CHAPTER I- DEFINITIONS employment thereat requires him (L) The term 'shares of stock' shall

to be physically present abroad include shares of stock of a

SEC. 22. Definitions. - When used in most of the time during the corporation, warrants and/or options to
this Title: taxable year. purchase shares of stock, as well as
units of participation in a partnership
(4) A citizen who has been (except general professional
(A) The term 'person' means an
previously considered as partnerships), joint stock companies,
individual, a trust, estate or
corporation. nonresident citizen and who joint accounts, joint ventures taxable
arrives in the Philippines at any as corporations, associations and
time during the taxable year to recreation or amusement clubs (such
(B) The term 'corporation' shall as golf, polo or similar clubs), and
reside permanently in the
include partnerships, no matter how mutual fund certificates.
Philippines shall likewise be
created or organized, joint-stock
companies, joint accounts (cuentas en treated as a nonresident citizen
participacion), association, or for the taxable year in which he (M) The term 'shareholder' shall
arrives in the Philippines with include holders of a share/s of stock,
insurance companies, but does not
respect to his income derived warrant/s and/or option/s to purchase
include general professional
from sources abroad until the shares of stock of a corporation, as
partnerships and a joint venture or
date of his arrival in the well as a holder of a unit of
consortium formed for the purpose of
undertaking construction projects or Philippines. participation in a partnership (except
engaging in petroleum, coal, general professional partnerships) in a
(5) The taxpayer shall submit joint stock company, a joint account, a
geothermaal and other energy
proof to the Commissioner to taxable joint venture, a member of an
operations pursuant to an operating
show his intention of leaving the association, recreation or amusement
consortium agreement under a service
Philippines to reside club (such as golf, polo or similar
contract with the Government.
'General professional partnerships' permanently abroad or to return clubs) and a holder of a mutual fund
to and reside in the Philippines certificate, a member in an
are partnerships formed by persons for
as the case may be for purpose association, joint-stock company, or
the sole purpose of exercising their
of this Section. insurance company.
common profession, no part of the
income of which is derived from
engaging in any trade or business. (F) The term 'resident alien' means an (N) The term 'taxpayer' means any
individual whose residence is within person subject to tax imposed by this
the Philippines and who is not a Title.
(C) The term 'domestic', when applied
to a corporation, means created or citizen thereof.
organized in the Philippines or under (O) The terms 'including' and
its laws. (G) The term 'nonresident alien' 'includes', when used in a definition
means an individual whose residence contained in this Title, shall not be
is not within the Philippines and who deemed to exclude other things
(D) The term 'foreign', when applied
is not a citizen thereof. otherwise within the meaning of the
to a corporation, means a corporation
term defined.
which is not domestic
(H) The term 'resident foreign
corporation' applies to a foreign (P) The term 'taxable year' means the
(E) The term 'nonresident citizen'
corporation engaged in trade or calendar year, or the fiscal year ending
means;
business within the Philippines. during such calendar year, upon the
basis of which the net income is
(1) A citizen of the Philippines computed under this Title. 'Taxable
who establishes to the (I) The term 'nonresident foreign
year' includes, in the case of a return
satisfaction of the Commissioner corporation' applies to a foreign
made for a fractional part of a year
the fact of his physical presence corporation not engaged in trade or
under the provisions of this Title or
abroad with a definite intention business within the Philippines.
under rules and regulations prescribed
to reside therein. by the Secretary of Finance, upon
(J) The term 'fiduciary' means a recommendation of the commissioner,
(2) A citizen of the Philippines guardian, trustee, executor, the period for which such return is
who leaves the Philippines administrator, receiver, conservator or made.
during the taxable year to reside any person acting in any fiduciary
abroad, either as an immigrant or capacity for any person.
(Q) The term 'fiscal year' means an
for employment on a permanent accounting period of twelve (12)
basis. (K) The term 'withholding agent' months ending on the last day of any
means any person required to deduct month other than December.
(3) A citizen of the Philippines and withhold any tax under the
who works and derives income provisions of Section 57.
(R) The terms 'paid or incurred' and
from abroad and whose 'paid or accrued' shall be construed
according to the method of accounting relending or purchasing receivables treated as loss from the sale or
upon the basis of which the net and other similar obligations: exchange of property which is not a
income is computed under this Title. Provided, however, That commercial, capital asset.
industrial and other non-financial
(S) The term 'trade or business' companies, which borrow funds (AA) The term 'rank and file
includes the performance of the through any of these means for the employees' shall mean all employees
functions of a public office. limited purpose of financing their own who are holding neither managerial
needs or the needs of their agents or nor supervisory position as defined
(T) The term 'securities' means shares dealers, shall not be considered as under existing provisions of the Labor
performing quasi-banking functions. Code of the Philippines, as amended.
of stock in a corporation and rights to
subscribe for or to receive such shares.
The term includes bonds, debentures, (Y) The term 'deposit substitutes' shall (BB) The term 'mutual fund company'
notes or certificates, or other evidence mean an alternative from of obtaining shall mean an open-end and close-end
or indebtedness, issued by any funds from the public (the term investment company as defined under
corporation, including those issued by 'public' means borrowing from twenty the Investment Company Act. [8]
a government or political subdivision (20) or more individual or corporate
thereof, with interest coupons or in lenders at any one time) other than
(CC) The term 'trade, business or
registered form. deposits, through the issuance,
profession' shall not include
endorsement, or acceptance of debt performance of services by the
(U) The term 'dealer in securities' instruments for the borrowers own taxpayer as an employee.
account, for the purpose of relending
means a merchant of stocks or
or purchasing of receivables and other
securities, whether an individual, (DD) The term 'regional or area
obligations, or financing their own
partnership or corporation, with an headquarters' shall mean a branch
needs or the needs of their agent or
established place of business, established in the Philippines by
regularly engaged in the purchase of dealer. These instruments may
include, but need not be limited to multinational companies and which
securities and the resale thereof to headquarters do not earn or derive
bankers' acceptances, promissory
customers; that is, one who, as a income from the Philippines and
notes, repurchase agreements,
merchant, buys securities and re-sells which act as supervisory,
including reverse repurchase
them to customers with a view to the communications and coordinating
gains and profits that may be derived agreements entered into by and
between the Bangko Sentral ng center for their affiliates, subsidiaries,
therefrom. or branches in the Asia-Pacific Region
Pilipinas (BSP) and any authorized
agent bank, certificates of assignment and other foreign markets.
