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NATIONAL INTERNAL REVENUE CODE OF 1997 - CHAN

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Republic Act No. 8424

AN ACT AMENDING THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, AND FOR OTHER PURPOSES

Tax Resolution
Services

SECTION 1. Short Title - This Act shall be cit ed as t he "Tax Reform Act of
www.TaxResolution.com
1997"

Industry Pioneers Since

1998. Don't Be
Fooled
by Policy. It is hereby declared t he policy of t he St at e t o
S EC
. 2 . State
Imitators!
promot e sust ainable economic growt h t hrough t he rat ionalizat ion of t he
Philippine int ernal revenue t ax syst em, including t ax administ rat ion; t o
provide, as much a s possible, an equit able relief t o a great er number of
t axpayers in order t o improve levels of disposable income and increase
economic act ivit y; and t o creat e a robust environment for business t o enable
firms t o compet e bet t er in t he regional as well as t he global market , at t he
same t ime t hat t he St at e ensures t hat Government is able t o provide for t he
needs of t hose under it s jurisdict ion and care.

Tax Resolution
Services S E C . 3 . President ial

Decree No. 1158, as amended by, among ot hers,

President
ial
Decree
No.
1994 and Execut ive Order No. 273, ot herwise known
www.TaxResolution.com
as t he Nat ional Int ernal Revenue Code, is hereby furt her amended.

Industry Pioneers Since

1998. Don't Be Fooled by
Imitators!

TITLE I
ORGANIZATION AND FUNCTION OF

THE BUREAU OF INTERNAL REVENUE

SECTION 1. Title of the Code - This Code shall be known as t he Nat ional
Int ernal Revenue Code of 1997.
S EC . 2 . Powers and Duties of the Bureau of Internal Revenue - The
Bureau of Int ernal Revenue shall be under t he supervision and cont rol of t he
Depart ment of Finance and it s powers and dut ies shall comprehend t he
assessment and collect ion of all nat ional int ernal revenue t axes, fees, and
charges, and t he enforcement of all forfeit ures, penalt ies, and fines
connect ed t herewit h, including t he execut ion of judgment s in all cases
decided in it s favor by t he Court of Tax Appeals and t he ordinary court s.
The Bureau shall give effect t o and administ er t he supervisory and police
powers conferred t o it by t his Code or ot her laws.
SEC. 3. Chief Officials of the Bureau of Internal Revenue - The Bureau of
Int ernal Revenue shall have a chief t o be known as Commissioner of Int ernal
Revenue, hereinaft er referred t o as t he Commissioner and four (4) assist ant
chiefs t o be known as Deput y Commissioners.
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide
Tax Cases - The power t o int erpret t he provisions of t his Code and ot her
t a x laws shall be under t he exclusive and original jurisdict ion of t he
Commissioner, subject t o review by t he Secret ary of Finance.
The power t o dec ide disput ed assessment s, refunds of int ernal
t axes, fees or ot her charges, penalt ies imposed in relat ion t heret o,
ma t t e r s a r is in g under t his Code or ot her laws or port ions
administ ered by t he B u r e a u of Int ernal Revenue is vest ed
Commissioner, subject t o t he exclusive appellat e jurisdict ion of t he
Tax Appeals.

revenue
or ot her
t hereof
in t he
Court of

SEC. 5 Power of the Commissioner to Obtain Information, and to

Summon, Examine, and Take Testimony of Persons - In ascert aining t he
correct ness of any ret urn, or in making a ret urn when none has been made,
or in det ermining t he liabilit y of any person for any int ernal revenue t ax, or in
collect ing any such liabilit y, or in evaluat ing t ax compliance, t he Commissioner
is aut horized:
(A) To examine any book, paper, record, or ot her dat a which may be relevant
or mat erial t o such inquiry;
(B) To obt ain o n a regular basis from any person ot her t han t he person
whose int ernal revenue t ax liabilit y is subject t o audit or invest igat ion, or
from any office or officer of t he nat ional and local government s, government
agencies and inst rument alit ies, including t he Bangko Sent ral ng Pilipinas and
government -owned or -cont rolled corporat ions, any informat ion such as, but
not limit ed t o, cost s and volume of product ion, receipt s or sales and gross
incomes of t axpayers, and t he names, addresses, and financial st at ement s of
corporat ions, mut ual fund companies, insurance companies, regional
operat ing headquart ers of mult inat ional companies, joint account s,
associat ions, joint vent ures of consort ia and regist ered part nerships, and
t heir members;
(C) To summon t he person liable for t ax or required t o file a ret urn, or any
officer or employee of such person, or any person having possession,
cust ody, or c a re of t he books of account s and ot her account ing records
cont aining ent ries relat ing t o t he business of t he person liable for t ax, or any
ot her person, t o appear before t he Commissioner or his duly aut horized
represent at ive at a t ime and place specified in t he summons and t o produce
such books, papers, records, or ot her dat a, and t o give t est imony;
(D) To t ake such t est imony of t he person concerned, under oat h, as may be
relevant or mat erial t o such inquiry; and
(E) To cause revenue officers and employees t o make a canvass from t ime t o
t ime of any revenue dist rict or region and inquire aft er and concerning all
persons t herein who may be liable t o pay any int ernal revenue t ax, and all
persons owning or having t he care, management or possession of any object
wit h respect t o which a t ax is imposed.

