AN ACT AMENDING
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED,
AND FOR OTHER
TAX ON INCOME
OF GROSS INCOME
32. Gross Income. -
- Except when otherwise provided in this Title, gross income means all
income derived from whatever source, including (but not limited to) the
for services in whatever form paid, including, but not limited to fees,
wages, commissions, and similar items;
(2) Gross income
derived from the conduct of trade or business or the exercise of a profession;
(3) Gains derived
from dealings in property;
(9) Prizes and
(10) Pensions; and
(11) Partner's distributive
share from the net income of the general professional partnership.(B) Exclusions
from Gross Income.
- The following items shall not be included in gross income and shall be
exempt from taxation under this title:
(1) Life Insurance.
- The proceeds of life insurance policies paid to the heirs or beneficiaries
upon the death of the insured, whether in a single sum or otherwise, but
if such amounts are held by the insurer under an agreement to pay interest
thereon, the interest payments shall be included in gross income.
Received by Insured as Return of Premium. - The amount received by
the insured, as a return of premiums paid by him under life insurance,
endowment, or annuity contracts, either during the term or at the maturity
of the term mentioned in the contract or upon surrender of the contract.
Bequests, and Devises. - The value of property acquired by gift, bequest,
devise, or descent: Provided, however, That income from such property,
as well as gift, bequest, devise or descent of income from any property,
in cases of transfers of divided interest, shall be included in gross income.
for Injuries or Sickness. - amounts received, through Accident or Health
Insurance or under Workmen's Compensation Acts, as compensation for personal
injuries or sickness, plus the amounts of any damages received, whether
by suit or agreement, on account of such injuries or sickness.
Exempt under Treaty. - Income of any kind, to the extent required by
any treaty obligation binding upon the Government of the Philippines.
benefits received under Republic Act No. 7641 and those received by officials
and employees of private firms, whether individual or corporate, in accordance
with a reasonable private benefit plan maintained by the employer: Provided,
That the retiring official or employee has been in the service of the same
employer for at least ten (10) years and is not less than fifty (50) years
of age at the time of his retirement: Provided, further, That the
benefits granted under this subparagraph shall be availed of by an official
or employee only once. For purposes of this Subsection, the term 'reasonable
private benefit plan' means a pension, gratuity, stock bonus or profit-sharing
plan maintained by an employer for the benefit of some or all of his officials
or employees, wherein contributions are made by such employer for the officials
or employees, or both, for the purpose of distributing to such officials
and employees the earnings and principal of the fund thus accumulated,
and wherein its is provided in said plan that at no time shall any part
of the corpus or income of the fund be used for, or be diverted to, any
purpose other than for the exclusive benefit of the said officials and
(b) Any amount
received by an official or employee or by his heirs from the employer as
a consequence of separation of such official or employee from the service
of the employer because of death sickness or other physical disability
or for any cause beyond the control of the said official or employee.
(c) The provisions
of any existing law to the contrary notwithstanding, social security benefits,
retirement gratuities, pensions and other similar benefits received by
resident or nonresident citizens of the Philippines or aliens who come
to reside permanently in the Philippines from foreign government agencies
and other institutions, private or public.
of benefits due or to become due to any person residing in the Philippines
under the laws of the United States administered by the United States Veterans
received from or enjoyed under the Social Security System in accordance
with the provisions of Republic Act No. 8282.
received from the GSIS under Republic Act No. 8291, including retirement
gratuity received by government officials and employees.
Derived by Foreign Government. - Income derived from investments in
the Philippines in loans, stocks, bonds or other domestic securities, or
from interest on deposits in banks in the Philippines by (i) foreign governments,
(ii) financing institutions owned, controlled, or enjoying refinancing
from foreign governments, and (iii) international or regional financial
institutions established by foreign governments.
