THE NATIONALINTERNALREVENUECODE OFTHEPHILIPPINES [TaxReformActof1997] RepublicActNo.8424 ANACTAMENDINGTHENATIONALINTERNALREVENUECODE,ASAMENDED, ANDFOROTHERPURPOSES SECTION1.ShortTitleThisActshallbecitedasthe"TaxReformActof1997". SEC.2.StatePolicy.

licy.ItisherebydeclaredthepolicyoftheStatetopromote sustainableeconomicgrowththroughtherationalizationofthePhilippineinternal revenuetaxsystem,includingtaxadministration;toprovide,asmuchaspossible,an equitablerelieftoagreaternumberoftaxpayersinordertoimprovelevelsof disposableincomeandincreaseeconomicactivity;andtocreatearobust environmentforbusinesstoenablefirmstocompetebetterintheregionalaswell astheglobalmarket,atthesametimethattheStateensuresthatGovernmentis abletoprovidefortheneedsofthoseunderitsjurisdictionandcare. SEC.3.PresidentialDecreeNo.1158,asamendedby,amongothers,Presidential DecreeNo.1994andExecutiveOrderNo.273,otherwiseknownastheNational InternalRevenueCode,isherebyfurtheramended. TITLEI ORGANIZATIONANDFUNCTIONOF THEBUREAUOFINTERNALREVENUE

 SECTION1.TitleoftheCode.ThisCodeshallbeknownastheNationalInternal RevenueCodeof1997. SEC.2.PowersandDutiesoftheBureauofInternalRevenue.TheBureauof InternalRevenueshallbeunderthesupervisionandcontroloftheDepartmentof Financeanditspowersanddutiesshallcomprehendtheassessmentandcollection ofallnationalinternalrevenuetaxes,fees,andcharges,andtheenforcementofall forfeitures,penalties,andfinesconnectedtherewith,includingtheexecutionof judgmentsinallcasesdecidedinitsfavorbytheCourtofTaxAppealsandthe ordinarycourts.TheBureaushallgiveeffecttoandadministerthesupervisoryand policepowersconferredtoitbythisCodeorotherlaws. SEC.3.ChiefOfficialsoftheBureauofInternalRevenue.TheBureauofInternal RevenueshallhaveachieftobeknownasCommissionerofInternalRevenue, hereinafterreferredtoastheCommissionerandfour(4)assistantchiefstobe knownasDeputyCommissioners. SEC.4.PoweroftheCommissionertoInterpretTaxLawsandtoDecideTax Cases.ThepowertointerprettheprovisionsofthisCodeandothertaxlawsshall beundertheexclusiveandoriginaljurisdictionoftheCommissioner,subjectto reviewbytheSecretaryofFinance. Thepowertodecidedisputedassessments,refundsofinternalrevenuetaxes, feesorothercharges,penaltiesimposedinrelationthereto,orothermattersarising underthisCodeorotherlawsorportionsthereofadministeredbytheBureauof InternalRevenueisvestedintheCommissioner,subjecttotheexclusiveappellate jurisdictionoftheCourtofTaxAppeals. SEC.5.PoweroftheCommissionertoObtainInformation,andtoSummon, Examine,andTakeTestimonyofPersons.Inascertainingthecorrectnessofany return,orinmakingareturnwhennonehasbeenmade,orindeterminingthe liabilityofanypersonforanyinternalrevenuetax,orincollectinganysuchliability, orinevaluatingtaxcompliance,theCommissionerisauthorized:

(A)Toexamineanybook,paper,record,orotherdatawhichmayberelevantor materialtosuchinquiry; (B)Toobtainonaregularbasisfromanypersonotherthanthepersonwhose internalrevenuetaxliabilityissubjecttoauditorinvestigation,orfromanyofficeor officerofthenationalandlocalgovernments,governmentagenciesand instrumentalities,includingtheBangkoSentralngPilipinasandgovernmentowned orcontrolledcorporations,anyinformationsuchas,butnotlimitedto,costsand volumeofproduction,receiptsorsalesandgrossincomesoftaxpayers,andthe names,addresses,andfinancialstatementsofcorporations,mutualfundcompanies, insurancecompanies,regionaloperatingheadquartersofmultinationalcompanies, jointaccounts,associations,jointventuresofconsortiaandregisteredpartnerships, andtheirmembers; (C)Tosummonthepersonliablefortaxorrequiredtofileareturn,oranyofficer oremployeeofsuchperson,oranypersonhavingpossession,custody,orcareof thebooksofaccountsandotheraccountingrecordscontainingentriesrelatingto thebusinessofthepersonliablefortax,oranyotherperson,toappearbeforethe Commissionerorhisdulyauthorizedrepresentativeatatimeandplacespecifiedin thesummonsandtoproducesuchbooks,papers,records,orotherdata,andtogive testimony; (D)Totakesuchtestimonyofthepersonconcerned,underoath,asmaybe relevantormaterialtosuchinquiry;and (E)Tocauserevenueofficersandemployeestomakeacanvassfromtimetotime ofanyrevenuedistrictorregionandinquireafterandconcerningallpersons thereinwhomaybeliabletopayanyinternalrevenuetax,andallpersonsowning orhavingthecare,managementorpossessionofanyobjectwithrespecttowhicha taxisimposed. Theprovisionsoftheforegoingparagraphsnotwithstanding,nothinginthis SectionshallbeconstruedasgrantingtheCommissionertheauthoritytoinquire intobankdepositsotherthanasprovidedforinSection6(F)ofthisCode. SEC.6.PoweroftheCommissionertoMakeassessmentsandPrescribe additionalRequirementsforTaxAdministrationandEnforcement.

 (A)ExaminationofReturnsandDeterminationofTaxDue.Afterareturnhas beenfiledasrequiredundertheprovisionsofthisCode,theCommissionerorhis dulyauthorizedrepresentativemayauthorizetheexaminationofanytaxpayerand theassessmentofthecorrectamountoftax:Provided,however;Thatfailuretofilea returnshallnotpreventtheCommissionerfromauthorizingtheexaminationofany taxpayer. Anyreturn,statementofdeclarationfiledinanyofficeauthorizedtoreceivethe sameshallnotbewithdrawn:Provided,Thatwithinthree(3)yearsfromthedateof suchfiling,thesamemaybemodified,changed,oramended:Provided,further,That nonoticeforauditorinvestigationofsuchreturn,statementordeclarationhasin themeantimebeenactuallyserveduponthetaxpayer. (B)FailuretoSubmitRequiredReturns,Statements,Reportsandother Documents.Whenareportrequiredbylawasabasisfortheassessmentofany nationalinternalrevenuetaxshallnotbeforthcomingwithinthetimefixedbylaws orrulesandregulationsorwhenthereisreasontobelievethatanysuchreportis false,incompleteorerroneous,theCommissionershallassessthepropertaxonthe bestevidenceobtainable. Incaseapersonfailstofilearequiredreturnorotherdocumentatthetime prescribedbylaw,orwillfullyorotherwisefilesafalseorfraudulentreturnorother document,theCommissionershallmakeoramendthereturnfromhisown knowledgeandfromsuchinformationashecanobtainthroughtestimonyor otherwise,whichshallbeprimafaciecorrectandsufficientforalllegalpurposes. (C)AuthoritytoConductInventorytaking,surveillanceandtoPrescribe PresumptiveGrossSalesandReceipts.TheCommissionermay,atanytimeduring thetaxableyear,orderinventorytakingofgoodsofanytaxpayerasabasisfor determininghisinternalrevenuetaxliabilities,ormayplacethebusiness operationsofanyperson,naturalorjuridical,underobservationorsurveillanceif thereisreasontobelievethatsuchpersonisnotdeclaringhiscorrectincome,sales orreceiptsforinternalrevenuetaxpurposes.Thefindingsmaybeusedasthebasis forassessingthetaxesfortheothermonthsorquartersofthesameordifferent taxableyearsandsuchassessmentshallbedeemedprimafaciecorrect. Whenitisfoundthatapersonhasfailedtoissuereceiptsandinvoicesinviolationof therequirementsofSections113and237ofthisCode,orwhenthereisreasonto

believethatthebooksofaccountsorotherrecordsdonotcorrectlyreflectthe declarationsmadeortobemadeinareturnrequiredtobefiledunderthe provisionsofthisCode,theCommissioner,aftertakingintoaccountthesales, receipts,incomeorothertaxablebaseofotherpersonsengagedinsimilar businessesundersimilarsituationsorcircumstancesorafterconsideringother relevantinformationmayprescribeaminimumamountofsuchgrossreceipts,sales andtaxablebase,andsuchamountsoprescribedshallbeprimafaciecorrectfor purposesofdeterminingtheinternalrevenuetaxliabilitiesofsuchperson. (D)AuthoritytoTerminateTaxablePeriod.Whenitshallcometotheknowledgeof theCommissionerthatataxpayerisretiringfrombusinesssubjecttotax,oris intendingtoleavethePhilippinesortoremovehispropertytherefromortohideor concealhisproperty,orisperforminganyacttendingtoobstructtheproceedings forthecollectionofthetaxforthepastorcurrentquarteroryearortorenderthe sametotallyorpartlyineffectiveunlesssuchproceedingsarebegunimmediately, theCommissionershalldeclarethetaxperiodofsuchtaxpayerterminatedatany timeandshallsendthetaxpayeranoticeofsuchdecision,togetherwitharequest fortheimmediatepaymentofthetaxfortheperiodsodeclaredterminatedandthe taxfortheprecedingyearorquarter,orsuchportionthereofasmaybeunpaid,and saidtaxesshallbedueandpayableimmediatelyandshallbesubjecttoallthe penaltieshereafterprescribed,unlesspaidwithinthetimefixedinthedemand madebytheCommissioner. (E)AuthorityoftheCommissionertoPrescribeRealPropertyValues.The CommissionerisherebyauthorizedtodividethePhilippinesintodifferentzonesor areasandshall,uponconsultationwithcompetentappraisersbothfromtheprivate andpublicsectors,determinethefairmarketvalueofrealpropertieslocatedineach zoneorarea.Forpurposesofcomputinganyinternalrevenuetax,thevalueofthe propertyshallbe,whicheveristhehigherof: (1)thefairmarketvalueasdeterminedbytheCommissioner,or (2)thefairmarketvalueasshowninthescheduleofvaluesoftheProvincialand CityAssessors. (F)AuthorityoftheCommissionertoinquireintoBankDepositAccounts. NotwithstandinganycontraryprovisionofRepublicActNo.1405andothergeneral orspeciallaws,theCommissionerisherebyauthorizedtoinquireintothebank depositsof:

 (1)adecedenttodeterminehisgrossestate;and (2)anytaxpayerwhohasfiledanapplicationforcompromiseofhistaxliability underSec.204(A)(2)ofthisCodebyreasonoffinancialincapacitytopayhistax liability. Incaseataxpayerfilesanapplicationtocompromisethepaymentofhistax liabilitiesonhisclaimthathisfinancialpositiondemonstratesaclearinabilityto paythetaxassessed,hisapplicationshallnotbeconsideredunlessanduntilhe waivesinwritinghisprivilegeunderRepublicActNo.1405orunderothergeneral orspeciallaws,andsuchwaivershallconstitutetheauthorityoftheCommissioner toinquireintothebankdepositsofthetaxpayer. (G)AuthoritytoAccreditandRegisterTaxAgents.TheCommissionershall accreditandregister,basedontheirprofessionalcompetence,integrityandmoral fitness,individualsandgeneralprofessionalpartnershipsandtheirrepresentatives whoprepareandfiletaxreturns,statements,reports,protests,andotherpapers withorwhoappearbefore,theBureaufortaxpayers.Withinonehundredtwenty (120)daysfromJanuary1,1998,theCommissionershallcreatenationaland regionalaccreditationboards,themembersofwhichshallserveforthree(3)years, andshalldesignatefromamongtheseniorofficialsoftheBureau,one(1)chairman andtwo(2)membersforeachboard,subjecttosuchrulesandregulationsasthe SecretaryofFinanceshallpromulgateupontherecommendationofthe Commissioner. Individualsandgeneralprofessionalpartnershipsandtheirrepresentativeswhoare deniedaccreditationbytheCommissionerand/orthenationalandregional accreditationboardsmayappealsuchdenialtotheSecretaryofFinance,whoshall ruleontheappealwithinsixty(60)daysfromreceiptofsuchappeal.Failureofthe SecretaryofFinancetoruleontheAppealwithintheprescribedperiodshallbe deemedasapprovaloftheapplicationforaccreditationoftheappellant. (H)AuthorityoftheCommissionertoPrescribeAdditionalProceduralor DocumentaryRequirements.TheCommissionermayprescribethemannerof compliancewithanydocumentaryorproceduralrequirementinconnectionwith thesubmissionorpreparationoffinancialstatementsaccompanyingthetaxreturns.

 SEC.7.AuthorityoftheCommissionertoDelegatePower.TheCommissioner maydelegatethepowersvestedinhimunderthepertinentprovisionsofthisCode toanyorsuchsubordinateofficialswiththerankequivalenttoadivisionchiefor higher,subjecttosuchlimitationsandrestrictionsasmaybeimposedunderrules andregulationstobepromulgatedbytheSecretaryoffinance,upon recommendationoftheCommissioner:Provided,however,Thatthefollowing powersoftheCommissionershallnotbedelegated: (a)Thepowertorecommendthepromulgationofrulesandregulationsbythe SecretaryofFinance; (b)Thepowertoissuerulingsoffirstimpressionortoreverse,revokeormodify anyexistingrulingoftheBureau; (c)Thepowertocompromiseorabate,underSec.204(A)and(B)ofthisCode, anytaxliability:Provided,however,Thatassessmentsissuedbytheregionaloffices involvingbasicdeficiencytaxesofFivehundredthousandpesos(P500,000)orless, andminorcriminalviolations,asmaybedeterminedbyrulesandregulationstobe promulgatedbytheSecretaryoffinance,uponrecommendationofthe Commissioner,discoveredbyregionalanddistrictofficials,maybecompromisedby aregionalevaluationboardwhichshallbecomposedoftheRegionalDirectoras Chairman,theAssistantRegionalDirector,theheadsoftheLegal,Assessmentand CollectionDivisionsandtheRevenueDistrictOfficerhavingjurisdictionoverthe taxpayer,asmembers;and (d)Thepowertoassignorreassigninternalrevenueofficerstoestablishments wherearticlessubjecttoexcisetaxareproducedorkept. SEC.8.DutyoftheCommissionertoEnsuretheProvisionandDistributionof forms,Receipts,Certificates,andAppliances,andtheAcknowledgmentofPayment ofTaxes. (A)ProvisionandDistributiontoProperOfficials.Itshallbethedutyofthe Commissioner,amongotherthings,toprescribe,provide,anddistributetothe properofficialstherequisitelicensesinternalrevenuestamps,labelsallother

forms,certificates,bonds,records,invoices,books,receipts,instruments,appliances andapparatususedinadministeringthelawsfallingwithinthejurisdictionofthe Bureau.Forthispurpose,internalrevenuestamps,stripstampsandlabelsshallbe causedbytheCommissionertobeprintedwithadequatesecurityfeatures. Internalrevenuestamps,whetherofabarcodeorfusiondesign,shallbefirmlyand conspicuouslyaffixedoneachpackofcigarsandcigarettessubjecttoexcisetaxin themannerandformasprescribedbytheCommissioner,uponapprovalofthe SecretaryofFinance. (B)ReceiptsforPaymentMade.ItshallbethedutyoftheCommissionerorhisduly authorizedrepresentativeoranauthorizedagentbanktowhomanypaymentofany taxismadeundertheprovisionofthisCodetoacknowledgethepaymentofsuch tax,expressingtheamountpaidandtheparticularaccountforwhichsuchpayment wasmadeinaformandmannerprescribedthereforbytheCommissioner. SEC.9.InternalRevenueDistricts.WiththeapprovaloftheSecretaryof Finance,theCommissionershalldividethePhilippinesintosuchnumberofrevenue districtsasmayformtimetotimeberequiredforadministrativepurposes.Eachof thesedistrictsshallbeunderthesupervisionofaRevenueDistrictOfficer. SEC.10.RevenueRegionalDirector.Underrulesandregulations,policiesand standardsformulatedbytheCommissioner,withtheapprovaloftheSecretaryof Finance,theRevenueRegionaldirectorshall,withintheregionanddistrictoffices underhisjurisdiction,amongothers: (a)Implementlaws,policies,plans,programs,rulesandregulationsofthe departmentoragenciesintheregionalarea; (b)Administerandenforceinternalrevenuelaws,andrulesandregulations, includingtheassessmentandcollectionofallinternalrevenuetaxes,chargesand fees. (c)IssueLettersofauthorityfortheexaminationoftaxpayerswithintheregion;

(d)Provideeconomical,efficientandeffectiveservicetothepeopleinthearea; (e)Coordinatewithregionalofficesorotherdepartments,bureausandagencies inthearea; (f)Coordinatewithlocalgovernmentunitsinthearea; (g)Exercisecontrolandsupervisionovertheofficersandemployeeswithinthe region;and (h)Performsuchotherfunctionsasmaybeprovidedbylawandasmaybe delegatedbytheCommissioner. SEC.11.DutiesofRevenueDistrictOfficersandOtherInternalRevenueOfficers. ItshallbethedutyofeveryRevenueDistrictOfficerorotherinternalrevenue officersandemployeestoensurethatalllaws,andrulesandregulationsaffecting nationalinternalrevenuearefaithfullyexecutedandcompliedwith,andtoaidin theprevention,detectionandpunishmentoffraudsofdelinquenciesinconnection therewith. ItshallbethedutyofeveryRevenueDistrictOfficertoexaminetheefficiencyof allofficersandemployeesoftheBureauofInternalRevenueunderhissupervision, andtoreportinwritingtotheCommissioner,throughtheRegionalDirector,any neglectofduty,incompetency,delinquency,ormalfeasanceinofficeofanyinternal revenueofficerofwhichhemayobtainknowledge,withastatementofallthefacts andanyevidencesustainingeachcase. SEC.12.AgentsandDeputiesforCollectionofNationalInternalRevenueTaxes. ThefollowingareherebyconstitutedagentsoftheCommissioner: (a)TheCommissionerofCustomsandhissubordinateswithrespecttothe collectionofnationalinternalrevenuetaxesonimportedgoods;

(b)Theheadoftheappropriategovernmentofficeandhissubordinateswith respecttothecollectionofenergytax;and (c)BanksdulyaccreditedbytheCommissionerwithrespecttoreceiptof paymentsinternalrevenuetaxesauthorizedtobemadethrubank. Anyofficeroremployeeofanauthorizedagentbankassignedtoreceiveinternal revenuetaxpaymentsandtransmittaxreturnsordocumentstotheBureauof InternalRevenueshallbesubjecttothesamesanctionsandpenaltiesprescribedin Sections269and270ofthisCode. SEC.13.AuthorityofaRevenueOffices.subjecttotherulesandregulationsto beprescribedbytheSecretaryofFinance,uponrecommendationofthe Commissioner,aRevenueOfficerassignedtoperformassessmentfunctionsinany districtmay,pursuanttoaLetterofAuthorityissuedbytheRevenueRegional Director,examinetaxpayerswithinthejurisdictionofthedistrictinordertocollect thecorrectamountoftax,ortorecommendtheassessmentofanydeficiencytax dueinthesamemannerthatthesaidactscouldhavebeenperformedbythe RevenueRegionalDirectorhimself. SEC.14.AuthorityofOfficerstoAdministerOathsandTakeTestimony.The Commissioner,DeputyCommissioners,ServiceChiefs,AssistantServiceChiefs, RevenueRegionalDirectors,AssistantRevenueRegionalDirectors,Chiefsand AssistantChiefsofDivisions,RevenueDistrictOfficers,specialdeputiesofthe Commissioner,internalrevenueofficersandanyotheremployeeoftheBureau thereuntoespeciallydeputizedbytheCommissionershallhavethepowerto administeroathsandtotaketestimonyinanyofficialmatterorinvestigation conductedbythemregardingmatterswithinthejurisdictionoftheBureau. SEC.15.AuthorityofInternalRevenueOfficerstoMakeArrestsandSeizures. TheCommissioner,theDeputyCommissioners,theRevenueRegionalDirectors,the RevenueDistrictOfficersandotherinternalrevenueofficersshallhaveauthorityto makearrestsandseizuresfortheviolationofanypenallaw,ruleorregulation administeredbytheBureauofInternalRevenue.Anypersonsoarrestedshallbe forthwithbroughtbeforeacourt,theretobedealtwithaccordingtolaw.

SEC.16.AssignmentofInternalRevenueOfficersInvolvedinExciseTax FunctionstoEstablishmentsWhereArticlessubjecttoExciseTaxareProducedor Kept.TheCommissionershallemploy,assign,orreassigninternalrevenueofficers involvedinexcisetaxfunctions,asoftenastheexigenciesoftherevenueservice mayrequire,toestablishmentsorplaceswherearticlessubjecttoexcisetaxare producedorkept:Provided,Thataninternalrevenueofficerassignedtoanysuch establishmentshallinnocasestayinhisassignmentformorethantwo(2)years, subjecttorulesandregulationstobeprescribedbytheSecretaryofFinance,upon recommendationoftheCommissioner. SEC.17.AssignmentofInternalRevenueOfficersandOtherEmployeestoOther Duties.TheCommissionermay,subjecttotheprovisionsofSection16andthe lawsoncivilservice,aswellastherulesandregulationstobeprescribedbythe SecretaryofFinanceupontherecommendationoftheCommissioner,assignor reassigninternalrevenueofficersandemployeesoftheBureauofInternalRevenue, withoutchangeintheirofficialrankandsalary,tootherorspecialdutiesconnected withtheenforcementoradministrationoftherevenuelawsastheexigenciesofthe servicemayrequire:Provided,Thatinternalrevenueofficersassignedtoperform assessmentorcollectionfunctionshallnotremaininthesameassignmentformore thanthree(3)years;Provided,further,Thatassignmentofinternalrevenueofficers andemployeesoftheBureautospecialdutiesshallnotexceedone(1)year. SEC.18.ReportsofViolationofLaws.Whenaninternalrevenueofficer discoversevidenceofaviolationofthisCodeorofanylaw,ruleorregulations administeredbytheBureauofInternalRevenueofsuchcharacterastowarrantthe institutionofcriminalproceedings,heshallimmediatelyreportthefactstothe Commissionerthroughhisimmediatesuperior,givingthenameandaddressofthe offenderandthenamesofthewitnessesifpossible:Provided,Thatinurgentcases, theRevenueRegionaldirectororRevenueDistrictOfficer,asthecasemaybe,may sendthereporttothecorrespondingprosecutingofficerinthelattercase,acopyof hisreportshallbesenttotheCommissioner. SEC.19.ContentsofCommissioner'sAnnualReport.TheAnnualReportofthe CommissionershallcontaindetailedstatementsofthecollectionsoftheBureau withspecificationsofthesourcesofrevenuebytypeoftax,bymannerofpayment, byrevenueregionandbyindustrygroupanditsdisbursementsbyclassesof expenditures.

Incasetheactualcollectionexceedsorfallsshortoftargetassetintheannual nationalbudgetbyfifteenpercent(15%)ormore,theCommissionershallexplain thereasonforsuchexcessorshortfall. SEC.20.SubmissionofReportandPertinentInformationbytheCommissioner. (A)SubmissionofPertinentInformationtoCongress.TheprovisionofSection 270ofthisCodetothecontrarynotwithstanding,theCommissionershall,upon requestofCongressandinaidoflegislation,furnishitsappropriateCommittee pertinentinformationincludingbutnotlimitedto:industryaudits,collection performancedata,statusreportsincriminalactionsinitiatedagainstpersonsand taxpayer'sreturns:Provided,however,Thatanyreturnorreturninformationwhich canbeassociatedwith,orotherwiseidentify,directlyorindirectly,aparticular taxpayershallbefurnishedtheappropriateCommitteeofCongressonlywhen sittinginExecutiveSessionUnlesssuchtaxpayerotherwiseconsentsinwritingto suchdisclosure. (B)ReporttoOversightCommittee.TheCommissionershall,withreferenceto Section204ofthisCode,submittotheOversightCommitteereferredtoinSection 290hereof,throughtheChairmenoftheCommitteeonWaysandMeansofthe SenateandHouseofRepresentatives,areportontheexerciseofhispowers pursuanttothesaidsection,everysix(6)monthsofeachcalendaryear. SEC.21.SourcesofRevenue.Thefollowingtaxes,feesandchargesaredeemedto benationalinternalrevenuetaxes: (a)Incometax; (b)Estateanddonor'staxes; (c)Valueaddedtax; (d)Otherpercentagetaxes; (e)Excisetaxes; (f)Documentarystamptaxes;and (g)SuchothertaxesasareorhereaftermaybeimposedandcollectedbytheBureau ofInternalRevenue.

 TITLEII TAXONINCOME CHAPTERI DEFINITIONS SEC.22.DefinitionsWhenusedinthisTitle: (A)Theterm"person"meansanindividual,atrust,estateorcorporation. (B)Theterm"corporation"shallincludepartnerships,nomatterhowcreatedor organized,jointstockcompanies,jointaccounts(cuentasenparticipacion), association,orinsurancecompanies,butdoesnotincludegeneralprofessional partnershipsandajointventureorconsortiumformedforthepurposeof undertakingconstructionprojectsorengaginginpetroleum,coal,geothermaland otherenergyoperationspursuanttoanoperatingconsortiumagreementundera servicecontractwiththeGovernment."Generalprofessionalpartnerships"are partnershipsformedbypersonsforthesolepurposeofexercisingtheircommon profession,nopartoftheincomeofwhichisderivedfromengaginginanytradeor business. (C)Theterm"domestic",whenappliedtoacorporation,meanscreatedor organizedinthePhilippinesorunderitslaws. (D)Theterm"foreign",whenappliedtoacorporation,meansacorporation whichisnotdomestic.

(E)Theterm"nonresidentcitizen"means: (1)AcitizenofthePhilippineswhoestablishestothesatisfactionofthe Commissionerthefactofhisphysicalpresenceabroadwithadefiniteintentionto residetherein. (2)AcitizenofthePhilippineswholeavesthePhilippinesduringthetaxableyear toresideabroad,eitherasanimmigrantorforemploymentonapermanentbasis. (3)AcitizenofthePhilippineswhoworksandderivesincomefromabroadand whoseemploymentthereatrequireshimtobephysicallypresentabroadmostof thetimeduringthetaxableyear. (4)Acitizenwhohasbeenpreviouslyconsideredasnonresidentcitizenandwho arrivesinthePhilippinesatanytimeduringthetaxableyeartoresidepermanently inthePhilippinesshalllikewisebetreatedasanonresidentcitizenforthetaxable yearinwhichhearrivesinthePhilippineswithrespecttohisincomederivedfrom sourcesabroaduntilthedateofhisarrivalinthePhilippines. (5)ThetaxpayershallsubmitprooftotheCommissionertoshowhisintentionof leavingthePhilippinestoresidepermanentlyabroadortoreturntoandresidein thePhilippinesasthecasemaybeforpurposeofthisSection. (F)Theterm"residentalien"meansanindividualwhoseresidenceiswithinthe Philippinesandwhoisnotacitizenthereof. (G)Theterm"nonresidentalien"meansanindividualwhoseresidenceisnot withinthePhilippinesandwhoisnotacitizenthereof. (H)Theterm"residentforeigncorporation"appliestoaforeigncorporation engagedintradeorbusinesswithinthePhilippines.

(I)Theterm'nonresidentforeigncorporation'appliestoaforeigncorporation notengagedintradeorbusinesswithinthePhilippines. (J)Theterm"fiduciary"meansaguardian,trustee,executor,administrator, receiver,conservatororanypersonactinginanyfiduciarycapacityforanyperson. (K)Theterm"withholdingagent"meansanypersonrequiredtodeductand withholdanytaxundertheprovisionsofSection57. (L)Theterm"sharesofstock"shallincludesharesofstockofacorporation, warrantsand/oroptionstopurchasesharesofstock,aswellasunitsof participationinapartnership(exceptgeneralprofessionalpartnerships),jointstock companies,jointaccounts,jointventurestaxableascorporations,associationsand recreationoramusementclubs(suchasgolf,poloorsimilarclubs),andmutualfund certificates. (M)Theterm"shareholder"shallincludeholdersofashare/sofstock,warrant/s and/oroption/stopurchasesharesofstockofacorporation,aswellasaholderofa unitofparticipationinapartnership(exceptgeneralprofessionalpartnerships)ina jointstockcompany,ajointaccount,ataxablejointventure,amemberofan association,recreationoramusementclub(suchasgolf,poloorsimilarclubs)anda holderofamutualfundcertificate,amemberinanassociation,jointstockcompany, orinsurancecompany. (N)Theterm"taxpayer"meansanypersonsubjecttotaximposedbythisTitle. (O)Theterms"including"and"includes",whenusedinadefinitioncontainedin thisTitle,shallnotbedeemedtoexcludeotherthingsotherwisewithinthemeaning ofthetermdefined. (P)Theterm"taxableyear"meansthecalendaryear,orthefiscalyearending duringsuchcalendaryear,uponthebasisofwhichthenetincomeiscomputed underthisTitle.'Taxableyear'includes,inthecaseofareturnmadeforafractional partofayearundertheprovisionsofthisTitleorunderrulesandregulations prescribedbytheSecretaryofFinance,uponrecommendationofthecommissioner, theperiodforwhichsuchreturnismade.

 (Q)Theterm"fiscalyear"meansanaccountingperiodoftwelve(12)months endingonthelastdayofanymonthotherthanDecember. (R)Theterms"paidorincurred"and'paidoraccrued'shallbeconstrued accordingtothemethodofaccountinguponthebasisofwhichthenetincomeis computedunderthisTitle. (S)Theterm"tradeorbusiness"includestheperformanceofthefunctionsofa publicoffice. (T)Theterm"securities"meanssharesofstockinacorporationandrightsto subscribeforortoreceivesuchshares.Thetermincludesbonds,debentures,notes orcertificates,orotherevidenceorindebtedness,issuedbyanycorporation, includingthoseissuedbyagovernmentorpoliticalsubdivisionthereof,with interestcouponsorinregisteredform. (U)Theterm"dealerinsecurities"meansamerchantofstocksorsecurities, whetheranindividual,partnershiporcorporation,withanestablishedplaceof business,regularlyengagedinthepurchaseofsecuritiesandtheresalethereofto customers;thatis,onewho,asamerchant,buyssecuritiesandresellsthemto customerswithaviewtothegainsandprofitsthatmaybederivedtherefrom. (V)Theterm"bank"meanseverybankinginstitution,asdefinedinSection2of RepublicActNo.337,asamended,otherwiseknownastheGeneralbankingAct.A bankmayeitherbeacommercialbank,athriftbank,adevelopmentbank,arural bankorspecializedgovernmentbank. (W)Theterm"nonbankfinancialintermediary"meansafinancialintermediary, asdefinedinSection2(D)(C)ofRepublicActNo.337,asamended,otherwiseknown astheGeneralBankingAct,authorizedbytheBangkoSentralngPilipinas(BSP)to performquasibankingactivities. (X)Theterm"quasibankingactivities"meansborrowingfundsfromtwenty(20) ormorepersonalorcorporatelendersatanyonetime,throughtheissuance,

endorsement,oracceptanceofdebtinstrumentsofanykindotherthandepositsfor theborrower'sownaccount,orthroughtheissuanceofcertificatesofassignmentor similarinstruments,withrecourse,orofrepurchaseagreementsforpurposesof relendingorpurchasingreceivablesandothersimilarobligations:Provided, however,Thatcommercial,industrialandothernonfinancialcompanies,which borrowfundsthroughanyofthesemeansforthelimitedpurposeoffinancingtheir ownneedsortheneedsoftheiragentsordealers,shallnotbeconsideredas performingquasibankingfunctions. (Y)Theterm"depositsubstitutes"shallmeananalternativefromofobtaining fundsfromthepublic(theterm'public'meansborrowingfromtwenty(20)ormore individualorcorporatelendersatanyonetime)otherthandeposits,throughthe issuance,endorsement,oracceptanceofdebtinstrumentsfortheborrowersown account,forthepurposeofrelendingorpurchasingofreceivablesandother obligations,orfinancingtheirownneedsortheneedsoftheiragentordealer.These instrumentsmayinclude,butneednotbelimitedtobankers'acceptances, promissorynotes,repurchaseagreements,includingreverserepurchase agreementsenteredintobyandbetweentheBangkoSentralngPilipinas(BSP)and anyauthorizedagentbank,certificatesofassignmentorparticipationandsimilar instrumentswithrecourse:Provided,however,Thatdebtinstrumentsissuedfor interbankcallloanswithmaturityofnotmorethanfive(5)daystocoverdeficiency inreservesagainstdepositliabilities,includingthosebetweenoramongbanksand quasibanks,shallnotbeconsideredasdepositsubstitutedebtinstruments. (Z)Theterm"ordinaryincome"includesanygainfromthesaleorexchangeof propertywhichisnotacapitalassetorpropertydescribedinSection39(A)(1).Any gainfromthesaleorexchangeofpropertywhichistreatedorconsidered,under otherprovisionsofthisTitle,as'ordinaryincome'shallbetreatedasgainfromthe saleorexchangeofpropertywhichisnotacapitalassetasdefinedinSection 39(A)(1).Theterm'ordinaryloss'includesanylossfromthesaleorexchangeof propertywhichisnotacapitalasset.Anylossfromthesaleorexchangeofproperty whichistreatedorconsidered,underotherprovisionsofthisTitle,as'ordinaryloss' shallbetreatedaslossfromthesaleorexchangeofpropertywhichisnotacapital asset. (AA)Theterm"rankandfileemployees"shallmeanallemployeeswhoare holdingneithermanagerialnorsupervisorypositionasdefinedunderexisting provisionsoftheLaborCodeofthePhilippines,asamended.

(BB)Theterm"mutualfundcompany"shallmeananopenendandcloseend investmentcompanyasdefinedundertheInvestmentCompanyAct. (CC)Theterm"trade,businessorprofession"shallnotincludeperformanceof servicesbythetaxpayerasanemployee. (DD)Theterm"regionalorareaheadquarters"shallmeanabranchestablished inthePhilippinesbymultinationalcompaniesandwhichheadquartersdonotearn orderiveincomefromthePhilippinesandwhichactassupervisory, communicationsandcoordinatingcenterfortheiraffiliates,subsidiaries,or branchesintheAsiaPacificRegionandotherforeignmarkets. (EE)Theterm"regionaloperatingheadquarters"shallmeanabranch establishedinthePhilippinesbymultinationalcompanieswhichareengagedinany ofthefollowingservices:generaladministrationandplanning;businessplanning andcoordination;sourcingandprocurementofrawmaterialsandcomponents; corporatefinanceadvisoryservices;marketingcontrolandsalespromotion; trainingandpersonnelmanagement;logisticservices;researchanddevelopment servicesandproductdevelopment;technicalsupportandmaintenance;data processingandcommunications;andbusinessdevelopment. (FF)Theterm"longtermdepositorinvestmentcertificates"shallrefertocertificate oftimedepositorinvestmentintheformofsavings,commonorindividualtrust funds,depositsubstitutes,investmentmanagementaccountsandotherinvestments withamaturityperiodofnotlessthanfive(5)years,theformofwhichshallbe prescribedbytheBangkoSentralngPilipinas(BSP)andissuedbybanksonly(not bynonbankfinancialintermediariesandfinancecompanies)toindividualsin denominationsofTenthousandpesos(P10,000)andotherdenominationsasmay beprescribedbytheBS. CHAPTERII GENERALPRINCIPLES SEC.23.GeneralPrinciplesofIncomeTaxationinthePhilippines.Exceptwhen otherwiseprovidedinthisCode:

 (A)AcitizenofthePhilippinesresidingthereinistaxableonallincomederived fromsourceswithinandwithoutthePhilippines; (B)Anonresidentcitizenistaxableonlyonincomederivedfromsourceswithin thePhilippines; (C)AnindividualcitizenofthePhilippineswhoisworkingandderivingincome fromabroadasanoverseascontractworkeristaxableonlyonincomederivedfrom sourceswithinthePhilippines:Provided,Thataseamanwhoisacitizenofthe Philippinesandwhoreceivescompensationforservicesrenderedabroadasa memberofthecomplementofavesselengagedexclusivelyininternationaltrade shallbetreatedasanoverseascontractworker; (D)Analienindividual,whetheraresidentornotofthePhilippines,istaxable onlyonincomederivedfromsourceswithinthePhilippines; (E)Adomesticcorporationistaxableonallincomederivedfromsourceswithin andwithoutthePhilippines;and (F)Aforeigncorporation,whetherengagedornotintradeorbusinessinthe Philippines,istaxableonlyonincomederivedfromsourceswithinthePhilippines. CHAPTERIII TAXONINDIVIDUALS SEC.24.IncomeTaxRates.

(A)RatesofIncomeTaxonIndividualCitizenandIndividualResidentAlienofthe Philippines. (1)Anincometaxisherebyimposed: (a)OnthetaxableincomedefinedinSection31ofthisCode,otherthan incomesubjecttotaxunderSubsections(B),(C)and(D)ofthisSection,derivedfor eachtaxableyearfromallsourceswithinandwithoutthePhilippinesbeevery individualcitizenofthePhilippinesresidingtherein; (b)OnthetaxableincomedefinedinSection31ofthisCode,otherthan incomesubjecttotaxunderSubsections(B),(C)and(D)ofthisSection,derivedfor eachtaxableyearfromallsourceswithinthePhilippinesbyanindividualcitizenof thePhilippineswhoisresidingoutsideofthePhilippinesincludingoverseas contractworkersreferredtoinSubsection(C)ofSection23hereof;and (c)OnthetaxableincomedefinedinSection31ofthisCode,otherthan incomesubjecttotaxunderSubsections(b),(C)and(D)ofthisSection,derivedfor eachtaxableyearfromallsourceswithinthePhilippinesbyanindividualalienwho isaresidentofthePhilippines. Thetaxshallbecomputedinaccordancewithandattheratesestablishedin thefollowingschedule: NotoverP10,000....5% OverP10,000butnotoverP30,000P500+10%oftheexcess overP10,000 OverP30,000butnotoverP70,000P2,500+15%oftheexcess overP30,000

OverP70,000butnotoverP140,000..P8,500+20%oftheexcess overP70,000 OverP140,000butnotoverP250,000P22,500+25%oftheexcess overP140,000 OverP250,000butnotoverP500,000P50,000+30%oftheexcess overP250,000 OverP500,000.....P125,000+34%oftheexcessover P500,000in1998. Provided,ThateffectiveJanuary1,1999,thetopmarginalrateshallbethirty threepercent(33%)andeffectiveJanuary1,2000,thesaidrateshallbethirtytwo percent(32%). Formarriedindividuals,thehusbandandwife,subjecttotheprovisionof Section51(D)hereof,shallcomputeseparatelytheirindividualincometaxbasedon theirrespectivetotaltaxableincome:Provided,Thatifanyincomecannotbe definitelyattributedtooridentifiedasincomeexclusivelyearnedorrealizedby eitherofthespouses,thesameshallbedividedequallybetweenthespousesforthe purposeofdeterminingtheirrespectivetaxableincome. (B)RateofTaxonCertainPassiveIncome. (1)Interests,Royalties,Prizes,andOtherWinnings.Afinaltaxattherateof twentypercent(20%)isherebyimposedupontheamountofinterestfromany currencybankdepositandyieldoranyothermonetarybenefitfromdeposit substitutesandfromtrustfundsandsimilararrangements;royalties,excepton books,aswellasotherliteraryworksandmusicalcompositions,whichshallbe imposedafinaltaxoftenpercent(10%);prizes(exceptprizesamountingtoTen thousandpesos(P10,000)orlesswhichshallbesubjecttotaxunderSubsection(A) ofSection24;andotherwinnings(exceptPhilippineCharitySweepstakesandLotto winnings),derivedfromsourceswithinthePhilippines:Provided,however,That interestincomereceivedbyanindividualtaxpayer(exceptanonresident individual)fromadepositorybankundertheexpandedforeigncurrencydeposit

systemshallbesubjecttoafinalincometaxattherateofsevenandonehalfpercent (71/2%)ofsuchinterestincome:Provided,further,Thatinterestincomefrom longtermdepositorinvestmentintheformofsavings,commonorindividualtrust funds,depositsubstitutes,investmentmanagementaccountsandotherinvestments evidencedbycertificatesinsuchformprescribedbytheBangkoSentralngPilipinas (BSP)shallbeexemptfromthetaximposedunderthisSubsection:Provided,finally, Thatshouldtheholderofthecertificatepreterminatethedepositorinvestment beforethefifth(5th)year,afinaltaxshallbeimposedontheentireincomeandshall bedeductedandwithheldbythedepositorybankfromtheproceedsofthelong termdepositorinvestmentcertificatebasedontheremainingmaturitythereof: Four(4)yearstolessthanfive(5)years5%; Three(3)yearstolessthan(4)years12%;and Lessthanthree(3)years20% (2)Cashand/orPropertyDividendsAfinaltaxatthefollowingratesshallbe imposeduponthecashand/orpropertydividendsactuallyorconstructively receivedbyanindividualfromadomesticcorporationorfromajointstock company,insuranceormutualfundcompaniesandregionaloperatingheadquarters ofmultinationalcompanies,orontheshareofanindividualinthedistributablenet incomeaftertaxofapartnership(exceptageneralprofessionalpartnership)of whichheisapartner,orontheshareofanindividualinthenetincomeaftertaxof anassociation,ajointaccount,orajointventureorconsortiumtaxableasa corporationofwhichheisamemberorcoventurer: Sixpercent(6%)beginningJanuary1,1998; Eightpercent(8%)beginningJanuary1,1999;and Tenpercent(10%beginningJanuary1,2000.

Provided,however,Thatthetaxondividendsshallapplyonlyonincomeearned onorafterJanuary1,1998.Incomeformingpartofretainedearningsasof December31,1997shallnot,evenifdeclaredordistributedonorafterJanuary1, 1998,besubjecttothistax. (C)CapitalGainsfromSaleofSharesofStocknotTradedintheStockExchange. TheprovisionsofSection39(B)notwithstanding,afinaltaxattheratesprescribed belowisherebyimposeduponthenetcapitalgainsrealizedduringthetaxableyear fromthesale,barter,exchangeorotherdispositionofsharesofstockinadomestic corporation,exceptsharessold,ordisposedofthroughthestockexchange. NotoverP100,000........5% OnanyamountinexcessofP100,00010% (D)CapitalGainsfromSaleofRealProperty. (1)InGeneral.TheprovisionsofSection39(B)notwithstanding,afinaltaxof sixpercent(6%)basedonthegrosssellingpriceorcurrentfairmarketvalueas determinedinaccordancewithSection6(E)ofthisCode,whicheverishigher,is herebyimposeduponcapitalgainspresumedtohavebeenrealizedfromthesale, exchange,orotherdispositionofrealpropertylocatedinthePhilippines,classified ascapitalassets,includingpactoderetrosalesandotherformsofconditionalsales, byindividuals,includingestatesandtrusts:Provided,Thatthetaxliability,ifany,on gainsfromsalesorotherdispositionsofrealpropertytothegovernmentoranyof itspoliticalsubdivisionsoragenciesortogovernmentownedorcontrolled corporationsshallbedeterminedeitherunderSection24(A)orunderthis Subsection,attheoptionofthetaxpayer. (2)Exception.Theprovisionsofparagraph(1)ofthisSubsectiontothe contrarynotwithstanding,capitalgainspresumedtohavebeenrealizedfromthe saleordispositionoftheirprincipalresidencebynaturalpersons,theproceedsof whichisfullyutilizedinacquiringorconstructinganewprincipalresidencewithin eighteen(18)calendarmonthsfromthedateofsaleordisposition,shallbeexempt fromthecapitalgainstaximposedunderthisSubsection:Provided,Thatthe historicalcostoradjustedbasisoftherealpropertysoldordisposedshallbecarried overtothenewprincipalresidencebuiltoracquired:Provided,further,Thatthe

Commissionershallhavebeendulynotifiedbythetaxpayerwithinthirty(30)days fromthedateofsaleordispositionthroughaprescribedreturnofhisintentionto availofthetaxexemptionhereinmentioned:Provided,stillfurther,Thatthesaidtax exemptioncanonlybeavailedofonceeveryten(10)years:Provided,finally,thatif thereisnofullutilizationoftheproceedsofsaleordisposition,theportionofthe gainpresumedtohavebeenrealizedfromthesaleordispositionshallbesubjectto capitalgainstax.Forthispurpose,thegrosssellingpriceorfairmarketvalueatthe timeofsale,whicheverishigher,shallbemultipliedbyafractionwhichthe unutilizedamountbearstothegrosssellingpriceinordertodeterminethetaxable portionandthetaxprescribedunderparagraph(1)ofthisSubsectionshallbe imposedthereon. SEC.25.TaxonNonresidentAlienIndividual. (A)NonresidentAlienEngagedintradeorBusinessWithinthePhilippines. (1)InGeneral.Anonresidentalienindividualengagedintradeorbusinessin thePhilippinesshallbesubjecttoanincometaxinthesamemannerasan individualcitizenandaresidentalienindividual,ontaxableincomereceivedfrom allsourceswithinthePhilippines.Anonresidentalienindividualwhoshallcometo thePhilippinesandstaythereinforanaggregateperiodofmorethanonehundred eighty(180)daysduringanycalendaryearshallbedeemeda'nonresidentalien doingbusinessinthePhilippines'.Section22(G)ofthisCodenotwithstanding. (2)Cashand/orPropertyDividendsfromaDomesticCorporationorJointStock Company,orInsuranceorMutualFundCompanyorRegionalOperating HeadquartersorMultinationalCompany,orShareintheDistributableNetIncomeof aPartnership(ExceptaGeneralProfessionalPartnership),JointAccount,Joint VentureTaxableasaCorporationorAssociation.,Interests,Royalties,Prizes,and OtherWinnings.Cashand/orpropertydividendsfromadomesticcorporation,or fromajointstockcompany,orfromaninsuranceormutualfundcompanyorfroma regionaloperatingheadquartersofmultinationalcompany,ortheshareofa nonresidentalienindividualinthedistributablenetincomeaftertaxofa partnership(exceptageneralprofessionalpartnership)ofwhichheisapartner,or theshareofanonresidentalienindividualinthenetincomeaftertaxofan association,ajointaccount,orajointventuretaxableasacorporationofwhichheis amemberoracoventurer;interests;royalties(inanyform);andprizes(except prizesamountingtoTenthousandpesos(P10,000)orlesswhichshallbesubjectto taxunderSubsection(B)(1)ofSection24)andotherwinnings(exceptPhilippine CharitySweepstakesandLottowinnings);shallbesubjecttoanincometaxof

twentypercent(20%)onthetotalamountthereof:Provided,however,that royaltiesonbooksaswellasotherliteraryworks,androyaltiesonmusical compositionsshallbesubjecttoafinaltaxoftenpercent(10%)onthetotalamount thereof:Provided,further,Thatcinematographicfilmsandsimilarworksshallbe subjecttothetaxprovidedunderSection28ofthisCode:Provided,furthermore, Thatinterestincomefromlongtermdepositorinvestmentintheformofsavings, commonorindividualtrustfunds,depositsubstitutes,investmentmanagement accountsandotherinvestmentsevidencedbycertificatesinsuchformprescribed bytheBangkoSentralngPilipinas(BSP)shallbeexemptfromthetaximposed underthisSubsection:Provided,finally,thatshouldtheholderofthecertificatepre terminatethedepositorinvestmentbeforethefifth(5th)year,afinaltaxshallbe imposedontheentireincomeandshallbedeductedandwithheldbythedepository bankfromtheproceedsofthelongtermdepositorinvestmentcertificatebasedon theremainingmaturitythereof: Four(4)yearstolessthanfive(5)years5%; Three(3)yearstolessthanfour(4)years12%;and Lessthanthree(3)years20%. (3)CapitalGains.Capitalgainsrealizedfromsale,barterorexchangeofshares ofstockindomesticcorporationsnottradedthroughthelocalstockexchange,and realpropertiesshallbesubjecttothetaxprescribedunderSubsections(C)and(D) ofSection24. (B)NonresidentAlienIndividualNotEngagedinTradeorBusinessWithinthe Philippines.Thereshallbelevied,collectedandpaidforeachtaxableyearuponthe entireincomereceivedfromallsourceswithinthePhilippinesbyeverynonresident alienindividualnotengagedintradeorbusinesswithinthePhilippinesasinterest, cashand/orpropertydividends,rents,salaries,wages,premiums,annuities, compensation,remuneration,emoluments,orotherfixedordeterminableannualor periodicorcasualgains,profits,andincome,andcapitalgains,ataxequaltotwenty fivepercent(25%)ofsuchincome.Capitalgainsrealizedbyanonresidentalien individualnotengagedintradeorbusinessinthePhilippinesfromthesaleofshares ofstockinanydomesticcorporationandrealpropertyshallbesubjecttothe incometaxprescribedunderSubsections(C)and(D)ofSection24.

(C)AlienIndividualEmployedbyRegionalorAreaHeadquartersandRegional OperatingHeadquartersofMultinationalCompanies.Thereshallbelevied, collectedandpaidforeachtaxableyearuponthegrossincomereceivedbyevery alienindividualemployedbyregionalorareaheadquartersandregionaloperating headquartersestablishedinthePhilippinesbymultinationalcompaniesassalaries, wages,annuities,compensation,remunerationandotheremoluments,suchas honorariaandallowances,fromsuchregionalorareaheadquartersandregional operatingheadquarters,ataxequaltofifteenpercent(15%)ofsuchgrossincome: Provided,however,ThatthesametaxtreatmentshallapplytoFilipinosemployed andoccupyingthesamepositionasthoseofaliensemployedbythesemultinational companies.ForpurposesofthisChapter,theterm'multinationalcompany'meansa foreignfirmorentityengagedininternationaltradewithaffiliatesorsubsidiariesor branchofficesintheAsiaPacificRegionandotherforeignmarkets. (D)AlienIndividualEmployedbyOffshoreBankingUnits.Thereshallbelevied, collectedandpaidforeachtaxableyearuponthegrossincomereceivedbyevery alienindividualemployedbyoffshorebankingunitsestablishedinthePhilippines assalaries,wages,annuities,compensation,remunerationandotheremoluments, suchashonorariaandallowances,fromsuchoffshorebankingunits,ataxequalto fifteenpercent(15%)ofsuchgrossincome:Provided,however,Thatthesametax treatmentshallapplytoFilipinosemployedandoccupyingthesamepositionsas thoseofaliensemployedbytheseoffshorebankingunits. (E)AlienIndividualEmployedbyPetroleumServiceContractorandSubcontractor. AnAlienindividualwhoisapermanentresidentofaforeigncountrybutwhois employedandassignedinthePhilippinesbyaforeignservicecontractororbya foreignservicesubcontractorengagedinpetroleumoperationsinthePhilippines shallbeliabletoataxoffifteenpercent(15%)ofthesalaries,wages,annuities, compensation,remunerationandotheremoluments,suchashonorariaand allowances,receivedfromsuchcontractororsubcontractor:Provided,however, ThatthesametaxtreatmentshallapplytoaFilipinoemployedandoccupyingthe samepositionasanalienemployedbypetroleumservicecontractorand subcontractor. AnyincomeearnedfromallothersourceswithinthePhilippinesbythealien employeesreferredtounderSubsections(C),(D)and(E)hereofshallbesubjectto thepertinentincometax,asthecasemaybe,imposedunderthisCode. SEC.26.TaxLiabilityofMembersofGeneralProfessionalPartnerships.Ageneral professionalpartnershipassuchshallnotbesubjecttotheincometaximposed

underthisChapter.Personsengaginginbusinessaspartnersinageneral professionalpartnershipshallbeliableforincometaxonlyintheirseparateand individualcapacities. Forpurposesofcomputingthedistributiveshareofthepartners,thenetincomeof thepartnershipshallbecomputedinthesamemannerasacorporation. Eachpartnershallreportasgrossincomehisdistributiveshare,actuallyor constructivelyreceived,inthenetincomeofthepartnership. CHAPTERIV TAXONCORPORATIONS SEC.27.RatesofIncometaxonDomesticCorporations. (A)InGeneral.ExceptasotherwiseprovidedinthisCode,anincometaxofthirty fivepercent(35%)isherebyimposeduponthetaxableincomederivedduringeach taxableyearfromallsourceswithinandwithoutthePhilippinesbyevery corporation,asdefinedinSection22(B)ofthisCodeandtaxableunderthisTitleasa corporation,organizedin,orexistingunderthelawsofthePhilippines:Provided, ThateffectiveJanuary1,1998,therateofincometaxshallbethirtyfourpercent (34%);effectiveJanuary1,1999,therateshallbethirtythreepercent(33%);and effectiveJanuary1,2000andthereafter,therateshallbethirtytwopercent(32%). Inthecaseofcorporationsadoptingthefiscalyearaccountingperiod,thetaxable incomeshallbecomputedwithoutregardtothespecificdatewhenspecificsales, purchasesandothertransactionsoccur.Theirincomeandexpensesforthefiscal yearshallbedeemedtohavebeenearnedandspentequallyforeachmonthofthe period. Thereducedcorporateincometaxratesshallbeappliedontheamountcomputed bymultiplyingthenumberofmonthscoveredbythenewrateswithinthefiscalyear bythetaxableincomeofthecorporationfortheperiod,dividedbytwelve.

Provided,further,ThatthePresident,upontherecommendationoftheSecretaryof Finance,mayeffectiveJanuary1,2000,allowcorporationstheoptiontobetaxedat fifteenpercent(15%)ofgrossincomeasdefinedherein,afterthefollowing conditionshavebeensatisfied: (1)Ataxeffortratiooftwentypercent(20%)ofGrossNationalProduct(GNP); (2)Aratiooffortypercent(40%)ofincometaxcollectiontototaltaxrevenues; (3)AVATtaxeffortoffourpercent(4%)ofGNP;and (4)A0.9percent(0.9%)ratiooftheConsolidatedPublicSectorFinancialPosition (CPSFP)toGNP. Theoptiontobetaxedbasedongrossincomeshallbeavailableonlytofirmswhose ratioofcostofsalestogrosssalesorreceiptsfromallsourcesdoesnotexceedfifty fivepercent(55%). Theelectionofthegrossincometaxoptionbythecorporationshallbeirrevocable forthree(3)consecutivetaxableyearsduringwhichthecorporationisqualified underthescheme. ForpurposesofthisSection,theterm'grossincome'derivedfrombusinessshallbe equivalenttogrosssaleslesssalesreturns,discountsandallowancesandcostof goodssold."Costofgoodssold"shallincludeallbusinessexpensesdirectlyincurred toproducethemerchandisetobringthemtotheirpresentlocationanduse. Foratradingormerchandisingconcern,"costofgoods"soldshallincludethe invoicecostofthegoodssold,plusimportduties,freightintransportingthegoods totheplacewherethegoodsareactuallysold,includinginsurancewhilethegoods areintransit. Foramanufacturingconcern,"costofgoodsmanufacturedandsold"shallinclude allcostsofproductionoffinishedgoods,suchasrawmaterialsused,directlabor andmanufacturingoverhead,freightcost,insurancepremiumsandothercosts incurredtobringtherawmaterialstothefactoryorwarehouse. Inthecaseoftaxpayersengagedinthesaleofservice,'grossincome'meansgross receiptslesssalesreturns,allowancesanddiscounts.

 (B)ProprietaryEducationalInstitutionsandHospitals.Proprietaryeducational institutionsandhospitalswhicharenonprofitshallpayataxoftenpercent(10%) ontheirtaxableincomeexceptthosecoveredbySubsection(D)hereof:Provided, thatifthegrossincomefromunrelatedtrade,businessorotheractivityexceedsfifty percent(50%)ofthetotalgrossincomederivedbysucheducationalinstitutionsor hospitalsfromallsources,thetaxprescribedinSubsection(A)hereofshallbe imposedontheentiretaxableincome.ForpurposesofthisSubsection,theterm 'unrelatedtrade,businessorotheractivity'meansanytrade,businessorother activity,theconductofwhichisnotsubstantiallyrelatedtotheexerciseor performancebysucheducationalinstitutionorhospitalofitsprimarypurposeor function.A"Proprietaryeducationalinstitution"isanyprivateschoolmaintained andadministeredbyprivateindividualsorgroupswithanissuedpermittooperate fromtheDepartmentofEducation,CultureandSports(DECS),ortheCommission onHigherEducation(CHED),ortheTechnicalEducationandSkillsDevelopment Authority(TESDA),asthecasemaybe,inaccordancewithexistinglawsand regulations. (C)GovernmentownedorControlledCorporations,AgenciesorInstrumentalities. Theprovisionsofexistingspecialorgenerallawstothecontrarynotwithstanding, allcorporations,agencies,orinstrumentalitiesownedorcontrolledbythe Government,excepttheGovernmentServiceInsuranceSystem(GSIS),theSocial SecuritySystem(SSS),thePhilippineHealthInsuranceCorporation(PHIC),the PhilippineCharitySweepstakesOffice(PCSO)andthePhilippineAmusementand GamingCorporation(PAGCOR),shallpaysuchrateoftaxupontheirtaxableincome asareimposedbythisSectionuponcorporationsorassociationsengagedins similarbusiness,industry,oractivity. (D)RatesofTaxonCertainPassiveIncomes. (1)InterestfromDepositsandYieldoranyotherMonetaryBenefitfromDeposit SubstitutesandfromTrustFundsandSimilarArrangements,andRoyalties.Afinal taxattherateoftwentypercent(20%)isherebyimposedupontheamountof interestoncurrencybankdepositandyieldoranyothermonetarybenefitfrom depositsubstitutesandfromtrustfundsandsimilararrangementsreceivedby domesticcorporations,androyalties,derivedfromsourceswithinthePhilippines: Provided,however,Thatinterestincomederivedbyadomesticcorporationfroma depositorybankundertheexpandedforeigncurrencydepositsystemshallbe subjecttoafinalincometaxattherateofsevenandonehalfpercent(71/2%)of suchinterestincome. (2)CapitalGainsfromtheSaleofSharesofStockNotTradedintheStockExchange. Afinaltaxattheratesprescribedbelowshallbeimposedonnetcapitalgains

realizedduringthetaxableyearfromthesale,exchangeorotherdispositionof sharesofstockinadomesticcorporationexceptsharessoldordisposedofthrough thestockexchange: NotoverP100,000.....5% AmountinexcessofP100,000..10% (3)TaxonIncomeDerivedundertheExpandedForeignCurrencyDepositSystem. Incomederivedbyadepositorybankundertheexpandedforeigncurrencydeposit systemfromforeigncurrencytransactionswithlocalcommercialbanks,including branchesofforeignbanksthatmaybeauthorizedbytheBangkoSentralngPilipinas (BSP)totransactbusinesswithforeigncurrencydepositorysystemunitsandother depositorybanksundertheexpandedforeigncurrencydepositsystem,including interestincomefromforeigncurrencyloansgrantedbysuchdepositorybanks undersaidexpandedforeigncurrencydepositsystemtoresidents,shallbesubject toafinalincometaxattherateoftenpercent(10%)ofsuchincome. Anyincomeofnonresidents,whetherindividualsorcorporations,fromtransactions withdepositorybanksundertheexpandedsystemshallbeexemptfromincometax. (4)IntercorporateDividends.Dividendsreceivedbyadomesticcorporationfrom anotherdomesticcorporationshallnotbesubjecttotax. (5)CapitalGainsRealizedfromtheSale,ExchangeorDispositionofLandsand/or Buildings.Afinaltaxofsixpercent(6%)isherebyimposedonthegainpresumed tohavebeenrealizedonthesale,exchangeordispositionoflandsand/orbuildings whicharenotactuallyusedinthebusinessofacorporationandaretreatedas capitalassets,basedonthegrosssellingpriceoffairmarketvalueasdeterminedin accordancewithSection6(E)ofthisCode,whicheverishigher,ofsuchlandsand/or buildings. (E)MinimumCorporateIncomeTaxonDomesticCorporations. (1)ImpositionofTax.Aminimumcorporateincometaxoftwopercent(2%0of thegrossincomeasoftheendofthetaxableyear,asdefinedherein,ishereby imposedonacorporationtaxableunderthisTitle,beginningonthefourthtaxable yearimmediatelyfollowingtheyearinwhichsuchcorporationcommencedits businessoperations,whentheminimumincometaxisgreaterthanthetax computedunderSubsection(A)ofthisSectionforthetaxableyear. (2)CarryForwardofExcessMinimumTax.Anyexcessoftheminimum corporateincometaxoverthenormalincometaxascomputedunderSubsection(A) ofthisSectionshallbecarriedforwardandcreditedagainstthenormalincometax forthethree(3)immediatelysucceedingtaxableyears.

 (3)RelieffromtheMinimumCorporateIncomeTaxUnderCertainConditions.The SecretaryofFinanceisherebyauthorizedtosuspendtheimpositionofthe minimumcorporateincometaxonanycorporationwhichsufferslossesonaccount ofprolongedlabordispute,orbecauseofforcemajeure,orbecauseoflegitimate businessreverses. TheSecretaryofFinanceisherebyauthorizedtopromulgate,upon recommendationoftheCommissioner,thenecessaryrulesandregulationthatshall definethetermsandconditionsunderwhichhemaysuspendtheimpositionofthe minimumcorporateincometaxinameritoriouscase. (4)GrossIncomeDefined.Forpurposesofapplyingtheminimumcorporate incometaxprovidedunderSubsection(E)hereof,theterm'grossincome'shall meangrosssaleslesssalesreturns,discountsandallowancesandcostofgoodssold. "Costofgoodssold'shallincludeallbusinessexpensesdirectlyincurredtoproduce themerchandisetobringthemtotheirpresentlocationanduse. Foratradingormerchandisingconcern,"costofgoodssold'shallincludethe invoicecostofthegoodssold,plusimportduties,freightintransportingthegoods totheplacewherethegoodsareactuallysoldincludinginsurancewhilethegoods areintransit. Foramanufacturingconcern,costof"goodsmanufacturedandsold"shallinclude allcostsofproductionoffinishedgoods,suchasrawmaterialsused,directlabor andmanufacturingoverhead,freightcost,insurancepremiumsandothercosts incurredtobringtherawmaterialstothefactoryorwarehouse. Inthecaseoftaxpayersengagedinthesaleofservice,'grossincome'meansgross receiptslesssalesreturns,allowances,discountsandcostofservices."Costof services"shallmeanalldirectcostsandexpensesnecessarilyincurredtoprovide theservicesrequiredbythecustomersandclientsincluding(A)salariesand employeebenefitsofpersonnel,consultantsandspecialistsdirectlyrenderingthe serviceand(B)costoffacilitiesdirectlyutilizedinprovidingtheservicesuchas depreciationorrentalofequipmentusedandcostofsupplies:Provided,however, Thatinthecaseofbanks,"costofservices"shallincludeinterestexpense. SEC.28.RatesofIncomeTaxonForeignCorporations. (A)TaxonResidentForeignCorporations. (1)InGeneral.ExceptasotherwiseprovidedinthisCode,acorporation organized,authorized,orexistingunderthelawsofanyforeigncountry,engagedin tradeorbusinesswithinthePhilippines,shallbesubjecttoanincometaxequivalent

tothirtyfivepercent(35%)ofthetaxableincomederivedintheprecedingtaxable yearfromallsourceswithinthePhilippines:Provided,ThateffectiveJanuary1, 1998,therateofincometaxshallbethirtyfourpercent(34%);effectiveJanuary1, 1999,therateshallbethirtythreepercent(33%),andeffectiveJanuary1,2000and thereafter,therateshallbethirtytwopercent(32%). Inthecaseofcorporationsadoptingthefiscalyearaccountingperiod,thetaxable incomeshallbecomputedwithoutregardtothespecificdatewhensales,purchases andothertransactionsoccur.Theirincomeandexpensesforthefiscalyearshallbe deemedtohavebeenearnedandspentequallyforeachmonthoftheperiod. Thereducedcorporateincometaxratesshallbeappliedontheamountcomputed bymultiplyingthenumberofmonthscoveredbythenewrateswithinthefiscalyear bythetaxableincomeofthecorporationfortheperiod,dividedbytwelve. Provided,however,Thataresidentforeigncorporationshallbegrantedtheoption tobetaxedatfifteenpercent(15%)ongrossincomeunderthesameconditions,as providedinSection27(A). (2)MinimumCorporateIncomeTaxonResidentForeignCorporations.A minimumcorporateincometaxoftwopercent(2%)ofgrossincome,asprescribed underSection27(E)ofthisCode,shallbeimposed,underthesameconditions,ona residentforeigncorporationtaxableunderparagraph(1)ofthisSubsection. (3)InternationalCarrier.AninternationalcarrierdoingbusinessinthePhilippines shallpayataxoftwoandonehalfpercent(21/2%)onits"GrossPhilippine Billings"asdefinedhereunder: (a)InternationalAirCarrier."GrossPhilippineBillings"referstotheamountof grossrevenuederivedfromcarriageofpersons,excessbaggage,cargoandmail originatingfromthePhilippinesinacontinuousanduninterruptedflight, irrespectiveoftheplaceofsaleorissueandtheplaceofpaymentoftheticketor passagedocument:Provided,Thatticketsrevalidated,exchangedand/orindorsed toanotherinternationalairlineformpartoftheGrossPhilippineBillingsifthe passengerboardsaplaneinaportorpointinthePhilippines:Provided,further, ThatforaflightwhichoriginatesfromthePhilippines,buttransshipmentof passengertakesplaceatanyportoutsidethePhilippinesonanotherairline,onlythe aliquotportionofthecostoftheticketcorrespondingtothelegflownfromthe PhilippinestothepointoftransshipmentshallformpartofGrossPhilippineBillings. (b)InternationalShipping."GrossPhilippineBillings"meansgrossrevenue whetherforpassenger,cargoormailoriginatingfromthePhilippinesuptofinal destination,regardlessoftheplaceofsaleorpaymentsofthepassageorfreight documents.

