Codal-The National Internal Revenue Code of the Philippines

7/27/2019 Codal-The National Internal Revenue Code of the Philippines

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THENATIONAL INTERNAL REVENUE CODEOF THE PHILIPPINES

[Tax Reform Act of 1997]

Re!"#$c Act No% &'('

AN ACT A)ENDIN* THE NATIONAL INTERNAL REVENUE CODE+ AS A)ENDED+ AND FOR OTHER

PURPOSES

SECTION 1% Short Title- This Act shall be cited as the "Tax Reform Act of 1997"

SEC% (% State Policy. It is hereby declared the policy of the State to promote sustainable economic

growth through the raonalizaon of the Philippine internal reenue ta! system" including ta!

administraon# to proide" as much as possible" an e$uitable relief to a greater number of ta!payers in

order to improe leels of disposable income and increase economic acity# and to create a robust

enironment for business to enable %rms to compete be&er in the regional as well as the global mar'et"

at the same me that the State ensures that (oernment is able to proide for the needs of those under

its )urisdicon and care.

SEC% ,% Presidenal *ecree +o. ,," as amended by" among others" Presidenal *ecree +o. ,//0 and

1!ecue 2rder +o. 345" otherwise 'nown as the +aonal Internal 6eenue 7ode" is hereby furtheramended.

TITLE I

OR*ANI-ATION AND FUNCTION OF

THE .UREAU OF INTERNAL REVENUE

SECTION 1. Title of the Code- This 7ode shall be 'nown as the +aonal Internal 6eenue 7ode of ,//4.

SEC% (% Powers and Dues of the Bureau of Internal Revenue- The 8ureau of Internal 6eenue shall be

under the superision and control of the *epartment of 9inance and its powers and dues shall

comprehend the assessment and collecon of all naonal internal reenue ta!es" fees" and charges" and

the enforcement of all forfeitures" penales" and %nes connected therewith" including the e!ecuon of

)udgments in all cases decided in its faor by the 7ourt of Ta! Appeals and the ordinary courts.

The 8ureau shall gie e:ect to and administer the superisory and police powers conferred to it by this7ode or other laws.

SEC% ,% Chief Ocials of the Bureau of Internal Revenue- The 8ureau of Internal 6eenue shall hae a

chief to be 'nown as 7ommissioner of Internal 6eenue" hereina;er referred to as the 7ommissioner

and four


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goernment-owned or -controlled corporaons" any informaon such as" but not limited to" costs and

olume of producon" receipts or sales and gross incomes of ta!payers" and the names" addresses" and

%nancial statements of corporaons" mutual fund companies" insurance companies" regional operang

head$uarters of mulnaonal companies" )oint accounts" associaons" )oint entures of consora and

registered partnerships" and their members#

Provided, hoever!That failure to %le a return shall not preent the

7ommissioner from authorizing the e!aminaon of any ta!payer.

Any return" statement of declaraon %led in any o?ce authorized to receie the same shall not be

withdrawn> Provided, Thatwithin three


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other records do not correctly reBect the declaraons made or to be made in a return re$uired to be

%led under the proisions of this 7ode" the 7ommissioner" a;er ta'ing into account the sales" receipts"

income or other ta!able base of other persons engaged in similar businesses under similar situaons or

circumstances or a;er considering other releant informaon may prescribe a minimum amount of such

gross receipts" sales and ta!able base" and such amount so prescribed shall be prima facie correct for

purposes of determining the internal reenue ta! liabilies of such person.


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9ailure of the Secretary of 9inance to rule on the Appeal within the prescribed period shall be deemed as

approal of the applicaon for accreditaon of the appellant.

Provided, hoever,That assessments issued by the regional

o?ces inoling basic de%ciency ta!es of 9ie hundred thousand pesos


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produced or 'ept>Provided" That an internal reenue o?cer assigned to any such establishment shall in

no case stay in his assignment for more than two


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Proided" howeer" That

commercial" industrial and other non-%nancial companies" which borrow funds through any of these

means for the limited purpose of %nancing their own needs or the needs of their agents or dealers" shall

not be considered as performing $uasi-ban'ing funcons.


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SEC% (,. 4eneral Princiles of Income Ta!aon in the Philiines-

1Q71PT when otherwise proided in this 7ode>

Provided,That a S1AMA+ who is a cizen of the Philippines and who receies

compensaon for serices rendered abroad as a member of the complement of a essel

engaged e!clusiely in I+T16+ATI2+AG tradeshall be treated as an oerseas contract

wor'er#

Provided, That a S1AMA+ who is a cizen of the Philippines and who receies

compensaon for serices rendered abroad as a member of the complement of a essel

engaged e!clusiely in I+T16+ATI2+AG trade shall be treated as an oerseas contract

wor'er#


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from all sources withinthe Philippines by an indiidual AGI1+ who is a 61SI*1+T0of the

Philippines.

The ta! shall be computed in accordance with and at the rates established in the

following schedule>

+ot oer P,C"CCC........

2er P,C"CCC but not oer P5C"CCC.. PCC,C of the e!cess oer P,C"CCC2er P5C"CCC but not oer P4C"CCC.. P3"CC, of the e!cess oer P5C"CCC

2er P4C"CCC but not oer P,0C"CCC. P"CC3C of the e!cess oer P4C"CCC

2er P,0C"CCC but not oer P3C"CCC. P33"CC3 of the e!cess oer P,0C"CCC

2er P3C"CCC but not oer PCC"CCC. PC"CCC5C of the e!cess oer P3C"CCC

2er PCC"CCC ..... P,3"CCC50 of the e!cess oer PCC"CCC in ,//.

Provided,That e:ece Danuary ," ,///" the top marginal rate shall be thirty-three

percent


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deried from sources ITFI+ the Philippines>

Provided, hoever" That interest income receied by an I+*INI*HAG ta!payer


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other disposion of shares of stoc' in a *2M1STI7 corporaon" 1Q71PT shares sold" or disposed of

through the stoc' e!change

o +2T oer P,CC"CCCUUUUU.

o 2n any amount in 1Q71SS of P,CC"CCCUUUU ,C


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There shall be leied" collected and paid for each ta!able year upon the enre income receied

from all sources within the Philippines by eery nonresident alien indiidual not engaged in trade

or business within the Philippines as interest" cash andEor property diidends" rents" salaries"

wages" premiums" annuies" compensaon" remuneraon" emoluments" or other %!ed or

determinable annual or periodic or casual gains" pro%ts" and income" and capital gains" a ta!

e$ual to twenty-%e percent Provided,

hoever,That the same ta! treatment shall apply to a 9ilipino employed and occupying the same

posion as an alien employed by petroleum serice contractor and subcontractor. cralaw

Any income earned from all other sources within the Philippines by the alien employees referred

to under Subsecons


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A general professional partnership as such shall not be sub)ect to the income ta! imposed under this

7hapter.

Persons engaging in business as partners in a general professional partnership shall be liable for income

ta! only in their separate and indiidual capacies. cralaw

9or purposes of compung the distribue share of the partners" the net income of the partnership shall

be computed in the same manner as a corporaon.

1ach partner shall report as gross income his distribue share" actually or construcely receied" in the

net income of the partnership.

CHAPTER IV

TA2 ON CORPORATIONS

SEC% (7. Rates of Income ta! on Domesc Cororaons. 5


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insurance premiums and other costs incurred to bring the raw materials to the factory or

warehouse. cralaw

In the case of ta!payers engaged in the sale of serice" Kgross incomeK means gross receipts less sales

returns" allowances and discounts. cralaw

Provided, hoever, That interest

income deried by a domesc corporaon from a depository ban' under the e!panded foreign currency

deposit system shall be sub)ect to a %nal income ta! at the rate of seen and one-half percent


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Any income of nonresidents" whether indiiduals or corporaons" from transacons with depository

ban's under the e!panded system shall be e!empt from income ta!.


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ta!able income deried in the preceding ta!able year from all sources within the

Philippines>Provided, That e:ece Danuary ," ,//" the rate of income ta! shall be thirty-four

percent


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corporaon during each ta!able year from all sources within the Philippines shall not be treated

as branch pro%ts unless the same are e:ecely connected with the conduct of its trade or

business in the Philippines.


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the purpose to aoid the ta! upon its shareholders or members unless the corporaon" by the

clear preponderance of eidence" shall proe to the contrary.


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+otwithstanding the proisions in the preceding paragraphs" the income of whateer 'ind and

character of the foregoing organizaons from any of their properes" real or personal" or from

any of their acies conducted for pro%t regardless of the disposion made of such income"

shall be sub)ect to ta! imposed under this 7ode.

