount advanced or loaned at the rates specified above: Provided, however, That if the full amount of the loan or credit, granted under the mortgage, pledge or deed of trust is specified in such mortgage, pledge or deed of trust, the documentary stamp tax prescribed in this section shall be paid and computed on the full amount of the loan or credit granted.

Section 196.chanroblesnad Stamp tax on deeds of sale and conveyance of real
property. On all conveyances, deeds, instruments, or writings, other than grants, patents, or original certificates of adjudication issued by the Government, whereby any lands, tenements or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to the purchaser, or purchasers, or to any person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax at the following rates:

(a)chanroblesnad When the consideration, or value received or contracted to be paid for such realty, after making proper allowance of any encumbrance, does not exceed one thousand pesos, ten pesos.

(b)chanroblesnad For each additional one thousand pesos, or fractional part thereof in excess of one thousand pesos of such consideration or value, ten pesos.

When it appears that the amount of the documentary stamp tax payable hereunder has been reduced by an incorrect statement, of the consideration in any conveyance, deed, instrument, or writing subject to such tax the Commissioner, provincial or city treasurer, or other revenue officer shall from the assessment rolls or other reliable source of information, assess the property of its true market value and collect the proper tax thereon.

Section 197.chanroblesnad Stamp tax on charter parties and similar instruments. On every charter party, contract, or agreement for the charter of any ship, vessel, or steamer, or any letter or memorandum or other writing between the captain, master, or owner, or other person acting as agent of any ship, vessel, or steamer and any other person or persons for or relating to the charter of any such ship, vessel, or steamer, and on any renewal or transfer of such charter, contract, agreement, letter or memorandum, there shall be collected a documentary stamp tax at the following rates:

(a)chanroblesnad If the registered gross tonnage of the ship, vessel, or steamer does not exceed three hundred tons, and the duration of the charter or contract does not exceed six months, one hundred pesos; and for each month of fraction of a month in excess of six months, an additional tax of twenty pesos shall be paid.

(b)chanroblesnad If the registered gross tonnage exceeds three hundred tons and does not exceed six hundred tons, and the duration of the charter or contract does not exceed six months, two hundred pesos; and for each month or fraction of a month in excess of six months, an additional tax of forty pesos shall be paid.

(c)chanroblesnad If the registered gross tonnage exceeds six hundred tons and the duration of the charter or contract does not exceed six months, three hundred pesos; and for each month or fraction of a month in excess of six months, an additional tax of fifty four pesos shall be paid.

Section 198.chanroblesnad Stamp tax on assignments and renewals of certain instruments. Upon each and every assignment or transfer of any mortgage, lease or policy of insurance, or the renewal or continuance of any agreement, contract, charter, or any evidence of obligation or indebtedness by altering or otherwise, there shall be levied, collected and paid a documentary stamp tax, at the same rate as that imposed on the original instrument.

Section 199.chanroblesnad Documents and papers not subject to stamp tax. The provisions of Section 173 to the contrary notwithstanding, the following instruments, documents, and papers shall be exempt from the documentary stamp tax:

(1)chanroblesnad Policies of insurance or annuities made or granted by a fraternal or beneficiary society, order, association, or cooperative company, operated on the lodge system or local cooperation plan and organized and conducted solely by the members thereof for the exclusive benefit of each member and not for profit.

(2)chanroblesnad Certificates of oaths administered to any government official in his official capacity or of acknowledgment by any government official in the performance of his official duties, written appearance in any court by any government official, in his official capacity; certificates of the administration of oaths to any person as to the authenticity of any paper required to be filed in court by any person or party thereto, whether the proceedings be civil or criminal; papers and documents filed in courts by or for the national, provincial, city, or municipal governments; affidavits of poor persons for the purpose of proving poverty; statements and other compulsory information required of persons of corporations by the rules and regulations of the national, provincial, city or municipal governments exclusively for statistical purposes and which are wholly for the use of or for the use or benefit of the person filing them; certified copies and the bureau or office in which they are filed, and not at the instance or for the use or benefit of the person filing them; certified copies and other certificates placed upon documents, instruments, and papers for the national, provincial, city or municipal governments, made at the instance and for the sole use of some other branch of the national, provincial, city or municipal governments; and certificates of the assessed value of lands, not exceeding two hundred pesos in value assessed, furnished by provincial, city, or municipal treasurer to applicants for registration of title to land. (As amended by PD No. 1994)

Sec. 200.chanroblesnad Payment of documentary stamp tax. Cancellation of stamp. Documentary stamp taxes shall be paid by the purchase and affixture of documentary stamps to the document or instrument taxed or to such other paper as may be indicated by law or regulations as the proper recipient of the stamp, and by the subsequent cancellation to be accomplished by writing, stamping or perforating the date of the cancellation across the face of each stamp in such manner that part of the writing, impression, or perforation shall be on the stamp itself and part on the paper to which it is attached: Provided, That if the cancellation is accomplished by writing or by stamping the date of cancellation, a hole sufficiently large to be visible to the naked eye shall be punched, cut or perforated on both the stamp and the document either by the use of a hand punch, knife, perforating machines, scissors, or any other cutting instrument; but if the cancellation is accomplished by perforating the date of cancellation, no other hole need be made on the stamp.

In appropriate cases, and in the discretion of the Commissioner, documentary stamps may be imprinted on certain documents upon payment of the face value of such stamps, in which case the imprinted stamps need not be cancelled as indicated in the preceding paragraph.

When the evidence of sale or transfer is shown only on the books of the company, the stamp shall be affixed to such books; and in case of the issuance of certificates of stock or other securities the stamp shall be affixed to the stub or duplicate to the kept in the office of the person or company issuing such certificates, securities, or tickets; and in case the change of ownership is by transfer of certificates the stamp shall be affixed to the certificates; and in case of an agreement to sell, or when the transfer is by delivery of the certificate assigned in blank, there shall be made and delivered by the seller to the buyer a bill or memorandum of such sale to which the stamp shall be affixed; and every such bill or memorandum of sale, or agreement to sell, shall show the date thereof, the name of the seller and/or of the purchaser, the amount of the sale, and the matter or thing to which it refers: Provided, That where the sale is effected through a broker, the memorandum of sale herein required shall be made and delivered by said broker: And provided, further, That for the purpose of this section a notice of sale to the vendor commonly known as "confirmation slip", shall be considered as bill or memorandum of sale.

Sec. 201.chanroblesnad Effect of failure of stamp taxable document. An instrument, document, or paper which is required by law to be stamped and which has been signed, issued, accepted, or transferred without being duly stamped, shall not be recorded, nor shall it or any copy thereof or any record of transfer of the same be admitted or used in evidence in any court until the requisite stamps shall have been affixed thereto and cancelled.

No notary public or other officer authorized to administer oaths shall add his jurat or acknowledgment to any document subject to documentary stamp tax unless the proper documentary stamps are affixed thereto and cancelled.

TITLE VIII. REMEDIES

CHAPTER I
PERIOD OF LIMITATION IN GENERAL AND COMPROMISE

Sec. 202.chanroblesnad Final deed to purchaser. In case the taxpayer shall not redeem the property as herein provided, the Revenue District Officer shall, as grantor, execute a deed conveying the purchaser so much of the property as has been sold, free from all liens of any kind whatsoever, and the deed shall succinctly recite all the proceedings upon which the validity of the sale depends.

Sec. 203.chanroblesnad Period of limitation upon assessment and collection. Except as provided in the succeeding section, internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three-year period shall be counted from the day the return was filed. For the purposes of this section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day. (As amended by B.P. Blg. 700)

Sec. 204.chanroblesnad Authority of the Commissioner to compromise, abate, and refund/credit taxes. The Commissioner may

(1)chanroblesnad Compromise the payment of any internal revenue tax when

(a)chanroblesnad A reasonable doubt as to the validity of the claim against the taxpayer exists; or

(b)chanroblesnad The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.

(2)chanroblesnad Abate or cancel a tax liability, when

(a)chanroblesnad The tax or any portion thereof appears to be unjustly or excessively assessed; or

(b)chanroblesnad The administration and collection costs involved do not justify the collection of the amount due.

All criminal violation may be compromised except; (a) those already filed in court, and (b) those involving fraud.

The Commissioner of Internal Revenue may delegate his power to compromise internal revenue cases, to the Deputy Commissioners and the Regional Directors, subject to such limitations and restrictions as may be imposed under rules and regulations to be promulgated for the purpose.

(3)chanroblesnad Credit refund taxes erroneously or illegally received, penalties imposed without authority, refund the value of internal revenue stamps when they are returned in goods condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two year after the payment of the tax or penalty.

CHAPTER II
CIVIL REMEDIES FOR COLLECTION OF TAXES

Sec. 205.chanroblesnad Remedies for the collection of delinquent taxes. The civil remedies for the collection of internal revenue taxes, fees, or charges, and any increment thereto resulting from delinquency shall be (a) by distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real property and interest in or rights to real property; and (b) by civil or criminal action. Either of these remedies or both simultaneously may be pursued in the discretion of the authorities charged with the collection of such taxes: Provided, however, That the remedies of distraint and levy shall not be availed of where the amount of tax involved is not more than one hundred pesos.

The judgment in the criminal case shall not only impose the penalty but shall also order payment of the taxes subject of the criminal case as finally decided by the Commissioner.