The provisions of t he foregoing paragraphs not wit hst anding, not hing in t his
Sect ion shall be const rued as grant ing t he Commissioner t he aut horit y t o
inquire int o bank deposit s ot her t han as provided for in Sect ion 6(F) of t his
Code.
SEC. 6. Power of the Commissioner to Make assessments and Prescribe
additional Requirements for Tax Administration and Enforcement. - (A)
Examination of Returns and Determination of Tax Due - Aft er a ret urn has
been filed as required under t he provisions of t his Code, t he Commissioner or
h i s d u ly aut horized represent at ive may aut horize t he examinat ion of any
t axpayer and t he assessment of t he correct amount of t ax: Provided,
however; That failure t o file a ret urn shall not prevent t he Commissioner from
aut horizing t he examinat ion of any t axpayer.
Any ret urn, st at ement of declarat ion filed in any office aut horized t o receive
t he same shall not be wit hdrawn: Provided, That wit hin t hree (3) years from
t he dat e of such filing, t he same may be modified, changed, or amended:
Provided, further, That no not ice for audit or invest igat ion of such ret urn,
st at ement or declarat ion has in t he meant ime been act ually served upon t he
t axpayer.
(B) Failure to Subm it Required Returns, Statements, Reports and other
Documents - When a report required by law as a basis for t he assessment of
any nat ional int ernal revenue t ax shall not be fort hcoming wit hin t he t ime
fixed by laws or rules and regulat ions or when t here is reason t o believe t hat
any such report is false, incomplet e or erroneous, t he Commissioner shall
assess t he proper t ax on t he best evidence obt ainable.
In case a person fails t o file a required ret urn or ot her document at t he t ime
prescribed by law, or willfully or ot herwise files a false or fraudulent ret urn or
ot her document , t he Commissioner shall make or amend t he ret urn from his
own knowledge and from such informat ion as he can obt ain t hrough
t est imony or ot herwise, which shall be prima facie correct and sufficient for
all legal purposes.
( C ) Authority t o Conduct Inventory-taking, surveillance and to Prescribe
Presumptive Gross Sales and Receipts - The Commissioner may, at any t ime
during t he t axable year, order invent ory-t aking of goods of any t axpayer as a
basis for det ermining h i s int ernal revenue t ax liabilit ies, or may place t he
business operat ions of any person, nat ural or juridical, under observat ion or
surveillance if t here is reason t o believe t hat such person is not declaring his
correct income, sales or receipt s for int ernal revenue t ax purposes.
The findings may be used as t he basis for assessing t he t axes for t he ot her
mont hs or quart ers of t he same or different t axable years and such
assessment shall be deemed prima facie correct .
When it is found t hat a person has failed t o issue receipt s and invoices in
violat ion of t he requirement s of Sect ions 113 and 237 of t his Code, or when
t here is reason t o believe t hat t he books of account s or ot her records do
n o t correct ly reflect t he declarat ions made or t o be made in a ret urn
required t o be filed under t he provisions of t his Code, t he Commissioner,
aft er t aking int o account t he sales, receipt s, income or ot her t axable base of
o t he r persons engaged in similar businesses under similar sit uat ions or
circumst ances or aft er considering ot her relevant informat ion may prescribe a
minimum amount of such gross receipt s, sales and t axable base, and such
amount so prescribed shall be prima facie correct for purposes of det ermining
t he int ernal revenue t ax liabilit ies of such person.
( D ) Authority t o Terminate Taxable Period - When it shall come t o t he
knowledge of t h e Commissioner t hat a t axpayer is ret iring from business
subject t o t ax, or is int ending t o leave t he Philippines or t o remove his
propert y t herefrom or t o hide or conceal his propert y, or is performing any
act t ending t o obst ruct t he proceedings for t he collect ion of t he t ax for t he
past or current quart er or year or t o render t he same t ot ally or part ly
ineffect ive unless such proceedings are begun immediat ely, t he Commissioner
shall declare t he t ax period of such t axpayer t erminat ed at any t ime and
shall send t he t axpayer a not ice of such decision, t oget her wit h a request for
t he immediat e payment of t he t ax for t he period so declared t erminat ed and
t he t ax for t he preceding year or quart er, or such port ion t hereof as may be
unpaid, and said t axes shall be due and payable immediat ely and shall be
subject t o all t he penalt ies hereaft er prescribed, unless paid wit hin t he t ime

fixed in t he demand made by t he Commissioner.

