AN ACT AMENDING
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED,
AND FOR OTHER
PURPOSES
TITLE II
TAX ON INCOME
CHAPTER III
TAX ON INDIVIDUALS
SEC.
24. Income Tax Rates.-
(A) Rates of Income
Tax on Individual Citizen and Individual Resident Alien of the Philippines.
(1) An income tax is
hereby imposed:
(a) On the taxable
income defined in Section 31 of this Code, other than income subject to
tax under Subsections (B), (C) and (D) of this Section, derived for each
taxable year from all sources within and without the Philippines be every
individual citizen of the Philippines residing therein;
(b) On the taxable
income defined in Section 31 of this Code, other than income subject to
tax under Subsections (B), (C) and (D) of this Section, derived for each
taxable year from all sources within the Philippines by an individual citizen
of the Philippines who is residing outside of the Philippines including
overseas contract workers referred to in Subsection(C) of Section 23 hereof;
and
(c) On the taxable
income defined in Section 31 of this Code, other than income subject to
tax under Subsections (b), (C) and (D) of this Section, derived for each
taxable year from all sources within the Philippines by an individual alien
who is a resident of the Philippines.
The tax shall be computed
in accordance with and at the rates established in the following schedule:
Not over P10,000…………………………………....5%
Over P10,000 but not
over P30,000………………P500+10% of the excess over
P10,000
Over P30,000 but not
over P70,000………………P2,500+15% of the excess over
P30,000
Over P70,000 but not
over P140,000……..………P8,500+20% of the excess over
P70,000
Over P140,000 but not
over P250,000……………P22,500+25% of the excess over
P140,000
Over P250,000 but not
over P500,000……………P50,000+30% of the excess over
P250,000
Over P500,000 ……………………………………...
P125,000+34% of the excess over
P500,000 in 1998.
Provided, That
effective January 1, 1999, the top marginal rate shall be thirty-three
percent (33%) and effective January 1, 2000, the said rate shall be thirty-two
percent (32%).
For married individuals,
the husband and wife, subject to the provision of Section 51 (D) hereof,
shall compute separately their individual income tax based on their respective
total taxable income: Provided, That if any income cannot be definitely
attributed to or identified as income exclusively earned or realized by
either of the spouses, the same shall be divided equally between the spouses
for the purpose of determining their respective taxable income.
(B) Rate of Tax on Certain
Passive Income.
(1) Interests, Royalties,
Prizes, and Other Winnings. - A final tax at the rate of twenty percent
(20%) is hereby imposed upon the amount of interest from any currency bank
deposit and yield or any other monetary benefit from deposit substitutes
and from trust funds and similar arrangements; royalties, except on books,
as well as other literary works and musical compositions, which shall be
imposed a final tax of ten percent (10%); prizes (except prizes amounting
to Ten thousand pesos (P10,000) or less which shall be subject to tax under
Subsection (A) of Section 24; and other winnings (except Philippine Charity
Sweepstakes and Lotto winnings), derived from sources within the Philippines:
Provided, however, That interest income received by an individual
taxpayer (except a nonresident individual) from a depository bank under
the expanded foreign currency deposit system shall be subject to a final
income tax at the rate of seven and one-half percent (7 1/2%) of such interest
income: Provided, further, That interest income from long-term deposit
or investment in the form of savings, common or individual trust funds,
deposit substitutes, investment management accounts and other investments
evidenced by certificates in such form prescribed by the Bangko Sentral
ng Pilipinas (BSP) shall be exempt from the tax imposed under this Subsection:
Provided, finally, That should the holder of the certificate pre-terminate
the deposit or investment before the fifth (5th) year, a final
tax shall be imposed on the entire income and shall be deducted and withheld
by the depository bank from the proceeds of the long-term deposit or investment
certificate based on the remaining maturity thereof:
Four (4) years to less
than five (5) years - 5%;
Three (3) years to
less than (4) years - 12%; and
Less than three (3)
years - 20%
(2) Cash and/or
Property Dividends - A final tax at the following rates shall be imposed
upon the cash and/or property dividends actually or constructively received
by an individual from a domestic corporation or from a joint stock company,
insurance or mutual fund companies and regional operating headquarters
of multinational companies, or on the share of an individual in the distributable
net income after tax of a partnership (except a general professional partnership)
of which he is a partner, or on the share of an individual in the net income
after tax of an association, a joint account, or a joint venture or consortium
taxable as a corporation of which he is a member or co-venturer:
Six percent (6%) beginning
January 1, 1998;
Eight percent (8%)
beginning January 1, 1999; and
Ten percent (10% beginning
January 1, 2000.