(V) The term 'bank' means every or participation and similar
banking institution, as defined in instruments with recourse: Provided, (EE) The term 'regional operating
Section 2 of Republic Act No. 337, [6] however, That debt instruments issued headquarters' shall mean a branch
as amended, otherwise known as the for interbank call loans with maturity established in the Philippines by
"General banking Act." A bank may of not more than five (5) days to cover multinational companies which are
either be a commercial bank, a thrift deficiency in reserves against deposit engaged in any of the following
bank, a development bank, a rural liabilities, including those between or services: general administration and
bank or specialized government bank. among banks and quasi-banks, shall planning; business planning and
not be considered as deposit substitute coordination; sourcing and
(W) The term 'non-bank financial debt instruments. procurement of raw materials and
intermediary' means a financial components; corporate finance
intermediary, as defined in Section (Z) The term 'ordinary income' advisory services; marketing control
2(D)(C) of Republic Act No. 337, [7] as includes any gain from the sale or and sales promotion; training and
amended, otherwise known as the exchange of property which is not a personnel management; logistic
"General Banking Act," authorized by capital asset or property described in services; research and development
the Bangko Sentral ng Pilipinas (BSP) Section 39(A)(1). Any gain from the services and product development;
to perform quasi-banking activities. sale or exchange of property which is technical support and maintenance;
treated or considered, under other data processing and communications;
(X) The term 'quasi-banking activities' provisions of this Title, as 'ordinary and business development.
means borrowing funds from twenty income' shall be treated as gain from
(20) or more personal or corporate the sale or exchange of property which (FF) The term 'long-term deposit or
lenders at any one time, through the is not a capital asset as defined in investment certificate' shall refer to
issuance, endorsement, or acceptance Section 39(A)(1). The term 'ordinary certificate of time deposit or
of debt instruments of any kind other loss' includes any loss from the sale or investment in the form of savings,
than deposits for the borrower's own exchange of property which is not a common or individual trust funds,
account, or through the issuance of capital asset. Any loss from the sale or deposit substitutes, investment
certificates of assignment or similar exchange of property which is treated management accounts and other
instruments, with recourse, or of or considered, under other provisions investments with a maturity period of
repurchase agreements for purposes of of this Title, as 'ordinary loss' shall be not less than five (5) years, the form of
which shall be prescribed by the (D) An alien individual, whether a by an individual alien who is a
Bangko Sentral ng Pilipinas (BSP) and resident or not of the Philippines, is resident of the Philippines.
issued by banks only (not by non-bank taxable only on income derived from
financial intermediaries and finance sources within the Philippines; “(2) Rates of Tax on Taxable Income
companies) to individuals in of Individuals.— The tax shall be
denominations of Ten thousand pesos (E) A domestic corporation is taxable computed in accordance with and at
(P10,000) and other denominations as on all income derived from sources the rates established in the following
may be prescribed by the BSP. within and without the Philippines; schedule:
and
(GG) The term 'statutory minimum “(a) Tax Schedule Effective January 1,
wage' shall refer to the rate fixed by (F) A foreign corporation, whether 2018 until December 31, 2022:
the Regional Tripartite Wage and engaged or not in trade or business in
Productivity Board, as defined by the the Philippines, is taxable only on
Bureau of Labor and Employment “Not over
income derived from sources within 0%
Statistics (BLES) of the Department of ₱250,000
the Philippines.
Labor and Employment (DOLE). [9] “Over ₱250,000
20% of the excess
but not over
over ₱250,000
(HH) The term 'minimum wage ₱400,000
earner' shall refer to a worker in the “Over ₱400,000 ₱30,000 + 25% of
CHAPTER III
private sector paid the statutory but not over the excess over
minimum wage or to an employee in ₱800,000 ₱400,000
the public sector with compensation TAX ON INDIVIDUALS
“Over ₱800,000 ₱130,000 + 30% of
income of not more than the statutory but not over the excess over
minimum wage in the non-agricultural “Sec. 24. Income Tax Rates.— ₱2,000,000 ₱800,000
sector where he/she is assigned. [10]
“Over ₱2,000,000 ₱490,000 + 32% of
“(A) Rates of Income Tax on but not over the excess over
Individual Citizen and Individual, ₱5,000,000 ₱2,000,000
Resident Alien of the Philippines.—
₱2,410,000 + 35%
CHAPTER II “Over ₱8,000,000 of the excess over
“(1) An income tax is hereby imposed: ₱8,000,000
GENERAL PRINCIPLES
“(a) On the taxable income defined in
Section 31 of this Code, other than “Tax Schedule Effective January 1,
SEC. 23. General Principles of Income 2023 and onwards:
Taxation in the Philippines. - Except income subject to tax under
when otherwise provided in this Code: Subsections (B), (C), and (D) of this
Section, derived for each taxable year “Not over
0%
from all sources within and without ₱250,000
(A) A citizen of the Philippines the Philippines by every individual
residing therein is taxable on all “Over ₱250,000
citizen of the Philippines residing 15% of the excess
income derived from sources within but not over
therein; over ₱250,000
and without the Philippines; ₱400,000
“Over ₱400,000 ₱22,500 + 20% of
“(b) On the taxable income defined in but not over the excess over
(B) A nonresident citizen is taxable Section 31 of this Code, other than
only on income derived from sources ₱800,000 ₱400,000
income subject to tax under
within the Philippines; “Over ₱800,000 ₱102,500 + 25% of
Subsections (B), (C), and (D) of this
Section, derived for each taxable year but not over the excess over
(C) An individual citizen of the from all sources within the Philippines ₱2,000,000 ₱800,000
Philippines who is working and by an individual citizen of the “Over ₱2,000,000 ₱402,500 + 30% of
deriving income from abroad as an Philippines who is residing outside of but not over the excess over
overseas contract worker is taxable the Philippines including overseas ₱8,000,000 ₱2,000,000
only on income derived from sources contract workers referred to in ₱2,202,500 + 35%
within the Philippines: Provided, That Subsection (C) of Section 23 hereof; “Over ₱8,000,000 of the excess over
a seaman who is a citizen of the and ₱8,000,000
Philippines and who receives
compensation for services rendered
“(c) On the taxable income defined in “For married individuals, the husband
abroad as a member of the
Section 31 of this Code, other than and wife, subject to the provision of
complement of a vessel engaged
income subject to tax under Section 51(D) hereof, shall compute
exclusively in international trade shall Subsections (B), (C), and (D) of this
be treated as an overseas contract separately their individual income tax
Section, derived for each taxable year based on their respective total taxable
worker;
from all sources within the Philippines income: Provided, That if any income
 cannot be definitely attributed to or and the percentage tax under Section or investment certificate based on the
identified as income exclusively 116 of this Code. remaining maturity thereof:
earned or realized by either of the
spouses, the same shall be divided “(b) If Total Gross Sales and/or Gross “x x x.”
equally between the spouses for the Receipts and Other Non-operating
purpose of determining their Income Exceeds the VAT Threshold “(2) Cash and/or Property
respective taxable income. as Provided in Section 109(BB) of this Dividends.— A final tax at the rate of
Code.— The rates prescribed under ten percent (10%) shall be imposed
“Provided, That minimum wage Subsection (A)(2)(a) of this Section. upon the cash and/or property
earners as defined in Section 22(HH) dividends actually or constructively
ofthis Code shall be exempt from the “(B) Rate of Tax on Certain Passive received by an individual from a
payment of income tax on their Income.— domestic corporation or from a joint
taxable income: Provided, further, stock company, insurance or mutual
That the holiday pay, pay received by “(1) Interests, Royalties, Prizes, and fund companies and regional
such minimum wage earners shall operating headquarters of
Other Winnings.— A final tax at the
likewise be exempt from income tax. multinational companies, or on the
rate of twenty percent (20%) is hereby
imposed upon the amount of interest share of an individual in the
“(b) Rate of Tax on Income of “Purely from any currency bank deposit and distributable net income after tax of a
Self-employed Individuals and/ or yield or any other monetary benefit partnership (except a general
Professionals Whose Gross Sales or from deposit substitutes and from trust professional partnership) of which he
Gross Receipts and Other Non- funds and. similar arrangements; is a partner, or on the share of an
operating Income Does Not Exceed royalties, except on books, as well as individual in the net income after tax
the Value-added Tax (VAT) Threshold other literary works and musical of an association, a joint account, or a
as Provided in Section 109(BB).— compositions, which shall be imposed joint venture or consortium taxable as
Self-employed individuals and/or a final tax of ten percent (10%); prizes a corporation of which he is a member
professionals shall have the option to (except prizes amounting to Ten or co-venturer.