( E ) Authority of the Commissioner to Prescribe Real Property Values - The
Commissioner i s hereby aut horized t o divide t he Philippines int o different
zones or areas and shall, upon consult at ion wit h compet ent appraisers bot h
from t he privat e and public sect ors, det ermine t he fair market value of real
propert ies locat ed in each zone or area.
F o r purposes of comput ing any int ernal revenue t ax, t he value of t he
propert y shall be, whichever is t he higher of:
(1) t he fair market value as det ermined by t he Commissioner, or
(2) t he fair market value as shown in t he schedule of values of t he Provincial
and Cit y Assessors.
(F) Authority o f the Commissioner to inquire into Bank Deposit Accounts Not wit hst anding any cont rary provision of Republic Act No. 1405 and ot her
general or special laws, t he Commissioner is hereby aut horized t o inquire int o
t he bank deposit s of:
(1) a decedent t o det ermine his gross est at e; and (2) any t axpayer who has
filed an applicat ion for compromise of his t ax liabilit y under Sec. 204 (A) (2) of
t his Code by reason of financial incapacit y t o pay his t ax liabilit y.
In case a t axpayer files an applicat ion t o compromise t he payment of his t ax
liabilit ies on his claim t hat his financial posit ion demonst rat es a clear inabilit y
t o pay t he t ax assessed, his applicat ion shall not be considered unless and
unt il he waives in writ ing his privilege under Republic Act No. 1405 or under
ot her general or special laws, and such waiver shall const it ut e t he aut horit y
of t he Commissioner t o inquire int o t he bank deposit s of t he t axpayer.
(G ) Authority t o Accredit and Register Tax Agents - The Commissioner shall
accredit and regist er, based on t heir professional compet ence, int egrit y and
mo ra l fit ness, individuals and general professional part nerships and t heir
represent at ives who pre pa re and file t ax ret urns, st at ement s, report s,
prot est s, and ot her papers wit h or who appear before, t he Bureau for
t axpayers.
Wit hin one hundred t went y (120) days from January 1, 1998, t he
Commissioner shall creat e nat ional and regional accredit at ion boards, t he
members of which shall serve for t hree (3) years, and shall designat e from
a mo ng t h e senior officials of t he Bureau, one (1) chairman and t wo (2)
members for each board, s ubjec t t o such rules and regulat ions as t he
Secret ary of Finance shall promulgat e upon t h e recommendat ion of t he
Commissioner.
Individuals a nd general professional part nerships and t heir represent at ives
who are denied accredit at ion by t he Commissioner and/or t he nat ional and
regional accredit at ion boards may appeal such denial t o t he Secret ary of
Finance, who shall rule on t he appeal wit hin sixt y (60) days from receipt of
such appeal.
Fa ilure of t he Secret ary of Finance t o rule on t he Appeal wit hin t he
pres c ribed period shall be deemed as approval of t he applicat ion for
accredit at ion of t he appellant .
(H) Authority o f the Commissioner to Prescribe Additional Procedural or
Documentary Requirements - The Commissioner may prescribe t he manner of
compliance wit h any document ary or procedural requirement in connect ion
wit h t he submission or preparat ion of financial st at ement s accompanying t he
t ax ret urns.
SEC. 7. Authority of the Commissioner to Delegate Power - The
Commissioner may delegat e t he powers vest ed in him under t he pert inent
provisions of t his Code t o any or such subordinat e officials wit h t he rank
equivalent t o a division chief or higher, subject t o such limit at ions and
rest rict ions as may be imposed under rules and regulat ions t o be
promulgat ed by t he Secret ary of finance, upon recommendat ion of t he
Commis s ioner: P r o vide d, however, That t he following powers of t he
Commissioner shall not be delegat ed:(a) The power t o recommend t he
promulgat ion of rules and regulat ions by t he Secret ary of Finance;(b) The
power t o issue rulings of first impression or t o reverse, revoke or modify any