CHAPTER V

CO)PUTATION OF TA2A.LE INCO)E

SEC% ,1Ta!a#le Income De+ned The term ta!able income means the pernent items of gross income

speci%ed in this 7ode" less the deducons andEor personal and addional e!empons" if any" authorized

for such types of income by this 7ode or other special laws.

CHAPTER VI

CO)PUTATION OF *ROSS INCO)E

SEC% ,( 4ross Income. 5 6

;A?4eneral De+nion. - 1!cept when otherwise proided in this Title" gross income means all

income deried from whateer source" including Proided" howeer"

That income from such property" as well as gi;" be$uest" deise or descent of income


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from any property" in cases of transfers of diided interest" shall be included in gross

income.


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o through rules and regulaons issued by the Secretary of

9inance"

o upon recommendaon of the 7ommissioner"

o a;er considering among others"

o the e:ect on the same of the inBaon rate at the end of the

ta!able year.


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a. cash or in

b. 'ind

by an employer to an indiidual employee


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in 7A66RI+( 2+ or which are *I617TGR ATT6I8HTA8G1 to"

the deelopment" management" operaon andEor conduct of the trade"

business or e!ercise of a profession" including>


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of the principal amorzed or paid during the year shall be allowed as

deducon in such ta!able year#


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his proporonate share of such ta!es of the general professional partnership or

the estate or trust paid or incurred during the ta!able year to a foreign country"

if his distribue share of the income of such partnership or

An AGI1+ indiidual and a 9261I(+ corporaon shall +2T be allowed the credits against

the ta! for the ta!es of foreign countries allowed under this paragraph. trust is reported

for ta!aon under this Title.

;'? "imitaons on Credit.

The AM2H+T of the credit ta'en under this Secon shall be sub)ect to each of the

following GIMITATI2+S>


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Provided, hoever, That any net loss incurred in a ta!able year *H6I+( which the

ta!payer was 1Q1MPT from income ta! shall +2T be allowed as a deducon under this

Subsecon>

Provided, further,That a net operang loss carry-oer shall be AGG21* 2+GR I9 there

has been +2 substanal change in the ownershipof the business or enterprise in that

Provided, That if such abandoned well is

reentered and producon is resumed" or if such e$uipment or facility is restored

into serice" the said costs shall be included as part of gross income in the year


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of resumpon or restoraon and shall be amorzed or depreciated" as the case

may be.

;E? Bad De#ts. 7

;1?In 4eneral.

*ebts due to the ta!payer actually ascertained to be worthless and charged o: within

the ta!able year

,. e!cept those not connected with profession" trade or business and

3. those sustained in a transacon entered into between pares menoned under

Secon 5@

Proided" That recoery of bad debts preiously allowed as deducon in the

preceding years shall be included as part of the gross income in the year of recoery

to the e!tent of the income ta! bene%t of said deducon.

;(? Securies Becomin* /orthless.

If securies" as de%ned in Secon 33


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the ta!payer and the 7ommissioner hae entered into an agreement in 6ITI+(

speci%cally dealing with the useful life and rate of depreciaon of any property"

the rate so agreed upon shall be binding on boththe ta!payer and the naonal

(oernment in the absence of facts and circumstances not ta'en into

consideraon during the adopon of such agreement.

The re5o45$"$#$t: of e5ta"#$5=$4 t=e ex$5te4ceof such facts and circumstances

shall rest with the party iniang the modi%caon.

A4: c=a4ein the agreed rate and useful life of the depreciable property as

speci%ed in the agreement shall +2T be e:ece for ta!able years P6I26 to the

ta!able year in which noce in wring by cer%ed mail or registered mail is

sered by the party iniang such change to the other party to the agreement>

o Provided, hoever" that where the ta!payer has adopted such useful life

and depreciaon rate for any depreciable and claimed the depreciaon

e!penses as deducon from his gross income" ITF2HT any wri&en

ob)econon the part of the 7ommissioner or his duly authorized

representaes" the aforesaid useful life and depreciaon rate so

A*2PT1* by the ta!payer for the aforesaid depreciable asset shall be

considered 8I+*I+( for purposes of this Subsecon.;'? Dereciaon of Proeres ;sed in PetroleumOeraons.

An allowance for depreciaon in respect of all properes directly related to

producon of petroleum inially placed in serice in a ta!able year shall be

allowed under the straight-line or declining-balance method of depreciaon at

the opon of the serice contractor.

Foweer" if the serice contractor inially elects the declining-balance method"

it may at any subse$uent date" shi; to the straight-line method.

The USEFUL LIFE of roer8e5 !5e6 $4 or re#ate6 to ro6!c8o4 of etro#e!m

shall be ten


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a reasonable allowance for the deterioraon of Property arising out of its

use or employment or its non-use in the business trade or profession shall

be permi&ed

o4#: =e4 5!c= roert: $5 #ocate6 $4 t=e P=$#$$4e5%

;*?Deleon of Oil and 4as /ells and 'ines.K5

;1?In 4eneral.- In the case of oil and gas wells or mines" a reasonable allowance for

depleon or amorzaon computed in accordance with the cost-depleon method shall

be granted under rules and regulaons to be prescribed by the Secretary of %nance"

upon recommendaon of the 7ommissioner. Provided, That when the allowance for

depleon shall e$ual the capital inested no further allowance shall be

granted> Provided, further,That a;er producon in commercial $uanes has

commenced" certain intangible e!ploraon and deelopment drilling costs>

Provided,That the

amount deducble for e!ploraon and deelopment e!penditures shall not e!ceed

twenty-%e percent


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In no case shall this paragraph apply with respect to amounts paid or incurred for the

e!ploraon and deelopment of oil and gas.

The term"ex'#oraon ex'enditures"means e!penditures paid or incurred for the

purpose of ascertaining the e!istence" locaon" e!tent or $uality of any deposit of ore or

other mineral" and paid or incurred before the beginning of the deelopment stage of

the mine or deposit.

The term "deve#o'ment ex'enditures"means e!penditures paid or incurred during the

deelopment stage of the mine or other natural deposits.

The deelopment stage of a mine or other natural deposit shall begin at the me when

deposits of ore or other minerals are shown to e!ist in su?cient commercial $uanty

and $uality and shall end upon commencement of actual commercial e!tracon.

;,? Deleon of Oil and 4as /ells and 'ines Deduc#le #y a ,onresident )lien

individual or orei*n Cororaon.- In the case of a nonresident alien indiidual

engaged in trade or business in the Philippines or a resident foreign corporaon"

allowance for depleon of oil and gas wells or mines under paragraph


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commitments entered into by the (oernment of the Philippines and the

foreign instuons or internaonal organizaons or in pursuance of special laws#


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;1? In 4eneral.- a ta!payer may treat research or deelopment e!penditures which are

paid or incurred by him during the ta!able year in connecon with his trade" business or

profession as ordinary and necessary e!penses which are not chargeable to capital

account.

The e!penditures so treated shall be allowed as deducon during the ta!able year when

paid or incurred.

;(?)mor-aon of Certain Research and Develoment %!enditures.

At the elecon of the ta!payer and in accordance with the rules and regulaons to be

prescribed by the Secretary of 9inance" upon recommendaon of the 7ommissioner" the

following research and deelopment e!penditures may be treated as deferred e!penses>


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Any amount paid or payable which is otherwise deducble from" or ta'en into account in

compung gross income or for which depreciaon or amorzaon may be allowed under this

Secon"

shall be allowed as a deducon

only if it is shown that the ta! re$uired to be deducted and withheld therefrom has been paid to

the 8ureau of Internal 6eenue in accordance with this Secon and , of this 7ode.

;L? Oonal Standard Deducon.-

In lieu of the deducons allowed under the preceding Subsecons"

an indiidual sub)ect to ta! under Secon 30"

other than a nonresident alien"

may elect a standard deducon in an amount not e!ceeding ten percent Provided, That said family has a gross income of not morethan Two hundred %;y thousand pesos


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9or purposes of determining the ta! proided in Secon 30


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If the ta!payer dies during the ta!able year" his estate may sll claim the personal and addional

e!empons for himself and his dependent


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to the ta!able year of the corporaon preceding the date of the sale of e!change was

under the law applicable to such ta!able year" a personal holding company or a foreign

personal holding company#

Provided, hoever, That the released resere be treated as

income for the year of release.

;.? 'utual Insurance Comanies. - In the case of mutual %re and mutual employersK liability and

mutual wor'menKs compensaon and mutual casualty insurance companies re$uiring theirmembers to ma'e premium deposits to proide for losses and e!penses" said companies shall

not return as income any poron of the premium deposits returned to their policyholders" but

shall return as ta!able income all income receied by them from all other sources plus such

poron of the premium deposits as are retained by the companies for purposes other than the

payment of losses and e!penses and reinsurance reseres.