Derived by the Government or its Political Subdivisions. - Income derived
from any public utility or from the exercise of any essential governmental
function accruing to the Government of the Philippines or to any political
and Awards. - Prizes and awards made primarily in recognition of religious,
charitable, scientific, educational, artistic, literary, or civic achievement
but only if:
(i) The recipient
was selected without any action on his part to enter the contest or
(ii) The recipient
is not required to render substantial future services as a condition to
receiving the prize or award.
and Awards in Sports Competition. - All prizes and awards granted to
athletes in local and international sports competitions and tournaments
whether held in the Philippines or abroad and sanctioned by their national
Month Pay and Other Benefits. - Gross benefits received by officials
and employees of public and private entities: Provided, however,
That the total exclusion under this subparagraph shall not exceed Thirty
thousand pesos (P30,000) which shall cover:
received by officials and employees of the national and local government
pursuant to Republic Act No. 6686;
received by employees pursuant to Presidential Decree No. 851, as
amended by Memorandum Order No. 28, dated August 13, 1986;
received by officials and employees not covered by Presidential decree
851, as amended by Memorandum Order No. 28, dated August 13, 1986; and
(iv) Other benefits
such as productivity incentives and Christmas bonus: Provided,
further, That the ceiling of Thirty thousand pesos (P30,000) may be
through rules and regulations issued by the Secretary of Finance, upon
recommendation of the Commissioner, after considering among others, the
effect on the same of the inflation rate at the end of the taxable year.
SSS, Medicare and Other Contributions. - GSIS, SSS, Medicare and Pag-ibig
contributions, and union dues of individuals.
from the Sale of Bonds, Debentures or other Certificate of Indebtedness.
- Gains realized from the same or exchange or retirement of bonds,
debentures or other certificate of indebtedness with a maturity of more
than five (5) years.
from Redemption of Shares in Mutual Fund. - Gains realized by the investor
upon redemption of shares of stock in a mutual fund company as defined
in Section 22 (BB) of this Code.
33. Special Treatment of Fringe Benefit.-
A final tax of thirty-four percent (34%) effective January 1, 1998; thirty-three
percent (33%) effective January 1, 1999; and thirty-two percent (32%) effective
January 1, 2000 and thereafter, is hereby imposed on the grossed-up monetary
value of fringe benefit furnished or granted to the employee (except rank
and file employees as defined herein) by the employer, whether an individual
or a corporation (unless the fringe benefit is required by the nature of,
or necessary to the trade, business or profession of the employer, or when
the fringe benefit is for the convenience or advantage of the employer).
The tax herein imposed is payable by the employer which tax shall be paid
in the same manner as provided for under Section 57 (A) of this Code. The
grossed-up monetary value of the fringe benefit shall be determined by
dividing the actual monetary value of the fringe benefit by sixty-six percent
(66%) effective January 1, 1998; sixty-seven percent (67%) effective January
1, 1999; and sixty-eight percent (68%) effective January 1, 2000 and thereafter:
Provided, however, That fringe benefit furnished to employees and
taxable under Subsections (B), (C), (D) and (E) of Section 25 shall be
taxed at the applicable rates imposed thereat: Provided, further,
That the grossed -Up value of the fringe benefit shall be determined by
dividing the actual monetary value of the fringe benefit by the difference
between one hundred percent (100%) and the applicable rates of income tax
under Subsections (B), (C), (D), and (E) of Section 25.
For purposes of this Section, the term "fringe benefit" means any
good, service or other benefit furnished or granted in cash or in kind
by an employer to an individual employee (except rank and file employees
as defined herein) such as, but not limited to, the following:
(2) Expense account;
(3) Vehicle of
personnel, such as maid, driver and others;
on loan at less than market rate to the extent of the difference between
market rate and actual rate granted;
fees, dues and other expenses borne by the employer for the employee in
social and athletic clubs or other similar organizations;
for foreign travel;
(8) Holiday and
assistance to the employee or his dependents; and
(10) Life or health
insurance and other non-life insurance premiums or similar amounts in
excess of what the law allows.
Benefits Not Taxable.
- The following fringe benefits are not taxable under this Section:
(1) fringe benefits
which are authorized and exempted from tax under special laws;
of the employer for the benefit of the employee to retirement, insurance
and hospitalization benefit plans;
given to the rank and file employees, whether granted under a collective
bargaining agreement or not; and
(4) De minimis
benefits as defined in the rules and regulations to be promulgated by
the Secretary of Finance, upon recommendation of the Commissioner.
The Secretary of Finance
is hereby authorized to promulgate, upon recommendation of the Commissioner,
such rules and regulations as are necessary to carry out efficiently and
fairly the provisions of this Section, taking into account the peculiar
nature and special need of the trade, business or profession of the employer.