power t o issue rulings of first impression or t o reverse, revoke or modify any

exist ing ruling of t he Bureau;(c) The power t o compromise or abat e, under
Sec. 204 (A) and (B) of t his Code, any t ax liabilit y: Provided, however, That
assessment s issued by t he regional offices involving basic deficiency t axes of
Five hundred t housand pesos (P500,000) or l e s s , and minor criminal
violat ions, as may be det ermined by rules and regulat ions t o be promulgat ed
b y t he Secret ary of finance, upon recommendat ion of t he Commissioner,
discovered b y regional and dist rict officials, may be compromised by a
regional evaluat ion board which shall be composed of t he Regional Direct or
as Chairman, t he Assist ant R egional Direct or, t he heads of t he Legal,
Assessment and Collect ion Divisions and t he Revenue Dist rict Officer having
jurisdict ion over t he t axpayer, as members; and(d) The power t o assign or
reassign int ernal revenue officers t o est ablishment s where art icles subject t o
excise t ax are produced or kept .
S E C . 8. Duty of the Commissioner to Ensure the Provision and
Distribution of forms, Receipts, Certificates, and Appliances, and the
Acknowledgment of Payment of Taxes. - (A) Provision and Distribution to
Proper Officials. - It shall be t he dut y of t he Commissioner, among ot her
t hings, t o prescribe, provide, and dist ribut e t o t he proper officials t he
requisit e licenses int ernal revenue st amps, labels all ot her forms, cert ificat es,
bonds, records, invoices, books, receipt s, inst rument s, appliances and
apparat us used in administ ering t he laws falling wit hin t he jurisdict ion of t he
Bureau.
For t his purpose, int ernal revenue st amps, st rip st amps and labels shall be
caused by t he Commissioner t o be print ed wit h adequat e securit y feat ures.
Int ernal revenue st amps, whet her of a bar code or fusion design, shall be
firmly and conspicuously affixed on each pack of cigars and cigaret t es subject
t o excise t ax in t he manner and form as prescribed by t he Commissioner,
upon approval of t he Secret ary of Finance.
(B ) Receipts for Payment Made - It shall be t he dut y of t he Commissioner or
his duly aut horized represent at ive or an aut horized agent bank t o whom any
payment of any t ax is made under t he provision of t his Code t o acknowledge
t h e payment of such t ax, expressing t he amount paid and t he part icular
account for which such payment was made in a form and manner prescribed
t herefor by t he Commissioner.
SEC. 9. Internal Revenue Districts - Wit h t he approval of t he Secret ary of
Finance, t he Commissioner shall divide t he Philippines int o such number of
revenue dist rict s as may form t ime t o t ime be required for administ rat ive
purposes. Each of t hese dist rict s shall be under t he supervision of a Revenue
Dist rict Officer.
SEC. 10. Revenue Regional Director. - Under rules and regulat ions, policies
and st andards formulat ed by t he Commissioner, wit h t he approval of t he
Secret ary of Finance, t he Revenue Regional direct or shall, wit hin t he region
and dist rict offices under his jurisdict ion, among ot hers:
(a) Implement laws, policies, plans, programs, rules and regulat ions of t he
depart ment or agencies in t he regional area;
(b) Administ er and enforce int ernal revenue laws, and rules and regulat ions,
including t he assessment and collect ion of all int ernal revenue t axes, charges
and fees.
(c) Issue L et t ers of aut horit y for t he examinat ion of t axpayers wit hin t he
region;(d) Provide economical, efficient and effect ive service t o t he people in
t he area;(e) Coordinat e wit h regional offices or ot her depart ment s, bureaus
and agencies in t he area;(f ) Coordinat e wit h local government unit s in t he
area;(g) Exercise cont rol and supervision over t he officers and employees
wit hin t he region; and(h) Perform such ot her funct ions as may be provided by
law and as may be delegat ed by t he Commissioner.
SEC. 11. Duties of Revenue District Officers and Other Internal Revenue
Officers - It shall be t he dut y of every Revenue Dist rict Officer or ot her
int ernal revenue officers and employees t o ensure t hat all laws, and rules and
regulat ions affect ing nat ional int ernal revenue are fait hfully execut ed and
complied wit h, and t o aid in t he prevent ion, det ect ion and punishment of
frauds of delinquencies in connect ion t herewit h.

