AN ACT AMENDING
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED,
AND FOR OTHER
TAX ON INCOME
22. Definitions - When used in this Title:
(A) The term "person"means an individual, a trust, estate or corporation.
(B) The term "corporation"
shall include partnerships, no matter how created or organized, joint-stock
companies, joint accounts (cuentas en participacion), association, or insurance
companies, but does not include general professional partnerships and a
joint venture or consortium formed for the purpose of undertaking construction
projects or engaging in petroleum, coal, geothermal and other energy operations
pursuant to an operating consortium agreement under a service contract
with the Government. "General professional partnerships" are
partnerships formed by persons for the sole purpose of exercising their
common profession, no part of the income of which is derived from engaging
in any trade or business.
(C) The term "domestic",
when applied to a corporation, means created or organized in the Philippines
or under its laws.
(D) The term "foreign",
when applied to a corporation, means a corporation which is not domestic.
(E) The term "nonresident
(1) A citizen of
the Philippines who establishes to the satisfaction of the Commissioner
the fact of his physical presence abroad with a definite intention to reside
(2) A citizen of
the Philippines who leaves the Philippines during the taxable year to reside
abroad, either as an immigrant or for employment on a permanent basis.
(3) A citizen of
the Philippines who works and derives income from abroad and whose employment
thereat requires him to be physically present abroad most of the time during
the taxable year.
(4) A citizen who
has been previously considered as nonresident citizen and who arrives in
the Philippines at any time during the taxable year to reside permanently
in the Philippines shall likewise be treated as a nonresident citizen for
the taxable year in which he arrives in the Philippines with respect to
his income derived from sources abroad until the date of his arrival in
(5) The taxpayer
shall submit proof to the Commissioner to show his intention of leaving
the Philippines to reside permanently abroad or to return to and reside
in the Philippines as the case may be for purpose of this Section.
(F) The term "resident
alien" means an individual whose residence is within the Philippines
and who is not a citizen thereof.
(G) The term "nonresident
alien" means an individual whose residence is not within the Philippines
and who is not a citizen thereof.
(H) The term
"resident foreign corporation" applies to a foreign corporation not
engaged in trade or business within the Philippines.
(I) The term 'nonresident
foreign corporation' applies to a foreign corporation not engaged in
trade or business within the Philippines.
(J) The term "fiduciary"
means a guardian, trustee, executor, administrator, receiver, conservator
or any person acting in any fiduciary capacity for any person.
(K) The term
"withholding agent" means any person required to deduct and withhold
any tax under the provisions of Section 57.
(L) The term "shares
of stock" shall include shares of stock of a corporation, warrants
and/or options to purchase shares of stock, as well as units of participation
in a partnership (except general professional partnerships), joint stock
companies, joint accounts, joint ventures taxable as corporations, associations
and recreation or amusement clubs (such as golf, polo or similar clubs),
and mutual fund certificates.
(M) The term
"shareholder" shall include holders of a share/s of stock, warrant/s
and/or option/s to purchase shares of stock of a corporation, as well as
a holder of a unit of participation in a partnership (except general professional
partnerships) in a joint stock company, a joint account, a taxable joint
venture, a member of an association, recreation or amusement club (such
as golf, polo or similar clubs) and a holder of a mutual fund certificate,
a member in an association, joint-stock company, or insurance company.
(N) The term
"taxpayer"means any person subject to tax imposed by this Title.
(O) The terms "including"and "includes", when used in a definition contained in
this Title, shall not be deemed to exclude other things otherwise within
the meaning of the term defined.
(P) The term
"taxable year" means the calendar year, or the fiscal year ending during
such calendar year, upon the basis of which the net income is computed
under this Title. 'Taxable year' includes, in the case of a return made
for a fractional part of a year under the provisions of this Title or under
rules and regulations prescribed by the Secretary of Finance, upon recommendation
of the commissioner, the period for which such return is made.
(Q) The term
"fiscal year" means an accounting period of twelve (12) months ending
on the last day of any month other than December.
(R) The terms
"paid or incurred" and 'paid or accrued' shall be construed according
to the method of accounting upon the basis of which the net income is computed
under this Title.
(S) The term "trade
or business" includes the performance of the functions of a public
(T) The term
"securities" means shares of stock in a corporation and rights to subscribe
for or to receive such shares. The term includes bonds, debentures, notes
or certificates, or other evidence or indebtedness, issued by any corporation,
including those issued by a government or political subdivision thereof,
with interest coupons or in registered form.