;C? 'utual 'arine Insurance Comanies.- Mutual marine insurance companies shall include in

their return of gross income" gross premiums collected and receied by them less amounts paid

to policyholders on account of premiums preiously paid by them and interest paid upon those

amounts between the ascertainment and payment thereof.

;D?)ssessment Insurance Comanies. - Assessment insurance companies" whether domesc or

foreign" may deduct from their gross income the actual deposit of sums with the o?cers of the(oernment of the Philippines pursuant to law" as addions to guarantee or resere

funds. 7ralaw

SEC% ,&% "osses from /ash Sales of Stoc& or Securies. 7 ) TO C@ .


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trademar's" trade brands" franchises and other li'e properes# and


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accounng has been so employed" or if the method employed does not clearly reBect the income" the

computaon shall be made in accordance with such method as in the opinion of the 7ommissioner

clearly reBects the income.

If the ta!payerKs annual accounng period is other than a %scal year" as de%ned in Secon 33


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The return should be accompanied by a return cer%cate of architects or engineers showing the

percentage of compleon during the ta!able year of the enre wor' performed under contract.

There should be deducted from such gross income all e!penditures made during the ta!able year on

account of the contract" account being ta'en of the material and supplies on hand at the beginning and

end of the ta!able period for use in connecon with the wor' under the contract but not yet so applied.

If upon compleon of a contract" it is found that the ta!able net income arising thereunder has not been

clearly reBected for any year or years" the 7ommissioner may permit or re$uire an amended

return. cralaw

SEC% '9% Installment Basis.-

;A? Sales of Dealers in Personal Proerty.- Hnder rules and regulaons prescribed by the Secretary of

9inance" upon recommendaon of the 7ommissioner" a person who regularly sells or otherwise disposes

of personal property on the installment plan may return as income therefrom in any ta!able year that

proporon of the installment payments actually receied in that year" which the gross pro%t realized or

to be realized when payment is completed" bears to the total contract price. cralaw

;.? Sales of Realty and Casual Sales of Personality. - In the case


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;*? Si*nature Presumed Correct. - The fact that an indiidualKs name is signed to a %led return shall

be'rima facieeidence for all purposes that the return was actually signed by him.

SEC% /(% Cororaon Returns. 5

;A? Re(uirements. -

1ery corporaon sub)ect to the ta! herein imposed"

e!cept foreign corporaons not engaged in trade or business in the Philippines"

shall render" in duplicate" a true and accurate $uarterly income ta! return and %nal or ad)ustment return

in accordance with the proisions of 7hapter QII of this Title.

The return shall be %led by the president" ice-president or other principal o?cer" and shall be sworn to

by such o?cer and by the treasurer or assistant treasurer. cralaw

;.? Ta!a#le 9ear of Cororaon. - A corporaon may employ either calendar year or %scal year as a basis

for %ling its annual income ta! return> Proided" That the corporaon shall not change the accounng

period employed without prior approal from the 7ommissioner in accordance with the proisions of

Secon 04 of this 7ode. cralaw

;C? Return of Cororaon Contemlan* Dissoluon or Reor*ani-aon.-

1ery corporaon shall" within thirty


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sub)ect to the ta! imposed by this Title"

such receiers" trustees or assignees shall ma'e returns of net income as and for such corporaon"

in the same manner and form as such organizaon is hereinbefore re$uired to ma'e returns" and

any ta! due on the income as returned by receiers" trustees or assignees shall be assessed and collected

in the same manner as if assessed directly against the organizaons of whose businesses or properes

they hae custody or control.

SEC% //% Returns of 4eneral Professional Partnershis. -

1ery general professional partnership shall %le" in duplicate" a return of its income"

e!cept income e!empt under Secon 53

Provided, further,That in case of failure to $ualify for e!empon under such special laws and

implemenng rules and regulaons" the ta! due on the gains realized from the original transacon shall

immediately become due and payable"

sub)ect to the penales prescribed under applicable proisions of this 7ode>

Provided, 5na##(" That if the seller" haing paid the ta!" submits such proof of intent within si!


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the ta! due from each installment payment shall be paid within .


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;A? uarterly Returns and Payments of Ta!es /ithheld.- Ta!es deducted and withheld under Secon 4

by withholding agents shall be coered by a return and paid to" e!cept in cases where the 7ommissioner

otherwise permits" an authorized Treasurer of the city or municipality where the withholding agent has

his legal residence or principal place of business" or where the withholding agent is a corporaon" where

the principal o?ce is located. cralaw

The ta!es deducted and withheld by the withholding agent shall be held as a special fund in trust for the

goernment unl paid to the collecng o?cers. cralaw

The return for %nal withholding ta! shall be %led and the payment made within twenty-%e


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Title>Provided, further,That in cases of transfer of property to a corporaon" pursuant to a merger"

consolidaon or reorganizaon" and where the law allows deferred recognion of income in accordance

with Secon 0C" the informaon as may be re$uired by rules and regulaons to be prescribed by the

Secretary of 9inance" upon recommendaon of the 7ommissioner" shall be annotated by the 6egister of

*eeds at the bac' of the Transfer 7er%cate of Title or 7ondominium 7er%cate of Title of the real

property inoled>Provided, 5na##(,That any iolaon of this proision by the 6egister of *eeds shall be

sub)ect to the penales imposed under Secon 3@/ of this 7ode.

SEC% /9% Ta! on Pro+ts Collec#le from Owner or Other Persons .- The ta! imposed under this Title upon

gains" pro%ts" and income not falling under the foregoing and not returned and paid by irtue of the

foregoing or as otherwise proided by law shall be assessed by personal return under rules and

regulaons to be prescribed by the Secretary of 9inance" upon recommendaon of the 7ommissioner.

The intent and purpose of the Title is that all gains" pro%ts and income of a ta!able class" as de%ned in

this Title" shall be charged and assessed with the corresponding ta! prescribed by this Title" and said ta!

shall be paid by the owners of such gains" pro%ts and income" or the proper person haing the receipt"

custody" control or disposal of the same.

9or purposes of this Title" ownership of such gains" pro%ts and income or liability to pay the ta! shall be

determined as of the year for which a return is re$uired to be rendered.

CHAPTER 2

ESTATES AND TRUSTS

SEC% 0% Imosion of Ta!.a"

;A?)licaon of Ta!. -

The ta! imposed by this Title upon indiiduals shall apply to the income of estates or of any 'ind of

property held in trust" including>. 0


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;C? Comutaon and Payment. =


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SEC% 0,% Revoca#le Trusts.

here at any me the power to reest in the grantor tle to any part of the corpus of the trust is ested


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goernment to obtain the informaon re$uired under this Title" as the Secretary of 9inance" upon

recommendaon of the 7ommissioner" shall prescribe.

SEC% 0&% Informaon at Source as to Income Payments. - all persons" corporaons or duly registered co-

partnerships Provided" That such returns shall be re$uired" in the case of payments of

interest upon bonds and mortgages or deeds of trust or other similar obligaons of corporaons" and in

the case of collecons of items" not payable in the Philippines" of interest upon the bonds of foreign

countries and interest from the bonds and diidends from the stoc' of foreign corporaons by persons"corporaons or duly registered general co-partnerships


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the President of the Philippines" under rules and regulaons to be prescribed by the Secretary of

9inance" upon recommendaon of the 7ommissioner.

The 7ommissioner may" in each year" cause to be prepared and published in any newspaper the lists

containing the names and addresses of persons who hae %led income ta! returns. cralaw

SEC% 7(% Suit to Recover Ta! Based on alse or raudulent Returns%c=a4ro"#e5 $rt!a# #a #$"rar:- hen

an assessment is made in case of any list" statement or return" which in the opinion of the 7ommissioner

was false or fraudulent or contained any understatement or underaluaon" no ta! collected under such

assessment shall be recoered by any suit" unless it is proed that the said list" statement or return was

not false nor fraudulent and did not contain any understatement or underaluaon# but this proision

shall not apply to statements or returns made or to be made in good faith regarding annual depreciaon

of oil or gas wells and mines. cralaw

SEC% 7,% Distri#uon of dividends or )ssets #y Cororaons. 5

;A? De+nion of Dividends% c=a4ro"#e5 $rt!a# #a #$"rar:- The term "dividends"when used in this Title

means any distribuon made by a corporaon to its shareholders out of its earnings or pro%ts and

payable to its shareholders" whether in money or in other property.

here a corporaon distributes all of its assets in complete li$uidaon or dissoluon" the gain realized

or loss sustained by the stoc'holder" whether indiidual or corporate" is a ta!able income or a deducble

loss" as the case may be.;.? Stoc& Dividend.- A stoc' diidend represenng the transfer of surplus to capital account shall not be

sub)ect to ta!.