(4)OffshoreBankingUnits.Theprovisionsofanylawtothecontrary notwithstanding,incomederivedbyoffshorebankingunitsauthorizedbythe BangkoSentralngPilipinas(BSP)totransactbusinesswithoffshorebankingunits, includinganyinterestincomederivedfromforeigncurrencyloansgrantedto residents,shallbesubjecttoafinalincometaxattherateoftenpercent(10%)of suchincome. Anyincomeofnonresidents,whetherindividualsorcorporations,fromtransactions withsaidoffshorebankingunitsshallbeexemptfromincometax. (5)TaxonBranchProfitsRemittances.Anyprofitremittedbyabranchtoitshead officeshallbesubjecttoataxoffifteen(15%)whichshallbebasedonthetotal profitsappliedorearmarkedforremittancewithoutanydeductionforthetax componentthereof(exceptthoseactivitieswhichareregisteredwiththePhilippine EconomicZoneAuthority).Thetaxshallbecollectedandpaidinthesamemanner asprovidedinSections57and58ofthisCode:provided,thatinterests,dividends, rents,royalties,includingremunerationfortechnicalservices,salaries,wages premiums,annuities,emolumentsorotherfixedordeterminableannual,periodicor casualgains,profits,incomeandcapitalgainsreceivedbyaforeigncorporation duringeachtaxableyearfromallsourceswithinthePhilippinesshallnotbetreated asbranchprofitsunlessthesameareeffectivelyconnectedwiththeconductofits tradeorbusinessinthePhilippines. (6)RegionalorAreaHeadquartersandRegionalOperatingHeadquartersof MultinationalCompanies. (a)RegionalorareaheadquartersasdefinedinSection22(DD)shallnotbesubject toincometax. (b)RegionaloperatingheadquartersasdefinedinSection22(EE)shallpayataxof tenpercent(10%)oftheirtaxableincome. (7)TaxonCertainIncomesReceivedbyaResidentForeignCorporation. (a)InterestfromDepositsandYieldoranyotherMonetaryBenefitfromDeposit Substitutes,TrustFundsandSimilarArrangementsandRoyalties.Interestfrom anycurrencybankdepositandyieldoranyothermonetarybenefitfromdeposit substitutesandfromtrustfundsandsimilararrangementsandroyaltiesderived fromsourceswithinthePhilippinesshallbesubjecttoafinalincometaxattherate oftwentypercent(20%)ofsuchinterest:Provided,however,Thatinterestincome derivedbyaresidentforeigncorporationfromadepositorybankunderthe expandedforeigncurrencydepositsystemshallbesubjecttoafinalincometaxat therateofsevenandonehalfpercent(71/2%)ofsuchinterestincome. (b)IncomeDerivedundertheExpandedForeignCurrencyDepositSystem.Income derivedbyadepositorybankundertheexpandedforeigncurrencydepositsystem fromforeigncurrencytransactionswithlocalcommercialbanksincludingbranches offoreignbanksthatmaybeauthorizedbytheBangkoSentralngPilipinas(BSP)to

transactbusinesswithforeigncurrencydepositsystemunits,includinginterest incomefromforeigncurrencyloansgrantedbysuchdepositorybanksundersaid expandedforeigncurrencydepositsystemtoresidents,shallbesubjecttoafinal incometaxattherateoftenpercent(10%)ofsuchincome. Anyincomeofnonresidents,whetherindividualsorcorporations,fromtransactions withdepositorybanksundertheexpandedsystemshallbeexemptfromincometax. (c)CapitalGainsfromSaleofSharesofStockNotTradedintheStockExchange.A finaltaxattheratesprescribedbelowisherebyimposeduponthenetcapitalgains realizedduringthetaxableyearfromthesale,barter,exchangeorotherdisposition ofsharesofstockinadomesticcorporationexceptsharessoldordisposedof throughthestockexchange: NotoverP100,000......5% OnanyamountinexcessofP100,000.10% (d)IntercorporateDividends.Dividendsreceivedbyaresidentforeigncorporation fromadomesticcorporationliabletotaxunderthisCodeshallnotbesubjecttotax underthisTitle. (B)TaxonNonresidentForeignCorporation. (1)InGeneral.ExceptasotherwiseprovidedinthisCode,aforeigncorporationnot engagedintradeorbusinessinthePhilippinesshallpayataxequaltothirtyfive percent(35%)ofthegrossincomereceivedduringeachtaxableyearfromall sourceswithinthePhilippines,suchasinterests,dividends,rents,royalties,salaries, premiums(exceptreinsurancepremiums),annuities,emolumentsorotherfixedor determinableannual,periodicorcasualgains,profitsandincome,andcapitalgains, exceptcapitalgainssubjecttotaxundersubparagraphs(C)and(d):Provided,That effective1,1998,therateofincometaxshallbethirtyfourpercent(34%);effective January1,1999,therateshallbethirtythreepercent(33%);and,effectiveJanuary 1,2000andthereafter,therateshallbethirtytwopercent(32%). (2)NonresidentCinematographicFilmOwner,LessororDistributor.A cinematographicfilmowner,lessor,ordistributorshallpayataxoftwentyfive percent(25%)ofitsgrossincomefromallsourceswithinthePhilippines. (3)NonresidentOwnerorLessorofVesselsCharteredbyPhilippineNationals.A nonresidentownerorlessorofvesselsshallbesubjecttoataxoffourandonehalf percent(41/2%)ofgrossrentals,leaseorcharterfeesfromleasesorchartersto Filipinocitizensorcorporations,asapprovedbytheMaritimeIndustryAuthority. (4)NonresidentOwnerorLessorofAircraft,MachineriesandOtherEquipment. Rentals,chartersandotherfeesderivedbyanonresidentlessorofaircraft, machineriesandotherequipmentshallbesubjecttoataxofsevenandonehalf percent(71/2%)ofgrossrentalsorfees.

(5)TaxonCertainIncomesReceivedbyaNonresidentForeignCorporation. (a)InterestonForeignLoans.Afinalwithholdingtaxattherateoftwentypercent (20%)isherebyimposedontheamountofinterestonforeignloanscontractedon orafterAugust1,1986; (b)IntercorporateDividends.Afinalwithholdingtaxattherateoffifteenpercent (15%)isherebyimposedontheamountofcashand/orpropertydividendsreceived fromadomesticcorporation,whichshallbecollectedandpaidasprovidedin Section57(A)ofthisCode,subjecttotheconditionthatthecountryinwhichthe nonresidentforeigncorporationisdomiciled,shallallowacreditagainstthetaxdue fromthenonresidentforeigncorporationtaxesdeemedtohavebeenpaidinthe Philippinesequivalenttotwentypercent(20%)for1997,nineteenpercent(19%) for1998,eighteenpercent(18%)for1999,andseventeenpercent(17%)thereafter, whichrepresentsthedifferencebetweentheregularincometaxofthirtyfive percent(35%)in1997,thirtyfourpercent(34%)in1998,andthirtythreepercent (33%)in1999,andthirtytwopercent(32%)thereafteroncorporationsandthe fifteenpercent(15%)taxondividendsasprovidedinthissubparagraph; (c)CapitalGainsfromSaleofSharesofStocknotTradedintheStockExchange.A finaltaxattheratesprescribedbelowisherebyimposeduponthenetcapitalgains realizedduringthetaxableyearfromthesale,barter,exchangeorotherdisposition ofsharesofstockinadomesticcorporation,exceptsharessold,ordisposedof throughthestockexchange: NotoverP100,000............5% OnanyamountinexcessofP100,00010% SEC.29.ImpositionofImproperlyAccumulatedEarningsTax. (A)InGeneral.InadditiontoothertaxesimposedbythisTitle,thereishereby imposedforeachtaxableyearontheimproperlyaccumulatedtaxableincomeof eachcorporationdescribedinSubsectionBhereof,animproperlyaccumulated earningstaxequaltotenpercent(10%)oftheimproperlyaccumulatedtaxable income. (B)TaxonCorporationsSubjecttoImproperlyAccumulatedEarningsTax. (1)InGeneral.Theimproperlyaccumulatedearningstaximposedinthepreceding Sectionshallapplytoeverycorporationformedoravailedforthepurposeof avoidingtheincometaxwithrespecttoitsshareholdersortheshareholdersofany

othercorporation,bypermittingearningsandprofitstoaccumulateinsteadofbeing dividedordistributed. (2)Exceptions.Theimproperlyaccumulatedearningstaxasprovidedforunder thisSectionshallnotapplyto: (a)Publiclyheldcorporations; (b)Banksandothernonbankfinancialintermediaries;and (c)Insurancecompanies. (C)EvidenceofPurposetoAvoidIncomeTax. (1)PrimaFacieEvidence.thefactthatanycorporationisamereholdingcompany orinvestmentcompanyshallbeprimafacieevidenceofapurposetoavoidthetax uponitsshareholdersormembers. (2)EvidenceDeterminativeofPurpose.Thefactthattheearningsorprofitsofa corporationarepermittedtoaccumulatebeyondthereasonableneedsofthe businessshallbedeterminativeofthepurposetoavoidthetaxuponits shareholdersormembersunlessthecorporation,bytheclearpreponderanceof evidence,shallprovetothecontrary. (D)ImproperlyAccumulatedTaxableIncome.ForpurposesofthisSection,the term'improperlyaccumulatedtaxableincome'meanstaxableincome'adjustedby: (1)Incomeexemptfromtax; (2)Incomeexcludedfromgrossincome; (3)Incomesubjecttofinaltax;and (4)Theamountofnetoperatinglosscarryoverdeducted; Andreducedbythesumof: (1)Dividendsactuallyorconstructivelypaid;and (2)Incometaxpaidforthetaxableyear. Provided,however,Thatforcorporationsusingthecalendaryearbasis,the accumulatedearningsundertaxshallnotapplyonimproperlyaccumulatedincome asofDecember31,1997.Inthecaseofcorporationsadoptingthefiscalyear accountingperiod,theimproperlyaccumulatedincomenotsubjecttothistax,shall bereckoned,asoftheendofthemonthcomprisingthetwelve(12)monthperiodof fiscalyear19971998.

(E)ReasonableNeedsoftheBusiness.ForpurposesofthisSection,theterm 'reasonableneedsofthebusiness'includesthereasonablyanticipatedneedsofthe business. SEC.30.ExemptionsfromTaxonCorporations.Thefollowingorganizationsshall notbetaxedunderthisTitleinrespecttoincomereceivedbythemassuch: (A)Labor,agriculturalorhorticulturalorganizationnotorganizedprincipallyfor profit; (B)Mutualsavingsbanknothavingacapitalstockrepresentedbyshares,and cooperativebankwithoutcapitalstockorganizedandoperatedformutualpurposes andwithoutprofit; (C)Abeneficiarysociety,orderorassociation,operatingfortheexclusivebenefitof thememberssuchasafraternalorganizationoperatingunderthelodgesystem,or mutualaidassociationoranonstockcorporationorganizedbyemployeesproviding forthepaymentoflife,sickness,accident,orotherbenefitsexclusivelytothe membersofsuchsociety,order,orassociation,ornonstockcorporationortheir dependents; (D)Cemeterycompanyownedandoperatedexclusivelyforthebenefitofits members; (E)Nonstockcorporationorassociationorganizedandoperatedexclusivelyfor religious,charitable,scientific,athletic,orculturalpurposes,orfortherehabilitation ofveterans,nopartofitsnetincomeorassetshallbelongtoorinurestothebenefit ofanymember,organizer,officeroranyspecificperson; (F)Businessleaguechamberofcommerce,orboardoftrade,notorganizedfor profitandnopartofthenetincomeofwhichinurestothebenefitofanyprivate stockholder,orindividual;

(G)Civicleagueororganizationnotorganizedforprofitbutoperatedexclusivelyfor thepromotionofsocialwelfare; (H)Anonstockandnonprofiteducationalinstitution; (I)Governmenteducationalinstitution; (J)Farmers'orothermutualtyphoonorfireinsurancecompany,mutualditchor irrigationcompany,mutualorcooperativetelephonecompany,orlikeorganization ofapurelylocalcharacter,theincomeofwhichconsistssolelyofassessments,dues, andfeescollectedfrommembersforthesolepurposeofmeetingitsexpenses;and (K)Farmers',fruitgrowers',orlikeassociationorganizedandoperatedasasales agentforthepurposeofmarketingtheproductsofitsmembersandturningbackto themtheproceedsofsales,lessthenecessarysellingexpensesonthebasisofthe quantityofproducefinishedbythem; Notwithstandingtheprovisionsintheprecedingparagraphs,theincomeof whateverkindandcharacteroftheforegoingorganizationsfromanyoftheir properties,realorpersonal,orfromanyoftheiractivitiesconductedforprofit regardlessofthedispositionmadeofsuchincome,shallbesubjecttotaximposed underthisCode. CHAPTERV COMPUTATIONOFTAXABLEINCOME SEC.31.TaxableIncomeDefined.Thetermtaxableincomemeansthepertinent itemsofgrossincomespecifiedinthisCode,lessthedeductionsand/orpersonal andadditionalexemptions,ifany,authorizedforsuchtypesofincomebythisCode orotherspeciallaws. CHAPTERVI COMPUTATIONOFGROSSINCOME

SEC.32.GrossIncome. (A)GeneralDefinition.ExceptwhenotherwiseprovidedinthisTitle,grossincome meansallincomederivedfromwhateversource,including(butnotlimitedto)the followingitems: (1)Compensationforservicesinwhateverformpaid,including,butnotlimitedto fees,salaries,wages,commissions,andsimilaritems; (2)Grossincomederivedfromtheconductoftradeorbusinessortheexerciseofa profession; (3)Gainsderivedfromdealingsinproperty; (4)Interests; (5)Rents; (6)Royalties; (7)Dividends; (8)Annuities; (9)Prizesandwinnings; (10)Pensions;and (11)Partner'sdistributivesharefromthenetincomeofthegeneralprofessional partnership. (B)ExclusionsfromGrossIncome.Thefollowingitemsshallnotbeincludedin grossincomeandshallbeexemptfromtaxationunderthistitle: (1)LifeInsurance.Theproceedsoflifeinsurancepoliciespaidtotheheirsor beneficiariesuponthedeathoftheinsured,whetherinasinglesumorotherwise, butifsuchamountsareheldbytheinsurerunderanagreementtopayinterest thereon,theinterestpaymentsshallbeincludedingrossincome. (2)AmountReceivedbyInsuredasReturnofPremium.Theamountreceived bytheinsured,asareturnofpremiumspaidbyhimunderlifeinsurance, endowment,orannuitycontracts,eitherduringthetermoratthematurityofthe termmentionedinthecontractoruponsurrenderofthecontract.

(3)Gifts,Bequests,andDevises.Thevalueofpropertyacquiredbygift,bequest, devise,ordescent:Provided,however,Thatincomefromsuchproperty,aswellas gift,bequest,deviseordescentofincomefromanyproperty,incasesoftransfersof dividedinterest,shallbeincludedingrossincome. (4)CompensationforInjuriesorSickness.amountsreceived,throughAccident orHealthInsuranceorunderWorkmen'sCompensationActs,ascompensationfor personalinjuriesorsickness,plustheamountsofanydamagesreceived,whetherby suitoragreement,onaccountofsuchinjuriesorsickness. (5)IncomeExemptunderTreaty.Incomeofanykind,totheextentrequiredby anytreatyobligationbindingupontheGovernmentofthePhilippines. (6)RetirementBenefits,Pensions,Gratuities,etc. (a)RetirementbenefitsreceivedunderRepublicActNo.7641andthose receivedbyofficialsandemployeesofprivatefirms,whetherindividualor corporate,inaccordancewithareasonableprivatebenefitplanmaintainedbythe employer:Provided,Thattheretiringofficialoremployeehasbeenintheserviceof thesameemployerforatleastten(10)yearsandisnotlessthanfifty(50)yearsof ageatthetimeofhisretirement:Provided,further,Thatthebenefitsgrantedunder thissubparagraphshallbeavailedofbyanofficialoremployeeonlyonce.For purposesofthisSubsection,theterm'reasonableprivatebenefitplan'meansa pension,gratuity,stockbonusorprofitsharingplanmaintainedbyanemployerfor thebenefitofsomeorallofhisofficialsoremployees,whereincontributionsare madebysuchemployerfortheofficialsoremployees,orboth,forthepurposeof distributingtosuchofficialsandemployeestheearningsandprincipalofthefund thusaccumulated,andwhereinitsisprovidedinsaidplanthatatnotimeshallany partofthecorpusorincomeofthefundbeusedfor,orbedivertedto,anypurpose otherthanfortheexclusivebenefitofthesaidofficialsandemployees. (b)Anyamountreceivedbyanofficialoremployeeorbyhisheirsfromthe employerasaconsequenceofseparationofsuchofficialoremployeefromthe serviceoftheemployerbecauseofdeathsicknessorotherphysicaldisabilityorfor anycausebeyondthecontrolofthesaidofficialoremployee.

(c)Theprovisionsofanyexistinglawtothecontrarynotwithstanding,social securitybenefits,retirementgratuities,pensionsandothersimilarbenefitsreceived byresidentornonresidentcitizensofthePhilippinesoralienswhocometoreside permanentlyinthePhilippinesfromforeigngovernmentagenciesandother institutions,privateorpublic. (d)Paymentsofbenefitsdueortobecomeduetoanypersonresidinginthe PhilippinesunderthelawsoftheUnitedStatesadministeredbytheUnitedStates VeteransAdministration. (e)BenefitsreceivedfromorenjoyedundertheSocialSecuritySystemin accordancewiththeprovisionsofRepublicActNo.8282. (f)BenefitsreceivedfromtheGSISunderRepublicActNo.8291,including retirementgratuityreceivedbygovernmentofficialsandemployees. (7)MiscellaneousItems. (a)IncomeDerivedbyForeignGovernment.Incomederivedfrom investmentsinthePhilippinesinloans,stocks,bondsorotherdomesticsecurities, orfrominterestondepositsinbanksinthePhilippinesby(i)foreigngovernments, (ii)financinginstitutionsowned,controlled,orenjoyingrefinancingfromforeign governments,and(iii)internationalorregionalfinancialinstitutionsestablishedby foreigngovernments. (b)IncomeDerivedbytheGovernmentoritsPoliticalSubdivisions.Income derivedfromanypublicutilityorfromtheexerciseofanyessentialgovernmental functionaccruingtotheGovernmentofthePhilippinesortoanypolitical subdivisionthereof. (c)PrizesandAwards.Prizesandawardsmadeprimarilyinrecognitionof religious,charitable,scientific,educational,artistic,literary,orcivicachievement butonlyif:

(i)Therecipientwasselectedwithoutanyactiononhisparttoenterthe contestorproceeding;and (ii)Therecipientisnotrequiredtorendersubstantialfutureservicesasa conditiontoreceivingtheprizeoraward. (d)PrizesandAwardsinSportsCompetition.Allprizesandawardsgranted toathletesinlocalandinternationalsportscompetitionsandtournamentswhether heldinthePhilippinesorabroadandsanctionedbytheirnationalsports associations. (e)13thMonthPayandOtherBenefits.Grossbenefitsreceivedbyofficials andemployeesofpublicandprivateentities:Provided,however,Thatthetotal exclusionunderthissubparagraphshallnotexceedThirtythousandpesos (P30,000)whichshallcover: (i)Benefitsreceivedbyofficialsandemployeesofthenationalandlocal governmentpursuanttoRepublicActNo.6686; (ii)BenefitsreceivedbyemployeespursuanttoPresidentialDecreeNo. 851,asamendedbyMemorandumOrderNo.28,datedAugust13,1986; (iii)Benefitsreceivedbyofficialsandemployeesnotcoveredby PresidentialdecreeNo.851,asamendedbyMemorandumOrderNo.28,dated August13,1986;and (iv)OtherbenefitssuchasproductivityincentivesandChristmasbonus: Provided,further,ThattheceilingofThirtythousandpesos(P30,000)maybe increasedthroughrulesandregulationsissuedbytheSecretaryofFinance,upon recommendationoftheCommissioner,afterconsideringamongothers,theeffecton thesameoftheinflationrateattheendofthetaxableyear. (f)GSIS,SSS,MedicareandOtherContributions.GSIS,SSS,Medicareand Pagibigcontributions,andunionduesofindividuals.

 (g)GainsfromtheSaleofBonds,DebenturesorotherCertificateof Indebtedness.Gainsrealizedfromthesameorexchangeorretirementofbonds, debenturesorothercertificateofindebtednesswithamaturityofmorethanfive(5) years. (h)GainsfromRedemptionofSharesinMutualFund.Gainsrealizedbythe investoruponredemptionofsharesofstockinamutualfundcompanyasdefinedin Section22(BB)ofthisCode. SEC.33.SpecialTreatmentofFringeBenefit. (A)ImpositionofTax.Afinaltaxofthirtyfourpercent(34%)effectiveJanuary1, 1998;thirtythreepercent(33%)effectiveJanuary1,1999;andthirtytwopercent (32%)effectiveJanuary1,2000andthereafter,isherebyimposedonthegrossed upmonetaryvalueoffringebenefitfurnishedorgrantedtotheemployee(except rankandfileemployeesasdefinedherein)bytheemployer,whetheranindividual oracorporation(unlessthefringebenefitisrequiredbythenatureof,ornecessary tothetrade,businessorprofessionoftheemployer,orwhenthefringebenefitisfor theconvenienceoradvantageoftheemployer).Thetaxhereinimposedispayable bytheemployerwhichtaxshallbepaidinthesamemannerasprovidedforunder Section57(A)ofthisCode.Thegrossedupmonetaryvalueofthefringebenefit shallbedeterminedbydividingtheactualmonetaryvalueofthefringebenefitby sixtysixpercent(66%)effectiveJanuary1,1998;sixtysevenpercent(67%) effectiveJanuary1,1999;andsixtyeightpercent(68%)effectiveJanuary1,2000 andthereafter:Provided,however,Thatfringebenefitfurnishedtoemployeesand taxableunderSubsections(B),(C),(D)and(E)ofSection25shallbetaxedatthe applicableratesimposedthereat:Provided,further,ThatthegrossedUpvalueof thefringebenefitshallbedeterminedbydividingtheactualmonetaryvalueofthe fringebenefitbythedifferencebetweenonehundredpercent(100%)andthe applicableratesofincometaxunderSubsections(B),(C),(D),and(E)ofSection25. (B)FringeBenefitdefined.ForpurposesofthisSection,theterm"fringebenefit" meansanygood,serviceorotherbenefitfurnishedorgrantedincashorinkindby anemployertoanindividualemployee(exceptrankandfileemployeesasdefined herein)suchas,butnotlimitedto,thefollowing: (1)Housing;

(2)Expenseaccount; (3)Vehicleofanykind; (4)Householdpersonnel,suchasmaid,driverandothers; (5)Interestonloanatlessthanmarketratetotheextentofthedifference betweenthemarketrateandactualrategranted; (6)Membershipfees,duesandotherexpensesbornebytheemployerforthe employeeinsocialandathleticclubsorothersimilarorganizations; (7)Expensesforforeigntravel; (8)Holidayandvacationexpenses; (9)Educationalassistancetotheemployeeorhisdependents;and (10)Lifeorhealthinsuranceandothernonlifeinsurancepremiumsorsimilar amountsinexcessofwhatthelawallows. (C)FringeBenefitsNotTaxable.Thefollowingfringebenefitsarenottaxable underthisSection: (1)fringebenefitswhichareauthorizedandexemptedfromtaxunderspecial laws; (2)Contributionsoftheemployerforthebenefitoftheemployeetoretirement, insuranceandhospitalizationbenefitplans; (3)Benefitsgiventotherankandfileemployees,whethergrantedundera collectivebargainingagreementornot;and (4)Deminimisbenefitsasdefinedintherulesandregulationstobe promulgatedbytheSecretaryofFinance,uponrecommendationofthe Commissioner. TheSecretaryofFinanceisherebyauthorizedtopromulgate,upon recommendationoftheCommissioner,suchrulesandregulationsasarenecessary tocarryoutefficientlyandfairlytheprovisionsofthisSection,takingintoaccount thepeculiarnatureandspecialneedofthetrade,businessorprofessionofthe employer.

CHAPTERVII ALLOWABLEDEDUCTIONS SEC.34.DeductionsfromGrossIncome.Exceptfortaxpayersearning compensationincomearisingfrompersonalservicesrenderedunderanemployer employeerelationshipwherenodeductionsshallbeallowedunderthisSection otherthanundersubsection(M)hereof,incomputingtaxableincomesubjectto incometaxunderSections24(A);25(A);26;27(A),(B)and(C);and28(A)(1), thereshallbeallowedthefollowingdeductionsfromgrossincome; (A)Expenses. (1)OrdinaryandNecessaryTrade,BusinessorProfessionalExpenses. (a)InGeneral.Thereshallbeallowedasdeductionfromgrossincomeallthe ordinaryandnecessaryexpensespaidorincurredduringthetaxableyearin carryingonorwhicharedirectlyattributableto,thedevelopment,management, operationand/orconductofthetrade,businessorexerciseofaprofession, including: (i)Areasonableallowanceforsalaries,wages,andotherformsofcompensationfor personalservicesactuallyrendered,includingthegrossedupmonetaryvalueof fringebenefitfurnishedorgrantedbytheemployertotheemployee:Provided,That thefinaltaximposedunderSection33hereofhasbeenpaid; (ii)Areasonableallowancefortravelexpenses,hereandabroad,whileawayfrom homeinthepursuitoftrade,businessorprofession; (iii)Areasonableallowanceforrentalsand/orotherpaymentswhicharerequired asaconditionforthecontinueduseorpossession,forpurposesofthetrade, businessorprofession,ofpropertytowhichthetaxpayerhasnottakenorisnot takingtitleorinwhichhehasnoequityotherthanthatofalessee,useror possessor; (iv)Areasonableallowanceforentertainment,amusementandrecreationexpenses duringthetaxableyear,thataredirectlyconnectedtothedevelopment, managementandoperationofthetrade,businessorprofessionofthetaxpayer,or thataredirectlyrelatedtoorinfurtheranceoftheconductofhisoritstrade, businessorexerciseofaprofessionnottoexceedsuchceilingsastheSecretaryof Financemay,byrulesandregulationsprescribe,uponrecommendationofthe Commissioner,takingintoaccounttheneedsaswellasthespecialcircumstances, natureandcharacteroftheindustry,trade,business,orprofessionofthetaxpayer:

Provided,Thatanyexpenseincurredforentertainment,amusementorrecreation thatiscontrarytolaw,moralspublicpolicyorpublicordershallinnocasebe allowedasadeduction. (b)SubstantiationRequirements.Nodeductionfromgrossincomeshallbeallowed underSubsection(A)hereofunlessthetaxpayershallsubstantiatewithsufficient evidence,suchasofficialreceiptsorotheradequaterecords:(i)theamountofthe expensebeingdeducted,and(ii)thedirectconnectionorrelationoftheexpense beingdeductedtothedevelopment,management,operationand/orconductofthe trade,businessorprofessionofthetaxpayer. (c)Bribes,KickbacksandOtherSimilarPayments.Nodeductionfromgrossincome shallbeallowedunderSubsection(A)hereofforanypaymentmade,directlyor indirectly,toanofficialoremployeeofthenationalgovernment,ortoanofficialor employeeofanylocalgovernmentunit,ortoanofficialoremployeeofa governmentownedorcontrolledcorporation,ortoanofficialoremployeeor representativeofaforeigngovernment,ortoaprivatecorporation,general professionalpartnership,orasimilarentity,ifthepaymentconstitutesabribeor kickback. (2)ExpensesAllowabletoPrivateEducationalInstitutions.Inadditiontothe expensesallowableasdeductionsunderthisChapter,aprivateeducational institution,referredtounderSection27(B)ofthisCode,mayatitsoptionelect either:(a)todeductexpendituresotherwiseconsideredascapitaloutlaysof depreciableassetsincurredduringthetaxableyearfortheexpansionofschool facilitiesor(b)todeductallowancefordepreciationthereofunderSubsection(F) hereof. (B)Interest. (1)InGeneral.Theamountofinterestpaidorincurredwithinataxableyearon indebtednessinconnectionwiththetaxpayer'sprofession,tradeorbusinessshall beallowedasdeductionfromgrossincome:Provided,however,Thatthetaxpayer's otherwiseallowabledeductionforinterestexpenseshallbereducedbyanamount equaltothefollowingpercentagesoftheinterestincomesubjectedtofinaltax: Fortyonepercent(41%)beginningJanuary1,1998; Thirtyninepercent(39%)beginningJanuary1,1999;and Thirtyeightpercent(38%)beginningJanuary1,2000; (2)Exceptions.Nodeductionshallbeallowedinrespectofinterestunderthe succeedingsubparagraphs: (a)Ifwithinthetaxableyearanindividualtaxpayerreportingincomeonthecash basisincursanindebtednessonwhichaninterestispaidinadvancethrough discountorotherwise:Provided,Thatsuchinterestshallbeallowedaadeductionin

theyeartheindebtednessispaid:Provided,further,Thatiftheindebtednessis payableinperiodicamortizations,theamountofinterestwhichcorrespondstothe amountoftheprincipalamortizedorpaidduringtheyearshallbeallowedas deductioninsuchtaxableyear; (b)Ifboththetaxpayerandthepersontowhomthepaymenthasbeenmadeoristo bemadearepersonsspecifiedunderSection36(B);or (c)Iftheindebtednessisincurredtofinancepetroleumexploration. (3)OptionalTreatmentofInterestExpense.Attheoptionofthetaxpayer,interest incurredtoacquirepropertyusedintradebusinessorexerciseofaprofessionmay beallowedasadeductionortreatedasacapitalexpenditure. (C)Taxes. (1)InGeneral.Taxespaidorincurredwithinthetaxableyearinconnection withthetaxpayer'sprofession,tradeorbusiness,shallbeallowedasdeduction, except (a)TheincometaxprovidedforunderthisTitle; (b)Incometaxesimposedbyauthorityofanyforeigncountry;butthisdeduction shallbeallowedinthecaseofataxpayerwhodoesnotsignifyinhisreturnhis desiretohavetoanyextentthebenefitsofparagraph(3)ofthissubsection(relating tocreditsfortaxesofforeigncountries); (c)Estateanddonor'staxes;and (d)Taxesassessedagainstlocalbenefitsofakindtendingtoincreasethevalueof thepropertyassessed. Provided,ThattaxesallowedunderthisSubsection,whenrefundedorcredited, shallbeincludedaspartofgrossincomeintheyearofreceipttotheextentofthe incometaxbenefitofsaiddeduction. (2)LimitationsonDeductions.Inthecaseofanonresidentalienindividual engagedintradeorbusinessinthePhilippinesandaresidentforeigncorporation, thedeductionsfortaxesprovidedinparagraph(1)ofthisSubsection(C)shallbe allowedonlyifandtotheextentthattheyareconnectedwithincomefromsources withinthePhilippines. (3)CreditAgainstTaxforTaxesofForeignCountries.Ifthetaxpayersignifiesinhis returnhisdesiretohavethebenefitsofthisparagraph,thetaximposedbythisTitle shallbecreditedwith:

(a)CitizenandDomesticCorporation.InthecaseofacitizenofthePhilippinesand ofadomesticcorporation,theamountofincometaxespaidorincurredduringthe taxableyeartoanyforeigncountry;and (b)PartnershipsandEstates.Inthecaseofanysuchindividualwhoisamemberof ageneralprofessionalpartnershiporabeneficiaryofanestateortrust,his proportionateshareofsuchtaxesofthegeneralprofessionalpartnershiporthe estateortrustpaidorincurredduringthetaxableyeartoaforeigncountry,ifhis distributiveshareoftheincomeofsuchpartnershiportrustisreportedfortaxation underthisTitle. Analienindividualandaforeigncorporationshallnotbeallowedthecreditsagainst thetaxforthetaxesofforeigncountriesallowedunderthisparagraph. (4)LimitationsonCredit.TheamountofthecredittakenunderthisSectionshall besubjecttoeachofthefollowinglimitations: (a)Theamountofthecreditinrespecttothetaxpaidorincurredtoanycountry shallnotexceedthesameproportionofthetaxagainstwhichsuchcreditistaken, whichthetaxpayer'staxableincomefromsourceswithinsuchcountryunderthis Titlebearstohisentiretaxableincomeforthesametaxableyear;and (b)Thetotalamountofthecreditshallnotexceedthesameproportionofthetax againstwhichsuchcreditistaken,whichthetaxpayer'staxableincomefrom sourceswithoutthePhilippinestaxableunderthisTitlebearstohisentiretaxable incomeforthesametaxableyear. (5)AdjustmentsonPaymentofIncurredTaxes.Ifaccruedtaxeswhenpaiddiffer fromtheamountsclaimedascreditsbythetaxpayer,orifanytaxpaidisrefunded inwholeorinpart,thetaxpayershallnotifytheCommissioner;whoshall redeterminetheamountofthetaxfortheyearoryearsaffected,andtheamountof taxdueuponsuchredetermination,ifany,shallbepaidbythetaxpayeruponnotice anddemandbytheCommissioner,ortheamountoftaxoverpaid,ifany,shallbe creditedorrefundedtothetaxpayer.Inthecaseofsuchataxincurredbutnotpaid, theCommissionerasaconditionprecedenttotheallowanceofthiscreditmay requirethetaxpayertogiveabondwithsuretiessatisfactorytoandtobeapproved bytheCommissionerinsuchsumashemayrequire,conditioneduponthepayment bythetaxpayerofanyamountoftaxfounddueuponanysuchredetermination.The bondhereinprescribedshallcontainsuchfurtherconditionsastheCommissioner mayrequire. (6)YearinWhichCreditTaken.ThecreditsprovidedforinSubsection(C)(3)of thisSectionmay,attheoptionofthetaxpayerandirrespectiveofthemethodof accountingemployedinkeepinghisbooks,betakenintheyearwhichthetaxesof theforeigncountrywereincurred,subject,however,totheconditionsprescribedin Subsection(C)(5)ofthisSection.Ifthetaxpayerelectstotakesuchcreditsinthe yearinwhichthetaxesoftheforeigncountryaccrued,thecreditsforallsubsequent

yearsshallbetakenuponthesamebasisandnoportionofanysuchtaxesshallbe allowedasadeductioninthesameoranysucceedingyear. (7)ProofofCredits.ThecreditsprovidedinSubsection(C)(3)hereofshallbe allowedonlyifthetaxpayerestablishestothesatisfactionoftheCommissionerthe following: (a)ThetotalamountofincomederivedfromsourceswithoutthePhilippines; (b)Theamountofincomederivedfromeachcountry,thetaxpaidorincurredto whichisclaimedasacreditundersaidparagraph,suchamounttobedetermined underrulesandregulationsprescribedbytheSecretaryofFinance;and (c)Allotherinformationnecessaryfortheverificationandcomputationofsuch credits. (D)Losses. (1)InGeneral.Lossesactuallysustainedduringthetaxableyearandnot compensatedforbyinsuranceorotherformsofindemnityshallbeallowedas deductions: (a)Ifincurredintrade,professionorbusiness; (b)Ofpropertyconnectedwiththetrade,businessorprofession,ifthelossarises fromfires,storms,shipwreck,orothercasualties,orfromrobbery,theftor embezzlement. TheSecretaryofFinance,uponrecommendationoftheCommissioner,ishereby authorizedtopromulgaterulesandregulationsprescribing,amongotherthings,the timeandmannerbywhichthetaxpayershallsubmitadeclarationoflosssustained fromcasualtyorfromrobbery,theftorembezzlementduringthetaxableyear: Provided,however,Thatthetimelimittobesoprescribedintherulesand regulationsshallnotbelessthanthirty(30)daysnormorethanninety(90)days fromthedateofdiscoveryofthecasualtyorrobbery,theftorembezzlementgiving risetotheloss. (c)NolossshallbeallowedasadeductionunderthisSubsectionifatthetimeofthe filingofthereturn,suchlosshasbeenclaimedasadeductionforestatetaxpurposes intheestatetaxreturn. (2)ProofofLoss.Inthecaseofanonresidentalienindividualorforeign corporation,thelossesdeductibleshallbethoseactuallysustainedduringtheyear incurredinbusiness,tradeorexerciseofaprofessionconductedwithinthe Philippines,whensuchlossesarenotcompensatedforbyinsuranceorotherforms ofindemnity.TheSecretaryofFinance,uponrecommendationoftheCommissioner, isherebyauthorizedtopromulgaterulesandregulationsprescribing,amongother things,thetimeandmannerbywhichthetaxpayershallsubmitadeclarationofloss sustainedfromcasualtyorfromrobbery,theftorembezzlementduringthetaxable

year:Provided,Thatthetimetobesoprescribedintherulesandregulationsshall notbelessthanthirty(30)daysnormorethanninety(90)daysfromthedateof discoveryofthecasualtyorrobbery,theftorembezzlementgivingrisetotheloss; and (3)NetOperatingLossCarryOver.Thenetoperatinglossofthebusinessor enterpriseforanytaxableyearimmediatelyprecedingthecurrenttaxableyear, whichhadnotbeenpreviouslyoffsetasdeductionfromgrossincomeshallbe carriedoverasadeductionfromgrossincomeforthenextthree(3)consecutive taxableyearsimmediatelyfollowingtheyearofsuchloss:Provided,however,That anynetlossincurredinataxableyearduringwhichthetaxpayerwasexemptfrom incometaxshallnotbeallowedasadeductionunderthisSubsection:Provided, further,Thatanetoperatinglosscarryovershallbeallowedonlyiftherehasbeen nosubstantialchangeintheownershipofthebusinessorenterpriseinthat (i)Notlessthanseventyfivepercent(75%)innominalvalueofoutstandingissued shares.,ifthebusinessisinthenameofacorporation,isheldbyoronbehalfofthe samepersons;or (ii)Notlessthanseventyfivepercent(75%)ofthepaidupcapitalofthe corporation,ifthebusinessisinthenameofacorporation,isheldbyoronbehalfof thesamepersons. Forpurposesofthissubsection,theterm"notoperatingloss"shallmeantheexcess ofallowabledeductionovergrossincomeofthebusinessinataxableyear. Provided,Thatforminesotherthanoilandgaswells,anetoperatinglosswithout thebenefitofincentivesprovidedforunderExecutiveOrderNo.226,asamended, otherwiseknownastheOmnibusInvestmentsCodeof1987,incurredinanyofthe firstten(10)yearsofoperationmaybecarriedoverasadeductionfromtaxable incomeforthenextfive(5)yearsimmediatelyfollowingtheyearofsuchloss.The entireamountofthelossshallbecarriedovertothefirstofthefive(5)taxable yearsfollowingtheloss,andanyportionofsuchlosswhichexceeds,thetaxable incomeofsuchfirstyearshallbedeductedinlikemannerformthetaxableincome ofthenextremainingfour(4)years. (4)CapitalLosses. (a)Limitation.LossfromsalesorExchangesofcapitalassetsshallbeallowedonly totheextentprovidedinSection39. (b)SecuritiesBecomingWorthless.IfsecuritiesasdefinedinSection22(T) becomeworthlessduringthetaxableyearandarecapitalassets,thelossresulting therefromshall,forpurposesofthisTitle,beconsideredasalossfromthesaleor exchange,onthelastdayofsuchtaxableyear,ofcapitalassets. (5)LossesFromWashSalesofStockorSecurities.Lossesfrom"washsales"of stockorsecuritiesasprovidedinSection38.

(6)WageringLosses.Lossesfromwageringtransactionsshallballowedonlytothe extentofthegainsfromsuchtransactions. (7)AbandonmentLosses. (a)Intheeventacontractareawherepetroleumoperationsareundertakenis partiallyorwhollyabandoned,allaccumulatedexplorationanddevelopment expenditurespertainingtheretoshallbeallowedasadeduction:Provided,That accumulatedexpendituresincurredinthatareapriortoJanuary1,1979shallbe allowedasadeductiononlyfromanyincomederivedfromthesamecontractarea. Inallcases,noticesofabandonmentshallbefiledwiththeCommissioner. (b)Incaseaproducingwellissubsequentlyabandoned,theunamortizedcosts thereof,aswellastheundepreciatedcostsofequipmentdirectlyusedtherein,shall beallowedasadeductionintheyearsuchwell,equipmentorfacilityisabandoned bythecontractor:Provided,Thatifsuchabandonedwellisreenteredand productionisresumed,orifsuchequipmentorfacilityisrestoredintoservice,the saidcostsshallbeincludedaspartofgrossincomeintheyearofresumptionor restorationandshallbeamortizedordepreciated,asthecasemaybe. (E)BadDebts. (1)InGeneral.Debtsduetothetaxpayeractuallyascertainedtobeworthlessand chargedoffwithinthetaxableyearexceptthosenotconnectedwithprofession, tradeorbusinessandthosesustainedinatransactionenteredintobetweenparties mentionedunderSection36(B)ofthisCode:Provided,Thatrecoveryofbaddebts previouslyallowedasdeductionintheprecedingyearsshallbeincludedaspartof thegrossincomeintheyearofrecoverytotheextentoftheincometaxbenefitof saiddeduction. (2)SecuritiesBecomingWorthless.Ifsecurities,asdefinedinSection22(T),are ascertainedtobeworthlessandchargedoffwithinthetaxableyearandarecapital assets,thelossresultingtherefromshall,inthecaseofataxpayerotherthanabank ortrustcompanyincorporatedunderthelawsofthePhilippinesasubstantialpart ofwhosebusinessisthereceiptofdeposits,forthepurposeofthisTitle,be consideredasalossfromthesaleorexchange,onthelastdayofsuchtaxableyear, ofcapitalassets. (F)Depreciation. (1)GeneralRule.Thereshallbeallowedasadepreciationdeductionareasonable allowancefortheexhaustion,wearandtear(includingreasonableallowancefor obsolescence)ofpropertyusedinthetradeorbusiness.Inthecaseofpropertyheld byonepersonforlifewithremaindertoanotherperson,thedeductionshallbe computedasifthelifetenantweretheabsoluteownerofthepropertyandshallbe allowedtothelifetenant.Inthecaseofpropertyheldintrust,theallowable deductionshallbeapportionedbetweentheincomebeneficiariesandthetrustees

inaccordancewiththepertinentprovisionsoftheinstrumentcreatingthetrust,or intheabsenceofsuchprovisions,onthebasisofthetrustincomeallowabletoeach. (2)UseofCertainMethodsandRates.Theterm"reasonableallowance"asusedin theprecedingparagraphshallinclude,butnotlimitedto,anallowancecomputedin accordancewithrulesandregulationsprescribedbytheSecretaryofFinance,upon recommendationoftheCommissioner,underanyofthefollowingmethods: (a)Thestraightlinemethod; (b)Decliningbalancemethod,usingaratenotexceedingtwicetheratewhich wouldhavebeenusedhadtheannualallowancebeencomputedunderthemethod describedinSubsection(F)(1); (c)Thesumoftheyearsdigitmethod;and (d)anyothermethodwhichmaybeprescribedbytheSecretaryofFinanceupon recommendationoftheCommissioner. (3)AgreementastoUsefulLifeonWhichDepreciationRateisBased.Whereunder rulesandregulationsprescribedbytheSecretaryofFinanceuponrecommendation oftheCommissioner,thetaxpayerandtheCommissionerhaveenteredintoan agreementinwritingspecificallydealingwiththeusefullifeandrateofdepreciation ofanyproperty,theratesoagreeduponshallbebindingonboththetaxpayerand thenationalGovernmentintheabsenceoffactsandcircumstancesnottakeninto considerationduringtheadoptionofsuchagreement.Theresponsibilityof establishingtheexistenceofsuchfactsandcircumstancesshallrestwiththeparty initiatingthemodification.Anychangeintheagreedrateandusefullifeofthe depreciablepropertyasspecifiedintheagreementshallnotbeeffectivefortaxable yearspriortothetaxableyearinwhichnoticeinwritingbycertifiedmailor registeredmailisservedbythepartyinitiatingsuchchangetotheotherpartytothe agreement: Provided,however,thatwherethetaxpayerhasadoptedsuchusefullifeand depreciationrateforanydepreciableandclaimedthedepreciationexpensesas deductionfromhisgrossincome,withoutanywrittenobjectiononthepartofthe Commissionerorhisdulyauthorizedrepresentatives,theaforesaidusefullifeand depreciationratesoadoptedbythetaxpayerfortheaforesaiddepreciableasset shallbeconsideredbindingforpurposesofthisSubsection. (4)DepreciationofPropertiesUsedinPetroleumOperations.Anallowancefor depreciationinrespectofallpropertiesdirectlyrelatedtoproductionofpetroleum initiallyplacedinserviceinataxableyearshallbeallowedunderthestraightlineor decliningbalancemethodofdepreciationattheoptionoftheservicecontractor. However,iftheservicecontractorinitiallyelectsthedecliningbalancemethod,it mayatanysubsequentdate,shifttothestraightlinemethod.

Theusefullifeofpropertiesusedinorrelatedtoproductionofpetroleumshallbe ten(10)yearsofsuchshorterlifeasmaybepermittedbytheCommissioner. Propertiesnotuseddirectlyintheproductionofpetroleumshallbedepreciated underthestraightlinemethodonthebasisofanestimatedusefullifeoffive(5) years. (5)DepreciationofPropertiesUsedinMiningOperations.anallowancefor depreciationinrespectofallpropertiesusedinminingoperationsotherthan petroleumoperations,shallbecomputedasfollows: (a)Atthenormalrateofdepreciationiftheexpectedlifeisten(10)yearsorless;or (b)Depreciatedoveranynumberofyearsbetweenfive(5)yearsandtheexpected lifeifthelatterismorethanten(10)years,andthedepreciationthereonallowedas deductionfromtaxableincome:Provided,Thatthecontractornotifiesthe Commissioneratthebeginningofthedepreciationperiodwhichdepreciationrate allowedbythisSectionwillbeused. (6)DepreciationDeductiblebyNonresidentAliensEngagedinTradeorBusinessor ResidentForeignCorporations.Inthecaseofanonresidentalienindividual engagedintradeorbusinessorresidentforeigncorporation,areasonable allowanceforthedeteriorationofPropertyarisingoutofitsuseoremploymentor itsnonuseinthebusinesstradeorprofessionshallbepermittedonlywhensuch propertyislocatedinthePhilippines. (G)DepletionofOilandGasWellsandMines. (1)InGeneral.Inthecaseofoilandgaswellsormines,areasonableallowancefor depletionoramortizationcomputedinaccordancewiththecostdepletionmethod shallbegrantedunderrulesandregulationstobeprescribedbytheSecretaryof finance,uponrecommendationoftheCommissioner.Provided,Thatwhenthe allowancefordepletionshallequalthecapitalinvestednofurtherallowanceshall begranted:Provided,further,Thatafterproductionincommercialquantitieshas commenced,certainintangibleexplorationanddevelopmentdrillingcosts:(a)shall bedeductibleintheyearincurredifsuchexpendituresareincurredfornon producingwellsand/ormines,or(b)shallbedeductibleinfullintheyearpaidor incurredorattheelectionofthetaxpayer,maybecapitalizedandamortizedifsuch expendituresincurredareforproducingwellsand/orminesinthesamecontract area. "Intangiblecostsinpetroleumoperations"referstoanycostincurredinpetroleum operationswhichinitselfhasnosalvagevalueandwhichisincidentaltoand necessaryforthedrillingofwellsandpreparationofwellsfortheproductionof petroleum:Provided,Thatsaidcostsshallnotpertaintotheacquisitionor improvementofpropertyofacharactersubjecttotheallowancefordepreciation exceptthattheallowancesfordepreciationonsuchpropertyshallbedeductible underthisSubsection.

Anyintangibleexploration,drillinganddevelopmentexpensesallowedasa deductionincomputingtaxableincomeduringtheyearshallnotbetakeninto considerationincomputingtheadjustedcostbasisforthepurposeofcomputing allowablecostdepletion. (2)ElectiontoDeductExplorationandDevelopmentExpenditures.Incomputing taxableincomefromminingoperations,thetaxpayermayathisoption,deduct explorationanddevelopmentexpendituresaccumulatedascostoradjustedbasis forcostdepletionasofdateofprospecting,aswellasexplorationanddevelopment expenditurespaidorincurredduringthetaxableyear:Provided,Thattheamount deductibleforexplorationanddevelopmentexpendituresshallnotexceedtwenty fivepercent(25%)ofthenetincomefromminingoperationscomputedwithoutthe benefitofanytaxincentivesunderexistinglaws.Theactualexplorationand developmentexpendituresminustwentyfivepercent(25%)ofthenetincomefrom miningshallbecarriedforwardtothesucceedingyearsuntilfullydeducted. Theelectionbythetaxpayertodeducttheexplorationanddevelopment expendituresisirrevocableandshallbebindinginsucceedingtaxableyears. "Netincomefromminingoperations",asusedinthisSubsection,shallmeangross incomefromoperationsless"allowabledeductions"whicharenecessaryorrelated tominingoperations."Allowabledeductions"shallincludemining,millingand marketingexpenses,anddepreciationofpropertiesdirectlyusedinthemining operations.Thisparagraphshallnotapplytoexpendituresfortheacquisitionor improvementofpropertyofacharacterwhichissubjecttotheallowancefor depreciation. Innocaseshallthisparagraphapplywithrespecttoamountspaidorincurredfor theexplorationanddevelopmentofoilandgas. Theterm"explorationexpenditures"meansexpenditurespaidorincurredforthe purposeofascertainingtheexistence,location,extentorqualityofanydepositof oreorothermineral,andpaidorincurredbeforethebeginningofthedevelopment stageofthemineordeposit. Theterm"developmentexpenditures"meansexpenditurespaidorincurredduring thedevelopmentstageofthemineorothernaturaldeposits.Thedevelopmentstage ofamineorothernaturaldepositshallbeginatthetimewhendepositsoforeor othermineralsareshowntoexistinsufficientcommercialquantityandqualityand shallenduponcommencementofactualcommercialextraction. (3)DepletionofOilandGasWellsandMinesDeductiblebyaNonresidentAlien individualorForeignCorporation.Inthecaseofanonresidentalienindividual engagedintradeorbusinessinthePhilippinesoraresidentforeigncorporation, allowancefordepletionofoilandgaswellsorminesunderparagraph(1)ofthis Subsectionshallbeauthorizedonlyinrespecttooilandgaswellsormineslocated withinthePhilippines.

(H)CharitableandOtherContributions. (1)InGeneral.Contributionsorgiftsactuallypaidormadewithinthetaxableyear to,orfortheuseoftheGovernmentofthePhilippinesoranyofitsagenciesorany politicalsubdivisionthereofexclusivelyforpublicpurposes,ortoaccredited domesticcorporationorassociationsorganizedandoperatedexclusivelyfor religious,charitable,scientific,youthandsportsdevelopment,culturalor educationalpurposesorfortherehabilitationofveterans,ortosocialwelfare institutions,ortonongovernmentorganizations,inaccordancewithrulesand regulationspromulgatedbytheSecretaryoffinance,uponrecommendationofthe Commissioner,nopartofthenetincomeofwhichinurestothebenefitofany privatestockholderorindividualinanamountnotinexcessoftenpercent(10%)in thecaseofanindividual,andfivepercent(%)inthecaseofacorporation,ofthe taxpayer'staxableincomederivedfromtrade,businessorprofessionascomputed withoutthebenefitofthisandthefollowingsubparagraphs. (2)ContributionsDeductibleinFull.Notwithstandingtheprovisionsofthe precedingsubparagraph,donationstothefollowinginstitutionsorentitiesshallbe deductibleinfull; (a)DonationstotheGovernment.DonationstotheGovernmentofthePhilippines ortoanyofitsagenciesorpoliticalsubdivisions,includingfullyownedgovernment corporations,exclusivelytofinance,toprovidefor,ortobeusedinundertaking priorityactivitiesineducation,health,youthandsportsdevelopment,human settlements,scienceandculture,andineconomicdevelopmentaccordingtoa NationalPriorityPlandeterminedbytheNationalEconomicandDevelopment Authority(NEDA),Inconsultationwithappropriategovernmentagencies,including itsregionaldevelopmentcouncilsandprivatephilantrophicpersonsand institutions:Provided,ThatanydonationwhichismadetotheGovernmentorto anyofitsagenciesorpoliticalsubdivisionsnotinaccordancewiththesaidannual priorityplanshallbesubjecttothelimitationsprescribedinparagraph(1)ofthis Subsection; (b)DonationstoCertainForeignInstitutionsorInternationalOrganizations. Donationstoforeigninstitutionsorinternationalorganizationswhicharefully deductibleinpursuanceoforincompliancewithagreements,treaties,or commitmentsenteredintobytheGovernmentofthePhilippinesandtheforeign institutionsorinternationalorganizationsorinpursuanceofspeciallaws; (c)DonationstoAccreditedNongovernmentOrganizations.Theterm "nongovernmentorganization"meansanonprofitdomesticcorporation: (1)Organizedandoperatedexclusivelyforscientific,research,educational, characterbuildingandyouthandsportsdevelopment,health,socialwelfare, culturalorcharitablepurposes,oracombinationthereof,nopartofthenetincome ofwhichinurestothebenefitofanyprivateindividual;

(2)Which,notlaterthanthe15thdayofthethirdmonthafterthecloseofthe accreditednongovernmentorganizationstaxableyearinwhichcontributionsare received,makesutilizationdirectlyfortheactiveconductoftheactivities constitutingthepurposeorfunctionforwhichitisorganizedandoperated,unless anextendedperiodisgrantedbytheSecretaryofFinanceinaccordancewiththe rulesandregulationstobepromulgated,uponrecommendationofthe Commissioner; (3)Thelevelofadministrativeexpenseofwhichshall,onanannualbasis,conform withtherulesandregulationstobeprescribedbytheSecretaryofFinance,upon recommendationoftheCommissioner,butinnocasetoexceedthirtypercent (30%)ofthetotalexpenses;and (4)Theassetsofwhich,intheevenofdissolution,wouldbedistributedtoanother nonprofitdomesticcorporationorganizedforsimilarpurposeorpurposes,ortothe stateforpublicpurpose,orwouldbedistributedbyacourttoanotherorganization tobeusedinsuchmannerasinthejudgmentofsaidcourtshallbestaccomplishthe generalpurposeforwhichthedissolvedorganizationwasorganized. SubjecttosuchtermsandconditionsasmaybeprescribedbytheSecretaryof Finance,theterm"utilization"means: (i)Anyamountincashorinkind(includingadministrativeexpenses)paidor utilizedtoaccomplishoneormorepurposesforwhichtheaccredited nongovernmentorganizationwascreatedororganized. (ii)Anyamountpaidtoacquireanassetused(orheldforuse)directlyincarrying outoneormorepurposesforwhichtheaccreditednongovernmentorganization wascreatedororganized. Anamountsetasideforaspecificprojectwhichcomeswithinoneormorepurposes oftheaccreditednongovernmentorganizationmaybetreatedasautilization,but onlyifatthetimesuchamountissetaside,theaccreditednongovernment organizationhasestablishedtothesatisfactionoftheCommissionerthatthe amountwillbepaidforthespecificprojectwithinaperiodtobeprescribedinrules andregulationstobepromulgatedbytheSecretaryofFinance,upon recommendationoftheCommissioner,butnottoexceedfive(5)years,andthe projectisonewhichcanbebetteraccomplishedbysettingasidesuchamountthan byimmediatepaymentoffunds. (3)Valuation.Theamountofanycharitablecontributionofpropertyotherthan moneyshallbebasedontheacquisitioncostofsaidproperty. (4)ProofofDeductions.Contributionsorgiftsshallbeallowableasdeductions onlyifverifiedundertherulesandregulationsprescribedbytheSecretaryof Finance,uponrecommendationoftheCommissioner. (I)ResearchandDevelopment.

(1)InGeneral.ataxpayermaytreatresearchordevelopmentexpenditureswhich arepaidorincurredbyhimduringthetaxableyearinconnectionwithhistrade, businessorprofessionasordinaryandnecessaryexpenseswhicharenot chargeabletocapitalaccount.Theexpendituressotreatedshallbeallowedas deductionduringthetaxableyearwhenpaidorincurred. (2)AmortizationofCertainResearchandDevelopmentExpenditures.Atthe electionofthetaxpayerandinaccordancewiththerulesandregulationstobe prescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner, thefollowingresearchanddevelopmentexpendituresmaybetreatedasdeferred expenses: (a)Paidorincurredbythetaxpayerinconnectionwithhistrade,businessor profession; (b)Nottreatedasexpensesunderparagraph91)hereof;and (c)Chargeabletocapitalaccountbutnotchargeabletopropertyofacharacter whichissubjecttodepreciationordepletion. Incomputingtaxableincome,suchdeferredexpensesshallbeallowedasdeduction ratablydistributedoveraperiodofnotlessthansixty(60)monthsasmaybe electedbythetaxpayer(beginningwiththemonthinwhichthetaxpayerfirst realizesbenefitsfromsuchexpenditures). Theelectionprovidedbyparagraph(2)hereofmaybemadeforanytaxableyear beginningaftertheeffectivityofthisCode,butonlyifmadenotlaterthanthetime prescribedbylawforfilingthereturnforsuchtaxableyear.Themethodsoelected, andtheperiodselectedbythetaxpayer,shallbeadheredtoincomputingtaxable incomeforthetaxableyearforwhichtheelectionismadeandforallsubsequent taxableyearsunlesswiththeapprovaloftheCommissioner,achangetoadifferent methodisauthorizedwithrespecttoapartorallofsuchexpenditures.Theelection shallnotapplytoanyexpenditurepaidorincurredduringanytaxableyearfor whichthetaxpayermakestheelection. (3)LimitationsonDeduction.ThisSubsectionshallnotapplyto: (a)Anyexpenditurefortheacquisitionorimprovementofland,orforthe improvementofpropertytobeusedinconnectionwithresearchanddevelopment ofacharacterwhichissubjecttodepreciationanddepletion;and (b)Anyexpenditurepaidorincurredforthepurposeofascertainingtheexistence, location,extent,orqualityofanydepositoforeorothermineral,includingoilor gas. (J)PensionTrusts.Anemployerestablishingormaintainingapensiontrustto provideforthepaymentofreasonablepensionstohisemployeesshallbeallowed asadeduction(inadditiontothecontributionstosuchtrustduringthetaxableyear

tocoverthepensionliabilityaccruingduringtheyear,allowedasadeductionunder Subsection(A)(1)ofthisSection)areasonableamounttransferredorpaidinto suchtrustduringthetaxableyearinexcessofsuchcontributions,butonlyifsuch amount(1)hasnottheretoforebeenallowedasadeduction,and(2)isapportioned inequalpartsoveraperiodoften(10)consecutiveyearsbeginningwiththeyearin whichthetransferorpaymentismade. (K)AdditionalRequirementsforDeductibilityofCertainPayments.Anyamount paidorpayablewhichisotherwisedeductiblefrom,ortakenintoaccountin computinggrossincomeorforwhichdepreciationoramortizationmaybeallowed underthisSection,shallbeallowedasadeductiononlyifitisshownthatthetax requiredtobedeductedandwithheldtherefromhasbeenpaidtotheBureauof InternalRevenueinaccordancewiththisSection58and81ofthisCode. (L)OptionalStandardDeduction.Inlieuofthedeductionsallowedunderthe precedingSubsections,anindividualsubjecttotaxunderSection24,otherthana nonresidentalien,mayelectastandarddeductioninanamountnotexceedingten percent(10%)ofhisgrossincome.Unlessthetaxpayersignifiesinhisreturnhis intentiontoelecttheoptionalstandarddeduction,heshallbeconsideredashaving availedhimselfofthedeductionsallowedintheprecedingSubsections.Such electionwhenmadeinthereturnshallbeirrevocableforthetaxableyearforwhich thereturnismade:Provided,Thatanindividualwhoisentitledtoandclaimedfor theoptionalstandarddeductionshallnotberequiredtosubmitwithhistaxreturn suchfinancialstatementsotherwiserequiredunderthisCode:Provided,further, ThatexceptwhentheCommissionerotherwisepermits,thesaidindividualshall keepsuchrecordspertainingtohisgrossincomeduringthetaxableyear,asmaybe requiredbytherulesandregulationspromulgatedbytheSecretaryofFinance, uponrecommendationoftheCommissioner. (M)PremiumPaymentsonHealthand/orHospitalizationInsuranceofanIndividual Taxpayer.TheamountofpremiumsnottoexceedTwothousandfourhundred pesos(P2,400)perfamilyorTwohundredpesos(P200)amonthpaidduringthe taxableyearforhealthand/orhospitalizationinsurancetakenbythetaxpayerfor himself,includinghisfamily,shallbeallowedasadeductionfromhisgrossincome: Provided,ThatsaidfamilyhasagrossincomeofnotmorethanTwohundredfifty thousandpesos(P250,000)forthetaxableyear:Provided,finally,Thatinthecaseof marriedtaxpayers,onlythespouseclaimingtheadditionalexemptionfor dependentsshallbeentitledtothisdeduction.

NotwithstandingtheprovisionoftheprecedingSubsections,TheSecretaryof Finance,uponrecommendationoftheCommissioner,afterapublichearingshall havebeenheldforthispurpose,mayprescribebyrulesandregulations,limitations orceilingsforanyoftheitemizeddeductionsunderSubsections(A)to(J)ofthis Section:Provided,Thatforpurposesofdeterminingsuchceilingsorlimitations,the SecretaryofFinanceshallconsiderthefollowingfactors:(1)adequacyofthe prescribedlimitsontheactualexpenditurerequirementsofeachparticular industry;and(2)effectsofinflationonexpenditurelevels:Provided,further,That noceilingsshallfurtherbeimposedonitemsofexpensealreadysubjecttoceilings underpresentlaw. SEC.35.AllowanceofPersonalExemptionforIndividualTaxpayer. (A)InGeneral.ForpurposesofdeterminingthetaxprovidedinSection24(A)of thisTitle,thereshallbeallowedabasicpersonalexemptionasfollows: Forsingleindividualormarriedindividualjudiciallydecreedaslegally separatedwithnoqualifieddependentsP20,000 ForHeadofFamilyP25,000 ForeachmarriedindividualP32,000 Inthecaseofmarriedindividualswhereonlyoneofthespousesisderivinggross income,onlysuchspouseshallbeallowedthepersonalexemption. Forpurposesofthisparagraph,theterm"headoffamily"meansanunmarriedor legallyseparatedmanorwomanwithoneorbothparents,orwithoneormore brothersorsisters,orwithoneormorelegitimate,recognizednaturalorlegally adoptedchildrenlivingwithanddependentuponhimfortheirchiefsupport,where suchbrothersorsistersorchildrenarenotmorethantwentyone(21)yearsofage, unmarriedandnotgainfullyemployedorwheresuchchildren,brothersorsisters, regardlessofageareincapableofselfsupportbecauseofmentalorphysicaldefect. (B)AdditionalExemptionforDependents.Thereshallbeallowedanadditional exemptionofEightthousandpesos(P8,000)foreachdependentnotexceedingfour (4).