It shall be t he d u t y of every Revenue Dist rict Officer t o examine t he

efficiency of all officers and employees of t he Bureau of Int ernal Revenue
under his supervision, and t o report in writ ing t o t he Commissioner, t hrough
t he Regional Direct or, any neglect of dut y, incompet ency, delinquency, or
malfeasance in office of any int ernal revenue officer of which he may obt ain
knowledge, wit h a st at ement of all t he fact s and any evidence sust aining
each case.
SEC. 12. Agents and Deputies for Collection of National Internal
Revenue Taxes - The following are hereby const it ut ed agent s of t he
Commissioner:(a) The Commissioner of Cust oms and his subordinat es wit h
respect t o t he collect ion of nat ional int ernal revenue t axes on import ed
goods;(b) The
head o f t he appropriat e government office and his
subordinat es wit h respect t o t he collect ion of energy t ax; and(c) Banks duly
accredit ed by t he Commissioner wit h respect t o receipt of payment s int ernal
revenue t axes aut horized t o be made t hru bank.Any officer or employee of an
aut horized agent bank assigned t o receive int ernal revenue t ax payment s
and t ransmit t ax ret urns or document s t o t he Bureau of Int ernal Revenue
shall be subject t o t he same sanct ions and penalt ies prescribed in Sect ions
269 and 270 of t his Code.
S E C . 1 3 . Authority of a Revenue Offices. - subject t o t he rules and
regulat ions t o be prescribed by t he S e c r e t a r y of Finance, upon
recommendat ion of t he Commissioner, a Revenue Officer assigned t o perform
assessment funct ions in any dist rict may, pursuant t o a Let t er of Aut horit y
issued by t he Revenue Regional Direct or, examine t axpayers wit hin t he
jurisdict ion of t he dist rict in order t o collect t he correct amount of t ax, or t o
recommend t he assessment of any deficiency t ax due in t he same manner
t hat t he said act s could have been performed by t he Revenue Regional
Direct or himself.
SEC. 14. Authority of Officers to Administer Oaths and Take Testimony. The Commissioner, Deput y Commissioners, Service Chiefs, Assist ant Service
Chiefs, Revenue Regional Direct ors, Assist ant Revenue Regional Direct ors,
Chiefs and Assist ant Chiefs of Divisions, Revenue Dist rict Officers, special
deput ies of t he Commissioner, int ernal revenue officers and any ot her
employee of t he Bureau t hereunt o especially deput ized by t he Commissioner
shall have t he power t o administ er oat hs and t o t ake t est imony in any official
mat t er or invest igat ion conduct ed by t hem regarding mat t ers wit hin t he
jurisdict ion of t he Bureau.
S EC . 15. Authority of Internal Revenue Officers to Make Arrests and
Seizures. - The Commissioner, t he Deput y Commissioners, t he Revenue
Regional Direct ors, t he Revenue Dist rict Officers and ot her int ernal revenue
officers shall have aut horit y t o make arrest s and seizures for t he violat ion of
any penal law, rule or regulat ion administ ered by t he Bureau of Int ernal
Revenue.
Any person so arrest ed shall be fort hwit h brought before a court , t here t o be
dealt wit h according t o law.
SEC. 16. Assignment of Internal Revenue Officers Involved in Excise Tax
Functions to Establishments Where Articles subject to Excise Tax are
Produced or Kept. - The Commissioner shall employ, assign, or reassign
int ernal revenue officers involved in excise t ax funct ions, as oft en as t he
exigencies o f t he revenue service may require, t o est ablishment s or places
where art icles subject t o excise t ax are produced or kept : Provided, That an
int ernal revenue officer assigned t o any such est ablishment shall in no case
s t ay in his assignment for more t han t wo (2) years, subject t o rules and
re gula t io ns t o be prescribed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner.
SEC. 17. Assignment of Internal Revenue Officers and Other Employees
t o O the r Duties. - The Commissioner may, subject t o t he provisions of
Sect ion 16 and t he laws on civil service, as well as t he rules and regulat ions
t o be prescribed by t he Secret ary of Finance upon t he recommendat ion of
t he Commissioner, assign or reassign int ernal revenue officers and employees
of t he Bureau of Int ernal Revenue, wit hout change in t heir official rank and
s a la ry, t o ot her or special dut ies connect ed wit h t he enforcement or
administ rat ion of t he revenue laws as t he exigencies of t he service may
re quire : Provided, That int ernal revenue officers assigned t o perform
assessment or collect ion funct ion shall not remain in t he same assignment for

more t han t hree (3) years; Provided, further, That assignment of int ernal
revenue officers and employees of t he Bureau t o special dut ies shall not
exceed one (1) year.
SEC. 18. Reports of Violation of Laws. - When an int ernal revenue officer
discovers evidence of a violat ion of t his Code or of any law, rule or
regulat ions administ ered by t he Bureau of Int ernal Revenue of such
charact er as t o warrant t he inst it ut ion of criminal proceedings, he shall
immediat ely report t he fact s t o t he Commissioner t hrough his immediat e
superior, giving t he name and address of t he offender and t he names of t he
wit nesses if possible: Provided, That in urgent cases, t he Revenue Regional
direct or or Revenue Dist rict Officer, as t h e case may be, may send t he
report t o t he corresponding prosecut ing officer in t he lat t er case, a copy of
his report shall be sent t o t he Commissioner.
SEC. 19. Contents of Commissioner's Annual Report. - The Annual Report
of t he Commissioner shall cont ain det ailed st at ement s of t he collect ions of
t he Bureau wit h specificat ions of t he sources of revenue by t ype of t ax, by
manner of payment , by revenue region and by indust ry group and it s
disbursement s by classes of expendit ures.
In case t he act ual collect ion exceeds or falls short of t arget as set in t he
annual nat ional budget by fift een percent (15%) or more, t he Commissioner
shall explain t he reason for such excess or short fall.
SEC. 20. Submission of Report and Pertinent Information by the
Commissioner - (A) Submission of Pertinent Information to Congress. - The
provision of Sect ion 270 of t his Code t o t he cont rary not wit hst anding, t he
Commissioner shall, upon request of Congress and in aid of legislat ion, furnish
it s appropriat e Commit t ee pert inent informat ion including but not limit ed t o:
indust ry audit s, collect ion performance d a t a , st at us report s in criminal
act ions init iat ed against persons and t axpayer's ret urns: Provided, however,
That any ret urn or ret urn informat ion which can be associat ed wit h, or
ot herwise ident ify, direct ly or indirect ly, a part icular t a xpa ye r shall be
furnished t he appropriat e Commit t ee of Congress only when sit t ing in
Execut ive Session Unless such t axpayer ot herwise consent s in writ ing t o
such disclosure.
(B ) Report to Oversight Committee. - The Commissioner shall, wit h reference
t o Sect ion 204 of t his Code, submit t o t he Oversight Commit t ee referred t o
in Sect ion 290 hereof, t hrough t he Chairmen of t he Commit t ee on Ways and
M eans of t he Senat e and House of Represent at ives, a report on t he exercise
of his powers pursuant t o t he said sect ion, every six (6) mont hs of each
calendar year.
SEC. 21. Sources of Revenue - The following t axes, fees and charges are
deemed t o be nat ional int ernal revenue t axes:
(a) Income t ax;
(b) Est at e and donor's t axes;
(c) Value-added t ax;
(d) Ot her percent age t axes;
(e) Excise t axes;
(f) Document ary st amp t axes; and
(g) Such ot her t axes as are or hereaft er may be imposed and collect ed by
t he Bureau of Int ernal Revenue.
TITLE II
TAX ON INCOME
CHAPTER I
DEFINITIONS
SEC. 22 Definitions - When used in t his Tit le:
(A) The t erm "person" means an individual, a t rust , est at e or corporat ion