Foweer" if a corporaon cancels or redeems stoc' issued as a diidend at such me and in such manner

as to ma'e the distribuon and cancellaon or redempon" in whole or in part" essenally e$uialent to

the distribuon of a ta!able diidend" the amount so distributed in redempon or cancellaon of the

stoc' shall be considered as ta!able income to the e!tent that it represents a distribuon of earnings or

pro%ts.

;C? Dividends Distri#uted are Deemed 'ade from 'ost Recently )ccumulated Pro+ts.-Any

distribuon made to the shareholders or members of a corporaon shall be deemed to hae been made

form the most recently accumulated pro%ts or surplus" and shall constute a part of the annual income

of the distributee for the year in which receied.;D? ,et Income of a Partnershi Deemed Construcvely Received #y Partners.-The ta!able income

declared by a partnership for a ta!able year which is sub)ect to ta! under Secon 34


62/138

o in combinaon with salaries" wages and other %!ed or determinable income"

shall ma'e and %le a declaraon of his esmated income for the current ta!able year

on or before April , of the same ta!able year.

In general" SELFE)PLO>)ENTincome consists of the earnings deried by the indiidual from the

pracce of profession or conduct of trade or business carried on by him as a sole proprietor or by a

partnership of which he is a member.

,. +onresident 9ilipino cizens" with respect to income from ITF2HT the Philippines"

3. and nonresident aliens +2T engaged in trade or business in the Philippines"

are +2T re$uired to render a declaraon of esmated income ta!.

The declaraon shall contain such pernent informaon as the Secretary of 9inance" upon

recommendaon of the 7ommissioner" may" by rules and regulaons prescribe.

An indiidual may ma'e amendments of a declaraon %led during the ta!able year under the rules and

regulaons prescribed by the Secretary of 9inance" upon recommendaon of the 7ommissioner. cralaw

;.? Return and Payment of %smated Income Ta! #y Individuals. -

The amount of esmated income as de%ned in Subsecon


63/138


64/138

;C? %mloyee. - The term KemployeeK refers to any indiidual who is the recipient of wages and includes

an o?cer" employee or elected o?cial of the (oernment of the Philippines or any polical subdiision"

agency or instrumentality thereof.

The term"em'#o(ee"also includes an o?cer of a corporaon.

;D?%mloyer. - The term"em'#o(er"means the person for whom an indiidual performs or performed

any serice" of whateer nature" as the employee of such person" e!cept that> Provided" howeer" That no

withholding of a ta! shall be re$uired where the total compensaon income of an indiidual does not

e!ceed the statutory minimum wage" or %e thousand pesos


65/138


66/138

The return shall be %led and the payment made within twenty-%e Provided, hoever,That the 7ommissioner may" with the approal of the Secretary of

9inance" re$uire the employers to pay or deposit the ta!es deducted and withheld at more fre$uent

interals" in cases where such re$uirement is deemed necessary to protect the interest of the

(oernment. cralaw

The ta!es deducted and withheld by employers shall be held in a special fund in trust for the

(oernment unl the same are paid to the said collecng o?cers.cralaw

SEC% &(% Return and Payment in Case of 4overnment %mloyees. - If the employer is the (oernment of

the Philippines or any polical subdiision" agency or instrumentality thereof" the return of the amount

deducted and withheld upon any wage shall be made by the o?cer or employee haing control of the

payment of such wage" or by any o?cer or employee duly designated for the purpose. cralaw

SEC% &,% Statements and Returns. -

;A? Re(uirements.- 1ery employer re$uired to deduct and withhold a ta! shall furnish to each such

employee in respect of his employment during the calendar year" on or before Danuary thirty-%rst


67/138

,C"CCC"CCC And 2er ,"3,"CCC 3C ,C"CCC"CCC

SEC% &/% 4ross %state.- the alue of the gross estate of the decedent shall be determined by including

the alue at the me of his death of all property" real or personal" tangible or intangible" whereer

situated> Provided, hoever" that in the case of a nonresident decedent who at the me of his death was

not a cizen of the Philippines" only that part of the enre gross estate which is situated in thePhilippines shall be included in his ta!able estate.

;A? Decedent3s Interest.- To the e!tent of the interest therein of the decedent at the me of his death#

;.? Transfer in Contemlaon of Death. - To the e!tent of any interest therein of which the decedent has

at any me made a transfer" by trust or otherwise" in contemplaon of or intended to ta'e e:ect in

possession or en)oyment at or a;er death" or of which he has at any me made a transfer" by trust or

otherwise" under which he has retained for his life or for any period which does not in fact end before

his death


68/138

;F? Prior Interests.- 1!cept as otherwise speci%cally proided therein" Subsecons


69/138

percent 2ne hundred percent


70/138

the death of the decedent" or if the property was transferred to him by gi;" within the same period prior

to his death#1ighty percent


71/138

SEC% &7% %!emon of Certain )c(uisions and Transmissions.- The following shall not be ta!ed>


72/138

;D? Place of ilin*.- 1!cept in cases where the 7ommissioner otherwise permits" the return re$uired

under Subsecon


73/138


74/138

;A? I4 t=e Ca5e of *$5 )a6e ": a Re5$6e4t%


75/138

nongoernment organizaon" trust or philanthropic organizaon andEor research instuon or

organizaon" incorporated as a nonstoc' enty" paying no diidends" goerned by trustees who receie

no compensaon" and deong all its income" whether studentsK fees or gi;s" donaon" subsidies or

other forms of philanthropy" to the accomplishment and promoon of the purposes enumerated in its

Arcles of Incorporaon.

;.? In the Case of 4iEs 'ade #y a ,onresident ,ot a Ci-en of the Philiines. - Provided, hoever,That not more than thirty percent


76/138

SEC% 1'% De+nions.- 9or purposes of this Title" the terms "ross estate"and "is"include real and

personal property" whether tangible or intangible" or mi!ed" whereer situated> Provided, hoever" That

where the decedent or donor was a nonresident alien at the me of his death or donaon" as the case

may be" his real and personal property so transferred but which are situated outside the Philippines shall

not be included as part of his "ross estate"or"ross i"G Provided, further" That franchise which must

be e!ercised in the Philippines# shares" obligaons or bonds issued by any corporaon or sociedad

anonima organized or constuted in the Philippines in accordance with its laws# shares" obligaons or

bonds by any foreign corporaon eighty-%e percent Provided, s##

further" that no ta! shall be collected under this Title in respect of intangible personal property>


77/138

;A? Rate and Base of Ta!.- There shall be leied" assessed and collected on eery sale" barter or

e!change of goods or properes" alue-added ta! e$uialent to ten percent


78/138

recommendaon of the 7ommissioner" the status of a person as a NAT-registered person changes or is

terminated.

;D?Determinaon of the Ta!. 5


79/138

including surety" %delity" indemnity and bonding companies# and similar serices regardless of whether

or not the performance thereof calls for the e!ercise or use of the physical or mental facules.

The phrase Ksale or e!change of sericesK shall li'ewise include>


80/138

or stripping.Polished andEor hus'ed rice" corn grits" raw cane sugar and molasses" and ordinary salt shall

be considered in their original state#


81/138

their importaon of machineries and e$uipment" including spare parts" which shall be directly used in

the generaon and distribuon of electricity#

6epublic Act +o. 30, and each calendar year therea;er" the amount of 1ight thousand pesos Provided, That not later than Danuary 5,st of

the calendar year subse$uent to the e:ecity of 6epublic Act +o. 30, and each calendar yeartherea;er" the amount of 9ie hundred %;y thousand pesos


82/138


83/138

Proided" That refunds under this paragraph shall be sub)ect to post audit by the

7ommission on Audit.

CHAPTER II

CO)PLIANCE REUIRE)ENTS

SEC% 11,% Invoicin* and )ccounn* Re(uirements for 2)T5Re*istered Persons. 5

;A? Invoicin* Re(uirements.- A NAT-registered person shall" for eery sale" issue an inoice or receipt.

In addion to the informaon re$uired under Secon 354" the following informaon shall be indicated in

the inoice or receipt>


84/138

;.?)ccounn* Re(uirements.- +otwithstanding the proisions of Secon 355" all persons sub)ect to the

alue-added ta! under Secons ,C@ and ,C shall" in addion to the regular accounng records re$uired"

maintain a subsidiary sales )ournal and subsidiary purchase )ournal on which the daily sales and

purchases are recorded.