avail of an eight percent (8%) tax on thousand pesos (₱10,000) or less
gross sales or gross receipts and other which shall be subject to tax under “(C) Capital Gains from Sale of
non-operating income in excess of Subsection (A) of Section 24; and Shares of Stock not Traded in the
Two hundred fifty thousand pesos other winnings (except winnings Stock Exchange.— The provisions of
(₱250,000) in lieu of the graduated amounting to Ten thousand pesos Section 39(B) notwithstanding, a final
income tax rates under Subsection (₱10,000) or less from Philippine tax at the rate of fifteen percent (15%)
(A)(2)(a) of this Section and the Charity Sweepstakes and Lotto which is hereby imposed upon the net capital
percentage tax under Section 116 of shall be exempt), derived from sources gains realized during the taxable year
this Code. within the Philippines: Provided, from the sale, barter, exchange or
however, That interest income other disposition of shares of stock in
“(c) Rate of Tax for Mixed Income received by an individual taxpayer a domestic corporation, except shares
Earners.— Taxpayers earning both (except a nonresident individual) from sold, or disposed of through the stock
compensation income and income a depository bank under the expanded exchange.
from business or practice of profession foreign currency deposit system shall
shall be subject to the following taxes: be subject to a final income tax at the
rate of fifteen percent (15%) of such
“(1) All Income from Compensation – interest income: Provided, further,
SEC. 24. Income Tax Rates. -
The rates prescribed under Subsection That interest income from long-term
(A)(2)(a) of this Section. deposit or investment in the form of
savings, common or individual trust (A) Rates of Income Tax on
funds, deposit substitutes, investment Individual Citizen and Individual
“(2) All Income from Business or Resident Alien of the Philippines.-
management accounts and other
Practice of Profession –
investments evidenced by certificates
in such form prescribed by the Bangko (1) An income tax is hereby
“(a) If Total Gross Sales and/or Gross Sentral ng Pilipinas (BSP) shall be imposed:
Receipts and Other Non-operating exempt from the tax imposed under
Income Do Not Exceed the VAT this Subsection: Provided, finally, (a) On the taxable income
Threshold as Provided in Section That should the holder of the defined in Section 31 of
109(BB) of this Code.— The rates certificate pre-terminate the deposit or this Code, other than
prescribed under Subsection (A)(2)(a) investment before the fifth (5th) year, a income subject to tax under
of this Section on taxable income, or final tax shall be imposed on the entire Subsections (B), (C) and
eight percent (8%) income tax based income and shall be deducted and (D) of this Section, derived
on gross sales or gross receipts and withheld by the depository bank from for each taxable year from
other non-operating income in lieu of the proceeds of the long-term deposit all sources within and
the graduated income tax rates under without the Philippines be
Subsection (A)(2)(a) of this Section
 every individual citizen of income: provided, further, That be imposed on the entire income
the Philippines residing the holiday pay, overtime pay, and shall be deducted and
therein; night shift differential pay and withheld by the depository bank
hazard pay received by such from the proceeds of the long-
(b) On the taxable income minimum wage earners shall term deposit or investment
defined in Section 31 of likewise be exempt from income certificate based on the
this Code, other than tax. [13] remaining maturity thereof:
income subject to tax under
Subsections (B), (C) and (B) Rate of Tax on Certain Passive Four (4) years to less than
(D) of this Section, derived Income: - five (5) years - 5%;
for each taxable year from Three (3) years to less than
all sources within the (1) Interests, Royalties, Prizes, (4) years - 12%; and
Philippines by an and Other Winnings. - Less than three (3) years -
individual citizen of the 20%
Philippines who is residing
A final tax at the rate of twenty
outside of the Philippines (2) Cash and/or Property
percent (20%) is hereby imposed
including overseas contract Dividends. - A final tax at the
upon the amount of interest from
workers referred to in following rates shall be imposed
any currency bank deposit and
Subsection(C) of Section yield or any other monetary upon the cash and/or property
23 hereof; and benefit from deposit substitutes dividends actually or
and from trust funds and similar constructively received by an
(c) On the taxable income arrangements; royalties, except individual from a domestic
defined in Section 31 of on books, as well as other corporation or from a joint stock
this Code, other than literary works and musical company, insurance or mutual
income subject to tax under compositions, which shall be fund companies and regional
Subsections (B), (C) and imposed a final tax of ten operating headquarters of
(D) of this Section, derived percent (10%); prizes (except multinational companies, or on
for each taxable year from prizes amounting to Ten the share of an individual in the
all sources within the thousand pesos (P10,000) or less distributable net income after tax
Philippines by an which shall be subject to tax of a partnership (except a
individual alien who is a under Subsection (A) of Section general professional partnership)
resident of the Philippines. 24; and other winnings (except of which he is a partner, or on
Philippine Charity Sweepstakes the share of an individual in the
(2) Rates of Tax on Taxable and Lotto winnings), derived net income after tax of an
Income of Individuals. [11] - The from sources within the association, a joint account, or a
tax shall be computed in Philippines: Provided, however, joint venture or consortium
accordance with and at the rates That interest income received by taxable as a corporation of which
established in the following an individual taxpayer (except a he is a member or co-venturer:
schedule: nonresident individual) from a
depository bank under the Six percent (6%) beginning
For married individuals, the expanded foreign currency January 1, 1998;
husband and wife, subject to the deposit system shall be subject Eight percent (8%)
provision of Section 51 (D) to a final income tax at the rate beginning January 1, 1999;
hereof, shall compute separately of seven and one-half percent (7 Ten percent (10%)
1
their individual income tax based /2%) of such interest income: beginning January 1, 2000.
on their respective total taxable Provided, further, That interest
income: Provided, That if any income from long-term deposit Provided, however, That the tax
income cannot be definitely or investment in the form of on dividends shall apply only on
attributed to or identified as savings, common or individual income earned on or after
income exclusively earned or trust funds, deposit substitutes, January 1, 1998. Income forming
realized by either of the spouses, investment management part of retained earnings as of
the same shall be divided equally accounts and other investments December 31, 1997 shall not,
between the spouses for the evidenced by certificates in such even if declared or distributed on
purpose of determining their form prescribed by the Bangko or after January 1, 1998, be
respective taxable income. Sentral ng Pilipinas (BSP) shall subject to this tax.