Theadditionalexemptionfordependentshallbeclaimedbyonlyoneofthespouses inthecaseofmarriedindividuals. Inthecaseoflegallyseparatedspouses,additionalexemptionsmaybeclaimedonly bythespousewhohascustodyofthechildorchildren:Provided,Thatthetotal amountofadditionalexemptionsthatmaybeclaimedbybothshallnotexceedthe maximumadditionalexemptionshereinallowed. ForpurposesofthisSubsection,a"dependent"meansalegitimate,illegitimateor legallyadoptedchildchieflydependentuponandlivingwiththetaxpayerifsuch dependentisnotmorethantwentyone(21)yearsofage,unmarriedandnot gainfullyemployedorifsuchdependent,regardlessofage,isincapableofself supportbecauseofmentalorphysicaldefect. (C)ChangeofStatus.Ifthetaxpayermarriesorshouldhaveadditional dependent(s)asdefinedaboveduringthetaxableyear,thetaxpayermayclaimthe correspondingadditionalexemption,asthecasemaybe,infullforsuchyear. Ifthetaxpayerdiesduringthetaxableyear,hisestatemaystillclaimthepersonal andadditionalexemptionsforhimselfandhisdependent(s)asifhediedattheclose ofsuchyear. Ifthespouseoranyofthedependentsdiesorifanyofsuchdependentsmarries, becomestwentyone(21)yearsoldorbecomesgainfullyemployedduringthe taxableyear,thetaxpayermaystillclaimthesameexemptionsasifthespouseor anyofthedependentsdied,orasifsuchdependentsmarried,becametwentyone (21)yearsoldorbecamegainfullyemployedatthecloseofsuchyear. (D)PersonalExemptionAllowabletoNonresidentAlienIndividual.Anonresident alienindividualengagedintrade,businessorintheexerciseofaprofessioninthe Philippinesshallbeentitledtoapersonalexemptionintheamountequaltothe exemptionsallowedintheincometaxlawinthecountryofwhichheisasubjector citizen,tocitizensofthePhilippinesnotresidinginsuchcountry,nottoexceedthe amountfixedinthisSectionasexemptionforcitizensorresidentofthePhilippines: Provided,Thatsaidnonresidentalienshouldfileatrueandaccuratereturnofthe totalincomereceivedbyhimfromallsourcesinthePhilippines,asrequiredbythis Title.

 SEC.36.ItemsNotDeductible. (A)GeneralRule.Incomputingnetincome,nodeductionshallinanycasebe allowedinrespectto (1)Personal,livingorfamilyexpenses; (2)Anyamountpaidoutfornewbuildingsorforpermanentimprovements,or bettermentsmadetoincreasethevalueofanypropertyorestate; ThisSubsectionshallnotapplytointangibledrillinganddevelopmentcosts incurredinpetroleumoperationswhicharedeductibleunderSubsection(G)(1)of Section34ofthisCode. (3)Anyamountexpendedinrestoringpropertyorinmakinggoodtheexhaustion thereofforwhichanallowanceisorhasbeenmade;or (4)Premiumspaidonanylifeinsurancepolicycoveringthelifeofanyofficeror employee,orofanypersonfinanciallyinterestedinanytradeorbusinesscarriedon bythetaxpayer,individualorcorporate,whenthetaxpayerisdirectlyorindirectlya beneficiaryundersuchpolicy. (B)LossesfromSalesorExchangesofProperty.Incomputingnetincome,no deductionsshallinanycasebeallowedinrespectoflossesfromsalesorexchanges ofpropertydirectlyorindirectly (1)Betweenmembersofafamily.Forpurposesofthisparagraph,thefamilyofan individualshallincludeonlyhisbrothersandsisters(whetherbythewholeorhalf blood),spouse,ancestors,andlinealdescendants;or (2)Exceptinthecaseofdistributionsinliquidation,betweenanindividualand corporationmorethanfiftypercent(50%)invalueoftheoutstandingstockof whichisowned,directlyorindirectly,byorforsuchindividual;or (3)Exceptinthecaseofdistributionsinliquidation,betweentwocorporations morethanfiftypercent(50%)invalueoftheoutstandingstockofwhichisowned, directlyorindirectly,byorforthesameindividualifeitheroneofsuch corporations,withrespecttothetaxableyearofthecorporationprecedingthedate ofthesaleofexchangewasunderthelawapplicabletosuchtaxableyear,apersonal holdingcompanyoraforeignpersonalholdingcompany; (4)Betweenthegrantorandafiduciaryofanytrust;or (5)Betweenthefiduciaryofandthefiduciaryofatrustandthefiduciaryofanother trustifthesamepersonisagrantorwithrespecttoeachtrust;or

(6)Betweenafiduciaryofatrustandbeneficiaryofsuchtrust. SEC.37.SpecialProvisionsRegardingIncomeandDeductionsofInsurance Companies,WhetherDomesticorForeign. (A)SpecialDeductionAllowedtoInsuranceCompanies.Inthecaseofinsurance companies,whetherdomesticorforeigndoingbusinessinthePhilippines,thenet additions,ifany,requiredbylawtobemadewithintheyeartoreservefundsand thesumsotherthandividendspaidwithintheyearonpolicyandannuitycontracts maybedeductedfromtheirgrossincome:Provided,however,Thatthereleased reservebetreatedasincomefortheyearofrelease. (B)MutualInsuranceCompanies.Inthecaseofmutualfireandmutualemployers' liabilityandmutualworkmen'scompensationandmutualcasualtyinsurance companiesrequiringtheirmemberstomakepremiumdepositstoprovideforlosses andexpenses,saidcompaniesshallnotreturnasincomeanyportionofthe premiumdepositsreturnedtotheirpolicyholders,butshallreturnastaxable incomeallincomereceivedbythemfromallothersourcesplussuchportionofthe premiumdepositsasareretainedbythecompaniesforpurposesotherthanthe paymentoflossesandexpensesandreinsurancereserves. (C)MutualMarineInsuranceCompanies.Mutualmarineinsurancecompaniesshall includeintheirreturnofgrossincome,grosspremiumscollectedandreceivedby themlessamountspaidtopolicyholdersonaccountofpremiumspreviouslypaidby themandinterestpaiduponthoseamountsbetweentheascertainmentand paymentthereof. (D)AssessmentInsuranceCompanies.Assessmentinsurancecompanies,whether domesticorforeign,maydeductfromtheirgrossincometheactualdepositofsums withtheofficersoftheGovernmentofthePhilippinespursuanttolaw,asadditions toguaranteeorreservefunds. SEC.38.LossesfromWashSalesofStockorSecurities. (A)Inthecaseofanylossclaimedtohavebeensustainedfromanysaleorother dispositionofsharesofstockorsecuritieswhereitappearsthatwithinaperiod beginningthirty(30)daysbeforethedateofsuchsaleordispositionandending

thirty(30)daysaftersuchdate,thetaxpayerhasacquired(bypurchaseorby exchangeuponwhichtheentireamountofgainorlosswasrecognizedbylaw),or hasenteredintoacontactoroptionsotoacquire,substantiallyidenticalstockor securities,thennodeductionforthelossshallbeallowedunderSection34unless theclaimismadebyadealerinstockorsecuritiesandwithrespecttoatransaction madeintheordinarycourseofthebusinessofsuchdealer. (B)Iftheamountofstockorsecuritiesacquired(orcoveredbythecontractor optiontoacquire)islessthantheamountofstockorsecuritiessoldorotherwise disposedof,thentheparticularsharesofstockorsecurities,thelossformthesale orotherdispositionofwhichisnotdeductible,shallbedeterminedunderrulesand regulationsprescribedbytheSecretaryofFinance,uponrecommendationofthe Commissioner. (C)Iftheamountofstockorsecuritiesacquired(orcoveredbythecontractor optiontoacquirewhich)resultedinthenondeductibilityoftheloss,shallbe determinedunderrulesandregulationsprescribedbytheSecretaryofFinance, uponrecommendationoftheCommissioner. SEC.39.CapitalGainsandLosses. (A)Definitions.AsusedinthisTitle (1)CapitalAssets.Theterm"capitalassets"meanspropertyheldbythetaxpayer (whetherornotconnectedwithhistradeorbusiness),butdoesnotincludestockin tradeofthetaxpayerorotherpropertyofakindwhichwouldproperlybeincluded intheinventoryofthetaxpayerifonhandatthecloseofthetaxableyear,or propertyheldbythetaxpayerprimarilyforsaletocustomersintheordinarycourse ofhistradeorbusiness,orpropertyusedinthetradeorbusiness,ofacharacter whichissubjecttotheallowancefordepreciationprovidedinSubsection(F)of Section34;orrealpropertyusedintradeorbusinessofthetaxpayer. (2)NetCapitalGain.Theterm"netcapitalgain"meanstheexcessofthegainsfrom salesorexchangesofcapitalassetsoverthelossesfromsuchsalesorexchanges. (3)NetCapitalLoss.Theterm"netcapitalloss"meanstheexcessofthelossesfrom salesorexchangesofcapitalassetsoverthegainsfromsuchsalesorexchanges. (B)PercentageTakenIntoAccount.Inthecaseofataxpayer,otherthana corporation,onlythefollowingpercentagesofthegainorlossrecognizeduponthe

saleorexchangeofacapitalassetshallbetakenintoaccountincomputingnet capitalgain,netcapitalloss,andnetincome: (1)Onehundredpercent(100%)ifthecapitalassethasbeenheldfornotmorethan twelve(12)months;and (2)Fiftypercent(50%)ifthecapitalassethasbeenheldformorethantwelve(12) months; (C)LimitationonCapitalLosses.Lossesfromsalesorexchangesofcapitalassets shallbeallowedonlytotheextentofthegainsfromsuchsalesorexchanges.Ifa bankortrustcompanyincorporatedunderthelawsofthePhilippines,asubstantial partofwhosebusinessisthereceiptofdeposits,sellsanybond,debenture,note,or certificateorotherevidenceofindebtednessissuedbyanycorporation(including oneissuedbyagovernmentorpoliticalsubdivisionthereof),withinterestcoupons orinregisteredform,anylossresultingfromsuchsaleshallnotbesubjecttothe foregoinglimitationandshallnotbeincludedindeterminingtheapplicabilityof suchlimitationtootherlosses. (D)NetCapitalLossCarryover.Ifanytaxpayer,otherthanacorporation,sustains inanytaxableyearanetcapitalloss,suchloss(inanamountnotinexcessofthenet incomeforsuchyear)shallbetreatedinthesucceedingtaxableyearasalossfrom thesaleorexchangeofacapitalassetheldfornotmorethantwelve(12)months. (E)RetirementofBonds,Etc.ForpurposesofthisTitle,amountsreceivedbythe holderupontheretirementofbonds,debentures,notesorcertificatesorother evidencesofindebtednessissuedbyanycorporation(includingthoseissuedbya governmentorpoliticalsubdivisionthereof)withinterestcouponsorinregistered form,shallbeconsideredasamountsreceivedinexchangetherefor. (F)GainsorLossesFromShortSales,Etc.ForpurposesofthisTitle (1)Gainsorlossesfromshortsalesofpropertyshallbeconsideredasgainsor lossesfromsalesorexchangesofcapitalassets;and (2)Gainsorlossesattributabletothefailuretoexerciseprivilegesoroptionstobuy orsellpropertyshallbeconsideredascapitalgainsorlosses. SEC.40.DeterminationofAmountandRecognitionofGainorLoss. (A)ComputationofGainorLoss.Thegainfromthesaleorotherdispositionof propertyshallbetheexcessoftheamountrealizedtherefromoverthebasisor

adjustedbasisfordetermininggain,andthelossshallbetheexcessofthebasisor adjustedbasisfordetermininglossovertheamountrealized.Theamountrealized fromthesaleorotherdispositionofpropertyshallbethesumofmoneyreceived plusthefairmarketvalueoftheproperty(otherthanmoney)received; (B)BasisforDeterminingGainorLossfromSaleorDispositionofProperty.The basisofpropertyshallbe (1)ThecostthereofinthecaseofpropertyacquiredonorafterMarch1,1913,if suchpropertywasacquiredbypurchase;or (2)Thefairmarketpriceorvalueasofthedateofacquisition,ifthesamewas acquiredbyinheritance;or (3)Ifthepropertywasacquiredbygift,thebasisshallbethesameasifitwouldbe inthehandsofthedonororthelastprecedingownerbywhomitwasnotacquired bygift,exceptthatifsuchbasisisgreaterthanthefairmarketvalueoftheproperty atthetimeofthegiftthen,forthepurposeofdeterminingloss,thebasisshallbe suchfairmarketvalue;or (4)Ifthepropertywasacquiredforlessthananadequateconsiderationinmoney ormoney'sworth,thebasisofsuchpropertyistheamountpaidbythetransferee fortheproperty;or (5)Thebasisasdefinedinparagraph(C)(5)ofthisSection,ifthepropertywas acquiredinatransactionwheregainorlossisnotrecognizedunderparagraph (C)(2)ofthisSection. (C)ExchangeofProperty. (1)GeneralRule.Exceptashereinprovided,uponthesaleorexchangeorproperty, theentireamountofthegainorloss,asthecasemaybe,shallberecognized. (2)Exception.Nogainorlossshallberecognizedifinpursuanceofaplanof mergerorconsolidation (a)Acorporation,whichisapartytoamergerorconsolidation,exchangesproperty solelyforstockinacorporation,whichisapartytothemergerorconsolidation;or (b)Ashareholderexchangesstockinacorporation,whichisapartytothemerger orconsolidation,solelyforthestockofanothercorporationalsoapartytothe mergerorconsolidation;or (c)Asecurityholderofacorporation,whichisapartytothemergeror consolidation,exchangeshissecuritiesinsuchcorporation,solelyforstockor securitiesinsuchcorporation,apartytothemergerorconsolidation.

Nogainorlossshallalsoberecognizedifpropertyistransferredtoacorporationby apersoninexchangeforstockorunitofparticipationinsuchacorporationofwhich asaresultofsuchexchangesaidperson,aloneortogetherwithothers,not exceedingfour(4)persons,gainscontrolofsaidcorporation:Provided,Thatstocks issuedforservicesshallnotbeconsideredasissuedinreturnforproperty. (3)ExchangeNotSolelyinKind. (a)If,inconnectionwithanexchangedescribedintheaboveexceptions,an individual,ashareholder,asecurityholderoracorporationreceivesnotonlystock orsecuritiespermittedtobereceivedwithouttherecognitionofgainorloss,but alsomoneyand/orproperty,thegain,ifany,butnottheloss,shallberecognized butinanamountnotinexcessofthesumofthemoneyandfairmarketvalueof suchotherpropertyreceived:Provided,Thatastotheshareholder,ifthemoney and/orotherpropertyreceivedhastheeffectofadistributionofataxabledividend, thereshallbetaxedasdividendtotheshareholderanamountofthegainrecognized notinexcessofhisproportionateshareoftheundistributedearningsandprofitsof thecorporation;theremainder,ifany,ofthegainrecognizedshallbetreatedasa capitalgain. (b)If,inconnectionwiththeexchangedescribedintheaboveexceptions,the transferorcorporationreceivesnotonlystockpermittedtobereceivedwithoutthe recognitionofgainorlossbutalsomoneyand/orotherproperty,then(i)ifthe corporationreceivingsuchmoneyand/orotherpropertydistributesitinpursuance oftheplanofmergerorconsolidation,nogaintothecorporationshallbe recognizedfromtheexchange,but(ii)ifthecorporationreceivingsuchother propertyand/ormoneydoesnotdistributeitinpursuanceoftheplanofmergeror consolidation,thegain,ifany,butnotthelosstothecorporationshallberecognized butinanamountnotinexcessofthesumofsuchmoneyandthefairmarketvalue ofsuchotherpropertysoreceived,whichisnotdistributed. (4)AssumptionofLiability. (a)Ifthetaxpayer,inconnectionwiththeexchangesdescribedintheforegoing exceptions,receivesstockorsecuritieswhichwouldbepermittedtobereceived withouttherecognitionofthegainifitwerethesoleconsideration,andaspartof theconsideration,anotherpartytotheexchangeassumesaliabilityofthetaxpayer, oracquiresfromthetaxpayerproperty,subjecttoaliability,thensuchassumption oracquisitionshallnotbetreatedasmoneyand/orotherproperty,andshallnot preventtheexchangefrombeingwithintheexceptions. (b)Iftheamountoftheliabilitiesassumedplustheamountoftheliabilitiestowhich thepropertyissubjectexceedthetotaloftheadjustedbasisoftheproperty transferredpursuanttosuchexchange,thensuchexcessshallbeconsideredasa gainfromthesaleorexchangeofacapitalassetorofpropertywhichisnotacapital asset,asthecasemaybe.

(5)Basis (a)Thebasisofthestockorsecuritiesreceivedbythetransferorupontheexchange specifiedintheaboveexceptionshallbethesameasthebasisoftheproperty,stock orsecuritiesexchanged,decreasedby(1)themoneyreceived,and(2)thefair marketvalueoftheotherpropertyreceived,andincreasedby(a)theamount treatedasdividendoftheshareholderand(b)theamountofanygainthatwas recognizedontheexchange:Provided,Thatthepropertyreceivedas"boot"shall haveasbasisitsfairmarketvalue:Provided,further,Thatifaspartofthe considerationtothetransferor,thetransfereeofpropertyassumesaliabilityofthe transferororacquiresformthelatterpropertysubjecttoaliability,such assumptionoracquisition(intheamountoftheliability)shall,forpurposesofthis paragraph,betreatedasmoneyreceivedbythetransferorontheexchange: Provided,finally,Thatifthetransferorreceivesseveralkindsofstockorsecurities, theCommissionerisherebyauthorizedtoallocatethebasisamongtheseveral classesofstocksorsecurities. (b)Thebasisofthepropertytransferredinthehandsofthetransfereeshallbethe sameasitwouldbeinthehandsofthetransferorincreasedbytheamountofthe gainrecognizedtothetransferoronthetransfer. (6)Definitions. (a)Theterm"securities"meansbondsanddebenturesbutnot"notes"ofwhatever classorduration. (b)Theterm"merger"or"consolidation",whenusedinthisSection,shallbe understoodtomean:(i)theordinarymergerorconsolidation,or(ii)theacquisition byonecorporationofallorsubstantiallyallthepropertiesofanothercorporation solelyforstock:Provided,Thatforatransactiontoberegardedasamergeror consolidationwithinthepurviewofthisSection,itmustbeundertakenforabona fidebusinesspurposeandnotsolelyforthepurposeofescapingtheburdenof taxation:Provided,further,Thatindeterminingwhetherabonafidebusiness purposeexists,eachandeverystepofthetransactionshallbeconsideredandthe wholetransactionorseriesoftransactionshallbetreatedasasingleunit:Provided, finally,Thatindeterminingwhetherthepropertytransferredconstitutesa substantialportionofthepropertyofthetransferor,theterm'property'shallbe takentoincludethecashassetsofthetransferor. (c)Theterm"control",whenusedinthisSection,shallmeanownershipofstocksin acorporationpossessingatleastfiftyonepercent(51%)ofthetotalvotingpower ofallclassesofstocksentitledtovote. (d)TheSecretaryofFinance,uponrecommendationoftheCommissioner,ishereby authorizedtoissuerulesandregulationsforthepurpose"substantiallyall"andfor theproperimplementationofthisSection.

SEC.41.Inventories.WheneverinthejudgmentoftheCommissioner,theuseof inventoriesisnecessaryinordertodetermineclearlytheincomeofanytaxpayer, inventoriesshallbetakenbysuchtaxpayeruponsuchbasisastheSecretaryof Finance,uponrecommendationoftheCommissioner,may,byrulesandregulations, prescribeasconformingasnearlyasmaybetothebestaccountingpracticeinthe tradeorbusinessandasmostclearlyreflectingtheincome. Ifataxpayer,afterhavingcompliedwiththetermsandaconditionsprescribedby theCommissioner,usesaparticularmethodofvaluingitsinventoryforanytaxable year,thensuchmethodshallbeusedinallsubsequenttaxableyearsunless: (i)withtheapprovaloftheCommissioner,achangetoadifferentmethodis authorized;or (ii)theCommissionerfindsthatthenatureofthestockonhand(e.g.,itsscarcity, liquidity,marketabilityandpricemovements)issuchthatinventorygainsshouldbe consideredrealizedfortaxpurposesand,therefore,itisnecessarytomodifythe valuationmethodforpurposesofascertainingtheincome,profit,orlossinamore realisticmanner:Provided,however,ThattheCommissionershallnotexercisehis authoritytorequireachangeininventorymethodmoreoftenthanonceeverythree (3)years:Provided,further,Thatanychangeinaninventoryvaluationmethodmust besubjecttoapprovalbytheSecretaryofFinance. SEC.42.IncomefromSourcesWithinthePhilippines. (A)GrossIncomeFromSourcesWithinthePhilippines.Thefollowingitemsof grossincomeshallbetreatedasgrossincomefromsourceswithinthePhilippines: (1)Interests.InterestsderivedfromsourceswithinthePhilippines,andinterests onbonds,notesorotherinterestbearingobligationofresidents,corporateor otherwise; (2)Dividends.Theamountreceivedasdividends: (a)fromadomesticcorporation;and (b)fromaforeigncorporation,unlesslessthanfiftypercent(50%)ofthegross incomeofsuchforeigncorporationforthethreeyearperiodendingwiththeclose ofitstaxableyearprecedingthedeclarationofsuchdividendsorforsuchpartof suchperiodasthecorporationhasbeeninexistence)wasderivedfromsources withinthePhilippinesasdeterminedundertheprovisionsofthisSection;butonly inanamountwhichbearsthesamerationtosuchdividendsasthegrossincomeof

thecorporationforsuchperiodderivedfromsourceswithinthePhilippinesbearsto itsgrossincomefromallsources. (3)Services.Compensationforlabororpersonalservicesperformedinthe Philippines; (4)RentalsandRoyalties.Rentalsandroyaltiesfrompropertylocatedinthe Philippinesorfromanyinterestinsuchproperty,includingrentalsorroyaltiesfor (a)TheuseofortherightorprivilegetouseinthePhilippinesanycopyright, patent,designormodel,plan,secretformulaorprocess,goodwill,trademark,trade brandorotherlikepropertyorright; (b)Theuseof,ortherighttouseinthePhilippinesanyindustrial,commercialor scientificequipment; (c)Thesupplyofscientific,technical,industrialorcommercialknowledgeor information; (d)Thesupplyofanyassistancethatisancillaryandsubsidiaryto,andisfurnished asameansofenablingtheapplicationorenjoymentof,anysuchpropertyorrightas ismentionedinparagraph(a),anysuchequipmentasismentionedinparagraph(b) oranysuchknowledgeorinformationasismentionedinparagraph(c); (e)Thesupplyofservicesbyanonresidentpersonorhisemployeeinconnection withtheuseofpropertyorrightsbelongingto,ortheinstallationoroperationof anybrand,machineryorotherapparatuspurchasedfromsuchnonresidentperson; (f)Technicaladvice,assistanceorservicesrenderedinconnectionwithtechnical managementoradministrationofanyscientific,industrialorcommercial undertaking,venture,projectorscheme;and (g)Theuseofortherighttouse: (i)Motionpicturefilms; (ii)Filmsorvideotapesforuseinconnectionwithtelevision;and (iii)Tapesforuseinconnectionwithradiobroadcasting. (5)SaleofRealProperty.Gains,profitsandincomefromthesaleofrealproperty locatedinthePhilippines;and (6)SaleofPersonalProperty.Gains;profitsandincomefromthesaleofpersonal property,asdeterminedinSubsection(E)ofthisSection. (B)TaxableIncomeFromSourcesWithinthePhilippines. (1)GeneralRule.FromtheitemsofgrossincomespecifiedinSubsection(A)ofthis Section,thereshallbedeductedtheexpenses,lossesandotherdeductionsproperly

allocatedtheretoandaratablepartofexpenses,interests,lossesandother deductionseffectivelyconnectedwiththebusinessortradeconductedexclusively withinthePhilippineswhichcannotdefinitelybeallocatedtosomeitemsorclassof grossincome:Provided,Thatsuchitemsofdeductionsshallbeallowedonlyiffully substantiatedbyalltheinformationnecessaryforitscalculation.Theremainder,if any,shallbetreatedinfullastaxableincomefromsourceswithinthePhilippines. (2)Exception.Nodeductionsforinterestpaidorincurredabroadshallbeallowed fromtheitemofgrossincomespecifiedinsubsection(A)unlessindebtednesswas actuallyincurredtoprovidefundsforuseinconnectionwiththeconductor operationoftradeorbusinessinthePhilippines. (C)GrossIncomeFromSourcesWithoutthePhilippines.Thefollowingitemsof grossincomeshallbetreatedasincomefromsourceswithoutthePhilippines: (1)InterestsotherthanthosederivedfromsourceswithinthePhilippinesas providedin paragraph(1)ofSubsection(A)ofthisSection; (2)DividendsotherthanthosederivedfromsourceswithinthePhilippinesas providedin paragraph(2)ofSubsection(A)ofthisSection; (3)CompensationforlabororpersonalservicesperformedwithoutthePhilippines; (4)RentalsorroyaltiesfrompropertylocatedwithoutthePhilippinesorfromany interestin suchpropertyincludingrentalsorroyaltiesfortheuseoforfortheprivilegeof using withoutthePhilippines,patents,copyrights,secretprocessesandformulas, goodwill, trademarks,tradebrands,franchisesandotherlikeproperties;and (5)Gains,profitsandincomefromthesaleofrealpropertylocatedwithoutthe Philippines. (D)TaxableIncomeFromSourcesWithoutthePhilippines.Fromtheitemsofgross incomespecifiedinSubsection(C)ofthisSectionthereshallbedeductedthe expenses,losses,andotherdeductionsproperlyapportionedorallocatedthereto andaratablepartofanyexpense,lossorotherdeductionwhichcannotdefinitelybe allocatedtosomeitemsorclassesofgrossincome.Theremainder,ifany,shallbe treatedinfullastaxableincomefromsourceswithoutthePhilippines.

(E)IncomeFromSourcesPartlyWithinandPartlyWithoutthePhilippines.Itemsof grossincome,expenses,lossesanddeductions,otherthanthosespecifiedin Subsections(A)and(C)ofthisSection,shallbeallocatedorapportionedtosources withinorwithoutthePhilippines,undertherulesandregulationsprescribedbythe SecretaryofFinance,uponrecommendationoftheCommissioner.Whereitemsof grossincomeareseparatelyallocatedtosourceswithinthePhilippines,thereshall bededucted(forthepurposeofcomputingthetaxableincometherefrom)the expenses,lossesandotherdeductionsproperlyapportionedorallocatedthereto andaratablepartofotherexpenses,lossesorotherdeductionswhichcannot definitelybeallocatedtosomeitemsorclassesofgrossincome.Theremainder,if any,shallbeincludedinfullastaxableincomefromsourceswithinthePhilippines. Inthecaseofgrossincomederivedfromsourcespartlywithinandpartlywithout thePhilippines,thetaxableincomemayfirstbecomputedbydeductingthe expenses,lossesorotherdeductionsapportionedorallocatedtheretoandaratable partofanyexpense,lossorotherdeductionwhichcannotdefinitelybeallocatedto someitemsorclassesofgrossincome;andtheportionofsuchtaxableincome attributabletosourceswithinthePhilippinesmaybedeterminedbyprocessesor formulasofgeneralapportionmentprescribedbytheSecretaryofFinance.Gains, profitsandincomefromthesaleofpersonalpropertyproduced(inwholeorin part)bythetaxpayerwithinandsoldwithoutthePhilippines,orproduced(in wholeorinpart)bythetaxpayerwithoutandsoldwithinthePhilippines,shallbe treatedasderivedpartlyfromsourceswithinandpartlyfromsourceswithoutthe Philippines. Gains,profitsandincomederivedfromthepurchaseofpersonalpropertywithin anditssalewithoutthePhilippines,orfromthepurchaseofpersonalproperty withoutanditssalewithinthePhilippinesshallbetreatedasderivedentirelyform sourceswithinthecountryinwhichsold:Provided,however,Thatgainfromthe saleofsharesofstockinadomesticcorporationshallbetreatedasderivedentirely formsourceswithinthePhilippinesregardlessofwherethesaidsharesaresold. Thetransferbyanonresidentalienoraforeigncorporationtoanyoneofanyshare ofstockissuedbyadomesticcorporationshallnotbeeffectedormadeinitsbook unless:(1)thetransferorhasfiledwiththeCommissionerabondconditionedupon thefuturepaymentbyhimofanyincometaxthatmaybedueonthegainsderived fromsuchtransfer,or(2)theCommissionerhascertifiedthatthetaxes,ifany, imposedinthisTitleanddueonthegainrealizedfromsuchsaleortransferhave beenpaid.Itshallbethedutyofthetransferorandthecorporationthesharesof whicharesoldortransferred,toadvisethetransfereeofthisrequirement. (F)Definitions.AsusedinthisSectionthewords"sale"or"sold"include "exchange"or"exchanged";andtheword"produced"includes"created", "fabricated","manufactured","extracted","processed","cured"or"aged".

CHAPTERVIII ACCOUNTINGPERIODS ANDMETHODSOFACCOUNTING SEC.43.GeneralRule.Thetaxableincomeshallbecomputeduponthebasisofthe taxpayer'sannualaccountingperiod(fiscalyearorcalendaryear,asthecasemay be)inaccordancewiththemethodofaccountingregularlyemployedinkeepingthe booksofsuchtaxpayer,butifnosuchmethodofaccountinghasbeensoemployed, orifthemethodemployeddoesnotclearlyreflecttheincome,thecomputationshall bemadeinaccordancewithsuchmethodasintheopinionoftheCommissioner clearlyreflectstheincome.Ifthetaxpayer'sannualaccountingperiodisotherthana fiscalyear,asdefinedinSection22(Q),orifthetaxpayerhasnoannualaccounting period,ordoesnotkeepbooks,orifthetaxpayerisanindividual,thetaxable incomeshallbecomputedonthebasisofthecalendaryear. SEC.44.PeriodinwhichItemsofGrossIncomeIncluded.Theamountofallitems ofgrossincomeshallbeincludedinthegrossincomeforthetaxableyearinwhich receivedbythetaxpayer,unless,undermethodsofaccountingpermittedunder Section43,anysuchamountsaretobeproperlyaccountedforasofadifferent period.Inthecaseofthedeathofataxpayer,thereshallbeincludedincomputing taxableincomeforthetaxableperiodinwhichfallsthedateofhisdeath,amounts accrueduptothedateofhisdeathifnototherwiseproperlyincludibleinrespectof suchperiodorapriorperiod. SEC.45.PeriodforwhichDeductionsandCreditsTaken.Thedeductionsprovided forinthisTitleshallbetakenforthetaxableyearinwhich"paidoraccrued"or "paidorincurred",dependentuponthemethodofaccountingthebasisofwhichthe netincomeiscomputed,unlessinordertoclearlyreflecttheincome,thedeductions shouldbetakenasofadifferentperiod.Inthecaseofthedeathofataxpayer,there shallbeallowedasdeductionsforthetaxableperiodinwhichfallsthedateofhis death,amountsaccrueduptothedateofhisdeathifnototherwiseproperly allowableinrespectofsuchperiodorapriorperiod. SEC.46.ChangeofAccountingPeriod.Ifataxpayer,otherthananindividual, changeshisaccountingperiodfromfiscalyeartocalendaryear,fromcalendaryear tofiscalyear,orfromonefiscalyeartoanother,thenetincomeshall,withthe

approvaloftheCommissioner,becomputedonthebasisofsuchnewaccounting period,subjecttotheprovisionsofSection47. SEC.47.FinalorAdjustmentReturnsforaPeriodofLessthanTwelve(12)Months. (A)ReturnsforShortPeriodResultingfromChangeofAccountingPeriod.Ifa taxpayer,otherthananindividual,withtheapprovaloftheCommissioner,changes thebasisofcomputingnetincomefromfiscalyeartocalendaryear,aseparatefinal oradjustmentreturnshallbemadefortheperiodbetweenthecloseofthelastfiscal yearforwhichreturnwasmadeandthefollowingDecember31.Ifthechangeis fromcalendaryeartofiscalyear,aseparatefinaloradjustmentreturnshallbemade fortheperiodbetweenthecloseofthelastcalendaryearforwhichreturnwasmade andthedatedesignatedasthecloseofthefiscalyear.Ifthechangeisfromonefiscal yeartoanotherfiscalyear,aseparatefinaloradjustmentreturnshallbemadefor theperiodbetweenthecloseoftheformerfiscalyearandthedatedesignatedasthe closeofthenewfiscalyear. (B)IncomeComputedonBasisofShortPeriod.Whereaseparatefinalor adjustmentreturnismadeunderSubsection(A)onaccountofachangeinthe accountingperiod,andinallothercaseswhereaseparatefinaloradjustmentreturn isrequiredorpermittedbyrulesandregulationsprescribedbytheSecretaryof Finance,uponrecommendationoftheCommissioner,tobemadeforafractional partofayear,thentheincomeshallbecomputedonthebasisoftheperiodfor whichseparatefinaloradjustmentreturnismade. SEC.48.AccountingforLongTermContracts.Incomefromlongtermcontracts shallbereportedfortaxpurposesinthemannerasprovidedinthisSection.Asused herein,theterm'longtermcontracts'meansbuilding,installationorconstruction contractscoveringaperiodinexcessofone(1)year.Personswhosegrossincomeis derivedinwholeorinpartfromsuchcontractsshallreportsuchincomeuponthe basisofpercentageofcompletion.Thereturnshouldbeaccompaniedbyareturn certificateofarchitectsorengineersshowingthepercentageofcompletionduring thetaxableyearoftheentireworkperformedundercontract.Thereshouldbe deductedfromsuchgrossincomeallexpendituresmadeduringthetaxableyearon accountofthecontract,accountbeingtakenofthematerialandsuppliesonhandat thebeginningandendofthetaxableperiodforuseinconnectionwiththework underthecontractbutnotyetsoapplied.Ifuponcompletionofacontract,itis foundthatthetaxablenetincomearisingthereunderhasnotbeenclearlyreflected foranyyearoryears,theCommissionermaypermitorrequireanamendedreturn.

 SEC.49.InstallmentBasis. (A)SalesofDealersinPersonalProperty.Underrulesandregulationsprescribed bytheSecretaryofFinance,uponrecommendationoftheCommissioner,aperson whoregularlysellsorotherwisedisposesofpersonalpropertyontheinstallment planmayreturnasincometherefrominanytaxableyearthatproportionofthe installmentpaymentsactuallyreceivedinthatyear,whichthegrossprofitrealized ortoberealizedwhenpaymentiscompleted,bearstothetotalcontractprice. (B)SalesofRealtyandCasualSalesofPersonality.Inthecase(1)ofacasualsaleor othercasualdispositionofpersonalproperty(otherthanpropertyofakindwhich wouldproperlybeincludedintheinventoryofthetaxpayerifonhandattheclose ofthetaxableyear),forapriceexceedingOnethousandpesos(P1,000),or(2)ofa saleorotherdispositionofrealproperty,ifineithercasetheinitialpaymentsdonot exceedtwentyfivepercent(25%)ofthesellingprice,theincomemay,underthe rulesandregulationsprescribedbytheSecretaryofFinance,uponrecommendation oftheCommissioner,bereturnedonthebasisandinthemanneraboveprescribed inthisSection.AsusedinthisSection,theterm"initialpayments"meansthe paymentsreceivedincashorpropertyotherthanevidencesofindebtednessofthe purchaserduringthetaxableperiodinwhichthesaleorotherdispositionismade. (C)SalesofRealPropertyConsideredasCapitalAssetbyIndividuals.Anindividual whosellsordisposesofrealproperty,consideredascapitalasset,andisotherwise qualifiedtoreportthegaintherefromunderSubsection(B)maypaythecapital gainstaxininstallmentsunderrulesandregulationstobepromulgatedbythe SecretaryofFinance,uponrecommendationoftheCommissioner. (D)ChangefromAccrualtoInstallmentBasis.Ifataxpayerentitledtothebenefits ofSubsection(A)electsforanytaxableyeartoreporthistaxableincomeonthe installmentbasis,thenincomputinghisincomefortheyearofchangeorany subsequentyear,amountsactuallyreceivedduringanysuchyearonaccountof salesorotherdispositionsofpropertymadeinanyprioryearshallnotbeexcluded. SEC.50.AllocationofIncomeandDeductions.Inthecaseoftwoormore organizations,tradesorbusinesses(whetherornotincorporatedandwhetheror notorganizedinthePhilippines)ownedorcontrolleddirectlyorindirectlybythe sameinterests,theCommissionerisauthorizedtodistribute,apportionorallocate grossincomeordeductionsbetweenoramongsuchorganization,tradeorbusiness,

ifhedeterminedthatsuchdistribution,apportionmentorallocationisnecessaryin ordertopreventevasionoftaxesorclearlytoreflecttheincomeofanysuch organization,tradeorbusiness. CHAPTERIX RETURNSANDPAYMENTOFTAX SEC.51.IndividualReturn. (A)Requirements. (1)Exceptasprovidedinparagraph(2)ofthisSubsection,thefollowingindividuals arerequiredtofileanincometaxreturn: (a)EveryFilipinocitizenresidinginthePhilippines; (b)EveryFilipinocitizenresidingoutsidethePhilippines,onhisincomefrom sourceswithinthePhilippines; (c)EveryalienresidinginthePhilippines,onincomederivedfromsourceswithin thePhilippines;and (d)Everynonresidentalienengagedintradeorbusinessorintheexerciseof professioninthePhilippines. (2)Thefollowingindividualsshallnotberequiredtofileanincometaxreturn; (a)Anindividualwhosegrossincomedoesnotexceedhistotalpersonaland additionalexemptionsfordependentsunderSection35:Provided,Thatacitizenof thePhilippinesandanyalienindividualengagedinbusinessorpracticeof professionwithinthePhilippineshallfileanincometaxreturn,regardlessofthe amountofgrossincome; (b)Anindividualwithrespecttopurecompensationincome,asdefinedinSection 32(A)(1),derivedfromsourceswithinthePhilippines,theincometaxonwhichhas beencorrectlywithheldundertheprovisionsofSection79ofthisCode:Provided, Thatanindividualderivingcompensationconcurrentlyfromtwoormore employersatanytimeduringthetaxableyearshallfileanincometaxreturn: Provided,further,Thatanindividualwhosecompensationincomederivedfrom

sourceswithinthePhilippinesexceedsSixtythousandpesos(P60,000)shallalsofile anincometaxreturn; (c)Anindividualwhosesoleincomehasbeensubjectedtofinalwithholdingtax pursuanttoSection57(A)ofthisCode;and (d)Anindividualwhoisexemptfromincometaxpursuanttotheprovisionsofthis Codeandotherlaws,generalorspecial. (3)Theforgoingnotwithstanding,anyindividualnotrequiredtofileanincometax returnmayneverthelessberequiredtofileaninformationreturnpursuanttorules andregulationsprescribedbytheSecretaryofFinance,uponrecommendationof theCommissioner. (4)Theincometaxreturnshallbefiledinduplicatebythefollowingpersons: (a)Aresidentcitizenonhisincomefromallsources; (b)Anonresidentcitizenonhisincomederivedfromsourceswithinthe Philippines; (c)AresidentalienonhisincomederivedfromsourceswithinthePhilippines;and (d)AnonresidentalienengagedintradeorbusinessinthePhilippinesonhis incomederivedfromsourceswithinthePhilippines. (B)WheretoFile.ExceptincaseswheretheCommissionerotherwisepermits,the returnshallbefiledwithanauthorizedagentbank,RevenueDistrictOfficer, CollectionAgentordulyauthorizedTreasurerofthecityormunicipalityinwhich suchpersonhashislegalresidenceorprincipalplaceofbusinessinthePhilippines, oriftherebenolegalresidenceorplaceofbusinessinthePhilippines,withthe OfficeoftheCommissioner. (C)WhentoFile. (1)Thereturnofanyindividualspecifiedaboveshallbefiledonorbeforethe fifteenth(15th)dayofAprilofeachyearcoveringincomefortheprecedingtaxable year. (2)Individualssubjecttotaxoncapitalgains;

(a)Fromthesaleorexchangeofsharesofstocknottradedthrualocalstock exchangeasprescribedunderSection24(c)shallfileareturnwithinthirty(30) daysaftereachtransactionandafinalconsolidatedreturnonorbeforeApril15of eachyearcoveringallstocktransactionsoftheprecedingtaxableyear;and (b)FromthesaleordispositionofrealpropertyunderSection24(D)shallfile areturnwithinthirty(30)daysfollowingeachsaleorotherdisposition. (D)HusbandandWife.Marriedindividuals,whethercitizens,residentor nonresidentaliens,whodonotderiveincomepurelyfromcompensation,shallfilea returnforthetaxableyeartoincludetheincomeofbothspouses,butwhereitis impracticableforthespousestofileonereturn,eachspousemayfileaseparate returnofincomebutthereturnssofiledshallbeconsolidatedbytheBureaufor purposesofverificationforthetaxableyear. (E)ReturnofParenttoIncludeIncomeofChildren.Theincomeofunmarried minorsderivedfromproperlyreceivedfromalivingparentshallbeincludedinthe returnoftheparent,except(1)whenthedonor'staxhasbeenpaidonsuch property,or(2)whenthetransferofsuchpropertyisexemptfromdonor'stax. (F)PersonsUnderDisability.Ifthetaxpayerisunabletomakehisownreturn,the returnmaybemadebyhisdulyauthorizedagentorrepresentativeorbythe guardianorotherpersonchargedwiththecareofhispersonorproperty,the principalandhisrepresentativeorguardianassumingtheresponsibilityofmaking thereturnandincurringpenaltiesprovidedforerroneous,falseorfraudulent returns. (G)SignaturePresumedCorrect.Thefactthatanindividual'snameissignedtoa filedreturnshallbeprimafacieevidenceforallpurposesthatthereturnwas actuallysignedbyhim. SEC.52.CorporationReturns. (A)Requirements.Everycorporationsubjecttothetaxhereinimposed,except foreigncorporationsnotengagedintradeorbusinessinthePhilippines,shall render,induplicate,atrueandaccuratequarterlyincometaxreturnandfinalor

adjustmentreturninaccordancewiththeprovisionsofChapterXIIofthisTitle.The returnshallbefiledbythepresident,vicepresidentorotherprincipalofficer,and shallbesworntobysuchofficerandbythetreasurerorassistanttreasurer. (B)TaxableYearofCorporation.Acorporationmayemployeithercalendaryearor fiscalyearasabasisforfilingitsannualincometaxreturn:Provided,Thatthe corporationshallnotchangetheaccountingperiodemployedwithoutprior approvalfromtheCommissionerinaccordancewiththeprovisionsofSection47of thisCode. (C)ReturnofCorporationContemplatingDissolutionorReorganization.Every corporationshall,withinthirty(30)daysaftertheadoptionbythecorporationofa resolutionorplanforitsdissolution,orfortheliquidationofthewholeoranypart ofitscapitalstock,includingacorporationwhichhasbeennotifiedofpossible involuntarydissolutionbytheSecuritiesandExchangeCommission,orforits reorganization,renderacorrectreturntotheCommissioner,verifiedunderoath, settingforththetermsofsuchresolutionorplanandsuchotherinformationasthe SecretaryofFinance,uponrecommendationofthecommissioner,shall,byrulesand regulations,prescribe. Thedissolvingorreorganizingcorporationshall,priortotheissuancebythe SecuritiesandExchangeCommissionoftheCertificateofDissolutionor Reorganization,asmaybedefinedbyrulesandregulationsprescribedbythe SecretaryofFinance,uponrecommendationoftheCommissioner,securea certificateoftaxclearancefromtheBureauofInternalRevenuewhichcertificate shallbesubmittedtotheSecuritiesandExchangeCommission. (D)ReturnonCapitalGainsRealizedfromSaleofSharesofStocknotTradedinthe LocalStockExchange.Everycorporationderivingcapitalgainsfromthesaleor exchangeofsharesofstocknottradedthrualocalstockexchangeasprescribed underSections24(c),25(A)(3),27(E)(2),28(A)(8)(c)and28(B)(5)(c),shallfilea returnwithinthirty(30)daysaftereachtransactionsandafinalconsolidatedreturn ofalltransactionsduringthetaxableyearonorbeforethefifteenth(15th)dayof thefourth(4th)monthfollowingthecloseofthetaxableyear. SEC.53.ExtensionofTimetoFileReturns.TheCommissionermay,inmeritorious cases,grantareasonableextensionoftimeforfilingreturnsofincome(orfinaland

adjustmentreturnsincaseofcorporations),subjecttotheprovisionsofSection56 ofthisCode. SEC.54.ReturnsofReceivers,TrusteesinBankruptcyorAssignees.Incases whereinreceivers,trusteesinbankruptcyorassigneesareoperatingtheproperty orbusinessofacorporation,subjecttothetaximposedbythisTitle,suchreceivers, trusteesorassigneesshallmakereturnsofnetincomeasandforsuchcorporation, inthesamemannerandformassuchorganizationishereinbeforerequiredtomake returns,andanytaxdueontheincomeasreturnedbyreceivers,trusteesor assigneesshallbeassessedandcollectedinthesamemannerasifassesseddirectly againsttheorganizationsofwhosebusinessesorpropertiestheyhavecustodyor control. SEC.55.ReturnsofGeneralProfessionalPartnerships.Everygeneralprofessional partnershipshallfile,induplicate,areturnofitsincome,exceptincomeexempt underSection32(B)ofthisTitle,settingforththeitemsofgrossincomeandof deductionsallowedbythisTitle,andthenames,TaxpayerIdentificationNumbers (TIN),addressesandsharesofeachofthepartners. SEC.56.PaymentandAssessmentofIncomeTaxforIndividualsandCorporation. (A)PaymentofTax. (1)InGeneral.ThetotalamountoftaximposedbythisTitleshallbepaidbythe personsubjecttheretoatthetimethereturnisfiled.Inthecaseoftrampvessels,the shippingagentsand/orthehusbandingagents,andintheirabsence,thecaptains thereofarerequiredtofilethereturnhereinprovidedandpaythetaxduethereon beforetheirdeparture.Uponfailureofthesaidagentsorcaptainstofilethereturn andpaythetax,theBureauofCustomsisherebyauthorizedtoholdthevesseland preventitsdepartureuntilproofofpaymentofthetaxispresentedorasufficient bondisfiledtoanswerforthetaxdue. (2)InstallmentofPayment.WhenthetaxdueisinexcessofTwothousand pesos(P2,000),thetaxpayerotherthanacorporationmayelecttopaythetaxin two(2)equalinstallmentsinwhichcase,thefirstinstallmentshallbepaidatthe timethereturnisfiledandthesecondinstallment,onorbeforeJuly15followingthe closeofthecalendaryear.Ifanyinstallmentisnotpaidonorbeforethedatefixed

foritspayment,thewholeamountofthetaxunpaidbecomesdueandpayable, togetherwiththedelinquencypenalties. (3)PaymentofCapitalGainsTax.Thetotalamountoftaximposedand prescribedunderSection24(c),24(D),27(E)(2),28(A)(8)(c)and28(B)(5)(c)shall bepaidonthedatethereturnprescribedthereforisfiledbythepersonliable thereto:Provided,Thatifthesellersubmitsproofofhisintentiontoavailhimselfof thebenefitofexemptionofcapitalgainsunderexistingspeciallaws,nosuch paymentsshallberequired:Provided,further,Thatincaseoffailuretoqualifyfor exemptionundersuchspeciallawsandimplementingrulesandregulations,thetax dueonthegainsrealizedfromtheoriginaltransactionshallimmediatelybecome dueandpayable,subjecttothepenaltiesprescribedunderapplicableprovisionsof thisCode:Provided,finally,Thatiftheseller,havingpaidthetax,submitssuchproof ofintentwithinsix(6)monthsfromtheregistrationofthedocumenttransferring therealproperty,heshallbeentitledtoarefundofsuchtaxuponverificationofhis compliancewiththerequirementsforsuchexemption. Incasethetaxpayerelectsandisqualifiedtoreportthegainbyinstallmentsunder Section49ofthisCode,thetaxduefromeachinstallmentpaymentshallbepaid within(30)daysfromthereceiptofsuchpayments. Noregistrationofanydocumenttransferringrealpropertyshallbeeffectedbythe RegisterofDeedsunlesstheCommissionerorhisdulyauthorizedrepresentative hascertifiedthatsuchtransferhasbeenreported,andthetaxhereinimposed,if any,hasbeenpaid. (B)AssessmentandPaymentofDeficiencyTax.Afterthereturnisfiled,the Commissionershallexamineitandassessthecorrectamountofthetax.Thetaxor deficiencyincometaxsodiscoveredshallbepaiduponnoticeanddemandfromthe Commissioner. AsusedinthisChapter,inrespectofataximposedbythisTitle,theterm "deficiency"means: (1)TheamountbywhichthetaximposedbythisTitleexceedstheamount shownasthetaxbythetaxpayeruponhisreturn;buttheamountsoshownonthe returnshallbeincreasedbytheamountspreviouslyassessed(orcollectedwithout

assessment)asadeficiency,anddecreasedbytheamountpreviouslyabated, credited,returnedorotherwiserepaidinrespectofsuchtax;or (2)Ifnoamountisshownasthetaxbythetaxpayeruponthisreturn,orifno returnismadebythetaxpayer,thentheamountbywhichthetaxexceedsthe amountspreviouslyassessed(orcollectedwithoutassessment)asadeficiency;but suchamountspreviouslyassessedorcollectedwithoutassessmentshallfirstbe decreasedbytheamountspreviouslyabated,creditedreturnedorotherwiserepaid inrespectofsuchtax. SEC.57.WithholdingofTaxatSource. (A)WithholdingofFinalTaxonCertainIncomes.Subjecttorulesandregulations theSecretaryofFinancemaypromulgate,upontherecommendationofthe Commissioner,requiringthefilingofincometaxreturnbycertainincomepayees, thetaximposedorprescribedbySections24(B)(1),24(B)(2),24(C),24(D)(1); 25(A)(2),25(A)(3),25(B),25(C),25(D),25(E),27(D)(!),27(D)(2),27(D)(3), 27(D)(5),28(A)(4),28(A)(5),28(A)(7)(a),28(A)(7)(b),28(A)(7)(c),28(B)(1), 28(B)(2),28(B)(3),28(B)(4),28(B)(5)(a),28(B)(5)(b),28(B)(5)(c);33;and282of thisCodeonspecifieditemsofincomeshallbewithheldbypayorcorporation and/orpersonandpaidinthesamemannerandsubjecttothesameconditionsas providedinSection58ofthisCode. (B)WithholdingofCreditableTaxatSource.TheSecretaryofFinancemay,upon therecommendationoftheCommissioner,requirethewithholdingofataxonthe itemsofincomepayabletonaturalorjuridicalpersons,residinginthePhilippines, bypayorcorporation/personsasprovidedforbylaw,attherateofnotlessthan onepercent(1%)butnotmorethanthirtytwopercent(32%)thereof,whichshall becreditedagainsttheincometaxliabilityofthetaxpayerforthetaxableyear. (C)TaxfreeCovenantBonds.Inanycasewherebonds,mortgages,deedsoftrustor othersimilarobligationsofdomesticorresidentforeigncorporations,containa contractorprovisionsbywhichtheobligoragreestopayanyportionofthetax imposedinthisTitleupontheobligeeortoreimbursetheobligeeforanyportionof thetaxortopaytheinterestwithoutdeductionforanytaxwhichtheobligormaybe requiredorpermittedtopaythereonortoretaintherefromunderanylawofthe Philippines,oranystateorcountry,theobligorshalldeductbonds,mortgages, deedsoftrustorotherobligations,whethertheinterestorotherpaymentsare

payableannuallyoratshorterorlongerperiods,andwhetherthebonds,securities orobligationshadbeenorwillbeissuedormarketed,andtheinterestorother paymentthereonpaid,withinorwithoutthePhilippines,iftheinterestorother paymentispayabletoanonresidentalienortoacitizenorresidentofthe Philippines. SEC.58.ReturnsandPaymentofTaxesWithheldatSource. (A)QuarterlyReturnsandPaymentsofTaxesWithheld.Taxesdeductedand withheldunderSection57bywithholdingagentsshallbecoveredbyareturnand paidto,exceptincaseswheretheCommissionerotherwisepermits,anauthorized Treasurerofthecityormunicipalitywherethewithholdingagenthashislegal residenceorprincipalplaceofbusiness,orwherethewithholdingagentisa corporation,wheretheprincipalofficeislocated. Thetaxesdeductedandwithheldbythewithholdingagentshallbeheldasaspecial fundintrustforthegovernmentuntilpaidtothecollectingofficers. Thereturnforfinalwithholdingtaxshallbefiledandthepaymentmadewithin twentyfive(25)daysfromthecloseofeachcalendarquarter,whilethereturnfor creditablewithholdingtaxesshallbefiledandthepaymentmadenotlaterthanthe lastdayofthemonthfollowingthecloseofthequarterduringwhichwithholding wasmade:Provided,ThattheCommissioner,withtheapprovaloftheSecretaryof Finance,mayrequirethesewithholdingagentstopayordepositthetaxesdeducted orwithheldatmorefrequentintervalswhennecessarytoprotecttheinterestofthe government. (B)StatementofIncomePaymentsMadeandTaxesWithheld.Everywithholding agentrequiredtodeductandwithholdtaxesunderSection57shallfurnisheach recipient,inrespecttohisoritsreceiptsduringthecalendarquarteroryear,a writtenstatementshowingtheincomeorotherpaymentsmadebythewithholding agentduringsuchquarteroryear,andtheamountofthetaxdeductedandwithheld therefrom,simultaneouslyuponpaymentattherequestofthepayee,butnotlate thanthetwentieth(20th)dayfollowingthecloseofthequarterinthecaseof corporatepayee,ornotlaterthanMarch1ofthefollowingyearinthecaseof individualpayeeforcreditablewithholdingtaxes.Forfinalwithholdingtaxes,the statementshouldbegiventothepayeeonorbeforeJanuary31ofthesucceeding year.

 (C)AnnualInformationReturn.Everywithholdingagentrequiredtodeductand withholdtaxesunderSection57shallsubmittotheCommissioneranannual informationreturncontainingthelistofpayeesandincomepayments,amountof taxeswithheldfromeachpayeeandsuchotherpertinentinformationasmaybe requiredbytheCommissioner.Inthecaseoffinalwithholdingtaxes,thereturn shallbefiledonorbeforeJanuary31ofthesucceedingyear,andforcreditable withholdingtaxes,notlaterthanMarch1oftheyearfollowingtheyearforwhich theannualreportisbeingsubmitted.Thisreturn,ifmadeandfiledinaccordance withtherulesandregulationsapprovedbytheSecretaryofFinance,upon recommendationoftheCommissioner,shallbesufficientcompliancewiththe requirementsofSection68ofthisTitleinrespecttotheincomepayments. TheCommissionermay,byrulesandregulations,granttoanywithholdingagenta reasonableextensionoftimetofurnishandsubmitthereturnrequiredinthis Subsection. (D)IncomeofRecipient.Incomeuponwhichanycreditabletaxisrequiredtobe withheldatsourceunderSection57shallbeincludedinthereturnofitsrecipient buttheexcessoftheamountoftaxsowithheldoverthetaxdueonhisreturnshall berefundedtohimsubjecttotheprovisionsofSection204;iftheincometax collectedatsourceislessthanthetaxdueonhisreturn,thedifferenceshallbepaid inaccordancewiththeprovisionsofSection56. AlltaxeswithheldpursuanttotheprovisionsofthisCodeanditsimplementing rulesandregulationsareherebyconsideredtrustfundsandshallbemaintainedina separateaccountandnotcommingledwithanyotherfundsofthewithholding agent. (E)RegistrationwithRegisterofDeeds.Noregistrationofanydocument transferringrealpropertyshallbeeffectedbytheRegisterofDeedsunlessthe Commissionerorhisdulyauthorizedrepresentativehascertifiedthatsuchtransfer hasbeenreported,andthecapitalgainsorcreditablewithholdingtax,ifany,has beenpaid:Provided,however,Thattheinformationasmayberequiredbyrulesand regulationstobeprescribedbytheSecretaryofFinance,uponrecommendationof theCommissioner,shallbeannotatedbytheRegisterofDeedsintheTransfer CertificateofTitleorCondominiumCertificateofTitle:Provided,further,Thatin casesoftransferofpropertytoacorporation,pursuanttoamerger,consolidationor reorganization,andwherethelawallowsdeferredrecognitionofincomein accordancewithSection40,theinformationasmayberequiredbyrulesand regulationstobeprescribedbytheSecretaryofFinance,uponrecommendationof

theCommissioner,shallbeannotatedbytheRegisterofDeedsatthebackofthe TransferCertificateofTitleorCondominiumCertificateofTitleoftherealproperty involved:Provided,finally,ThatanyviolationofthisprovisionbytheRegisterof DeedsshallbesubjecttothepenaltiesimposedunderSection269ofthisCode. SEC.59.TaxonProfitsCollectiblefromOwnerorOtherPersons.Thetaximposed underthisTitleupongains,profits,andincomenotfallingundertheforegoingand notreturnedandpaidbyvirtueoftheforegoingorasotherwiseprovidedbylaw shallbeassessedbypersonalreturnunderrulesandregulationstobeprescribedby theSecretaryofFinance,uponrecommendationoftheCommissioner.Theintent andpurposeoftheTitleisthatallgains,profitsandincomeofataxableclass,as definedinthisTitle,shallbechargedandassessedwiththecorrespondingtax prescribedbythisTitle,andsaidtaxshallbepaidbytheownersofsuchgains, profitsandincome,ortheproperpersonhavingthereceipt,custody,controlor disposalofthesame.ForpurposesofthisTitle,ownershipofsuchgains,profitsand incomeorliabilitytopaythetaxshallbedeterminedasoftheyearforwhicha returnisrequiredtoberendered. CHAPTERX ESTATESANDTRUSTS SEC.60.ImpositionofTax. (A)ApplicationofTax.ThetaximposedbythisTitleuponindividualsshallapplyto theincomeofestatesorofanykindofpropertyheldintrust,including: (1)Incomeaccumulatedintrustforthebenefitofunbornorunascertained personorpersonswithcontingentinterests,andincomeaccumulatedorheldfor futuredistributionunderthetermsofthewillortrust; (2)Incomewhichistobedistributedcurrentlybythefiduciarytothebeneficiaries, andincomecollectedbyaguardianofaninfantwhichistobeheldordistributedas thecourtmaydirect;

(3)Incomereceivedbyestatesofdeceasedpersonsduringtheperiodof administrationorsettlementoftheestate;and (4)Incomewhich,inthediscretionofthefiduciary,maybeeitherdistributedtothe beneficiariesoraccumulated. (B)Exception.ThetaximposedbythisTitleshallnotapplytoemployee'strust whichformspartofapension,stockbonusorprofitsharingplanofanemployerfor thebenefitofsomeorallofhisemployees(1)ifcontributionsaremadetothetrust bysuchemployer,oremployees,orbothforthepurposeofdistributingtosuch employeestheearningsandprincipalofthefundaccumulatedbythetrustin accordancewithsuchplan,and(2)ifunderthetrustinstrumentitisimpossible,at anytimepriortothesatisfactionofallliabilitieswithrespecttoemployeesunder thetrust,foranypartofthecorpusorincometobe(withinthetaxableyearor thereafter)usedfor,ordivertedto,purposesotherthanfortheexclusivebenefitof hisemployees:Provided,Thatanyamountactuallydistributedtoanyemployeeor distributeeshallbetaxabletohimintheyearinwhichsodistributedtotheextent thatitexceedstheamountcontributedbysuchemployeeordistributee. (C)ComputationandPayment. (1)InGeneral.Thetaxshallbecomputeduponthetaxableincomeoftheestate ortrustandshallbepaidbythefiduciary,exceptasprovidedinSection63(relating torevocabletrusts)andSection64(relatingtoincomeforthebenefitofthe grantor). (2)ConsolidationofIncomeofTwoorMoreTrusts.Where,inthecaseoftwoor moretrusts,thecreatorofthetrustineachinstanceisthesameperson,andthe beneficiaryineachinstanceisthesame,thetaxableincomeofallthetrustsshallbe consolidatedandthetaxprovidedinthisSectioncomputedonsuchconsolidated income,andsuchproportionofsaidtaxshallbeassessedandcollectedfromeach trusteewhichthetaxableincomeofthetrustadministeredbyhimbearstothe consolidatedincomeoftheseveraltrusts. SEC.61.TaxableIncome.Thetaxableincomeoftheestateortrustshallbe computedinthesamemannerandonthesamebasisasinthecaseofanindividual, exceptthat:

(A)Thereshallbeallowedasadeductionincomputingthetaxableincomeofthe estateortrusttheamountoftheincomeoftheestateortrustforthetaxableyear whichistobedistributedcurrentlybythefiduciarytothebeneficiaries,andthe amountoftheincomecollectedbyaguardianofaninfantwhichistobeheldor distributedasthecourtmaydirect,buttheamountsoallowedasadeductionshall beincludedincomputingthetaxableincomeofthebeneficiaries,whether distributedtothemornot.Anyamountallowedasadeductionunderthis SubsectionshallnotbeallowedasadeductionunderSubsection(B)ofthisSection inthesameoranysucceedingtaxableyear. (B)Inthecaseofincomereceivedbyestatesofdeceasedpersonsduringtheperiod ofadministrationorsettlementoftheestate,andinthecaseofincomewhich,inthe discretionofthefiduciary,maybeeitherdistributedtothebeneficiaryor accumulated,thereshallbeallowedasanadditionaldeductionincomputingthe taxableincomeoftheestateortrusttheamountoftheincomeoftheestateortrust foritstaxableyear,whichisproperlypaidorcreditedduringsuchyeartoany legatee,heirorbeneficiarybuttheamountsoallowedasadeductionshallbe includedincomputingthetaxableincomeofthelegatee,heirorbeneficiary. (C)Inthecaseofatrustadministeredinaforeigncountry,thedeductions mentionedinSubsections(A)and(B)ofthisSectionshallnotbeallowed:Provided, Thattheamountofanyincomeincludedinthereturnofsaidtrustshallnotbe includedincomputingtheincomeofthebeneficiaries. SEC.62.ExemptionAllowedtoEstatesandTrusts.Forthepurposeofthetax providedforinthisTitle,thereshallbeallowedanexemptionofTwentythousand pesos(P20,000)fromtheincomeoftheestateortrust. SEC.63.RevocableTrusts.Whereatanytimethepowertorevestinthegrantor titletoanypartofthecorpusofthetrustisvested(1)inthegrantoreitheraloneor inconjunctionwithanypersonnothavingasubstantialadverseinterestinthe dispositionofsuchpartofthecorpusortheincometherefrom,or(2)inanyperson nothavingasubstantialadverseinterestinthedispositionofsuchpartofthe corpusortheincometherefrom,theincomeofsuchpartofthetrustshallbe includedincomputingthetaxableincomeofthegrantor. SEC.64.IncomeforBenefitofGrantor.