The subsidiary )ournals shall contain such informaon as may be re$uired by the Secretary of 9inance.

SEC% 11'% Return and Payment of 2alue5)dded Ta!. 5

;A? In 4eneral.- 1ery person liable to pay the alue-added ta! imposed under this Title shall %le a

$uarterly return of the amount of his gross sales or receipts within twenty-%e Provided, hoever, That NAT-registered

persons shall pay the alue-added ta! on a monthly basis. cralaw

Any person" whose registraon has been cancelled in accordance with Secon 35@" shall %le a return and

pay the ta! due thereon within twenty-%e Provided, That only one consolidated return shall be %led by the ta!payer for his principal

place of business or head o?ce and all branches. cralaw

;.? /here to ile the Return and Pay the Ta!.- 1!cept as the 7ommissioner otherwise permits" the

return shall be %led with and the ta! paid to an authorized agent ban'" 6eenue 7ollecon 2?cer or

duly authorized city or municipal Treasurer in the Philippines located within the reenue district where

the ta!payer is registered or re$uired to register. cralaw;C? /ithholdin* of Credita#le 2alue5)dded Ta!.- The (oernment or any of its polical subdiisions"

instrumentalies or agencies" including goernment-owned or -controlled corporaons


85/138

SEC% 110% Ta! on Persons %!emt rom 2alue5)dded Ta! A2)T. - Any person whose sales or receipts are

e!empt under Secon ,C/


86/138

The ta! imposed in this Secon shall be payable by the person paying for the serices rendered and shall

be paid to the person rendering the serices who is re$uired to collect and pay the ta! within twenty

Short-term maturity


87/138

Provided, hoever,That in case the maturity period is shortened thru preterminaon" then the maturity

period shall be rec'oned to end as of the date of preterminaon for purposes of classifying the

transacon as short" medium or long-term and the correct rate of ta! shall be applied accordingly.

+othing in this 7ode shall preclude the 7ommissioner from imposing the same ta! herein proided on

persons performing similar %nancing acies. cralaw

SEC% 1(,% Ta! on "ife Insurance Premiums.- There shall be collected from eery person" company or

corporaon


88/138

9or the purpose of the amusement ta!" the term "ross recei'ts"embraces all the receipts of the

proprietor" lessee or operator of the amusement place.

Said gross receipts also include income from teleision" radio and moon picture rights" if any.

A person or enty or associaon conducng any acity sub)ect to the ta! herein imposed shall be

similarly liable for said ta! with respect to such poron of the receipts deried by him or it.

The ta!es imposed herein shall be payable at the end of each $uarter and it shall be the duty of the

proprietor" lessee or operator concerned" as well as any party liable" within twenty Provided, That in the case of winnings from

double" forecastE$uinella and trifecta bets" the ta! shall be four percent


89/138


90/138

condion" ade$uate measures of security" and such other releant informaon re$uired to be submi&ed

under the pernent proisions of this 7ode# and

Provided,That the e!cise ta! on locally manufactured petroleum

products and indigenous petroleum leied under Secons ,0 and ,,


91/138

products from Danuary ," ,/// and therea;er>Provided, further, That the e!cise ta! on nonmetallic

mineral or mineral products" or $uarry resources shall be due and payable upon remoal of such

products from the locality where mined or e!tracted" but with respect to the e!cise ta! on locally

produced or e!tracted metallic mineral or mineral products" the person liable shall %le a return and pay

the ta! within %;een Provided, hoever,That for metallic minerals

processed abroad" the return shall be %led and the ta! due thereon paid to the 6eenue *istrict 2?ce

haing )urisdicon oer the locality where the same are mined" e!tracted or $uarried.

;.? Determinaon of 4ross Sellin* Price of 4oods Su#0ect to )d 2alorem Ta!.- Hnless otherwise

proided" the price" e!cluding the alue-added ta!" at which the goods are sold at wholesale in the placeof producon or through their sales agents to the public shall constute the gross selling price.

If the manufacturer also sells or allows such goods to be sold at wholesale in another establishment of

which he is the owner or in the pro%ts of which he has an interest" the wholesale price in such

establishment shall constute the gross selling price.

Should such price be less than the cost of manufacture plus e!penses incurred unl the goods are %nally

sold" then a proporonate margin of pro%t" not less than ten percent Provided" That the e!cise ta! on mineral


92/138

products" e!cept coal and co'e" imposed under Secon ,, shall not be creditable or refundable een if

the mineral products are actually e!ported. cralaw

SEC% 1,1% Payment of %!cise Ta!es on Imorter )rcles. 5

;A? Persons "ia#le.- 1!cise ta!es on imported arcles shall be paid by the owner or importer to the

7ustoms 2?cers" conformably with the regulaons of the *epartment of 9inance and before the release

of such arcles from the customs house" or by the person who is found in possession of arcles which

are e!empt from e!cise ta!es other than those legally entled to e!empon.In the case of ta!-free

arcles brought or imported into the Philippines by persons" entles" or agencies e!empt from ta! which

are subse$uently sold" transferred or e!changed in the Philippines to non-e!empt persons or entles"

the purchasers or recipients shall be considered the importers thereof" and shall be liable for the duty

and internal reenue ta! due on such importaon.The proision of any special or general law to the

contrary notwithstanding" the importaon of cigars and cigare&es" dislled spirits and wines into the

Philippines" een if desned for ta! and duty free shops" shall be sub)ect to all applicable ta!es" dues"

charges" including e!cise ta!es due thereon> Provided, hoever,That this shall not apply to cigars and

cigare&es" dislled spirits and wines brought directly into the duly chartered or legislated freeports of

the Subic Special 1conomic and 9reeport one" crated under 6epublic Act +o. 4334# the 7agayan Special

1conomic one and 9reeport" created under 6epublic Act +o. 4/33# and the amboanga 7ity Special

1conomic one" created under 6epublic Act +o. 4/C5" and are not transshipped to any other port in thePhilippines> Provided, further" That importaons of cigars and cigare&es" dislled spirits and wines by a

goernment-owned and operated duty-free shop" li'e the *uty-9ree Philippines Provided, s## further, That if

such arcles directly imported by a goernment-owned and operated duty-free shop li'e the *uty-9ree

Philippines" shall be labeled "tax and dut(-free" and "not for resa#e"> Provided, s## further,That is such

arcles brought into the duly chartered or legislated freeports under 6epublic Acts +o. 4334" 4/33 and

4/C5 are subse$uently introduced into the Philippine customs territory" then such arcles shall" upon

such introducon" be deemed imported into the Philippines and shall be sub)ect to all imposts and

e!cise ta!es proided herein and other statutes> Provided, 5na##(" That the remoal and transfer of ta!

and duty-free goods" products" machinery" e$uipment and other similar arcles" from one freeport to

another freeport" shall not be deemed an introducon into the Philippine customs territory.Arclescon%scated shall be disposed of in accordance with the rules and regulaons to be promulgated by the

Secretary of 9inance" upon recommendaon of the 7ommissioner of 7ustoms and Internal 6eenue"

upon consultaon with the Secretary of Tourism and the (eneral manager of the Philippine Tourism

Authority.The ta! due on any such goods" products" machinery" e$uipment or other similar arcles shall

constute a lien on the arcle itself" and such lien shall be superior to all other charges or liens"

irrespece of the possessor thereof.

;.? Rate and Basis of the %!cise Ta! on Imorted )rcles.- Hnless otherwise speci%ed imported arcles

shall be sub)ect to the same rates and basis of e!cise ta!es applicable to locally manufactured arcles.

SEC% 1,(% 'ode of Comun* Contents of Cas& or Pac&a*e.- 1ery fraconal part of a proof liter e$ual

to or greater than a half liter in a cas' or pac'age containing more than one liter shall be ta!ed as a liter"

and any smaller fraconal part shall be e!empt# but any pac'age of spirits" the total content of which are

less than a proof liter" shall be ta!ed as one liter.

CHAPTER II

E2E)PTION OR CONDITIONAL TA2FREE RE)OVAL OF CERTAIN ARTICLES

SEC% 1,,% Removal of /ines and Dislled Sirits for Treatment of To#acco "eaf. - Hpon issuance of a

permit from the 7ommissioner and sub)ect to the rules and regulaons prescribed by the Secretary of

9inance" manufacturers of cigars and cigare&es may withdraw from bond" free of e!cise local and

imported wines and dislled spirits in speci%c $uanes and grades for use in the treatment of tobacco


93/138

leaf to be used in the manufacture of cigars and cigare&es# but such wines and dislled spirits must %rst

be suitably denatured.