c ra l a w

(B) The t erm "corporation" shall include part nerships, no mat t er how creat ed
or
organized, j o int -s t o c k companies, joint
account s (cuent as en
part icipacion), associat ion, or insurance companies, but does not include

general professional part nerships and a joint vent ure or consort ium formed
for t he purpose of undert aking const ruct ion project s or engaging in
pet roleum, coal, geot hermal and ot her energy operat ions pursuant t o an
operat ing consort ium agreement under a service cont ract wit h t he
Government "General professional partnerships" a r e part nerships formed by
persons for t he sole purpose of exercising t heir common profession, no part
of t he income of which is derived from engaging in any t rade or business
c ra l a w

(C) The t erm "domestic", when applied t o a corporat ion, means creat ed or
organized in t he Philippines or under it s laws
c ra l a w

(D) The t erm "foreign", when applied t o a corporat ion, means a corporat ion
which is not domest ic
c ra l a w

(E) The t erm "nonresident citizen" means:

(1) A cit izen o f t he Philippines who est ablishes t o t he sat isfact ion of t he
Commissioner t he fact of his physical presence abroad wit h a definit e
int ent ion t o reside t herein.
(2) A cit izen of t he Philippines who leaves t he Philippines during t he t axable
year t o re s ide abroad, eit her as an immigrant or for employment on a
permanent basis.
(3) A cit izen o f t he Philippines who works and derives income from abroad
and whose employment t hereat requires him t o be physically present abroad
most of t he t ime during t he t axable year.
(4) A cit izen who has been previously considered as nonresident cit izen and
who arrives i n t he Philippines at any t ime during t he t axable year t o reside
permanent ly in t he Philippines shall likewise be t reat ed as a nonresident
cit izen for t he t axable year in which he arrives in t he Philippines wit h respect
t o his income derived from sources abroad unt il t he dat e of his arrival in t he
Philippines.
(5) The t axpayer shall submit proof t o t he Commissioner t o show his
int ent ion of leaving t he Philippines t o reside permanent ly abroad or t o ret urn
t o and reside in t he Philippines as t he case may be for purpose of t his
Sect ion.
(F) The t erm "resident alien" means an individual whose residence is wit hin
t he Philippines and who is not a cit izen t hereof.
(G) The t erm "nonresident alien" means an individual whose residence is not
wit hin t he Philippines and who is not a cit izen t hereof.
(H) The t erm "resident foreign corporation" applies t o a foreign corporat ion
engaged in t rade or business wit hin t he Philippines.
(I) The t erm 'no nresident foreign corporat ion' applies t o a foreign
corporat ion not engaged in t rade or business wit hin t he Philippines.
(J) The t erm "fiduciary" means a guardian, t rust ee, execut or, administ rat or,
receiver, conservat or or any person act ing in any fiduciary capacit y for any
person.
(K) The t erm "withholding agent" means any person required t o deduct and
wit hhold any t ax under t he provisions of Sect ion 57.
(L) The t erm "shares of stock" shall include shares of st ock of a corporat ion,
warrant s and/or opt ions t o purchase shares of st ock, as well as unit s of
part icipat ion in a part nership (except general professional part nerships),
j o i n t s t o c k companies, joint account s, joint vent ures t axable as
corporat ions, associat ions and recreat ion or amusement clubs (such as golf,
polo or similar clubs), and mut ual fund cert ificat es.
(M ) The t erm "shareholder" shall include holders of a share/s of st ock,
warrant /s and/or opt ion/s t o purchase shares of st ock of a corporat ion, as
well a s a holder of a unit of part icipat ion in a part nership (except general
professional part nerships) in a joint st ock company, a joint account , a
t axable joint vent ure, a member of an associat ion, recreat ion or amusement
club (such as golf, polo or similar clubs) and a holder of a mut ual fund