The Bureau of Internal Revenue shall advance the amounts needed to defray costs of collection by means of civil or criminal action, including the preservation or transportation of personal property distrained and the advertisement and sale thereof as well as of real property and improvements thereon.

Sec. 206.chanroblesnad Constructive distraint of the property of a taxpayer. To safeguard the interest of the Government, the Commissioner may place under constructive distraint the property of a delinquent taxpayer or any taxpayer who, in his opinion, is retiring from any business subject to tax, or intends to leave the Philippines, or remove his property therefrom, or hide or conceal his property, or perform any act tending to obstruct the proceedings for collecting the tax due or which may be due from him.

The constructive distraint of personal property shall be effected by requiring the taxpayer or any person having possession or control of such property to sign a receipt covering the property distrained and obligate himself to preserve the same intact and unaltered and not to dispose of the same in any manner whatever without the express authority of the Commissioner.

In case the taxpayer or the person having the possession and control of the property sought to be placed under constructive distraint refuses or fails to sign the receipt herein referred to, the revenue officer effecting the constructive distraint shall proceed to prepare a list of such property and in the presence of two witnesses leave a copy thereof in the premises where the property distrained is located, after which the said property shall be deemed to have been placed under constructive distraint.

Sec. 207.chanroblesnad Distraint of personal property. The remedy by distraint shall proceed as follows: Upon the failure of the person owing any delinquent tax or delinquent revenue to pay the same, at the time required, the Revenue District Officer, if the amount involved does not exceed five thousand pesos; the Revenue Regional Director, if the amount involved is more than five thousand pesos but does not exceed twenty thousand pesos; and the Commissioner, if the amount involved exceeds twenty thousand pesos shall seize and distraint not earlier than three months nor later than six months from receipt of demand any goods, chattels, or effects, and the personal property, including stocks and other securities, debts, credits, bank account, and interest in and rights to personal property, of such in sufficient quantity to satisfy the tax, or charge, together with any increment thereto incident to delinquency, and the expenses of the distraint and the cost of the subsequent sale.

A report on any distraint shall, within ten days from receipt of the warrant, be submitted by the distraining officer to the Revenue District Officer, to the Revenue Regional Director and to the Commissioner.

Sec. 208.chanroblesnad Mode of procedure. The officer levying the distraint shall make or cause to be made an account of the goods, chattels, effects, or other personal property distrained, a copy of which, signed by himself, shall be left either with the owner or person from whose possession such goods, chattels, or effects. or other personal property were taken, or at the dwelling or place of business of such person and with someone of suitable age and discretion, to which list shall be added a statement of the sum demanded and note of the time and place of sale.

Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon the taxpayer and upon the president, manager, treasurer, or other responsible officer of the corporation, company or association which issued the said stocks or securities.

Debts and credits shall be distrained by leaving with the person owing the debts or having in his possession or under his control such credits, or with his agent, a copy of the warrant of distraint. The warrant of distraint shall be sufficient authority to the person owing the debts or having in his possession or under his control any credits belonging to the taxpayer to pay to the Commissioner the amount of such debts or credits.

Bank accounts shall be garnished by serving a warrant of garnishment upon the taxpayer and upon the president, manage, treasurer, or other responsible officer of the bank. Upon receipt of the warrant of garnishment, the bank shall turn over to the Commissioner so much of the bank accounts as may be sufficient to satisfy the claim of the Government.

Sec. 209.chanroblesnad Sale of property distrained and disposition of proceeds. The officer levying the distraint shall forthwith cause a notification to be exhibited in not less than two public places in the municipality or city where the distraint is made, specifying the time and place of sale and the articles distrained. The time of sale shall not be less than twenty days after notice to the owner or possessor of the property as above specified and the publication or posting of such notice. One place for the posting of such notice shall be at the office of the mayor of the city or municipality in which the property is distrained.

At the time and place fixed in such notice the said officer shall sell the goods, chattels, or effects, or other personal property, including-stocks and other securities so distrained, at public auction, to the highest bidder for cash, or with the approval of the Commissioner, through duly licensed produce or stock exchanges.

In the case of stocks and other securities, the officer making the sale shall execute a bill of sale which he will deliver to the buyer, and a copy thereof furnished the corporation, company, or association which issued the stocks or other securities. Upon receipt of the copy of the bill of sale, the corporation, company, or association shall make the corresponding entry in its books, transfer the stocks or other securities sold in the name of the buyer, and issue, if required to do so, the corresponding certificate of stock or other securities.

Any residue over above what is required to pay the entire claim, including expenses, shall be returned to the owner of the property sold. The expenses chargeable upon each seizure and sale shall embrace only the actual expenses of seizure and preservation of the property pending the sale, and no charge shall be imposed for the services of the local internal revenue officer or his deputy.

Sec. 210.chanroblesnad Release of distrained property upon payment prior to sale. If at any time prior to the consummation of the sale all proper charges are paid to the officer conducting the sale, the goods or effects distrained shall be restored to the owner.

Sec. 211.chanroblesnad Report of sale to Bureau of Internal Revenue. Within two days after the sale the office making the same shall make a report of his proceedings in writing to the Commissioner and shall himself preserve a copy of such report as an official record.

Sec. 212.chanroblesnad Purchase by Government at sale upon distraint. When the amount bid for the property under distraint is not equal to the amount of the tax or is very much less than the actual market value of the articles offered for sale, the Commissioner or his deputy may purchase the same in behalf of the National Government for the amount of taxes, penalties, and costs due thereon.

Property so purchased may be resold by the Commissioner or his deputy, subject to the regulations of the Secretary of Finance, the net proceeds to be remitted into the National Treasury and accounted for as internal revenue.

Sec. 213.chanroblesnad Levy on real estate. After the expiration of the time required to pay the delinquent tax or delinquent revenue as prescribed in Sec. 207, real property may be levied upon before, simultaneously or after the distraint of personal property belonging to the delinquent. To this end, any internal revenue officer designated by the Revenue District Officer, or the Revenue Regional Director or the Commissioner, as the case may be, shall prepare a duly authenticated certificate showing the name of the taxpayer and the amounts of the tax and penalty due from him. Said certificate shall operate with the force of legal execution throughout the Philippines. Levy shall be effected by writing upon said certificate a description of the property upon which levy is made. At the same time, written notice of the levy shall be mailed to or served upon the Register of Deeds of the province or city where the property is located and upon the delinquent taxpayer, or, if he be absent from the Philippines, to his agent or the manager of the business in respect to which the liability arose, or, if there be none, to the occupant of the property in question.

In case the levy on real property is not issued before or simultaneously with the warrant of distraint on personal property and the personal property of the taxpayer is not sufficient to satisfy his tax delinquency, the Revenue District Officer, Regional Director or Commissioner, as the case may be, shall within thirty days after execution of the distraint, proceed with the levy on the taxpayer's real property.

A report on any levy shall, within ten days after receipt of the warrant, be submitted by the levying officer to the District Revenue Officer, the Revenue Regional Director, and to the Commissioner.

Sec. 214.chanroblesnad Advertisement and sale. Within twenty days after levy, the officer conducting the proceedings shall proceed to advertise the property or a usable portion thereof as may be necessary to satisfy the claim and costs of sale; and such advertisement shall cover a period of at least thirty days. It shall be effectuated by posting a notice at the main entrance of the municipal building or city hall and in a public and conspicuous place in the barrio or district in which the real estate lies and by publication once a week for three weeks in a newspaper of general circulation in the municipality or city where the property is located. The advertisement shall contain a statement of the amount of taxes and penalties so due and the time and place of sale, the name of the taxpayer against whom taxes are levied, and a short description of the property to be sold. At any time before the day fixed for the sale, the taxpayer may discontinue all proceedings by paying the taxes, penalties and interest. If he does not do so, the sale shall proceed and shall be held either at the main entrance of the municipal building or city hall, or on the premises to be sold, as the officer conducting the proceedings shall determine and as the notice of sale shall specify.

Within five days after the sale a return by the distraining or levying officer of the proceedings shall be entered upon the records of the Collection Agent, the Revenue District Officer, the Revenue Regional Director, and the Commissioner. The collection agent, in consultation with the Revenue District Officer, shall then make out and deliver to thechanroblesnad purchaser a certificate from his records, showing the proceedings of the sale, describing the properly sold, stating the name of the purchaser and setting out the exact amount of all taxes, penalties and interest: Provided, however, That in case the proceeds of the sale exceeds the claim and cost of sale, the excess shall be turned over to the owner of the property.

The collection agent, upon approval by the Revenue District Officer may out of his collection, advance an amount sufficient to defray the costs of collection by means of the summary remedies provided for in this Code, including the preservation or transportation in case of personal property, and the advertisement and subsequent sale, both in cases of personal and real property including improvements founds on the latter. In his monthly collection reports, such advances shall be reflected and supported by receipts.

Sec. 215.chanroblesnad Redemption of property sold. Within one year from the date of sale, the delinquent taxpayer, or any one for him, shall have the right of paying to the Revenue District Officer the amount of the public taxes, penalties, and interests thereon from the date of delinquency to the date of sale, together with interest on said purchase price at the rate of fifteen per centum per annum from the date of purchase to the date of redemption, and such payment shall entitle the person paying to the delivery of the certificate issued to the purchaser and a certificate from the said Revenue District Officer that he has thus redeemed the property, and the Revenue District Officer shall forthwith pay over to the purchaser the amount by which such property has thus been redeemed, and said property thereafter shall be free from the lien of such taxes and penalties.