(A)Whereanypartoftheincomeofatrust(1)is,orinthediscretionofthegrantor orofanypersonnothavingasubstantialadverseinterestinthedispositionofsuch partoftheincomemaybeheldoraccumulatedforfuturedistributiontothe grantor,or(2)may,orinthediscretionofthegrantororofanypersonnothavinga substantialadverseinterestinthedispositionofsuchpartoftheincome,be distributedtothegrantor,or(3)is,orinthediscretionofthegrantororofany personnothavingasubstantialadverseinterestinthedispositionofsuchpartof theincomemaybeappliedtothepaymentofpremiumsuponpoliciesofinsurance onthelifeofthegrantor,suchpartoftheincomeofthetrustshallbeincludedin computingthetaxableincomeofthegrantor. (B)AsusedinthisSection,theterm'inthediscretionofthegrantor'meansinthe discretionofthegrantor,eitheraloneorinconjunctionwithanypersonnothaving asubstantialadverseinterestinthedispositionofthepartoftheincomein question. SEC.65.FiduciaryReturns.Guardians,trustees,executors,administrators, receivers,conservatorsandallpersonsorcorporations,actinginanyfiduciary capacity,shallrender,induplicate,areturnoftheincomeoftheperson,trustor estateforwhomorwhichtheyact,andbesubjecttoalltheprovisionsofthisTitle, whichapplytoindividualsincasesuchperson,estateortrusthasagrossincomeof Twentythousandpesos(P20,000)oroverduringthetaxableyear.Suchfiduciaryor personfilingthereturnforhimorit,shalltakeoaththathehassufficientknowledge oftheaffairsofsuchperson,trustorestatetoenablehimtomakesuchreturnand thatthesameis,tothebestofhisknowledgeandbelief,trueandcorrect,andbe subjecttoalltheprovisionsofthisTitlewhichapplytoindividuals:Provided,Thata returnmadebyorforoneortwoormorejointfiduciariesfiledintheprovince wheresuchfiduciariesreside;undersuchrulesandregulationsastheSecretaryof Finance,uponrecommendationoftheCommissioner,shallprescribe,shallbea sufficientcompliancewiththerequirementsofthisSection. SEC.66.FiduciariesIndemnifiedAgainstClaimsforTaxesPaid.Trustees, executors,administratorsandotherfiduciariesareindemnifiedagainsttheclaims ordemandsofeverybeneficiaryforallpaymentsoftaxeswhichtheyshallbe requiredtomakeundertheprovisionsofthisTitle,andtheyshallhavecreditforthe amountofsuchpaymentsagainstthebeneficiaryorprincipalinanyaccounting whichtheymakeassuchtrusteesorotherfiduciaries. CHAPTERXI OTHERINCOMETAXREQUIREMENTS

 SEC.67.CollectionofForeignPayments.Allpersons,corporations,dulyregistered generalcopartnerships(companiascolectivas)undertakingforprofitorotherwise thecollectionofforeignpaymentsofinterestsordividendsbymeansofcoupons, checksorbillsofexchangeshallobtainalicensefromtheCommissioner,andshall besubjecttosuchrulesandregulationsenablingthegovernmenttoobtainthe informationrequiredunderthisTitle,astheSecretaryofFinance,upon recommendationoftheCommissioner,shallprescribe. SEC.68.InformationatSourceastoIncomePayments.allpersons,corporationsor dulyregisteredcopartnerships(companiascolectivas),inwhatevercapacity acting,includinglesseesormortgagorsofrealorpersonalproperty,trustees,acting inanytrustcapacity,executors,administrators,receivers,conservatorsand employeesmakingpaymenttoanotherperson,corporationordulyregistered generalcopartnership(companiacolectiva),ofinterests,rents,salaries,wages, premiums,annuities,compensations,remunerations,emolumentsorotherfixedor determinablegains,profitsandincome,otherthanpaymentdescribedinSection69, inanytaxableyear,orinthecaseofsuchpaymentsmadebytheGovernmentofthe Philippines,theofficersoremployeesoftheGovernmenthavinginformationasto suchpaymentsandrequiredtomakereturnsinregardthereto,areauthorizedand requiredtorenderatrueandaccuratereturntotheCommissioner,undersuchrules andregulations,andinsuchformandmannerasmaybeprescribedbythe SecretaryofFinance,uponrecommendationoftheCommissioner,settingforththe amountofsuchgains,profitsandincomeandthenameandaddressoftherecipient ofsuchpayments:Provided,Thatsuchreturnsshallberequired,inthecaseof paymentsofinterestuponbondsandmortgagesordeedsoftrustorothersimilar obligationsofcorporations,andinthecaseofcollectionsofitems,notpayableinthe Philippines,ofinterestuponthebondsofforeigncountriesandinterestfromthe bondsanddividendsfromthestockofforeigncorporationsbypersons, corporationsordulyregisteredgeneralcopartnerships(companiascolectivas), undertakingasamatterofbusinessorforprofitorotherwisethecollectionof foreignpaymentsofsuchinterestsordividendsbymeansofcouponsorbillsof exchange. SEC.69.ReturnofInformationofBrokers.Everyperson,corporationorduly registeredgeneralcopartnership(companiacolectiva),doingbusinessasabroker inanyexchangeorboardorothersimilarplaceofbusiness,shall,whenrequiredby theCommissioner,renderacorrectreturndulyverifiedunderoathundersuchrules andregulationsastheSecretaryofFinance,uponrecommendationofthe Commissioner,mayprescribe,showingthenamesofcustomersforwhomsuch

person,corporationordulyregisteredgeneralcopartnership(companiacolectiva) hastransactedanybusiness,withsuchdetailsastotheprofits,lossesorother informationwhichtheCommissioner,mayrequireastoeachofsuchcustomersas willenabletheCommissionertodeterminewhetherallincometaxdueonprofitsor gainsofsuchcustomershasbeenpaid. SEC.70.ReturnsofForeignCorporations. (A)Requirements.UnderrulesandregulationsprescribedbytheSecretaryof finance,upontherecommendationoftheCommissioner,anyattorney,accountant, fiduciary,bank,trustcompany,financialinstitutionorotherperson,whoaids, assists,counselsoradvisesin,owithrespectto;theformation,organizationor reorganizationofanyforeigncorporation,shall,withinthirty(30)daysthereafter, filewiththeCommissionerareturn. (B)FormandContentsofReturn.Suchreturnshallbeinsuchformandshall setforth;underoath,inrespectofeachsuchcorporation,tothefullextentofthe informationwithinthepossessionorknowledgeorunderthecontroloftheperson requiredtofilethereturn,suchinformationastheSecretaryofFinance,upon recommendationoftheCommissioner,shallprescribebyrulesandregulationsas necessaryforcarryingouttheprovisionsofthisTitle.NothinginthisSectionshall beconstruedtorequirethedivulgingofprivilegedcommunicationsbetween attorneyandclient. SEC.71.DispositionofIncomeTaxReturns,PublicationofListsofTaxpayersand Filers.Aftertheassessmentshallhavebeenmade,asprovidedinthisTitle,the returns,togetherwithanycorrectionsthereofwhichmayhavebeenmadebythe Commissioner,shallbefiledintheOfficeoftheCommissionerandshallconstitute publicrecordsandbeopentoinspectionassuchupontheorderofthePresidentof thePhilippines,underrulesandregulationstobeprescribedbytheSecretaryof Finance,uponrecommendationoftheCommissioner. TheCommissionermay,ineachyear,causetobepreparedandpublishedinany newspaperthelistscontainingthenamesandaddressesofpersonswhohavefiled incometaxreturns.

SEC.72.SuittoRecoverTaxBasedonFalseorFraudulentReturns.Whenan assessmentismadeincaseofanylist,statementorreturn,whichintheopinionof theCommissionerwasfalseorfraudulentorcontainedanyunderstatementor undervaluation,notaxcollectedundersuchassessmentshallberecoveredbyany suit,unlessitisprovedthatthesaidlist,statementorreturnwasnotfalsenor fraudulentanddidnotcontainanyunderstatementorundervaluation;butthis provisionshallnotapplytostatementsorreturnsmadeortobemadeingoodfaith regardingannualdepreciationofoilorgaswellsandmines. SEC.73.DistributionofdividendsorAssetsbyCorporations. (A)DefinitionofDividends.Theterm"dividends"whenusedinthisTitle meansanydistributionmadebyacorporationtoitsshareholdersoutofitsearnings orprofitsandpayabletoitsshareholders,whetherinmoneyorinotherproperty. Whereacorporationdistributesallofitsassetsincompleteliquidationor dissolution,thegainrealizedorlosssustainedbythestockholder,whether individualorcorporate,isataxableincomeoradeductibleloss,asthecasemaybe. (B)StockDividend.Astockdividendrepresentingthetransferofsurplusto capitalaccountshallnotbesubjecttotax.However,ifacorporationcancelsor redeemsstockissuedasadividendatsuchtimeandinsuchmannerastomakethe distributionandcancellationorredemption,inwholeorinpart,essentially equivalenttothedistributionofataxabledividend,theamountsodistributedin redemptionorcancellationofthestockshallbeconsideredastaxableincometothe extentthatitrepresentsadistributionofearningsorprofits. (C)DividendsDistributedareDeemedMadefromMostRecentlyAccumulated Profits.Anydistributionmadetotheshareholdersormembersofacorporation shallbedeemedtohavebeenmadeformthemostrecentlyaccumulatedprofitsor surplus,andshallconstituteapartoftheannualincomeofthedistributeeforthe yearinwhichreceived. (D)NetIncomeofaPartnershipDeemedConstructivelyReceivedbyPartners. Thetaxableincomedeclaredbyapartnershipforataxableyearwhichissubjectto taxunderSection27(A)ofthisCode,afterdeductingthecorporateincometax imposedtherein,shallbedeemedtohavebeenactuallyorconstructivelyreceived

bythepartnersinthesametaxableyearandshallbetaxedtothemintheir individualcapacity,whetheractuallydistributedornot. CHAPTERXII QUARTERLYCORPORATEINCOMETAX,ANNUALDECLARATION ANDQUARTERLYPAYMENTSOFINCOMETAXES SEC.74.DeclarationofIncomeTaxforIndividuals. (A)InGeneral.ExceptasotherwiseprovidedinthisSection,everyindividual subjecttoincometaxunderSections24and25(A)ofthisTitle,whoisreceivingself employmentincome,whetheritconstitutesthesolesourceofhisincomeorin combinationwithsalaries,wagesandotherfixedordeterminableincome,shall makeandfileadeclarationofhisestimatedincomeforthecurrenttaxableyearon orbeforeApril15ofthesametaxableyear.Ingeneral,selfemploymentincome consistsoftheearningsderivedbytheindividualfromthepracticeofprofessionor conductoftradeorbusinesscarriedonbyhimasasoleproprietororbya partnershipofwhichheisamember.NonresidentFilipinocitizens,withrespectto incomefromwithoutthePhilippines,andnonresidentaliensnotengagedintradeor businessinthePhilippines,arenotrequiredtorenderadeclarationofestimated incometax.Thedeclarationshallcontainsuchpertinentinformationasthe SecretaryofFinance,uponrecommendationoftheCommissioner,may,byrulesand regulationsprescribe.Anindividualmaymakeamendmentsofadeclarationfiled duringthetaxableyearundertherulesandregulationsprescribedbytheSecretary ofFinance,uponrecommendationoftheCommissioner. (B)ReturnandPaymentofEstimatedIncomeTaxbyIndividuals.Theamountof estimatedincomeasdefinedinSubsection(C)withrespecttowhichadeclarationis requiredunderSubsection(A)shallbepaidinfour(4)installments.Thefirst installmentshallbepaidatthetimeofthedeclarationandthesecondandthird shallbepaidonAugust15andNovember15ofthecurrentyear,respectively.The fourthinstallmentshallbepaidonorbeforeApril15ofthefollowingcalendaryear whenthefinaladjustedincometaxreturnisduetobefiled.

(C)DefinitionofEstimatedTax.Inthecaseofanindividual,theterm"estimated tax"meanstheamountwhichtheindividualdeclaredasincometaxinhisfinal adjustedandannualincometaxreturnfortheprecedingtaxableyearminusthesum ofthecreditsallowedunderthisTitleagainstthesaidtax.If,duringthecurrent taxableyear,thetaxpayerreasonableexpectstopayabiggerincometax,heshall fileanamendeddeclarationduringanyintervalofinstallmentpaymentdates. SEC.75.DeclarationofQuarterlyCorporateIncomeTax.Everycorporationshall fileinduplicateaquarterlysummarydeclarationofitsgrossincomeanddeductions onacumulativebasisfortheprecedingquarterorquartersuponwhichtheincome tax,asprovidedinTitleIIofthisCode,shallbelevied,collectedandpaid.Thetaxso computedshallbedecreasedbytheamountoftaxpreviouslypaidorassessed duringtheprecedingquartersandshallbepaidnotlaterthansixty(60)daysfrom thecloseofeachofthefirstthree(3)quartersofthetaxableyear,whethercalendar orfiscalyear. SEC.76.FinalAdjustmentReturn.EverycorporationliabletotaxunderSection27 shallfileafinaladjustmentreturncoveringthetotaltaxableincomeforthe precedingcalendarorfiscalyear.Ifthesumofthequarterlytaxpaymentsmade duringthesaidtaxableyearisnotequaltothetotaltaxdueontheentiretaxable incomeofthatyear,thecorporationshalleither: (A)Paythebalanceoftaxstilldue;or (B)Carryovertheexcesscredit;or (C)Becreditedorrefundedwiththeexcessamountpaid,asthecasemaybe. Incasethecorporationisentitledtoataxcreditorrefundoftheexcessestimated quarterlyincometaxespaid,theexcessamountshownonitsfinaladjustment returnmaybecarriedoverandcreditedagainsttheestimatedquarterlyincometax liabilitiesforthetaxablequartersofthesucceedingtaxableyears.Oncetheoptionto carryoverandapplytheexcessquarterlyincometaxagainstincometaxdueforthe taxablequartersofthesucceedingtaxableyearshasbeenmade,suchoptionshallbe consideredirrevocableforthattaxableperiodandnoapplicationforcashrefundor issuanceofataxcreditcertificateshallbeallowedtherefor.

 SEC.77.PlaceandTimeofFilingandPaymentofQuarterlyCorporateIncomeTax. (A)PlaceofFiling.ExceptastheCommissionerotherwisepermits,thequarterly incometaxdeclarationrequiredinSection75andthefinaladjustmentreturn requiredinSection76shallbefiledwiththeauthorizedagentbanksorRevenue DistrictOfficerorCollectionAgentordulyauthorizedTreasurerofthecityor municipalityhavingjurisdictionoverthelocationoftheprincipalofficeofthe corporationfilingthereturnorplacewhereitsmainbooksofaccountsandother datafromwhichthereturnispreparedarekept. (B)TimeofFilingtheIncomeTaxReturn.Thecorporatequarterlydeclaration shallbefiledwithinsixty(60)daysfollowingthecloseofeachofthefirstthree(3) quartersofthetaxableyear.Thefinaladjustmentreturnshallbefiledonorbefore thefifteenth(15th)dayofApril,oronorbeforethefifteenth(15th)dayofthe fourth(4th)monthfollowingthecloseofthefiscalyear,asthecasemaybe. (C)TimeofPaymentoftheIncomeTax.Theincometaxdueonthecorporate quarterlyreturnsandthefinaladjustmentincometaxreturnscomputedin accordancewithSections75and76shallbepaidatthetimethedeclarationor returnisfiledinamannerprescribedbytheCommissioner. CHAPTERXIII WITHHOLDINGONWAGES SEC.78.Definitions.AsusedinthisChapter: (A)Wages.Theterm'wages'meansallremuneration(otherthanfeespaidtoa publicofficial)forservicesperformedbyanemployeeforhisemployer,including thecashvalueofallremunerationpaidinanymediumotherthancash,exceptthat suchtermshallnotincluderemunerationpaid: (1)Foragriculturallaborpaidentirelyinproductsofthefarmwherethelaboris performed,or

 (2)Fordomesticserviceinaprivatehome,or (3)Forcasuallabornotinthecourseoftheemployer'stradeorbusiness,or (4)ForservicesbyacitizenorresidentofthePhilippinesforaforeign governmentoraninternationalorganization. Iftheremunerationpaidbyanemployertoanemployeeforservicesperformed duringonehalf(1/2)ormoreofanypayrollperiodofnotmorethanthirtyone(31) consecutivedaysconstituteswages,alltheremunerationpaidbysuchemployerto suchemployeeforsuchperiodshallbedeemedtobewages;butiftheremuneration paidbyanemployertoanemployeeforservicesperformedduringmorethanone half(1/2)ofanysuchpayrollperioddoesnotconstitutewages,thennoneofthe remunerationpaidbysuchemployertosuchemployeeforsuchperiodshallbe deemedtobewages. (B)PayrollPeriod.Theterm'payrollperiod'meansaperiodforwhichpaymentof wagesisordinarilymadetotheemployeebyhisemployer,andtheterm "miscellaneouspayrollperiod"meansapayrollperiodotherthan,adaily,weekly, biweekly,semimonthly,monthly,quarterly,semiannual,orannualperiod. (C)Employee.Theterm'employee'referstoanyindividualwhoistherecipientof wagesandincludesanofficer,employeeorelectedofficialoftheGovernmentofthe Philippinesoranypoliticalsubdivision,agencyorinstrumentalitythereof.Theterm "employee"alsoincludesanofficerofacorporation. (D)Employer.Theterm"employer"meansthepersonforwhomanindividual performsorperformedanyservice,ofwhatevernature,astheemployeeofsuch person,exceptthat: (1)Ifthepersonforwhomtheindividualperformsorperformedanyservice doesnothavecontrolofthepaymentofthewagesforsuchservices,theterm "employer"(exceptforthepurposeofSubsection(A)meansthepersonhaving controlofthepaymentofsuchwages;and

 (2)Inthecaseofapersonpayingwagesonbehalfofanonresidentalien individual,foreignpartnershiporforeigncorporationnotengagedintradeor businesswithinthePhilippines,theterm"employer"(exceptforthepurposeof Subsection(A)meanssuchperson. SEC.79.IncomeTaxCollectedatSource. (A)RequirementofWithholding.Everyemployermakingpaymentofwagesshall deductandwithholduponsuchwagesataxdeterminedinaccordancewiththe rulesandregulationstobeprescribedbytheSecretaryofFinance,upon recommendationoftheCommissioner:Provided,however,Thatnowithholdingofa taxshallberequiredwherethetotalcompensationincomeofanindividualdoesnot exceedthestatutoryminimumwage,orfivethousandpesos(P5,000.00)permonth, whicheverishigher. (B)TaxPaidbyRecipient.Iftheemployer,inviolationoftheprovisionsofthis Chapter,failstodeductandwithholdthetaxasrequiredunderthisChapter,and thereafterthetaxagainstwhichsuchtaxmaybecreditedispaid,thetaxsorequired tobedeductedandwithheldshallnotbecollectedfromtheemployer;butthis Subsectionshallinnocaserelievetheemployerfromliabilityforanypenaltyor additiontothetaxotherwiseapplicableinrespectofsuchfailuretodeductand withhold. (C)RefundsorCredits. (1)Employer.WhentherehasbeenanoverpaymentoftaxunderthisSection, refundorcreditshallbemadetotheemployeronlytotheextentthattheamountof suchoverpaymentwasnotdeductedandwithheldhereunderbytheemployer. (2)Employees.TheamountdeductedandwithheldunderthisChapterduring anycalendaryearshallbeallowedasacredittotherecipientofsuchincomeagainst thetaximposedunderSection24(A)ofthisTitle.Refundsandcreditsincasesof excessivewithholdingshallbegrantedunderrulesandregulationspromulgatedby theSecretaryofFinance,uponrecommendationoftheCommissioner.

Anyexcessofthetaxeswithheldoverthetaxduefromthetaxpayershallbe returnedorcreditedwithinthree(3)monthsfromthefifteenth(15th)dayofApril. Refundsorcreditsmadeaftersuchtimeshallearninterestattherateofsixpercent (6%)perannum,startingafterthelapseofthethreemonthperiodtothedatethe refundofcreditismade. RefundsshallbemadeuponwarrantsdrawnbytheCommissionerorbyhisduly authorizedrepresentativewithoutthenecessityofcountersignaturebythe Chairman,CommissiononAuditorthelatter'sdulyauthorizedrepresentativeasan exceptiontotherequirementprescribedbySection49,Chapter8,SubtitleB,Title1 ofBookVofExecutiveOrderNo.292,otherwiseknownastheAdministrativeCode of1987. (D)PersonalExemptions. (1)InGeneral.UnlessotherwiseprovidedbythisChapter,thepersonaland additionalexemptionsapplicableunderthisChaptershallbedeterminedin accordancewiththemainprovisionsofthisTitle. (2)ExemptionCertificate. (a)WhentoFile.Onorbeforethedateofcommencementofemployment withanemployer,theemployeeshallfurnishtheemployerwithasigned withholdingexemptioncertificaterelatingtothepersonalandadditional exemptionstowhichheisentitled. (b)ChangeofStatus.Incaseofchangeofstatusofanemployeeasaresultof whichhewouldbeentitledtoalesserorgreateramountofexemption,the employeeshall,withinten(10)daysfromsuchchange,filewiththeemployeranew withholdingexemptioncertificatereflectingthechange. (c)UseofCertificates.Thecertificatesfiledhereundershallbeusedbythe employerinthedeterminationoftheamountoftaxestobewithheld.

(d)FailuretoFurnishCertificate.Whereanemployee,inviolationofthis Chapter,eitherfailsorrefusestofileawithholdingexemptioncertificate,the employershallwithholdthetaxesprescribedunderthescheduleforzeroexemption ofthewithholdingtaxtabledeterminedpursuanttoSubsection(A)hereof. (E)WithholdingonBasisofAverageWages.TheCommissionermay,underrules andregulationspromulgatedbytheSecretaryofFinance,authorizeemployersto: (1)estimatethewageswhichwillbepaidtoanemployeeinanyquarterofthe calendaryear; (2)determinetheamounttobedeductedandwithhelduponeachpaymentof wagestosuchemployeeduringsuchquarterasiftheappropriateaverageofthe wagessoestimatedconstitutedtheactualwagespaid;and (3)deductandwithholduponanypaymentofwagestosuchemployeeduring ;suchquartersuchamountasmayberequiredtobedeductedandwithheldduring suchquarterwithoutregardtothisSubsection. (F)HusbandandWife.Whenahusbandandwifeeacharerecipientsofwages, whetherfromthesameorfromdifferentemployers,taxestobewithheldshallbe determinedonthefollowingbases: (1)Thehusbandshallbedeemedtheheadofthefamilyandproperclaimantofthe additionalexemptioninrespecttoanydependentchildren,unlessheexplicitly waiveshisrightinfavorofhiswifeinthewithholdingexemptioncertificate. (2)Taxesshallbewithheldfromthewagesofthewifeinaccordancewiththe scheduleforzeroexemptionofthewithholdingtaxtableprescribedinSubsection (D)(2)(d)hereof. (G)NonresidentAliens.Wagespaidtononresidentalienindividualsengagedin tradeorbusinessinthePhilippinesshallbesubjecttotheprovisionsofthisChapter. (H)YearEndAdjustment.Onorbeforetheendofthecalendaryearbutpriorto thepaymentofthecompensationforthelastpayrollperiod,theemployershall determinethetaxduefromeachemployeeontaxablecompensationincomeforthe entiretaxableyearinaccordancewithSection24(A).Thedifferencebetweenthetax

duefromtheemployeefortheentireyearandthesumoftaxeswithheldfrom JanuarytoNovembershalleitherbewithheldfromhissalaryinDecemberofthe currentcalendaryearorrefundedtotheemployeenotlaterthanJanuary25ofthe succeedingyear. SEC.80.LiabilityforTax. (A)Employer.Theemployershallbeliableforthewithholdingandremittanceof thecorrectamountoftaxrequiredtobedeductedandwithheldunderthisChapter. Iftheemployerfailstowithholdandremitthecorrectamountoftaxasrequiredto bewithheldundertheprovisionofthisChapter,suchtaxshallbecollectedfromthe employertogetherwiththepenaltiesoradditionstothetaxotherwiseapplicablein respecttosuchfailuretowithholdandremit. (B)Employee.Whereanemployeefailsorrefusestofilethewithholding exemptioncertificateorwillfullysuppliesfalseorinaccurateinformation thereunder,thetaxotherwiserequiredtobewithheldbytheemployershallbe collectedfromhimincludingpenaltiesoradditionstothetaxfromtheduedateof remittanceuntilthedateofpayment.Ontheotherhand,excesstaxeswithheld madebytheemployerdueto: (1)failureorrefusaltofilethewithholdingexemptioncertificate;or (2)falseandinaccurateinformationshallnotberefundedtotheemployeebutshall beforfeitedinfavoroftheGovernment. SEC.81.FilingofReturnandPaymentofTaxesWithheld.Exceptasthe Commissionerotherwisepermits,taxesdeductedandwithheldbytheemployeron wagesofemployeesshallbecoveredbyareturnandpaidtoanauthorizedagent bank;CollectionAgent,orthedulyauthorizedTreasurerofthecityormunicipality wheretheemployerhashislegalresidenceorprincipalplaceofbusiness,orincase theemployerisacorporation,wheretheprincipalofficeislocated. Thereturnshallbefiledandthepaymentmadewithintwentyfive(25)daysfrom thecloseofeachcalendarquarter:Provided,however,ThattheCommissionermay, withtheapprovaloftheSecretaryofFinance,requiretheemployerstopayor depositthetaxesdeductedandwithheldatmorefrequentintervals,incaseswhere suchrequirementisdeemednecessarytoprotecttheinterestoftheGovernment.

Thetaxesdeductedandwithheldbyemployersshallbeheldinaspecialfundin trustfortheGovernmentuntilthesamearepaidtothesaidcollectingofficers. SEC.82.ReturnandPaymentinCaseofGovernmentEmployees.Iftheemployeris theGovernmentofthePhilippinesoranypoliticalsubdivision,agencyor instrumentalitythereof,thereturnoftheamountdeductedandwithhelduponany wageshallbemadebytheofficeroremployeehavingcontrolofthepaymentofsuch wage,orbyanyofficeroremployeedulydesignatedforthepurpose. SEC.83.StatementsandReturns. (A)Requirements.Everyemployerrequiredtodeductandwithholdataxshall furnishtoeachsuchemployeeinrespectofhisemploymentduringthecalendar year,onorbeforeJanuarythirtyfirst(31st)ofthesucceedingyear,orifhis employmentisterminatedbeforethecloseofsuchcalendaryear,onthesamedayof whichthelastpaymentofwagesismade,awrittenstatementconfirmingthewages paidbytheemployertosuchemployeeduringthecalendaryear,andtheamountof taxdeductedandwithheldunderthisChapterinrespectofsuchwages.The statementrequiredtobefurnishedbythisSectioninrespectofanywageshall containsuchotherinformation,andshallbefurnishedatsuchothertimeandin suchformastheSecretaryofFinance,upontherecommendationofthe Commissioner,may,byrulesandregulation,prescribe. (B)AnnualInformationReturns.Everyemployerrequiredtodeductandwithhold thetaxesinrespectofthewagesofhisemployeesshall,onorbeforeJanuarythirty first(31st)ofthesucceedingyear,submittotheCommissioneranannual informationreturncontainingalistofemployees,thetotalamountofcompensation incomeofeachemployee,thetotalamountoftaxeswithheldtherefromduringthe year,accompaniedbycopiesofthestatementreferredtointhepreceding paragraph,andsuchotherinformationasmaybedeemednecessary.Thisreturn,if madeandfiledinaccordancewithrulesandregulationspromulgatedbythe SecretaryofFinance,uponrecommendationoftheCommissioner,shallbesufficient compliancewiththerequirementsofSection68ofthisTitleinrespectofsuch wages. (C)Extensionoftime.TheCommissioner,undersuchrulesandregulationsasmay bepromulgatedbytheSecretaryofFinance,maygranttoanyemployera

reasonableextensionoftimetofurnishandsubmitthestatementsandreturns requiredunderthisSection. TITLEIII CHAPTERI ESTATETAX SEC.84.RatesofEstateTax.Thereshallbelevied,assessed,collectedandpaid uponthetransferofthenetestateasdeterminedinaccordancewithSections85 and86ofeverydecedent,whetherresidentornonresidentofthePhilippines,atax basedonthevalueofsuchnetestate,ascomputedinaccordancewiththefollowing schedule: Ifthenetestateis: OVER

BUTNOTOVER

THETAXSHALLBE PLUS

OFTHEEXCESSOVER P200,000 Exempt

P200,000

550,000

 0 5%

P200,000 500,000

2,000,000

P15,000 8%

500,000 2,000,000

5,000,000

135,000 11%

2,000,000 5,000,000

10,000,000

465,000 15%

5,000,000 10,000,000

AndOver

1,215,000 20%

10,000,000 SEC.85.GrossEstate.thevalueofthegrossestateofthedecedentshallbe determinedbyincludingthevalueatthetimeofhisdeathofallproperty,realor personal,tangibleorintangible,whereversituated:Provided,however,thatinthe caseofanonresidentdecedentwhoatthetimeofhisdeathwasnotacitizenofthe Philippines,onlythatpartoftheentiregrossestatewhichissituatedinthe Philippinesshallbeincludedinhistaxableestate. (A)Decedent'sInterest.Totheextentoftheinterestthereinofthedecedentatthe timeofhisdeath; (B)TransferinContemplationofDeath.Totheextentofanyinterestthereinof whichthedecedenthasatanytimemadeatransfer,bytrustorotherwise,in contemplationoforintendedtotakeeffectinpossessionorenjoymentatorafter death,orofwhichhehasatanytimemadeatransfer,bytrustorotherwise,under

whichhehasretainedforhislifeorforanyperiodwhichdoesnotinfactendbefore hisdeath(1)thepossessionorenjoymentof,ortherighttotheincomefromthe property,or(2)theright,eitheraloneorinconjunctionwithanyperson,to designatethepersonwhoshallpossessorenjoythepropertyortheincome therefrom;exceptincaseofabonafidesaleforanadequateandfullconsiderationin moneyormoney'sworth. (C)RevocableTransfer. (1)Totheextentofanyinteresttherein,ofwhichthedecedenthasatanytime madeatransfer(exceptincaseofabonafidesaleforanadequateandfull considerationinmoneyormoney'sworth)bytrustorotherwise,wherethe enjoymentthereofwassubjectatthedateofhisdeathtoanychangethroughthe exerciseofapower(inwhatevercapacityexerciseable)bythedecedentaloneorby thedecedentinconjunctionwithanyotherperson(withoutregardtowhenorfrom whatsourcethedecedentacquiredsuchpower),toalter,amend,revoke,or terminate,orwhereanysuchpowerisrelinquishedincontemplationofthe decedent'sdeath. (2)ForthepurposeofthisSubsection,thepowertoalter,amendorrevokeshall beconsideredtoexistonthedateofthedecedent'sdeatheventhoughtheexercise ofthepowerissubjecttoaprecedentgivingofnoticeoreventhoughthealteration, amendmentorrevocationtakeseffectonlyontheexpirationofastatedperiodafter theexerciseofthepower,whetherornotonorbeforethedateofthedecedent's deathnoticehasbeengivenorthepowerhasbeenexercised.Insuchcases,proper adjustmentshallbemaderepresentingtheinterestswhichwouldhavebeen excludedfromthepowerifthedecedenthadlived,andforsuchpurposeifthe noticehasnotbeengivenorthepowerhasnotbeenexercisedonorbeforethedate ofhis death,suchnoticeshallbeconsideredtohavebeengiven,orthepower exercised,onthedateofhisdeath. (D)PropertyPassingUnderGeneralPowerofAppointment.Totheextentofany propertypassingunderageneralpowerofappointmentexercisedbythedecedent: (1)bywill,or(2)bydeedexecutedincontemplationof,orintendedtotakeeffectin possessionorenjoymentat,orafterhisdeath,or(3)bydeedunderwhichhehas retainedforhislifeoranyperiodnotascertainablewithoutreferencetohisdeathor foranyperiodwhichdoesnotinfactendbeforehisdeath(a)thepossessionor enjoymentof,ortherighttotheincomefrom,theproperty,or(b)theright,either

aloneorinconjunctionwithanyperson,todesignatethepersonswhoshallpossess orenjoythepropertyortheincometherefrom;exceptincaseofabonafidesalefor anadequateandfullconsiderationinmoneyormoney'sworth. (E)ProceedsofLifeInsurance.Totheextentoftheamountreceivablebytheestate ofthedeceased,hisexecutor,oradministrator,asinsuranceunderpoliciestaken outbythedecedentuponhisownlife,irrespectiveofwhetherornottheinsured retainedthepowerofrevocation,ortotheextentoftheamountreceivablebyany beneficiarydesignatedinthepolicyofinsurance,exceptwhenitisexpressly stipulatedthatthedesignationofthebeneficiaryisirrevocable. (F)PriorInterests.Exceptasotherwisespecificallyprovidedtherein,Subsections (B),(C)and(E)ofthisSectionshallapplytothetransfers,trusts,estates,interests, rights,powersandrelinquishmentofpowers,asseverallyenumeratedand describedtherein,whethermade,created,arising,existing,exercisedor relinquishedbeforeoraftertheeffectivityofthisCode. (G)TransfersofInsufficientConsideration.Ifanyoneofthetransfers,trusts, interests,rightsorpowersenumeratedanddescribedinSubsections(B),(C)and (D)ofthisSectionismade,created,exercisedorrelinquishedforaconsiderationin moneyormoney'sworth,butisnotabonafidesaleforanadequateandfull considerationinmoneyormoney'sworth,thereshallbeincludedinthegrossestate onlytheexcessofthefairmarketvalue,atthetimeofdeath,oftheproperty otherwisetobeincludedonaccountofsuchtransaction,overthevalueofthe considerationreceivedthereforbythedecedent. (H)CapitaloftheSurvivingSpouse.Thecapitalofthesurvivingspouseofa decedentshallnot,forthepurposeofthisChapter,bedeemedapartofhisorher grossestate. SEC.86.ComputationofNetEstate.Forthepurposeofthetaximposedinthis Chapter,thevalueofthenetestateshallbedetermined: (A)DeductionsAllowedtotheEstateofCitizenoraResident.Inthecaseofa citizenorresidentofthePhilippines,bydeductingfromthevalueofthegrossestate

 (1)Expenses,Losses,Indebtedness,andtaxes.Suchamounts: (a)Foractualfuneralexpensesorinanamountequaltofivepercent(5%)of thegrossestate,whicheverislower,butinnocasetoexceedTwohundred thousandpesos(P200,000); (b)Forjudicialexpensesofthetestamentaryorintestateproceedings; (c)Forclaimsagainsttheestate:Provided,Thatatthetimetheindebtedness wasincurredthedebtinstrumentwasdulynotarizedand,iftheloanwascontracted withinthree(3)yearsbeforethedeathofthedecedent,theadministratoror executorshallsubmitastatementshowingthedispositionoftheproceedsofthe loan; (d)Forclaimsofthedeceasedagainstinsolventpersonswherethevalueof decedent'sinterestthereinisincludedinthevalueofthegrossestate;and (e)Forunpaidmortgagesupon,oranyindebtednessinrespectto,property wherethevalueofdecedent'sinteresttherein,undiminishedbysuchmortgageor indebtedness,isincludedinthevalueofthegrossestate,butnotincludingany incometaxuponincomereceivedafterthedeathofthedecedent,orpropertytaxes notaccruedbeforehisdeath,oranyestatetax.Thedeductionhereinallowedinthe caseofclaimsagainsttheestate,unpaidmortgagesoranyindebtednessshall,when foundeduponapromiseoragreement,belimitedtotheextentthattheywere contractedbonafideandforanadequateandfullconsiderationinmoneyor money'sworth.Thereshallalsobedeductedlossesincurredduringthesettlement oftheestatearisingfromfires,storms,shipwreck,orothercasualties,orfrom robbery,theftorembezzlement,whensuchlossesarenotcompensatedforby insuranceorotherwise,andifatthetimeofthefilingofthereturnsuchlosseshave notbeenclaimedasadeductionfortheincometaxpurposesinanincometax return,andprovidedthatsuchlosseswereincurrednotlaterthanthelastdayfor thepaymentoftheestatetaxasprescribedinSubsection(A)ofSection91. (2)PropertyPreviouslyTaxed.Anamountequaltothevaluespecifiedbelowof anypropertyformingapartofthegrossestatesituatedinthePhilippinesofany

personwhodiedwithinfive(5)yearspriortothedeathofthedecedent,or transferredtothedecedentbygiftwithinfive(5)yearspriortohisdeath,where suchpropertycanbeidentifiedashavingbeenreceivedbythedecedentfromthe donorbygift,orfromsuchpriordecedentbygift,bequest,deviseorinheritance,or whichcanbeidentifiedashavingbeenacquiredinexchangeforpropertyso received: Onehundredpercent(100%)ofthevalue,ifthepriordecedentdiedwithinone (1)yearpriortothedeathofthedecedent,orifthepropertywastransferredtohim bygiftwithinthesameperiodpriortohisdeath; Eightypercent(80%)ofthevalue,ifthepriordecedentdiedmorethanone(1) yearbutnotmorethantwo(2)yearspriortothedeathofthedecedent,orifthe propertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath; Sixtypercent(60%)ofthevalue,ifthepriordecedentdiedmorethantwo(2) yearsbutnotmorethanthree(3)yearspriortothedeathofthedecedent,orifthe propertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath; Fortypercent(40%)ofthevalue,ifthepriordecedentdiedmorethanthree(3) yearsbutnotmorethanfour(4)yearspriortothedeathofthedecedent,orifthe propertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath; Twentypercent(20%)ofthevalue,ifthepriordecedentdiedmorethanfour(4) yearsbutnotmorethanfive(5)yearspriortothedeathofthedecedent,orifthe propertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath; Thesedeductionsshallbeallowedonlywhereadonor'staxorestatetax imposedunderthisTitlewasfinallydeterminedandpaidbyoronbehalfofsuch donor,ortheestateofsuchpriordecedent,asthecasemaybe,andonlyinthe amountfinallydeterminedasthevalueofsuchpropertyindeterminingthevalueof thegift,orthegrossestateofsuchpriordecedent,andonlytotheextentthatthe valueofsuchpropertyisincludedinthedecedent'sgrossestate,andonlyifin determiningthevalueoftheestateofthepriordecedent,nodeductionwas allowableunderparagraph(2)inrespectofthepropertyorpropertiesgivenin exchangetherefor.Whereadeductionwasallowedofanymortgageorotherlienin determiningthedonor'stax,ortheestatetaxofthepriordecedent,whichwaspaid

inwholeorinpartpriortothedecedent'sdeath,thenthedeductionallowable undersaidSubsectionshallbereducedbytheamountsopaid.Suchdeduction allowableshallbereducedbyanamountwhichbearsthesameratiototheamounts allowedasdeductionsunderparagraphs(1)and(3)ofthisSubsectionasthe amountotherwisedeductibleundersaidparagraph(2)bearstothevalueofthe decedent'sestate.Wherethepropertyreferredtoconsistsoftwoormoreitems,the aggregatevalueofsuchitemsshallbeusedforthepurposeofcomputingthe deduction. (3)TransfersforPublicUse.Theamountofallthebequests,legacies,devisesor transferstoorfortheuseoftheGovernmentoftheRepublicofthePhilippines,or anypoliticalsubdivisionthereof,forexclusivelypublicpurposes. (4)TheFamilyHome.Anamountequivalenttothecurrentfairmarketvalueof thedecedent'sfamilyhome:Provided,however,Thatifthesaidcurrentfairmarket valueexceedsOnemillionpesos(P1,000,000),theexcessshallbesubjecttoestate tax.Asasinequanonconditionfortheexemptionordeduction,saidfamilyhome musthavebeenthedecedent'sfamilyhomeascertifiedbythebarangaycaptainof thelocality. (5)StandardDeduction.AnamountequivalenttoOnemillionpesos (P1,000,000). (6)MedicalExpenses.MedicalExpensesincurredbythedecedentwithinone (1)yearpriortohisdeathwhichshallbedulysubstantiatedwithreceipts:Provided, ThatinnocaseshallthedeductiblemedicalexpensesexceedFiveHundred ThousandPesos(P500,000). (7)AmountReceivedbyHeirsUnderRepublicActNo.4917.Anyamount receivedbytheheirsfromthedecedentemployeeasaconsequenceofthedeathof thedecedentemployeeinaccordancewithRepublicActNo.4917:Provided,That suchamountisincludedinthegrossestateofthedecedent. (B)DeductionsAllowedtoNonresidentEstates.Inthecaseofanonresidentnota citizenofthePhilippines,bydeductingfromthevalueofthatpartofhisgrossestate whichatthetimeofhisdeathissituatedinthePhilippines:

 (1)Expenses,Losses,IndebtednessandTaxes.Thatproportionofthe deductionsspecifiedinparagraph(1)ofSubsection(A)ofthisSectionwhichthe valueofsuchpartbearstothevalueofhisentiregrossestatewhereversituated; (2)PropertyPreviouslyTaxed.Anamountequaltothevaluespecifiedbelowof anypropertyformingpartofthegrossestatesituatedinthePhilippinesofany personwhodiedwithinfive(5)yearspriortothedeathofthedecedent,or transferredtothedecedentbygiftwithinfive(5)yearspriortohisdeath,where suchpropertycanbeidentifiedashavingbeenreceivedbythedecedentfromthe donorbygift,orfromsuchpriordecedentbygift,bequest,deviseorinheritance,or whichcanbeidentifiedashavingbeenacquiredinexchangeforpropertyso received: Onehundredpercent(100%)ofthevalueifthepriordecedentdiedwithinone (1)yearpriortothedeathofthedecedent,orifthepropertywastransferredtohim bygift,withinthesameperiodpriortohisdeath; Eightypercent(80%)ofthevalue,ifthepriordecedentdiedmorethanone(1) yearbutnotmorethantwo(2)yearspriortothedeathofthedecedent,orifthe propertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath; Sixtypercent(60%)ofthevalue,ifthepriordecedentdiedmorethantwo(2) yearsbutnotmorethanthree(3)yearspriortothedeathofthedecedent,orifthe propertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath; Fortypercent(40%)ofthevalue,ifthepriordecedentdiedmorethanthree(3) yearsbutnotmorethanfour(4)yearspriortothedeathofthedecedent,orifthe propertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath; and Twentypercent(20%)ofthevalue,ifthepriordecedentdiedmorethanfour(4) yearsbutnotmorethanfive(5)yearspriortothedeathofthedecedent,orifthe propertywastransferredtohimbygiftwithinthesameperiodpriortohisdeath.

Thesedeductionsshallbeallowedonlywhereadonor'stax,orestatetax imposedunderthisTitleisfinallydeterminedandpaidbyoronbehalfofsuch donor,ortheestateofsuchpriordecedent,asthecasemaybe,andonlyinthe amountfinallydeterminedasthevalueofsuchpropertyindeterminingthevalueof thegift,orthegrossestateofsuchpriordecedent,andonlytotheextentthatthe valueofsuchpropertyisincludedinthatpartofthedecedent'sgrossestatewhich atthetimeofhisdeathissituatedinthePhilippines;andonlyif,indeterminingthe valueofthenetestateofthepriordecedent,nodeductionisallowableunder paragraph(2)ofSubsection(B)ofthisSection,inrespectofthepropertyor propertiesgiveninexchangetherefore.Whereadeductionwasallowedofany mortgageorotherlienindeterminingthedonor'stax,ortheestatetaxoftheprior decedent,whichwaspaidinwholeorinpartpriortothedecedent'sdeath,thenthe deductionallowableundersaidparagraphshallbereducedbytheamountsopaid. Suchdeductionallowableshallbereducedbyanamountwhichbearsthesameratio totheamountsallowedasdeductionsunderparagraphs(1)and(3)ofthis Subsectionastheamountotherwisedeductibleunderparagraph(2)bearstothe valueofthatpartofthedecedent'sgrossestatewhichatthetimeofhisdeathis situatedinthePhilippines.Wherethepropertyreferredtoconsistsoftwo(2)or moreitems,theaggregatevalueofsuchitemsshallbeusedforthepurposeof computingthededuction. (3)TransfersforPublicUse.Theamountofallbequests,legacies,devisesor transferstoorfortheuseoftheGovernmentoftheRepublicofthePhilippinesor anypoliticalsubdivisionthereof,forexclusivelypublicpurposes. (C)ShareintheConjugalProperty.thenetshareofthesurvivingspouseinthe conjugalpartnershippropertyasdiminishedbytheobligationsproperlychargeable tosuchpropertyshall,forthepurposeofthisSection,bedeductedfromthenet estateofthedecedent. (D)MiscellaneousProvisions.Nodeductionshallbeallowedinthecaseofa nonresidentnotacitizenofthePhilippines,unlesstheexecutor,administrator,or anyoneoftheheirs,asthecasemaybe,includesinthereturnrequiredtobefiled underSection90thevalueatthetimeofhisdeathofthatpartofthegrossestateof thenonresidentnotsituatedinthePhilippines. (E)TaxCreditforEstateTaxespaidtoaForeignCountry.

(1)InGeneral.ThetaximposedbythisTitleshallbecreditedwiththeamounts ofanyestatetaximposedbytheauthorityofaforeigncountry. (2)LimitationsonCredit.TheamountofthecredittakenunderthisSection shallbesubjecttoeachofthefollowinglimitations: (a)Theamountofthecreditinrespecttothetaxpaidtoanycountryshallnot exceedthesameproportionofthetaxagainstwhichsuchcreditistaken,whichthe decedent'snetestatesituatedwithinsuchcountrytaxableunderthisTitlebearsto hisentirenetestate;and (b)Thetotalamountofthecreditshallnotexceedthesameproportionofthe taxagainstwhichsuchcreditistaken,whichthedecedent'snetestatesituated outsidethePhilippinestaxableunderthisTitlebearstohisentirenetestate. SEC.87.ExemptionofCertainAcquisitionsandTransmissions.Thefollowingshall notbetaxed: (A)Themergerofusufructintheownerofthenakedtitle; (B)Thetransmissionordeliveryoftheinheritanceorlegacybythefiduciaryheir orlegateetothefideicommissary; (C)Thetransmissionfromthefirstheir,legateeordoneeinfavorofanother beneficiary,inaccordancewiththedesireofthepredecessor;and (D)Allbequests,devises,legaciesortransferstosocialwelfare,culturaland charitableinstitutions,nopartofthenetincomeofwhichinsurestothebenefitof anyindividual:Provided,however,Thatnotmorethanthirtypercent(30%)ofthe saidbequests,devises,legaciesortransfersshallbeusedbysuchinstitutionsfor administrationpurposes. SEC.88.DeterminationoftheValueoftheEstate.

 (A)Usufruct.Todeterminethevalueoftherightofusufruct,useorhabitation,as wellasthatofannuity,thereshallbetakenintoaccounttheprobablelifeofthe beneficiaryinaccordancewiththelatestBasicStandardMortalityTable,tobe approvedbytheSecretaryofFinance,uponrecommendationoftheInsurance Commissioner. (B)Properties.Theestateshallbeappraisedatitsfairmarketvalueasofthetime ofdeath.However,theappraisedvalueofrealpropertyasofthetimeofdeathshall be,whicheverishigherof: (1)ThefairmarketvalueasdeterminedbytheCommissioner,or (2)Thefairmarketvalueasshowninthescheduleofvaluesfixedbythe ProvincialandCityAssessors. SEC.89.NoticeofDeathtobeFiled.Inallcasesoftransferssubjecttotax,orwhere, thoughexemptfromtax,thegrossvalueoftheestateexceedsTwentythousand pesos(P20,000),theexecutor,administratororanyofthelegalheirs,asthecase maybe,withintwo(2)monthsafterthedecedent'sdeath,orwithinalikeperiod afterqualifyingassuchexecutororadministrator,shallgiveawrittennoticethereof totheCommissioner. SEC.90.EstateTaxReturns. (A)Requirements.Inallcasesoftransferssubjecttothetaximposedherein,or where,thoughexemptfromtax,thegrossvalueoftheestateexceedsTwohundred thousandpesos(P200,000),orregardlessofthegrossvalueoftheestate,wherethe saidestateconsistsofregisteredorregistrablepropertysuchasrealproperty, motorvehicle,sharesofstockorothersimilarpropertyforwhichaclearancefrom theBureauofInternalRevenueisrequiredasaconditionprecedentforthetransfer ofownershipthereofinthenameofthetransferee,theexecutor,orthe administrator,oranyofthelegalheirs,asthecasemaybe,shallfileareturnunder oathinduplicate,settingforth:

(1)Thevalueofthegrossestateofthedecedentatthetimeofhisdeath,orin caseofanonresident,notacitizenofthePhilippines,ofthatpartofhisgrossestate situatedinthePhilippines; (2)Thedeductionsallowedfromgrossestateindeterminingtheestateas definedinSection86;and (3)Suchpartofsuchinformationasmayatthetimebeascertainableandsuch supplementaldataasmaybenecessarytoestablishthecorrecttaxes. Provided,however,ThatestatetaxreturnsshowingagrossvalueexceedingTwo millionpesos(P2,000,000)shallbesupportedwithastatementdulycertifiedtoby aCertifiedPublicAccountantcontainingthefollowing: (a)Itemizedassetsofthedecedentwiththeircorrespondinggrossvalueat thetimeofhisdeath,orinthecaseofanonresident,notacitizenofthePhilippines, ofthatpartofhisgrossestatesituatedinthePhilippines; (b)ItemizeddeductionsfromgrossestateallowedinSection86;and (c)Theamountoftaxduewhetherpaidorstilldueandoutstanding. (B)TimeforFiling.Forthepurposeofdeterminingtheestatetaxprovidedforin Section84ofthisCode,theestatetaxreturnrequiredunderthepreceding Subsection(A)shallbefiledwithinsix(6)monthsfromthedecedent'sdeath. Acertifiedcopyofthescheduleofpartitionandtheorderofthecourtapprovingthe sameshallbefurnishedtheCommissionerwithinthirty(30)afterthepromulgation ofsuchorder. (C)ExtensionofTime.TheCommissionershallhaveauthoritytogrant,in meritoriouscases,areasonableextensionnotexceedingthirty(30)daysforfiling thereturn.

 (D)PlaceofFiling.ExceptincaseswheretheCommissionerotherwisepermits,the returnrequiredunderSubsection(A)shallbefiledwithanauthorizedagentbank, orRevenueDistrictOfficer,CollectionOfficer,ordulyauthorizedTreasurerofthe cityormunicipalityinwhichthedecedentwasdomiciledatthetimeofhisdeathor iftherebenolegalresidenceinthePhilippines,withtheOfficeoftheCommissioner. SEC.91.PaymentofTax. (A)TimeofPayment.TheestatetaximposedbySection84shallbepaidatthe timethereturnisfiledbytheexecutor,administratorortheheirs. (B)ExtensionofTime.WhentheCommissionerfindsthatthepaymentonthedue dateoftheestatetaxorofanypartthereofwouldimposeunduehardshipuponthe estateoranyoftheheirs,hemayextendthetimeforpaymentofsuchtaxorany partthereofnottoexceedfive(5)years,incasetheestateissettledthroughthe courts,ortwo(2)yearsincasetheestateissettledextrajudicially.Insuchcase,the amountinrespectofwhichtheextensionisgrantedshallbepaidonorbeforethe dateoftheexpirationoftheperiodoftheextension,andtherunningoftheStatute ofLimitationsforassessmentasprovidedinSection203ofthisCodeshallbe suspendedfortheperiodofanysuchextension. Wherethetaxesareassessedbyreasonofnegligence,intentionaldisregardofrules andregulations,orfraudonthepartofthetaxpayer,noextensionwillbegrantedby theCommissioner. Ifanextensionisgranted,theCommissionermayrequiretheexecutor,or administrator,orbeneficiary,asthecasemaybe,tofurnishabondinsuchamount, notexceedingdoubletheamountofthetaxandwithsuchsuretiesasthe Commissionerdeemsnecessary,conditioneduponthepaymentofthesaidtaxin accordancewiththetermsoftheextension. (C)LiabilityforPayment.TheestatetaximposedbySection84shallbepaidbythe executororadministratorbeforedeliverytoanybeneficiaryofhisdistributiveshare oftheestate.Suchbeneficiaryshalltotheextentofhisdistributiveshareofthe

estate,besubsidiarilyliableforthepaymentofsuchportionoftheestatetaxashis distributivesharebearstothevalueofthetotalnetestate. ForthepurposeofthisChapter,theterm"executor"or"administrator"meansthe executororadministratorofthedecedent,orifthereisnoexecutoror administratorappointed,qualified,andactingwithinthePhilippines,thenany personinactualorconstructivepossessionofanypropertyofthedecedent. SEC.92.DischargeofExecutororAdministratorfromPersonalLiability.Ifthe executororadministratormakesawrittenapplicationtotheCommissionerfor determinationoftheamountoftheestatetaxanddischargefrompersonalliability therefore,theCommissioner(assoonaspossible,andinanyeventwithinone(1) yearafterthemakingofsuchapplication,oriftheapplicationismadebeforethe returnisfiled,thenwithinone(1)yearafterthereturnisfiled,butnotafterthe expirationoftheperiodprescribedfortheassessmentofthetaxinSection203shall notnotifytheexecutororadministratoroftheamountofthetax.Theexecutoror administrator,uponpaymentoftheamountofwhichheisnotified,shallbe dischargedfrompersonalliabilityforanydeficiencyinthetaxthereafterfoundtobe dueandshallbeentitledtoareceiptorwritingshowingsuchdischarge. SEC.93.DefinitionofDeficiency.AsusedinthisChapter,theterm"deficiency" means: (a)TheamountbywhichthetaximposedbythisChapterexceedstheamount shownasthetaxbytheexecutor,administratororanyoftheheirsuponhisreturn; buttheamountssoshownonthereturnshallfirstbeincreasedbytheamounts previouslyassessed(orcollectedwithoutassessment)asadeficiencyanddecreased bytheamountpreviouslyabated,refundedorotherwiserepaidinrespectofsuch tax;or (b)Ifnoamountisshownasthetaxbytheexecutor,administratororanyofthe heirsuponhisreturn,orifnoreturnismadebytheexecutor,administrator,orany heir,thentheamountbywhichthetaxexceedstheamountspreviouslyassessed(or collectedwithoutassessment)asadeficiency;butsuchamountspreviously assessedorcollectedwithoutassessmentshallfirstbedecreasedbytheamounts previouslyabated,refundedorotherwiserepaidinrespectofsuchtax.

SEC.94.PaymentBeforeDeliverybyExecutororAdministrator.Nojudgeshall authorizetheexecutororjudicialadministratortodeliveradistributiveshareto anypartyinterestedintheestateunlessacertificationfromtheCommissionerthat theestatetaxhasbeenpaidisshown. SEC.95.DutiesofCertainOfficersandDebtors.RegistersofDeedsshallnot registerintheRegistryofPropertyanydocumenttransferringrealpropertyorreal rightsthereinoranychattelmortgage,bywayofgiftsintervivosormortiscausa, legacyorinheritance,unlessacertificationfromtheCommissionerthatthetaxfixed inthisTitleandactuallyduethereonhadbeenpaidisshow,andtheyshall immediatelynotifytheCommissioner,RegionalDirector,RevenueDistrictOfficer,or RevenueCollectionOfficerorTreasurerofthecityormunicipalitywheretheir officesarelocated,ofthenonpaymentofthetaxdiscoveredbythem.Anylawyer, notarypublic,oranygovernmentofficerwho,byreasonofhisofficialduties, intervenesinthepreparationoracknowledgmentofdocumentsregardingpartition ordisposalofdonationintervivosormortiscausa,legacyorinheritance,shallhave thedutyoffurnishingtheCommissioner,RegionalDirector,RevenueDistrictOfficer orRevenueCollectionOfficeroftheplacewherehemayhavehisprincipaloffice, withcopiesofsuchdocumentsandanyinformationwhatsoeverwhichmay facilitatethecollectionoftheaforementionedtax.Neithershalladebtorofthe deceasedpayhisdebtstotheheirs,legatee,executororadministratorofhis creditor,unlessthecertificationoftheCommissionerthatthetaxfixedinthis Chapterhadbeenpaidisshown;buthemaypaytheexecutororjudicial administratorwithoutsaidcertificationifthecreditisincludedintheinventoryof theestateofthedeceased. SEC.96.RestitutionofTaxUponSatisfactionofOutstandingObligations.Ifafterthe paymentoftheestatetax,newobligationsofthedecedentshallappear,andthe personsinterestedshallhavesatisfiedthembyorderofthecourt,theyshallhavea righttotherestitutionoftheproportionalpartofthetaxpaid. SEC.97.PaymentofTaxAntecedenttotheTransferofShares,BondsorRights. Thereshallnotbetransferredtoanynewownerinthebooksofanycorporation, sociedadanonima,partnership,business,orindustryorganizedorestablishedinthe Philippinesanyshare,obligation,bondorrightbywayofgiftintervivosormortis causa,legacyorinheritance,unlessacertificationfromtheCommissionerthatthe taxesfixedinthisTitleandduethereonhavebeenpaidisshown. Ifabankhasknowledgeofthedeathofaperson,whomaintainedabankdeposit accountalone,orjointlywithanother,itshallnotallowanywithdrawalfromthe saiddepositaccount,unlesstheCommissionerhascertifiedthatthetaxesimposed thereonbythisTitlehavebeenpaid:Provided,however,Thattheadministratorof

theestateoranyone(1)oftheheirsofthedecedentmay,uponauthorizationbythe Commissioner,withdrawanamountnotexceedingTwentythousandpesos (P20,000)withoutthesaidcertification.Forthispurpose,allwithdrawalslipsshall containastatementtotheeffectthatallofthejointdepositorsarestilllivingatthe timeofwithdrawalbyanyoneofthejointdepositorsandsuchstatementshallbe underoathbythesaiddepositors. CHAPTERII DONOR'STAX SEC.98.ImpositionofTax. (A)Thereshallbelevied,assessed,collectedandpaiduponthetransferbyany person,residentornonresident,ofthepropertybygift,atax,computedasprovided inSection99. (B)Thetaxshallapplywhetherthetransferisintrustorotherwise,whetherthe giftisdirectorindirect,andwhetherthepropertyisrealorpersonal,tangibleor intangible. SEC.99.RatesofTaxPayablebyDonor. (A)InGeneral.Thetaxforeachcalendaryearshallbecomputedonthebasisof thetotalnetgiftsmadeduringthecalendaryearinaccordancewiththefollowing schedule: Ifthenetgiftis: OVER

BUTNOTOVER

THETAXSHALLBE

PLUS

OFTHEEXCESSOVER

P100,000

Exempt

P100,000

200,000 0 2%

P100,000 200,000

500,000

2,000 4%

200,000 500,000

1,000,000

14,000 6%

500,000 1,000,000

3,000,000

44,000 8%

1,000,000 3,000,000

5,000,000

204,000

10%

3,000,000 5,000,000

10,000,000

404,000

12%

5,000,000 10,000,000

1,004,000

15%

10,000,000 (B)TaxPayablebyDonorifDoneeisaStranger.Whenthedoneeorbeneficiaryis stranger,thetaxpayablebythedonorshallbethirtypercent(30%)ofthenetgifts. Forthepurposeofthistax,a"stranger",isapersonwhoisnota:

 (1)Brother,sister(whetherbywholeorhalfblood),spouse,ancestorandlineal descendant;or (2)Relativebyconsanguinityinthecollaterallinewithinthefourthdegreeof relationship. (C)Anycontributionincashorinkindtoanycandidate,politicalpartyorcoalition ofpartiesforcampaignpurposesshallbegovernedbytheElectionCode,as amended. SEC.100.TransferforLessThanAdequateandFullConsideration.Where property,otherthanrealpropertyreferredtoinSection24(D),istransferredfor lessthananadequateandfullconsiderationinmoneyormoney'sworth,thenthe amountbywhichthefairmarketvalueofthepropertyexceededthevalueofthe considerationshall,forthepurposeofthetaximposedbythisChapter,bedeemeda gift,andshallbeincludedincomputingtheamountofgiftsmadeduringthe calendaryear. SEC.101.ExemptionofCertainGifts.Thefollowinggiftsordonationsshallbe exemptfromthetaxprovidedforinthisChapter: (A)IntheCaseofGiftsMadebyaResident. (1)Dowriesorgiftsmadeonaccountofmarriageandbeforeitscelebrationor withinoneyearthereafterbyparentstoeachoftheirlegitimate,recognizednatural, oradoptedchildrentotheextentofthefirstTenthousandpesos(P10,000): (2)GiftsmadetoorfortheuseoftheNationalGovernmentoranyentitycreated byanyofitsagencieswhichisnotconductedforprofit,ortoanypolitical subdivisionofthesaidGovernment;and

(3)Giftsinfavorofaneducationaland/orcharitable,religious,culturalorsocial welfarecorporation,institution,accreditednongovernmentorganization,trustor philanthropicorganizationorresearchinstitutionororganization:Provided, however,Thatnotmorethanthirtypercent(30%)ofsaidgiftsshallbeusedbysuch doneeforadministrationpurposes.Forthepurposeoftheexemption,a'nonprofit educationaland/orcharitablecorporation,institution,accreditednongovernment organization,trustorphilanthropicorganizationand/orresearchinstitutionor organization'isaschool,collegeoruniversityand/orcharitablecorporation, accreditednongovernmentorganization,trustorphilanthropicorganizationand/or researchinstitutionororganization,incorporatedasanonstockentity,payingno dividends,governedbytrusteeswhoreceivenocompensation,anddevotingallits income,whetherstudents'feesorgifts,donation,subsidiesorotherformsof philanthropy,totheaccomplishmentandpromotionofthepurposesenumeratedin itsArticlesofIncorporation. (B)IntheCaseofGiftsMadebyaNonresidentNotaCitizenofthePhilippines. (1)GiftsmadetoorfortheuseoftheNationalGovernmentoranyentitycreated byanyofitsagencieswhichisnotconductedforprofit,ortoanypolitical subdivisionofthesaidGovernment. (2)Giftsinfavorofaneducationaland/orcharitable,religious,culturalorsocial welfarecorporation,institution,foundation,trustorphilanthropicorganizationor researchinstitutionororganization:Provided,however,Thatnotmorethanthirty percent(30%)ofsaidgiftsshallbeusedbysuchdoneeforadministrationpurposes. (C)TaxCreditforDonor'sTaxesPaidtoaForeignCountry. (1)InGeneral.ThetaximposedbythisTitleuponadonorwhowasacitizenor aresidentatthetimeofdonationshallbecreditedwiththeamountofanydonor's taxofanycharacteranddescriptionimposedbytheauthorityofaforeigncountry. (2)LimitationsonCredit.TheamountofthecredittakenunderthisSection shallbesubjecttoeachofthefollowinglimitations:

(a)Theamountofthecreditinrespecttothetaxpaidtoanycountryshallnot exceedthesameproportionofthetaxagainstwhichsuchcreditistaken,whichthe netgiftssituatedwithinsuchcountrytaxableunderthisTitlebearstohisentirenet gifts;and (b)Thetotalamountofthecreditshallnotexceedthesameproportionofthe taxagainstwhichsuchcreditistaken,whichthedonor'snetgiftssituatedoutside thePhilippinestaxableunderthistitlebearstohisentirenetgifts. SEC.102.ValuationofGiftsMadeinProperty.Ifthegiftismadeinproperty,the fairmarketvaluethereofatthetimeofthegiftshallbeconsideredtheamountofthe gift.Incaseofrealproperty,theprovisionsofSection88(B)shallapplytothe valuationthereof. SEC.103.FilingofReturnandPaymentofTax. (A)Requirements.anyindividualwhomakesanytransferbygift(exceptthose which,underSection101,areexemptfromthetaxprovidedforinthisChapter) shall,forthepurposeofthesaidtax,makeareturnunderoathinduplicate.The returnshallseforth: (1)Eachgiftmadeduringthecalendaryearwhichistobeincludedincomputing netgifts; (2)Thedeductionsclaimedandallowable; (3)Anypreviousnetgiftsmadeduringthesamecalendaryear; (4)Thenameofthedonee;and (5)Suchfurtherinformationasmayberequiredbyrulesandregulationsmade pursuanttolaw.