be exempt from the tax imposed
Provided, That minimum wage under this Subsection: Provided, (C) Capital Gains from Sale of Shares
earners as defined in Section finally, That should the holder of of Stock not Traded in the Stock
the certificate pre-terminate the
22(HH) of this Code shall be Exchange. - The provisions of Section
deposit or investment before the
exempt from the payment of 39(B) notwithstanding, a final tax at
fifth (5th) year, a final tax shall
income tax on their taxable the rates prescribed below is hereby
imposed upon the net capital gains eighteen (18) calendar months Multinational Companies.—
realized during the taxable year from from the date of sale or There shall be levied, collected
the sale, barter, exchange or other disposition, shall be exempt and paid for each taxable year
disposition of shares of stock in a from the capital gains tax upon the gross income received
domestic corporation, except shares imposed under this Subsection: by every alien individual
sold, or disposed of through the stock Provided, That the historical cost employed by regional or area
exchange. or adjusted basis of the real headquarters and regional
property sold or disposed shall operating headquarters
Not over P 5% be carried over to the new established in the Philippines by
100,000 10 principal residence built or multinational companies as
On any % acquired: Provided, further, That salaries, wages, annuities,
amount in the Commissioner shall have compensation, remuneration and
excess of been duly notified by the other emoluments, such as
P taxpayer within thirty (30) days honoraria and allowances, from
100,000 from the date of sale or such regional or area
disposition through a prescribed headquarters and regional
return of his intention to avail of operating headquarters, a tax
the tax exemption herein equal to fifteen percent (15%) of
(D) Capital Gains from Sale of Real mentioned: Provided, still such gross income: Provided,
Property. - further, That the said tax however, That the same tax
exemption can only be availed of treatment shall apply to Filipinos
(1) In General. - The provisions once every ten (10) years: employed and occupying the
of Section 39(B) Provided, finally, That if there is same position as those of aliens
notwithstanding, a final tax of no full utilization of the proceeds employed by these multinational
six percent (6%) based on the of sale or disposition, the portion companies. For purposes of this
gross selling price or current fair of the gain presumed to have Chapter, the term ‘multinational
market value as determined in been realized from the sale or company’ means a foreign firm
accordance with Section 6(E) of disposition shall be subject to or entity engaged in international
this Code, whichever is higher, capital gains tax. For this trade with affiliates or
is hereby imposed upon capital purpose, the gross selling price subsidiaries or branch offices in
gains presumed to have been or fair market value at the time the Asia-Pacific Region and
realized from the sale, exchange, of sale, whichever is higher, other foreign markets.
or other disposition of real shall be multiplied by a fraction
property located in the which the unutilized amount “(D) Alien Individual Employed
Philippines, classified as capital bears to the gross selling price in by Offshore Banking Units.—
assets, including pacto de retro order to determine the taxable There shall be levied, collected
sales and other forms of portion and the tax prescribed and paid for each taxable year
conditional sales, by individuals, under paragraph (1) of this upon the gross income received
including estates and trusts: Subsection shall be imposed by every alien individual
Provided, That the tax liability, thereon. employed by offshore banking
if any, on gains from sales or units established in the
other dispositions of real “Sec. 25. Tax on Nonresident Philippines as salaries, wages,
property to the government or Alien Individual.— annuities, compensation,
any of its political subdivisions remuneration and other
or agencies or to government- “(A) Nonresident Alien Engaged emoluments such as honoraria
owned or controlled corporations in Trade or Business Within the and allowances, from such
shall be determined either under Philippines.— offshore banking units, a tax
Section 24 (A) or under this equal to fifteen percent (15%) of
Subsection, at the option of the such gross income: Provided,
taxpayer; “x x x
however, That the same tax
treatment shall apply to Filipinos
(2) Exception. - The provisions “(B) Nonresident Alien employed and occupying the
of paragraph (1) of this Individual Not Engaged in Trade same position as those of aliens
Subsection to the contrary or Business Within the employed by these offshore
notwithstanding, capital gains Philippines.— banking units.
presumed to have been realized
from the sale or disposition of “x x x “(E) Alien Individual Employed
their principal residence by by Petroleum Service Contractor
natural persons, the proceeds of “(C) Alien Individual Employed and Subcontractor.— An alien
which is fully utilized in by Regional or Area individual who is a permanent
acquiring or constructing a new Headquarters and Regional resident of a foreign country but
principal residence within Operating Headquarters of who is employed and assigned in
 the Philippines by a foreign (A) Nonresident Alien Engaged in shall be subject to tax under
service contractor or by a foreign trade or Business Within the Subsection (B)(1) of Section 24)
service subcontractor engaged in Philippines. - and other winnings (except
petroleum operations in the Philippine Charity Sweepstakes
Philippines shall be liable to a (1) In General. - A nonresident and Lotto winnings); shall be
tax of fifteen percent (15%) of alien individual engaged in trade subject to an income tax of
the salaries, wages, annuities, or business in the Philippines twenty percent (20%) on the
compensation, remuneration and shall be subject to an income tax total amount thereof: Provided,
other emoluments, such as in the same manner as an however, that royalties on books
honoraria and allowances, individual citizen and a resident as well as other literary works,
received from such contractor or alien individual, on taxable and royalties on musical
subcontractor: Provided, income received from all sources compositions shall be subject to
however, That the same tax within the Philippines. A a final tax of ten percent (10%)
treatment shall apply to a nonresident alien individual who on the total amount thereof:
Filipino employed and shall come to the Philippines and Provided, further, That
occupying the same position as stay therein for an aggregate cinematographic films and
an alien employed by petroleum period of more than one hundred similar works shall be subject to
service contractor and eighty (180) days during any the tax provided under Section
subcontractor. calendar year shall be deemed a 28 of this Code: Provided,
'nonresident alien doing business furthermore, That interest
“Any income earned from all in the Philippines'. Section 22 income from long-term deposit
other sources within the (G) of this Code or investment in the form of
Philippines by the alien notwithstanding. savings, common or individual
employees referred to under trust funds, deposit substitutes,
Subsections (C), (D), and (E) (2) Cash and/or Property investment management
hereof shall be subject to the Dividends from a Domestic accounts and other investments
pertinent income tax, as the case evidenced by certificates in such
Corporation or Joint Stock
may be, imposed under this form prescribed by the Bangko
Company, or Insurance or
Code. Sentral ng Pilipinas (BSP) shall
Mutual Fund Company or
be exempt from the tax imposed
Regional Operating Headquarter
“(F) The preferential tax or Multinational Company, or under this Subsection: Provided,
treatment provided in Share in the Distributable Net finally, that should the holder of
the certificate pre-terminate the
Subsections (C), (D), and (E) of Income of a Partnership (Except
deposit or investment before the
this Section shall not be a General Professional
fifth (5th) year, a final tax shall
applicable to regional Partnership), Joint Account,
be imposed on the entire income
headquarters (RHQs), regional Joint Venture Taxable as a
operating headquarters Corporation or Association., and shall be deducted and
(ROHQs), offshore banking Interests, Royalties, Prizes, and withheld by the depository bank
from the proceeds of the long-
units (OBUs) or petroleum Other Winnings. - Cash and/or
term deposit or investment
service contractors and property dividends from a
certificate based on the
subcontractors registering with domestic corporation, or from a
remaining maturity thereof:
the Securities and Exchange joint stock company, or from an
Commission (SEC) after January insurance or mutual fund
1, 2018: Provided, however, company or from a regional Four (4) years to less than
That existing RHQs/ROHQs, operating headquarter of five (5) years - 5%;
OBUs or petroleum service multinational company, or the Three (3) years to less than
contractors and subcontractors share of a nonresident alien four (4) years - 12%; and
presently availing of preferential individual in the distributable net Less than three (3) years -
tax rates for qualified employees income after tax of a partnership 20%.