Provided, however,
That the tax on dividends shall apply only on income earned on or after
January 1, 1998. Income forming part of retained earnings as of December
31, 1997 shall not, even if declared or distributed on or after January
1, 1998, be subject to this tax.
(C) Capital Gains from
Sale of Shares of Stock not Traded in the Stock Exchange. - The provisions
of Section 39(B) notwithstanding, a final tax at the rates prescribed below
is hereby imposed upon the net capital gains realized during the taxable
year from the sale, barter, exchange or other disposition of shares of
stock in a domestic corporation, except shares sold, or disposed of through
the stock exchange.
Not over P100,000……………………………........
5%
On any amount in excess
of P100,000………… 10%
(D) Capital Gains from
Sale of Real Property. -
(1) In General.
- The provisions of Section 39(B) notwithstanding, a final tax of six percent
(6%) based on the gross selling price or current fair market value as determined
in accordance with Section 6(E) of this Code, whichever is higher, is hereby
imposed upon capital gains presumed to have been realized from the sale,
exchange, or other disposition of real property located in the Philippines,
classified as capital assets, including pacto de retro sales and other
forms of conditional sales, by individuals, including estates and trusts:
Provided, That the tax liability, if any, on gains from sales or
other dispositions of real property to the government or any of its political
subdivisions or agencies or to government-owned or controlled corporations
shall be determined either under Section 24 (A) or under this Subsection,
at the option of the taxpayer.
(2) Exception.
- The provisions of paragraph (1) of this Subsection to the contrary notwithstanding,
capital gains presumed to have been realized from the sale or disposition
of their principal residence by natural persons, the proceeds of which
is fully utilized in acquiring or constructing a new principal residence
within eighteen (18) calendar months from the date of sale or disposition,
shall be exempt from the capital gains tax imposed under this Subsection:
Provided, That the historical cost or adjusted basis of the real
property sold or disposed shall be carried over to the new principal residence
built or acquired: Provided, further, That the Commissioner shall
have been duly notified by the taxpayer within thirty (30) days from the
date of sale or disposition through a prescribed return of his intention
to avail of the tax exemption herein mentioned: Provided, still further,
That the said tax exemption can only be availed of once every ten (10)
years: Provided, finally, that if there is no full utilization of
the proceeds of sale or disposition, the portion of the gain presumed to
have been realized from the sale or disposition shall be subject to capital
gains tax. For this purpose, the gross selling price or fair market value
at the time of sale, whichever is higher, shall be multiplied by a fraction
which the unutilized amount bears to the gross selling price in order to
determine the taxable portion and the tax prescribed under paragraph (1)
of this Subsection shall be imposed thereon.
SEC.
25. Tax on Nonresident Alien Individual. -
(A) Nonresident Alien
Engaged in trade or Business Within the Philippines. -
(1) In General.
- A nonresident alien individual engaged in trade or business in the Philippines
shall be subject to an income tax in the same manner as an individual citizen
and a resident alien individual, on taxable income received from all sources
within the Philippines. A nonresident alien individual who shall come to
the Philippines and stay therein for an aggregate period of more than one
hundred eighty (180) days during any calendar year shall be deemed a 'nonresident
alien doing business in the Philippines'. Section 22 (G) of this Code notwithstanding.
(2) Cash and/or Property
Dividends from a Domestic Corporation or Joint Stock Company, or Insurance
or Mutual Fund Company or Regional Operating Headquarters or Multinational
Company, or Share in the Distributable Net Income of a Partnership (Except
a General Professional Partnership), Joint Account, Joint Venture Taxable
as a Corporation or Association., Interests, Royalties, Prizes, and Other
Winnings. - Cash and/or property dividends from a domestic corporation,
or from a joint stock company, or from an insurance or mutual fund company
or from a regional operating headquarters of multinational company, or
the share of a nonresident alien individual in the distributable net income
after tax of a partnership (except a general professional partnership)
of which he is a partner, or the share of a nonresident alien individual
in the net income after tax of an association, a joint account, or a joint
venture taxable as a corporation of which he is a member or a co-venturer;
interests; royalties (in any form); and prizes (except prizes amounting
to Ten thousand pesos (P10,000) or less which shall be subject to tax under
Subsection (B)(1) of Section 24) and other winnings (except Philippine
Charity Sweepstakes and Lotto winnings); shall be subject to an income
tax of twenty percent (20%) on the total amount thereof: Provided, however,
that royalties on books as well as other literary works, and royalties
on musical compositions shall be subject to a final tax of ten percent
(10%) on the total amount thereof: Provided, further, That cinematographic
films and similar works shall be subject to the tax provided under Section
28 of this Code: Provided, furthermore, That interest income from
long-term deposit or investment in the form of savings, common or individual
trust funds, deposit substitutes, investment management accounts and other
investments evidenced by certificates in such form prescribed by the Bangko
Sentral ng Pilipinas (BSP) shall be exempt from the tax imposed under this
Subsection: Provided, finally, that should the holder of the certificate
pre-terminate the deposit or investment before the fifth (5th)
year, a final tax shall be imposed on the entire income and shall be deducted
and withheld by the depository bank from the proceeds of the long-term
deposit or investment certificate based on the remaining maturity thereof:
Four (4) years to less
than five (5) years - 5%;
Three (3) years to
less than four (4) years - 12%; and
Less than three (3)
years - 20%.