SEC% 1,'% Domesc Denatured )lcohol.- *omesc alcohol of not less than one hundred eighty degrees

Provided, hoever,That such

denatured alcohol shall be sub)ect to ta! under Secon ,C@ Provided, further,That if

such alcohol is to be used for automoe power" it shall be ta!ed under Secon ,0 Provided, 5na##(,That any alcohol" preiously rendered un%t for oral inta'e a;er denaturing but

subse$uently rendered %t for oral inta'e a;er undergoing fermentaon" diluon" puri%caon" mi!ture or

any other similar process shall be ta!ed under Secon ,0, of this 7ode and such ta! shall be paid by the

person in possession of such reprocessed spirits.

SEC% 1,/% Petroleum Products Sold to Internaonal Carriers and %!emt %nes or )*encies.

- Petroleum products sold to the following are e!empt from e!cise ta!> Provided, That the

petroleum products sold to these internaonal carriers shall be stored in a bonded storage tan' and may

be disposed of only in accordance with the rules and regulaons to be prescribed by the Secretary of

9inance" upon recommendaon of the 7ommissioner# Provided, That the disller remoing such spirits and the rec%er receiing

them shall %le with the 7ommissioner their )oint bond condioned upon the payment by the rec%er of

the e!cise ta! due on the rec%ed alcohol> Provided, further,That in cases where alcohol has already

been rec%ed either by original and connuous disllaon or by redisllaon" no loss for rec%caon

and handling shall be allowed and the rec%er thereof shall pay the e!cise ta! due on such

losses> Provided, 5na##(,That where a rec%er ma'es use of spirits upon which the e!cise ta! has not

been paid" he shall be liable for the payment of the ta! otherwise due thereon.

SEC% 1,&% Removal of ermented "i(uors to Bonded /arehouse. - Any brewer may remoe or transport

from his brewery or other place of manufacture to a bonded warehouse used by him e!clusiely for the

storage or sale in bul' of fermented li$uors of his own manufacture" any $uanty of such fermented

li$uors" not less than one thousand


94/138

otherwise damaged so as to be un%t for use as such" brewers may sell and a;er securing a special permit

from the 7ommissioner" under such condions as may be prescribed in the rules and regulaons

prescribed by the Secretary of 9inance" remoe the same without the payment of ta! thereon in cas' or

other pac'ages" disnct from those ordinarily used for fermented li$uors" each containing not less than

one hundred seenty-%e


95/138

The rates of ta! imposed under this Secon shall be increased by twele percent


96/138

The rates of e!cise ta! on fermented li$uor under paragraphs


97/138

SEC% 1'/% Ci*ars and Ci*areJes. 5

;A? Ci*ars.- There shall be leied" assessed and collected on cigars a ta! of 2ne peso


98/138

Any corporaon" associaon or partnership liable for any of the acts or omissions in iolaon of this

Secon shall be %ned treble the amount of de%ciency ta!es" surcharges and interest which may be

assessed pursuant to this Secon. cralaw

Any person liable for any of the acts or omissions prohibited under this Secon shall be criminally liable

and penalized under Secon 30 of this 7ode.

Any person who willfully aids or abets in the commission of any such act or omission shall be criminally

liable in the same manner as the principal. cralaw

If the o:ender is not a cizen of the Philippines" he shall be deported immediately a;er sering the

sentence without further proceedings for deportaon.

SEC% 1'0% Insecon ee. 5 9or inspecon madein accordance with this 7hapter" there shall be collected

a fee of 9i;y centaos


99/138


100/138

the conduct and operaons of their business" such as deliery truc's and cargo ans with gross ehicle

weight aboe three Provided,

further" That ehicles owned by tourist-oriented enterprises" such as tourist buses and cars with yellow

plates" color-coded" and ulized e!clusiely for the purpose of transporng tourists in tourism-related

acies" and serice ehicles of freeport registered enterprises and e!ecues" such as company serice

cars and e!patriatesV and inestorsV automobiles brought in the name of such enterprises" may be used

outside the freeport zone for such periods as may be prescribed by the *epartments of 9inance" and

Trade and Industry" the 8ureau of 7ustoms and the 9reeport authories concerned" which in no case

shall e!ceed fourteen


101/138

Provided,That if the minerals or mineral products are sold or

consigned abroad by the lessee or owner of the mine under 7.I.9.

terms" the actual cost of ocean freight and insurance shall be deducted>Provided, hoever,That in the

case of mineral concentrate" not traded in commodity e!changes in the Philippines or abroad" such as

copper concentrate" the actual mar'et alue shall be the world price $uotaons of the re%ned mineral

products content thereof preailing in the said commodity e!changes" a;er deducng the smelng"

re%ning and other charges incurred in the process of conerng the mineral concentrates into re%ned

metal traded in those commodity e!changes. Provided" That they

contain no metal or other aluable minerals in economically wor'able $uanes.

CHAPTER VIII

AD)INISTRATIVE PROVISIONS RE*ULATIN* .USINESS

OR PERSONS DEALIN* IN ARTICLES SU.GECT TO E2CISE TA2

SEC% 1/(% %!tent of Suervision Over %sta#lishments Producin* Ta!a#le Outut. - The 8ureau of Internal

6eenue has authority to superise establishments where arcles sub)ect to e!cise ta! are made or 'ept.

The Secretary of 9inance shall prescribe rules and regulaons as to the mode in which the process of

producon shall be conducted insofar as may be necessary to secure a sanitary output and to safeguard

the reenue.


102/138

SEC% 1/,% Records to #e 1et #y 'anufacturersK )ssessment Based Thereon.- Manufacturers of arcles

sub)ect to e!cise ta! shall 'eep such records as re$uired by rules and regulaons recommended by the

7ommissioner and approed by the Secretary of 9inance" and such records" whether of raw materials

receied into the factory or of arcles produced therein" shall be deemed public and o?cial documents

for all purposes. cralaw

The records of raw materials 'ept by such manufacturers may be used as eidence by which to

determine the amount of e!cise ta!es due from them" and wheneer the amounts of raw material

receied into any factory e!ceeds the amount of manufactured or parally manufactured products on

hand and lawfully remoed from the factory" plus waste remoed or destroyed" and a reasonable

allowance for unaoidable loss in manufacture" the 7ommissioner may assess and collect the ta! due on

the products which should hae been produced from the e!cess. cralaw

The e!cise ta! due on the products as determined and assessed in accordance with this Secon shall be

payable upon demand or within the period speci%ed therein.

SEC% 1/'% Premises Su#0ect to )roval #y Commissioner.- +o person shall engage in business as a

manufacturer of or dealer in arcles sub)ect to e!cise ta! unless the premises upon which the business is

to conducted shall hae been approed by the 7ommissioner.

SEC% 1//% 'anufacturers to Provide Themselves with Counn* or 'eterin* Devices to Determine

Producon.- Manufacturers of cigare&es" alcoholic products" oil products and other arcles sub)ect toe!cise ta! that can be similarly measured shall proide themseles with such necessary number of

suitable counng or metering deices to determine as accurately as possible the olume" $uanty or

number of the arcles produced by them under rules and regulaons promulgated by the Secretary of

9inance" upon recommendaon of the 7ommissioner. cralaw

This re$uirement shall be complied with before commencement of operaons.

SEC% 1/0% "a#els and orm of Pac&a*es.- All arcles of domesc manufacture sub)ect to e!cise ta! and

all leaf tobacco shall be put up and prepared by the manufacturer or producer" when remoed for sale or

consumpon" in such pac'ages only and bearing such mar's or brand as shall be prescribed in the rules

and regulaons promulgated by the Secretary of 9inance# and goods of similar character imported into

the Philippines shall li'ewise be pac'ed and mar'ed in such a manner as may be re$uired. cralaw

SEC% 1/7% Removal of )rcles )Eer the Payment of Ta!. hen the ta! has been paid on arcles orproducts sub)ect to e!cise ta!" the same shall not therea;er be stored or permi&ed to remain in the

disllery" disllery warehouse" bonded warehouse" or other factory or place where produced.

Foweer" upon prior permit from the 7ommissioner" oil re%neries andEor companies may store or

deposit ta!-paid petroleum products and commingle the same with its own manufactured products not

yet sub)ected to e!cise ta!.

Imported petroleum products may be allowed to be withdrawn from customs custody without the

prepayment of e!cise ta!" which products may be commingled with the ta!-paid or bonded products of

the importer himself a;er securing a prior permit from the 7ommissioner> Provided,That withdrawals

shall be ta!ed and accounted for on a "5rst-in, 5rst-out"basis.