The owner shall not, however, be deprived of the possession of the said property and shall be entitled to the rents and other income thereof until the expiration of the time allowed for its redemption.

Sec. 216.chanroblesnad Forfeiture to Government for want of bidder. In case there is no bidder for real property exposed for sale as hereinabove provided or if the highest bid is for an amount insufficient to pay the taxes, penalties, and costs, the internal revenue officer conducting the sale shall declare the property forfeited to the Government in satisfaction of the claim in question and within two days thereafter shall make a return of his proceedings and the forfeiture which shall be spread upon the records of his office. It shall be the duty of the Register of Deeds concerned upon registration with his Office of any such declaration of forfeiture to transfer the title of the property forfeited to the government without the necessity of an order from a competent Court.

Within one year from the date of such forfeiture the taxpayer, or any one for him, may redeem said property by paying to the Commissioner or the latter's Collection Agent the full amount of the taxes and penalties, together with interest thereon and the cost of sale; but if the property be not thus redeemed, the forfeiture shall become absolute.

Sec. 217.chanroblesnad Resale of real estate taken for taxes. The Commissioner shall have charge of any real estate obtained by the Government of the Philippines in payment or satisfaction of taxes, penalties, or costs arising under this Code or in compromise or adjustment of any claim therefor; and said Commissioner may upon the giving of not less than twenty days notice sell and dispose of the same at public auction, or, with the prior approval of the Secretary Head, may dispose of the same at private sale. In either case the proceeds of the sale shall be deposited in the National Treasury, and an accounting of the same be rendered to the Chairman of the Commission on Audit.

Sec. 218.chanroblesnad Further distraint or levy. The remedy by distraint of personal property and levy on realty may be repeated if necessary until the full amount due, including all expenses, is collected.

Sec. 219.chanroblesnad Injunction not available to restrain collection of tax. No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee, or charge imposed by this Code.

Sec. 220.chanroblesnad Nature and extent of tax lien. If any person, corporation, partnership, joint-account (cuenta en participacion), association, or insurance company liable to pay an internal revenue tax, neglects or refuses to pay the same after demand, the amount shall be a lien in favor of the Government of the Philippines from the time when the assessment was made by the Commissioner until paid, with interest, penalties, and costs that may accrue in addition thereto upon all property and rights to property belonging to the taxpayer: Provided, That this lien shall not be valid against any mortgagee, purchaser, or judgment creditor until notice of such lien shall be filed by the Commissioner in the Office of the Register of Deeds of the province or city where the property of the taxpayer is situated or located.

Sec. 221.chanroblesnad Form and mode of proceeding in actions arising under this Code. Civil and criminal actions and proceedings instituted in behalf of the Government under the authority of this Code or other law enforced by the Bureau of Internal Revenue shall be brought in the name of the Government of the Philippines and shall be conducted by the provincial or city fiscal, or the Solicitor-General, or by the legal officers of the Bureau of Internal Revenue deputized by the Secretary of Justice, but no civil and criminal actions for the recovery of taxes or the enforcement of any fine, penalty or forfeiture under this Code shall be begun without the approval of the Commissioner.

Sec. 222.chanroblesnad Remedy for enforcement of statutory penal provisions. The remedy for enforcement of statutory penalties of all sorts shall be by criminal or civil action, as the particular situation may require, subject to the approval of the Commissioner.

Sec. 223.chanroblesnad Exceptions as to period of limitation of assessment and collection of taxes. (a) In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time within ten years after the discovery of the falsity, fraud, or omission: Provided, That in a fraud assessment which has become final and executory, the fact of fraud shall be judicially taken cognizance of in the city or criminal action for the collection thereof.

(b)chanroblesnad If before the expiration of the time prescribed in the preceding section for the assessment of the tax, both the Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement made before the expiration of the period previously agreed upon.

(c)chanroblesnad Any internal revenue tax which has been assessed within the period of limitation above-prescribed may be collected by distraint or levy or by a proceeding in court within three years following the assessment of the tax.

(d)chanroblesnad Any internal revenue tax which has been assessed within the period agreed upon as provided in paragraph (b) hereinabove may be collected by distraint or levy or by a proceeding in court within the period agreed upon in writing before the expiration of the three-year period. The period so agreed upon may be extended by subsequent written agreements made before the expiration of the period previously agreed upon.

(e)chanroblesnad Provided, however, That nothing in the immediately preceding section and paragraph (a) hereof shall be construed to authorize the examination and investigation or inquiry into any tax returns filed in accordance with the provisions of any tax amnesty law or decree. (As amended by BP Blg. 700)

Sec. 224.chanroblesnad Suspension of running of statute. The running of the statute of limitation provided in Sec. 203 and 223 on the making of assessment and the beginning of distraint or levy or a proceeding in court for collection, in respect of any deficiency, shall be suspended for the period during which the Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in court and for sixty days thereafter; when the taxpayer requests for a reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the return filed upon which a tax is being assessed or collected: Provided, That, if the taxpayer inform the Commissioner of any change in address, the running of the statute of limitations will not be suspended; when the warrant of distraint and levy is duly served upon the taxpayer, his authorized representative, or a members of his household with sufficient discretion, and no property could be located; and when the taxpayer is out of the Philippines.

Sec. 225.chanroblesnad Remedy for enforcement of forfeitures. The forfeiture of chattels and removable fixtures of any sort shall be enforced by the seizure and sale, or destruction, of the specific forfeited property. The forfeiture of real property shall be enforced by a judgment of condemnation and sale in a legal action or proceeding, civil or criminal, as the case may require.

Sec. 226.chanroblesnad When property to be sold or destroyed. Sales of forfeited chattels and removable fixtures shall be effected, so for as practicable, in the same manner and under the same condition as the public notice and the time and manner of sale as are prescribed for sales of personal property distrained for the non-payment of taxes.

Distilled spirits, liquors, cigars, cigarettes, other manufactured products of tobacco, and all apparatus used in or about the illicit production of such articles may, upon forfeiture, be destroyed by order of the Commissioner, when the sale of the same for consumption or use would be injurious to the public health or prejudicial to the enforcement of the law.

All other articles subject to specific tax, which have been manufactured or removed in violation of this Code, as well as dies for the printing or making of internal revenue stamps and labels which are in imitation of or purport to be lawful stamps, or labels may, upon forfeiture, be sold or destroyed in the discretion of the Commissioner.

Forfeited property shall not be destroyed until at least twenty days after seizure.

Sec. 227.chanroblesnad Disposition of funds recovered in legal proceedings or obtained from forfeitures. All judgments and moneys recovered and received for taxes, costs, forfeitures, fines, and penalties shall be paid to the Commissioner or his authorized deputies as the themselves are required to be paid, and, except as specially provided, shall be accounted for and dealt with in the same way.

Sec. 228.chanroblesnad Satisfaction of judgment recovered against any internal revenue officer. When an action is brought against any revenue officer to recover damages by reason of any act done in the performance of official duty, and the Commissioner is notified of such action in time to make defense against the same, through the Solicitor General, any judgment, damages, or costs recovered in such action shall be satisfied by the Commissioner upon approval of the Secretary Head, or if the same be paid by the person sued, shall be repaid or reimbursed to him.

No such judgment, damages, or costs shall be paid or reimbursed in behalf of a person who has acted negligently or in faith, or with willful oppression.

CHAPTER III
PROTESTING AN ASSESSMENT, REFUND, ETC

Sec. 229.chanroblesnad Protesting of assessment. When the Commissioner of Internal Revenue or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings. Within a period to be prescribed by implementing regulations, the taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the Commissioner shall issue an assessment based on his findings.

Such assessment may be protested administratively by filing a request for reconsideration or reinvestigation in such form and manner as may be prescribed by implementing regulation within thirty (30) days from receipt of the assessment; otherwise, the assessment shall become final and unappealable.

If the protest is denied in whole or in part, the individual, association or corporation adversely affected by the decision on the protest may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision; otherwise, the decision shall become final, executory and demandable.

Sec. 230.chanroblesnad Recovery of tax erroneously or illegally collected. No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.

Forfeiture of refund. A refund check or warrant issued in accordance with the pertinent provisions of this Code which shall remain unclaimed or uncashed within five (5) years from the date the said warrant or check was mailed or delivered shall be forfeited in favor of the government and the amount thereof shall revert to the General Fund.

Sec. 231.chanroblesnad Action to contest forfeiture of chattel. In case of the seizure of personal property under claim of forfeiture, the owner desiring to contest the validity of the forfeiture may, at time before sale or destruction of the property, bring an action against the person seizing the property or having possession thereof to recover the same, and upon giving proper bond may enjoin the sale; or after the sale and within six months he may bring an action to recover the net proceeds realized at the sale.

TITLE IX. COMPLIANCE REQUIREMENTS

CHAPTER I
KEEPING OF BOOKS OF ACCOUNTS AND RECORDS

Sec. 232.chanroblesnad (A) Corporations companies, partnerships or persons required to keep books of accounts. All corporations, companies, partnerships, or persons, required by law to pay internal revenue taxes shall keep a journal and a ledger, or their equivalents: Provided, however, That those whose quarterly sales, earnings, receipts, or output do not exceed five thousand pesos shall keep and use a simplified set of bookkeeping records duly authorized by the Secretary of Finance wherein all transactions and results of operations are shown and from which all taxes due the government may readily and accurately be ascertained and determined any time of the year: And provided, further, That in the case of corporations, companies, partnerships, or persons whose gross quarterly sales, earnings, receipts of output exceed twenty-five thousand pesos, they shall have their books of accounts audited and examined yearly by independent Certified Public Accountants and their income tax returns accompanied with certified balance sheets, profit and loss statements, schedules listing income-producing properties and the corresponding income therefrom and other relevant statements.