shall continue to be entitled to (except a general professional
avail of the preferential tax rate partnership) of which he is a (3) Capital Gains. - Capital gains
for present and future qualified partner, or the share of a realized from sale, barter or
employees.” nonresident alien individual in exchange of shares of stock in
the net income after tax of an domestic corporations not traded
association, a joint account, or a through the local stock
joint venture taxable as a exchange, and real properties
corporation of which he is a shall be subject to the tax
SEC. 25. Tax on Nonresident Alien
Individual. - member or a co-venturer; prescribed under Subsections (C)
interests; royalties (in any form); and (D) of Section 24.
and prizes (except prizes
amounting to Ten thousand
pesos (P10,000) or less which
(B) Nonresident Alien Individual Not employed by offshore banking units Each partner shall report as gross
Engaged in Trade or Business Within established in the Philippines as income his distributive share, actually
the Philippines. - There shall be salaries, wages, annuities, or constructively received, in the net
levied, collected and paid for each compensation, remuneration and other income of the partnership.
taxable year upon the entire income emoluments, such as honoraria and
received from all sources within the allowances, from such off-shore
Philippines by every nonresident alien banking units, a tax equal to fifteen
individual not engaged in trade or percent (15%) of such gross income:
CHAPTER IV
business within the Philippines as Provided, however, That the same tax
interest, cash and/or property treatment shall apply to Filipinos
dividends, rents, salaries, wages, employed and occupying the same TAX ON CORPORATIONS
premiums, annuities, compensation, positions as those of aliens employed
remuneration, emoluments, or other by these offshore banking units. “Sec. 27. Rates of Income Tax on
fixed or determinable annual or Domestic Corporations.—
periodic or casual gains, profits, and (E) Alien Individual Employed by
income, and capital gains, a tax equal Petroleum Service Contractor and “(A) In General.— x x x
to twenty-five percent (25%) of such Subcontractor. [14] - An Alien
income. Capital gains realized by a individual who is a permanent resident “x x x
nonresident alien individual not of a foreign country but who is
engaged in trade or business in the employed and assigned in the “(C) Government-owned or -
Philippines from the sale of shares of Philippines by a foreign service Controlled Corporations, Agencies or
stock in any domestic corporation and contractor or by a foreign service Instrumentalities.— The provisions of
real property shall be subject to the subcontractor engaged in petroleum existing special or general laws to the
income tax prescribed under operations in the Philippines shall be contrary notwithstanding, all
Subsections (C) and (D) of Section 24. liable to a tax of fifteen percent (15%) corporations, agencies, or
of the salaries, wages, annuities, instrumentalities owned or controlled
(C) Alien Individual Employed by compensation, remuneration and other by the Government, except the
Regional or Area Headquarters and emoluments, such as honoraria and Government Service Insurance System
Regional Operating Headquarters of allowances, received from such (GSIS), the Social Security System
Multinational Companies. - There contractor or subcontractor: Provided, (SSS), the Philippine Health Insurance
shall be levied, collected and paid for however, That the same tax treatment Corporation (PHIC), and the local
each taxable year upon the gross shall apply to a Filipino employed and water districts shall pay such rate of
income received by every alien occupying the same position as an tax upon their taxable income as are
individual employed by regional or alien employed by petroleum service imposed by this Section upon
area headquarters and regional contractor and subcontractor. corporations or associations engaged
operating headquarters established in in similar business, industry, or
the Philippines by multinational Any income earned from all other activity.
companies as salaries, wages, sources within the Philippines by the
annuities, compensation, remuneration alien employees referred to under “(D) Rates of Tax on Certain Passive
and other emoluments, such as Subsections (C), (D) and (E) hereof Incomes.—
honoraria and allowances, from such shall be subject to the pertinent
regional or area headquarters and income tax, as the case may be,
regional operating headquarters, a tax “(1) Interest from Deposits and Yield
imposed under this Code.
equal to fifteen percent (15%) of such or any other Monetary Benefit from
gross income: Provided, however, Deposit Substitutes and from Trust
SEC. 26. Tax Liability of Members of Funds and Similar Arrangements, and
That the same tax treatment shall
General Professional Partnerships. - A Royalties.— A final tax at the rate of
apply to Filipinos employed and general professional partnership as
occupying the same position as those twenty percent (20%) is hereby
such shall not be subject to the income imposed upon the amount of interest
of aliens employed by these
tax imposed under this Chapter. on currency bank deposit and yield or
multinational companies. For purposes
Persons engaging in business as any other monetary benefit from
of this Chapter, the term 'multinational
partners in a general professional deposit substitutes and from trust
company' means a foreign firm or
partnership shall be liable for income funds and similar arrangements
entity engaged in international trade tax only in their separate and
with affiliates or subsidiaries or received by domestic corporations,
individual capacities. and royalties, derived from sources
branch offices in the Asia-Pacific
Region and other foreign markets. within the Philippines: Provided,
For purposes of computing the however, That interest income derived
distributive share of the partners, the by a domestic corporation from a
(D) Alien Individual Employed by net income of the partnership shall be depository bank under the expanded
Offshore Banking Units. - There shall computed in the same manner as a foreign currency deposit system shall
be levied, collected and paid for each
corporation. be subject to a final income tax at the
taxable year upon the gross income
received by every alien individual
 rate of fifteen percent (15%) of such (1) A tax effort ratio of twenty (B) Proprietary Educational
interest income. percent (20%) of Gross National Institutions and Hospitals. -
Product (GNP);
“(2) Capital Gains from the Sale of (2) A ratio of forty percent Proprietary educational institutions
Shares of Stock Not Traded in the (40%) of income tax collection and hospitals which are nonprofit shall
Stock Exchange.— A final tax at the to total tax revenues; pay a tax of ten percent (10%) on their
rate of fifteen percent (15%) shall be (3) A VAT tax effort of four taxable income except those covered
imposed on net capital gains realized percent (4%) of GNP; and by Subsection (D) hereof: Provided,
during the taxable year from the sale, (4) A 0.9 percent (0.9%) ratio of that if the gross income from
exchange or other disposition of the Consolidated Public Sector 'unrelated trade, business or other
shares of stock in a domestic Financial Position (CPSFP) to activity' exceeds fifty percent (50%) of
corporation except shares sold or GNP. the total gross income derived by such
disposed of through the stock educational institutions or hospitals
exchange. The option to be taxed based on gross from all sources, the tax prescribed in
income shall be available only to firms Subsection (A) hereof shall be
SEC. 27. Rates of Income tax on whose ratio of cost of sales to gross imposed on the entire taxable income.