 (B)TimeandPlaceofFilingandPayment.Thereturnofthedonorrequiredinthis Sectionshallbefiledwithinthirty(30)daysafterthedatethegiftismadeandthe taxduethereonshallbepaidatthetimeoffiling.Exceptincaseswherethe Commissionerotherwisepermits,thereturnshallbefiledandthetaxpaidtoan authorizedagentbank,theRevenueDistrictOfficer,RevenueCollectionOfficeror dulyauthorizedTreasurerofthecityormunicipalitywherethedonorwas domiciledatthetimeofthetransfer,oriftherebenolegalresidenceinthe Philippines,withtheOfficeoftheCommissioner.Inthecaseofgiftsmadebya nonresident,thereturnmaybefiledwiththePhilippineEmbassyorConsulatein thecountrywhereheisdomiciledatthetimeofthetransfer,ordirectlywiththe OfficeoftheCommissioner. SEC.104.Definitions.ForpurposesofthisTitle,theterms"grossestate"and"gifts" includerealandpersonalproperty,whethertangibleorintangible,ormixed, whereversituated:Provided,however,Thatwherethedecedentordonorwasa nonresidentalienatthetimeofhisdeathordonation,asthecasemaybe,hisreal andpersonalpropertysotransferredbutwhicharesituatedoutsidethePhilippines shallnotbeincludedaspartofhis"grossestate"or"grossgift":Provided,further, ThatfranchisewhichmustbeexercisedinthePhilippines;shares,obligationsor bondsissuedbyanycorporationorsociedadanonimaorganizedorconstitutedin thePhilippinesinaccordancewithitslaws;shares,obligationsorbondsbyany foreigncorporationeightyfivepercent(85%)ofthebusinessofwhichislocatedin thePhilippines;shares,obligationsorbondsissuedbyanyforeigncorporationif suchshares,obligationsorbondshaveacquiredabusinesssitusinthePhilippines; sharesorrightsinanypartnership,businessorindustryestablishedinthe Philippines,shallbeconsideredassituatedinthePhilippines:Provided,stillfurther, thatnotaxshallbecollectedunderthisTitleinrespectofintangiblepersonal property:(a)ifthedecedentatthetimeofhisdeathorthedonoratthetimeofthe donationwasacitizenandresidentofaforeigncountrywhichatthetimeofhis deathordonationdidnotimposeatransfertaxofanycharacter,inrespectof intangiblepersonalpropertyofcitizensofthePhilippinesnotresidinginthat foreigncountry,or(b)ifthelawsoftheforeigncountryofwhichthedecedentor donorwasacitizenandresidentatthetimeofhisdeathordonationallowsasimilar exemptionfromtransferordeathtaxesofeverycharacterordescriptioninrespect ofintangiblepersonalpropertyownedbycitizensofthePhilippinesnotresidingin thatforeigncountry. Theterm"deficiency"means:(a)theamountbywhichtaximposedbythisChapter exceedstheamountshownasthetaxbythedonoruponhisreturn;buttheamount soshownonthereturnshallfirstbeincreasedbytheamountpreviouslyassessed (orcollectedwithoutassessment)asadeficiency,anddecreasedbytheamounts

previouslyabated,refundedorotherwiserepaidinrespectofsuchtax,or(b)ifno amountisshownasthetaxbythedonor,thentheamountbywhichthetaxexceeds theamountspreviouslyassessed,(orcollectedwithoutassessment)asadeficiency, butsuchamountspreviouslyassessed,orcollectedwithoutassessment,shallfirst bedecreasedbytheamountpreviouslyabated,refundedorotherwiserepaidin respectofsuchtax. TITLEIV VALUEADDEDTAX CHAPTERI IMPOSITIONOFTAX SEC.105.PersonsLiable.Anypersonwho,inthecourseoftradeorbusiness,sells barters,exchanges,leasesgoodsorproperties,rendersservices,andanyperson whoimportsgoodsshallbesubjecttothevalueaddedtax(VAT)imposedin Sections106to108ofthisCode. Thevalueaddedtaxisanindirecttaxandtheamountoftaxmaybeshiftedor passedontothebuyer,transfereeorlesseeofthegoods,propertiesorservices.This ruleshalllikewiseapplytoexistingcontractsofsaleorleaseofgoods,propertiesor servicesatthetimeoftheeffectivityofRepublicActNo.7716. Thephrase"inthecourseoftradeorbusiness"meanstheregularconductor pursuitofacommercialoraneconomicactivity,includingtransactionsincidental thereto,byanypersonregardlessofwhetherornotthepersonengagedthereinisa nonstock,nonprofitprivateorganization(irrespectiveofthedispositionofitsnet incomeandwhetherornotitsellsexclusivelytomembersortheirguests),or governmententity. Theruleofregularity,tothecontrarynotwithstanding,servicesasdefinedinthis CoderenderedinthePhilippinesbynonresidentforeignpersonsshallbe consideredasbeingcourseoftradeorbusiness.

 SEC.106.ValueAddedTaxonSaleofGoodsorProperties. (A)RateandBaseofTax.Thereshallbelevied,assessedandcollectedonevery sale,barterorexchangeofgoodsorproperties,valueaddedtaxequivalenttoten percent(10%)ofthegrosssellingpriceorgrossvalueinmoneyofthegoodsor propertiessold,barteredorexchanged,suchtaxtobepaidbytheselleror transferor. (1)Theterm"goods"or"properties"shallmeanalltangibleandintangible objectswhicharecapableofpecuniaryestimationandshallinclude: (a)Realpropertiesheldprimarilyforsaletocustomersorheldforleasein theordinarycourseoftradeorbusiness; (b)Therightortheprivilegetousepatent,copyright,designormodel,plan, secretformulaorprocess,goodwill,trademark,tradebrandorotherlikeproperty orright; (c)TherightortheprivilegetouseinthePhilippinesofanyindustrial, commercialorscientificequipment; (d)Therightortheprivilegetousemotionpicturefilms,tapesanddiscs;and (e)Radio,television,satellitetransmissionandcabletelevisiontime. Theterm"grosssellingprice"meansthetotalamountofmoneyorits equivalentwhichthepurchaserpaysorisobligatedtopaytothesellerin considerationofthesale,barterorexchangeofthegoodsorproperties,excluding thevalueaddedtax.Theexcisetax,ifany,onsuchgoodsorpropertiesshallform partofthegrosssellingprice.

(2)ThefollowingsalesbyVATregisteredpersonsshallbesubjecttozero percent(0%)rate: (a)ExportSales.Theterm"exportsales"means: (1)ThesaleandactualshipmentofgoodsfromthePhilippinestoaforeign country,irrespectiveofanyshippingarrangementthatmaybeagreeduponwhich mayinfluenceordeterminethetransferofownershipofthegoodssoexportedand paidforinacceptableforeigncurrencyoritsequivalentingoodsorservices,and accountedforinaccordancewiththerulesandregulationsoftheBangkoSentralng Pilipinas(BSP); (2)Saleofrawmaterialsorpackagingmaterialstoanonresidentbuyerfor deliverytoaresidentlocalexportorientedenterprisetobeusedinmanufacturing, processing,packingorrepackinginthePhilippinesofthesaidbuyer'sgoodsand paidforinacceptableforeigncurrencyandaccountedforinaccordancewiththe rulesandregulationsoftheBangkoSentralngPilipinas(BSP); (3)Saleofrawmaterialsorpackagingmaterialstoexportorientedenterprise whoseexportsalesexceedseventypercent(70%)oftotalannualproduction; (4)SaleofgoldtotheBangkoSentralngPilipinas(BSP);and (5)ThoseconsideredexportsalesunderExecutiveOrderNO.226,otherwise knownastheOmnibusInvestmentCodeof1987,andotherspeciallaws. (b)ForeignCurrencyDenominatedSale.Thephrase"foreigncurrency denominatedsale"meanssaletoanonresidentofgoods,exceptthosementionedin Sections149and150,assembledormanufacturedinthePhilippinesfordeliveryto aresidentinthePhilippines,paidforinacceptableforeigncurrencyandaccounted forinaccordancewiththerulesandregulationsoftheBangkoSentralngPilipinas (BSP).

(c)Salestopersonsorentitieswhoseexemptionunderspeciallawsor internationalagreementstowhichthePhilippinesisasignatoryeffectivelysubjects suchsalestozerorate. (B)TransactionsDeemedSale.Thefollowingtransactionsshallbedeemedsale: (1)Transfer,useorconsumptionnotinthecourseofbusinessofgoodsor propertiesoriginallyintendedforsaleorforuseinthecourseofbusiness; (2)Distributionortransferto: (a)ShareholdersorinvestorsasshareintheprofitsoftheVATregistered persons;or (b)Creditorsinpaymentofdebt; (3)Consignmentofgoodsifactualsaleisnotmadewithinsixty(60)days followingthedatesuchgoodswereconsigned;and (4)Retirementfromorcessationofbusiness,withrespecttoinventoriesof taxablegoodsexistingasofsuchretirementorcessation. (C)ChangesinorCessationofStatusofaVATregisteredPerson.Thetaximposed inSubsection(A)ofthisSectionshallalsoapplytogoodsdisposedoforexistingas ofacertaindateifundercircumstancestobeprescribedinrulesandregulationsto bepromulgatedbytheSecretaryofFinance,uponrecommendationofthe Commissioner,thestatusofapersonasaVATregisteredpersonchangesoris terminated. (D)DeterminationoftheTax.

(1)Thetaxshallbecomputedbymultiplyingthetotalamountindicatedinthe invoicebyoneeleventh(1/11). (2)SalesReturns,AllowancesandSalesDiscounts.Thevalueofgoodsor propertiessoldandsubsequentlyreturnedorforwhichallowancesweregrantedby aVATregisteredpersonmaybedeductedfromthegrosssalesorreceiptsforthe quarterinwhicharefundismadeoracreditmemorandumorrefundisissued. Salesdiscountgrantedandindicatedintheinvoiceatthetimeofsaleandthegrant ofwhichdoesnotdependuponthehappeningofafutureeventmaybeexcluded fromthegrosssaleswithinthesamequarteritwasgiven. (3)AuthorityoftheCommissionertoDeterminetheAppropriateTaxBase.The Commissionershall,byrulesandregulationsprescribedbytheSecretaryofFinance, determinetheappropriatetaxbaseincaseswhereatransactionisdeemedasale, barterorexchangeofgoodsorpropertiesunderSubsection(B)hereof,orwherethe grosssellingpriceisunreasonablylowerthantheactualmarketvalue. SEC.107.ValueAddedTaxonImportationofGoods. (A)InGeneral.Thereshallbelevied,assessedandcollectedoneveryimportation ofgoodsavalueaddedtaxequivalenttotenpercent(10%)basedonthetotalvalue usedbytheBureauofCustomsindeterminingtariffandcustomsdutiesplus customsduties,excisetaxes,ifany,andothercharges,suchtaxtobepaidbythe importerpriortothereleaseofsuchgoodsfromcustomscustody:Provided,That wherethecustomsdutiesaredeterminedonthebasisofthequantityorvolumeof thegoods,thevalueaddedtaxshallbebasedonthelandedcostplusexcisetaxes,If any. (B)TransferofGoodsbyTaxExemptPersons.Inthecaseoftaxfreeimportation ofgoodsintothePhilippinesbypersons,entitiesoragenciesexemptfromtaxwhere suchgoodsaresubsequentlysold,transferredorexchangedinthePhilippinesto nonexemptpersonsorentities,thepurchasers,transfereesorrecipientsshallbe consideredtheimportersthereof,whoshallbeliableforanyinternalrevenuetaxon suchimportation.Thetaxdueonsuchimportationshallconstitutealienonthe goodssuperiortoallchargesorliensonthegoods,irrespectiveofthepossessor thereof.

SEC.108.ValueaddedTaxonSaleofServicesandUseorLeaseofProperties. (A)RateandBaseofTax.Thereshallbelevied,assessedandcollected,avalue addedtaxequivalenttotenpercent(10%)ofgrossreceiptsderivedfromthesaleor exchangeofservices,includingtheuseorleaseofproperties. Thephrase"saleorexchangeofservices"meanstheperformanceofallkindsor servicesinthePhilippinesforothersforafee,remunerationorconsideration, includingthoseperformedorrenderedbyconstructionandservicecontractors; stock,realestate,commercial,customsandimmigrationbrokers;lessorsof property,whetherpersonalorreal;warehousingservices;lessorsordistributorsof cinematographicfilms;personsengagedinmillingprocessing,manufacturingor repackinggoodsforothers;proprietors,operatorsorkeepersofhotels,motels, resthouses,pensionhouses,inns,resorts;proprietorsoroperatorsofrestaurants, refreshmentparlors,cafesandothereatingplaces,includingclubsandcaterers; dealersinsecurities;lendinginvestors;transportationcontractorsontheir transportofgoodsorcargoes,includingpersonswhotransportgoodsorcargoesfor hireanotherdomesticcommoncarriersbyland,airandwaterrelativetotheir transportofgoodsorcargoes;servicesoffranchisegranteesoftelephoneand telegraph,radioandtelevisionbroadcastingandallotherfranchisegranteesexcept thoseunderSection119ofthisCode;servicesofbanks,nonbankfinancial intermediariesandfinancecompanies;andnonlifeinsurancecompanies(except theircropinsurances),includingsurety,fidelity,indemnityandbondingcompanies; andsimilarservicesregardlessofwhetherornottheperformancethereofcallsfor theexerciseoruseofthephysicalormentalfaculties.Thephrase'saleorexchange ofservices'shalllikewiseinclude: (1)Theleaseortheuseofortherightorprivilegetouseanycopyright,patent, designormodel,plansecretformulaorprocess,goodwill,trademark,tradebrand orotherlikepropertyorright; (2)Theleaseoftheuseof,ortherighttouseofanyindustrial,commercialor scientificequipment; (3)Thesupplyofscientific,technical,industrialorcommercialknowledgeor information;

(4)Thesupplyofanyassistancethatisancillaryandsubsidiarytoandis furnishedasameansofenablingtheapplicationorenjoymentofanysuchproperty, orrightasismentionedinsubparagraph(2)oranysuchknowledgeorinformation asismentionedinsubparagraph(3); (5)Thesupplyofservicesbyanonresidentpersonorhisemployeein connectionwiththeuseofpropertyorrightsbelongingto,ortheinstallationor operationofanybrand,machineryorotherapparatuspurchasedfromsuch nonresidentperson. (6)Thesupplyoftechnicaladvice,assistanceorservicesrenderedinconnection withtechnicalmanagementoradministrationofanyscientific,industrialor commercialundertaking,venture,projectorscheme; (7)Theleaseofmotionpicturefilms,films,tapesanddiscs;and (8)Theleaseortheuseofortherighttouseradio,television,satellite transmissionandcabletelevisiontime. Leaseofpropertiesshallbesubjecttothetaxhereinimposedirrespectiveofthe placewherethecontractofleaseorlicensingagreementwasexecutedifthe propertyisleasedorusedinthePhilippines. Theterm"grossreceipts"meansthetotalamountofmoneyoritsequivalent representingthecontractprice,compensation,servicefee,rentalorroyalty, includingtheamountchargedformaterialssuppliedwiththeservicesanddeposits andadvancedpaymentsactuallyorconstructivelyreceivedduringthetaxable quarterfortheservicesperformedortobeperformedforanotherperson,excluding valueaddedtax. (B)TransactionsSubjecttoZeroPercent(0%)Rate.Thefollowingservices performedinthePhilippinesbyVATregisteredpersonsshallbesubjecttozero percent(0%)rate.

(1)Processing,manufacturingorrepackinggoodsforotherpersonsdoing businessoutsidethePhilippineswhichgoodsaresubsequentlyexported,wherethe servicesarepaidforinacceptableforeigncurrencyandaccountedforinaccordance withtherulesandregulationsoftheBangkoSentralngPilipinas(BSP); (2)Servicesotherthanthosementionedintheprecedingparagraph,the considerationforwhichispaidforinacceptableforeigncurrencyandaccountedfor inaccordancewiththerulesandregulationsoftheBangkoSentralngPilipinas (BSP); (3)Servicesrenderedtopersonsorentitieswhoseexemptionunderspecial lawsorinternationalagreementstowhichthePhilippinesisasignatoryeffectively subjectsthesupplyofsuchservicestozeropercent(0%)rate; (4)Servicesrenderedtovesselsengagedexclusivelyininternationalshipping; and (5)Servicesperformedbysubcontractorsand/orcontractorsinprocessing, converting,ofmanufacturinggoodsforanenterprisewhoseexportsalesexceed seventypercent(70%)oftotalannualproduction. (C)DeterminationoftheTax.Thetaxshallbecomputedbymultiplyingthetotal amountindicatedintheofficialreceiptbyoneeleventh(1/11). SEC.109.ExemptTransactions.Thefollowingshallbeexemptfromthevalue addedtax: (a)Saleofnonfoodagriculturalproducts;marineandforestproductsintheir originalstatebytheprimaryproducerortheownerofthelandwherethesameare produced; (b)Saleofcottonseedsintheiroriginalstate;andcopra;

(c)Saleorimportationofagriculturalandmarinefoodproductsintheiroriginal state,livestockandpoultryoforkinggenerallyusedas,oryieldingorproducing foodsforhumanconsumption;andbreedingstockandgeneticmaterialstherefor. Productsclassifiedunderthisparagraphandparagraph(a)shallbeconsidered intheiroriginalstateeveniftheyhaveundergonethesimpleprocessesof preparationorpreservationforthemarket,suchasfreezing,drying,salting, broiling,roasting,smokingorstripping. Polishedand/orhuskedrice,corngrits,rawcanesugarandmolasses,and ordinarysaltshallbeconsideredintheiroriginalstate; (d)Saleorimportationoffertilizers;seeds,seedlingsandfingerlings;fish, prawn,livestockandpoultryfeeds,includingingredients,whetherlocallyproduced orimported,usedinthemanufactureoffinishedfeeds(exceptspecialtyfeedsfor racehorses,fightingcocks,aquariumfish,zooanimalsandotheranimalsgenerally consideredaspets); (e)Saleorimportationofcoalandnaturalgas,inwhateverformorstate,and petroleumproducts(exceptlubricatingoil,processedgas,grease,waxand petrolatum)subjecttoexcisetaximposedunderTitleVI; (f)Saleorimportationofrawmaterialstobeusedbythebuyerorimporter himselfinthemanufactureofpetroleumproductssubjecttoexcisetax,except lubricatingoil,processedgas,grease,waxandpetrolatum; (g)Importationofpassengerand/orcargovesselsofmorethanfivethousand tons(5,000)whethercoastwiseoroceangoing,includingengineandsparepartsof saidvesseltobeusedbytheimporterhimselfasoperatorthereof; (h)Importationofpersonalandhouseholdeffectsbelongingtotheresidentsof thePhilippinesreturningfromabroadandnonresidentcitizenscomingtoresettlein thePhilippines:Provided,Thatsuchgoodsareexemptfromcustomsdutiesunder theTariffandCustomsCodeofthePhilippines;

(i)Importationofprofessionalinstrumentsandimplements,wearingapparel, domesticanimals,andpersonalhouseholdeffects(exceptanyvehicle,vessel, aircraft,machineryothergoodsforuseinthemanufactureandmerchandiseofany kindincommercialquantity)belongingtopersonscomingtosettleinthe Philippines,fortheirownuseandnotforsale,barterorexchange,accompanying suchpersons,orarrivingwithinninety(90)daysbeforeoraftertheirarrival,upon theproductionofevidencesatisfactorytotheCommissioner,thatsuchpersonsare actuallycomingtosettleinthePhilippinesandthatthechangeofresidenceisbona fide; (j)ServicessubjecttopercentagetaxunderTitleV; (k)Servicesbyagriculturalcontractgrowersandmillingforothersofpalayinto rice,cornintogritsandsugarcaneintorawsugar; (l)Medical,dental,hospitalandveterinaryservicessubjecttotheprovisionsof Section17ofRepublicActNo.7716,asamended: (m)Educationalservicesrenderedbyprivateeducationalinstitutions,duly accreditedbytheDepartmentofEducation,CultureandSports(DECS)andthe CommissiononHigherEducation(CHED),andthoserenderedbygovernment educationalinstitutions; (n)Salebytheartisthimselfofhisworksofart,literaryworks,musical compositionsandsimilarcreations,orhisservicesperformedfortheproductionof suchworks; (o)Servicesrenderedbyindividualspursuanttoanemployeremployee relationship; (p)Servicesrenderedbyregionalorareaheadquartersestablishedinthe Philippinesbymultinationalcorporationswhichactassupervisory, communicationsandcoordinatingcentersfortheiraffiliates,subsidiariesor branchesintheAsiaPacificRegionanddonotearnorderiveincomefromthe Philippines;

 (q)Transactionswhichareexemptunderinternationalagreementstowhichthe Philippinesisasignatoryorunderspeciallaws,exceptthoseunderPresidential DecreeNos.66,529and1590; (r)SalesbyagriculturalcooperativesdulyregisteredwiththeCooperative DevelopmentAuthoritytotheirmembersaswellassaleoftheirproduce,whether initsoriginalstateorprocessedform,tononmembers;theirimportationofdirect farminputs,machineriesandequipment,includingsparepartsthereof,tobeused directlyandexclusivelyintheproductionand/orprocessingoftheirproduce; (s)SalesbyelectriccooperativesdulyregisteredwiththeCooperative DevelopmentauthorityorNationalElectrificationAdministration,relativetothe generationanddistributionofelectricityaswellastheirimportationofmachineries andequipment,includingspareparts,whichshallbedirectlyusedinthegeneration anddistributionofelectricity; (t)Grossreceiptsfromlendingactivitiesbycreditormultipurposecooperatives dulyregisteredwiththeCooperativeDevelopmentAuthoritywhoselending operationislimitedtotheirmembers; (u)Salesbynonagricultural,nonelectricandnoncreditcooperativesduly registeredwiththeCooperativeDevelopmentAuthority:Provided,Thattheshare capitalcontributionofeachmemberdoesnotexceedFifteenthousandpesos (P15,000)andregardlessoftheaggregatecapitalandnetsurplusratably distributedamongthemembers; (v)ExportsalesbypersonswhoarenotVATregistered; (w)Saleofrealpropertiesnotprimarilyheldforsaletocustomersorheldfor leaseintheordinarycourseoftradeorbusinessorrealpropertyutilizedforlow costandsocializedhousingasdefinedbyRepublicActNo.7279,otherwiseknown astheUrbanDevelopmentandHousingActof1992,andotherrelatedlaws,house andlotandotherresidentialdwellingsvaluedatOnemillionpesos(P1,000,000) andbelow:Provided,ThatnotlaterthanJanuary31stofthecalendaryear subsequenttotheeffectivityofthisActandeachcalendaryearthereafter,the

amountofOnemillionpesos(P1,000,000)shallbeadjustedtoitspresentvalue usingtheConsumerPriceIndex,aspublishedbythenationalStatisticsOffice(NSO); (x)LeaseofaresidentialunitwithamonthlyrentalnotexceedingEight thousandpesos(P8,000);Provided,ThatnotlaterthanJanuary31stofthecalendar yearsubsequenttotheeffectivityofRepublicActNo.8241andeachcalendaryear thereafter,theamountofEightthousandpesos(P8,000)shallbeadjustedtoits presentvalueusingtheConsumerPriceIndexaspublishedbytheNationalStatistics Office(NS0); (y)Sale,importation,printingorpublicationofbooksandanynewspaper, magazinerevieworbulletinwhichappearsatregularintervalswithfixedpricesfor subscriptionandsaleandwhichisnotdevotedprincipallytothepublicationofpaid advertisements;and (z)Saleorleaseofgoodsorpropertiesortheperformanceofservicesotherthan thetransactionsmentionedintheprecedingparagraphs,thegrossannualsales and/orreceiptsdonotexceedtheamountofFivehundredfiftythousandpesos (P550,000):Provided,ThatnotlaterthanJanuary31stofthecalendaryear subsequenttotheeffectivityofRepublicActNo.8241andeachcalendaryear thereafter,theamountofFivehundredfiftythousandpesos(550,000)shallbe adjustedtoitspresentvalueusingtheConsumerPriceIndex,aspublishedbythe NationalStatisticsOffice(NSO). Theforegoingexemptionstothecontrarynotwithstanding,anypersonwhosesale ofgoodsorpropertiesorserviceswhichareotherwisenotsubjecttoVAT,butwho issuesaVATinvoiceorreceiptthereforshall,inadditiontohisliabilitytoother applicablepercentagetax,ifany,beliabletothetaximposedinSection106or108 withoutthebenefitofinputtaxcredit,andsuchtaxshallalsoberecognizedasinput taxcredittothepurchaserunderSection110,allofthisCode. SEC.110.TaxCredits. (A)CreditableInputTax.

(1)AnyinputtaxevidencedbyaVATinvoiceorofficialreceiptissuedin accordancewithSection113hereofonthefollowingtransactionsshallbecreditable againsttheoutputtax: (a)Purchaseorimportationofgoods: (i)Forsale;or (ii)Forconversionintoorintendedtoformpartofafinishedproductfor saleincludingpackagingmaterials;or (iii)Foruseassuppliesinthecourseofbusiness;or (iv)Foruseasmaterialssuppliedinthesaleofservice;or (v)Foruseintradeorbusinessforwhichdeductionfordepreciationor amortizationisallowedunderthisCode,exceptautomobiles,aircraftandyachts. (b)Purchaseofservicesonwhichavalueaddedtaxhasbeenactuallypaid. (2)Theinputtaxondomesticpurchaseofgoodsorpropertiesshallbe creditable: (a)Tothepurchaseruponconsummationofsaleandonimportationofgoods orproperties;and (b)Totheimporteruponpaymentofthevalueaddedtaxpriortotherelease ofthegoodsfromthecustodyoftheBureauofCustoms. However,inthecaseofpurchaseofservices,leaseoruseofproperties,the inputtaxshallbecreditabletothepurchaser,lesseeorlicenseeuponpaymentofthe compensation,rental,royaltyorfee. (3)AVATregisteredpersonwhoisalsoengagedintransactionsnotsubjectto thevalueaddedtaxshallbeallowedtaxcreditasfollows:

(a)Totalinputtaxwhichcanbedirectlyattributedtotransactionssubjectto valueaddedtax;and (b)Aratableportionofanyinputtaxwhichcannotbedirectlyattributedto eitheractivity. Theterm"inputtax"meansthevalueaddedtaxduefromorpaidbyaVAT registeredpersoninthecourseofhistradeorbusinessonimportationofgoodsor localpurchaseofgoodsorservices,includingleaseoruseofproperty,fromaVAT registeredperson.Itshallalsoincludethetransitionalinputtaxdeterminedin accordancewithSection111ofthisCode. Theterm"outputtax"meansthevalueaddedtaxdueonthesaleorleaseof taxablegoodsorpropertiesorservicesbyanypersonregisteredorrequiredto registerunderSection236ofthisCode. (B)ExcessOutputorInputTax.Ifattheendofanytaxablequartertheoutputtax exceedstheinputtax,theexcessshallbepaidbytheVATregisteredperson.Ifthe inputtaxexceedstheoutputtax,theexcessshallbecarriedovertothesucceeding quarterorquarters.anyinputtaxattributabletothepurchaseofcapitalgoodsorto zeroratedsalesbyaVATregisteredpersonmayathisoptionberefundedor creditedagainstotherinternalrevenuetaxes,subjecttotheprovisionsofSection 112. (C)DeterminationofCreditableInputTax.Thesumoftheexcessinputtaxcarried overfromtheprecedingmonthorquarterandtheinputtaxcreditabletoaVAT registeredpersonduringthetaxablemonthorquartershallbereducedbythe amountofclaimforrefundortaxcreditforvalueaddedtaxandotheradjustments, suchaspurchasereturnsorallowancesandinputtaxattributabletoexemptsale. Theclaimfortaxcreditreferredtointheforegoingparagraphshallincludenotonly thosefiledwiththeBureauofInternalRevenuebutalsothosefiledwithother governmentagencies,suchastheBoardofInvestmentstheBureauofCustoms. SEC.111.Transitional/PresumptiveInputTaxCredits.

 (A)TransitionalInputTaxCredits.Apersonwhobecomesliabletovalueadded taxoranypersonwhoelectstobeaVATregisteredpersonshall,subjecttothe filingofaninventoryaccordingtorulesandregulationsprescribedbytheSecretary offinance,uponrecommendationoftheCommissioner,beallowedinputtaxonhis beginninginventoryofgoods,materialsandsuppliesequivalentforeightpercent (8%)ofthevalueofsuchinventoryortheactualvalueaddedtaxpaidonsuch goods,materialsandsupplies,whicheverishigher,whichshallbecreditableagainst theoutputtax. (B)PresumptiveInputTaxCredits. (1)Personsorfirmsengagedintheprocessingofsardines,mackerelandmilk, andinmanufacturingrefinedsugarandcookingoil,shallbeallowedapresumptive inputtax,creditableagainsttheoutputtax,equivalenttooneandonehalfpercent (11/2%)ofthegrossvalueinmoneyoftheirpurchasesofprimaryagricultural productswhichareusedasinputstotheirproduction. AsusedinthisSubsection,theterm"processing"shallmeanpasteurization, canningandactivitieswhichthroughphysicalorchemicalprocessaltertheexterior textureorformorinnersubstanceofaproductinsuchmannerastoprepareitfor specialusetowhichitcouldnothavebeenputinitsoriginalformorcondition. (2)Publicworkscontractorsshallbeallowedapresumptiveinputtaxequivalent tooneandonehalfpercent(11/2%)ofthecontractpricewithrespectto governmentcontractsonlyinlieuofactualinputtaxestherefrom. SEC.112.RefundsorTaxCreditsofInputTax. (A)ZeroRatedorEffectivelyZeroRatedSales.anyVATregisteredperson,whose salesarezeroratedoreffectivelyzeroratedmay,withintwo(2)yearsafterthe closeofthetaxablequarterwhenthesalesweremade,applyfortheissuanceofa taxcreditcertificateorrefundofcreditableinputtaxdueorpaidattributableto suchsales,excepttransitionalinputtax,totheextentthatsuchinputtaxhasnot beenappliedagainstoutputtax:Provided,however,Thatinthecaseofzerorated salesunderSection106(A)(2)(a)(1),(2)and(B)andSection108(B)(1)and(2),the

acceptableforeigncurrencyexchangeproceedsthereofhadbeendulyaccountedfor inaccordancewiththerulesandregulationsoftheBangkoSentralngPilipinas (BSP):Provided,further,Thatwherethetaxpayerisengagedinzeroratedor effectivelyzeroratedsaleandalsointaxableorexemptsaleofgoodsofproperties orservices,andtheamountofcreditableinputtaxdueorpaidcannotbedirectly andentirelyattributedtoanyoneofthetransactions,itshallbeallocated proportionatelyonthebasisofthevolumeofsales. (B)CapitalGoods.AVATregisteredpersonmayapplyfortheissuanceofatax creditcertificateorrefundofinputtaxespaidoncapitalgoodsimportedorlocally purchased,totheextentthatsuchinputtaxeshavenotbeenappliedagainstoutput taxes.Theapplicationmaybemadeonlywithintwo(2)yearsafterthecloseofthe taxablequarterwhentheimportationorpurchasewasmade. (C)CancellationofVATRegistration.Apersonwhoseregistrationhasbeen cancelledduetoretirementfromorcessationofbusiness,orduetochangesinor cessationofstatusunderSection106(C)ofthisCodemay,withintwo(2)yearsfrom thedateofcancellation,applyfortheissuanceofataxcreditcertificateforany unusedinputtaxwhichmaybeusedinpaymentofhisotherinternalrevenuetaxes. (D)PeriodWithinWhichRefundorTaxCreditofInputTaxesShallbeMade.In propercases,theCommissionershallgrantarefundorissuethetaxcredit certificateforcreditableinputtaxeswithinonehundredtwenty(120)daysfromthe dateofsubmissionofcompetedocumentsinsupportoftheapplicationfiledin accordancewithSubsections(A)and(B)hereof. Incaseoffullorpartialdenialoftheclaimfortaxrefundortaxcredit,orthefailure onthepartoftheCommissionertoactontheapplicationwithintheperiod prescribedabove,thetaxpayeraffectedmay,withinthirty(30)daysfromthe receiptofthedecisiondenyingtheclaimoraftertheexpirationoftheonehundred twentydayperiod,appealthedecisionortheunactedclaimwiththeCourtofTax Appeals. (E)MannerofGivingRefund.Refundsshallbemadeuponwarrantsdrawnbythe Commissionerorbyhisdulyauthorizedrepresentativewithoutthenecessityof beingcountersignedbytheChairman,Commissiononaudit,theprovisionsofthe AdministrativeCodeof1987tothecontrarynotwithstanding:Provided,That refundsunderthisparagraphshallbesubjecttopostauditbytheCommissionon Audit.

 CHAPTERII COMPLIANCEREQUIREMENTS SEC.113.InvoicingandAccountingRequirementsforVATRegisteredPersons. (A)InvoicingRequirements.AVATregisteredpersonshall,foreverysale,issuean invoiceorreceipt.InadditiontotheinformationrequiredunderSection237,the followinginformationshallbeindicatedintheinvoiceorreceipt: (1)AstatementthatthesellerisaVATregisteredperson,followedbyhis taxpayer'sidentificationnumber(TIN);and (2)Thetotalamountwhichthepurchaserpaysorisobligatedtopaytotheseller withtheindicationthatsuchamountincludesthevalueaddedtax. (B)AccountingRequirements.NotwithstandingtheprovisionsofSection233,all personssubjecttothevalueaddedtaxunderSections106and108shall,inaddition totheregularaccountingrecordsrequired,maintainasubsidiarysalesjournaland subsidiarypurchasejournalonwhichthedailysalesandpurchasesarerecorded. Thesubsidiaryjournalsshallcontainsuchinformationasmayberequiredbythe SecretaryofFinance. SEC.114.ReturnandPaymentofValueAddedTax. (A)InGeneral.Everypersonliabletopaythevalueaddedtaximposedunderthis Titleshallfileaquarterlyreturnoftheamountofhisgrosssalesorreceiptswithin twentyfive(25)daysfollowingthecloseofeachtaxablequarterprescribedforeach taxpayer:Provided,however,ThatVATregisteredpersonsshallpaythevalue addedtaxonamonthlybasis.

Anyperson,whoseregistrationhasbeencancelledinaccordancewithSection236, shallfileareturnandpaythetaxduethereonwithintwentyfive(25)daysfromthe dateofcancellationofregistration:Provided,Thatonlyoneconsolidatedreturn shallbefiledbythetaxpayerforhisprincipalplaceofbusinessorheadofficeandall branches. (B)WheretoFiletheReturnandPaytheTax.ExceptastheCommissioner otherwisepermits,thereturnshallbefiledwithandthetaxpaidtoanauthorized agentbank,RevenueCollectionOfficerordulyauthorizedcityormunicipal TreasurerinthePhilippineslocatedwithintherevenuedistrictwherethetaxpayer isregisteredorrequiredtoregister. (C)WithholdingofCreditableValueAddedTax.TheGovernmentoranyofits politicalsubdivisions,instrumentalitiesoragencies,includinggovernmentowned orcontrolledcorporations(GOCCs)shall,beforemakingpaymentonaccountof eachpurchaseofgoodsfromsellersandservicesrenderedbycontractorswhichare subjecttothevalueaddedtaximposedinSections106and108ofthisCode,deduct andwithholdthevalueaddedtaxdueattherateofthreepercent(3%)ofthegross paymentforthepurchaseofgoodsandsixpercent(6%)ongrossreceiptsfor servicesrenderedbycontractorsoneverysaleorinstallmentpaymentwhichshall becreditableagainstthevalueaddedtaxliabilityofthesellerorcontractor: Provided,however,Thatinthecaseofgovernmentpublicworkscontractors,the withholdingrateshallbeeightandonehalfpercent(8.5%):Provided,further,That thepaymentforleaseoruseofpropertiesorpropertyrightstononresidentowners shallbesubjecttotenpercent(10%)withholdingtaxatthetimeofpayment.For thispurpose,thepayororpersonincontrolofthepaymentshallbeconsideredas thewithholdingagent. ThevalueaddedtaxwithheldunderthisSectionshallberemittedwithinten(10) daysfollowingtheendofthemonththewithholdingwasmade. SEC.115.PoweroftheCommissionertoSuspendtheBusinessOperationsofa Taxpayer.TheCommissionerorhisauthorizedrepresentativeishereby empoweredtosuspendthebusinessoperationsandtemporarilyclosethebusiness establishmentofanypersonforanyofthefollowingviolations: (a)InthecaseofaVATregisteredPerson.

(1)Failuretoissuereceiptsorinvoices; (2)FailuretofileavalueaddedtaxreturnasrequiredunderSection114;or (3)Understatementoftaxablesalesorreceiptsbythirtypercent(30%)or moreofhiscorrecttaxablesalesorreceiptsforthetaxablequarter. (b)FailureofanyPersontoRegisterasRequiredunderSection236. Thetemporaryclosureoftheestablishmentshallbeforthedurationofnotlessthan five(5)daysandshallbeliftedonlyuponcompliancewithwhateverrequirements prescribedbytheCommissionerintheclosureorder. TITLEV OTHERPERCENTAGETAXES SEC.116.TaxonPersonsExemptFromValueAddedTax(VAT).Anypersonwhose salesorreceiptsareexemptunderSection109(z)ofthisCodefromthepaymentof valueaddedtaxandwhoisnotaVATregisteredpersonshallpayataxequivalent tothreepercent(3%)ofhisgrossquarterlysalesorreceipts:Provided,That cooperativesshallbeexemptfromthethreepercent(3%)grossreceiptstaxherein imposed. SEC.117.PercentageTaxonDomesticCarriersandKeepersofGarages.Carsfor rentorhiredrivenbythelessee,transportationcontractors,includingpersonswho transportpassengersforhire,andotherdomesticcarriersbyland,airorwater,for thetransportofpassengers,exceptownersofbancasandownerofanimaldrawn twowheeledvehicle,andkeepersofgaragesshallpayataxequivalenttothree percent(3%)oftheirquarterlygrossreceipts.

Thegrossreceiptsofcommoncarriersderivedfromtheirincomingandoutgoing freightshallnotbesubjectedtothelocaltaxesimposedunderRepublicActNo. 7160,otherwiseknownastheLocalGovernmentCodeof1991. IncomputingthepercentagetaxprovidedinthisSection,thefollowingshallbe consideredtheminimumquarterlygrossreceiptsineachparticularcase: Jeepneyforhire 1.ManilaandothercitiesP2,400 2.Provincial1,200 Publicutilitybus Notexceeding30passengers3,600 Exceeding30butnotexceeding50passengers6,000 Exceeding50passengers7,200 Taxis 1.ManilaandothercitiesP3,600 2.Provincial2,400 Carforhire(withchauffer)3,000 Carforhire(withoutchauffer)1,800 SEC.118.PercentageTaxonInternationalCarriers. (A)InternationalaircarriersdoingbusinessinthePhilippinesshallpayataxof threepercent(3%)oftheirquarterlygrossreceipts. (B)InternationalshippingcarriersdoingbusinessinthePhilippinesshallpayatax equivalenttothreepercent(3%)oftheirquarterlygrossreceipts.

SEC.119.TaxonFranchises.Anyprovisionofgeneralorspeciallawtothecontrary notwithstanding,thereshallbelevied,assessedandcollectedinrespecttoall franchisesonradioand/ortelevisionbroadcastingcompanieswhoseannualgross receiptsoftheprecedingyeardoesnotexceedTenmillionpesos(P10,000.00), subjecttoSection236ofthisCode,ataxofthreepercent(3%)andonelectric,gas andwaterutilities,ataxoftwopercent(2%)onthegrossreceiptsderivedfromthe businesscoveredbythelawgrantingthefranchise:Provided,however,Thatradio andtelevisionbroadcastingcompaniesreferredtointhisSectionshallhavean optiontoberegisteredasavalueaddedtaxpayerandpaythetaxduethereon: Provided,further,Thatoncetheoptionisexercised,itshallnotberevoked. Thegranteeshallfilethereturnwith,andpaythetaxduethereontothe Commissionerorhisdulyauthorizedrepresentative,inaccordancewiththe provisionsofSection128ofthisCode,andthereturnshallbesubjecttoauditbythe BureauofInternalRevenue,anyprovisionofanyexistinglawtothecontrary notwithstanding. SEC.120.TaxonOverseasDispatch,MessageorConversationOriginatingfromthe Philippines. (A)PersonsLiable.Thereshallbecollecteduponeveryoverseasdispatch,message orconversationtransmittedfromthePhilippinesbytelephone,telegraph,telewriter exchange,wirelessandothercommunicationequipmentservice,ataxoftenpercent (10%)ontheamountpaidforsuchservices.ThetaximposedinthisSectionshallbe payablebythepersonpayingfortheservicesrenderedandshallbepaidtothe personrenderingtheserviceswhoisrequiredtocollectandpaythetaxwithin twenty(20)daysaftertheendofeachquarter. (B)Exemptions.ThetaximposedbythisSectionshallnotapplyto: (1)Government.AmountspaidformessagestransmittedbytheGovernmentofthe RepublicofthePhilippinesoranyofitspoliticalsubdivisionsorinstrumentalities; (2)DiplomaticServices.Amountspaidformessagestransmittedbyanyembassy andconsularofficesofaforeigngovernment; (3)InternationalOrganizations.Amountspaidformessagestransmittedbya publicinternationalorganizationoranyofitsagenciesbasedinthePhilippines enjoyingprivileges,exemptionsandimmunitieswhichtheGovernmentofthe Philippinesiscommittedtorecognizepursuanttoaninternationalagreement;and

(4)NewsServices.Amountspaidformessagesfromanynewspaper,press association,radioortelevisionnewspaper,broadcastingagency,ornewstickers services,toanyothernewspaper,pressassociation,radioortelevisionnewspaper broadcastingagency,ornewstickerserviceortoabonafidecorrespondent,which messagesdealexclusivelywiththecollectionofnewsitemsfor,orthedissemination ofnewsitemthrough,publicpress,radioortelevisionbroadcastingoranewsticker servicefurnishingageneralnewsservicesimilartothatofthepublicpress. SEC.121.TaxonBanksandNonBankFinancialIntermediaries.Thereshallbea collectedtaxongrossreceiptsderivedfromsourceswithinthePhilippinesbyall banksandnonbankfinancialintermediariesinaccordancewiththefollowing schedule: (a)Oninterest,commissionsanddiscountsfromlendingactivitiesaswellas incomefromfinancialleasing,onthebasisofremainingmaturitiesofinstruments fromwhichsuchreceiptsarederived: Shorttermmaturity(noninexcessoftwo(2)years)5% Mediumtermmaturity(overtwo(2)yearsbut notexceedingfour(4)years)3% Longtermmaturity (1)Overfour(4)yearsbutnotexceedingseven(7)years1% (2)Overseven(7)years0% (b)Ondividends0% (c)Onroyalties,rentalsofproperty,realorpersonal,profits, fromexchangeandallotheritemstreatedasgrossincome underSection32ofthisCode5% Provided,however,Thatincasethematurityperiodreferredtoinparagraph(a)is shortenedthrupretermination,thenthematurityperiodshallbereckonedtoendas ofthedateofpreterminationforpurposesofclassifyingthetransactionasshort, mediumorlongtermandthecorrectrateoftaxshallbeappliedaccordingly.

NothinginthisCodeshallprecludetheCommissionerfromimposingthesametax hereinprovidedonpersonsperformingsimilarbankingactivities. SEC.122.TaxonFinanceCompanies.Thereshallbecollectedataxoffivepercent (5%)onthegrossreceiptsderivedbyallfinancecompanies,aswellasbyother financialintermediariesnotperformingquasibankingfunctionsdongbusinessin thePhilippines,frominterest,discountsandallotheritemstreatedasgrossincome underthisCode:Provided,Thatinterests,commissionsanddiscountsfromlending activities,aswellasincomefromfinancialleasing,shallbetaxedonthebasisofthe remainingmaturitiesoftheinstrumentsfromwhichsuchreceiptsarederived,in accordancewiththefollowingschedule: Shorttermmaturity(noninexcessoftwo(2)years)5% Mediumtermmaturity(overtwo(2)years butnotexceedingfour(4)years)3% Longtermmaturity (1)Overfour(4)yearsbutnotexceedingseven(7)1% (2)Overseven(7)years0% Provided,however,Thatincasethematurityperiodisshortenedthru pretermination,thenthematurityperiodshallbereckonedtoendasofthedateof preterminationforpurposesofclassifyingthetransactionasshort,mediumorlong termandthecorrectrateoftaxshallbeappliedaccordingly. NothinginthisCodeshallprecludetheCommissionerfromimposingthesametax hereinprovidedonpersonsperformingsimilarfinancingactivities. SEC.123.TaxonLifeInsurancePremiums.Thereshallbecollectedfromevery person,companyorcorporation(exceptpurelycooperativecompaniesor associations)doinglifeinsurancebusinessofanysortinthePhilippinesataxoffive percent(5%)ofthetotalpremiumcollected,whethersuchpremiumsarepaidin money,notes,creditsoranysubstituteformoney;butpremiumsrefundedwithin six(6)monthsafterpaymentonaccountofrejectionofriskorreturnedforother reasontoapersoninsuredshallnotbeincludedinthetaxablereceipts;norshall anytaxbepaiduponreinsurancebyacompanythathasalreadypaidthetax;nor upondoingbusinessoutsidethePhilippinesonaccountofanylifeinsuranceofthe insuredwhoisanonresident,ifanytaxonsuchpremiumisimposedbytheforeign countrywherethebranchisestablishednoruponpremiumscollectedorreceived

onaccountofanyreinsurance,iftheinsured,incaseofpersonalinsurance,resides outsidethePhilippines,ifanytaxonsuchpremiumsisimposedbytheforeign countrywheretheoriginalinsurancehasbeenissuedorperfected;noruponthat portionofthepremiumscollectedorreceivedbytheinsurancecompanieson variablecontracts(asdefinedinsection232(2)ofPresidentialDecreeNo.612),in excessoftheamountsnecessarytoinsurethelivesofthevariablecontractworkers. Cooperativecompaniesorassociationsaresuchasareconductedbythemembers thereofwiththemoneycollectedfromamongthemselvesandsolelyfortheirown protectionandnotforprofit. SEC.124.TaxonAgentsofForeignInsuranceCompanies.Everyfire,marineor miscellaneousinsuranceagentauthorizedundertheInsuranceCodetoprocure policiesofinsuranceashemayhavepreviouslybeenlegallyauthorizedtotransact onriskslocatedinthePhilippinesforcompaniesnotauthorizedtotransactbusiness inthePhilippinesshallpayataxequaltotwicethetaximposedinSection123: Provided,ThattheprovisionofthisSectionshallnotapplytoreinsurance:Provided, however,ThattheprovisionsofthisSectionshallnotaffecttherightofanownerof propertytoapplyforandobtainforhimselfpoliciesinforeigncompaniesincases wheresaidownerdoesnotmakeuseoftheservicesofanyagent,companyor corporationresidingordoingbusinessinthePhilippines.Inallcaseswhereowners ofpropertyobtaininsurancedirectlywithforeigncompanies,itshallbethedutyof saidownerstoreporttotheInsuranceCommissionerandtotheCommissionereach casewhereinsurancehasbeensoeffected,andshallpaythetaxoffivepercent(5%) onpremiumspaid,inthemannerrequiredbySection123. SEC.125.AmusementTaxes.Thereshallbecollectedfromtheproprietor,lesseeor operatorofcockpits,cabarets,nightordayclubs,boxingexhibitions,professional basketballgames,JaiAlaiandracetracks,ataxequivalentto: (a)Eighteenpercent(18%)inthecaseofcockpits; (b)Eighteenpercent(18%)inthecaseofcabarets,nightordayclubs; (c)Tenpercent(10%)inthecaseofboxingexhibitions:Provided,however,That boxingexhibitionswhereinWorldorOrientalChampionshipsinanydivisionisat stakeshallbeexemptfromamusementtax:Provided,further,Thatatleastoneof

thecontendersforWorldorOrientalChampionshipisacitizenofthePhilippines andsaidexhibitionsarepromotedbyacitizen/softhePhilippinesorbya corporationorassociationatleastsixtypercent(60%)ofthecapitalofwhichis ownedbysuchcitizens; (d)Fifteenpercent(15%)inthecaseofprofessionalbasketballgamesas envisionedinPresidentialDecreeNo.871:Provided,however,Thatthetaxherein shallbeinlieuofallotherpercentagetaxesofwhatevernatureanddescription;and (e)Thirtypercent(30%)inthecaseofJaiAlaiandracetracksoftheirgross receipts,irrespective,ofwhetherornotanyamountischargedforadmission. Forthepurposeoftheamusementtax,theterm"grossreceipts"embracesallthe receiptsoftheproprietor,lesseeoroperatoroftheamusementplace.Saidgross receiptsalsoincludeincomefromtelevision,radioandmotionpicturerights,ifany. Apersonorentityorassociationconductinganyactivitysubjecttothetaxherein imposedshallbesimilarlyliableforsaidtaxwithrespecttosuchportionofthe receiptsderivedbyhimorit. Thetaxesimposedhereinshallbepayableattheendofeachquarteranditshallbe thedutyoftheproprietor,lesseeoroperatorconcerned,aswellasanypartyliable, withintwenty(20)daysaftertheendofeachquarter,tomakeatrueandcomplete returnoftheamountofthegrossreceiptsderivedduringtheprecedingquarterand paythetaxduethereon. SEC.126.TaxonWinnings.Everypersonwhowinsinhorseracesshallpayatax equivalenttotenpercent(10%)ofhiswinningsor'dividends',thetaxtobebased ontheactualamountpaidtohimforeverywinningticketafterdeductingthecostof theticket:Provided,Thatinthecaseofwinningsfromdouble,forecast/quinellaand trifectabets,thetaxshallbefourpercent(4%).Inthecaseofownersofwinning racehorses,thetaxshallbetenpercent(10%)oftheprizes. Thetaxhereinprescribedshallbedeductedfromthe'dividends'correspondingto eachwinningticketorthe"prize"ofeachwinningracehorseownerandwithheld bytheoperator,managerorpersoninchargeofthehorseracesbeforepayingthe dividendsorprizestothepersonsentitledthereto.

 Theoperator,managerorpersoninchargeofhorseracesshall,withintwenty(20) daysfromthedatethetaxwasdeductedandwithheldinaccordancewiththe secondparagraphhereof,fileatrueandcorrectreturnwiththeCommissionerin themannerorformtobeprescribedbytheSecretaryofFinance,andpaywithinthe sameperiodthetotalamountoftaxsodeductedandwithheld. SEC.127.TaxonSale,BarterorExchangeofSharesofStockListedandTraded ThroughtheLocalStockExchangeorThroughInitialPublicOffering. (A)TaxonSale,BarterorExchangeofSharesofStockListedandTradedThrough theLocalStockExchange.Thereshallbelevied,assessedandcollectedonevery sale,barter,exchange,orotherdispositionofsharesofstocklistedandtraded throughthelocalstockexchangeotherthanthesalebyadealerinsecurities,ataxat therateofonehalfofonepercent(1/2of1%)ofthegrosssellingpriceorgross valueinmoneyofthesharesofstocksold,bartered,exchangedorotherwise disposedwhichshallbepaidbythesellerortransferor. (B)TaxonSharesofStockSoldorExchangedThroughInitialPublicOffering. Thereshallbelevied,assessedandcollectedoneverysale,barter,exchangeorother dispositionthroughinitialpublicofferingofsharesofstockincloselyheld corporations,asdefinedherein,ataxattheratesprovidedhereunderbasedonthe grosssellingpriceorgrossvalueinmoneyofthesharesofstocksold,bartered, exchangedorotherwisedisposedinaccordancewiththeproportionofsharesof stocksold,bartered,exchangedorotherwisedisposedtothetotaloutstanding sharesofstockafterthelistinginthelocalstockexchange: Uptotwentyfivepercent(25%)4% Overtwentyfivepercent(25%)butnotoverthirtythree andonethirdpercent(331/3%)2% Overthirtythreeandonethirdpercent(331/3%)1% Thetaxhereinimposedshallbepaidbytheissuingcorporationinprimaryoffering orbythesellerinsecondaryoffering. ForpurposesofthisSection,theterm"closelyheldcorporation"meansany corporationatleastfiftypercent(50%)invalueofoutstandingcapitalstockorat leastfiftypercent(505)ofthetotalcombinedvotingpowerofallclassesofstock

entitledtovoteisowneddirectlyorindirectlybyorfornotmorethantwenty(20) individuals. Forpurposesofdeterminingwhetherthecorporationisacloselyheldcorporation, insofarassuchdeterminationisbasedonstockownership,thefollowingrulesshall beapplied: (1)StockNotOwnedbyIndividuals.Stockowneddirectlyorindirectlybyorfora corporation,partnership,estateortrustshallbeconsideredasbeingowned proportionatelybyitsshareholders,partnersorbeneficiaries. (2)FamilyandPartnershipOwnerships.Anindividualshallbeconsideredas owningthestockowned,directlyorindirectly,byorforhisfamily,orbyorforhis partner.Forpurposesoftheparagraph,the'familyofanindividual'includesonly hisbrothersandsisters(whetherbywholeorhalfblood),spouse,ancestorsand linealdescendants. (3)Option.Ifanypersonhasanoptionacquirestock,suchstockshallbe consideredasownedbysuchperson.Forpurposesofthisparagraph,anoptionto acquiresuchanoptionandeachoneofaseriesofoptionsshallbeconsideredasan optiontoacquiresuchstock. (4)ConstructiveOwnershipasActualOwnership.Stockconstructivelyownedby reasonoftheapplicationofparagraph(1)or(3)hereofshall,forpurposesof applyingparagraph(1)or(2),betreatedasactuallyownedbysuchperson;but stockconstructivelyownedbytheindividualbyreasonoftheapplicationof paragraph(2)hereofshallnotbetreatedasownedbyhimforpurposesofagain applyingsuchparagraphinordertomakeanothertheconstructiveownerofsuch stock. (C)ReturnonCapitalGainsRealizedfromSaleofSharesofStocks. (1)ReturnonCapitalGainsRealizedfromSaleofSharesofStockListedandTraded intheLocalStockExchange.Itshallbethedutyofeverystockbrokerwhoeffected thesalesubjecttothetaximposedhereintocollectthetaxandremitthesameto theBureauofInternalRevenuewithinfive(5)bankingdaysfromthedateof collectionthereofandtosubmitonMondaysofeachweektothesecretaryofthe stockexchange,ofwhichheisamember,atrueandcompletereturnwhichshall containadeclarationofallthetransactionseffectedthroughhimduringthe precedingweekandoftaxescollectedbyhimandturnedovertotheBureauOf InternalRevenue. (2)ReturnonPublicOfferingsofShareStock.Incaseofprimaryoffering,the corporateissuershallfilethereturnandpaythecorrespondingtaxwithinthirty

(30)daysfromthedateoflistingofthesharesofstockinthelocalstockexchange. Inthecaseofsecondaryoffering,theprovisionofSubsection(C)(1)ofthisSection shallapplyastothetimeandmannerofthepaymentofthetax. (D)CommonProvisions.Anygainderivedfromthesale,barter,exchangeorother dispositionofsharesofstockunderthisSectionshallbeexemptfromthetax imposedinSections24(C),27(D)(2),28(A)(8)(c),and28(B)(5)(c)ofthisCodeand fromtheregularindividualorcorporateincometax.TaxpaidunderthisSection shallnotbedeductibleforincometaxpurposes. SEC.128.ReturnsandPaymentofPercentageTaxes. (A)ReturnsofGrossSales,ReceiptsorEarningsandPaymentofTax. (1)PersonsLiabletoPayPercentageTaxes.Everypersonsubjecttothepercentage taxesimposedunderthisTitleshallfileaquarterlyreturnoftheamountofhisgross sales,receiptsorearningsandpaythetaxduethereonwithintwentyfive(25)days aftertheendofeachtaxablequarter:Provided,Thatinthecaseofapersonwhose VATregistrationiscancelledandwhobecomesliabletothetaximposedinSection 116ofthisCode,thetaxshallaccruefromthedateofcancellationandshallbepaid inaccordancewiththeprovisionsofthisSection. (2)PersonRetiringfromBusiness.Anypersonretiringfromabusinesssubjectto percentagetaxshallnotifythenearestinternalrevenueofficer,filehisreturnand paythetaxduethereonwithintwenty(20)daysafterclosinghisbusiness. (3)Exceptions.TheCommissionermay,byrulesandregulations,prescribe: (a)Thetimeforfilingthereturnatintervalsotherthanthetimeprescribedinthe precedingparagraphsforaparticularclassorclassesoftaxpayersafterconsidering suchfactorsasvolumeofsales,financialcondition,adequatemeasuresofsecurity, andsuchotherrelevantinformationrequiredtobesubmittedunderthepertinent provisionsofthisCode;and (b)Themannerandtimeofpaymentofpercentagetaxesotherthanashereinabove prescribed,includingaschemeoftaxprepayment.

(4)DeterminationofCorrectSalesorReceipts.Whenitisfoundthatapersonhas failedtoissuereceiptsorinvoices,orwhennoreturnisfiled,orwhenthereis reasontobelievethatthebooksofaccountsorotherrecordsdonotcorrectlyreflect thedeclarationsmadeortobemadeinareturnrequiredtobefiledunderthe provisionsofthisCode,theCommissioner,aftertakingintoaccountthesales, receiptsorothertaxablebaseofotherpersonsengagedinsimilarbusinessesunder similarsituationsorcircumstances,orafterconsideringotherrelevantinformation mayprescribeaminimumamountofsuchgrossreceipts,salesandtaxablebaseand suchamountsoprescribedshallbeprimafaciecorrectforpurposesofdetermining theinternalrevenuetaxliabilitiesofsuchperson. (B)WheretoFile.ExceptastheCommissionerotherwisepermits,everyperson liabletothepercentagetaxunderthisTitlemay,athisoption,fileaseparatereturn foreachbranchorplaceofbusiness,oraconsolidatedreturnforallbranchesor placesofbusinesswiththeauthorizedagentbank,RevenueDistrictOfficer, CollectionAgentordulyauthorizedTreasurerofthecityormunicipalitywheresaid businessorprincipalplaceofbusinessislocated,asthecasemaybe. TITLEVI EXCISETAXESONCERTAINGOODS CHAPTERI GENERALPROVISIONS SEC.129.GoodsSubjecttoExciseTaxes.Excisetaxesapplytogoodsmanufactured orproducedinthePhilippinesfordomesticsalesorconsumptionorforanyother dispositionandtothingsimported.Theexcisetaximposedhereinshallbein additiontothevalueaddedtaximposedunderTitleIV. ForpurposesofthisTitle,excisetaxeshereinimposedandbasedonweightor volumecapacityoranyotherphysicalunitormeasurementshallbereferredtoas "specifictax"andanexcisetaxhereinimposedandbasedonsellingpriceorother specifiedvalueofthegoodshallbereferredtoas"advaloremtax".

SEC.130.FilingofReturnandPaymentofExciseTaxonDomesticProducts. (A)PersonsLiabletoFileaReturn,FilingofReturnonRemovalandPaymentofTax. (1)PersonsLiabletoFileaReturn.Everypersonliabletopayexcisetax imposedunderthisTitleshallfileaseparatereturnforeachplaceofproduction settingforth,amongothers,thedescriptionandquantityorvolumeofproductsto beremoved,theapplicabletaxbaseandtheamountoftaxduethereon:Provided, however,Thatinthecaseofindigenouspetroleum,naturalgasorliquefiednatural gas,theexcisetaxshallbepaidbythefirstbuyer,purchaserortransfereeforlocal sale,barterortransfer,whiletheexcisetaxonexportedproductsshallbepaidby theowner,lessee,concessionaireoroperatoroftheminingclaim. Shoulddomesticproductsberemovedfromtheplaceofproductionwithoutthe paymentofthetax,theownerorpersonhavingpossessionthereofshallbeliablefor thetaxduethereon. (2)TimeforFilingofReturnandPaymentoftheTax.Unlessotherwise specificallyallowed,thereturnshallbefiledandtheexcisetaxpaidbythe manufacturerorproducerbeforeremovalofdomesticproductsformplaceof production:Provided,Thattheexcisetaxonlocallymanufacturedpetroleum productsandindigenouspetroleumleviedunderSections148and151(A)(4), respectively,ofthisTitleshallbepaidwithinten(10)daysfromthedateofremoval ofsuchproductsfortheperiodfromJanuary1,1998toJune30,1998;withinfive (5)daysfromthedateofremovalofsuchproductsfortheperiodfromJuly1,1998 toDecember31,1998;and,beforeremovalfromtheplaceofproductionofsuch productsfromJanuary1,1999andthereafter:Provided,further,Thattheexcisetax onnonmetallicmineralormineralproducts,orquarryresourcesshallbedueand payableuponremovalofsuchproductsfromthelocalitywhereminedorextracted, butwithrespecttotheexcisetaxonlocallyproducedorextractedmetallicmineral ormineralproducts,thepersonliableshallfileareturnandpaythetaxwithin fifteen(15)daysaftertheendofthecalendarquarterwhensuchproductswere removedsubjecttosuchconditionsasmaybeprescribedbyrulesandregulationsto bepromulgatedbytheSecretaryofFinance,uponrecommendationofthe Commissioner.Forthispurpose,thetaxpayershallfileabondinanamountwhich approximatestheamountofexcisetaxdueontheremovalsforthesaidquarter.The foregoingrulesnotwithstanding,forimportedmineralormineralproducts,whether metallicornonmetallic,theexcisetaxduethereonshallbepaidbeforetheir removalfromcustomscustody.

 (3)PlaceofFilingofReturnandPaymentoftheTax.Exceptasthe Commissionerotherwisepermits,thereturnshallbefiledwithandthetaxpaidto anyauthorizedagentbankorRevenueCollectionOfficer,ordulyauthorizedCityor MunicipalTreasurerinthePhilippines. (4)Exceptions.TheSecretaryofFinance,uponrecommendationofthe Commissionermay,byrulesandregulations,prescribe: (a)Thetimeforfilingthereturnatintervalsotherthanthetimeprescribedin theprecedingparagraphsforaparticularclassorclassesoftaxpayersafter consideringfactorssuchasvolumeofremovals,adequatemeasuresofsecurityand suchotherrelevantinformationrequiredtobesubmittedunderthepertinent provisionsofthisCode;and (b)Themannerandtimeofpaymentofexcisetaxesotherthanasherein prescribed,underataxprepayment,advancedepositorsimilarschemes.Inthecase oflocallyproducedofextractedmineralsandmineralproductsorquarryresources wheretheminesiteorplaceofextractionisnotthesameastheplaceofprocessing orproduction,thereturnshallbefiledwithandthetaxpaidtotheRevenueDistrict Officehavingjurisdictionoverthelocalitywherethesamearemined,extractedor quarried:Provided,however,Thatformetallicmineralsprocessedabroad,the returnshallbefiledandthetaxduethereonpaidtotheRevenueDistrictOffice havingjurisdictionoverthelocalitywherethesamearemined,extractedor quarried. (B)DeterminationofGrossSellingPriceofGoodsSubjecttoAdValoremTax. Unlessotherwiseprovided,theprice,excludingthevalueaddedtax,atwhichthe goodsaresoldatwholesaleintheplaceofproductionorthroughtheirsalesagents tothepublicshallconstitutethegrosssellingprice.Ifthemanufactureralsosellsor allowssuchgoodstobesoldatwholesaleinanotherestablishmentofwhichheis theownerorintheprofitsofwhichhehasaninterest,thewholesalepriceinsuch establishmentshallconstitutethegrosssellingprice.Shouldsuchpricebelessthan thecostofmanufactureplusexpensesincurreduntilthegoodsarefinallysold,then aproportionatemarginofprofit,notlessthantenpercent(10%)ofsuch manufacturingcostandexpenses,shallbeaddedtoconstitutethegrossselling price.