cert ificat e, a member in an associat ion, joint -st ock company, or insurance
company.
(N) The t erm "taxpayer" means any person subject t o t ax imposed by t his
Tit le.
(O) The t erms "including" and "includes", when used in a definit ion cont ained
in t his Tit le, shall not be deemed t o exclude ot her t hings ot herwise wit hin t he
meaning of t he t erm defined.
(P) The t erm "taxable year" means t he calendar year, or t he fiscal year
ending during such calendar year, upon t he basis of which t he net income is
comput ed under t his Tit le.
'Taxable year' includes, in t he case of a ret urn made for a fract ional part of a
year under t he provisions of t his Tit le or u n d e r rules and regulat ions
prescribed by t he Secret ary of Finance, upon recommendat ion of t he
commissioner, t he period for which such ret urn is made.
(Q) The t erm "fiscal year" means an account ing period of t welve (12) mont hs
ending on t he last day of any mont h ot her t han December.
(R) The t erms "paid or incurred" and 'paid or accrued' shall be const rued
according t o t he met hod of account ing upon t he basis of which t he net
income is comput ed under t his Tit le.
(S) The t erm "trade or business" includes t he performance of t he funct ions of
a public office.
(T) The t erm "securities" means shares of st ock in a corporat ion and right s t o
subscribe for or t o receive such shares.
The t erm includes bonds, debent ures, not es or cert ificat es, or ot her evidence
or indebt edness, issued by any corporat ion, including t hose issued by a
government or polit ical subdivision t hereof, wit h int erest coupons or in
regist ered form.
(U) The t erm "dealer in securities" means a merchant of st ocks or securit ies,
whet her an individual, part nership or corporat ion, wit h an est ablished place
o f business, regularly engaged in t he purchase of securit ies and t he resale
t hereof t o cust omers; t hat is, one who, as a merchant , buys securit ies and
re-sells t hem t o cust omers wit h a view t o t he gains and profit s t hat may be
derived t herefrom.
(V) The t erm "bank" means every banking inst it ut ion, as defined in Sect ion 2
of Republic Act No. 337, as amended, ot herwise known as t he General
banking Act .
A bank may eit her be a commercial bank, a t hrift bank, a development bank,
a rural bank or specialized government bank.
(W)
The
t erm "n o n -b a n k financial intermediary" means a financial
int ermediary, as defined in Sect ion 2(D)(C) of Republic Act No. 337, as
amended, ot herwise known as t he General Banking Act , aut horized by t he
Bangko Sent ral ng Pilipinas (BSP) t o perform quasi-banking act ivit ies.
(X) The t erm "quasi-banking activities" means borrowing funds from t went y
(20) or more personal or corporat e lenders at any one t ime, t hrough t he
issuance, endorsement , or accept ance of debt inst rument s of any kind ot her
t han deposit s for t he borrower's own account , or t hrough t he issuance of
cert ificat es of assignment or similar inst rument s, wit h recourse, or of
repurchase agreement s for purposes of relending or purchasing receivables
and ot her similar obligat ions: Provided, however, That commercial, indust rial
and ot her non-financial companies, which borrow funds t hrough any of t hese
means for t he limit ed purpose of financing t heir own needs or t he needs of
t heir agent s or dealers, shall not be considered as performing quasi-banking
funct ions.
(Y) The t erm "deposit substitutes" shall mean an alt ernat ive from of obt aining
funds from t he public (t he t erm 'public' means borrowing from t went y (20) or
more individual or corporat e lenders at any one t ime) ot her t han deposit s,
t hrough t he issuance, endorsement , or accept ance of debt inst rument s for
t he borrowers own account , for t he purpose of relending or purchasing of