SEC% 1/&% Stora*e of 4oods in Internal5Revenue Bonded /arehouses.- An internal-reenue bonded

warehouse may be maintained in any port of entry for the storing of imported or manufactured goods

which are sub)ect to e!cise ta!.

The ta!es on such goods shall be payable only upon remoal from such warehouse and a reasonable

charge shall be made for their storage therein.

The 7ommissioner" may" in his discreon" e!act a bond to secure the payment of the ta! on any goods so

stored.

SEC% 1/9% Proof of %!ortaonK %!orter3s Bond.- 1!porters of goods that would be sub)ect to e!cise ta!"

if sold or remoed for consumpon in the Philippines" shall submit proof of e!portaon sasfactory to


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the 7ommissioner and" when the same is deemed necessary" shall be re$uired to gie a bond prior to

the remoal of the goods for shipment" condioned upon the e!portaon of the same in good faith.

SEC% 10% 'anufacturers3 and Imorters3 Bond.- Manufacturers and importers of arcles sub)ect to

e!cise ta! shall post a bond sub)ect to the following condions>

;A? Inial Bond.- In case of inial bond" the amount shall be e$ual to 2ne Fundred thousand pesos


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part of his disllery premises and to be used only for the storage of dislled spirits of his own

manufacture unl the ta! thereon shall hae been paid# but no dwelling house shall be used for such

purpose.

Such warehouse" when approed by the 7ommissioner" is declared to be a bonded warehouse" and shall

be 'nown as a disllery warehouse.

SEC% 100% Custody of Disllery or Disllery /arehouse.1ery disllery or disllery warehouse shall be

in the )oint custody of the reenue inspector" if one is assigned thereto" and of the proprietor thereof.

It shall be 'ept securely loc'ed" and shall at no me be unloc'ed or opened or remain unloc'ed or

opened unless in the presence of such reenue inspector or other person who may be designated to act

for him as proided by law.

SEC% 107% "imitaon on uanty of Sirits Removed from /arehouse.+o dislled spirits shall be

remoed from any disllery" disllery warehouse" or bonded warehouse in $uanes of less than %;een


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and in respect of the transacon so had or accomplished" the corresponding documentary stamp ta!es

prescribed in the following Secons of this Title" by the person ma'ing" signing" issuing" accepng" or

transferring the same whereer the document is made" signed" issued" accepted or transferred when the

obligaon or right arises from Philippine sources or the property is situated in the Philippines" and the

same me such act is done or transacon had> Provided" That wheneer one party to the ta!able

document en)oys e!empon from the ta! herein imposed" the other party who is not e!empt shall be

the one directly liable for the ta!.

SEC% 17'% Stam Ta! on De#entures and Cer+cates of Inde#tedness.2n all debentures and cer%cates

of indebtedness issued by any associaon" company or corporaon" there shall be collected a

documentary stamp ta! of 2ne peso and %;y centaos


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persons" companies or corporaons" at sight or on demand" there shall be collected a documentary

stamp ta! of 2ne peso and %;y centaos


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liability" plate" glass" steam" boiler" burglar" eleator" automac sprin'ler" or other branch of insurance


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SEC% 19(% Stam Ta! on Pro!ies.2n each pro!y for ong at any elecon for o?cers of any company or

associaon" or for any other purpose" e!cept pro!ies issued a:ecng the a:airs of associaons or

corporaons organized for religious" charitable or literary purposes" there shall be collected a

documentary stamp ta! of 9i;een pesos Provided, hoever" That if the full amount of the loan or credit" granted under the mortgage"

pledge or deed of trust shall be computed on the amount actually loaned or gien at the me of the

e!ecuon of the mortgage" pledge or deed of trust.

Foweer" if subse$uent adances are made on such mortgage" pledge or deed of trust" addional

documentary stamp ta! shall be paid which shall be computed on the basis of the amount adanced or

loaned at the rates speci%ed aboe> Provided, hoever" That if the full amount of the loan or credit"

granted under the mortgage" pledge or deed of trust is speci%ed in such mortgage" pledge or deed of

trust" the documentary stamp ta! prescribed in this Secon shall be paid and computed on the full

amount of the loan or credit granted.

SEC% 190% Stam ta! on Deeds of Sale and Conveyances of Real Proerty. 2n all coneyances" deeds"

instruments" or wrings" other than grants" patents or original cer%cates of ad)udicaon issued by the

(oernment" whereby any land" tenement" or other realty sold shall be granted" assigned" transferred or

otherwise coneyed to the purchaser" or purchasers" or to any other person or persons designated by

such purchaser or purchasers" there shall be collected a documentary stamp ta!" at the rates herein

below prescribed" based on the consideraon contracted to be paid for such realty or on its fair mar'et

alue determined in accordance with Secon @


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upon documents" instruments and papers for the naonal" proincial" city" or municipal goernments"

made at the instance and for the sole use of some other branch of the naonal" proincial" city or

municipal goernments# and cer%cates of the assessed alue of lands" not e!ceeding Two hundred

pesos


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SEC% ('%)uthority of the Commissioner to Comromise$ )#ate and Refund or Credit Ta!es. 5 The

7ommissioner may -

;A? Comrom$5e t=e Pa:me4t of a4: I4ter4a# Ree4!e Tax+ =e4J

Provided" That the original copy of the Ta! 7redit 7er%cate showing acreditable balance is surrendered to the appropriate reenue o?cer for eri%caon and

cancellaon>Provided, further,That in no case shall a ta! refund be gien resulng from aailment of

incenes granted pursuant to special laws for which no actual payment was made.

The 7ommissioner shall submit to the 7hairmen of the 7ommi&ee on ays and Means of both the

Senate and Fouse of 6epresentaes" eery si!


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1ither of these remedies or both simultaneously may be pursued in the discreon of the authories

charged with the collecon of such ta!es> Provided, hoever,That the remedies of distraint and ley

shall not be aailed of where the amount of ta! inole is not more than 2ne hundred pesos


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At the same me" wri&en noce of the ley shall be mailed to or sered upon the 6egister of *eeds for

the proince or city where the property is located and upon the delin$uent ta!payer" or if he be absent

from the Philippines" to his agent or the manager of the business in respect to which the liability arose"

or if there be none" to the occupant of the property in $ueson. cralaw

In case the warrant of ley on real property is not issued before or simultaneously with the warrant of

distraint on personal property" and the personal property of the ta!payer is not su?cient to sasfy his

ta! delin$uency" the 7ommissioner or his duly authorized representae shall" within thirty Provided, hoever,That a

consolidated report by the 6eenue 6egional *irector may be re$uired by the 7ommissioner as o;en as

necessary> Proided" further" That the 7ommissioner or his duly authorized representae" sub)ect to

rules and regulaons promulgated by the Secretary of 9inance" upon recommendaon of the

7ommissioner" shall hae the authority to li; warrants of ley issued in accordance with the proisions

hereof.

SEC% (&% Procedure for Distraint and 4arnishment. 5 The o?cer sering the warrant of distraint shall

ma'e or cause to be made an account of the goods" cha&els" e:ects or other personal property

distrained" a copy of which" signed by himself" shall be le; either with the owner or person from whosepossession such goods" cha&els" or e:ects or other personal property were ta'en" or at the dwelling or

place of business of such person and with someone of suitable age and discreon" to which list shall be

added a statement of the sum demanded and note of the me and place of sale. cralaw

Stoc's and other securies shall be distrained by sering a copy of the warrant of distraint upon the

ta!payer and upon the president" manager" treasurer or other responsible o?cer of the corporaon"

company or associaon" which issued the said stoc's or securies. cralaw

*ebts and credits shall be distrained by leaing with the person owing the debts or haing in his

possession or under his control such credits" or with his agent" a copy of the warrant of distraint.

The warrant of distraint shall be su?cient authority to the person owning the debts or haing in his

possession or under his control any credits belonging to the ta!payer to pay to the 7ommissioner the

amount of such debts or credits. cralaw8an' accounts shall be garnished by sering a warrant of garnishment upon the ta!payer and upon the

president" manager" treasurer or other responsible o?cer of the ban'.

Hpon receipt of the warrant of garnishment" the ban' shall tun oer to the 7ommissioner so much of the

ban' accounts as may be su?cient to sasfy the claim of the (oernment.

SEC% (9% Sale of Proerty Distrained and Disosion of Proceeds. 5 The 6eenue *istrict 2?cer or his

duly authorized representae" other than the o?cer referred to in Secon 3C of this 7ode shall"

according to rules and regulaons prescribed by the Secretary of 9inance" upon recommendaon of the

7ommissioner" forthwith cause a no%caon to be e!hibited in not less than two


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In the case of Stoc's and other securies" the o?cer ma'ing the sale shall e!ecute a bill of sale which he

shall delier to the buyer" and a copy thereof furnished the corporaon" company or associaon which

issued the stoc's or other securies.