(C)Manufacturer'sorProducer'sSwornStatement.Everymanufactureror producerofgoodsorproductssubjecttoexcisetaxesshallfilewiththe Commissioneronthedateordatesdesignatedbythelatter,andasoftenasmaybe required,aswornstatementshowing,amongotherinformation,thedifferentgoods orproductsmanufacturedorproducedandtheircorrespondinggrosssellingprice ormarketvalue,togetherwiththecostofmanufactureorproductionplusexpenses incurredortobeincurreduntilthegoodsorproductsarefinallysold. (D)CreditforExciseTaxonGoodsActuallyExported.Whengoodslocally producedormanufacturedareremovedandactuallyexportedwithoutreturningto thePhilippines,whethersoexportedintheiroriginalstateorasingredientsorparts ofanymanufacturedgoodsorproducts,anyexcisetaxpaidthereonshallbe creditedorrefundeduponsubmissionoftheproofofactualexportationandupon receiptofthecorrespondingforeignexchangepayment:Provided,Thattheexcise taxonmineralproducts,exceptcoalandcoke,imposedunderSection151shallnot becreditableorrefundableevenifthemineralproductsareactuallyexported. SEC.131.PaymentofExciseTaxesonImporterArticles. (A)PersonsLiable.Excisetaxesonimportedarticlesshallbepaidbytheowner orimportertotheCustomsOfficers,conformablywiththeregulationsofthe DepartmentofFinanceandbeforethereleaseofsucharticlesfromthecustoms house,orbythepersonwhoisfoundinpossessionofarticleswhichareexempt fromexcisetaxesotherthanthoselegallyentitledtoexemption. InthecaseoftaxfreearticlesbroughtorimportedintothePhilippinesby persons,entitles,oragenciesexemptfromtaxwhicharesubsequentlysold, transferredorexchangedinthePhilippinestononexemptpersonsorentitles,the purchasersorrecipientsshallbeconsideredtheimportersthereof,andshallbe liableforthedutyandinternalrevenuetaxdueonsuchimportation. Theprovisionofanyspecialorgenerallawtothecontrarynotwithstanding,the importationofcigarsandcigarettes,distilledspiritsandwinesintothePhilippines, evenifdestinedfortaxanddutyfreeshops,shallbesubjecttoallapplicabletaxes, duties,charges,includingexcisetaxesduethereon:Provided,however,Thatthis shallnotapplytocigarsandcigarettes,distilledspiritsandwinesbroughtdirectly intothedulycharteredorlegislatedfreeportsoftheSubicSpecialEconomicand FreeportZone,cratedunderRepublicActNo.7227;theCagayanSpecialEconomic

ZoneandFreeport,createdunderRepublicActNo.7922;andtheZamboangaCity SpecialEconomicZone,createdunderRepublicActNo.7903,andarenot transshippedtoanyotherportinthePhilippines:Provided,further,That importationsofcigarsandcigarettes,distilledspiritsandwinesbyagovernment ownedandoperateddutyfreeshop,liketheDutyFreePhilippines(DFP),shallbe exemptedfromallapplicabletaxes,duties,charges,includingexcisetaxdue thereon:Provided,stillfurther,Thatifsucharticlesdirectlyimportedbya governmentownedandoperateddutyfreeshopliketheDutyFreePhilippines, shallbelabeled"taxanddutyfree"and"notforresale":Provided,stillfurther,That issucharticlesbroughtintothedulycharteredorlegislatedfreeportsunder RepublicActsNo.7227,7922and7903aresubsequentlyintroducedintothe Philippinecustomsterritory,thensucharticlesshall,uponsuchintroduction,be deemedimportedintothePhilippinesandshallbesubjecttoallimpostsandexcise taxesprovidedhereinandotherstatutes:Provided,finally,Thattheremovaland transferoftaxanddutyfreegoods,products,machinery,equipmentandother similararticles,fromonefreeporttoanotherfreeport,shallnotbedeemedan introductionintothePhilippinecustomsterritory. Articlesconfiscatedshallbedisposedofinaccordancewiththerulesand regulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationof theCommissionerofCustomsandInternalRevenue,uponconsultationwiththe SecretaryofTourismandtheGeneralmanagerofthePhilippineTourismAuthority. Thetaxdueonanysuchgoods,products,machinery,equipmentorothersimilar articlesshallconstitutealienonthearticleitself,andsuchlienshallbesuperiorto allotherchargesorliens,irrespectiveofthepossessorthereof. (B)RateandBasisoftheExciseTaxonImportedArticles.Unlessotherwise specifiedimportedarticlesshallbesubjecttothesameratesandbasisofexcise taxesapplicabletolocallymanufacturedarticles. SEC.132.ModeofComputingContentsofCaskorPackage.Everyfractionalpartof aproofliterequaltoorgreaterthanahalfliterinacaskorpackagecontainingmore thanonelitershallbetaxedasaliter,andanysmallerfractionalpartshallbe exempt;butanypackageofspirits,thetotalcontentofwhicharelessthanaproof liter,shallbetaxedasoneliter. CHAPTERII

EXEMPTIONORCONDITIONALTAXFREEREMOVALOFCERTAINARTICLES SEC.133.RemovalofWinesandDistilledSpiritsforTreatmentofTobaccoLeaf. UponissuanceofapermitfromtheCommissionerandsubjecttotherulesand regulationsprescribedbytheSecretaryofFinance,manufacturersofcigarsand cigarettesmaywithdrawfrombond,freeofexciselocalandimportedwinesand distilledspiritsinspecificquantitiesandgradesforuseinthetreatmentoftobacco leaftobeusedinthemanufactureofcigarsandcigarettes;butsuchwinesand distilledspiritsmustfirstbesuitablydenatured. SEC.134.DomesticDenaturedAlcohol.Domesticalcoholofnotlessthanone hundredeightydegrees(180O)proof(ninetypercent[90%]absolutealcohol)shall, whensuitablydenaturedandrenderedunfitfororalintake,beexemptfromthe excisetaxprescribedinSection141:Provided,however,Thatsuchdenatured alcoholshallbesubjecttotaxunderSection106(A)ofthisCode:Provided,further, Thatifsuchalcoholistobeusedforautomotivepower,itshallbetaxedunder Section148(d)ofthisCode:Provided,finally,Thatanyalcohol,previouslyrendered unfitfororalintakeafterdenaturingbutsubsequentlyrenderedfitfororalintake afterundergoingfermentation,dilution,purification,mixtureoranyothersimilar processshallbetaxedunderSection141ofthisCodeandsuchtaxshallbepaidby thepersoninpossessionofsuchreprocessedspirits. SEC.135.PetroleumProductsSoldtoInternationalCarriersandExemptEntitiesor Agencies.Petroleumproductssoldtothefollowingareexemptfromexcisetax: (a)InternationalcarriersofPhilippineorforeignregistryontheiruseor consumptionoutsidethePhilippines:Provided,Thatthepetroleumproductssoldto theseinternationalcarriersshallbestoredinabondedstoragetankandmaybe disposedofonlyinaccordancewiththerulesandregulationstobeprescribedby theSecretaryofFinance,uponrecommendationoftheCommissioner; (b)Exemptentitiesoragenciescoveredbytaxtreaties,conventionsandother internationalagreementsfortheiruseorconsumption:Provided,however,Thatthe countryofsaidforeigninternationalcarrierorexemptentitiesoragenciesexempts fromsimilartaxespetroleumproductssoldtoPhilippinecarriers,entitiesor agencies;and (c)Entitieswhicharebylawexemptfromdirectandindirecttaxes. SEC.136.Denaturation,WithdrawalandUseofDenaturedAlcohol.Anyperson whoproduces,withdraws,sells,transportsorknowinglyuses,orisinpossessionof

denaturedalcohol,orarticlescontainingdenaturedalcoholinviolationoflawsor regulationsnoworhereafterinforcepertainingtheretoshallberequiredtopaythe correspondingtax,inadditiontothepenaltiesprovidedforunderTitleXofthis Code. SEC.137.RemovalofSpiritsUnderBondforRectification.Spiritsrequiring rectificationmayberemovedfromtheplaceofproductiontoanotherestablishment forthepurposeofrectificationwithoutprepaymentoftheexcisetax:Provided,That thedistillerremovingsuchspiritsandtherectifierreceivingthemshallfilewiththe Commissionertheirjointbondconditioneduponthepaymentbytherectifierofthe excisetaxdueontherectifiedalcohol:Provided,further,Thatincaseswhere alcoholhasalreadybeenrectifiedeitherbyoriginalandcontinuousdistillationorby redistillation,nolossforrectificationandhandlingshallbeallowedandtherectifier thereofshallpaytheexcisetaxdueonsuchlosses:Provided,finally,Thatwherea rectifiermakesuseofspiritsuponwhichtheexcisetaxhasnotbeenpaid,heshallbe liableforthepaymentofthetaxotherwiseduethereon. SEC.138.RemovalofFermentedLiquorstoBondedWarehouse.Anybrewermay removeortransportfromhisbreweryorotherplaceofmanufacturetoabonded warehouseusedbyhimexclusivelyforthestorageorsaleinbulkoffermented liquorsofhisownmanufacture,anyquantityofsuchfermentedliquors,notless thanonethousand(1,000)litersatoneremoval,withoutprepaymentofthetax thereonunderapermitwhichshallbegrantedbytheCommissioner.Suchpermit shallbeaffixedtoeverypackagesoremovedandshallbecancelledordestroyedin suchmannerastheCommissionermayprescribe.Thereafter,themanufacturerof suchfermentedliquorsshallpaythetaxinthesamemannerandunderthesame penaltyandliabilityaswhenpaidatthebrewery. SEC.139.RemovalofDamagedLiquorsFreeofTax.Whenanyfermentedliquor hasbecomesourorotherwisedamagedsoastobeunfitforuseassuch,brewers maysellandaftersecuringaspecialpermitfromtheCommissioner,undersuch conditionsasmaybeprescribedintherulesandregulationsprescribedbythe SecretaryofFinance,removethesamewithoutthepaymentoftaxthereonincask orotherpackages,distinctfromthoseordinarilyusedforfermentedliquors,each containingnotlessthanonehundredseventyfive(175)literswithanoteoftheir contentspermanentlyaffixedthereon. SEC.140.RemovalofTobaccoProductsWithoutPrepaymentofTax.Productsof tobaccoentirelyunfitforchewingorsmokingmayberemovedfreeoftaxfor agriculturalorindustrialuse,undersuchconditionsasmaybeprescribedinthe

rulesandregulationsprescribedbytheSecretaryofFinance.Stemmedleaftobacco, finecutshorts,therefuseoffinecutchewingtobacco,scraps,cuttings,clippings, stems,ormidribs,andsweepingsoftobaccomaybesoldinbulkasrawmaterialby onemanufacturerdirectlytoanotherwithoutpaymentofthetax,undersuch conditionsasmaybeprescribedintherulesandregulationsprescribedbythe SecretaryofFinance. "Stemmedleaftobacco",ashereinused,meansleaftobaccowhichhashadthestem ormidribremoved.Thetermdoesnotincludebrokenleaftobacco. CHAPTERIII EXCISETAXONALCOHOLPRODUCTS SEC.141.DistilledSpirits.Ondistilledspirits,thereshallbecollected,subjecttothe provisionsofSection133ofthisCode,excisetaxesasfollows: (a)Ifproducedfromthesapofnipa,coconut,cassava,camote,orburipalmor fromthejuice,syruporsugarofthecane,providedsuchmaterialsareproduced commerciallyinthecountrywheretheyareprocessedintodistilledspirits,per proofliter,Eightpesos(P8.00):Provided,Thatifproducedinapotstillorother similarprimarydistillingapparatusbyadistillerproducingnotmorethanone hundred(100)litersaday,containingnotmorethanfiftypercent(50%)ofalcohol byvolume,perproofliter,Fourpesos(P4.00); (b)Ifproducedfromrawmaterialsotherthanthoseenumeratedinthe precedingparagraph,thetaxshallbeinaccordancewiththenetretailpriceper bottleofsevenhundredfiftymilliliter(750ml.)volumecapacity(excludingthe excisetaxandthevalueaddedtax)asfollows: (1)LessthanTwohundredandfiftypesos(P250)Seventyfivepesos(P75), perproofliter;

(2)Twohundredandfiftypesos(P250)uptoSixhundredandSeventyFive pesos(P675)Onehundredandfiftypesos(P150),perproofliter;and (3)MorethanSixhundredandseventyfivepesos(P675)Threehundred pesos(P300),perproofliter. (c)Medicinalpreparations,flavoringextracts,andallotherpreparations,except toiletpreparations,ofwhich,excludingwater,distilledspiritsforthechief ingredient,shallbesubjecttothesametaxassuchchiefingredient. Thistaxshallbeproportionallyincreasedforanystrengthofthespiritstaxedover proofspirits,andthetaxshallattachtothissubstanceassoonasitisinexistenceas such,whetheritbesubsequentlyseparatedaspureorimpurespirits,or transformedintoanyothersubstanceeitherintheprocessoforiginalproductionor byanysubsequentprocess. "Spiritsordistilledspirits"isthesubstanceknownasethylalcohol,ethanolor spiritsofwine,includingalldilutions,purificationsandmixturesthereof,from whateversource,bywhateverprocessproduced,andshallincludewhisky,brandy, rum,ginandvodka,andothersimilarproductsormixtures. "Proofspirits"isliquorcontainingonehalf(1/2)ofitsvolumeofalcoholofa specificgravityofseventhousandninehundredandthirtyninethousandths (0.7939)atfifteendegreescentigrade(15OC).A"proofliter"meansaliterofproof spirits. TheratesoftaximposedunderthisSectionshallbeincreasedbytwelvepercent (12%)onJanuary1,2000. Newbrandsshallbeclassifiedaccordingtotheircurrent"netretailprice". Fortheabovepurpose,"netretailprice"shallmeanthepriceatwhichthedistilled spiritissoldonretailinten(10)majorsupermarketsinMetroManila,excludingthe

amountintendedtocovertheapplicableexcisetaxandthevalueaddedtaxasof October1,1996. Theclassificationofeachbrandofdistilledspiritsbasedontheaveragenetretail priceasofOctober1,1996,assetforthinAnnex"A",shallremaininforceuntil revisedbyCongress. SEC.142.Wines.Onwines,thereshallbecollectedperliterofvolumecapacity,the followingtaxes: (a)Sparklingwines/champagnesregardlessofproof,ifthenetretailpriceper bottle(excludingtheexcisetaxandvalueaddedtax)is: (1)Fivehundredpesos(P500)orlessOnehundredpesos(P100);and (2)MorethanFivehundredpesos(P500)Threehundredpesos(P300). (b)Stillwinescontainingfourteenpercent(14%)ofalcoholbyvolumeorless, Twelvepesos(P12.00);and (c)Stillwinescontainingmorethanfourteenpercent(14%)butnotmorethan twentyfivepercent(25%)ofalcoholbyvolume,Twentyfourpesos(P24.00). Fortifiedwinescontainingmorethantwentyfivepercentofalcoholbyvolumeshall betaxedasdistilledspirits."Fortifiedwines"shallmeannaturalwinestowhich distilledspiritsareaddedtoincreasetheiralcoholicstrength. TheratesoftaximposedunderthisSectionshallbeincreasedbytwelvepercent (12%)onJanuary1,2000. Newbrandsshallbeclassifiedaccordingtotheircurrentnetretailprice.

Fortheabovepurpose,"netretailprice"shallmeanthepriceatwhichwineissold onretailinten(10)majorsupermarketsinMetroManila,excludingtheamount intendedtocovertheapplicableexcisetaxandthevalueaddedtaxasofOctober1, 1996. Theclassificationofeachbrandofwinesbasedonitsaveragenetretailpriceasof October1,1996,assetforthinAnnex"B",shallremaininforceuntilrevisedby Congress. SEC.143.FermentedLiquor.Thereshallbelevied,assessedandcollectedanexcise taxonbeer,lagerbeer,ale,porterandotherfermentedliquorsexcepttuba,basi, tapuyandsimilardomesticfermentedliquorsinaccordancewiththefollowing schedule: (a)Ifthenetretailprice(excludingtheexcisetaxandvalueaddedtax)perliter ofvolumecapacityislessthanFourteenpesosandfiftycentavos(P14.50),thetax shallbeSixpesosandfifteencentavos(P6.15)perliter; (b)Ifthenetretailprice(excludingtheexcisetaxandthevalueaddedtax)the perliterofvolumecapacityisFourteenpesosandfiftycentavos(P14.50)upto Twentytwopesos(P22.00),thetaxshallbeNinepesosandfifteencentavos(P9.15) perliter; (c)Ifthenetretailprice(excludingtheexcisetaxandthevalueaddedtax)per literofvolumecapacityismorethanTwentytwopesos(P22.00),thetaxshallbe Twelvepesosandfifteencentavos(P12.15)perliter. Variantsofexistingbrandswhichareintroducedinthedomesticmarketafterthe effectivityofRepublicActNo.8240shallbetaxedunderthehighestclassificationof anyvariantofthatbrand. Fermentedliquorwhicharebrewedandsoldatmicrobreweriesorsmall establishmentssuchaspubsandrestaurantsshallbesubjecttotheratein paragraph(c)hereof.

Theexcisetaxfromanybrandoffermentedliquorwithinthenextthree(3)years fromtheeffectivityofRepublicActNo.8240shallnotbelowerthanthetaxwhich wasduefromeachbrandonOctober1,1996. Theratesofexcisetaxonfermentedliquorunderparagraphs(a),(b)and(c)hereof shallbeincreasedbytwelvepercent(12%)onJanuary1,2000. Newbrandsshallbeclassifiedaccordingtotheircurrentnetretailprice. Fortheabovepurpose,"netretailprice"shallmeanthepriceatwhichthe fermentedliquorissoldonretailintwenty(20)majorsupermarketsinMetro Manila(forbrandsoffermentedliquormarketednationally)excludingtheamount intendedtocovertheapplicableexcisetaxandthevalueaddedtax.Forbrands whicharemarketedonlyoutsideMetroManila,the"netretailprice"shallmeanthe priceatthewhichthefermentedliquorissoldinfive(5)majorsupermarketsinthe regionexcludingtheamountintendedtocovertheapplicableexcisetaxandthe valueaddedtax. Theclassificationofeachbrandoffermentedliquorbasedonitsaveragenetretail priceasofOctober1,1996,assetforthinAnnex"C",shallremaininforceuntil revisedbyCongress. "Avariantofbrand"shallrefertoabrandonwhichamodifierisprefixedand/or suffixedtotherootnameofthebrandand/oradifferentbrandwhichcarriesthe samelogoordesignoftheexistingbrand. Everybrewerorimporteroffermentedliquorshall,withinthirty(30)daysfromthe effectivityofR.A.No.8240,andwithinthefirstfive(5)daysofeverymonth thereafter,submittotheCommissioneraswornstatementofthevolumeofsalesfor eachparticularbrandoffermentedliquorsoldathisestablishmentforthethree monthperiodimmediatelypreceding. Anybrewerorimporterwho,inviolationofthisSection,knowinglymisdeclaresor misrepresentsinhisoritsswornstatementhereinrequiredanypertinentdataor informationshallbepenalizedbyasummarycancellationorwithdrawalofhisorits permittoengageinbusinessasbrewerorimporteroffermentedliquor.

 Anycorporation,associationorpartnershipliableforanyoftheactsoromissionsin violationofthisSectionshallbefinedtrebletheamountofdeficiencytaxes, surcharge,andinterestwhichmaybeassessedpursuanttothisSection. AnypersonliableforanyoftheactsoromissionsprohibitedunderthisSectionshall becriminallyliableandpenalizedunderSection254ofthisCode.Anypersonwho willfullyaidsorabetsinthecommissionofanysuchactoromissionshallbe criminallyliableinthesamemannerastheprincipal. IftheoffenderisnotacitizenofthePhilippines,heshallbedeportedimmediately afterservingthesentence,withoutfurtherproceedingsfordeportation. CHAPTERIV EXCISETAXONTOBACCOPRODUCTS SEC.144.TobaccoProducts.Thereshallbecollectedataxofseventyfivecentavos (P0.75)oneachkilogramofthefollowingproductsoftobacco: (a)Tobaccotwistedbyhandorreducedintoaconditiontobeconsumedinany mannerotherthantheordinarymodeofdryingandcuring; (b)Tobaccopreparedorpartiallypreparedwithorwithouttheuseofany machineorinstrumentsorwithoutbeingpressedorsweetened;and (c)Finecutshortsandrefuse,scraps,clippings,cuttings,stemsandsweepingsof tobacco. Finecutshortsandrefuse,scraps,clippings,cuttings,stemsandsweepingsof tobaccoresultingfromthehandlingorstrippingofwholeleaftobaccomaybe transferred,disposedof,orotherwisesold,withoutprepaymentoftheexcisetax

hereinprovidedforundersuchconditionsasmaybeprescribedintherulesand regulationspromulgatedbytheSecretaryofFinance,uponrecommendationofthe Commissioner,ifthesamearetobeexportedortobeusedinthemanufactureof othertobaccoproductsonwhichtheexcisetaxwilleventuallybepaidonthe finishedproduct. Ontobaccospeciallypreparedforchewingsoastobeunsuitableforuseinany othermanner,oneachkilogram,Sixtycentavos(P0.60). SEC.145.CigarsandCigarettes. (A)Cigars.Thereshallbelevied,assessedandcollectedoncigarsataxofOnepeso (P1.00)percigar. (B)CigarettesPackedbyHand.Thereshallbelevied,assessedandcollectedon cigarettespackedbyhandataxofFortycentavos(P0.40)perpack. (C)CigarettesPackedbyMachine.Thereshallbelevied,assessedandcollectedon cigarettespackedbymachineataxattheratesprescribedbelow: (1)Ifthenetretailprice(excludingtheexcisetaxandthevalueaddedtax)is aboveTen pesos(P10.00)perpack,thetaxshallbeTwelvepesos(P12.00)perpack; (2)Ifthenetretailprice(excludingtheexcisetaxandthevalueaddedtax) exceedsSix pesosandfiftycentavos(P6.50)butdoesnotexceedTenpesos(P10.00)per pack, thetaxshallbeEightpesos(8.00)perpack; (3)Ifthenetretailprice(excludingtheexcisetaxandthevalueaddedtax)is Fivepesos

(P5.00)butdoesnotexceedSixpesosandfiftycentavos(P6.50)perpack,the tax shallbeFivepesos(P5.00)perpack; (4)Ifthenetretailprice(excludingtheexcisetaxandthevalueaddedtaxis belowFive pesos(P5.00)perpack,thetaxshallbeOnepeso(P1.00)perpack; Variantsofexistingbrandsofcigaretteswhichareintroducedinthedomestic marketaftertheeffectivityofR.A.No.8240shallbetaxedunderthehighest classificationofanyvariantofthatbrand. Theexcisetaxfromanybrandofcigaretteswithinthenextthree(3)yearsfromthe effectivityofR.A.No.8240shallnotbelowerthanthetax,whichisduefromeach brandonOctober1,1996:Provided,however,Thatincaseswheretheexcisetax ratesimposedinparagraphs(1),(2),(3)and(4)hereinabovewillresultinan increaseinexcisetaxofmorethanseventypercent(70%);forabrandofcigarette, theincreaseshalltakeeffectintwotranches:fiftypercent(50%)oftheincrease shallbeeffectivein1997andonehundredpercent(100%)oftheincreaseshallbe effectivein1998. Dulyregisteredorexistingbrandsofcigarettesornewbrandsthereofpackedby machineshallonlybepackedintwenties. Theratesofexcisetaxoncigarsandcigarettesunderparagraphs(1),(2),(3)and (4)hereof,shallbeincreasedbytwelvepercent(12%)onJanuary1,2000. Newbrandsshallbeclassifiedaccordingtotheircurrentnetretailprice. Fortheabovepurpose,"netretailprice"shallmeanthepriceatwhichthecigarette issoldonretailintwenty(20)majorsupermarketsinMetroManila(forbrandsof cigarettesmarketednationally),excludingtheamountintendedtocoverthe applicableexcisetaxandthevalueaddedtax.Forbrandswhicharemarketedonly outsideMetroManila,the"netretailprice"shallmeanthepriceatwhichthe

cigaretteissoldinfive(5)majorsupermarketsintheregionexcludingtheamount intendedtocovertheapplicableexcisetaxandthevalueaddedtax. Theclassificationofeachbrandofcigarettesbasedonitsaveragenetretailpriceas ofOctober1,1996,assetforthinAnnex"D",shallremaininforceuntilrevisedby Congress. "Variantofabrand"shallrefertoabrandonwhichamodifierisprefixedand/or suffixedtotherootnameofthebrandand/oradifferentbrandwhichcarriesthe samelogoordesignoftheexistingbrand. Manufacturesandimportersofcigarsandcigarettesshall,withinthirty(30)days fromtheeffectivityofR.A.No.8240andwithinthefirstfive(5)daysofevery monththereaftersubmittotheCommissioneraswornstatementofthevolumeof salesforeachparticularbrandofcigarsand/orcigarettessoldathisestablishment forthethreemonthperiodimmediatelypreceding. Anymanufacturerorimporterwho,inviolationofthisSection,knowingly misdeclaresormisrepresentsinhisoritsswornstatementhereinrequiredany pertinentdataorinformationshall,upondiscovery,bepenalizedbyasummary cancellationorwithdrawalofhisoritspermittoengageinbusinessas manufacturerorimporterofcigarsorcigarettes. Anycorporation,associationorpartnershipliableforanyoftheactsoromissionsin violationofthisSectionshallbefinedtrebletheamountofdeficiencytaxes, surchargesandinterestwhichmaybeassessedpursuanttothisSection. AnypersonliableforanyoftheactsoromissionsprohibitedunderthisSectionshall becriminallyliableandpenalizedunderSection254ofthisCode.Anypersonwho willfullyaidsorabetsinthecommissionofanysuchactoromissionshallbe criminallyliableinthesamemannerastheprincipal. IftheoffenderisnotacitizenofthePhilippines,heshallbedeportedimmediately afterservingthesentencewithoutfurtherproceedingsfordeportation.

SEC.146.InspectionFee.ForinspectionmadeinaccordancewiththisChapter, thereshallbecollectedafeeofFiftycentavos(P0.50)foreachthousandcigarsor fractionthereof;Tencentavos(P0.10)foreachthousandcigarettesoffraction thereof;Twocentavos(P0.02)foreachkilogramofleaftobaccoorfractionthereof; andThreecentavos(P0.03)foreachkilogramorfractionthereof,ofscrapandother manufacturedtobacco. Theinspectionfeeonleaftobacco,scrap,cigars,cigarettesandothertobacco productsasdefinedinSection147ofthisCodeshallbepaidbythewholesaler, manufacturer,producer,owneroroperatorofredryingplant,asthecasemaybe, immediatelybeforeremovalthereoffromtheestablishmentofthewholesaler, manufacturer,owneroroperatoroftheredryingplant.Incaseofimportedleaf tobaccoandproductsthereof,theinspectionfeeshallbepaidbytheimporter beforeremovalfromcustoms'custody. Fiftypercent(50%)ofthetobaccoinspectionfeeshallaccruetotheTobacco InspectionFundcreatedbySection12ofActNo.2613,asamendedbyActNo.3179, andfiftypercent(50%)shallaccruetotheCulturalCenterofthePhilippines. SEC.147.DefinitionofTerms.Whenusedhereinandinstatementsorofficial formsprescribedhereunder,thefollowingtermsshallhavethemeaningindicated: (a)"Cigars"meanallrollsoftobaccooranysubstitutethereof,wrappedinleaf tobacco. (b)"Cigarettes"meanallrollsoffinelycutleaftobacco,oranysubstitute therefor,wrappedinpaperorinanyothermaterial. (c)"Wholesaleprice"shallmeantheamountofmoneyorpricepaidforcigarsor cigarettespurchasedforthepurposeofresale,regardlessofquantity. (d)"Retailprice"shallmeantheamountofmoneyorpricewhichanultimate consumerorenduserpaysforcigarsorcigarettespurchased.

 CHAPTERV EXCISETAXONPETROLEUMPRODUCTS SEC.148.ManufacturedOilsandOtherFuels.Thereshallbecollectedonrefined andmanufacturedmineraloilsandmotorfuels,thefollowingexcisetaxeswhich shallattachtothegoodshereunderenumeratedassoonastheyareinexistenceas such: (a)Lubricatingoilsandgreases,includingbutnotlimitedto,basestockforlube oilsandgreases,highvacuumdistillates,aromaticextracts,andothersimilar preparations,andadditivesforlubricatingoilsandgreases,whethersuchadditives arepetroleumbasedornot,perliterandkilogramrespectively,ofvolumecapacity orweight,Fourpesosandfiftycentavos(P4.50):Provided,however,Thattheexcise taxespaidonthepurchasedfeedstock(bunker)usedinthemanufactureof excisablearticlesandformingpartthereofshallbecreditedagainsttheexcisetax duetherefrom:Provided,further,Thatlubricatingoilsandgreasesproducedfrom basestocksandadditivesonwhichtheexcisetaxhasalreadybeenpaidshallno longerbesubjecttoexcisetax:Provided,finally,Thatlocallyproducedorimported oilspreviouslytaxedassuchbutaresubsequentlyreprocessed,rerefinedor recycledshalllikewisebesubjecttothetaximposedunderthisSection. (b)Processedgas,perliterofvolumecapacity,Fivecentavos(P0.05); (c)Waxesandpetrolatum,perkilogram,Threepesosandfiftycentavos(P3.50); (d)Ondenaturedalcoholtobeusedformotivepower,perliterofvolume capacity,Fivecentavos(P0.05):Provided,Thatunlessotherwiseprovidedbyspecial laws,ifthedenaturedalcoholismixedwithgasoline,theexcisetaxonwhichhas alreadybeenpaid,onlythealcoholcontentshallbesubjecttothetaxherein prescribed.ForpurposesofthisSubsection,theremovalofdenaturedalcoholofnot lessthanonehundredeightydegrees(180o)proof(ninetypercent(90%)absolute alcohol)shallbedeemedtohavebeenremovedformotivepower,unlessshown otherwise;

(e)Naphtha,regulargasolineandothersimilarproductsofdistillation,perliter ofvolumecapacity,Fourpesosandeightycentavos(P4.80):Provided,however, Thatnaphtha,whenusedasarawmaterialintheproductionofpetrochemical productsorasreplacementfuelfornaturalgasfiredcombinedcyclepowerplant, inlieuoflocallyextractednaturalgasduringthenonavailabilitythereof,subjectto therulesandregulationstobepromulgatedbytheSecretaryofEnergy,in consultationwiththeSecretaryofFinance,perliterofvolumecapacity,Zero (P0.00):Provided,further,Thatthebyproductincludingfueloil,dieselfuel, kerosene,pyrolysisgasoline,liquefiedpetroleumgasesandsimilaroilshavingmore orlessthesamegeneratingpower,whichareproducedintheprocessingofnaphtha intopetrochemicalproductsshallbesubjecttotheapplicableexcisetaxspecifiedin thisSection,exceptwhensuchbyproductsaretransferredtoanyofthelocaloil refineriesthroughsale,barterorexchange,forthepurposeoffurtherprocessingor blendingintofinishedproductswhicharesubjecttoexcisetaxunderthisSection; (f)Leadedpremiumgasoline,perliterofvolumecapacity,Fivepesosandthirty fivecentavos(P5.35);unleadedpremiumgasoline,perliterofvolumecapacity,Four pesosandthirtyfivecentavos(P4.35); (g)Aviationturbojetfuel,perliterofvolumecapacity,Threepesosandsixty sevencentavos(P3.67); (h)Kerosene,perliterofvolumecapacity,Sixtycentavos(0.60):Provided,That kerosene,whenusedasaviationfuel,shallbesubjecttothesametaxonaviation turbojetfuelundertheprecedingparagraph(g),suchtaxtobeassessedontheuser thereof; (i)Dieselfueloil,anonsimilarfueloilshavingmoreorlessthesamegenerating power,perliterofvolumecapacity,Onepesoandsixtythreecentavos(P1.63); (j)Liquefiedpetroleumgas,perliter,Zero(P0.00):Provided,Thatliquefied petroleumgasusedformotivepowershallbetaxedattheequivalentrateasthe excisetaxondieselfueloil; (k)Asphalts,perkilogram,Fiftysixcentavos(P0.56);and

(l)Bunkerfueloil,andonsimilarfueloilshavingmoreorlessthesame generatingpower,perliterofvolumecapacity,Thirtycentavos(P0.30). CHAPTERVI EXCISETAXONMISCELLANEOUSARTICLES SEC.149.Automobiles.Thereshallbelevied,assessedandcollectedanadvalorem taxonautomobilesbasedonthemanufacturersorimporterssellingprice,netof exciseandvalueaddedtax,inaccordancewiththefollowingschedule: ENGINEDISPLACEMENT[incc.] GASOLINEDIESEL Upto1600 TAXRATE

Upto1800

15% 1601to2000

1801to2300

35% 2001to2700

2301to3000

50% 2701orover

3001toover

100% Provided,Thatinthecaseofimportedautomobilesnotforsale,thetaximposed hereinshallbebasedonthetotalvalueusedbytheBureauofCustomsin determiningtariffandcustomsduties,includingcustomsdutyandallothercharges, plustenpercent(10%)ofthetotalthereof. Automobilesacquiredforusebypersonsorentitiesoperatingwithinthefreeport zoneshallbeexemptfromexcisetax:Provided,Thatutilityvehiclesofregistered zoneenterprises,whichareindispensableintheconductandoperationsoftheir business,suchasdeliverytrucksandcargovanswithgrossvehicleweightabove three(3)metrictonsmaybeallowedunrestricteduseoutsidethefreeportzone: Provided,further,Thatvehiclesownedbytouristorientedenterprises,suchas touristbusesandcarswithyellowplates,colorcoded,andutilizedexclusivelyfor thepurposeoftransportingtouristsintourismrelatedactivities,andservice vehiclesoffreeportregisteredenterprisesandexecutives,suchascompanyservice carsandexpatriatesandinvestorsautomobilesbroughtinthenameofsuch enterprises,maybeusedoutsidethefreeportzoneforsuchperiodsasmaybe prescribedbytheDepartmentsofFinance,andTradeandIndustry,theBureauof CustomsandtheFreeportauthoritiesconcerned,whichinnocaseshallexceed fourteen(14)dayspermonth. Incasesuchtouristbusesandcars,servicevehiclesofregisteredfreeport enterprisesandcompanyservicecarsareusedformorethananaggregateperiodof fourteen(14)dayspermonthoutsideofthefreeportzone,theownerorimporter shallpaythecorrespondingcustomsduties,taxesandcharges.

Inthecaseofpersonallyownedvehiclesofresidents,includingleaseholdersof residencesinsidethefreeportzone,theuseofsuchvehiclesoutsideofthefreeport zoneshallbedeemedanintroductionintothePhilippinecustomsterritory,and suchintroductionshallbedeemedanimportationintothePhilippinesandshall subjectsuchvehiclestoCustomsdutiestaxesandcharges,includingexcisetaxdue onsuchvehicle. TheSecretariesofFinance,andTradeandIndustry,togetherwiththeCommissioner ofCustomsandtheadministratorsofthefreeportsconcerned,shallpromulgate rulesandregulationsfortheproperidentificationandcontrolofsaidautomobiles. SEC.150.NonEssentialGoods.Thereshallbelevied,assessedandcollectedatax equivalenttotwentypercent(20%)basedonthewholesalepriceorthevalueof importationusedbytheBureauofCustomsindeterminingtariffandcustoms duties,netofexcisetaxandvalueaddedtax,ofthefollowinggoods: (a)Allgoodscommonlyorcommerciallyknownasjewelry,whetherrealor imitation,pearls,preciousandsemipreciousstonesandimitationsthereof;goods madeof,orornamented,mountedorfittedwith,preciousmetalsorimitations thereoforivory(notincludingsurgicalanddentalinstruments,silverplatedwares, framesormountingsforspectaclesoreyeglasses,anddentalgoldorgoldalloysand otherpreciousmetalsusedinfilling,mountingorfittingtheteeth);operaglasses andlorgnettes.Theterm"preciousmetals"shallincludeplatinum,gold,silverand othermetalsofsimilarorgreatervalue.Thetermimitationsthereofshallinclude platingsandalloysofsuchmetals; (b)Perfumesandtoiletwaters; (c)Yachtsandothervesselsintendedforpleasureorsports. CHAPTERVII EXCISETAXONMINERALPRODUCTS

SEC.151.MineralProducts. (A)RatesofTax.Thereshallbelevied,assessedandcollectedonminerals,mineral productsandquarryresources,excisetaxasfollows: (1)Oncoalandcoke,ataxofTenpesos(P10.00)permetricton; (2)Onallnonmetallicmineralsandquarryresources,ataxoftwopercent(2%) basedon theactualmarketvalueofthegrossoutputthereofatthetimeofremoval,in thecase ofthoselocallyextractedorproduced;orthevalueusedbytheBureauof Customsin determiningtariffandcustomsduties,netofexcisetaxandvalueaddedtax,in thecase ofimportation. Notwithstandingtheprovisionofparagraph(4)ofSubsection(A)ofSection151, locallyextractednaturalgasandliquefiednaturalgasshallbetaxedattherateof twopercent(2%); (3)Onallmetallicminerals,ataxbasedontheactualmarketvalueofthegross outputthereof atthetimeofremoval,inthecaseofthoselocallyextractedorproduced;or thevalueused bytheBureauofCustomsindeterminingtariffandcustomsduties,netof excisetaxand valueaddedtax,inthecaseofimportation,inaccordancewiththefollowing schedule: (a)Copperandothermetallicminerals;

 (i)Onthefirstthree(3)yearsupontheeffectivityofRepublicActNo. 7729, onepercent(1%); (ii)Onthefourthandthefifthyears,oneandahalfpercent(1%);and (iii)Onthesixthyearandthereafter,twopercent(2%); (b)Goldandchromite,twopercent(2%). (4)Onindigenouspetroleum,ataxofthreepercent(3%)ofthefairinternational marketprice thereof,onthefirsttaxablesale,barter,exchangeorsuchsimilartransaction, suchtax tobepaidbythebuyerorpurchaserbeforeremovalfromtheplaceof production.The phrase"firsttaxablesale,barter,exchangeorsimilartransaction"meansthe transfer ofindigenouspetroleuminitsoriginalstatetoafirsttaxabletransferee.The fair internationalmarketpriceshallbedeterminedinconsultationwithan appropriate governmentagency. ForthepurposeofthisSubsection,"indigenouspetroleum"shallincludelocally extractedmineraloil,hydrocarbongas,bitumen,crudeasphalt,mineralgasandall othersimilarornaturallyassociatedsubstanceswiththeexceptionofcoal,peat, bituminousshaleand/orstratifiedmineraldeposits. (B)ForPurposesofThisSection,theTerm:

 (1)"Grossoutput"shallbeinterpretedastheactualmarketvalueofmineralsor mineralproductsorofbullionfromeachmineorminerallandoperatedasa separateentity,withoutanydeductionfrommining,milling,refining(includingall expensesincurredtopreparethesaidmineralsormineralproductsinamarketable state),aswellastransporting,handling,marketingoranyotherexpenses:Provided, Thatifthemineralsormineralproductsaresoldorconsignedabroadbythelessee orownerofthemineunderC.I.F.terms,theactualcostofoceanfreightand insuranceshallbededucted:Provided,however,Thatinthecaseofmineral concentrate,nottradedincommodityexchangesinthePhilippinesorabroad,such ascopperconcentrate,theactualmarketvalueshallbetheworldpricequotationsof therefinedmineralproductscontentthereofprevailinginthesaidcommodity exchanges,afterdeductingthesmelting,refiningandotherchargesincurredinthe processofconvertingthemineralconcentratesintorefinedmetaltradedinthose commodityexchanges. (2)"Minerals"shallmeanallnaturallyoccurringinorganicsubstances(foundin nature)whetherinsolid,liquid,gaseousoranyintermediatestate. (3)"Mineralproducts"shallmeanthingsproducedandpreparedinamarketable statebysimpletreatmentprocessessuchaswashingordrying,butwithout undergoinganychemicalchangeorprocessormanufacturingbythelessee, concessionaireorownerofminerallands. (4)"Quarryresources"shallmeananycommonstoneorothercommonmineral substancesastheDirectoroftheBureauofMinesandGeoSciencesmaydeclareto bequarryresourcessuchas,butnotrestrictedto,marl,marble,granite,volcanic cinders,basalt,tuffandrockphosphate:Provided,Thattheycontainnometalor othervaluablemineralsineconomicallyworkablequantities. CHAPTERVIII ADMINISTRATIVEPROVISIONSREGULATINGBUSINESS ORPERSONSDEALINGINARTICLESSUBJECTTOEXCISETAX

SEC.152.ExtentofSupervisionOverEstablishmentsProducingTaxableOutput. TheBureauofInternalRevenuehasauthoritytosuperviseestablishmentswhere articlessubjecttoexcisetaxaremadeorkept.TheSecretaryofFinanceshall prescriberulesandregulationsastothemodeinwhichtheprocessofproduction shallbeconductedinsofarasmaybenecessarytosecureasanitaryoutputandto safeguardtherevenue. SEC.153.RecordstobeKeptbyManufacturers;AssessmentBasedThereon. Manufacturersofarticlessubjecttoexcisetaxshallkeepsuchrecordsasrequiredby rulesandregulationsrecommendedbytheCommissionerandapprovedbythe SecretaryofFinance,andsuchrecords,whetherofrawmaterialsreceivedintothe factoryorofarticlesproducedtherein,shallbedeemedpublicandofficial documentsforallpurposes. Therecordsofrawmaterialskeptbysuchmanufacturersmaybeusedasevidence bywhichtodeterminetheamountofexcisetaxesduefromthem,andwheneverthe amountsofrawmaterialreceivedintoanyfactoryexceedstheamountof manufacturedorpartiallymanufacturedproductsonhandandlawfullyremoved fromthefactory,pluswasteremovedordestroyed,andareasonableallowancefor unavoidablelossinmanufacture,theCommissionermayassessandcollectthetax dueontheproductswhichshouldhavebeenproducedfromtheexcess. Theexcisetaxdueontheproductsasdeterminedandassessedinaccordancewith thisSectionshallbepayableupondemandorwithintheperiodspecifiedtherein. SEC.154.PremisesSubjecttoApprovalbyCommissioner.Nopersonshallengage inbusinessasamanufacturerofordealerinarticlessubjecttoexcisetaxunlessthe premisesuponwhichthebusinessistoconductedshallhavebeenapprovedbythe Commissioner. SEC.155.ManufacturerstoProvideThemselveswithCountingorMeteringDevices toDetermineProduction.Manufacturersofcigarettes,alcoholicproducts,oil productsandotherarticlessubjecttoexcisetaxthatcanbesimilarlymeasuredshall providethemselveswithsuchnecessarynumberofsuitablecountingormetering devicestodetermineasaccuratelyaspossiblethevolume,quantityornumberof thearticlesproducedbythemunderrulesandregulationspromulgatedbythe SecretaryofFinance,uponrecommendationoftheCommissioner.

Thisrequirementshallbecompliedwithbeforecommencementofoperations. SEC.156.LabelsandFormofPackages.Allarticlesofdomesticmanufacture subjecttoexcisetaxandallleaftobaccoshallbeputupandpreparedbythe manufacturerorproducer,whenremovedforsaleorconsumption,insuchpackages onlyandbearingsuchmarksorbrandasshallbeprescribedintherulesand regulationspromulgatedbytheSecretaryofFinance;andgoodsofsimilarcharacter importedintothePhilippinesshalllikewisebepackedandmarkedinsuchamanner asmayberequired. SEC.157.RemovalofArticlesAfterthePaymentofTax.Whenthetaxhasbeenpaid onarticlesorproductssubjecttoexcisetax,thesameshallnotthereafterbestored orpermittedtoremaininthedistillery,distillerywarehouse,bondedwarehouse,or otherfactoryorplacewhereproduced.However,uponpriorpermitfromthe Commissioner,oilrefineriesand/orcompaniesmaystoreordeposittaxpaid petroleumproductsandcomminglethesamewithitsownmanufacturedproducts notyetsubjectedtoexcisetax.Importedpetroleumproductsmaybeallowedtobe withdrawnfromcustomscustodywithouttheprepaymentofexcisetax,which productsmaybecommingledwiththetaxpaidorbondedproductsoftheimporter himselfaftersecuringapriorpermitfromtheCommissioner:Provided,That withdrawalsshallbetaxedandaccountedforona"firstin,firstout"basis. SEC.158.StorageofGoodsinInternalRevenueBondedWarehouses.Aninternal revenuebondedwarehousemaybemaintainedinanyportofentryforthestoring ofimportedormanufacturedgoodswhicharesubjecttoexcisetax.Thetaxeson suchgoodsshallbepayableonlyuponremovalfromsuchwarehouseanda reasonablechargeshallbemadefortheirstoragetherein.TheCommissioner,may, inhisdiscretion,exactabondtosecurethepaymentofthetaxonanygoodsso stored. SEC.159.ProofofExportation;Exporter'sBond.Exportersofgoodsthatwouldbe subjecttoexcisetax,ifsoldorremovedforconsumptioninthePhilippines,shall submitproofofexportationsatisfactorytotheCommissionerand,whenthesameis deemednecessary,shallberequiredtogiveabondpriortotheremovalofthegoods forshipment,conditionedupontheexportationofthesameingoodfaith. SEC.160.Manufacturers'andImporters'Bond.Manufacturersandimportersof articlessubjecttoexcisetaxshallpostabondsubjecttothefollowingconditions:

 (A)InitialBond.Incaseofinitialbond,theamountshallbeequaltoOneHundred thousandpesos(P100,000):Provided,Thatifaftersix(6)monthsofoperation,the amountofinitialbondislessthantheamountofthetotalexcisetaxpaidduringthe period,theamountofthebondshallbeadjustedtotwicethetaxactuallypaidfor theperiod. (B)BondfortheSucceedingYearsofOperation.Thebondsforthesucceeding yearsofoperationshallbebasedontheactualtotalexcisetaxpaidduringthe periodtheyearimmediatelyprecedingtheyearofoperation. Suchbondshallbeconditioneduponfaithfulcompliance,duringthetimesuch businessisfollowed,withlawsandrulesandregulationsrelatingtosuchbusiness andforthesatisfactionofallfinesandpenaltiesimposedbythisCode. SEC.161.RecordstobeKeptbyWholesaleDealers.Wholesaledealersshallkeep recordsoftheirpurchasesandsalesordeliveriesofarticlessubjecttoexcisetax,in suchformasshallbeprescribedintherulesandregulationsbytheSecretaryof Finance.Theserecordsandtheentirestockofgoodssubjecttotaxshallbesubject atalltimestoinspectionofinternalrevenueofficers. SEC.162.RecordstobeKeptbyDealersinLeafTobacco.Dealersinleaftobacco shallkeeprecordsoftheproductssoldordeliveredbythemtootherpersonsin suchmannerasmaybeprescribedintherulesandregulationsbytheSecretaryof Finance,suchrecordstobeatalltimessubjecttoinspectionofinternalrevenue officers. SEC.163.PreservationofInvoicesandStamps.Alldealerswhosoevershall preserve,fortheperiodprescribedinSection235,allofficialinvoicesreceivedby themfromotherdealersorfrommanufacturers,togetherwiththefractionalparts ofstampsaffixedthereto,ifany,andupondemand,shalldeliverortransmitthe sametoanyintervalrevenueofficer. SEC.164.InformationtobeGivenbyManufacturers,Importers,Indentors,and WholesalersofanyApparatusorMechanicalContrivanceSpeciallyforthe ManufactureofArticlesSubjecttoExciseTaxandImporters,Indentors,

ManufacturersorSellersofCigarettePaperinBobbins,CigaretteTippingPaperor CigaretteFilterTips.Manufacturers,indentors,wholesalersandimportersofany apparatusormechanicalcontrivancespeciallyforthemanufactureofarticles subjecttotaxshall,beforeanysuchapparatusormechanicalcontrivanceis removedfromtheplaceofmanufactureorfromthecustomshouse,givewritten informationtotheCommissionerastothenatureandcapacityofthesame,thetime whenitistoberemoved,andtheplaceforwhichitisdestined,aswellasthename ofthepersonbywhomitistobeused;andsuchapparatusormechanical contrivanceshallnotbesetupnordismantledortransferredwithoutapermitin writingfromtheCommissioner. AwrittenpermitfromtheCommissionerforimporting,manufacturingorsellingof cigarettepaperinbobbinsorrolls,cigarettetippingpaperorcigarettefiltertipsis requiredbeforeanypersonshallengageintheimportation,manufactureorsaleof thesaidarticles.Nopermittosellsaidarticlesshallbegrantedunlessthenameand addressoftheprospectivebuyerisfirstsubmittedtotheCommissionerand approvedbyhim.Records,showingthestockofthesaidarticlesandthedisposal thereofbysaleofpersonswiththeirrespectiveaddressesasapprovedbythe Commissioner,shallbekeptbytheseller,andrecords,showingstockofsaidarticles andconsumptionthereof,shallbekeptbythebuyer,subjecttoinspectionby internalrevenueofficers. SEC.165.EstablishmentofDistilleryWarehouse.Everydistiller,whensorequired bytheCommissioner,shallprovideathisownexpenseawarehouse,andshallbe situatedinandconstituteapartofhisdistillerypremisesandtobeusedonlyforthe storageofdistilledspiritsofhisownmanufactureuntilthetaxthereonshallhave beenpaid;butnodwellinghouseshallbeusedforsuchpurpose.Suchwarehouse, whenapprovedbytheCommissioner,isdeclaredtobeabondedwarehouse,and shallbeknownasadistillerywarehouse. SEC.166.CustodyofDistilleryorDistilleryWarehouse.Everydistilleryordistillery warehouseshallbeinthejointcustodyoftherevenueinspector,ifoneisassigned thereto,andoftheproprietorthereof.Itshallbekeptsecurelylocked,andshallat notimebeunlockedoropenedorremainunlockedoropenedunlessinthe presenceofsuchrevenueinspectororotherpersonwhomaybedesignatedtoact forhimasprovidedbylaw. SEC.167.LimitationonQuantityofSpiritsRemovedfromWarehouse.Nodistilled spiritsshallberemovedfromanydistillery,distillerywarehouse,orbonded warehouseinquantitiesoflessthanfifteen(15)gaugelitersatanyonetime,except

bottledgoods,whichmayberemovedbythecaseofnotlessthantwelve(12) bottles. SEC.168.DenaturingWithinPremises.ForpurposesofthisTitle,theprocessof denaturingalcoholshallbeeffectedonlywithinthedistillerypremiseswherethe alcoholtobedenaturedisproducedinaccordancewithformulasdulyapprovedby theBureauofInternalRevenueandonlyinthepresenceofdulydesignated representativesofsaidBureau. SEC.169.RecoveryofAlcoholforUseinArtsandIndustries.Manufacturers employingprocessesinwhichdenaturedalcoholusedinartsandindustriesis expressedorevaporatedfromthearticlesmanufacturedmay,underrulesand regulationstobeprescribedbytheSecretaryofFinance,uponrecommendationof theCommissioner,bepermittedtorecoverthealcoholsousedandrestoreitagain toaconditionsuitablesolelyforuseinmanufacturingprocesses. SEC.170.RequirementsGoverningRectificationandCompoundingofLiquors. Personsengagedintherectificationorcompoundingofliquorsshall,astothemode ofconductingtheirbusinessandsupervisionoverthesame,besubjecttoallthe requirementsoflawapplicabletodistilleries:Provided,Thatwherearectifier makesuseofspiritsuponwhichtheexcisetaxhasbeenpaid,nofurthertaxshallbe collectedonanyrectifiedspiritsproducedexclusivelytherefrom:Provided,further, Thatcompoundersinthemanufactureofanyintoxicatingbeveragewhatever,shall notbeallowedtomakeuseofspiritsuponwhichtheexcisetaxhasnotbeen previouslypaid. SEC.171.AuthorityofInternalRevenueOfficerinSearchingforTaxableArticles. Anyinternalrevenueofficermay,inthedischargeofhisofficialduties,enterany house,buildingorplacewherearticlessubjecttotaxunderthisTitleareproduced orkept,orarebelievedbyhimuponreasonablegroundstobeproducedorkept,so farasmaybenecessarytoexamine,discoverorseizethesame. Hemayalsostopandsearchanyvehicleorothermeansoftransportationwhen uponreasonablegroundshebelievesthatthesamecarriesanyarticleonwhichthe excisetaxhasnotbeenpaid. SEC.172.DetentionofPackageContainingTaxableArticles.Anyrevenueofficer maydetainanypackagecontainingorsupposedtocontainarticlessubjecttoexcise taxwhenhehasgoodreasontobelievethatthelawfultaxhasnotbeenpaidorthat

thepackagehasbeenorisbeingremovedinviolationoflaw,andeverysuch packageshallbeheldbysuchofficerinasafeplaceuntilitshallbedetermined whetherthepropertysodetainedisliablebylawtobeproceededagainstfor forfeiture;butsuchsummarydetentionshallnotcontinueinanycaselongerthan seven(7)dayswithoutdueprocessoflaworinterventionoftheofficertowhom suchdetentionistobereported. TITLEVII DOCUMENTARYSTAMPTAX SEC.173.StampTaxesUponDocuments,LoanAgreements,InstrumentsandPapers. Upondocuments,instruments,loanagreementsandpapers,anduponacceptances, assignments,salesandtransfersoftheobligation,rightorpropertyincidentthereto, thereshallbelevied,collectedandpaidfor,andinrespectofthetransactionsohad oraccomplished,thecorrespondingdocumentarystamptaxesprescribedinthe followingSectionsofthisTitle,bythepersonmaking,signing,issuing,accepting,or transferringthesamewhereverthedocumentismade,signed,issued,acceptedor transferredwhentheobligationorrightarisesfromPhilippinesourcesorthe propertyissituatedinthePhilippines,andthesametimesuchactisdoneor transactionhad:Provided,Thatwheneveronepartytothetaxabledocumentenjoys exemptionfromthetaxhereinimposed,theotherpartywhoisnotexemptshallbe theonedirectlyliableforthetax. SEC.174.StampTaxonDebenturesandCertificatesofIndebtedness.Onall debenturesandcertificatesofindebtednessissuedbyanyassociation,companyor corporation,thereshallbecollectedadocumentarystamptaxofOnepesoandfifty centavos(P1.50)oneachTwohundredpesos(P200),orfractionalpartthereof,of thefacevalueofsuchdocuments. SEC.175.StampTaxonOriginalIssueofSharesofStock.Oneveryoriginalissue, whetheronorganization,reorganizationorforanylawfulpurpose,ofsharesof stockbyanyassociation,companyorcorporation,thereshallbecollecteda documentarystamptaxofTwopesos(P2.00)oneachTwohundredpesos(P200), orfractionalpartthereof,oftheparvalue,ofsuchsharesofstock:Provided,Thatin thecaseoftheoriginalissueofsharesofstockwithoutparvaluetheamountofthe documentarystamptaxhereinprescribedshallbebasedupontheactual

considerationfortheissuanceofsuchsharesofstock:Provided,further,Thatinthe caseofstockdividends,ontheactualvaluerepresentedbyeachshare. SEC.176.StampTaxonSales,AgreementstoSell,MemorandaofSales,Deliveriesor TransferofDuebills,CertificatesofObligation,orSharesofCertificatesofStock. Onallsales,oragreementstosell,ormemorandaofsale,ordeliveries,ortransferof duebills,certificatesofobligation,orsharesofcertificatesofstockinany association,company,orcorporation,ortransferofsuchsecuritiesbyassignmentin blank,orbydelivery,orbyanypaperoragreement,ormemorandumorother evidencesoftransferorsalewhetherentitlingtheholderinanymannertothe benefitofsuchduebills,certificatesofobligationorstock,ortosecurethefuture paymentofmoney,orforthefuturetransferofanyduebill,certificateofobligation orstock,thereshallbecollectedadocumentarystamptaxofOnepesoandfifty centavos(P1.50)oneachTwohundredpesos(P200)orfractionalpartthereof,of theparvalueofsuchduebill,certificateofobligationorstock;Provided,Thatonly onetaxshallbecollectedoneachsaleortransferofstockorsecuritiesfromone persontoanother,regardlessofwhetherornotacertificateofstockorobligationis issued,indorsed,ordeliveredinpursuanceofsuchsaleortransfer:and,Provided, further,Thatinthecaseofstockwithoutparvaluetheamountofdocumentary stamptaxhereinprescribedshallbeequivalenttotwentyfivepercent(25%)ofthe documentarystamptaxpaidupontheoriginalissueofsaidstock. SEC.177.StampTaxonBonds,Debentures,CertificateofStockorIndebtedness IssuedinForeignCountries.Onallbonds,debentures,certificatesofstock,or certificatesofindebtednessissuedinanyforeigncountry,thereshallbecollected fromthepersonsellingortransferringthesameinthePhilippines,suchastaxasis requiredbylawonsimilarinstrumentswhenissued,soldortransferredinthe Philippines. SEC.178.StampTaxonCertificatesofProfitsorInterestinPropertyor Accumulations.Onallcertificatesofprofits,oranycertificateormemorandum showinginterestinthepropertyoraccumulationsofanyassociation,companyor corporation,andonalltransfersofsuchcertificatesormemoranda,thereshallbe collectedadocumentarystamptaxofFiftycentavos(P0.50)oneachTwohundred pesos(P200),orfractionalpartthereof,ofthefacevalueofsuchcertificateor memorandum. SEC.179.StampTaxonBankChecks,Drafts,CertificatesofDepositnotBearing Interest,andOtherInstruments.Oneachbankcheck,draft,orcertificateofdeposit notdrawinginterest,ororderforthepaymentofanysumofmoneydrawnuponor

issuedbyanybank,trustcompany,oranypersonorpersons,companiesor corporations,atsightorondemand,thereshallbecollectedadocumentarystamp taxofOnepesoandfiftycentavos(P1.50). SEC.180.StampTaxonAllBonds,LoanAgreements,promissoryNotes,Billsof Exchange,Drafts,InstrumentsandSecuritiesIssuedbytheGovernmentorAnyofits Instrumentalities,DepositSubstituteDebtInstruments,CertificatesofDeposits BearingInterestandOthersNotPayableonSightorDemand.Onallbonds,loan agreements,includingthosesignedabroad,whereintheobjectofthecontractis locatedorusedinthePhilippines,billsofexchange(betweenpointswithinthe Philippines),drafts,instrumentsandsecuritiesissuedbytheGovernmentoranyof itsinstrumentalities,depositsubstitutedebtinstruments,certificatesofdeposits drawinginterest,ordersforthepaymentofanysumofmoneyotherwisethanat sightorondemand,onallpromissorynotes,whethernegotiableornonnegotiable, exceptbanknotesissuedforcirculation,andoneachrenewalofanysuchnote, thereshallbecollectedadocumentarystamptaxofThirtycentavos(P0.30)oneach Twohundredpesos(P200),orfractionalpartthereof,ofthefacevalueofanysuch agreement,billofexchange,draft,certificateofdeposit,ornote:Provided,Thatonly onedocumentarystamptaxshallbeimposedoneitherloanagreement,or promissorynotesissuedtosecuresuchloan,whicheverwillyieldahighertax: Provided,however,Thatloanagreementsorpromissorynotestheaggregateof whichdoesnotexceedTwohundredfiftythousandpesos(P250,000)executedby anindividualforhispurchaseoninstallmentforhispersonaluseorthatofhis familyandnotforbusiness,resale,barterorhireofahouse,lot,motorvehicle, applianceorfurnitureshallbeexemptfromthepaymentofthedocumentarystamp taxprovidedunderthisSection. SEC.181.StampTaxUponAcceptanceofBillsofExchangeandOthers.Uponany acceptanceorpaymentofanybillofexchangeororderforthepaymentofmoney purportingtobedrawninaforeigncountrybutpayableinthePhilippines,there shallbecollectedadocumentarystamptaxofThirtycentavos(P0.30)oneachTwo hundredpesos(P200),orfractionalpartthereof,ofthefacevalueofanysuchbillof exchange,ororder,orthePhilippineequivalenttosuchvalue,ifexpressedinforeign currency. SEC.182.StampTaxonForeignBillsofExchangeandLettersofCredit.Onall foreignbillsofexchangeandlettersofcredit(includingorders,bytelegraphor otherwise,forthepaymentofmoneyissuedbyexpressorsteamshipcompaniesor byanypersonorpersons)drawninbutpayableoutofthePhilippinesinasetof three(3)ormoreaccordingtothecustomofmerchantsandbankers,thereshallbe collectedadocumentarystamptaxofThirtycentavos(P0.30)oneachTwohundred

pesos(P200),orfractionalpartthereof,ofthefacevalueofanysuchbillofexchange orletterofcredit,orthePhilippineequivalentofsuchfacevalue,ifexpressedin foreigncurrency. SEC.183.StampTaxonLifeInsurancePolicies.Onallpoliciesofinsuranceorother instrumentsbywhatevernamethesamemaybecalled,wherebyanyinsurance shallbemadeorreneweduponanylifeorlives,thereshallbecollecteda documentarystamptaxofFiftycentavos(P0.50)oneachTwohundredpesos (P200),orfractionalpartthereof,oftheamountinsuredbyanysuchpolicy. SEC.184.StampTaxonPoliciesofInsuranceUponProperty.Onallpoliciesof insuranceorotherinstrumentsbywhatevernamethesamemaybecalled,bywhich insuranceshallbemadeorreneweduponpropertyofanydescription,including rentsorprofits,againstperilbyseaoroninlandwaters,orbyfireorlightning,there shallbecollectedadocumentarystamptaxofFiftycentavos(P0.50)oneachFour pesos(P4.00),orfractionalpartthereof,oftheamountofpremiumcharged: Provided,however,Thatnodocumentarystamptaxshallbecollectedon reinsurancecontractsoronanyinstrumentbywhichcessionoracceptanceof insurancerisksunderanyreinsuranceagreementiseffectedorrecorded. SEC.185.StampTaxonFidelityBondsandOtherInsurancePolicies.Onallpolicies ofinsuranceorbondsorobligationsofthenatureofindemnityforloss,damageor liabilitymadeorrenewedbyanyperson,association,companyorcorporation transactingthebusinessofaccident,fidelity,employersliability,plate,glass,steam, boiler,burglar,elevator,automaticsprinkler,orotherbranchofinsurance(except life,marine,inland,andfireinsurance),andallbonds,undertakings,or recognizances,conditionedfortheperformanceofthedutiesofanyofficeor position,forthedoingornotdoingofanythingthereinspecified,andonall obligationsguaranteeingthevalidityorlegalityofanybondorotherobligations issuedbyanyprovince,city,municipality,orotherpublicbodyororganization,and onallobligationsguaranteeingthetitletoanyrealestate,orguaranteeingany mercantilecredits,whichmaybemadeorrenewedbyanysuchperson,companyor corporation,thereshallbecollectedadocumentarystamptaxofFiftycentavos (P0.50)oneachFourpesos(P4.00),orfractionalpartthereof,ofthepremium charged. SEC.186.StampTaxonPoliciesofAnnuitiesandPreNeedPlans.Onallpoliciesof annuities,orotherinstrumentsbywhatevernamethesamemaybecalled,whereby anannuitymaybemade,transferredorredeemed,thereshallbecollecteda documentarystamptaxofOnepesoandfiftycentavos(P1.50)oneachTwohundred

pesos(P200)orfractionalpartthereof,ofthecapitaloftheannuity,orshouldthis beunknown,thenoneachTwohundred(P200)pesos,orfractionalpartthereof,of thirtythreeandonethird(331/3)timestheannualincome.Onpreneedplans,the documentarystamptaxshallbeFiftycentavos(P0.50)oneachFivehundredpesos (P500),orfractionalpartthereof,ofthevalueoramountoftheplan. SEC.187.StampTaxonIndemnityBonds.Onallbondsforindemnifyingany person,firmorcorporationwhoshallbecomeboundorengagedassuretyforthe paymentofanysumofmoneyorforthedueexecutionorperformanceoftheduties ofanyofficeorpositionortoaccountformoneyreceivedbyvirtuethereof,andon allotherbondsofanydescription,exceptsuchasmayberequiredinlegal proceedings,orareotherwiseprovidedforherein,thereshallbecollecteda documentarystamptaxofThirtycentavos(P0.30)oneachFourpesos(P4.00),or fractionalpartthereof,ofthepremiumcharged. SEC.188.StampTaxonCertificates.Oneachcertificateofdamagesorotherwise, andoneverycertificateordocumentissuedbyanycustomsofficer,marine surveyor,orotherpersonactingassuch,andoneachcertificateissuedbyanotary public,andoneachcertificateofanydescriptionrequiredbylaworbyrulesor regulationsofapublicoffice,orwhichisissuedforthepurposeofgiving information,orestablishingproofofafact,andnototherwisespecifiedherein,there shallbecollectedadocumentarystamptaxofFifteenpesos(P15.00). SEC.189.StampTaxonWarehouseReceipts.Oneachwarehousereceiptfor propertyheldinstorageinapublicorprivatewarehouseoryardforanyperson otherthantheproprietorofsuchwarehouseoryard,thereshallbecollecteda documentarystamptaxofFifteenpesos(P15.00):Provided,Thatnotaxshallbe collectedoneachwarehousereceiptissuedtoanyonepersoninanyonecalendar monthcoveringpropertythevalueofwhichdoesnotexceedTwohundredpesos (P200). SEC.190.StampTaxonJaiAlai,HorseRacingTickets,lottoorOtherAuthorized NumbersGames.Oneachjaialai,horseraceticket,lotto,orotherauthorized numbergames,thereshallbecollectedadocumentarystamptaxofTencentavos (P0.10):Provided,ThatifthecostoftheticketexceedsOnepeso(P1.00),an additionaltaxofTencentavos(P0.10)oneveryOnepeso(P1.00,orfractionalpart thereof,shallbecollected.