(B)chanroblesnad Independent Certified Public Accountant defined. The term "Independent Certified Public Accountant" as used in the preceding paragraph, means an accountant who possesses the independence as defined in Article four, Section seven of the rules and regulations of the Board of Accountancy promulgated by authority of Republic Act Numbered Five thousand one hundred sixty-six, as amended.

(C)chanroblesnad Penal Provision. Any certified public accountant employed to examine and audit books of taxpayers under subsection (A) of this section or any person under his direction who willfully falsifies report or statement bearing on any examination or audit, or renders a report, including exhibits, statements, schedules or other forms of accountancy work which has not been verified by him personally or under his supervision or by a member of his firm or by a member of his staff in accordance with sound auditing practices, or certified financial statements of a business enterprise containing an essential misstatement of facts or omission in respect to the transactions, taxable income, deduction and exemption of his client or who, not being an Independent Certified Public Accountant according to subsection (b) of this section, examines and audits books of taxpayers, or any person who offers any taxpayer to use wrong accounting/bookkeeping records, or in any way commits an act or omission in violation of the provision of this section shall be punished by a fine of not exceeding five thousand pesos and imprisonment of not less than two years. If the offender is a certified public accountant, upon conviction, his certificate as a certified public accountant shall be automatically revoked or cancelled. In the case of foreigners, conviction under this Code shall constitute a ground for deportation.

Sec. 233.chanroblesnad Subsidiary books. All corporations, companies, partnerships, or persons keeping the books of accounts mentioned in the preceding section may, at their option, keep subsidiary books as the needs of their business may require: Provided, That where such subsidiaries are kept, they shall form part of the accounting system of the taxpayer and shall be subject to the same rules and regulations as to their keeping translation, production and inspection as are applicable to the journal and the ledger.

Sec. 234.chanroblesnad Language in which books are to be kept; translation. All such corporations, companies, partnerships, or persons shall keep the books or records mentioned in Sec. 232 hereof in a native language, English or Spanish: Provided, however, That if in addition to said books or records the taxpayer keeps other books or records in a language other than a native language, English or Spanish, he shall make a true and complete translation of all the entries in such other books or records into a native language, English, or Spanish, and the said translation must be made by the bookkeeper or such taxpayer, or, in his absence, by his manager and must be certified under oath as to its correctness by the said bookkeeper or manager, and shall form an integral part of the books of accounts aforesaid. The keeping of such books or records in any language other than a native language, English or Spanish, is hereby prohibited.

Sec. 235.chanroblesnad Preservation of books of accounts and other accounting records. All books of accounts including the subsidiary books, and other accounting records of corporations, partnerships, or persons shall be preserved by them for a period beginning from the last entry in each book until the last day prescribed by Sec. 203 within which the Commissioner is authorized to make an assessment. The said books and records shall be subject to examination and inspection by internal revenue officers: Provided, That for income tax purposes, such examination and inspection shall be made only in a taxable year, except in the following cases:

(a)chanroblesnad Fraud, irregularity or mistakes as determined by the Commissioner;

(b)chanroblesnad The taxpayer requests reinvestigation;

(c)chanroblesnad Verification of compliance with withholding tax laws and regulations;

(d)chanroblesnad Verification of capital gains tax liabilities; and

(e)chanroblesnad In the exercise of the Commissioner's power under Sec. 7 (b) to obtain information from other persons, in which case, another or separate examination and inspection may be made. Examination and inspection of books of accounts and other accounting records shall be done in the taxpayer's office or place of business or in the office of the Bureau of Internal Revenue. All corporations, partnerships or persons that retire from business shall, within ten days from the date of retirement or within such period of time as may be allowed by the Commissioner in special cases, submit their books of accounts, including the subsidiary books and other accounting records to the Commissioner or any of his deputies for examination; after which they shall be returned. Corporations and partnerships contemplating dissolution must notify the Commissioner; and shall not be dissolved until cleared of any tax liability.

Any provision of existing general or special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organizations or grantees of tax incentives shall be subject to examination by the Bureau of Internal Revenue for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liability, if any. (As amended by P.D. No. 1959)

Sec. 236.chanroblesnad Supplying of taxpayer account number. Any person required under the authority of this Code to make, render, or file a return, statement, or other document shall be supplied with or assigned a taxpayer account number which he shall include in such return, statement or document filed with the Commissioner for his proper identification for tax purposes.

Only one account number shall be given to a person required to have one, and any persons who shall secure more than one account number shall be criminally liable under the provisions of Sec. 337 (should now be 274) of this Code.

CHAPTER II
MISCELLANEOUS ADMINISTRATIVE PROVISIONS

Sec. 237.chanroblesnad Registration of name or style with the revenue district officer or collection agent. Every person, other than persons required to be registered under the provisions of Section 107, engaged in any business shall, on or before the commencement of his business, or whenever he transfers to another revenue district, register with the revenue district officer concerned within 10 days from commencement of business or transfer. In cities or municipalities where no revenue district officer is stationed, such person shall register with the collection agent. The registration shall contain his name or style, place of residence, business, the place where such business is carried on, and such other information as may be required by the Commissioner in the form prescribed thereof. In case of a firm the names and residences of the various persons constituting the same shall also be registered. The Commissioner, after taking into consideration the volume of sales, financial condition and other relevant factors, may required the registrant to guarantee the payment of his taxes by way of advance payment, or the posting or filing of a security, guarantee or collateral acceptable to the Commissioner. (As amended by E.O. No. 273)

Sec. 238.chanroblesnad Insurance of receipts or sales or commercial invoices. All person, subject to an internal revenue tax shall for each sale or transfer of merchandise or for services rendered valued at P25 or more, issue receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service; Provided, That in the case of sales, receipts or transfers in the amount of P100 or more, or, regardless of amount. where the sale or transfer is made by persons subject to value-added tax to other persons also subject to value-added tax; or, where the receipt is issued to cover payment made as rentals, commissions, compensation or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer, or client. The original of each receipt or invoice shall be issued to the purchaser, customer or client at the time the transaction is effected, who, if engaged in business or in the exercise of profession, shall keep and preserve the same in his place of business for a period of 3 years from the close of the taxable year in which such invoice or receipt was issued, while the duplicate shall be kept and preserved by the issuer, also in his place of business, for a like period.

The Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this section. (As amended by E.O. No. 273)

Sec. 239.chanroblesnad Printing of receipts or sales or commercial invoices. All persons who print receipts or sales or commercial invoices shall, for every job order, secure from the Bureau of Internal Revenue an authority to print said receipts or invoices before printing the same.

No authority to print receipts or sales or commercial invoices shall be granted unless the receipt or invoices to be printed are serially numbered and shall show, among other things, the name, business style, taxpayer account number and business address of the person or entity to use the same.

Within twenty (20) days from the end of every calendar quarter, the printer shall submit to the Bureau of Internal Revenue a report containing the following information: (1) Names, addresses, taxpayer account numbers of the persons or entities for whom the receipt or sales or commercial invoices were printed during the preceding quarter, and (2) Quantity of receipts or invoices printed and the serial numbers of the receipts or invoices in each booklet.

Sec. 240.chanroblesnad Sign to be exhibited by distiller, rectifier, compounder, repacker, and wholesale liquor dealer. Every person engaged in distilling or rectifying spirits, compounding liquors, repacking wines or distilled spirits, and every wholesale liquor dealer, shall keep conspicuously on the outside of his place of business a sign exhibiting, in letters not less than six centimeters high, his name or firm style, with the words "Registered distiller", "Rectifier of spirits", "Compounder of liquors", "Repacker of wines or distilled spirits", or Wholesale liquor dealer", as the case may be, and his assessment number.

Sec. 241.chanroblesnad Sign to be exhibited by manufacturer of products of tobacco. Every manufacturer of cigars, cigarettes or tobacco, and every wholesale dealer in leaf tobacco or manufactured products of tobacco shall place and keep on the building wherein his business is carried on, so that it can be distinctly seen, a sign stating his full name and business in letters not less than six centimeters high and also his assessment number.

Sec. 242.chanroblesnad Exhibition of certificate of payment at place of business. The certificate or receipts showing payments of taxes issued to a person engaged in a business subject to a privilege tax shall be kept conspicuously exhibited in plain view in or at the place where the business is conducted; and, in case of a peddler or other persons not having a fixed place of business, shall be kept in the possession of the holder thereof, subject to production upon the demand of any internal revenue officer.

Sec. 243.chanroblesnad Continuation of business of deceased person. When any individual paying a business tax dies and the same business is continued by the person or persons interested in his estate, no additional payment shall be required for the residue of the term for which the tax was paid: Provided, however, that the person or persons interested in the estate should within thirty days from the death of the decedent submit to the Bureau of Internal Revenue or the regional or revenue district office inventories of goods or stocks had at the time of such death.

The requirement under this section shall also be applicable in the case of transfer of ownership or change of name of the business establishment.

Sec. 244.chanroblesnad Removal of business to other location. Any business for which the privilege tax has been paid may, subject to the regulations of the Department of Finance, be removed and continued in any other place without the payment of additional tax during the term for which the payment was made.