Domestic Corporations. - sales or receipts from all sources does For purposes of this Subsection, the
not exceed fifty-five percent (55%). term 'unrelated trade, business or
(A) In General. - Except as otherwise other activity' means any trade,
provided in this Code, an income tax The election of the gross income tax business or other activity, the conduct
option by the corporation shall be of which is not substantially related to
of thirty-five percent (35%) is hereby
irrevocable for three (3) consecutive the exercise or performance by such
imposed upon the taxable income
taxable years during which the educational institution or hospital of
derived during each taxable year from
corporation is qualified under the its primary purpose or function. A
all sources within and without the
Philippines by every corporation, as scheme. 'proprietary educational institution' is
any private school maintained and
defined in Section 22(B) of this Code
administered by private individuals or
and taxable under this Title as a For purposes of this Section, the term
groups with an issued permit to
corporation, organized in, or existing 'gross income' derived from business
operate from the Department of
under the laws of the Philippines: shall be equivalent to gross sales less
Provided, That effective January 1, sales returns, discounts and Education, Culture and Sports (DECS)
[17]
2009, the rate of income tax shall be allowances and cost of goods sold. , or the Commission on Higher
Education (CHED), or the Technical
thirty percent (30%). [15] 'Cost of goods sold' shall include all
Education and Skills Development
business expenses directly incurred to
Authority (TESDA), as the case may
In the case of corporations adopting produce the merchandise to bring
be, in accordance with existing laws
the fiscal-year accounting period, the them to their present location and use.
and regulations.
taxable income shall be computed
without regard to the specific date For a trading or merchandising
(C) Government-owned or -Controlled
when specific sales, purchases and concern, 'cost of goods sold' shall
Corporations, Agencies or
other transactions occur. Their income include the invoice cost of the goods
Instrumentalities. [18] - The provisions
and expenses for the fiscal year shall sold, plus import duties, freight in
be deemed to have been earned and transporting the goods to the place of existing special or general laws to
spent equally for each month of the where the goods are actually sold, the contrary notwithstanding, all
corporations, agencies, or
period. including insurance while the goods
instrumentalities owned or controlled
are in transit.
by the Government, except the
The corporate income tax rate shall be Government Service Insurance System
applied on the amount computed by For a manufacturing concern, 'cost of (GSIS), the Social Security System
multiplying the number of months goods manufactured and sold' shall (SSS), the Philippine Health Insurance
covered by the new rate within the include all costs of production of Corporation (PHIC), the local water
fiscal year by the taxable income of finished goods, such as raw materials districts (LWDs), [19] and the
the corporation for the period, divided used, direct labor and manufacturing Philippine Charity Sweepstakes Office
by twelve. [16] overhead, freight cost, insurance (PCSO) and the Philippine
premiums and other costs incurred to Amusement and Gaming Corporation
Provided, further, That the President, bring the raw materials to the factory (PAGCOR), shall pay such rate of tax
upon the recommendation of the or warehouse. upon their taxable income as are
Secretary of Finance, may effective imposed by this Section upon
January 1, 2000, allow corporations In the case of taxpayers engaged in the corporations or associations engaged
the option to be taxed at fifteen sale of service, 'gross income' means in s similar business, industry, or
percent (15%) of gross income as gross receipts less sales returns, activity.
defined herein, after the following allowances and discounts.
conditions have been satisfied:
(D) Rates of Tax on Certain Passive except net income from such following the year in which such
Incomes. - transactions as may be specified corporation commenced its
by the Secretary of Finance, business operations, when the
(1) Interest from Deposits and upon recommendation by the minimum income tax is greater
Yield or any other Monetary Monetary Board to be subject to than the tax computed under
Benefit from Deposit Substitutes the regular income tax payable Subsection (A) of this Section
and from Trust Funds and by banks: Provided, however, for the taxable year.
Similar Arrangements, and That interest income from
Royalties. - A final tax at the rate foreign currency loans granted (2) Carry Froward of Excess
of twenty percent (20%) is by such depository banks under Minimum Tax. - Any excess of
hereby imposed upon the amount said expanded system to the minimum corporate income
of interest on currency bank residents other than offshore tax over the normal income tax
deposit and yield or any other banking units in the Philippines as computed under Subsection
monetary benefit from deposit or other depository banks under (A) of this Section shall be
substitutes and from trust funds the expanded system, shall be carried forward and credited
and similar arrangements subject to a final tax at the rate against the normal income tax
received by domestic of ten percent (10%). [20] for the three (3) immediately
corporations, and royalties, succeeding taxable years.
derived from sources within the Any income of nonresidents,
Philippines: Provided, however, whether individuals or (3) Relief from the Minimum
That interest income derived by corporations, from transactions Corporate Income Tax Under
a domestic corporation from a with depository banks under the Certain Conditions. - The
depository bank under the expanded system shall be Secretary of Finance is hereby
expanded foreign currency exempt from income tax. authorized to suspend the
deposit system shall be subject imposition of the minimum
to a final income tax at the rate (4) Intercorporate Dividends. - corporate income tax on any
of seven and one-half percent (7 Dividends received by a corporation which suffers losses
1
/2%) of such interest income. domestic corporation from on account of prolonged labor
another domestic corporation dispute, or because of force
(2) Capital Gains from the Sale shall not be subject to tax. majeure, or because of legitimate
of Shares of Stock Not Traded in business reverses.
the Stock Exchange. - A final tax (5) Capital Gains Realized from
at the rates prescribed below the Sale, Exchange or The Secretary of Finance is
shall be imposed on net capital Disposition of Lands and/or hereby authorized to promulgate,
gains realized during the taxable Buildings. - A final tax of six upon recommendation of the
year from the sale, exchange or percent (6%) is hereby imposed Commissioner, the necessary
other disposition of shares of on the gain presumed to have rules and regulation that shall
stock in a domestic corporation been realized on the sale, define the terms and conditions
except shares sold or disposed of exchange or disposition of lands under which he may suspend the
through the stock exchange: and/or buildings which are not imposition of the minimum
actually used in the business of a corporate income tax in a
Not over P 100,000 5% corporation and are treated as meritorious case.
Amount in excess of P 10% capital assets, based on the gross
100,000 selling price of fair market value (4) Gross Income Defined. - For
as determined in accordance purposes of applying the
with Section 6(E) of this Code, minimum corporate income tax
(3) Tax on Income Derived whichever is higher, of such
under the Expanded Foreign provided under Subsection (E)
lands and/or buildings. hereof, the term 'gross income'
Currency Deposit System. -
Income derived by a depository shall mean gross sales less sales
bank under the expanded foreign (E) Minimum Corporate Income Tax returns, discounts and
currency deposit system from on Domestic Corporations. - allowances and cost of goods
foreign currency transactions sold. 'Cost of goods sold' shall
with nonresidents, offshore (1) Imposition of Tax. - A include all business expenses
banking units in the Philippines, minimum corporate income tax directly incurred to produce the
local commercial banks of two percent (2%) of the gross merchandise to bring them to
including branches of foreign income as of the end of the their present location and use.
banks that may be authorized by taxable year, as defined herein,
the Bangko Sentral ng Pilipinas is hereby imposed on a For a trading or merchandising
(BSP) to transact business with corporation taxable under this concern, 'cost of goods sold' shall
foreign currency deposit system Title, beginning on the fourth include the invoice cost of the goods
shall be exempt from all taxes, taxable year immediately sold, plus import duties, freight in
transporting the goods to the place without regard to the specific revalidated, exchanged
where the goods are actually sold date when sales, purchases and and/or indorsed to another
including insurance while the goods other transactions occur. Their international airline form
are in transit. income and expenses for the part of the Gross Philippine
fiscal year shall be deemed to Billings if the passenger
For a manufacturing concern, 'cost of have been earned and spent boards a plane in a port or
goods manufactured and sold' shall equally for each month of the point in the Philippines:
include all costs of production of period. Provided, further, That for
finished goods, such as raw materials a flight which originates
used, direct labor and manufacturing The corporate income tax rate from the Philippines, but
overhead, freight cost, insurance shall be applied on the amount transshipment of passenger
premiums and other costs incurred to computed by multiplying the takes place at any part
bring the raw materials to the factory number of months covered by outside the Philippines on
or warehouse. the new rate within the fiscal another airline, only the
year by the taxable income of the aliquot portion of the cost
corporation for the period, of the ticket corresponding
In the case of taxpayers engaged in the
divided by twelve. [23] to the leg flown from the
sale of service, 'gross income' means
Philippines to the point of
gross receipts less sales returns,
transshipment shall form
allowances, discounts and cost of Provided, however, That a
services. 'Cost of services' shall mean resident foreign corporation shall part of Gross Philippine
all direct costs and expenses be granted the option to be taxed Billings.