(3) Capital Gains.
- Capital gains realized from sale, barter or exchange of shares of stock
in domestic corporations not traded through the local stock exchange, and
real properties shall be subject to the tax prescribed under Subsections
(C) and (D) of Section 24.
(B) Nonresident Alien
Individual Not Engaged in Trade or Business Within the Philippines. -
There shall be levied, collected and paid for each taxable year upon the
entire income received from all sources within the Philippines by every
nonresident alien individual not engaged in trade or business within the
Philippines as interest, cash and/or property dividends, rents, salaries,
wages, premiums, annuities, compensation, remuneration, emoluments, or
other fixed or determinable annual or periodic or casual gains, profits,
and income, and capital gains, a tax equal to twenty-five percent (25%)
of such income. Capital gains realized by a nonresident alien individual
not engaged in trade or business in the Philippines from the sale of shares
of stock in any domestic corporation and real property shall be subject
to the income tax prescribed under Subsections (C) and (D) of Section 24.
(C) Alien Individual
Employed by Regional or Area Headquarters and Regional Operating Headquarters
of Multinational Companies. - There shall be levied, collected and
paid for each taxable year upon the gross income received by every alien
individual employed by regional or area headquarters and regional operating
headquarters established in the Philippines by multinational companies
as salaries, wages, annuities, compensation, remuneration and other emoluments,
such as honoraria and allowances, from such regional or area headquarters
and regional operating headquarters, a tax equal to fifteen percent (15%)
of such gross income: Provided, however, That the same tax treatment
shall apply to Filipinos employed and occupying the same position as those
of aliens employed by these multinational companies. For purposes of this
Chapter, the term 'multinational company' means a foreign firm or entity
engaged in international trade with affiliates or subsidiaries or branch
offices in the Asia-Pacific Region and other foreign markets.
(D) Alien Individual
Employed by Offshore Banking Units. - There shall be levied, collected
and paid for each taxable year upon the gross income received by every
alien individual employed by offshore banking units established in the
Philippines as salaries, wages, annuities, compensation, remuneration and
other emoluments, such as honoraria and allowances, from such off-shore
banking units, a tax equal to fifteen percent (15%) of such gross income:
Provided, however, That the same tax treatment shall apply to Filipinos
employed and occupying the same positions as those of aliens employed by
these offshore banking units.
(E) Alien Individual
Employed by Petroleum Service Contractor and Subcontractor. - An Alien
individual who is a permanent resident of a foreign country but who is
employed and assigned in the Philippines by a foreign service contractor
or by a foreign service subcontractor engaged in petroleum operations in
the Philippines shall be liable to a tax of fifteen percent (15%) of the
salaries, wages, annuities, compensation, remuneration and other emoluments,
such as honoraria and allowances, received from such contractor or subcontractor:
Provided, however, That the same tax treatment shall apply to a Filipino
employed and occupying the same position as an alien employed by petroleum
service contractor and subcontractor.
Any income earned from
all other sources within the Philippines by the alien employees referred
to under Subsections (C), (D) and (E) hereof shall be subject to the pertinent
income tax, as the case may be, imposed under this Code.
SEC.
26. Tax Liability of Members of General Professional Partnerships.
- A general professional partnership as such shall not be subject to the
income tax imposed under this Chapter. Persons engaging in business as
partners in a general professional partnership shall be liable for income
tax only in their separate and individual capacities.
For purposes of computing
the distributive share of the partners, the net income of the partnership
shall be computed in the same manner as a corporation.
Each partner shall report
as gross income his distributive share, actually or constructively received,
in the net income of the partnership.
Harvard
Computer Systems, Inc.