(U) The term "dealer
in securities" means a merchant of stocks or securities, whether an
individual, partnership or corporation, with an established place of business,
regularly engaged in the purchase of securities and the resale thereof
to customers; that is, one who, as a merchant, buys securities and re-sells
them to customers with a view to the gains and profits that may be derived
(V) The term
"bank"means every banking institution, as defined in Section
2 of Republic Act No. 337, as amended, otherwise known as the General banking
Act. A bank may either be a commercial bank, a thrift bank, a development
bank, a rural bank or specialized government bank.
(W) The term "non-bank
financial intermediary" means a financial intermediary, as defined
in Section 2(D)(C) of Republic Act No. 337, as amended, otherwise known
as the General Banking Act, authorized by the Bangko Sentral ng Pilipinas
(BSP) to perform quasi-banking activities.
(X) The term "quasi-banking
activities" means borrowing funds from twenty (20) or more personal
or corporate lenders at any one time, through the issuance, endorsement,
or acceptance of debt instruments of any kind other than deposits for the
borrower's own account, or through the issuance of certificates of assignment
or similar instruments, with recourse, or of repurchase agreements for
purposes of relending or purchasing receivables and other similar obligations:
Provided, however, That commercial, industrial and other non-financial
companies, which borrow funds through any of these means for the limited
purpose of financing their own needs or the needs of their agents or dealers,
shall not be considered as performing quasi-banking functions.
(Y) The term "deposit
substitutes" shall mean an alternative from of obtaining funds from
the public (the term 'public' means borrowing from twenty (20) or more
individual or corporate lenders at any one time) other than deposits, through
the issuance, endorsement, or acceptance of debt instruments for the borrowers
own account, for the purpose of relending or purchasing of receivables
and other obligations, or financing their own needs or the needs of their
agent or dealer. These instruments may include, but need not be limited
to bankers' acceptances, promissory notes, repurchase agreements, including
reverse repurchase agreements entered into by and between the Bangko Sentral
ng Pilipinas (BSP) and any authorized agent bank, certificates of assignment
or participation and similar instruments with recourse: Provided, however,
That debt instruments issued for interbank call loans with maturity of
not more than five (5) days to cover deficiency in reserves against deposit
liabilities, including those between or among banks and quasi-banks, shall
not be considered as deposit substitute debt instruments.
(Z) The term "ordinary
income" includes any gain from the sale or exchange of property which
is not a capital asset or property described in Section 39(A)(1). Any gain
from the sale or exchange of property which is treated or considered, under
other provisions of this Title, as 'ordinary income' shall be treated as
gain from the sale or exchange of property which is not a capital asset
as defined in Section 39(A)(1). The term 'ordinary loss' includes any loss
from the sale or exchange of property which is not a capital asset. Any
loss from the sale or exchange of property which is treated or considered,
under other provisions of this Title, as 'ordinary loss' shall be treated
as loss from the sale or exchange of property which is not a capital asset.
(AA) The term "rank
and file employees" shall mean all employees who are holding neither
managerial nor supervisory position as defined under existing provisions
of the Labor Code of the Philippines, as amended.
(BB) The term "mutual
fund company" shall mean an open-end and close-end investment company
as defined under the Investment Company Act.
(CC) The term "trade,
business or profession" shall not include performance of services by
the taxpayer as an employee.
(DD) The term "regional
or area headquarters" shall mean a branch established in the Philippines
by multinational companies and which headquarters do not earn or derive
income from the Philippines and which act as supervisory, communications
and coordinating center for their affiliates, subsidiaries, or branches
in the Asia-Pacific Region and other foreign markets.
(EE) The term "regional
operating headquarters" shall mean a branch established in the Philippines
by multinational companies which are engaged in any of the following services:
general administration and planning; business planning and coordination;
sourcing and procurement of raw materials and components; corporate finance
advisory services; marketing control and sales promotion; training and
personnel management; logistic services; research and development services
and product development; technical support and maintenance; data processing
and communications; and business development.
(FF) The term "long-term
deposit or investment certificates" shall refer to certificate of time
deposit or investment in the form of savings, common or individual trust
funds, deposit substitutes, investment management accounts and other investments
with a maturity period of not less than five (5) years, the form of which
shall be prescribed by the Bangko Sentral ng Pilipinas (BSP) and issued
by banks only (not by nonbank financial intermediaries and finance companies)
to individuals in denominations of Ten thousand pesos (P10,000) and other
denominations as may be prescribed by the BSP.