Hpon receipt of the copy of the bill of sale" the corporaon" company or associaon shall ma'e the

corresponding entry in its boo's" transfer the stoc's or other securies sold in the name of the buyer"

and issue" if re$uired to do so" the corresponding cer%cates of stoc' or other securies. cralaw

Any residue oer and aboe what is re$uired to pay the enre claim" including e!penses" shall be

returned to the owner of the property sold.

The e!penses chargeable upon each seizure and sale shall embrace only the actual e!penses of seizure

and preseraon of the property pending #the sale" and no charge shall be imposed for the serices of

the local internal reenue o?cer or his deputy.

SEC% (1% Release of Distrained Proerty ;on Payment Prior to Sale. 5If at any me prior to the

consummaon of the sale all proper charges are paid to the o?cer conducng the sale" the goods or

e:ects distrained shall be restored to the owner.

SEC% (11% Reort of Sale to Bureau of Internal Revenue. 5 ithin two Provided, hoever,That in case the proceeds of the sale e!ceeds the claim and

cost of sale" the e!cess shall be turned oer to the owner of the property. cralaw


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The 6eenue 7ollecon 2?cer" upon approal by the 6eenue *istrict 2?cer may" out of his collecon"

adance an amount su?cient to defray the costs of collecon by means of the summary remedies

proided for in this 7ode" including #the preseraon or transportaon in case of personal property" and

the adersement and subse$uent sale" both in cases of personal and real property including

improements found on the la&er.

In his monthly collecon reports" such adances shall be reBected and supported by receipts.

SEC% (1'% Redemon of Proerty Sold. 5 ithin one


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purchaser or )udgment creditor unl noce of such lien shall be %led by the 7ommissioner in the o?ce

of the 6egister of *eeds of the proince or city where the property of the ta!payer is situated or located.

SEC% ((% orm and 'ode of Proceedin* in )cons )risin* under this Code. 5 7iil and criminal acons

and proceedings instuted in behalf of the (oernment under the authority of this 7ode or other law

enforced by the 8ureau of Internal 6eenue shall be brought in the name of the (oernment of the

Philippines and shall be conducted by legal o?cers of the 8ureau of Internal 6eenue but no ciil or

criminal acon for the recoery of ta!es or the enforcement of any %ne" penalty or forfeiture under this

7ode shall be %led in court without the approal of the 7ommissioner.

SEC% ((1% Remedy for %nforcement of Statutory Penal Provisions. 5 The remedy for enforcement of

statutory penales of all sorts shall be by criminal or ciil acon" as the parcular situaon may re$uire"

sub)ect to the approal of the 7ommissioner.

SEC% (((% %!ceons as to Period of "imitaon of )ssessment and Collecon of Ta!es. 5

Proided" That in a

fraud assessment which has become %nal and e!ecutory" the fact of fraud shall be )udicially ta'en

cognizance of in the ciil or criminal acon for the collecon thereof.


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SEC% ((/% /hen Proerty to #e Sold or Destroyed. 5 Sales of forfeited cha&els and remoable %!tures

shall be e:ected" so far as praccable" in the same manner and under the same condions as the public

noce and the me and manner of sale as are prescribed for sales of personal property distrained for

the non-payment of ta!es.

*islled spirits" li$uors" cigars" cigare&es" other manufactured products of tobacco" and all apparatus

used I or about the illicit producon of such arcles may" upon forfeiture" be destroyed by order of the

7ommissioner" when the sale of the same for consumpon or use would be in)urious to public health or

pre)udicial to the enforcement of the law. cralaw

All other arcles sub)ect to e!cise ta!" which hae been manufactured or remoed in iolaon of this

7ode" as well as dies for the prinng or ma'ing of internal reenue stamps and labels which are in

imitaon of or purport to be lawful stamps" or labels may" upon forfeiture" be sold or destroyed in the

discreon of the 7ommissioner. cralaw

9orfeited property shall not be destroyed unl at least twenty Provided,

hoever,That a preassessment noce shall not be re$uired in the following cases>


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Such assessment may be protested administraely by %ling a re$uest for reconsideraon or

reinesgaon within thirty Provided, hoever, That those whose $uarterly sales"


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earnings" receipts" or output do not e!ceed 9i;y thousand pesos Provided, hoever,That if in addion to said boo's or records the ta!payer

'eeps other boo's or records in a language other than a nae language" 1nglish or Spanish" he shall

ma'e a true and complete translaon of all the entries in suc' other boo's or records into a nae

language# 1nglish or Spanish" and the said translaon must be made by the boo''eeper" or such

ta!payer" or in his absence" by his manager and must be cer%ed under oath as to its correctness by the

said boo''eeper or manager" and shall form an integral part of the aforesaid boo's of accounts.

The 'eeping of such boo's or records in any language other than a nae language" 1nglish or Spanish" is

hereby prohibited.SEC% (,/% Preservaon of Boo&s and )ccounts and Other )ccounn* Records. All the boo's of

accounts" including the subsidiary boo's and other accounng records of corporaons" partnerships" or

persons" shall be presered by them for a period beginning from the last entry in each boo' unl the last

day prescribed by Secon 3C5 within which the 7ommissioner is authorized to ma'e an assessment.

The said boo's and records shall be sub)ect to e!aminaon and inspecon by internal reenue

o?cers> Provided" That for income ta! purposes" such e!aminaon and inspecon shall be made only

once in a ta!able year" e!cept in the following cases>


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7orporaons and partnerships contemplang dissoluon must nofy the 7ommissioner and shall not be

dissoled unl cleared of any ta! liability.

Any proision of e!isng general or special law to the contrary notwithstanding" the boo's of accounts

and other pernent records of ta!-e!empt organizaons or grantees of ta! incenes shall be sub)ect to

e!aminaon by the 8ureau of Internal 6eenue for purposes of ascertaining compliance with the

condions under which they hae been granted ta! e!empons or ta! incenes" and their ta! liability" if

any.

CHAPTER II

AD)INISTRATIVE PROVISIONS

SEC% (,0% Re*istraon Re(uirements. 5

;A? Re(uirements. 5 1ery person sub)ect to any internal reenue ta! shall register once with the

appropriate 6eenue *istrict 2?cer>

Provided, hoever, That cooperaes" indiiduals earning purely compensaon income"

whether locally or abroad" and oerseas wor'ers are not liable to the registraon fee herein

imposed. cralawThe registraon fee shall be paid to an authorized agent ban' located within the reenue district" or to

the 6eenue 7ollecon 2?cer" or duly authorized Treasurer of the city of municipality where each place

of business or branch is registered. cralaw

;C? Re*istraon of %ach Tye of Internal Revenue Ta!. 5 1ery person who is re$uired to register with

the 8ureau of Internal 6eenue under Subsecon


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which has )urisdicon oer the head o?ce or branch and shall pay the annual registraon fee prescribed

in Subsecon


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nature of serice> Provided, hoever" That in the case of sales" receipts or transfers in the amount of 2ne

hundred pesos


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estate" no addional payment shall be re$uired for the residue of the term which the ta! was

paid>Provided, hoever,That the person or persons interested in the estate should" within thirty


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such ta!es and the returns" papers and statements that may be %led by the ta!payers in connecon with

the payment of the ta!> Provided, hoever,That notwithstanding the other proisions of this 7ode

prescribing the place of %ling of returns and payment of ta!es" the 7ommissioner may" by rules and

regulaons" re$uire that the ta! returns" papers and statements that may be %led by the ta!payers in

connecon with the payment of the ta!. Provided, hoever,That notwithstanding the other proisions

of this 7ode prescribing the place of %ling of returns and payment of ta!es" the 7ommissioner may" by

rules and regulaons re$uire that the ta! returns" papers and statements and ta!es of large ta!payers be

%led and paid" respecely" through collecon o?cers or through duly authorized agent ban's> Provided,

further" That the 7ommissioner can e!ercise this power within si!


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for the withholding and remi&ance of the ta! shall be personally liable for the addions to the ta!

prescribed herein.


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7ommissioner on the date prescribed therefor" unless it is shown that such failure is due to reasonable

cause and not to willful neglect" there shall" upon noce and demand by the 7ommissioner" be paid by

the person failing to %le" 'eep or supply the same" 2ne thousand pesos

7/27/2019 Codal-The National Internal Re

Codal-The National Internal Revenue Code of the Philippines

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Transcript of Codal-The National Internal Revenue Code of the Philippines