SEC.191.StampTaxonBillsofLadingorReceipts.Oneachsetofbillsofladingor receipts(exceptcharterparty)foranygoods,merchandiseoreffectsshippedfrom oneportorplaceinthePhilippinestoanotherportorplaceinthePhilippines (exceptonferriesacrossrivers),ortoanyforeignport,thereshallbecollected documentarystamptaxofOnepeso(P1.00),ifthevalueofsuchgoodsexceedsOne hundredpesos(P100)anddoesnotexceedOneThousandpesos(P1,000);Ten pesos(P10),ifthevalueexceedsOnethousandpesos(P1,000):Provided,however, Thatfreightticketscoveringgoods,merchandiseoreffectscarriedasaccompanied baggageofpassengersonlandandwatercarriersprimarilyengagedinthe transportationofpassengersareherebyexempt. SEC.192.StampTaxonProxies.Oneachproxyforvotingatanyelectionfor officersofanycompanyorassociation,orforanyotherpurpose,exceptproxies issuedaffectingtheaffairsofassociationsorcorporationsorganizedforreligious, charitableorliterarypurposes,thereshallbecollectedadocumentarystamptaxof Fifteenpesos(P15.00). SEC.193.StampTaxonPowersofAttorney.Oneachpowerofattorneytoperform anyactwhatsoever,exceptactsconnectedwiththecollectionofclaimsduefromor accruingtotheGovernmentoftheRepublicofthePhilippines,orthegovernmentof anyprovince,cityormunicipality,thereshallbecollectedadocumentarystamptax ofFivepesos(P5.00). SEC.194.StampTaxonLeasesandOtherHiringAgreements.Oneachlease, agreement,memorandum,orcontractforhire,useorrentofanylandsor tenements,orportionsthereof,thereshallbecollectedadocumentarystamptaxof Threepesos(P3.00)forthefirstTwothousandpesos(P2,000),orfractionalpart thereof,andanadditionalOnepeso(P1.00)foreveryOneThousandpesos(P1,000) orfractionalpartthereof,inexcessofthefirstTwothousandpesos(P2,000)for eachyearofthetermofsaidcontractoragreement. SEC.195.StampTaxonMortgages,PledgesandDeedsofTrust.Oneverymortgage orpledgeoflands,estate,orproperty,realorpersonal,heritableormovable, whatsoever,wherethesameshallbemadeasasecurityforthepaymentofany definiteandcertainsumofmoneylentatthetimeorpreviouslydueandowingof forbornetobepaid,beingpayableandonanyconveyanceofland,estate,or propertywhatsoever,intrustortobesold,orotherwiseconvertedintomoney whichshallbeandintendedonlyassecurity,eitherbyexpressstipulationor otherwise,thereshallbecollectedadocumentarystamptaxatthefollowingrates:

 (a)WhentheamountsecureddoesnotexceedFivethousandpesos(P5,000), Twentypesos(P20.00). (b)OneachFivethousandpesos(P5,000),orfractionalpartthereofinexcessof Fivethousandpesos(P5,000),anadditionaltaxofTenpesos(P10.00). Onanymortgage,pledge,ordeedoftrust,wherethesameshallbemadeasa securityforthepaymentofafluctuatingaccountorfutureadvanceswithoutfixed limit,thedocumentarystamptaxonsuchmortgage,pledgeordeedoftrustshallbe computedontheamountactuallyloanedorgivenatthetimeoftheexecutionofthe mortgage,pledgeordeedoftrust,additionaldocumentarystamptaxshallbepaid whichshallbecomputedonthebasisoftheamountadvancedorloanedattherates specifiedabove:Provided,however,Thatifthefullamountoftheloanorcredit, grantedunderthemortgage,pledgeordeedoftrustshallbecomputedonthe amountactuallyloanedorgivenatthetimeoftheexecutionofthemortgage,pledge ordeedoftrust.However,ifsubsequentadvancesaremadeonsuchmortgage, pledgeordeedoftrust,additionaldocumentarystamptaxshallbepaidwhichshall becomputedonthebasisoftheamountadvancedorloanedattheratesspecified above:Provided,however,Thatifthefullamountoftheloanorcredit,granted underthemortgage,pledgeordeedoftrustisspecifiedinsuchmortgage,pledgeor deedoftrust,thedocumentarystamptaxprescribedinthisSectionshallbepaid andcomputedonthefullamountoftheloanorcreditgranted. SEC.196.StamptaxonDeedsofSaleandConveyancesofRealProperty.Onall conveyances,deeds,instruments,orwritings,otherthangrants,patentsororiginal certificatesofadjudicationissuedbytheGovernment,wherebyanyland,tenement, orotherrealtysoldshallbegranted,assigned,transferredorotherwiseconveyedto thepurchaser,orpurchasers,ortoanyotherpersonorpersonsdesignatedbysuch purchaserorpurchasers,thereshallbecollectedadocumentarystamptax,atthe rateshereinbelowprescribed,basedontheconsiderationcontractedtobepaidfor suchrealtyoronitsfairmarketvaluedeterminedinaccordancewithSection6(E)of thisCode,whicheverishigher:Provided,Thatwhenoneofthecontractingpartiesis theGovernmentthetaxhereinimposedshallbebasedontheactualconsideration. (a)Whentheconsideration,orvaluereceivedorcontractedtobepaidforsuch realtyaftermakingproperallowanceofanyencumbrance,doesnotexceedOne thousandpesos(P1,000)fifteenpesos(P15.00).

 (b)ForeachadditionalOnethousandPesos(P1,000),orfractionalpartthereofin excessofOnethousandpesos(P1,000)ofsuchconsiderationorvalue,Fifteenpesos (P15.00). Whenitappearsthattheamountofthedocumentarystamptaxpayablehereunder hasbeenreducedbyanincorrectstatementoftheconsiderationinanyconveyance, deed,instrumentorwritingsubjecttosuchtaxtheCommissioner,provincialorcity Treasurer,orotherrevenueofficershall,fromtheassessmentrollsorotherreliable sourceofinformation,assessthepropertyofitstruemarketvalueandcollectthe propertaxthereon. SEC.197.StampTaxonCharterPartiesandSimilarInstruments.Oneverycharter party,contractoragreementforthecharterofanyship,vesselorsteamer,orany letterormemorandumorotherwritingbetweenthecaptain,masterorowner,or otherpersonactingasagentofanyship,vesselorsteamer,andanyotherpersonor personsfororrelatingtothecharterofanysuchship,vesselorsteamer,andonany renewalortransferofsuchcharter,contract,agreement,letterormemorandum, thereshallbecollectedadocumentarystamptaxatthefollowingrates: (a)Iftheregisteredgrosstonnageoftheship,vesselorsteamerdoesnotexceed onethousand(1,000)tons,andthedurationofthecharterorcontractdoesnot exceedsix(6)months,Fivehundredpesos(P500);andforeachmonthorfractionof amonthinexcessofsix(6)months,anadditionaltaxofFiftypesos(P50.00)shallbe paid. (b)Iftheregisteredgrosstonnageexceedsonethousand(1,000)tonsanddoes notexceedtenthousand(10,000)tons,andthedurationofthecharterorcontract doesnotexceedsix(6)months,Onethousandpesos(P1,000);andforeachmonth orfractionofamonthinexcessofsix(6)months,anadditionaltaxofOnehundred pesos(P100)shallbepaid. (c)Iftheregisteredgrosstonnageexceedstenthousand(10,000)tonsandthe durationofthecharterorcontractdoesnotexceedsix(6)months,Onethousand fivehundredpesos(P1,500);andforeachmonthorfractionofamonthinexcessof six(6)months,anadditionaltaxofOnehundredfiftypesos(P150)shallbepaid.

SEC.198.StampTaxonAssignmentsandRenewalsofCertainInstruments.Upon eachandeveryassignmentortransferofanymortgage,leaseorpolicyofinsurance, ortherenewalorcontinuanceofanyagreement,contract,charter,oranyevidence ofobligationorindebtednessbyalteringorotherwise,thereshallbelevied, collectedandpaidadocumentarystamptax,atthesamerateasthatimposedonthe originalinstrument. SEC.199.DocumentsandPapersNotSubjecttoStampTax.Theprovisionsof Section173tothecontrarynotwithstanding,thefollowinginstruments,documents andpapersshallbeexemptfromthedocumentarystamptax: (a)Policiesofinsuranceorannuitiesmadeorgrantedbyafraternalor beneficiarysociety,order,associationorcooperativecompany,operatedonthe lodgesystemorlocalcooperationplanandorganizedandconductedsolelybythe membersthereoffortheexclusivebenefitofeachmemberandnotforprofit. (b)Certificatesofoathsadministeredtoanygovernmentofficialinhisofficial capacityorofacknowledgmentbyanygovernmentofficialintheperformanceofhis officialduties,writtenappearanceinanycourtbyanygovernmentofficial,inhis officialcapacity;certificatesoftheadministrationofoathstoanypersonastothe authenticityofanypaperrequiredtobefiledincourtbyanypersonorparty thereto,whethertheproceedingsbecivilorcriminal;papersanddocumentsfiledin courtsbyorforthenational,provincial,cityormunicipalgovernments;affidavitsof poorpersonsforthepurposeofprovingpoverty;statementsandothercompulsory informationrequiredofpersonsorcorporationsbytherulesandregulationsofthe national,provincial,cityormunicipalgovernmentsexclusivelyforstatistical purposesandwhicharewhollyfortheuseofthebureauorofficeinwhichtheyare filed,andnotattheinstanceorfortheuseorbenefitofthepersonfilingthem; certifiedcopiesandothercertificatesplacedupondocuments,instrumentsand papersforthenational,provincial,city,ormunicipalgovernments,madeatthe instanceandforthesoleuseofsomeotherbranchofthenational,provincial,cityor municipalgovernments;andcertificatesoftheassessedvalueoflands,not exceedingTwohundredpesos(P200)invalueassessed,furnishedbytheprovincial, cityormunicipalTreasurertoapplicantsforregistrationoftitletoland. SEC.200.PaymentofDocumentaryStampTax.

(A)InGeneral.TheprovisionsofPresidentialDecreeNo.1045notwithstanding, anypersonliabletopaydocumentarystamptaxuponanydocumentsubjecttotax underTitleVIIofthisCodeshallfileataxreturnandpaythetaxinaccordancewith therulesandregulationstobeprescribedbytheSecretaryofFinance,upon recommendationoftheCommissioner. (B)TimeforFilingandPaymentoftheTax.Exceptasprovidedbyrulesand regulationspromulgatedbytheSecretaryofFinance,uponrecommendationofthe Commissioner,thetaxreturnprescribedinthisSectionshallbefiledwithinten(10) daysafterthecloseofthemonthwhenthetaxabledocumentwasmade,signed, issued,accepted,ortransferred,andthetaxthereonshallbepaidatthesametime theaforesaidreturnisfiled. (C)WheretoFile.ExceptincaseswheretheCommissionerotherwisepermits,the aforesaidtaxreturnshallbefiledwithandthetaxdueshallbepaidthroughthe authorizedagentbankwithintheterritorialjurisdictionoftheRevenueDistrict Officewhichhasjurisdictionovertheresidenceorprincipalplaceofbusinessofthe taxpayer.Inplaceswherethereisnoauthorizedagentbank,thereturnshallbefiled withtheRevenueDistrictOfficer,collectionagent,ordulyauthorizedTreasurerof thecityormunicipalityinwhichthetaxpayerhashislegalresidenceorprincipal placeofbusiness. (D)Exception.InlieuoftheforegoingprovisionsofthisSection,thetaxmaybe paideitherthroughpurchaseandactualaffixture;orbyimprintingthestamps throughadocumentarystampmeteringmachine,onthetaxabledocument,inthe mannerasmaybeprescribedbyrulesandregulationstobepromulgatedbythe SecretaryofFinance,uponrecommendationoftheCommissioner. SEC.201.EffectofFailuretoStampTaxableDocument.Aninstrument,document orpaperwhichisrequiredbylawtobestampedandwhichhasbeensigned,issued, acceptedortransferredwithoutbeingdulystamped,shallnotberecorded,norshall itoranycopythereoforanyrecordoftransferofthesamebeadmittedorusedin evidenceinanycourtuntiltherequisitestamporstampsareaffixedtheretoand cancelled. TITLEVIII REMEDIES

CHAPTERI REMEDIESINGENERAL SEC.202.FinalDeedtoPurchaser.Incasethetaxpayershallnotredeemthe propertyashereinprovidedtheRevenueDistrictOfficershall,asgrantor,executea deedconveyingtothepurchasersomuchofthepropertyashasbeensold,freefrom allliensofanykindwhatsoever,andthedeedshallsuccintlyreciteallthe proceedingsuponwhichthevalidityofthesaledepends. SEC.203.PeriodofLimitationUponAssessmentandCollection.Exceptasprovided inSection222,internalrevenuetaxesshallbeassessedwithinthree(3)yearsafter thelastdayprescribedbylawforthefilingofthereturn,andnoproceedingincourt withoutassessmentforthecollectionofsuchtaxesshallbebegunafterthe expirationofsuchperiod:Provided,Thatinacasewhereareturnisfiledbeyondthe periodprescribedbylaw,thethree(3)yearperiodshallbecountedfromtheday thereturnwasfiled.ForpurposesofthisSection,areturnfiledbeforethelastday prescribedbylawforthefilingthereofshallbeconsideredasfiledonsuchlastday. SEC.204.AuthorityoftheCommissionertoCompromise,AbateandRefundor CreditTaxes.TheCommissionermay (A)CompromisethePaymentofanyInternalRevenueTax,when: (1)Areasonabledoubtastothevalidityoftheclaimagainstthetaxpayerexists; or (2)Thefinancialpositionofthetaxpayerdemonstratesaclearinabilitytopay theassessedtax. Thecompromisesettlementofanytaxliabilityshallbesubjecttothefollowing minimumamounts:

Forcasesoffinancialincapacity,aminimumcompromiserateequivalentto tenpercent(10%)ofthebasicassessedtax;and Forothercases,aminimumcompromiserateequivalenttofortypercent(40%)of thebasicassessedtax. WherethebasictaxinvolvedexceedsOnemillionpesos(P1,000.000)orwherethe settlementofferedislessthantheprescribedminimumrates,thecompromiseshall besubjecttotheapprovaloftheEvaluationBoardwhichshallbecomposedofthe Commissionerandthefour(4)DeputyCommissioners. (B)AbateorCancelaTaxLiability,when: (1)Thetaxoranyportionthereofappearstobeunjustlyorexcessively assessed;or (2)Theadministrationandcollectioncostsinvolveddonotjustifythecollection ofthe amountdue. Allcriminalviolationsmaybecompromisedexcept:(a)thosealreadyfiledin court,or(b)thoseinvolvingfraud. (C)Creditorrefundtaxeserroneouslyorillegallyreceivedorpenaltiesimposed withoutauthority,refundthevalueofinternalrevenuestampswhentheyare returnedingoodconditionbythepurchaser,and,inhisdiscretion,redeemor changeunusedstampsthathavebeenrenderedunfitforuseandrefundtheirvalue uponproofofdestruction.Nocreditorrefundoftaxesorpenaltiesshallbeallowed unlessthetaxpayerfilesinwritingwiththeCommissioneraclaimforcreditor refundwithintwo(2)yearsafterthepaymentofthetaxorpenalty:Provided, however,Thatareturnfiledshowinganoverpaymentshallbeconsideredasa writtenclaimforcreditorrefund. ATaxCreditCertificatevalidlyissuedundertheprovisionsofthisCodemaybe appliedagainstanyinternalrevenuetax,excludingwithholdingtaxes,forwhichthe

taxpayerisdirectlyliable.Anyrequestforconversionintorefundofunutilizedtax creditsmaybeallowed,subjecttotheprovisionsofSection230ofthisCode: Provided,ThattheoriginalcopyoftheTaxCreditCertificateshowingacreditable balanceissurrenderedtotheappropriaterevenueofficerforverificationand cancellation:Provided,further,Thatinnocaseshallataxrefundbegivenresulting fromavailmentofincentivesgrantedpursuanttospeciallawsforwhichnoactual paymentwasmade. TheCommissionershallsubmittotheChairmenoftheCommitteeonWaysand MeansofboththeSenateandHouseofRepresentatives,everysix(6)months,a reportontheexerciseofhispowersunderthisSection,statingthereinthefollowing factsandinformation,amongothers:namesandaddressesoftaxpayerswhose caseshavebeenthesubjectofabatementorcompromise;amountinvolved;amount compromisedorabated;andreasonsfortheexerciseofpower:Provided,Thatthe saidreportshallbepresentedtotheOversightCommitteeinCongressthatshallbe constitutedtodeterminethatsaidpowersarereasonablyexercisedandthatthe governmentisnotundulydeprivedofrevenues. CHAPTERII CIVILREMEDIESFORCOLLECTIONOFTAXES SEC.205.RemediesfortheCollectionofDelinquentTaxes.Thecivilremediesfor thecollectionofinternalrevenuetaxes,feesorcharges,andanyincrementthereto resultingfromdelinquencyshallbe: (a)Bydistraintofgoods,chattels,oreffects,andotherpersonalpropertyof whatevercharacter,includingstocksandothersecurities,debts,credits,bank accountsandinterestinandrightstopersonalproperty,andbylevyuponreal propertyandinterestinrightstorealproperty;and (b)Bycivilorcriminalaction. Eitheroftheseremediesorbothsimultaneouslymaybepursuedinthe discretionoftheauthoritieschargedwiththecollectionofsuchtaxes:Provided, however,Thattheremediesofdistraintandlevyshallnotbeavailedofwherethe amountoftaxinvolveisnotmorethanOnehundredpesos(P100).

 Thejudgmentinthecriminalcaseshallnotonlyimposethepenaltybutshallalso orderpaymentofthetaxessubjectofthecriminalcaseasfinallydecidedbythe Commissioner. TheBureauofInternalRevenueshalladvancetheamountsneededtodefray costsofcollectionbymeansofcivilorcriminalaction,includingthepreservationor transportationofpersonalpropertydistrainedandtheadvertisementandsale thereof,aswellasofrealpropertyandimprovementsthereon. SEC.206.ConstructiveDistraintofthePropertyofaTaxpayer.Tosafeguardthe interestoftheGovernment,theCommissionermayplaceunderconstructive distraintthepropertyofadelinquenttaxpayeroranytaxpayerwho,inhisopinion, isretiringfromanybusinesssubjecttotax,orisintendingtoleavethePhilippines ortoremovehispropertytherefromortohideorconcealhispropertyorto performanyacttendingtoobstructtheproceedingsforcollectingthetaxdueor whichmaybeduefromhim. Theconstructivedistraintofpersonalpropertyshallbeaffectedbyrequiringthe taxpayeroranypersonhavingpossessionorcontrolofsuchpropertytosigna receiptcoveringthepropertydistrainedandobligatehimselftopreservethesame intactandunalteredandnottodisposeofthesame;inanymannerwhatever, withouttheexpressauthorityoftheCommissioner. Incasethetaxpayerorthepersonhavingthepossessionandcontroloftheproperty soughttobeplacedunderconstructivedistraintrefusesorfailstosignthereceipt hereinreferredto,therevenueofficereffectingtheconstructivedistraintshall proceedtopreparealistofsuchpropertyand,inthepresenceoftwo(2)witnessed, leaveacopythereofinthepremiseswherethepropertydistrainedislocated,after whichthesaidpropertyshallbedeemedtohavebeenplacedunderconstructive distraint. SEC.207.SummaryRemedies. (A)DistraintofPersonalProperty.Uponthefailureofthepersonowingany delinquenttaxordelinquentrevenuetopaythesameatthetimerequired,the

Commissionerorhisdulyauthorizedrepresentative,iftheamountinvolvedisin excessofOnemillionpesos(P1,000,000),ortheRevenueDistrictOfficer,ifthe amountinvolvedisOnemillionpesos(P1,000,000)orless,shallseizeanddistraint anygoods,chattelsoreffects,andthepersonalproperty,includingstocksandother securities,debts,credits,bankaccounts,andinterestsinandrightstopersonal propertyofsuchpersons;insufficientquantitytosatisfythetax,orcharge,together withanyincrementtheretoincidenttodelinquency,andtheexpensesofthe distraintandthecostofthesubsequentsale. Areportonthedistraintshall,withinten(10)daysfromreceiptofthewarrant,be submittedbythedistrainingofficertotheRevenueDistrictOfficer,andtothe RevenueRegionalDirector:Provided,ThattheCommissionerorhisdulyauthorized representativeshall,subjecttorulesandregulationspromulgatedbytheSecretary ofFinance,uponrecommendationoftheCommissioner,havethepowertoliftsuch orderofdistraint:Provided,further,ThataconsolidatedreportbytheRevenue RegionalDirectormayberequiredbytheCommissionerasoftenasnecessary. (B)LevyonRealProperty.Aftertheexpirationofthetimerequiredtopaythe delinquenttaxordelinquentrevenueasprescribedinthisSection,realproperty maybeleviedupon,beforesimultaneouslyorafterthedistraintofpersonal propertybelongingtothedelinquent.Tothisend,anyinternalrevenueofficer designatedbytheCommissionerorhisdulyauthorizedrepresentativeshallprepare adulyauthenticatedcertificateshowingthenameofthetaxpayerandtheamounts ofthetaxandpenaltyduefromhim.Saidcertificateshalloperatewiththeforceofa legalexecutionthroughoutthePhilippines. Levyshallbeaffectedbywritinguponsaidcertificateadescriptionoftheproperty uponwhichlevyismade.Atthesametime,writtennoticeofthelevyshallbemailed toorservedupontheRegisterofDeedsfortheprovinceorcitywheretheproperty islocatedanduponthedelinquenttaxpayer,orifhebeabsentfromthePhilippines, tohisagentorthemanagerofthebusinessinrespecttowhichtheliabilityarose,or iftherebenone,totheoccupantofthepropertyinquestion. Incasethewarrantoflevyonrealpropertyisnotissuedbeforeorsimultaneously withthewarrantofdistraintonpersonalproperty,andthepersonalpropertyofthe taxpayerisnotsufficienttosatisfyhistaxdelinquency,theCommissionerorhis dulyauthorizedrepresentativeshall,withinthirty(30)daysafterexecutionofthe distraint,proceedwiththelevyonthetaxpayer'srealproperty.

Withinten(10)daysafterreceiptofthewarrant,areportonanylevyshallbe submittedbythelevyingofficertotheCommissionerorhisdulyauthorized representative:Provided,however,ThataconsolidatedreportbytheRevenue RegionalDirectormayberequiredbytheCommissionerasoftenasnecessary: Provided,further,ThattheCommissionerorhisdulyauthorizedrepresentative, subjecttorulesandregulationspromulgatedbytheSecretaryofFinance,upon recommendationoftheCommissioner,shallhavetheauthoritytoliftwarrantsof levyissuedinaccordancewiththeprovisionshereof. SEC.208.ProcedureforDistraintandGarnishment.Theofficerservingthewarrant ofdistraintshallmakeorcausetobemadeanaccountofthegoods,chattels,effects orotherpersonalpropertydistrained,acopyofwhich,signedbyhimself,shallbe lefteitherwiththeownerorpersonfromwhosepossessionsuchgoods,chattels,or effectsorotherpersonalpropertyweretaken,oratthedwellingorplaceof businessofsuchpersonandwithsomeoneofsuitableageanddiscretion,towhich listshallbeaddedastatementofthesumdemandedandnoteofthetimeandplace ofsale. Stocksandothersecuritiesshallbedistrainedbyservingacopyofthewarrantof distraintuponthetaxpayeranduponthepresident,manager,treasurerorother responsibleofficerofthecorporation,companyorassociation,whichissuedthesaid stocksorsecurities. Debtsandcreditsshallbedistrainedbyleavingwiththepersonowingthedebtsor havinginhispossessionorunderhiscontrolsuchcredits,orwithhisagent,acopy ofthewarrantofdistraint.Thewarrantofdistraintshallbesufficientauthorityto thepersonowningthedebtsorhavinginhispossessionorunderhiscontrolany creditsbelongingtothetaxpayertopaytotheCommissionertheamountofsuch debtsorcredits. Bankaccountsshallbegarnishedbyservingawarrantofgarnishmentuponthe taxpayeranduponthepresident,manager,treasurerorotherresponsibleofficerof thebank.Uponreceiptofthewarrantofgarnishment,thebankshalltunovertothe Commissionersomuchofthebankaccountsasmaybesufficienttosatisfytheclaim oftheGovernment. SEC.209.SaleofPropertyDistrainedandDispositionofProceeds.TheRevenue DistrictOfficerorhisdulyauthorizedrepresentative,otherthantheofficerreferred

toinSection208ofthisCodeshall,accordingtorulesandregulationsprescribedby theSecretaryofFinance,uponrecommendationoftheCommissioner,forthwith causeanotificationtobeexhibitedinnotlessthantwo(2)publicplacesinthe municipalityorcitywherethedistraintismade,specifying;thetimeandplaceof saleandthearticlesdistrained.Thetimeofsaleshallnotbelessthantwenty(20) daysafternotice.OneplaceforthepostingofsuchnoticeshallbeattheOfficeofthe Mayorofthecityormunicipalityinwhichthepropertyisdistrained. Atthetimeandplacefixedinsuchnotice,thesaidrevenueofficershallsellthe goods,chattels,oreffects,orotherpersonalproperty,includingstocksandother securitiessodistrained,atpublicauction,tothehighestbidderforcash,orwiththe approvaloftheCommissioner,throughdulylicensedcommodityorstock exchanges. InthecaseofStocksandothersecurities,theofficermakingthesaleshallexecutea billofsalewhichheshalldelivertothebuyer,andacopythereoffurnishedthe corporation,companyorassociationwhichissuedthestocksorothersecurities. Uponreceiptofthecopyofthebillofsale,thecorporation,companyorassociation shallmakethecorrespondingentryinitsbooks,transferthestocksorother securitiessoldinthenameofthebuyer,andissue,ifrequiredtodoso,the correspondingcertificatesofstockorothersecurities. Anyresidueoverandabovewhatisrequiredtopaytheentireclaim,including expenses,shallbereturnedtotheownerofthepropertysold.Theexpenses chargeableuponeachseizureandsaleshallembraceonlytheactualexpensesof seizureandpreservationofthepropertypending;thesale,andnochargeshallbe imposedfortheservicesofthelocalinternalrevenueofficerorhisdeputy. SEC.210.ReleaseofDistrainedPropertyUponPaymentPriortoSale.Ifatanytime priortotheconsummationofthesaleallproperchargesarepaidtotheofficer conductingthesale,thegoodsoreffectsdistrainedshallberestoredtotheowner. SEC.211.ReportofSaletoBureauofInternalRevenue.Withintwo(2)daysafter thesale,theofficermakingthesameshallmakeareportofhisproceedingsin writingtotheCommissionerandshallhimselfpreserveacopyofsuchreportasan officialrecord.

SEC.212.PurchasebyGovernmentatSaleUponDistraint.Whentheamountbid forthepropertyunderdistraintisnotequaltotheamountofthetaxorisverymuch lessthantheactualmarketvalueofthearticlesofferedforsale,theCommissioner orhisdeputymaypurchasethesameinbehalfofthenationalGovernmentforthe amountoftaxes,penaltiesandcostsduethereon. PropertysopurchasedmayberesoldbytheCommissionerorhisdeputy,subjectto therulesandregulationsprescribedbytheSecretaryofFinance,thenetproceeds therefromshallberemittedtotheNationalTreasuryandaccountedforasinternal revenue. SEC.213.AdvertisementandSale.Withintwenty(20)daysafterlevy,theofficer conductingtheproceedingsshallproceedtoadvertisethepropertyorausable portionthereofasmaybenecessarytosatisfytheclaimandcostofsale;andsuch advertisementshallcoveraperiodofaleastthirty(30)days.Itshallbeeffectuated bypostinganoticeatthemainentranceofthemunicipalbuildingorcityhallandin publicandconspicuousplaceinthebarrioordistrictinwhichtherealestatelies and;bypublicationonceaweekforthree(3)weeksinanewspaperofgeneral circulationinthemunicipalityorcitywherethepropertyislocated.The advertisementshallcontainastatementoftheamountoftaxesandpenaltiessodue andthetimeandplaceofsale,thenameofthetaxpayeragainstwhomtaxesare levied,andashortdescriptionofthepropertytobesold.Atanytimebeforetheday fixedforthesale,thetaxpayermaydiscontinueallproceedingsbypayingthetaxes, penaltiesandinterest.Ifhedoesnotdoso,thesaleshallproceedandshallbeheld eitheratthemainentranceofthemunicipalbuildingorcityhall,oronthepremises tobesold,astheofficerconductingtheproceedingsshalldetermineandasthe noticeofsaleshallspecify. Withinfive(5)daysafterthesale,areturnbythedistrainingorlevyingofficerofthe proceedingsshallbeenteredupontherecordsoftheRevenueCollectionOfficer,the RevenueDistrictofficerandtheRevenueRegionalDirector.TheRevenueCollection Officer,inconsultationwiththeRevenuedistrictOfficer,shallthenmakeoutand delivertothepurchaseracertificatefromhisrecords,showingtheproceedingsof thesale,describingthepropertysoldstatingthenameofthepurchaserandsetting outtheexactamountofalltaxes,penaltiesandinterest:Provided,however,Thatin casetheproceedsofthesaleexceedstheclaimandcostofsale,theexcessshallbe turnedovertotheowneroftheproperty. TheRevenueCollectionOfficer,uponapprovalbytheRevenueDistrictOfficermay, outofhiscollection,advanceanamountsufficienttodefraythecostsofcollectionby

meansofthesummaryremediesprovidedforinthisCode,including;the preservationortransportationincaseofpersonalproperty,andtheadvertisement andsubsequentsale,bothincasesofpersonalandrealpropertyincluding improvementsfoundonthelatter.Inhismonthlycollectionreports,suchadvances shallbereflectedandsupportedbyreceipts. SEC.214.RedemptionofPropertySold.Withinone(1)yearfromthedateofsale, thedelinquenttaxpayer,oranyoneforhim,shallhavetherightofpayingtothe RevenueDistrictOfficertheamountofthepublictaxes,penalties,andinterest thereonfromthedateofdelinquencytothedateofsale,togetherwithintereston saidpurchasepriceattherateoffifteenpercent(15%)perannumfromthedateof purchasetothedateofredemption,andsuchpaymentshallentitletheperson payingtothedeliveryofthecertificateissuedtothepurchaserandacertificatefrom thesaidRevenueDistrictOfficerthathehasthusredeemedtheproperty,andthe RevenueDistrictOfficershallforthwithpayovertothepurchasertheamountby whichsuchpropertyhasthusbeenredeemed,andsaidpropertythereaftershallbe freeformthelienofsuchtaxesandpenalties. Theownershallnot,however,bedeprivedofthepossessionofthesaidproperty andshallbeentitledtotherentsandotherincomethereofuntiltheexpirationofthe timeallowedforitsredemption. SEC.215.ForfeituretoGovernmentforWantofBidder.Incasethereisnobidder forrealpropertyexposedforsaleashereinaboveprovidedorifthehighestbidis foranamountinsufficienttopaythetaxes,penaltiesandcosts,theInternalRevenue OfficerconductingthesaleshalldeclarethepropertyforfeitedtotheGovernmentin satisfactionoftheclaiminquestionandwithintwo(2)daysthereafter,shallmakea returnofhisproceedingsandtheforfeiturewhichshallbespreadupontherecords ofhisoffice.ItshallbethedutyoftheRegisterofDeedsconcerned,upon registrationwithhisofficeofanysuchdeclarationofforfeiture,totransferthetitle ofthepropertyforfeitedtotheGovernmentwithoutthenecessityofanorderfroma competentcourt. Withinone(1)yearfromthedateofsuchforfeiture,thetaxpayer,oranyonefor himmayredeemsaidpropertybypayingtotheCommissionerorthelatter's RevenueCollectionOfficerthefullamountofthetaxesandpenalties,togetherwith interestthereonandthecostsofsale,butifthepropertybenotthusredeemed,the forfeitureshallbecomeabsolute.

SEC.216.ResaleofRealEstateTakenforTaxes.TheCommissionershallhave chargeofanyrealestateobtainedbytheGovernmentofthePhilippinesinpayment orsatisfactionoftaxes,penaltiesorcostsarisingunderthisCodeorincompromise oradjustmentofanyclaimtherefore,andsaidCommissionermay,uponthegiving ofnotlessthantwenty(20)daysnotice,sellanddisposeofthesameofpublic auctionorwithpriorapprovaloftheSecretaryofFinance,disposeofthesameat privatesale.Ineithercase,theproceedsofthesaleshallbedepositedwiththe NationalTreasury,andanaccountingofthesameshallrenderedtotheChairmanof theCommissiononAudit. SEC.217.FurtherDistraintorLevy.Theremedybydistraintofpersonalproperty andlevyonrealtymayberepeatedifnecessaryuntilthefullamountdue,including allexpenses,iscollected. SEC.218.InjunctionnotAvailabletoRestrainCollectionofTax.Nocourtshallhave theauthoritytograntaninjunctiontorestrainthecollectionofanynationalinternal revenuetax,feeorchargeimposedbythisCode. SEC.219.NatureandExtentofTaxLien.Ifanyperson,corporation,partnership, jointaccount(cuentasenparticipacion),associationorinsurancecompanyliableto payaninternalrevenuetax,neglectsorrefusestopaythesameafterdemand,the amountshallbealieninfavoroftheGovernmentofthePhilippinesfromthetime whentheassessmentwasmadebytheCommissioneruntilpaid,withinterests, penalties,andcoststhatmayaccrueinadditiontheretouponallpropertyandrights topropertybelongingtothetaxpayer:Provided,Thatthislienshallnotbevalid againstanymortgageepurchaserorjudgmentcreditoruntilnoticeofsuchlienshall befiledbytheCommissionerintheofficeoftheRegisterofDeedsoftheprovinceor citywherethepropertyofthetaxpayerissituatedorlocated. SEC.220.FormandModeofProceedinginActionsArisingunderthisCode.Civil andcriminalactionsandproceedingsinstitutedinbehalfoftheGovernmentunder theauthorityofthisCodeorotherlawenforcedbytheBureauofInternalRevenue shallbebroughtinthenameoftheGovernmentofthePhilippinesandshallbe conductedbylegalofficersoftheBureauofInternalRevenuebutnocivilorcriminal actionfortherecoveryoftaxesortheenforcementofanyfine,penaltyorforfeiture underthisCodeshallbefiledincourtwithouttheapprovaloftheCommissioner.

SEC.221.RemedyforEnforcementofStatutoryPenalProvisions.Theremedyfor enforcementofstatutorypenaltiesofallsortsshallbebycriminalorcivilaction,as theparticularsituationmayrequire,subjecttotheapprovaloftheCommissioner. SEC.222.ExceptionsastoPeriodofLimitationofAssessmentandCollectionof Taxes. (a)Inthecaseofafalseorfraudulentreturnwithintenttoevadetaxoroffailure tofileareturn,thetaxmaybeassessed,oraproceedingincourtforthecollectionof suchtaxmaybefiledwithoutassessment,atanytimewithinten(10)yearsafterthe discoveryofthefalsity,fraudoromission:Provided,Thatinafraudassessment whichhasbecomefinalandexecutory,thefactoffraudshallbejudiciallytaken cognizanceofinthecivilorcriminalactionforthecollectionthereof. (b)IfbeforetheexpirationofthetimeprescribedinSection203forthe assessmentofthetax,boththeCommissionerandthetaxpayerhaveagreedin writingtoitsassessmentaftersuchtime,thetaxmaybeassessedwithintheperiod agreedupon.Theperiodsoagreeduponmaybeextendedbysubsequentwritten agreementmadebeforetheexpirationoftheperiodpreviouslyagreedupon. (c)Anyinternalrevenuetaxwhichhasbeenassessedwithintheperiodof limitationasprescribedinparagraph(a)hereofmaybecollectedbydistraintor levyorbyaproceedingincourtwithinfive(5)yearsfollowingtheassessmentofthe tax. (d)Anyinternalrevenuetax,whichhasbeenassessedwithintheperiodagreed uponasprovidedinparagraph(b)hereinabove,maybecollectedbydistraintor levyorbyaproceedingincourtwithintheperiodagreeduponinwritingbeforethe expirationofthefive(5)yearperiod.Theperiodsoagreeduponmaybeextended bysubsequentwrittenagreementsmadebeforetheexpirationoftheperiod previouslyagreedupon. (e)Provided,however,Thatnothingintheimmediatelyprecedingand paragraph(a)hereofshallbeconstruedtoauthorizetheexaminationand investigationorinquiryintoanytaxreturnfiledinaccordancewiththeprovisions ofanytaxamnestylawordecree.

 SEC.223.SuspensionofRunningofStatuteofLimitations.Therunningofthe StatuteofLimitationsprovidedinSections203and222onthemakingof assessmentandthebeginningofdistraintorlevyaproceedingincourtfor collection,inrespectofanydeficiency,shallbesuspendedfortheperiodduring whichtheCommissionerisprohibitedfrommakingtheassessmentorbeginning distraintorlevyoraproceedingincourtandforsixty(60)daysthereafter;when thetaxpayerrequestsforareinvestigationwhichisgrantedbytheCommissioner; whenthetaxpayercannotbelocatedintheaddressgivenbyhiminthereturnfiled uponwhichataxisbeingassessedorcollected:Provided,that,ifthetaxpayer informstheCommissionerofanychangeinaddress,therunningoftheStatuteof Limitationswillnotbesuspended;whenthewarrantofdistraintorlevyisduly serveduponthetaxpayer,hisauthorizedrepresentative,oramemberofhis householdwithsufficientdiscretion,andnopropertycouldbelocated;andwhen thetaxpayerisoutofthePhilippines. SEC.224.RemedyforEnforcementofForfeitures.Theforfeitureofchattelsand removablefixturesofanysortshallbeenforcedbytheseizureandsale,or destruction,ofthespecificforfeitedproperty.Theforfeitureofrealpropertyshallbe enforcedbyajudgmentofcondemnationandsaleinalegalactionorproceeding, civilorcriminal,asthecasemayrequire. SEC.225.WhenPropertytobeSoldorDestroyed.Salesofforfeitedchattelsand removablefixturesshallbeeffected,sofaraspracticable,inthesamemannerand underthesameconditionsasthepublicnoticeandthetimeandmannerofsaleas areprescribedforsalesofpersonalpropertydistrainedforthenonpaymentof taxes. Distilledspirits,liquors,cigars,cigarettes,othermanufacturedproductsoftobacco, andallapparatususedIorabouttheillicitproductionofsucharticlesmay,upon forfeiture,bedestroyedbyorderoftheCommissioner,whenthesaleofthesamefor consumptionorusewouldbeinjurioustopublichealthorprejudicialtothe enforcementofthelaw. Allotherarticlessubjecttoexcisetax,whichhavebeenmanufacturedorremovedin violationofthisCode,aswellasdiesfortheprintingormakingofinternalrevenue stampsandlabelswhichareinimitationoforpurporttobelawfulstamps,orlabels may,uponforfeiture,besoldordestroyedinthediscretionoftheCommissioner.

 Forfeitedpropertyshallnotbedestroyeduntilatleasttwenty(20)daysafter seizure. SEC.226.DispositionoffundsRecoveredinLegalProceedingsorObtainedfrom Forfeitures.alljudgmentsandmoniesrecoveredandreceivedfortaxes,costs, forfeitures,finesandpenaltiesshallbepaidtotheCommissionerorhisauthorized deputiesasthetaxesthemselvesarerequiredtobepaid,andexceptasspecially provided,shallbeaccountedforanddealtwiththesameway. SEC.227.SatisfactionofJudgmentRecoveredAgainstanyInternalRevenueOfficer. WhenanactionisbroughtagainstanyInternalRevenueofficertorecoverdamages byreasonofanyactdoneintheperformanceofofficialduty,andtheCommissioner isnotifiedofsuchactionintimetomakedefenseagainstthesame,throughthe SolicitorGeneral,anyjudgment,damagesorcostsrecoveredinsuchactionshallbe satisfiedbytheCommissioner,uponapprovaloftheSecretaryofFinance,orifthe samebepaidbythepersonusedshallberepaidorreimbursedtohim. Nosuchjudgment,damages,orcostsshallbepaidorreimbursedinbehalfofa personwhohasactednegligentlyorinbadfaith,orwithwillfuloppression. CHAPTERIII PROTESTINGANASSESSMENT,REFUND,ETC. SEC.228.ProtestingofAssessment.WhentheCommissionerorhisdulyauthorized representativefindsthatpropertaxesshouldbeassessed,heshallfirstnotifythe taxpayerofhisfindings:Provided,however,Thatapreassessmentnoticeshallnot berequiredinthefollowingcases: (a)Whenthefindingforanydeficiencytaxistheresultofmathematicalerrorin thecomputationofthetaxasappearingonthefaceofthereturn;or (b)Whenadiscrepancyhasbeendeterminedbetweenthetaxwithheldandthe amountactuallyremittedbythewithholdingagent;or

 (c)Whenataxpayerwhooptedtoclaimarefundortaxcreditofexcess creditablewithholdingtaxforataxableperiodwasdeterminedtohavecarriedover andautomaticallyappliedthesameamountclaimedagainsttheestimatedtax liabilitiesforthetaxablequarterorquartersofthesucceedingtaxableyear;or (d)Whentheexcisetaxdueonexciseablearticleshasnotbeenpaid;or (e)Whenthearticlelocallypurchasedorimportedbyanexemptperson,suchas, butnotlimitedto,vehicles,capitalequipment,machineriesandspareparts,has beensold,tradedortransferredtononexemptpersons. Thetaxpayersshallbeinformedinwritingofthelawandthefactsonwhichthe assessmentismade;otherwise,theassessmentshallbevoid. Withinaperiodtobeprescribedbyimplementingrulesandregulations,the taxpayershallberequiredtorespondtosaidnotice.Ifthetaxpayerfailstorespond, theCommissionerorhisdulyauthorizedrepresentativeshallissueanassessment basedonhisfindings. Suchassessmentmaybeprotestedadministrativelybyfilingarequestfor reconsiderationorreinvestigationwithinthirty(30)daysfromreceiptofthe assessmentinsuchformandmannerasmaybeprescribedbyimplementingrules andregulations. Withinsixty(60)daysfromfilingoftheprotest,allrelevantsupportingdocuments shallhavebeensubmitted;otherwise,theassessmentshallbecomefinal. Iftheprotestisdeniedinwholeorinpart,orisnotacteduponwithinonehundred eighty(180)daysfromsubmissionofdocuments,thetaxpayeradverselyaffectedby thedecisionorinactionmayappealtotheCourtofTaxAppealswithinthirty(30) daysfromreceiptofthesaiddecision,orfromthelapseofonehundredeighty (180)dayperiod;otherwise,thedecisionshallbecomefinal,executoryand demandable.

 SEC.229.RecoveryofTaxErroneouslyorIllegallyCollected.nosuitorproceeding shallbemaintainedinanycourtfortherecoveryofanynationalinternalrevenue taxhereafterallegedtohavebeenerroneouslyorillegallyassessedorcollected,or ofanypenaltyclaimedtohavebeencollectedwithoutauthority,ofanysumalleged tohavebeenexcessivelyorinanymannerwrongfullycollectedwithoutauthority, orofanysumallegedtohavebeenexcessivelyorinanymannerwrongfully collected,untilaclaimforrefundorcredithasbeendulyfiledwiththe Commissioner;butsuchsuitorproceedingmaybemaintained,whetherornotsuch tax,penalty,orsumhasbeenpaidunderprotestorduress. Inanycase,nosuchsuitorproceedingshallbefiledaftertheexpirationoftwo(2) yearsfromthedateofpaymentofthetaxorpenaltyregardlessofanysupervening causethatmayariseafterpayment:Provided,however,ThattheCommissioner may,evenwithoutawrittenclaimtherefor,refundorcreditanytax,whereonthe faceofthereturnuponwhichpaymentwasmade,suchpaymentappearsclearlyto havebeenerroneouslypaid. SEC.230.ForfeitureofCashRefundandofTaxCredit. (A)ForfeitureofRefund.Arefundcheckorwarrantissuedinaccordancewiththe pertinentprovisionsofthisCode,whichshallremainunclaimedoruncashedwithin five(5)yearsfromthedatethesaidwarrantorcheckwasmailedordelivered,shall beforfeitedinfavoroftheGovernmentandtheamountthereofshallreverttothe generalfund. (B)ForfeitureofTaxCredit.Ataxcreditcertificateissuedinaccordancewiththe pertinentprovisionsofthisCode,whichshallremainunutilizedafterfive(5)years fromthedateofissue,shall,unlessrevalidated,beconsideredinvalid,andshallnot beallowedaspaymentforinternalrevenuetaxliabilitiesofthetaxpayer,andthe amountcoveredbythecertificateshallreverttothegeneralfund. (C)TransitoryProvision.ForpurposesoftheprecedingSubsection,ataxcredit certificateissuedbytheCommissionerorhisdulyauthorizedrepresentativeprior toJanuary1,1998,whichremainsunutilizedorhasacreditablebalanceasofsaid date,shallbepresentedforrevalidationwiththeCommissionerorhisduly authorizedrepresentativeoronbeforeJune30,1998.

SEC.231.ActiontoContestForfeitureofChattel.Incaseoftheseizureofpersonal propertyunderclaimofforfeiture,theownerdesiringtocontestthevalidityofthe forfeituremay,atanytimebeforesaleordestructionoftheproperty,bringan actionagainstthepersonseizingthepropertyorhavingpossessionthereofto recoverthesame,andupongivingproperbond,mayenjointhesale;orafterthe saleandwithinsix(6)months,hemaybringanactiontorecoverthenetproceeds realizedatthesale. TITLEIX COMPLIANCEREQUIREMENTS CHAPTERI KEEPINGOFBOOKSOFACCOUNTSANDRECORDS SEC.232.KeepingofBooksofAccounts. (A)Corporations,Companies,PartnershipsorPersonsRequiredtoKeepBooksof Accounts.Allcorporations,companies,partnershipsorpersonsrequiredbylawto payinternalrevenuetaxesshallkeepajournalandaledgerortheirequivalents: Provided,however,Thatthosewhosequarterlysales,earnings,receipts,oroutput donotexceedFiftythousandpesos(P50,000)shallkeepandusesimplifiedsetof bookkeepingrecordsdulyauthorizedbytheSecretaryofFinancewhereinall transactionsandresultsofoperationsareshownandfromwhichalltaxesduethe Governmentmayreadilyandaccuratelybeascertainedanddeterminedanytimeof theyear:Provided,further,Thatcorporations,companies,partnershipsorpersons whosegrossquarterlysales,earnings,receiptsoroutputexceedOnehundredfifty thousandpesos(P150,000)shallhavetheirbooksofaccountsauditedand examinedyearlybyindependentCertifiedPublicAccountantsandtheirincometax returnsaccompaniedwithadulyaccomplishedAccountInformationForm(AIF) whichshallcontain,amongothers,informationliftedfromcertifiedbalancesheets, profitandlossstatements,scheduleslistingincomeproducingpropertiesandthe correspondingincometherefromandotherrelevantstatements. (B)IndependentCertifiedPublicAccountantDefined.Theterm"Independent CertifiedPublicAccountant",asusedintheprecedingparagraph,meansan

accountantwhopossessestheindependenceasdefinedintherulesandregulations oftheBoardofAccountancypromulgatedpursuanttoPresidentialDecreeNo.692, otherwiseknownastheRevisedAccountancyLaw. SEC.233.SubsidiaryBooks.Allcorporations,companies,partnershipsorpersons keepingthebooksofaccountsmentionedintheprecedingSectionmay,attheir option,keepsubsidiarybooksastheneedsoftheirbusinessmayrequire:Provided, Thatweresuchsubsidiariesarekept,theyshallformpartoftheaccountingsystem ofthetaxpayerandshallbesubjecttothesamerulesandregulationsastotheir keeping,translation,productionandinspectionasareapplicabletothejournaland theledger. SEC.234.LanguageinwhichBooksaretobeKept;Translation.Allsuch corporations,companies,partnershipsorpersonsshallkeepthebooksorrecords mentionedinSection232hereofinnativelanguage,EnglishorSpanish:Provided, however,Thatifinadditiontosaidbooksorrecordsthetaxpayerkeepsotherbooks orrecordsinalanguageotherthananativelanguage,EnglishorSpanish,heshall makeatrueandcompletetranslationofalltheentriesinsuckotherbooksor recordsintoanativelanguage;EnglishorSpanish,andthesaidtranslationmustbe madebythebookkeeper,orsuchtaxpayer,orinhisabsence,byhismanagerand mustbecertifiedunderoathastoitscorrectnessbythesaidbookkeeperor manager,andshallformanintegralpartoftheaforesaidbooksofaccounts.The keepingofsuchbooksorrecordsinanylanguageotherthananativelanguage, EnglishorSpanish,isherebyprohibited. SEC.235.PreservationofBooksandAccountsandOtherAccountingRecords.All thebooksofaccounts,includingthesubsidiarybooksandotheraccountingrecords ofcorporations,partnerships,orpersons,shallbepreservedbythemforaperiod beginningfromthelastentryineachbookuntilthelastdayprescribedbySection 203withinwhichtheCommissionerisauthorizedtomakeanassessment.Thesaid booksandrecordsshallbesubjecttoexaminationandinspectionbyinternal revenueofficers:Provided,Thatforincometaxpurposes,suchexaminationand inspectionshallbemadeonlyonceinataxableyear,exceptinthefollowingcases: (a)Fraud,irregularityormistakes,asdeterminedbytheCommissioner; (b)Thetaxpayerrequestsreinvestigation;

(c)Verificationofcompliancewithwithholdingtaxlawsandregulations; (d)Verificationofcapitalgainstaxliabilities;and (e)IntheexerciseoftheCommissioner'spowerunderSection5(B)toobtain informationfromotherpersonsinwhichcase,anotherorseparateexaminationand inspectionmaybemade.Examinationandinspectionofbooksofaccountsandother accountingrecordsshallbedoneinthetaxpayer'sofficeorplaceofbusinessorin theofficeoftheBureauofInternalRevenue.Allcorporations,partnershipsor personsthatretirefrombusinessshall,withinten(10)daysfromthedateof retirementorwithinsuchperiodoftimeasmaybeallowedbytheCommissionerin specialcases,submittheirbooksofaccounts,includingthesubsidiarybooksand otheraccountingrecordstotheCommissioneroranyofhisdeputiesfor examination,afterwhichtheyshallbereturned.Corporationsandpartnerships contemplatingdissolutionmustnotifytheCommissionerandshallnotbedissolved untilclearedofanytaxliability. Anyprovisionofexistinggeneralorspeciallawtothecontrarynotwithstanding,the booksofaccountsandotherpertinentrecordsoftaxexemptorganizationsor granteesoftaxincentivesshallbesubjecttoexaminationbytheBureauofInternal Revenueforpurposesofascertainingcompliancewiththeconditionsunderwhich theyhavebeengrantedtaxexemptionsortaxincentives,andtheirtaxliability,if any. CHAPTERII ADMINISTRATIVEPROVISIONS SEC.236.RegistrationRequirements. (A)Requirements.Everypersonsubjecttoanyinternalrevenuetaxshallregister oncewiththeappropriateRevenueDistrictOfficer:

(1)Withinten(10)daysfromdateofemployment,or (2)Onorbeforethecommencementofbusiness,or (3)Beforepaymentofanytaxdue,or (4)Uponfilingofareturn,statementordeclarationasrequiredinthisCode. Theregistrationshallcontainthetaxpayer'sname,style,placeofresidence, businessandsuchotherinformationasmayberequiredbytheCommissionerinthe formprescribedtherefor. Apersonmaintainingaheadoffice,branchorfacilityshallregisterwiththeRevenue DistrictOfficerhavingjurisdictionovertheheadoffice,brandorfacility.For purposesofthisSection,theterm"facility"mayincludebutnotbelimitedtosales outlets,placesofproduction,warehousesorstorageplaces. (B)AnnualRegistrationFee.AnannualregistrationfeeintheamountofFive hundredpesos(P500)foreveryseparateordistinctestablishmentorplaceof business,includingfacilitytypeswheresalestransactionsoccur,shallbepaidupon registrationandeveryyearthereafteronorbeforethelastdayofJanuary:Provided, however,Thatcooperatives,individualsearningpurelycompensationincome, whetherlocallyorabroad,andoverseasworkersarenotliabletotheregistration feehereinimposed. Theregistrationfeeshallbepaidtoanauthorizedagentbanklocatedwithinthe revenuedistrict,ortotheRevenueCollectionOfficer,ordulyauthorizedTreasurer ofthecityofmunicipalitywhereeachplaceofbusinessorbranchisregistered. (C)RegistrationofEachTypeofInternalRevenueTax.Everypersonwhois requiredtoregisterwiththeBureauofInternalRevenueunderSubsection(A) hereof,shallregistereachtypeofinternalrevenuetaxforwhichheisobligated, shallfileareturnandshallpaysuchtaxes,andshallupdatessuchregistrationofany changesinaccordancewithSubsection(E)hereof.

 (D)TransferofRegistration.Incasearegisteredpersondecidestotransferhis placeofbusinessorhisheadofficeorbranches,itshallbehisdutytoupdatehis registrationstatusbyfilinganapplicationforregistrationinformationupdateinthe formprescribedtherefor. (E)OtherUpdates.AnypersonregisteredinaccordancewiththisSectionshall, wheneverapplicable,updatehisregistrationinformationwiththeRevenueDistrict Officewhereheisregistered,specifyingthereinanychangeintypeandother taxpayerdetails. (F)CancellationofRegistration.Theregistrationofanypersonwhoceasestobe liabletoataxtypeshallbecancelleduponfilingwiththeRevenueDistrictOffice whereheisregisteredanapplicationforregistrationinformationupdateinaform prescribedtherefor. (G)PersonsCommencingBusiness.Anyperson,whoexpectstorealizegrosssales orreceiptssubjecttovalueaddedtaxinexcessoftheamountprescribedunder Section109(z)ofthisCodeforthenext12monthperiodfromthecommencement ofthebusiness,shallregisterwiththeRevenueDistrictOfficewhichhasjurisdiction overtheheadofficeorbranchandshallpaytheannualregistrationfeeprescribedin Subsection(B)hereof. (H)PersonsBecomingLiabletotheValueaddedTax.Anyperson,whosegross salesorreceiptsinany12monthperiodexceedstheamountprescribedunder Subsection109(z)ofthisCodeforexemptionfromthevalueaddedtaxshallregister inaccordancewithSubsection(A)hereof,andshallpaytheannualregistrationfee prescribedwithinten(10)daysaftertheendofthelastmonthofthatperiod,and shallbeliabletothevalueaddedtaxcommencingfromthefirstdayofthemonth followinghisregistration. (I)OptionalRegistrationofExemptPerson.Anypersonwhosetransactionsare exemptfromvalueaddedtaxunderSection109(z)ofthisCode;oranyperson whosetransactionsareexemptfromthevalueaddedtaxunderSection109(a),(b), (c),and(d)ofthisCode,whooptstoregisterasaVATtaxpayerwithrespecttohis exportsalesonly,mayupdatehisregistrationinformationinaccordancewith Subsection(E)hereof,notlaterthanten(10)daysbeforethebeginningofthe

taxablequarterandshallpaytheannualregistrationfeeprescribedinSubsection (B)hereof. Inanycase,theCommissionermay,foradministrativereasons,denyanyapplication forregistrationincludingupdatesprescribedunderSubsection(E)hereof. ForpurposesofTitleIVofthisCode,anypersonwhohasregisteredvalueaddedtax asataxtypeinaccordancewiththeprovisionsofSubsection(C)hereofshallbe referredtoasVATregisteredpersonwhoshallbeassignedonlyoneTaxpayer IdentificationNumber. (J)SupplyingofTaxpayerIdentificationNumber(TIN).Anypersonrequiredunder theauthorityofthisCodetomake,renderorfileareturn,statementorother documentshallbesuppliedwithorassignedaTaxpayerIdentificationNumber (TIN)whichheshallindicateinsuchreturn,statementordocumentfiledwiththe BureauofInternalRevenueforhisproperidentificationfortaxpurposes,andwhich heshallindicateincertaindocuments,suchas,butnotlimitedtothefollowing: (1)Sugarquedans,refinedsugarreleaseorderorsimilarinstruments; (2)Domesticbillsoflading; (3)DocumentstoberegisteredwiththeRegisterofDeedsofAssessor'sOffice; (4)Registrationcertificateoftransportationequipmentbyland,seaorair; (5)DocumentstoberegisteredwiththeSecuritiesandExchangeCommission; (6)Buildingconstructionpermits;

(7)Applicationforloanwithbanks,financialinstitutions,orotherfinancial intermediaries; (8)Applicationformayor'spermit; (9)ApplicationforbusinesslicensewiththeDepartmentofTrade&Industry; and (10)Suchotherdocumentswhichmayhereafterberequiredunderrulesand regulationstobepromulgatedbytheSecretaryofFinance,uponrecommendationof theCommissioner. Incaseswherearegisteredtaxpayerdies,theadministratororexecutorshall registertheestateofthedecedentinaccordancewithSubsection(A)hereofanda newTaxpayerIdentificationNumber(TIN)shallbesuppliedinaccordancewiththe provisionsofthisSection. Inthecaseofanonresidentdecedent,theexecutororadministratoroftheestate shallregistertheestatewiththeRevenueDistrictOfficewhereheisregistered: Provided,however,Thatincasesuchexecutororadministratorisnotregistered, registrationoftheestateshallbemadewiththeTaxpayerIdentificationNumber (TIN)suppliedbytheRevenueDistrictOfficehavingjurisdictionoverhislegal residence. OnlyoneTaxpayeridentificationNumber(TIN)shallbeassignedtoataxpayer.Any personwhoshallsecuremorethanoneTaxpayerIdentificationNumbershallbe criminallyliableundertheprovisionofSection275on'ViolationofOtherProvisions ofthisCodeorRegulationsinGeneral'. SEC.237.IssuanceofReceiptsorSalesorCommercialInvoices.Allpersonssubject toaninternalrevenuetaxshall,foreachsaleortransferofmerchandiseorfor servicesrenderedvaluedatTwentyfivepesos(P25.00)ormore,issueduly registeredreceiptsorsalesorcommercialinvoices,preparedatleastinduplicate, showingthedateoftransaction,quantity,unitcostanddescriptionofmerchandise ornatureofservice:Provided,however,Thatinthecaseofsales,receiptsor transfersintheamountofOnehundredpesos(P100.00)ormore,orregardlessof

theamount,wherethesaleortransferismadebyapersonliabletovalueaddedtax toanotherpersonalsoliabletovalueaddedtax;orwherethereceiptisissuedto coverpaymentmadeasrentals,commissions,compensationsorfees,receiptsor invoicesshallbeissuedwhichshallshowthename,businessstyle,ifany,and addressofthepurchaser,customerorclient:Provided,further,Thatwherethe purchaserisaVATregisteredperson,inadditiontotheinformationherein required,theinvoiceorreceiptshallfurthershowtheTaxpayerIdentification Number(TIN)ofthepurchaser. Theoriginalofeachreceiptorinvoiceshallbeissuedtothepurchaser,customeror clientatthetimethetransactioniseffected,who,ifengagedinbusinessorinthe exerciseofprofession,shallkeepandpreservethesameinhisplaceofbusinessfor aperiodofthree(3)yearsfromthecloseofthetaxableyearinwhichsuchinvoice orreceiptwasissued,whiletheduplicateshallbekeptandpreservedbytheissuer, alsoinhisplaceofbusiness,foralikeperiod. TheCommissionermay,inmeritoriouscases,exemptanypersonsubjecttointernal revenuetaxfromcompliancewiththeprovisionsofthisSection. SEC.238.PrintingofReceiptsorSalesorCommercialInvoices.Allpersonswhoare engagedinbusinessshallsecurefromtheBureauofInternalRevenueanauthority toprintreceiptsorsalesorcommercialinvoicesbeforeaprintercanprintthesame. Noauthoritytoprintreceiptsorsalesorcommercialinvoicesshallbegranted unlessthereceiptsorinvoicestobeprintedareseriallynumberedandshallshow, amongotherthings,thename,businessstyle,TaxpayerIdentificationNumber(TIN) andbusinessaddressofthepersonorentitytousethesame,andsuchother informationthatmayberequiredbyrulesandregulationstobepromulgatedbythe SecretaryofFinance,uponrecommendationoftheCommissioner. Allpersonswhoprintreceiptorsalesorcommercialinvoicesshallmaintaina logbook/registeroftaxpayerswhoavailedoftheirprintingservices.The logbook/registershallcontainthefollowinginformation: (1)Names,TaxpayerIdentificationNumbersofthepersonsorentitiesforwhom thereceipts

orsalesorcommercialinvoiceswereprinted;and (2)Numberofbooklets,numberofsetsperbooklet,numberofcopiesperset andthe serialnumbersofthereceiptsorinvoicesineachbooklet. SEC.239.SigntobeExhibitedbyDistiller,Rectifier,Compounder,Repackerand WholesaleLiquorDealer.Everypersonengagedindistillingorrectifyingspirits, compoundingliquors,repackingwinesordistilledspirits,andeverywholesale liquordealershallkeepconspicuouslyontheoutsideofhisplaceofbusinessasign exhibiting,inlettersnotlessthansixcentimeters(6cms.)high,hisnameorfirm style,withthewords"RegisteredDistiller","RectifierofSpirits","Compounderof Liquors","RepackerofWinesorDistilledSpirits",or"WholesaleLiquorDealer",as thecasemaybe,andhisassessmentnumber. SEC.240.SigntobeExhibitedbyManufacturerofProductsofTobacco.Every manufacturerofcigars,cigarettesortobacco,andeverywholesaledealerinleaf tobaccoormanufacturedproductsoftobaccoshallplaceandkeeponoutsideofthe buildingwhereinhisbusinessiscarriedon,sothatitcanbedistinctlyseen,asign statinghisfullnameandbusinessinlettersnotlessthansixcentimeters(6cms.) highandalsogivinghisassessmentnumber. SEC.241.ExhibitionofCertificateofPaymentatPlaceofBusiness.Thecertificate orreceiptsshowingpaymentoftaxesissuedtoapersonengagedinabusiness subjecttoanannualregistrationfeeshallbekeptconspicuouslyexhibitedinplain viewinorattheplacewherethebusinessisconducted;andincaseofapeddleror otherpersonsnothavingafixedplaceofbusiness,shallbekeptinthepossessionof theholderthereof,subjecttoproductionupondemandofanyinternalrevenue officer. SEC.242.ContinuationofBusinessofDeceasedPerson.Whenanyindividualwho haspaidtheannualregistrationfeedies,andthesamebusinessiscontinuedbythe personorpersonsinterestedinhisestate,noadditionalpaymentshallberequired fortheresidueofthetermwhichthetaxwaspaid:Provided,however,Thatthe personorpersonsinterestedintheestateshould,withinthirty(30)daysfromthe deathofthedecedent,submittotheBureauofInternalRevenueortheregionalor revenueDistrictOfficeinventoriesofgoodsorstockshadatthetimeofsuchdeath.