necessarily incurred to provide the at fifteen percent (15%) on gross
services required by the customers and income under the same (b) International Shipping.
clients including (A) salaries and conditions, as provided in - 'Gross Philippine
employee benefits of personnel, Section 27 (A). Billings' means gross
consultants and specialists directly revenue whether for
rendering the service and (B) cost of passenger, cargo or mail
(2) Minimum Corporate Income
facilities directly utilized in providing originating from the
Tax on Resident Foreign
the service such as depreciation or Philippines up to final
Corporations. - A minimum
rental of equipment used and cost of corporate income tax of two destination, regardless of
supplies: Provided, however, That in percent (2%) of gross income, as the place of sale or
the case of banks, 'cost of services' payments of the passage or
prescribed under Section 27 (E)
shall include interest expense. freight documents.
of this Code, shall be imposed,
under the same conditions, on a
SEC. 28. Rates of Income Tax on resident foreign corporation Provided, That international
Foreign Corporations. - [21] taxable under paragraph (1) of carriers doing business in the
this Subsection. Philippines may avail of a
preferential rate or exemption
(A) Tax on Resident Foreign
from the tax herein imposed on
Corporations. - (3) International Carrier. - An
their gross revenue derived from
international carrier doing
business in the Philippines shall the carriage of persons and their
(1) In General. - Except as excess baggage on the basis of
otherwise provided in this Code, pay a tax of two and one-half
an applicable tax treaty or
a corporation organized, percent (2 1/2 %) on its 'Gross
international agreement to which
authorized, or existing under the Philippine Billings' as defined
the Philippines is a signatory or
laws of any foreign country, hereunder:
on the basis of reciprocity such
engaged in trade or business that an international carrier,
within the Philippines, shall be (a) International Air whose home country grants
subject to an income tax Carrier. - 'Gross Philippine income tax exemption to
equivalent to thirty-five percent Billings' refers to the Philippine carriers, shall likewise
(35%) of the taxable income amount of gross revenue be exempt from the tax imposed
derived in the preceding taxable derived from carriage of under this provision.
year from all sources within the persons, excess baggage,
Philippines: Provided, That cargo, and mail originating
(4) Offshore Banking Units. -
effective January 1, 2009, the from the Philippines in a
The provisions of any law to the
rate of income tax shall be thirty continuous and
contrary notwithstanding,
percent (30%). [22] uninterrupted flight,
irrespective of the place of income derived by offshore
sale or issue and the place banking units authorized by the
In the case of corporations Bangko Sentral ng Pilipinas
adopting the fiscal-year of payment of the ticket or
(BSP), from foreign currency
accounting period, the taxable passage document:
transactions with nonresidents,
income shall be computed Provided, That tickets
other offshore banking units, be treated as branch profits depository bank under the
local commercial banks, unless the same are effectively expanded foreign currency
including branches of foreign connected with the conduct of its deposit system from
banks that may be authorized by trade or business in the foreign currency
the Bangko Sentral ng Pilipinas Philippines. transactions with
(BSP) to transact business with nonresidents, offshore
offshore banking units shall be (6) Regional or Area banking units in the
exempt from all taxes except net Headquarters and Regional Philippines, local
income from such transactions as Operating Headquarters of commercial banks
may be specified by the Multinational Companies. - including branches of
Secretary of Finance, upon foreign banks that may be
recommendation of the authorized by the Bangko
(a) Regional or area
Monetary Board which shall be Sentral ng Pilipinas (BSP)
headquarters as defined in
subject to the regular income tax Section 22(DD) shall not to transact business with
payable by banks: Provided, be subject to income tax. foreign currency deposit
however, That any interest system units, and other
income derived from foreign depository banks under the
currency loans granted to (b) Regional operating expanded foreign currency
residents other than offshore headquarters as defined in deposit system shall be
banking units or local Section 22(EE) shall pay a exempt from all taxes,
commercial banks, including tax of ten percent (10%) of except net income from
local, branches of foreign banks their taxable income. such transactions as may
that may be authorized by the be specified by the
BSP to transact business with (7) Tax on Certain Incomes Secretary of Finance, upon
offshore banking units, shall be Received by a Resident Foreign recommendation by the
subject only to a final tax at the Corporation. - Monetary Board to be
rate of ten percent (10%). [24] subject to the regular
(a) Interest from Deposits income tax payable by
Any income of nonresidents, and Yield or any other banks: Provided, however,
whether individuals or Monetary Benefit from That interest income from
corporations, from transactions Deposit Substitutes, Trust foreign currency loans
with said offshore banking units Funds and Similar granted by such depository
shall be exempt from income Arrangements and banks under said expanded
tax. Royalties. - Interest from system to residents other
any currency bank deposit than offshore banking units
and yield or any other in the Philippines or other
(5) Tax on Branch Profits
Remittances. - Any profit monetary benefit from depository banks under the
remitted by a branch to its head deposit substitutes and expanded system shall be
from trust funds and subject to a final tax at the
office shall be subject to a tax of
similar arrangements and rate of ten percent (10%).
fifteen (15%) which shall be [25]
based on the total profits applied royalties derived from
or earmarked for remittance sources within the
without any deduction for the tax Philippines shall be subject Any income of
component thereof (except those to a final income tax at the nonresidents, whether
activities which are registered rate of twenty percent individuals or corporations,
with the Philippine Economic (20%) of such interest: from transactions with
Zone Authority). The tax shall Provided, however, That depository banks under the
be collected and paid in the same interest income derived by expanded system shall be
manner as provided in Sections a resident foreign exempt from income tax.