CHAPTER III
RULES AND REGULATIONS

Sec. 245.chanroblesnad Authority of Secretary of Finance to promulgate rules and regulations. The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code.

The authority of the Secretary of Finance to determine articles similar or analogous to those subject to a rate of sales tax under a certain category enumerated in Sections 163, and 165 of this Code shall be without prejudice to the power of the Commissioner of Internal Revenue to make rulings or opinions in connection with the implementation of the provisions of internal revenue laws, including rulings on the classification of articles for sales tax and similar purposes.

Sec. 246.chanroblesnad Non-retroactivity of rulings. Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding section or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal will be prejudicial to the taxpayers except in the following cases: (a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) where the taxpayer acted in bad faith.

TITLE X. STATUTORY OFFENSES AND PENALTIES

CHAPTER I
ADDITIONS TO THE TAX

Sec. 247.chanroblesnad General provisions. (a) The additions to the tax or deficiency tax prescribed in this Chapter shall apply to all taxes, fees and charges imposed in this Code. The amount so added to the tax shall be collected at the same time, in the same manner and as part of the tax.

(b)chanroblesnad If the withholding agent is the Government or any of its agencies, political subdivisions or instrumentalities, or a government-owned or controlled corporation, the employee thereof responsible for the withholding and remittance of the tax shall be personally liable for the additions to the tax prescribed herein.

(c)chanroblesnad The term "person", as used in this Chapter, includes an officer or employee of a corporation who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

Sec. 248.chanroblesnad Civil Penalties. (a) There shall be imposed, in addition to the tax required to be paid, penalty equivalent to twenty-five percent (25%) of the amount due, in the following cases:

(1)chanroblesnad Failure to file any return required under the provisions of this Code or regulations on the date prescribed; or

(2)chanroblesnad Filing a return with an internal revenue officer other than those with whom the return is required to be filed; or

(3)chanroblesnad Failure to pay the tax within the time prescribed for its payment; or

(4)chanroblesnad Failure to pay the full amount of tax shown or any return required to be filed under the provisions of this Code or regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment.

(b)chanroblesnad In case of willful neglect to file the return within the period prescribed by this Code or regulations, or in case a false or fraudulent return is willfully made, the penalty to be imposed shall be fifty percent (50%) of the tax or of the deficiency tax, in case any payment has been made on the basis of such return before the discovery of the falsity or fraud.

(c)chanroblesnad The penalties imposed hereunder shall form part of the tax and the entire amount shall be subject to the interest prescribed in Sec. 249.

(d)chanroblesnad In the case of failure to affix proper documentary stamps to a document or instrument, there shall, for every violation, be imposed, in addition to the amount of documentary stamp tax required to be paid, an amount equivalent to twenty-five percent of such unpaid amount which shall be in lieu of the interest prescribed in Sec. 249: Provided, That when the amount is not paid within the time prescribed in the notice and demand, there shall be collected on the total unpaid amount, including the surcharge, the interest prescribed in Sec. 249 (a) from the due date prescribed in the notice and demand until the amount is fully paid, which interest shall form part of the tax.

Sec. 249.chanroblesnad Interest, (a) In general. There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (20%) per annum, or such higher rate as may be prescribed by regulations, from the date prescribed for payment until the amount is fully paid.

(b)chanroblesnad Deficiency interest. Any deficiency in the tax due, as the term is defined in this Code, shall be subject to the interest prescribed in paragraph (a) hereof, which interest shall be assessed and collected from the date prescribed for its payment until the full payment thereof.

(c)chanroblesnad Delinquency interest. In case of failure to pay:

(1)chanroblesnad The amount of the tax due on any return required to be filed, or

(2)chanroblesnad The amount of the tax due for which no return is required, or

(3)chanroblesnad A deficiency tax, or any surcharge or interest thereon, on the due date appearing in the notice and demand of the Commissioner,

there shall be assessed and collected, on the unpaid, amount, interest at the rate prescribed in paragraph (a) hereof until the amount is fully paid, which interest shall form part of the tax.

(d)chanroblesnad Interest on extended payment. If any person required to pay the tax is qualified and elects to pay the tax on installment under the provisions of this Code, but fails to pay the tax or any installment thereof, or any part of such amount or installment on or before the date prescribed for its payment, or where the Commissioner has authorized an extension of time within which to pay a tax or a deficiency tax or any part thereof, there shall be assessed and collected interest at the rate hereinabove prescribed on the tax or deficiency tax or any part thereof unpaid from the date of notice and demand until it is paid.

Sec. 250.chanroblesnad Failure to file certain information returns. In the case of each failure to file information return, statement or list, or keep any record, or supply any information required by this Code or by the Commissioner on the date prescribed thereof, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the Commissioner, be paid by the person failing to file, keep or supply the same, one thousand pesos for each such failure: Provided, however, That the aggregate amount to be imposed for all such failure during a calendar year shall not exceed twenty-five thousand pesos.

Sec. 251.chanroblesnad Failure of a withholding agent to collect and remit tax. Any person required to collect, account for, and remit any tax imposed by this Code who willfully fails to collect such tax, or account for and remit such tax, or willfully assists in any manner to evade any such tax or the payment thereof, shall, in addition to other penalties provided for under this Chapter, be liable to a penalty equal to the total amount of the tax not collected or not accounted for and remitted.

Sec. 251-A.chanroblesnad Failure of a withholding agent to refund excess withholding tax. Any employer/withholding agent who fails, or refuses to refund excess withholding tax shall, in addition to the penalties provided in this Title, be liable to a penalty equal to the total amount of refunds which was not refunded to the employee resulting from any excess of the amount withheld over the tax actually due on their return. (As added by R.A. 7497)

CHAPTER II.
CRIMES, OTHER OFFENSES AND FORFEITURES

Sec. 252.chanroblesnad General Provisions. (a) Any person convicted of a crime penalized by this Code shall, in addition to being liable for the payment of the tax, be subject to the penalties imposed herein: Provided, That payment of the tax due after apprehension shall not constitute a valid defense in any prosecution for violation of any provision of this Code or in any action for the forfeiture of untaxed articles.

(b)chanroblesnad Any person who willfullyds or abet in the commission of a crime penalties herein or who causes the commission of any such offense by another, shall be liable in the same manner as the principal.

(c)chanroblesnad If the offender is not a citizen of the Philippines, he shall be deported immediately after serving the sentence without further proceedings for deportation. If he is a public officer or employee, the maximum penalty prescribed for the offense shall be imposed and, in addition, he shall be dismissed from the public service and perpetually disqualified from holding any public office, to vote and to participate in any election. If the offender is a certified public accountant, his certificate as a certified public accountant shall, upon conviction, be automatically revoked or cancelled.

(d)chanroblesnad In the case of associations, partnerships, or corporations, the penalty shall be imposed on the partner, president, general manager, branch manager, treasurer, officer-in-charge, and employees responsible for the violation.

Sec. 253.chanroblesnad Attempt to evade or defeat tax. Any person who willfully attempts in any manner to evade or defeat any tax imposed under this code or the payment thereof shall, in addition to other penalties provided by law, upon conviction thereof, be fined not more than ten thousand pesos or imprisoned for not more than two years, or both.

Sec. 254.chanroblesnad Failure to file return, supply correct and accurate information, pay tax, withhold and remit tax and refund excess taxes withheld on compensation. Any person required under this Code or by regulations promulgated thereunder to pay any tax, make a return, keep any record, or supply correct and accurate information, who willfully fails to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or regulations shall, in addition to other penalties provided by law, upon conviction thereof, be fined not less than ten thousand pesos (P10,000) and imprisonment of not less than one (1) year but not more than ten (10) years. (As amended by R.A. 7497)

Any person who attempts to make it appear for any reason that he or another has in fact filed a return or statement, or actually files a return or statement and subsequently withdraws, the same return or statement after securing the official receiving seal or stamp of receipt of an internal revenue office wherein the same was actually filed shall, upon conviction thereof be fined not less than three thousand pesos or imprisoned for not more than one year, or both.

Sec. 255.chanroblesnad Penal liability of corporations. Any corporation, association or general co-partnership liable for any of the acts or omissions penalized under this Code, in addition to the penalties imposed herein upon the responsible corporate officers, partners or employees, shall upon conviction, for each act or omission be fined for not less than ten thousand pesos but not more than one hundred thousand pesos.

Sec. 256.chanroblesnad Penal liability for making false entries records or reports. (a) Any independent certified public accountant engaged to examine and audit books of accounts of taxpayer under subparagraph (a) of Sec. 232 and any person under this direction who:

(1)chanroblesnad Willfully falsifies any report or statement bearing on any examination or audit, or renders a report, including exhibits, statements, schedules or other forms of accountancy work which has not been verified by him personally or under his supervision or by a member of his firm or by a member of his staff in accordance with sound auditing practices, or

(2)chanroblesnad Certifies financial statements of a business enterprise containing an essential misstatement of facts or omission in respect of the transactions, taxable income, deduction and exemption of his client, or

(b)chanroblesnad Any person who:

(1)chanroblesnad Not being an Independent Certified Public Accountant according to subparagraph (8) of Sec. 232, examines and audits books of accounts of taxpayers, or

(2)chanroblesnad Offers top sign and certify financial statements without audit, or

(3)chanroblesnad Offers any taxpayer the use of accounting bookkeeping records for internal revenue purposes not in conformity with the requirements prescribed in this Code or regulations promulgated thereunder, or

(4)chanroblesnad Knowingly makes any false entry or enters any false or fictitious name in the books of accounts or records mentioned in the preceding paragraphs, or

(5)chanroblesnad Keeps two or more sets of such records or books on accounts, or

(6)chanroblesnad In any way commits an act or omission, in violation of the provisions of this Section, or

(7)chanroblesnad Fails to keep the books of accounts or records mentioned in Sec. 232 in a native language, English or Spanish, or to make a true and complete translation as required in Sec. 231 of this Code, or whose books of accounts or records kept in a native language, English, or Spanish are found to be at material variance with books or records kept by him in another language, shall, upon conviction for each act or omission, be punished by a fine of not less than ten thousand pesos but not more than fifty thousand pesos or by imprisonment of not less than four years and one day but not more than six years, or both.