TherequirementunderthisSectionshallalsobeapplicableinthecaseoftransferof ownershiporchangeofnameofthebusinessestablishment. SEC.243.RemovalofBusinesstoOtherLocation.Anybusinessforwhichthe annualregistrationfeehasbeenpaidmay,subjecttotherulesandregulations prescribedbytheSecretaryofFinance,uponrecommendationoftheCommissioner, beremovedandcontinuedinanyotherplacewithoutthepaymentofadditionaltax duringthetermforwhichthepaymentwasmade. CHAPTERIII RULESANDREGULATIONS SEC.244.AuthorityofSecretaryofFinancetoPromulgateRulesandRegulations. TheSecretaryofFinance,uponrecommendationoftheCommissioner,shall promulgateallneedfulrulesandregulationsfortheeffectiveenforcementofthe provisionsofthisCode. SEC.245.SpecificProvisionstobeContainedinRulesandRegulations.Therules andregulationsoftheBureauofInternalRevenueshall,amongotherthins,contain provisionsspecifying,prescribingordefining: (a)ThetimeandmannerinwhichRevenueRegionalDirectorshallcanvasstheir respectiveRevenueRegionsforthepurposeofdiscoveringpersonsandproperty liabletonationalinternalrevenuetaxes,andthemannerinwhichtheirlistsand recordsoftaxablepersonsandtaxableobjectsshallbemadeandkept; (b)Theformsoflabels,brandsormarkstoberequiredongoodssubjecttoan excisetax,andthemannerinwhichthelabelling,brandingormarkingshallbe effected; (c)Theconditionsunderwhichandthemannerinwhichgoodsintendedfor export,whichifnotexportedwouldbesubjecttoanexcisetax,shallbelabelled, brandedormarked;

 (d)Theconditionstobeobservedbyrevenueofficersrespectingtheinstitutions andconductoflegalactionsandproceedings; (e)Theconditionsunderwhichgoodsintendedforstorageinbonded warehousesshallbeconveyedthither,theirmannerofstorageandthemethodof keepingtheentriesandrecordsinconnectiontherewith,alsothebookstobekept byRevenueInspectorsandthereportstobemadebytheminconnectionwiththeir supervisionofsuchhouses; (f)Theconditionsunderwhichdenaturedalcoholmayberemovedanddealtin, thecharacterandquantityofthedenaturingmaterialtobeused,themannerin whichtheprocessofdenaturingshallbeeffected,soastorenderthealcohol suitablydenaturedandunfitfororalintake,thebondstobegiven,thebooksand recordstobekept,theentriestobemadetherein,thereportstobemadetothe Commissioner,andthesignstobedisplayedinthebusinessorbythepersonfor whomsuchdenaturingisdoneorbywhom,suchalcoholisdealtin; (g)Themannerinwhichrevenueshallbecollectedandpaid,theinstrument, documentorobjecttowhichrevenuestampsshallbeaffixed,themodeof cancellationofthesame,themannerinwhichtheproperbooks,records,invoices andotherpapersshallbekeptandentriesthereinmadebythepersonsubjecttothe tax,aswellasthemannerinwhichlicensesandstampsshallbegatheredupand returnedafterservingtheirpurposes; (h)Theconditionstobeobservedbyrevenueofficersrespectingthe enforcementofTitleIIIimposingataxonestateofadecedent,andothertransfers mortiscausa,aswellasongiftsandsuchotherrulesandregulationswhichthe CommissionermayconsidersuitablefortheenforcementofthesaidTitleIII; (i)Themannerinwhichtaxreturns,informationandreportsshallbeprepared andreportedandthetaxcollectedandpaid,aswellastheconditionsunderwhich evidenceofpaymentshallbefurnishedthetaxpayer,andthepreparationand publicationoftaxstatistics;

(j)Themannerinwhichinternalrevenuetaxes,suchasincometax,including withholdingtax,estateanddonor'staxes,valueaddedtax,otherpercentagetaxes, excisetaxesanddocumentarystamptaxesshallbepaidthroughthecollection officersoftheBureauofInternalRevenueorthroughdulyauthorizedagentbanks whichareherebydeputizedtoreceivepaymentsofsuchtaxesandthereturns, papersandstatementsthatmaybefiledbythetaxpayersinconnectionwiththe paymentofthetax:Provided,however,Thatnotwithstandingtheotherprovisions ofthisCodeprescribingtheplaceoffilingofreturnsandpaymentoftaxes,the Commissionermay,byrulesandregulations,requirethatthetaxreturns,papers andstatementsthatmaybefiledbythetaxpayersinconnectionwiththepaymentof thetax.Provided,however,ThatnotwithstandingtheotherprovisionsofthisCode prescribingtheplaceoffilingofreturnsandpaymentoftaxes,theCommissioner may,byrulesandregulationsrequirethatthetaxreturns,papersandstatements andtaxesoflargetaxpayersbefiledandpaid,respectively,throughcollection officersorthroughdulyauthorizedagentbanks:Provided,further,Thatthe Commissionercanexercisethispowerwithinsix(6)yearsfromtheapprovalof RepublicActNo.7646orthecompletionofitscomprehensivecomputerization program,whichevercomesearlier:Provided,finally,Thatseparatevenuesforthe Luzon,VisayasandMindanaoareasmaybedesignatedforthefilingoftaxreturns andpaymentoftaxesbysaidlargetaxpayers. ForthepurposeofthisSection,"largetaxpayer"meansataxpayerwhosatisfiesany ofthefollowingcriteria; (1)ValueAddedTax(VAT).BusinessestablishmentwithVATpaidorpayableofat leastOnehundredthousandpesos(P100,000)foranyquarterofthepreceding taxableyear; (2)ExciseTax.Businessestablishmentwithexcisetaxpaidorpayableofatleast Onemillionpesos(P1,000,000)fortheprecedingtaxableyear; (3)CorporateIncomeTax.Businessestablishmentwithannualincometaxpaidor payableofatleastOnemillionpesos(P1,000,000)fortheprecedingtaxableyear; and (4)WithholdingTax.Businessestablishmentwithwithholdingtaxpaymentor remittanceofatleastOnemillionpesos(P1,000,000)fortheprecedingtaxableyear.

Provided,however,ThattheSecretaryofFinance,uponrecommendationofthe Commissioner,maymodifyoraddtotheabovecriteriafordeterminingalarge taxpayerafterconsideringsuchfactorsasinflation,volumeofbusiness,wageand employmentlevels,andsimilareconomicfactors. ThepenaltiesprescribedunderSection248ofthisCodeshallbeimposedonany violationoftherulesandregulationsissuedbytheSecretaryofFinance,upon recommendationoftheCommissioner,prescribingtheplaceoffilingofreturnsand paymentsoftaxesbylargetaxpayers. SEC.246.NonRetroactivityofRulings.Anyrevocation,modificationorreversalof anyoftherulesandregulationspromulgatedinaccordancewiththepreceding SectionsoranyoftherulingsorcircularspromulgatedbytheCommissionershall notbegivenretroactiveapplicationiftherevocation,modificationorreversalwill beprejudicialtothetaxpayers,exceptinthefollowingcases: (a)Wherethetaxpayerdeliberatelymisstatesoromitsmaterialfactsfromhis returnoranydocumentrequiredofhimbytheBureauofInternalRevenue; (b)WherethefactssubsequentlygatheredbytheBureauofInternalRevenueare materiallydifferentfromthefactsonwhichtherulingisbased;or (c)Wherethetaxpayeractedinbadfaith. TITLEX STATUTORYOFFENSESANDPENALTIES CHAPTERI ADDITIONSTOTAX

SEC.247.GeneralProvisions. (a)TheadditionstothetaxordeficiencytaxprescribedinthisChaptershall applytoalltaxes,feesandchargesimposedinthisCode.TheAmountsoaddedto thetaxshallbecollectedatthesametime,inthesamemannerandaspartofthetax. (b)IfthewithholdingagentistheGovernmentoranyofitsagencies,political subdivisionsorinstrumentalities,oragovernmentownedorcontrolled corporation,theemployeethereofresponsibleforthewithholdingandremittance ofthetaxshallbepersonallyliablefortheadditionstothetaxprescribedherein. (c)theterm"person",asusedinthisChapter,includesanofficeroremployeeof acorporationwhoassuchofficer,employeeormemberisunderadutytoperform theactinrespectofwhichtheviolationoccurs. SEC.248.CivilPenalties. (A)Thereshallbeimposed,inadditiontothetaxrequiredtobepaid,apenalty equivalenttotwentyfivepercent(25%)oftheamountdue,inthefollowingcases: (1)Failuretofileanyreturnandpaythetaxduethereonasrequiredunder theprovisionsofthisCodeorrulesandregulationsonthedateprescribed;or (2)UnlessotherwiseauthorizedbytheCommissioner,filingareturnwithan internalrevenueofficerotherthanthosewithwhomthereturnisrequiredtobe filed;or (3)Failuretopaythedeficiencytaxwithinthetimeprescribedforits paymentinthenoticeofassessment;or (4)Failuretopaythefullorpartoftheamountoftaxshownonanyreturn requiredtobefiledundertheprovisionsofthisCodeorrulesandregulations,orthe

fullamountoftaxdueforwhichnoreturnisrequiredtobefiled,onorbeforethe dateprescribedforitspayment. (B)Incaseofwillfulneglecttofilethereturnwithintheperiodprescribedbythis Codeorbyrulesandregulations,orincaseafalseorfraudulentreturniswillfully made,thepenaltytobeimposedshallbefiftypercent(50%)ofthetaxorofthe deficiencytax,incase,anypaymenthasbeenmadeonthebasisofsuchreturn beforethediscoveryofthefalsityorfraud:Provided,Thatasubstantial underdeclarationoftaxablesales,receiptsorincome,orasubstantialoverstatement ofdeductions,asdeterminedbytheCommissionerpursuanttotherulesand regulationstobepromulgatedbytheSecretaryofFinance,shallconstituteprima facieevidenceofafalseorfraudulentreturn:Provided,further,Thatfailureto reportsales,receiptsorincomeinanamountexceedingthirtypercent(30%)ofthat declaredperreturn,andaclaimofdeductionsinanamountexceeding(30%)of actualdeductions,shallrenderthetaxpayerliableforsubstantialunderdeclaration ofsales,receiptsorincomeorforoverstatementofdeductions,asmentioned herein. SEC.249.Interest. (A)InGeneral.Thereshallbeassessedandcollectedonanyunpaidamountoftax, interestattherateoftwentypercent(20%)perannum,orsuchhigherrateasmay beprescribedbyrulesandregulations,fromthedateprescribedforpaymentuntil theamountisfullypaid. (B)DeficiencyInterest.Anydeficiencyinthetaxdue,asthetermisdefinedinthis Code,shallbesubjecttotheinterestprescribedinSubsection(A)hereof,which interestshallbeassessedandcollectedfromthedateprescribedforitspayment untilthefullpaymentthereof. (C)DelinquencyInterest.Incaseoffailuretopay: (1)Theamountofthetaxdueonanyreturntobefiled,or (2)Theamountofthetaxdueforwhichnoreturnisrequired,or

 (3)Adeficiencytax,oranysurchargeorinterestthereonontheduedate appearinginthenoticeanddemandoftheCommissioner,thereshallbeassessed andcollectedontheunpaidamount,interestattherateprescribedinSubsection (A)hereofuntiltheamountisfullypaid,whichinterestshallformpartofthetax. (D)InterestonExtendedPayment.Ifanypersonrequiredtopaythetaxis qualifiedandelectstopaythetaxoninstallmentundertheprovisionsofthisCode, butfailstopaythetaxoranyinstallmenthereof,oranypartofsuchamountor installmentonorbeforethedateprescribedforitspayment,orwherethe Commissionerhasauthorizedanextensionoftimewithinwhichtopayataxora deficiencytaxoranypartthereof,thereshallbeassessedandcollectedinterestat theratehereinaboveprescribedonthetaxordeficiencytaxoranypartthereof unpaidfromthedateofnoticeanddemanduntilitispaid. SEC.250.FailuretoFileCertainInformationReturns.Inthecaseofeachfailureto fileaninformationreturn,statementorlist,orkeepanyrecord,orsupplyany informationrequiredbythisCodeorbytheCommissioneronthedateprescribed therefor,unlessitisshownthatsuchfailureisduetoreasonablecauseandnotto willfulneglect,thereshall,uponnoticeanddemandbytheCommissioner,bepaid bythepersonfailingtofile,keeporsupplythesame,Onethousandpesos(1,000) foreachfailure:Provided,however,Thattheaggregateamounttobeimposedforall suchfailuresduringacalendaryearshallnotexceedTwentyfivethousandpesos (P25,000). SEC.251.FailureofaWithholdingAgenttoCollectandRemitTax.Anyperson requiredtowithhold,accountfor,andremitanytaximposedbythisCodeorwho willfullyfailstowithholdsuchtax,oraccountforandremitsuchtax,oraidsorabets inanymannertoevadeanysuchtaxorthepaymentthereof,shall,inadditionto otherpenaltiesprovidedforunderthisChapter,beliableuponconvictiontoa penaltyequaltothetotalamountofthetaxnotwithheld,ornotaccountedforand remitted. SEC.252.FailureofaWithholdingAgenttorefundExcessWithholdingTax.Any employer/withholdingagentwhofailsorrefusestorefundexcesswithholdingtax shall,inadditiontothepenaltiesprovidedinthisTitle,beliabletoapenaltytothe totalamountofrefundswhichwasnotrefundedtotheemployeeresultingfromany excessoftheamountwithheldoverthetaxactuallydueontheirreturn.

 CHAPTERII CRIMES,OTHEROFFENSESANDFORFEITURES SEC.253.GeneralProvisions. (a)AnypersonconvictedofacrimepenalizedbythisCodeshall,inadditionto beingliableforthepaymentofthetax,besubjecttothepenaltiesimposedherein: Provided,Thatpaymentofthetaxdueafterapprehensionshallnotconstitutea validdefenseinanyprosecutionforviolationofanyprovisionofthisCodeorinany actionfortheforfeitureofuntaxedarticles. (b)Anypersonwhowillfullyaidsorabetsinthecommissionofacrimepenalized hereinorwhocausesthecommissionofanysuchoffensebyanothershallbeliable inthesamemannerastheprincipal. (c)IftheoffenderisnotacitizenofthePhilippines,heshallbedeported immediatelyafterservingthesentencewithoutfurtherproceedingsfordeportation. Ifheisapublicofficeroremployee,themaximumpenaltyprescribedfortheoffense shallbeimposedand,inaddition,heshallbedismissedfromthepublicserviceand perpetuallydisqualifiedfromholdinganypublicoffice,tovoteandtoparticipatein anyelection.IftheoffenderisaCertifiedPublicAccountant,hiscertificateasa CertifiedPublicAccountantshall,uponconviction,beautomaticallyrevokedor cancelled. (d)Inthecaseofassociations,partnershipsorcorporations,thepenaltyshallbe imposedonthepartner,president,generalmanager,branchmanager,treasurer, officerincharge,andtheemployeesresponsiblefortheviolation. (e)ThefinestobeimposedforanyviolationoftheprovisionsofthisCodeshall notbelowerthanthefinesimposedhereinortwicetheamountoftaxes,interest andsurchargesduefromthetaxpayer,whicheverishigher.

SEC.254.AttempttoEvadeorDefeatTax.Anypersonwhowillfullyattemptsin anymannertoevadeordefeatanytaximposedunderthisCodeorthepayment thereofshall,inadditiontootherpenaltiesprovidedbylaw,uponconviction thereof,bepunishedbyafinenotlessthanThirtythousand(P30,000)butnotmore thanOnehunderdthousandpesos(P100,000)andsufferimprisonmentofnotless thantwo(2)yearsbutnotmorethanfour(4)years:Provided,Thattheconviction oracquittalobtainedunderthisSectionshallnotbeabartothefilingofacivilsuit forthecollectionoftaxes. SEC.255.FailuretoFileReturn,SupplyCorrectandAccurateInformation,PayTax WithholdandRemitTaxandRefundExcessTaxesWithheldonCompensation.Any personrequiredunderthisCodeorbyrulesandregulationspromulgated thereundertopayanytaxmakeareturn,keepanyrecord,orsupplycorrectthe accurateinformation,whowillfullyfailstopaysuchtax,makesuchreturn,keep suchrecord,orsupplycorrectandaccurateinformation,orwithholdorremittaxes withheld,orrefundexcesstaxeswithheldoncompensation,atthetimeortimes requiredbylaworrulesandregulationsshall,inadditiontootherpenalties providedbylaw,uponconvictionthereof,bepunishedbyafineofnotlessthanTen thousandpesos(P10,000)andsufferimprisonmentofnotlessthanone(1)yearbut notmorethanten(10)years. Anypersonwhoattemptstomakeitappearforanyreasonthatheoranotherhasin factfiledareturnorstatement,oractuallyfilesareturnorstatementand subsequentlywithdrawsthesamereturnorstatementaftersecuringtheofficial receivingsealorstampofreceiptofinternalrevenueofficewhereinthesamewas actuallyfiledshall,uponconvictiontherefor,bepunishedbyafineofnotlessthan Tenthousandpesos(P10,000)butnotmorethanTwentythousandpesos(P20,000) andsufferimprisonmentofnotlessthanone(1)yearbutnotmorethanthree(3) years. SEC.256.PenalLiabilityofCorporations.Anycorporation,associationorgeneral copartnershipliableforanyoftheactsoromissionspenalizedunderthisCode,in additiontothepenaltiesimposedhereinupontheresponsiblecorporateofficers, partners,oremployeesshall,uponconvictionforeachactoromission,bepunished byafineofnotlessthanFiftythousandpesos(P50,000)butnotmorethanOne hundredthousandpesos(P100,000). SEC.257.PenalLiabilityforMakingFalseEntries,RecordsorReports,orUsing FalsifiedorFakeAccountableForms.

 (A)AnyfinancialofficerorindependentCertifiedPublicAccountantengagedto examineandauditbooksofaccountsoftaxpayersunderSection232(A)andany personunderhisdirectionwho: (1)Willfullyfalsifiesanyreportorstatementbearingonanyexaminationor audit,orrendersareport,includingexhibits,statements,schedulesorotherforms ofaccountancyworkwhichhasnotbeenverifiedbyhimpersonallyorunderhis supervisionorbyamemberofhisfirmorbyamemberofhisstaffinaccordance withsoundauditingpractices;or (2)Certifiesfinancialstatementsofabusinessenterprisecontaininganessential misstatementoffactsoromissioninrespectofthetransactions,taxableincome, deductionandexemptionofhisclient;or (B)Anypersonwho: (1)NotbeinganindependentCertifiedPublicAccountantaccordingtoSection 232(B)orafinancialofficer,examinesandauditsbooksofaccountsoftaxpayers;or (2)Offerstosignandcertifyfinancialstatementswithoutaudit;or (3)Offersanytaxpayertheuseofaccountingbookkeepingrecordsforinternal revenuepurposesnotinconformitywiththerequirementsprescribedinthisCode orrulesandregulationspromulgatedthereunder;or (4)Knowinglymakesanyfalseentryorentersanyfalseorfictitiousnameinthe booksofaccountsorrecordmentionedintheprecedingparagraphs;or (5)Keepstwo(2)ormoresetsofsuchrecordsorbooksofaccounts;or

(6)Inanywaycommitsanactoromission,inviolationoftheprovisionsofthis Section;or (7)FailstokeepthebooksofaccountsorrecordsmentionedinSection232ina nativelanguage,EnglishorSpanish,ortomakeatrueandcompletetranslationas requiredinSection234ofthisCode,orwhosebooksofaccountsorrecordskeptina nativelanguage,EnglishorSpanish,andfoundtobeatmaterialvariancewithbooks orrecordskeptbyhiminanotherlanguage;or (8)Willfullyattemptsinanymannertoevadeordefeatanytaximposedunder thisCode,orknowinglyusesfakeorfalsifiedrevenueofficialreceipts,Lettersof Authority,certificatesauthorizingregistration,TaxCreditCertificates,TaxDebit Memorandaandotheraccountableformsshall,uponconvictionforeachactor omission,bepunishedbyafinenotlessthanFiftythousandpesos(P50,000)butnot morethanOnehundredpesos(P100,000)andsufferimprisonmentofnotlessthan two(2)yearsbutnotmorethansix(6)years. IftheoffenderisaCertifiedPublicAccountant,hiscertificateasaCertifiedPublic Accountantshallbeautomaticallyrevokedorcancelleduponconviction. Inthecaseofforeigners,convictionunderthisCodeshallresultinhisimmediate deportationafterservingsentence,withoutfurtherproceedingsfordeportation. SEC.258.UnlawfulPursuitofBusiness.Anypersonwhocarriesonanybusiness forwhichanannualregistrationfeeisimposedwithoutpayingthetaxasrequired bylawshall,uponconvictionforeachactoromission,bepunishedbyafineofnot lessthanFivethousandpesos(P5,000)butnotmorethanTwentythousandpesos (P20,000)andsufferimprisonmentofnotlessthansix(6)monthsbutnotmore thantwo(2)years:Provided,Thatinthecaseofapersonengagedinthebusinessof distilling,rectifying,repacking,compoundingormanufacturinganyarticlesubject toexcisetax,heshall,uponconvictionforeachactoromission,bepunishedbya fineofnotlessthanThirtythousandpesos(P30,000)butnotmorethanFifty thousandpesos(P50,000)andsufferimprisonmentofnotlessthantwo(2)years butnotmorethanfour(4)years. SEC.259.IllegalCollectionofForeignPayments.Anypersonwhoknowingly undertakesthecollectionofforeignpaymentsasprovidedunderSection67ofthis

Codewithouthavingobtainedalicensetherefor,orwithoutcomplyingwithits implementingrulesandregulations,shall,uponconvictionforeachactoromission, bepunishedbyafineofnotlessthanTwentythousandpesos(P20,000)butnot morethanFiftythousandpesos(P50,000)andsufferimprisonmentofnotlessthan one(1)yearbutnotmorethantwo(2)years. SEC.260.UnlawfulPossessionofCigarettePaperinBobbinsorRolls,Etc.Itshallbe unlawfulforanypersontohaveinhispossessioncigarettepaperinbobbinsorrolls, cigarettetippingpaperorcigarettefiltertips,withoutthecorrespondingauthority thereforissuedbytheCommissioner.Anyperson,importer,manufacturerofcigar andcigarettes,whohasbeenfoundguiltyunderthisSection,shall,uponconviction foreachactoromission,bepunishedbyafineofnotlessthanTwentythousand pesos(P20,000)butnotmorethanOnehundredthousandpesos(P1000,000)and sufferimprisonmentforatermofnotlessthansix(6)yearsandone(1)daybutnot morethantwelve(12)years. SEC.261.UnlawfulUseofDenaturedAlcohol.Anypersonwhoforthepurposeof manufacturinganybeverage,usesdenaturedalcoholoralcoholspeciallydenatured tobeusedformotivepowerorwithdrawnunderbondforindustrialusesoralcohol knowinglymisrepresentedtobedenaturedtobeunfitfororalintakeorwho knowinglysellsoroffersforsaleanybeveragemadeinwholeorinpartfromsuch alcoholorwhousessuchalcoholforthemanufactureofliquidmedicinal preparationstakeninternally,orknowinglysellsoroffersforsalesuchpreparations containingasaningredientsuchalcohol,shalluponconvictionforeachactor omissionbepunishedbyafineofnotlessthanTwentythousandpesos(P20,000) butnotmorethanOnehundredthousandpesos(P100,000)andsuffer imprisonmentforatermofnotlessthansix(6)yearsandone(1)daybutnotmore thantwelve(12)years. Anypersonwhoshallunlawfullyrecoverorattempttorecoverbydistillationor otherprocessanydenaturedalcoholorwhoknowinglysellsoroffersforsale, concealsorotherwisedisposesofalcoholsorecoveredorredistilledshallbesubject tothesamepenaltiesimposedunderthisSection. SEC.262.ShipmentorRemovalofLiquororTobaccoProductsunderFalseNameor BrandorasanImitationofanyExistingorOtherwiseKnownProductNameor Brand.Anypersonwhoships,transportsorremovesspirituous,compoundedor fermentedliquors,winesoranymanufacturedproductsoftobaccounderanyother thanthepropernameorbrandknowntothetradeasdesignatingthekindand qualityofthecontentsofthecask,bottleorpackagecontainingthesameorasan

imitationofanyexistingorotherwiseknownproductnameorbrandorcausessuch acttobedone,shall,uponconvictionforeachactoromission,bepunishedbyafine ofnotlessthanTwentythousandpesos(P20,000)butnotmorethanOnehundred thousandpesos(P1000,000)andsufferimprisonmentofnotlessthansix(6)years andone(1)daybutnotmorethantwelve(12)years. SEC.263.UnlawfulPossessionorRemovalofArticlesSubjecttoExciseTaxwithout PaymentoftheTax.Anypersonwhoownsand/orisfoundinpossessionof importedarticlessubjecttoexcisetax,thetaxonwhichhasnotbeenpaidin accordancewithlaw,oranypersonwhoownsand/orisfoundinpossessionof importedtaxexemptarticlesotherthanthosetowhomtheyarelegallyissuedshall bepunishedby: (a)AfineofnotlessthanOnethousandpesos(P1,000)normorethanTwo thousandpesos(P2,000)andsufferimprisonmentofnotlessthansixty(60)days butnotmorethanonehundred(100)days,iftheappraisedvalue,tobedetermined inthemannerprescribedintheTariffandCustomsCode,includingdutiesandtaxes, ofthearticlesdoesnotexceedOnethousandpesos(P1,000). (b)AfineofnotlessthanTenthousandpesos(P10,000)butnotmorethan Twentythousandpesos(P20,000)andsufferimprisonmentofnotlessthantwo(2) yearsbutnotmorethanfour(4)years,iftheappraisedvalue,tobedeterminedin themannerprescribedintheTariffandCustomsCode,includingdutiesandtaxes,of thearticlesexceedsOnethousandpesos(P1,000)butdoesnotexceedFifty thousandpesos(P50,000); (c)AfineofnotlessthanThirtythousandpesos(P30,000)butnotmorethan Sixtythousandpesos(P60,000)andsufferimprisonmentofnotlessthanfour(4) yearsbutnotmorethansix(6)years,iftheappraisedvalue,tobedeterminedinthe mannerprescribedintheTariffandCustomsCode,includingdutiesandtaxesofthe articlesismorethanFiftythousandpesos(P50,000)butdoesnotexceedOne hundredfiftythousandpesos(P150,000);or (d)AfineofnotlessthanFiftythousandpesos(P50,000)butnotmorethanOne hundredthousandpesos(P100,000)andsufferimprisonmentofnotlessthanten (10)yearsbutnotmorethantwelve(12)years,iftheappraisedvalue,tobe determinedinthemannerprescribedintheTariffandCustomsCode,including

dutiesandtaxes,ofthearticlesexceedsOnehundredfiftythousandpesos (P150,000). Anypersonwhoisfoundinpossessionoflocallymanufacturedarticlessubjectto excisetax,thetaxonwhichhasnotbeenpaidinaccordancewithlaw,oranyperson whoisfoundinpossessionofsucharticleswhichareexemptfromexcisetaxother thanthosetowhomthesameislawfullyissuedshallbepunishedwithafineofnot lessthan(10)timestheamountofexcisetaxdueonthearticlesfoundbutnotless thanFivehundredpesos(P500)andsufferimprisonmentofnotlessthantwo(2) yearsbutnotmorethanfour(4)years. Anymanufacturer,ownerorpersoninchargeofanyarticlesubjecttoexcisetax whoremovesorallowsorcausestheunlawfulremovalofanysucharticlesfromthe placeofproductionorbondedwarehouse,uponwhichtheexcisetaxhasnotbeen paidatthetimeandinthemannerrequired,andanypersonwhoknowinglyaidsor abetsintheremovalofsucharticlesasaforesaid,orconcealsthesameafterillegal removalshall,forthefirstoffense,bepunishedwithafineofnotlessthanten(10) timestheamountofexcisetaxdueonthearticlesbutnotlessthanOnethousand pesos(P1,000)andsufferimprisonmentofnotlessthanone(1)yearbutnotmore thantwo(2)years. Themereunexplainedpossessionofarticlessubjecttoexcisetax,thetaxonwhich hasnotbeenpaidinaccordancewithlaw,shallbepunishableunderthisSection. Sec.264.FailureorrefusaltoIssueReceiptsorSalesorCommercialInvoices, ViolationsrelatedtothePrintingofsuchReceiptsorInvoicesandOtherViolations. (a)Anypersonwho,beingrequiredunderSection237toissuereceiptsorsalesor commercialinvoices,failsorrefusestoissuesuchreceiptsofinvoices,issues receiptsorinvoicesthatdonottrulyreflectand/orcontainalltheinformation requiredtobeshowntherein,orusesmultipleordoublereceiptsorinvoices,shall, uponconvictionforeachactoromission,bepunishedbyafineofnotlessthanOne thousandpesos(P1,000)butnotmorethanFiftythousandpesos(P50,000)and sufferimprisonmentofnotlessthantwo(2)yearsbutnotmorethanfour(4)years. (b)Anypersonwhocommitsanyoftheactsenumeratedhereundershallbe penalizedinthesamemannerandtothesameextentasprovidedforinthisSection:

 (1)Printingofreceiptsorsalesorcommercialinvoiceswithoutauthorityfrom theBureauofInternalRevenue;or (2)Printingofdoubleormultiplesetsofinvoicesorreceipts;or (3)Printingofunnumberedreceiptsorsalesorcommercialinvoices,notbearing thename,businessstyle,TaxpayerIdentificationNumber,andbusinessaddressof thepersonorentity. SEC.265.OffensesRelatingtoStamps.Anypersonwhocommitsanyoftheacts enumeratedhereundershall,uponconvictionthereof,bepunishedbyafineofnot lessthanTwentythousandpesos(P20,000)butnotmorethanFiftythousandpesos (P50,000)andsufferimprisonmentofnotlessthanfour(4)yearsbutnotmorethan eight(8)years: (a)making,importing,selling,usingorpossessingwithoutexpressauthority fromtheCommissioner,anydieforprintingormakingstamps,labels,tagsor playingcards; (b)Erasingthecancellationmarksofanystamppreviouslyused,oralteringthe writtenfiguresorlettersorcancellationmarksoninternalrevenuestamps; (c)Possessingfalse,counterfeit,restoredoralteredstamps,labelsortagsor causingthecommissionofanysuchoffensebyanother; (d)Sellingorofferingforsaleanyboxorpackagecontainingarticlessubjectto excisetaxwithfalse,spuriousorcounterfeitstampsorlabelsorsellingfromany suchfraudulentbox,packageorcontainerasaforementioned;or (e)Givingawayoracceptingfromanother,orselling,buyingorusingcontainers onwhichthestampsarenotcompletelydestroyed.

Sec.266.FailuretoObeySummons.Anypersonwho,beingdulysummonedto appeartotestify,ortoappearandproducebooksofaccounts,records,memoranda orotherpapers,ortofurnishinformationasrequiredunderthepertinent provisionsofthisCode,neglectstoappearortoproducesuchbooksofaccounts, records,memorandaorotherpapers,ortofurnishsuchinformation,shall,upon conviction,bepunishedbyafineofnotlessthanFivethousandpesos(P5,000)but notmorethantenthousandpesos(P10,000)andsufferimprisonmentofnotless thanone(1)yearbutnotmorethantwo(2)years. SEC.267.DeclarationunderPenaltiesofPerjury.Anydeclaration,returnandother statementrequiredunderthisCode,shall,inlieuofanoath,containawritten statementthattheyaremadeunderthepenaltiesofperjury.Anypersonwho willfullyfilesadeclaration,returnorstatementcontaininginformationwhichisnot trueandcorrectastoeverymaterialmattershall,uponconviction,besubjecttothe penaltiesprescribedforperjuryundertheRevisedPenalCode. SEC.268.OtherCrimesandOffenses. (A)MisdeclarationorMisrepresentationofManufacturersSubjecttoExciseTax. Anymanufacturerwho,inviolationoftheprovisionsofTitleVIofthisCode, misdeclaresintheswornstatementrequiredthereinorinthesalesinvoice,any pertinentdataorinformationshallbepunishedbyasummarycancellationor withdrawalofthepermittoengageinbusinessasamanufacturerofarticlessubject toexcisetax. (B)ForfeitureofPropertyUsedinUnlicensedBusinessorDiesUsedforPrinting FalseStamps,Etc.Allchattels,machinery,andremovablefixturesofanysortused intheunlicensedproductionofarticlessubjecttoexcisetaxshallbeforfeited.Dies andotherequipmentusedfortheprintingormakingofanyinternalrevenuestamp, labelortagwhichisinimitationoforpurportstobealawfulstamp,labelortag shallalsobeforfeited. (C)ForfeitureofGoodsIllegallyStoredorRemoved.Unlessotherwisespecifically authorizedbytheCommissioner,allarticlessubjecttoexcisetaxshouldnotbe storedorallowedtoremaininthedistillerywarehouse,bondedwarehouseorother placewheremade,afterthetaxthereonhasbeenpaid;otherwise,allsucharticles shallbeforfeited.Articleswithdrawnfromanysuchplaceorfromcustomscustody

orimportedintothecountrywithoutthepaymentoftherequiredtaxshalllikewise beforfeited. CHAPTERIII PENALTIESIMPOSEDONPUBLICOFFICERS SEC.269.ViolationsCommittedbyGovernmentEnforcementOfficers.Every official,agent,oremployeeoftheBureauofInternalRevenueoranyotheragencyof theGovernmentchargedwiththeenforcementoftheprovisionsofthisCode,whois guiltyofanyoftheoffenseshereinbelowspecifiedshall,uponconvictionforeach actoromission,bepunishedbyafineofnotlessthanFiftythousandpesos (P50,000)butnotmorethanOnehundredthousandpesos(P100,000)andsuffer imprisonmentofnotlessthanten(10)yearsbutnotmorethanfifteen(15)years andshalllikewisesufferanadditionalpenaltyofperpetualdisqualificationtohold publicoffice,tovote,andtoparticipateinanypublicelection: (a)Extortionorwillfuloppressionthroughtheuseofhisofficeorwillful oppressionandharassmentofataxpayerwhorefused,declined,turneddownor rejectedanyofhisoffersspecifiedinparagraph(d)hereof; (b)Knowinglydemandingorreceivinganyfee,otherorgreatersumsthatare authorizedbylaworreceivinganyfee,compensationorreward,exceptasbylaw prescribed,fortheperformanceofanyduty; (c)Willfullyneglectingtogivereceipts,asbylawrequired,foranysumcollected intheperformanceofdutyorwillfullyneglectingtoperformanyotherduties enjoinedbylaw; (d)Offeringorundertakingtoaccomplish,fileorsubmitareportorassessment onataxpayerwithouttheappropriateexaminationofthebooksofaccountsortax liability,orofferingorundertakingtosubmitareportorassessmentlessthanthe amountduetheGovernmentforanyconsiderationorcompensation,orconspiring orcolludingwithanotherorotherstodefraudtherevenuesorotherwiseviolatethe provisionsofthisCode;

 (e)Neglectingorbydesignpermittingtheviolationofthelawbyanyother person; (f)Makingorsigninganyfalseentryorentriesinanybook,ormakingorsigning anyfalsecertificateorreturn; (g)Allowingorconspiringorcolludingwithanothertoallowtheunauthorized retrieval,withdrawalorrecallofanyreturn,statementordeclarationafterthesame hasbeenofficiallyreceivedbytheBureauofInternalRevenue; (h)HavingknowledgeorinformationofanyviolationofthisCodeorofanyfraud committedontherevenuescollectiblebytheBureauofInternalRevenue,failureto reportsuchknowledgeorinformationtotheirsuperiorofficer,orfailuretoreport asotherwiserequiredbylaw;and (i)Withouttheauthorityoflaw,demandingoracceptingorattemptingtocollect, directlyorindirectly,aspaymentorotherwiseanysumofmoneyorotherthingof valueforthecompromise,adjustmentorsettlementofanychargeorcomplaintfor anyviolationorallegedviolationofthisCode. Provided,Thattheprovisionsoftheforegoingparagraphnotwithstanding,any internalrevenueofficerforwhichaprimafaciecaseofgravemisconducthasbeen establishedshall,afterduenoticeandhearingoftheadministrativecaseandsubject toCivilServiceLaws,bedismissedfromtherevenueservice:Provided,further,That theterm"gravemisconduct",asdefinedinCivilServiceLaw,shallincludethe issuanceoffakelettersofauthorityandreceipts,forgeryofsignature,usurpationof authorityandhabitualissuanceofunreasonableassessments. SEC.270.UnlawfulDivulgenceofTradeSecrets.ExceptasprovidedinSection71of thisCodeandSection26ofRepublicActNo.6388,anyofficeroremployeeofthe BureauofInternalRevenuewhodivulgestoanypersonormakesknowninany othermannerthanmaybeprovidedbylawinformationregardingthebusiness, incomeorestateofanytaxpayer,thesecrets,operation,styleorwork,orapparatus ofanymanufacturerorproducer,orconfidentialinformationregardingthebusiness ofanytaxpayer,knowledgeofwhichwasacquiredbyhiminthedischargeofhis

officialduties,shalluponconvictionforeachactoromission,bepunishedbyafine ofnotlessthanFiftythousandpesos(P50,000)butnotmorethanOnehundred thousandpesos(P100,000),orsufferimprisonmentofnotlessthantwo(2)years butnotmorethanfive(5)years,orboth. SEC.271.UnlawfulInterestofRevenueLawEnforcersinBusiness.Anyinternal revenueofficerwhoisorshallbecomeinterested,directlyorindirectly,inthe manufacture,saleorimportationofanyarticlesubjecttoexcisetaxunderTitleVIof thisCodeorinthemanufactureorrepairorsale,ofanydieforprinting,ormaking ofstamps,orlabelsshalluponconvictionforeachactoromission,bepunishedbya fineofnotlessthanFivethousandpesos(P5,000)butnotmorethanTenthousand pesos(P10,000),orsufferimprisonmentofnotlessthantwo(2)yearsandone(1) daybutnotmorethanfour(4)years,orboth. SEC.272.ViolationofWithholdingTaxProvision.Everyofficeroremployeeofthe GovernmentoftheRepublicofthePhilippinesoranyofitsagenciesand instrumentalities,itspoliticalsubdivisions,aswellasgovernmentownedor controlledcorporations,includingtheBangkoSentralngPilipinas(BSP),who,under theprovisionsofthisCodeorrulesandregulationspromulgatedthereunder,is chargedwiththedutytodeductandwithholdanyinternalrevenuetaxandtoremit thesameinaccordancewiththeprovisionsofthisCodeandotherlawsisguiltyof anyoffensehereinbelowspecifiedshall,uponconvictionforeachactoromissionbe punishedbyafineofnotlessthanFivethousandpesos(P5,000)butnotmorethan Fiftythousandpesos(P50,000)orsufferimprisonmentofnotlessthansix(6) monthsandone(1)daybutnotmorethantwo(2)years,orboth: (a)Failingorcausingthefailuretodeductandwithholdanyinternalrevenuetax underanyofthewithholdingtaxlawsandimplementingrulesandregulations; (b)Failingorcausingthefailuretoremittaxesdeductedandwithheldwithinthe timeprescribedbylaw,andimplementingrulesandregulations;and (c)Failingorcausingthefailuretofilereturnorstatementwithinthetime prescribed,orrenderingorfurnishingafalseorfraudulentreturnorstatement requiredunderthewithholdingtaxlawsandrulesandregulations.

SEC.273.PenaltyforFailuretoIssueandExecuteWarrant.Anyofficialwhofailsto issueorexecutethewarrantofdistraintorlevywithinthirty(30)daysafterthe expirationofthetimeprescribedinSection207orwhoisfoundguiltyofabusing theexercisethereofbycompetentauthorityshallbeautomaticallydismissedfrom theserviceafterduenoticeandhearing. CHAPTERIV OTHERPENALPROVISIONS SEC.274.PenaltyforSecondandSubsequentOffenses.Inthecaseofreincidence, themaximumofthepenaltyprescribedfortheoffenseshallbeimposed. SEC.275.ViolationofOtherProvisionsofthisCodeorRulesandRegulationsin General.AnypersonwhoviolatesanyprovisionofthisCodeoranyruleor regulationpromulgatedbytheDepartmentofFinance,forwhichnospecificpenalty isprovidedbylaw,shall,uponconvictionforeachactoromission,bepunishedbya fineofnotmorethanOnethousandpesos(P1,000)orsufferimprisonmentofnot morethansix(6)months,orboth. SEC.276.PenaltyforSelling,Transferring,EncumberingorinAnyWayDisposingof PropertyPlacedUnderConstructiveDistraint.Anytaxpayer,whosepropertyhas beenplacedunderconstructivedistraint,whosells,transfers,encumbersorinany waydisposesofsaidproperty,oranypartthereof,withouttheknowledgeand consentoftheCommissioner,shall,uponconvictionforeachactoromission,be punishedbyafineofnotlessthantwicethevalueofthepropertysosold, encumberedordisposedofbutnotlessthanFiveThousandpesos(P5,000),or sufferimprisonmentofnotlessthantwo(2)yearsandone(1)daybutnotmore thanfour(4)years,ofboth. SEC.277.FailuretoSurrenderPropertyPlacedUnderDistraintandLevy.Any personhavinginhispossessionorunderhiscontrolanypropertyorrightsto property,uponwhichawarrantofconstructivedistraint,oractualdistraintand levyhasbeenissuedshall,upondemandbytheCommissioneroranyofhisdeputies executingsuchwarrant,surrendersuchpropertyorrighttopropertytothe Commissioneroranyofhisdeputies,unlesssuchpropertyorrightis,atthetimeof suchdemand,subjecttoanattachmentorexecutionunderanyjudicialprocess.Any

personwhofailsorrefusestosurrenderanyofsuchpropertyorrightshallbeliable inhisownpersonandestatetotheGovernmentinasumequaltothevalueofthe propertyorrightsnotsosurrenderedbutnotexceedingtheamountofthetaxes (includingpenaltiesandinterest)forthecollectionofwhichsuchwarranthadbeen issued,togetherwithcostandinterestifany,fromthedateofsuchwarrant.In addition,suchpersonshall,uponconvictionforeachactoromission,bepunished byafineofnotlessthanFivethousandpesos(P5,000),orsufferimprisonmentof notlessthansix(6)monthsandone(1)daybutnotmorethantwo(2)years,or both. SEC.278.ProcuringUnlawfulDivulgenceofTradeSecrets.Anypersonwhocauses orprocuresanofficeroremployeeoftheBureauofInternalRevenuetodivulgeany confidentialinformationregardingthebusiness,incomeorinheritanceofany taxpayer,knowledgeofwhichwasacquiredbyhiminthedischargeofhisofficial duties,andwhichitisunlawfulforhimtoreveal,andanypersonwhopublishesor printsinanymannerwhatever,notprovidedbylaw,anyincome,profit,lossor expenditureappearinginanyincometaxreturn,shallbepunishedbyafineofnot morethanTwothousandpesos(P2,000),orsufferimprisonmentofnotlessthansix (6)monthsnormorethanfive(5)years,orboth. SEC.279.ConfiscationandForfeitureoftheProceedsorInstrumentsofCrime.In additiontothepenaltyImposedfortheviolationoftheprovisionsofTitleXofthis Code,thesameshallcarrywithittheconfiscationandforfeitureinfavorofthe governmentoftheproceedsofthecrimeorvalueofthegoods,andtheinstruments ortoolswithwhichthecrimewascommitted:Provided,however,Thatifinthe courseoftheproceedings,itisestablishedthattheinstrumentsortoolsusedinthe illicitactbelongtoathirdperson,thesameshallbeconfiscatedandforfeitedafter duenoticeandhearinginaseparateproceedinginfavoroftheGovernmentifsuch thirdpersonleased,let,charteredorotherwiseentrustedthesametotheoffender: Provided,further,Thatincasethelesseesubleased,ortheborrower,charterer,or trusteeallowedtheuseoftheinstrumentsortoolstotheoffender,suchinstruments ortoolsshall,likewise,beconfiscatedandforfeited:Provided,finally,Thatproperty ofcommoncarriersshallnotbesubjecttoforfeiturewhenusedinthetransactionof theirbusinessassuchcommoncarrier,unlesstheowneroroperatorofsaid commoncarrierwas,atthetimeoftheillegalact,aconsentingpartyorprivy thereto,withoutprejudicetotheowner'srightofrecoveryagainsttheoffenderina civilorcriminalaction.Articleswhicharenotsubjectoflawfulcommerceshallbe destroyed. SEC.280.SubsidiaryPenalty.Ifthepersonconvictedforviolationofanyofthe provisionsofthisCodehasnopropertywithwhichtomeetthefineimposedupon

himbythecourt,orisunabletopaysuchfine,heshallbesubjecttoasubsidiary personalliabilityattherateofone(1)dayforeachEightpesosandfiftycentavos (P8.50)subjecttotherulesestablishedinArticle39oftheRevisedPenalCode. SEC.281.PrescriptionforViolationsofanyProvisionofthisCode.Allviolationsof anyprovisionofthisCodeshallprescribeafterFive(5)years. Prescriptionshallbegintorunfromthedayofthecommissionoftheviolationofthe law,andifthesamebenotknownatthetime,fromthediscoverythereofandthe institutionofjudicialproceedingsforitsinvestigationandpunishment. Theprescriptionshallbeinterruptedwhenproceedingsareinstitutedagainstthe guiltypersonsandshallbegintorunagainiftheproceedingsaredismissedfor reasonsnotconstitutingjeopardy. Thetermofprescriptionshallnotrunwhentheoffenderisabsentfromthe Philippines. SEC.282.Informer'sRewardtoPersonsInstrumentalintheDiscoveryofViolations oftheNationalInternalRevenueCodeandintheDiscoveryandSeizureofSmuggled Goods. (A)ForViolationsoftheNationalInternalRevenueCode.Anyperson,exceptan internalrevenueofficialoremployee,orotherpublicofficialoremployee,orhis relativewithinthesixthdegreeofconsanguinity,whovoluntarilygivesdefiniteand sworninformation,notyetinthepossessionoftheBureauofInternalRevenue, leadingtothediscoveryoffraudsupontheinternalrevenuelawsorviolationsof anyoftheprovisionsthereof,therebyresultingintherecoveryofrevenues, surchargesandfeesand/ortheconvictionoftheguiltypartyand/ortheimposition ofanyofthefineorpenalty,shallberewardedinasumequivalenttotenpercent (10%)oftherevenues,surchargesorfeesrecoveredand/orfineorpenaltyimposed andcollectedorOneMillionPesos(P1,000,000)percase,whicheverislower.The sameamountofrewardshallalsobegiventoaninformerwheretheoffenderhas offeredtocompromisetheviolationoflawcommittedbyhimandhisofferhasbeen acceptedbytheCommissionerandcollectedfromtheoffender:Provided,That shouldnorevenue,surchargesorfeesbeactuallyrecoveredorcollected,such personshallnotbeentitledtoareward:Provided,further,Thattheinformation

mentionedhereinshallnotrefertoacasealreadypendingorpreviously investigatedorexaminedbytheCommissioneroranyofhisdeputies,agentsor examiners,ortheSecretaryofFinanceoranyofhisdeputiesoragents:Provided, finally,Thattherewardprovidedhereinshallbepaidunderrulesandregulations issuedbytheSecretaryofFinance,uponrecommendationoftheCommissioner. (B)ForDiscoveryandSeizureofSmuggledGoods.Toencouragethepublicto extendfullcooperationineradicatingsmuggling,acashrewardequivalenttoten percent(10%)ofthefairmarketvalueofthesmuggledandconfiscatedgoodsor OneMillionPesos(P1,000,000)percase,whicheverislower,shallbegivento personsinstrumentalinthediscoveryandseizureofsuchsmuggledgoods. Thecashrewardsofinformersshallbesubjecttoincometax,collectedasafinal withholdingtax,atarateoftenpercent(10%). TheprovisionsoftheforegoingSubsectionsnotwithstanding,allpublicofficials, whetherincumbentorretired,whoacquiredtheinformationinthecourseofthe performanceoftheirdutiesduringtheirincumbency,areprohibitedfromclaiming informer'sreward. TITLEXI ALLOTMENTOFINTERNALREVENUE CHAPTERI DISPOSITIONANDALLOTMENTOFNATIONALINTERNALREVENUEINGENERAL SEC.283.DispositionofNationalInternalRevenue.NationalInternalrevenue collectedandnotappliedashereinaboveprovidedorotherwisespeciallydisposed ofbylawshallaccruetotheNationalTreasuryandshallbeavailableforthegeneral purposesoftheGovernment,withtheexceptionoftheamountssetapartbywayof allotmentasprovidedforunderRepublicActNo.7160,otherwiseknownasthe LocalGovernmentCodeof1991.

Inadditiontotheinternalrevenueallotmentasprovidedforinthepreceding paragraph,fiftypercent(50%)ofthenationaltaxescollectedunderSections106, 108and116ofthisCodeinexcessoftheincreaseincollectionsfortheimmediately precedingyearshallbedistributedasfollows: (a)Twentypercent(20%)shallaccruetothecityormunicipalitywheresuch taxesarecollectedandshallbeallocatedinaccordancewithSection150ofRepublic ActNo.7160,otherwiseknownastheLocalGovernmentCodeof1991;and (b)Eightypercent(80%)shallaccruetotheNationalGovernment. SEC.284.AllotmentfortheCommissiononAudit.Onehalfofonepercent(1/2of 1%)ofthecollectionsfromthenationalinternalrevenuetaxesnototherwise accruingtospecialaccountsinthegeneralfundofthenationalgovernmentshall accruetotheCommissiononAuditasafeeforauditingservicesrenderedtolocal governmentunits,excludingmaintenance,equipment,andotheroperatingexpenses asprovidedforinSection21ofPresidentialDecreeNo.898. TheSecretaryofFinanceisherebyauthorizedtodeductfromthemonthlyinternal revenuetaxcollectionsanamountequivalenttothepercentageashereinfixed,and toremitthesamedirectlytotheCommissiononAuditundersuchrulesand regulationsasmaybepromulgatedbytheSecretaryofFinanceandtheChairmanof theCommissiononAudit. SEC.285.AllotmentfortheBureauofInternalRevenue.Anamountequivalentto fivepercent(5%)oftheexcessofactualcollectionsofnationalinternalrevenue taxesoverthecollectiongoalshallaccruetothespecialfundoftheBureauof InternalRevenueandshallbetreatedasreceiptsautomaticallyappropriated.Said amountshallbeutilizedasincentivebonusforrevenuepersonnel,purchaseof necessaryequipmentandfacilitiesfortheimprovementoftaxadministration,as approvedbytheCommissioner:Provided,ThatthePresidentmay,upon recommendationoftheCommissioner,directthattheexcessbecreditedtoaSpecial AccountintheNationalTreasurytobeheldinthereserveavailablefordistribution asincentivebonusinthesubsequentyears. TheSecretaryofFinanceisherebyauthorizedtotransferfromtheTreasuryan amountequivalenttothepercentageashereinfixedandtoremitthesamedirectly totheBureauofInternalRevenueundersuchrulesandregulationsasmaybe promulgatedbytheSecretaryofFinance.

 CHAPTERII SPECIALDISPOSITIONOFCERTAINNATIONALINTERNALREVENUETAXES SEC.286.DispositionofProceedsofinsurancePremiumTax.Twentyfivepercent (25%)ofthepremiumtaxcollectedunderSection123ofthisCodeshallaccrueto theInsuranceFundascontemplatedinSection418ofPresidentialDecreeNo.612 whichshallbeusedforthepurposeofdefrayingtheexpensesoftheInsurance Commission.TheCommissionershallturnoveranddeliverthesaidInsuranceFund totheInsuranceCommissionerassoonasthecollectionismade. SEC.287.SharesofLocalGovernmentUnitsintheProceedsfromtheDevelopment andUtilizationoftheNationalWealth.LocalGovernmentunitsshallhavean equitableshareintheproceedsderivedfromtheutilizationanddevelopmentofthe nationalwealth,withintheirrespectiveareas,includingsharingthesamewiththe inhabitantsbywayofdirectbenefits. (A)AmountofShareofLocalGovernmentUnits.Localgovernmentunitsshall,in additiontotheinternalrevenueallotment,haveashareoffortypercent(40%)of thegrosscollectionderivedbythenationalgovernmentfromtheprecedingfiscal yearfromexcisetaxesonmineralproducts,royalties,andsuchothertaxes,feesor charges,includingrelatedsurcharges,interestsorfines,andfromitsshareinany coproduction,jointventureorproductionsharingagreementintheutilizationand developmentofthenationalwealthwithintheirterritorialjurisdiction. (B)ShareoftheLocalGovernmentsfromAnyGovernmentAgencyorGovernment OwnedorControlledCorporation.LocalGovernmentUnitsshallhaveashare, basedontheprecedingfiscalyear,fromtheproceedsderivedbyanygovernment agencyorgovernmentownedorcontrolledcorporationengagedintheutilization anddevelopmentofthenationalwealthbasedonthefollowingformula,whichever willproduceahighershareforthelocalgovernmentunit: (1)Onepercent(1%)ofthegrosssalesorreceiptsoftheprecedingcalendar year,or

(2)Fortypercent(40%)oftheexcisetaxesonmineralproducts,royalties,and suchothertaxes,feesorcharges,includingrelatedsurcharges,interestsorfinesthe governmentagencyorgovernmentownedorcontrolledcorporationswouldhave paidifitwerenototherwiseexempt. (C)AllocationofShares.TheshareintheprecedingSectionshallbedistributedin thefollowingmanner: (1)Wherethenaturalresourcesarelocatedintheprovince: (a)Provincetwentypercent(20%) (b)Componentcity/municipalityfortyfivepercent(45%);and (c)Barangaythirtyfivepercent(35%) Provided,however,Thatwherethenaturalresourcesarelocatedintwo(2)ormore cities,theallocationofsharesshallbebasedontheformulaonpopulationandland areaasspecifiedinsubsection(C)(1)hereof. (2)Wherethenaturalresourcesarelocatedinahighlyurbanizedorindependent componentcity: (a)Citysixtyfivepercent(65%);and (b)Barangaythirtyfivepercent(35%) Provided,however,Thatwherethenaturalresourcesarelocatedintwo(2)ormore cities,theallocationofsharesshallbebasedontheformulaonpopulationandland areaasspecifiedinsubsection(c)(1)hereof.

SEC.288.DispositionofIncrementalRevenues. (A)IncrementalRevenuesfromRepublicActNo.7660.Theincrementalrevenues fromtheincreaseinthedocumentarystamptaxesunderR.A.No.7660shallbeset asideforthefollowingpurposes: (1)In1994and1995,twentyfivepercent(25%)thereofrespectively,shall accruetotheUnifiedHomeLendingProgramunderExecutiveOrderNo.90 particularlyformasssocializedhousingprogramtobeallocatedasfollows:fifty percent(50%)formasssocializedhousing;thirtypercent(30%)forthecommunity mortgageprogram;andtwentypercent(20%)forlandbankinganddevelopmentto beadministeredbytheNationalHousingAuthority:Provided,Thatnomorethan onepercent(1%)oftherespectiveallocationshereofshallbeusedfor administrativeexpenses; (2)In1996,twentyfivepercent(25%)thereoftobeutilizedfortheNational HealthInsuranceProgramthathereaftermaybemandatedbylaw; (3)In1994andeveryyearthereafter,twentyfivepercent(25%)thereofshall accruetoaSpecialEducationFundtobeAdministeredbytheDepartmentof Education,CultureandSportsfortheconstructionandrepairofschoolfacilities, trainingorteachers,andprocurementorproductionofinstructionalmaterialsand teachingaids;and (4)In1994andeveryyearthereafter,fiftypercent(50%)thereofshallaccrueto aSpecialInfrastructureFundfortheConstructionandrepairofroads,bridges,dams andirrigation,seaportsandhydroelectricandotherindigenouspowerprojects: however,Thatfortheyears1994and1995,thirtypercent(30%),andfortheyears 1996,1997and1998,twentypercent(20%),ofthisfundshallbeallocatedfor depressedprovincesasdeclaredbythePresidentasofthetimeoftheeffectivityof R.A.No.7660:Provided,further,Thatavailmentsunderthisfundshallbe determinedbythePresidentonthebasisofequity. Provided,finally,Thatinparagraphs(2),(3),and(4)ofthisSection,notmoreone percent(1%)oftheallocatedfundsthereofshallbeusedforadministrative expensesbytheimplementingagencies.

 (B)IncrementalRevenuesfromRepublicActNo.8240.Fifteenpercent(15%)of theincrementalrevenuecollectedfromtheexcisetaxontobaccoproductsunderR. A.No.8240shallbeallocatedanddividedamongtheprovincesproducingburley andnativetobaccoinaccordancewiththevolumeoftobaccoleafproduction.The fundshallbeexclusivelyutilizedforprogramsinpursuitofthefollowingobjectives: (1)Cooperativeprojectsthatwillenhancebetterqualityofagriculturalproducts andincreaseincomeandproductivityoffarmers; (2)Livelihoodprojects,particularlythedevelopmentofalternativefarming systemtoenhancefarmer'sincome;and (3)Agroindustrialprojectsthatwillenabletobaccofarmerstobeinvolvedinthe managementandsubsequentownershipofprojects,suchaspostharvestand secondaryprocessinglikecigarettemanufacturingandbyproductutilization. TheDepartmentofBudgetandManagement,inconsultationwiththeOversight CommitteecreatedundersaidR.A.No.8240,shallissuethecorrespondingrulesand regulationsgoverningtheallocationanddisbursementofthisfund. SEC.289.SpecialFinancialSupporttoBeneficiaryProvincesProducingVirginia Tobacco.ThefinancialsupportgivenbytheNationalGovernmentforthe beneficiaryprovincesshallbeconstitutedandcollectedfromtheproceedsoffifteen percent(15%)oftheexcisetaxesonlocallymanufacturedVirginiatypeof cigarettes. Thefundsallottedshallbedividedamongthebeneficiaryprovincesprorata accordingtothevolumeofVirginiatobaccoproduction. ProductionproducingVirginiatobaccoshallbethebeneficiaryprovincesunder RepublicActNo.7171.Provided,however,thattoqualifyasbeneficiaryunderR.A. No.7171,aprovincemusthaveanaverageannualproductionofVirginialeaf tobaccoinanamountnotlessthanonemillionkilos:Provided,further,thatthe DepartmentofBudgetandManagement(DBM)shalleachyeardeterminethe

beneficiaryprovincesandtheircomputedshareofthefundsunderR.A.No.7171, referringtotheNationalTobaccoAdministration(NTA)recordsoftobacco acceptances,atthetobaccotradingcentersfortheimmediatepastyear. TheSecretaryofBudgetandManagementisherebydirectedtoretainannuallythe saidfundsequivalenttofifteenpercent(15%)ofexcisetaxesonlocally manufacturedVirginiatypecigarettestoberemittedtothebeneficiaryprovinces qualifiedunderR.A.No.7171. Theprovisionofexistinglawstothecontrarynotwithstanding,thefifteenpercent (15%)sharefromgovernmentrevenuesmentionedinR.A.No.7171andduetothe Virginiatobaccoproducingprovincesshallbedirectlyremittedtotheprovinces concerned. Provided,ThatthisSectionshallbeimplementedinaccordancewiththeguidelines ofMemorandumCircularNo.61AdatedNovember28,1993,whichamended MemorandumCircularNo.61,entitled"PrescribingGuidelinesforImplementing RepublicActNo.7171",datedJanuary1,1992. Provided,further,Thatinadditiontothelocalgovernmentunitsmentionedinthe abovecircular,theconcernedofficialsintheprovinceshallbeconsultedasregards theidentificationofprojectstobefinanced. TITLEXII OVERSIGHTCOMMITTEE SEC.290.CongressionalOversightCommittee. ACongressionalOversightCommittee,hereinafterreferredtoastheCommittee,is herebyconstitutedinaccordancewiththeprovisionsofthisCode.TheCommittee shallbecomposedoftheChairmenoftheCommitteeonWaysandMeansofthe SenateandHouseRepresentativesandfour(4)additionalmembersfromeach house,tobedesignatedbytheSpeakeroftheHouseofRepresentativesandthe SenatePresident,respectively.

 TheCommitteeshall,amongothers,inaidoflegislation: (1)MonitorandensuretheproperimplementationofRepublicActNo.8240; (2)DeterminethatthepoweroftheCommissionertocompromiseandabateis reasonablyexercised; (3)ReviewthecollectionperformanceoftheBureauofInternalRevenue;and (4)ReviewtheimplementationoftheprogramsoftheBureauofInternal Revenue. Infurtheranceofthehereinabovecitedobjectives,theCommitteeisempoweredto requireoftheBureauofInternalRevenue,submissionofallpertinentinformation, includingbutnotlimitedto:industryaudits;collectionperformancedata;status reportoncriminalactionsinitiatedagainstpersons;andsubmissionoftaxpayer returns:Provided,however,Thatanyreturnorreturninformationwhichcanbe associatedwith,orotherwiseidentify,directlyorindirectly,aparticulartaxpayer shallbefurnishedtheCommitteeonlywhensittinginExecutiveSessionunlesssuch taxpayerotherwiseconsentsinwritingtosuchdisclosure. TITLEXIII REPEALINGPROVISIONS SEC.291.InGeneral.Alllaws,decrees,executiveorders,rulesandregulationsor partsthereofwhicharecontrarytoorinconsistentwiththisCodearehereby repealed,amendedormodifiedaccordingly. TITLEXIV FINALPROVISIONS

 SEC.292.SeparabilityClause.Ifanyclause,sentence,paragraphorpartofthis CodeshallbeadjudgedbyanyCourtofcompetentjurisdictiontobeinvalid,such judgmentshallnotaffect,impairorinvalidatetheremainderofsaidCode,butshall beconfinedinitsoperationtotheclause,sentence,paragraphorpartthereof directlyinvolvedinthecontroversy. SEC.4.TheSecretaryofFinanceshall,uponrecommendationoftheCommissioner ofInternalRevenue,promulgateandpublishthenecessaryrulesandregulationsfor theeffectiveimplementationofthisAct. SEC.5.TransitoryProvisions.DefermentoftheEffectivityoftheImpositionofVAT onCertainServices.Theeffectivityoftheimpositionofthevalueaddedtaxon servicesasprescribedinSection17(a)and(b)ofRepublicActNo.7616,as amendedbyRepublicAct.8241,isherebyfurtherdeferreduntilDecember31,1999, unlessCongressdeemsotherwise:Provided,Thatthesaidservicesshallcontinueto paytheapplicabletaxprescribedunderthepresentprovisionsoftheNational InternalRevenueCode,asamended. SEC.6.SeparabilityClause.IfanyprovisionofthisActissubsequentlydeclared unconstitutional,thevalidityoftheremainingprovisionshereofshallremaininfull forceandeffect. SEC.7.RepealingClauses. (A)TheprovisionofSection17ofRepublicActNo.7906,otherwiseknownasthe "ThriftBanksActof1995"shallcontinuetobeinforceandeffectonlyuntil December31,1999. EffectiveJanuary1,2000,allthriftbanks,whetherinoperationasofthatdateor thereafter,shallnolongerenjoytaxexemptionasprovidedunderSection17ofR.A. No.7906,therebysubjectingallthriftbankstotaxes,feesandchargesinthesame mannerandatthesamerateasbanksandotherfinancialintermediaries.

(B)TheprovisionsoftheNationalInternalRevenueCode,asamended,andallother laws,includingchartersofgovernmentownedorcontrolledcorporations,decrees, orders,orregulationsorpartsthereof,thatareinconsistentwiththisActarehereby repealedoramendedaccordingly. SEC.8.Effectivity.ThisActshalltakeeffectonJanuary1,1998.