57 and 58 of this Code: corporation from a
Provided, that interests, depository bank under the (c) Capital Gains from Sale
dividends, rents, royalties, expanded foreign currency of Shares of Stock Not
including remuneration for deposit system shall be Traded in the Stock
technical services, salaries, subject to a final income Exchange. - A final tax at
wages premiums, annuities, tax at the rate of seven and the rates prescribed below
emoluments or other fixed or one-half percent (7 1/2%) of is hereby imposed upon the
determinable annual, periodic or such interest income. net capital gains realized
casual gains, profits, income and during the taxable year
capital gains received by a (b) Income Derived under from the sale, barter,
foreign corporation during each the Expanded Foreign exchange or other
taxable year from all sources Currency Deposit System. disposition of shares of
within the Philippines shall not - Income derived by a stock in a domestic
 1
corporation except shares /2%) of gross rentals, lease or against the tax due shall be
sold or disposed of through charter fees from leases or equivalent to fifteen
the stock exchange: charters to Filipino citizens or percent (15%), which
corporations, as approved by the represents the difference
Not over P 5% Maritime Industry Authority. between the regular income
100,000 10% tax of thirty percent (30%)
On any amount (4) Nonresident Owner or Lessor and the fifteen percent
in excess of P of Aircraft, Machineries and (15%) tax on dividends; [27]
100,000 Other Equipment. - Rentals,
charters and other fees derived (c) Capital Gains from Sale
by a nonresident lessor of of Shares of Stock not
(d) Intercorporate aircraft, machineries and other Traded in the Stock
Dividends. - Dividends equipment shall be subject to a Exchange. - A final tax at
received by a resident tax of seven and one-half percent the rates prescribed below
foreign corporation from a (7 1/2%) of gross rentals or fees. is hereby imposed upon the
domestic corporation liable net capital gains realized
to tax under this Code shall during the taxable year
not be subject to tax under (5) Tax on Certain Incomes
Received by a Nonresident from the sale, barter,
this Title. exchange or other
Foreign Corporation. -
disposition of shares of
(B) Tax on Nonresident Foreign stock in a domestic
Corporation. - (a) Interest on Foreign
corporation, except shares
Loans. - A final
sold, or disposed of
withholding tax at the rate
(1) In General. - Except as through the stock
of twenty percent (20%) is
otherwise provided in this Code, hereby imposed on the exchange:
a foreign corporation not amount of interest on
engaged in trade or business in foreign loans contracted on Not over P 5%
the Philippines shall pay a tax or after August 1, 1986; 100,000 10%
equal to thirty-five percent On any amount
(35%) of the gross income in excess of P
received during each taxable (b) Intercorporate
Dividends. - A final 100,000
year from all sources within the
Philippines, such as interests, withholding tax at the rate
dividends, rents, royalties, of fifteen percent (15%) is SEC. 29. Imposition of Improperly
salaries, premiums (except hereby imposed on the Accumulated Earnings Tax. -
reinsurance premiums), amount of cash and/or
annuities, emoluments or other property dividends (A) In General. - In addition to other
fixed or determinable annual, received from a domestic taxes imposed by this Title, there is
periodic or casual gains, profits corporation, which shall be hereby imposed for each taxable year
and income, and capital gains, collected and paid as on the improperly accumulated
except capital gains subject to provided in Section 57 (A) taxable income of each corporation
tax under subparagraph 5 ( c ): of this Code, subject to the described in Subsection B hereof, an
Provided, That effective January condition that the country improperly accumulated earnings tax
1, 2009, the rate of income tax in which the nonresident equal to ten percent (10%) of the
shall be thirty percent (30%). [26] foreign corporation is improperly accumulated taxable
domiciled, shall allow a income.
credit against the tax due
(2) Nonresident from the nonresident
Cinematographic Film Owner, foreign corporation taxes (B) Tax on Corporations Subject to
Lessor or Distributor. - A deemed to have been paid Improperly Accumulated Earnings
cinematographic film owner, in the Philippines Tax. -
lessor, or distributor shall pay a equivalent to twenty
tax of twenty-five percent (25%) percent (20%), which (1) In General. - The improperly
of its gross income from all represents the difference accumulated earnings tax
sources within the Philippines. between the regular income imposed in the preceding Section
tax of thirty-five percent shall apply to every corporation
(3) Nonresident Owner or Lessor (35%) and the fifteen formed or availed for the
of Vessels Chartered by percent (15%) tax on purpose of avoiding the income
Philippine Nationals. - A dividends as provided in tax with respect to its
nonresident owner or lessor of this subparagraph: shareholders or the shareholders
vessels shall be subject to a tax Provided, that effective of any other corporation, by
of four and one-half percent (4 January 1, 2009, the credit permitting earnings and profits
 to accumulate instead of being Provided, however, That for (F) Business league chamber of
divided or distributed. corporations using the calendar year commerce, or board of trade, not
basis, the accumulated earnings tax organized for profit and no part of the
(2) Exceptions. - The improperly shall not apply on improperly net income of which inures to the
accumulated earnings tax as accumulated income as of December benefit of any private stock-holder, or
provided for under this Section 31, 1997. In the case of corporations individual;
shall not apply to: adopting the fiscal year accounting
period, the improperly accumulated (G) Civic league or organization not
(a) Publicly-held income not subject to this tax, shall be organized for profit but operated
reckoned, as of the end of the month exclusively for the promotion of social
corporations;
comprising the twelve (12)-month welfare;
(b) Banks and other
period of fiscal year 1997-1998.
nonbank financial
intermediaries; and (H) A nonstock and nonprofit
(c) Insurance companies. (E) Reasonable Needs of the Business. educational institution;
- For purposes of this Section, the
term 'reasonable needs of the business'
(C) Evidence of Purpose to Avoid (I) Government educational
includes the reasonably anticipated
Income Tax. - institution;
needs of the business.
(1) Prima Facie Evidence. - the (J) Farmers' or other mutual typhoon
SEC. 30. Exemptions from Tax on
fact that any corporation is a or fire insurance company, mutual
Corporations. - The following
mere holding company or ditch or irrigation company, mutual or
organizations shall not be taxed under
investment company shall be cooperative telephone company, or
this Title in respect to income received
prima facie evidence of a like organization of a purely local
purpose to avoid the tax upon its by them as such: character, the income of which
shareholders or members. consists solely of assessments, dues,
(A) Labor, agricultural or and fees collected from members for
horticultural organization not the sole purpose of meeting its
(2) Evidence Determinative of
Purpose. - The fact that the organized principally for profit; expenses; and
earnings or profits of a
corporation are permitted to (B) Mutual savings bank not having a (K) Farmers', fruit growers', or like
accumulate beyond the capital stock represented by shares, association organized and operated as
reasonable needs of the business and cooperative bank without capital a sales agent for the purpose of
shall be determinative of the stock organized and operated for marketing the products of its members
purpose to avoid the tax upon its mutual purposes and without profit; and turning back to them the proceeds
shareholders or members unless of sales, less the necessary selling
the corporation, by the clear (C) A beneficiary society, order or expenses on the basis of the quantity
preponderance of evidence, shall association, operating for the of produce finished by them;
prove to the contrary. exclusive benefit of the members such
as a fraternal organization operating Notwithstanding the provisions in the
(D) Improperly Accumulated Taxable under the lodge system, or mutual aid preceding paragraphs, the income of
Income. - For purposes of this Section, association or a nonstock corporation whatever kind and character of the
the term 'improperly accumulated organized by employees providing for foregoing organizations from any of
taxable income' means taxable income the payment of life, sickness, accident, their properties, real or personal, or
adjusted by: or other benefits exclusively to the from any of their activities conducted
members of such society, order, or for profit regardless of the disposition
association, or nonstock corporation or made of such income, shall be subject
(a) Income exempt from tax;
their dependents; to tax imposed under this Code.
(b) Income excluded from gross
income;
(c) Income subject to final tax; (D) Cemetery company owned and
and operated exclusively for the benefit of
(d) The amount of net operating its members;
loss carry-over deducted;
(E) Nonstock corporation or
And reduced by the sum of: association organized and operated
exclusively for religious, charitable,
scientific, athletic, or cultural
(a) Dividends actually or
purposes, or for the rehabilitation of
constructively paid; and
veterans, no part of its net income or
(b) Income tax paid for the
taxable year. asset shall belong to or inure to the
benefit of any member, organizer,
officer or any specific person;