Sec. 257.chanroblesnad Unlawful pursuit of business. Any person who carries on any business for which a privilege tax is imposed without paying the tax as required by law shall, upon conviction for each act or omission, be fined not less than one thousand pesos but more than five thousand pesos or imprisoned for not less than one month but not more than six months, or both; Provided, That in the case of a person engaged in the business of distilling, rectifying, repacking, compounding or manufacturing any article subject to excise tax, he shall, upon conviction for each act or omission, be fined for not less than five thousand pesos but not more than twenty-five thousand pesos or imprisoned for a term of not less than six months but not more than three years, or both.

Sec. 258.chanroblesnad Illegal collection of foreign payments. Any person who knowingly undertakes the collection of foreign payment as provided under Sec. 70 (now 60) of this Code without having obtained a license therefor, or without complying with its implementing regulations, shall, upon conviction for each act or omission, be fined for not less than five thousand pesos nor more than twenty-five thousand pesos, or imprisoned for not less than six months but not more than three years, or both.

Sec. 259.chanroblesnad Unlawful possession of cigarette paper in bobbins, etc. It shall be unlawful for any person to have in his possession cigarette papers in bobbins or rolls, cigarette tipping paper or cigarette filter tips, without the corresponding authority therefor issued by the Commissioner. Any person, importer, manufacturer of cigar and cigarettes who has been found guilty under this Section shall upon conviction of each act or omission be fined a sum not less than twenty thousand pesos but not more than one hundred thousand pesos and imprisoned for a term of not less than six years and one day but not more than twelve years.

Sec. 260.chanroblesnad Unlawful use of denatured alcohol. Any person who for the purpose of manufacturing any beverage uses denatured alcohol or alcohol specially denatured to be used for motive power or withdrawn under bond for industrial uses or alcohol knowingly misrepresented to be denatured to be unfit for oral intake or who knowingly sells or offers for sale any beverage made in whole or in part from such alcohol or who uses such alcohol for the manufacture of liquid medicinal preparations taken internally or knowingly sells or offers for sale such preparations containing as an ingredient such alcohol shall upon conviction for each act or omission be fined for not less than twenty thousand pesos but not more than one hundred thousand pesos and imprisoned for a term of not less than six years and one day but not more than twelve years.

Any person who shall unlawfully recover or attempt to recover by distillation or other process any denatured alcohol or who knowingly sells or offers for sale conceals or otherwise disposes of alcohol so recovered or redistilled shall be subject to the same penalties imposed under this Section.

Sec. 261.chanroblesnad Shipment or removal of liquor or tobacco products under false name or brand or as an imitation of any existing or otherwise known products name or brand. Any person who ships, transports or removes spirituous compounded or fermented liquors, wines or any manufactured products of tobacco under any other than the proper name or brand known to the trade as designating the kind and quality of the contents of the cask, bottle or package containing the same or as an imitation of any existing or otherwise known product name or brand or causes such act to be done, shall, upon conviction for each act or omission, be fined for not less than twenty thousand pesos but not more than one hundred thousand pesos and imprisoned for not less than six years and one day but not more than twelve years.

Sec. 262.chanroblesnad Unlawful possession or removal of articles subject to excise tax without payment of the tax. Any person who owns and/or is found in possession of imported article subject to excise tax, the tax on which had not been paid in accordance with law or any person who owns and/or is found in possession of imported tax-exempt articles other than those to whom they are legally issued shall be punished by:

1.chanroblesnad A fine of not less than one hundred pesos nor more than five hundred pesos and imprisonment of not less than fifteen days nor more than thirty days if the appraised value, to be determined in the manner prescribed in the Tariff and Customs Code, including duties and taxes, of the articles does not exceed five hundred pesos.

2.chanroblesnad A fine of not less than one thousand pesos nor more than five thousand pesos and imprisonment of not less than six months and one day nor more than four years, if the appraised value, to be determined in the manner prescribed in the Tariff and Customs Code, including duties and taxes, of the articles exceed five hundred pesos but does not exceed fifty thousand pesos.

3.chanroblesnad A fine of not less than ten thousand pesos nor more than twenty-five thousand pesos and imprisonment of not less than four years and one day nor more than eight years, if the appraised value, to be determined in the manner prescribed in the Tariff and Customs Code, including taxes and duties, of the articles is more than fifty thousand pesos but does not exceed one hundred fifty thousand pesos.

4.chanroblesnad A fine of not less than twenty thousand pesos nor more than fifty thousand pesos and imprisonment of not less than ten years and one day nor more than fourteen years, if the appraised value, to be determined in the manner prescribed in the Tariff and Customs Code, including taxes and duties, of the articles exceeds one hundred fifty thousand pesos.

Any person who is found in possession locally manufactured articles subject to excise tax, the tax on which has not been paid in accordance with law, or any person who is found in possession of such articles which are exempt from excise tax other than those to whom the same is lawfully issued shall be punished with a fine of not less than ten times the amount of excise tax due on the articles found but not less than five hundred pesos nor more than ten thousand pesos and imprisonment of from six months and one day to four years.

Any manufacturer, owner, or person in charge of any article subject to excise tax who removes or allows or caused the unlawful removal of any such articles from the place of production or bonded warehouse, upon which the articles subject to excise tax has not been paid at the time and in manner required, and any person who knowinglyds or abets in the removal of such articles as aforesaid, or conceals the same after illegal removal shall, for the first offense, be punished with a fine of not less than ten times the amount of excise tax due on the articles, but not less than one thousand pesos nor more than one hundred thousand pesos and imprisonment of not less than six months and one day but not more than six years.

The mere unexplained possession of articles subject to excise tax, the tax on which has not been paid in accordance with law, shall be punished under this Section.

Sec. 263.chanroblesnad Failure or refusal to issue receipts or sales or commercial invoices; violations related to the printing of such receipts or invoices and other violations. (a) Any person who, being required under Sec. 238 to issue receipts or sales or commercial invoices, fails or refuses to issue such receipts or invoices, issues receipts or invoices that do not truly reflect and/or contain all the information required to be shown therein or uses multiple or double receipts or invoices, shall, upon conviction, for each act or omission be fined not less than one thousand pesos but not more than fifty thousand pesos or imprisonment for a term of not less than six months and one day but not more than two years or both.

(b)chanroblesnad Any person who commits any of the acts enumerated hereunder shall be penalized in the same manner and to the same extent as provided for in this Section:

1.chanroblesnad Prints receipts or sales or commercial invoices without authority from the Bureau of Internal Revenue;

2.chanroblesnad Prints double or multiple sets of invoices or receipted;

3.chanroblesnad Prints unnumbered receipts or sales or commercial invoices, not bearing the name, business style, taxpayer account number, and business address of the person or entity; or

4.chanroblesnad Fails to submit the quarterly report required in Sec. 239.

Sec. 264.chanroblesnad Offenses relating to stamps. Any person who commits any of the acts enumerated hereunder shall, upon conviction thereof, be fined not more than ten thousand pesos or imprisoned for not more than five years, or both:

(1)chanroblesnad Makes, imports, sells, uses or possesses without express authority from the Commissioner, any die for printing or making stamps, labels, tags or playing cards.

(2)chanroblesnad Erases the cancellation marks of any stamps previously used or alters the written figures or letters or cancellation marks on internal revenue stamps.

(3)chanroblesnad Possesses false, counterfeit, restored or altered stamps, labels or tags or causes the commission of any such offense by another.

(4)chanroblesnad Sells or offers for sale any box or package containing articles subject to excise tax with false, spurious or counterfeit stamps or labels or sells from any such fraudulent box, package or container as aforesaid.

(5)chanroblesnad Gives away or accepts from another or sells, buys or uses containers on which the stamps are not completely destroyed.

Sec. 265.chanroblesnad Failure to obey summons. Any person who, being duly summoned to appear to testify, or to appear and produce books of accounts, records, memoranda, or other papers, or to furnish information as required under the pertinent provisions of this Code, neglects to appear or to produce such books of accounts, records, memoranda, or other papers, or to furnish such information, shall, upon conviction, be fined not less than one thousand pesos or imprisoned for not more than one year, or both.

Sec. 266.chanroblesnad Declaration under penalties of perjury. Any declaration, return and other statements required under this Code, shall, in lieu of an oath, contain a written statement that they are made under the penalties of perjury. Any person who willfully files a declaration, return or statement containing information which is not true and correct as to every material matter shall, upon conviction, be subject to the penalties prescribed for perjury under the Revised Penal Code.

Sec. 267.chanroblesnad Other crimes and offenses. (a) Misdeclaration or misrepresentation of manufacturers subject to excise tax. Any manufacturer who, in violation of the provision of Title IV (now VI) of this Code misdeclares in the sworn statement required therein or in the sales invoice, any pertinent data or information shall be punished by a summary cancellation or withdrawal of the permit to engage in business as a manufacturer of articles subject to excise tax.

(b)chanroblesnad Forfeiture of property used in unlicensed business or dies used for printing false stamps, etc. All chattels, machinery, and removable fixtures of any sort used in the unlicensed production of articles subject to excise tax shall be forfeited.

Dies and other equipment used for the printing or making of any internal revenue stamp, label, or tag which is in imitation of or purports to be a lawful stamp, label, or tag shall also be forfeited.

(c)chanroblesnad Forfeiture of goods illegally stored or removed. Unless otherwise specifically authorized by the Commissioner, all articles subject to excise tax should not be stored or allowed to remain in a distillery, distillery warehouse, bonded warehouse, or other place where made, after the tax thereon has been paid, otherwise all such articles shall be forfeited. Article withdrawn from any such place or from customs custody or imported into the country without the payment of the required tax shall likewise be forfeited.

CHAPTER III
PENALTIES IMPOSED ON PUBLIC OFFICERS

Sec. 268.chanroblesnad Violations committed by government enforcement officers. Every official, agent or employee of the Bureau of Internal Revenue or any other agency of the government charged with the enforcement of the provisions of this Code, who is guilty of any of the offenses hereinbelow specified, shall, upon conviction for each act or omission, be fined in a sum of not less than five thousand pesos but not more than fifty thousand pesos or imprisoned for a term of not less than one year but not more than ten years, or both:

1.chanroblesnad Those guilty of extortion or willful oppression through the use of his office;

2.chanroblesnad Those who knowingly demand other or greater sums than are authorized by law or receive any fees, compensation or reward, except as by law prescribed, for the performance of any duty;

3.chanroblesnad Those who willfully neglect to give receipts, as by law required, for any sums collected in the performance of duty or who willfully neglect to perform any other duties enjoined by law;

4.chanroblesnad Those who conspire or collude with another or others to defraud the revenues or otherwise violate the provisions of this Code;

5.chanroblesnad Those who by neglect or design permit the violation of the law by any other person;

6chanroblesnad Those who made or sign any false entry or entries in any books, or make or sign any false certificate or return;

7.chanroblesnad Those who allow, or conspire or collude with another to allow the unauthorized retrieval, withdrawal or recall of return, statement or declaration after the same has been officially received by the Bureau of Internal Revenue;

8.chanroblesnad Those who, having knowledge or information of a violation of this Code or of any fraud committed on the revenues collectible by the Bureau of Internal Revenue, fail to report such knowledge or information to their superior officer or to report as otherwise required by law; and

9.chanroblesnad Those who, without the authority of law, demand or accept or attempt to collect, directly or indirectly, as payment or otherwise any sum of money or other thing of value for the compromise, adjustment, or settlement of any charge or complaint for any violation or alleged violation of this Code.

Sec. 269.chanroblesnad Unlawful divulgence of trade secrets. Except as provided in Sec. 74 (now 64) of this Code and Sec. 26 of Republic Act Numbered 6388, any officer or employee of the Bureau of Internal Revenue who divulges to any person or makes known in any other manner than may be provided by law information regarding the business, income, or estate of any taxpayer, the secrets, operation, style or work, or apparatus of any manufacturer or producer, or confidential information regarding the business of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties, shall upon conviction for each act or omission, be fined in a sum of not less than five thousand pesos but not more than ten thousand pesos, or imprisoned for a term of not less than six months but not more than five years or both.

Sec. 270.chanroblesnad Unlawful interest of revenue law enforcers in business. Any internal revenue officer who is or shall become interested directly or indirectly, in the manufacture, sale, or importation of any article subject to tax under Title IV (now VI) of this Code or in the manufacture or repair or sale of any die for the printing, or making of stamps, or labels shall, upon conviction for each act or omission, be fined in a sum of not less than five thousand pesos but not more than ten thousand pesos, or imprisoned for a term of not less than two years and one day but not more than four years, or both.

Sec. 271.chanroblesnad Violation of withholding tax provision. Every officer or employee of the government of the Republic of the Philippines or any of its agencies and instrumentalities, its political subdivisions, as well as government-owned or controlled corporation including the Central Bank who, under the provisions of this Code or regulations promulgated thereunder, is charged with the duty to deduct and withhold any internal revenue tax and to remit the same in accordance with the provisions of this Code and other laws is guilty of any offense hereinbelow specified shall, upon conviction for each act or omission, be fined in a sum of not less than five thousand pesos but not more than fifty thousand pesos or imprisoned for a term of not less than six months and one day but not more than two years, or both:

1.chanroblesnad Those who fail or cause the failure to deduct and withhold any internal revenue tax under any of the withholding tax laws and implementing regulations;

2.chanroblesnad Those who fail or cause the failure to remit taxes deducted and withheld within the time prescribed by law, and implementing regulations; and

3.chanroblesnad Those who fail or cause the failure to file return or statement within the time prescribed, or render or furnish a false or fraudulent return or statement required under the withholding tax laws and regulations.

Sec. 272.chanroblesnad Penalty for failure to issue and execute warrant. Any official who fails to issue or execute the warrant of distraint or levy within thirty days after the expiration of the time prescribed in Sec. 207 and 213 or who is found guilty of abusing the exercise thereof by competent authority shall be automatically dismissed from the service after due notice and hearing.

CHAPTER IV
OTHER PENAL PROVISIONS

Sec. 273.chanroblesnad Penalty for second and subsequent offenses. In the case of reincidence, the maximum of the penalty prescribed for the offense shall be imposed.

Sec. 274.chanroblesnad Violation of other provisions of this Code or regulations in general. A person who violates any provision of this Code or any regulation of the Secretary of Finance promulgated thereunder, for which no specific penalty is provided by law shall, upon conviction for each act or omission, be fined in a sum of not more than one thousand pesos or imprisoned for a term of not more than six months, or both.

Sec. 275.chanroblesnad Penalty for selling, transferring, encumbering, or in any way disposing of property placed under constructive distraint. Any taxpayer whose property has been placed under constructive distraint who sells, transfers, encumbers, or in any way disposes of said property, or any part thereof, without the knowledge and consent of the Commissioner, shall, upon conviction for each act or omission be fined in a sum of not less than twice the value of the property so sold, encumbered or disposed of, but not less than five thousand pesos, or imprisoned for a term of not less than two years and one day but not more than four years, or both.

Sec. 276.chanroblesnad Failure to surrender property placed under distraint and levy. Any person having in his possession or under his control any property or rights to property, upon which a warrant of constructive distraint or of actual distraint and levy has been issued shall, upon demand by the Commissioner or any of his deputies executing such warrant, surrender such property or right to property to the Commissioner or any of his deputies, unless such property or right is, at the time of such demand, subject to an attachment or execution under any judicial process. Any person who fails or refuses to surrender any of such property or right shall be liable in his own person and estate to the Government in a sum equal to the value of the property or rights not so surrendered but not exceeding the amount of the taxes (including penalties and interest) for the collection of which such warrant had been issued, together with costs and interest, if any, from the date of such warrant. In addition, such person shall, upon conviction for each act or omission, be fined in a sum of not less than five thousand pesos or imprisoned for a term of not less than six months and one day but not more than two years, or both.

Sec. 277.chanroblesnad Procuring unlawful divulgence of trade secrets. Any person who causes or procures an officer or employee of the Bureau of Internal Revenue to divulge any confidential information regarding the business, income, or inheritance of any taxpayer, knowledge of which was acquired by him in the discharge of his official duties, and which it is unlawful for him to reveal, and any person who publishes or prints in any manner whatever, not provided by law, any income, profits, losses, or expenditures appearing in any income tax return shall be fined in a sum of not more than two thousand pesos or imprisoned for a term of not less than six months nor more than five years, or both.

Sec. 278.chanroblesnad Confiscation and forfeiture of the proceeds or instruments of crime. In addition to the penalty imposed for the violation of the provisions of Title IV (now VI), Sections 163, 164 and 165 of Title V, and Chapter V and Chapter VI of Title VIII all of this Code the same shall carry with it the confiscation and forfeiture in favor of the government of the proceeds of the crime or value of the goods, and the instruments or tools with which the crime was committed: Provided, however, That if, in the course of the proceedings it is established that the instruments or tools used in the illicit act belong to a third person, the same shall be confiscated and forfeited after due notice and hearing in a separate proceeding in favor of the government if such third person leased, let, chartered, or otherwise entrusted the same to the offender: Provided, further, That in case the lessee subleased, or the borrower, charterer, or trustee allowed the use of the instrument of tools to the offender, such instruments, or tools shall, likewise, be confiscated and forfeited: Provided, finally, That property of common carriers shall not be subject to forfeiture when used in the transaction of their business as such common carrier, unless the owner or operator of said common carrier was, at the time of the illegal act, a consenting party or privy thereto, without prejudice to the owner's right of recovery against the offender in a civil or criminal action. Articles which are not subject of lawful commerce shall be destroyed.

Sec. 279.chanroblesnad Subsidiary penalty. If the person convicted for violation of the provisions of this Code has no property with which to meet the fine imposed upon him by the court, or is unable to pay such fine, he shall be subject to a subsidiary liability at the rate of one day for each eight pesos and fifty centavos subject to the rules established in Article 39 of the Revised Penal Code.

Sec. 280.chanroblesnad Prescription for violations of any provisions of this Code. All violations of any provisions of this Code shall prescribe after five years.

Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment.

The prescription shall be interrupted when proceedings are instituted against the guilty persons and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy.

The term of prescription shall not run when the offender is absent from the Philippines.

Sec. 281.chanroblesnad Informer's reward to persons instrumental in the discovery of violations of the National Internal Revenue Code and in the discovery and seizure of smuggled goods.

(1)chanroblesnad For violation of the National Internal Revenue Code. Any person, except an internal revenue official or employee, or other public official, or his relative within the sixth degree of consanguinity, who voluntarily gives definite and sworn information, not yet in the possession of the Bureau of Internal Revenue, leading to the discovery of frauds upon the internal revenue laws or violations of any of the provisions thereof, thereby resulting in the recovery of revenues, surcharges and fees and/or the conviction of the guilty party and/or the imposition of any fine or penalty, shall be rewarded in a sum equivalent to fifteen per centum of the revenues; surcharges or fees recovered and/or fine or penalty imposed and collected. The same amount of reward shall also be given to an informer where the offender has offered to compromise the violation of law committed by him and his offer has been accepted by the Commissioner and in such a case, the fifteen per centum reward fixed herein shall be based on the amount agreed upon in the compromise and collected from the offender: Provided, That should no revenue, surcharges or fees be actually recovered or collected, such person shall not be entitled to a reward: Provided, further, That the information mentioned herein shall not refer to a case already pending or previously investigated or examined by the Commissioner or any of his deputies, agent or examiners, or the Secretary of Finance or any of his deputies or agents: Provided, finally, That the reward provided herein shall be paid under regulations issued by the Commissioner of Internal Revenue with the approval of the Secretary of Finance.

(2)chanroblesnad For discovery and seizure of smuggled goods. To encourage the public and law-enforcement personnel to extend full cooperation in eradicating smuggling, a cash reward equivalent to fifteen per centum of the fair market value of the smuggled and confiscated goods shall be given to persons instrumental in the discovery and seizure of such smuggled goods.

TITLE XI. ALLOTMENT OF INTERNAL REVENUE

CHAPTER I
DISPOSITION AND ALLOTMENT OF NATIONAL INTERNAL REVENUE IN GENERAL

Sec. 282.chanroblesnad Disposition of national internal revenue.

(a)chanroblesnad In general. National Internal Revenue collected and not applied as hereinabove provided or otherwise specially disposed of by law shall accrue to the National Treasury and shall be available for the general purposes of the Government, with the exception of the amounts set apart by way of allotment under the next succeeding section.

(b)chanroblesnad Shares of local governments. Twenty per centum of the collection from the national internal revenue taxes shall accrue to local governments to be computed on the basis of the collections of the third fiscal year preceding the current fiscal year. This allotment shall be distributed as follows: Thirty per centum (30%) to provinces; forty-five per centum (45%) to municipalities; twenty-five per centum (25%) to cities and sixty-five million pesos (P65M) to the barangays. The share of each province, city and municipality shall be determined on the basis of the following formulae: seventy (70%) per centum population; twenty (20) per centum land area; and ten (10%) per centum equal sharing.

For the new fiscal year commencing on January 1, 1977 and ending on December 31, 1977, the annual allotment of any local government as determined under this paragraph, shall not increase by more than twenty-five per centum (25%), or, nor less than, the annual allotment it shall actually receive for the fiscal year from July 1, 1975 to June 30, 1976.

(c)chanroblesnad Five per cent (5%) of the total tax collected on subsequent sale under Section 165 (B) of this Code shall accrue to the city or municipality in which the tax is collected and another five per cent (5%) of the total annual tax collected on said subsequent sales shall accrue to the Secretary of Education, Culture and Sports. (As added by PD. No. 2006)

Thereafter, or beginning January 1, 1978, the annual allotment shares of each local government shall be determined solely on the basis of this paragraph.

In addition, five per centum (5%) of the collection from national internal revenue taxes not otherwise accruing to special funds and special accounts in the general fund shall accrue to a local government fund which shall be released by the President as financiald to local governments or to projects.

Sec. 283.chanroblesnad Allotment for the Commission on Audit. One-half of one, per centum (1/2 of 1%) of the collections from national internal revenue taxes not otherwise accruing to special accounts in the general fund of the national government shall accrue to the Commission on Audit as a fee for auditing services rendered to local government units, excluding maintenance, equipment, and other operating expenses as provided for in Sec. 21 of Presidential Decree No. 898.

The Secretary of Finance is hereby authorized to deduct from the monthly internal revenue tax collections an amount equivalent to the percentage as herein fixed, and to remit the same direct to the Commission on Audit under such regulations as may be promulgated by the Secretary of Finance and the Chairman of the Commission on Audit.

Sec. 284.chanroblesnad In general. All acts, laws, decrees, executive orders, rules and regulations, or parts thereof, which are contrary to or inconsistent within this Code are hereby repealed, amended or modified accordingly.

CHAPTER II
SPECIAL DISPOSITION OF CERTAIN NATIONAL INTERNAL REVENUE TAXES

Sec. 285.chanroblesnad Disposition of proceeds of insurance premium tax. Twenty-five per centum of the premium tax collected under Section two hundred and twenty-three (now 121) of this Code shall accrue to the Insurance Funds (as contemplated in Section four hundred and eighteen of Presidential Decree numbered six hundred and twelve) which shall be used for the purpose of defraying the expenses of the Insurance Commission. The Commissioner of Internal Revenue shall turn over and deliver the said Insurance Funds to the Insurance Commissioners as soon as the collection is made.

Sec. 286.chanroblesnad Granting provinces, cities and municipalities shares in the specific tax on certain petroleum products. In addition to the internal revenue allotment under Section three hundred forty-four, provinces, cities and municipalities shall share in the specific taxes on the following petroleum products in such amount as may be equivalent to the collection therefrom at the rates indicated hereunder:

(a)chanroblesnad Lubricating oil, per liter of volume capacity, twenty centavos;

(b)chanroblesnad Naptha, gasoline and all other similar products of distillation, per liter of volume capacity, four centavos;

(c)chanroblesnad On bunker fuel oil, and all similar fuel oil having more or less the same generating power, per liter of volume capacity, one-half centavos:

(d)chanroblesnad On diesel fuel oil, and on all similar fuel oil having more or less the same generating power, per liter of volume capacity, one-half centavo.

The additional allotment is in lieu of local taxes imposed on petroleum products and for this purpose. Section twenty-four of Presidential Decree numbered two hundred thirty-one, otherwise known as the Local Tax Code, has been repealed by Presidential Decree numbered four hundred thirty-six on March thirty, nineteen hundred seventy-four.

The shares of provinces, cities and municipalities shall be allotted on the basis of the collections in specific taxes during the second fiscal year immediately preceding the current fiscal year in the following proportions:

Twenty per centum (20%) of total shares to provinces

Thirty per centum (30%) of total shares to municipalities

Fifty per centum (50%) of total shares to chartered cities

The allotment of each provinces, city and municipality shall be determined on the basis of the following formulae:

Seventy (70%) per cent population

Twenty (20%) per cent land area

Ten (10%) per cent equal sharing

TITLE XII. REPEALING PROVISIONS

CHAPTER I
SEPARABILITY CLAUSE

Sec. 287.chanroblesnad Separability Clause. If any clause, sentence, paragraph or part of this Code shall be adjudged by any Court of competent jurisdiction to be invalid, such judgment shall not affect, impair, or invalidate the clause, sentence, paragraph, or part thereof directly involved in the controversy.


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PRESIDENTIAL DECREE NOS. 1067 - 1162                  

  • Presidential Decree No. 1067

  • Presidential Decree No. 1067-B

  • Presidential Decree No. 1068

  • Presidential Decree No. 1069

  • Presidential Decree No. 1070

  • Presidential Decree No. 1071

  • Presidential Decree No. 1072

  • Presidential Decree No. 1073

  • Presidential Decree No. 1074

  • Presidential Decree No. 1075

  • Presidential Decree No. 1076

  • Presidential Decree No. 1077

  • Presidential Decree No. 1078

  • Presidential Decree No. 1079

  • Presidential Decree No. 1080

  • Presidential Decree No. 1081

  • Presidential Decree No. 1082

  • Presidential Decree No. 1084

  • Presidential Decree No. 1085

  • Presidential Decree No. 1086

  • Presidential Decree No. 1087

  • Presidential Decree No. 1088

  • Presidential Decree No. 1089

  • Presidential Decree No. 1083

  • Presidential Decree No. 1090

  • Presidential Decree No. 1091

  • Presidential Decree No. 1092

  • Presidential Decree No. 1093

  • Presidential Decree No. 1094

  • Presidential Decree No. 1095

  • Presidential Decree No. 1097

  • Presidential Decree No. 1098

  • Presidential Decree No. 1099

  • Presidential Decree No. 1100

  • Presidential Decree No. 1101

  • Presidential Decree No. 1102

  • Presidential Decree No. 1103

  • Presidential Decree No. 1104

  • Presidential Decree No. 1105

  • Presidential Decree No. 1106

  • Presidential Decree No. 1107

  • Presidential Decree No. 1108

  • Presidential Decree No. 1109

  • Presidential Decree No. 1096

  • Presidential Decree No. 1110

  • Presidential Decree No. 1110-A

  • Presidential Decree No. 1111

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