receivables and ot her obligat ions, or financing t heir own needs or t he needs
of t heir agent or dealer.
These inst rument s may include, but need not be limit ed t o bankers'
accept ances, promissory not es, repurchase agreement s, including reverse
repurchase agreement s ent ered int o by and bet ween t he Bangko Sent ral ng
Pilipinas (BSP) and any aut horized agent bank, cert ificat es of assignment or
part icipat ion and similar inst rument s wit h recourse: Provided, however, That
debt inst rument s issued for int erbank call loans wit h mat urit y of not more
t han five (5) days t o cover deficiency in reserves against deposit liabilit ies,
including t hose bet ween or among banks and quasi-banks, s ha ll not be
considered as deposit subst it ut e debt inst rument s.
(Z) The t erm "ordinary income" includes any gain from t he sale or exchange
of propert y whic h is not a capit al asset or propert y described in Sect ion
39(A)(1).
A n y g a i n from t he sale or exchange of propert y which is t reat ed or
considered, under ot her provisions of t his Tit le, as 'ordinary income' shall be
t reat ed as gain from t he sale or exchange of propert y which is not a capit al
asset as defined in Sect ion 39(A)(1).
The t erm 'ordinary loss' includes any lo s s from t he sale or exchange of
propert y which is not a capit al asset .
A n y loss from t he sale or exchange of propert y which is t reat ed or
considered, under ot her provisions of t his Tit le, as 'ordinary loss' shall be
t reat ed as loss from t he sale or exchange of propert y which is not a capit al
asset .
(AA) The t erm "rank and file employees" shall mean all employees who are
holding neit her managerial nor supervisory posit ion as defined under exist ing
provisions of t he Labor Code of t he Philippines, as amended.
(BB) The t erm "mutual fund company" shall mean an open-end and close-end
invest ment company as defined under t he Invest ment Company Act .
(CC) The t erm "trade, business or profession" shall not include performance of
services by t he t axpayer as an employee.
(DD) The t erm "re gional or area headquarters" shall mean a branch
est ablished in t he P hilippine s by mult inat ional companies and which
headquart ers do not earn or derive income from t he Philippines and which act
as supervisory, communicat ions and coordinat ing cent er for t heir affiliat es,
subsidiaries, or branches in t he Asia-Pacific Region and ot her foreign
market s.
(EE) The t erm "regional operating headquarters" shall mean a branch
est ablished in t he P hilippines by mult inat ional companies which are engaged
in any of t he following s ervic es : general administ rat ion and planning;
business planning and coordinat ion; sourcing and procurement of raw
mat erials and component s; corporat e finance advisory services; market ing
cont rol and sales promot ion; t raining and personnel management ; logist ic
services; research and development s ervic es and product development ;
t echnical support and maint enance; dat a processing and communicat ions;
and business development .
(FF) The t erm "long-term deposit or investment certificates" shall refer t o
cert ificat e of t ime deposit or invest ment in t he form of savings, common or
individual t rust funds, deposit subst it ut es, invest ment management account s
and ot her invest ment s wit h a mat urit y period of not less t han five (5) years,
t he form of whic h shall be prescribed by t he Bangko Sent ral ng Pilipinas
(BSP) and issued by banks only (not by nonbank financial int ermediaries and
finance companies) t o individuals in denominat ions of Ten t housand pesos
(P10,000) and ot her denominat ions as may be prescribed by t he BS.
CHAPTER II
GENERAL PRINCIPLES
SEC. 23. General Principles of Income Taxation in the Philippines- Except
when ot herwise provided in t his Code:(A) A cit izen of t he Philippines residing
t herein is t axable on all income derived from sources wit hin and wit hout t he

Philippines;(B) A nonresident cit izen is t axable only on income derived from

sources wit hin t he Philippines;(C) An individual cit izen of t he Philippines who
is working and deriving income from abroad as an overseas cont ract worker is
t axable only on income derived from sources wit hin t he Philippines: Provided,
That a seaman who is a cit izen of t he Philippines and who receives
compensat ion for services rendered abroad as a member of t he complement
of a vessel engaged exclusively in int ernat ional t rade shall be t reat ed as an
overseas cont ract worker;(D) An alien individual, whet her a resident or not
of t he Philippines, is t axable only on income derived from sources wit hin t he
Philippines;(E) A domest ic corporat ion is t axable on all income derived from
sources wit hin and wit hout t he Philippines; and (F) A foreign corporat ion,
whet her engaged or not in t rade or business in t he Philippines, is t axable
only on income derived from sources wit hin t he Philippines.

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 t ax is hereby imposed: (a) On t he t axable income defined in
Sect ion 31 of t his Code, ot her t han income subject t o t ax under Subsect ions
(B), (C) and (D) of t his Sect ion, derived for e a c h t axable year from all
sources wit hin and wit hout t he Philippines be every individual cit izen of t he
Philippines residing t herein; (b) On t he t axable income defined in Sect ion 31
of t his Code, ot her t han income subject t o t ax under Subsect ions (B), (C)
and (D) of t his Sect ion, derived for each t axable year from all sources wit hin
t he Philippines by an individual cit izen of t he Philippines who is residing
out side of t he Philippines including overseas cont ract workers referred t o in
Subsect ion(C) of Sect ion 23 hereof; and (c) On t he t axable income defined in
Sect ion 31 of t his Code, ot her t han income subject t o t ax under Subsect ions
(b), (C) and (D) of t his Sect ion, derived for e a c h t axable year from all
sources wit hin t he Philippines by an individual alien who is a resident of t he
Philippines.
The t ax shall be comput ed in accordance wit h and at t he rat es est ablished in
t he following schedule:
Not over P10,000........

5%

Over P10,000 but not over

P30,000..

P500+10% of t he excess over P10,000

Over P30,000 but not over

P70,000..

P2,500+15% of t he excess over P30,000

Over P70,000 but not over

P140,000.

P8,500+20% of t he excess over P70,000

Over P140,000 but not over

P250,000.

P22,500+25% of t he excess over

P140,000

Over P250,000 but not over

P500,000.

P50,000+30% of t he excess over

P250,000

Over P500,000 .....

P125,000+34% of t he excess over

P500,000 in 1998.

Provided, That effect ive January 1, 1999, t he t op marginal rat e shall be

t hirt y-t hree percent (33%) and effect ive January 1, 2000, t he said rat e shall
be t hirt y-t wo percent (32%)
For married individuals, t he husband and wife, subject t o t he provision of
Sect ion 51 (D) hereof, shall comput e separat ely t heir individual income t ax
based on t heir respect ive t ot al t axable income: Provided, That if any income
cannot be definit ely at t ribut ed t o or ident ified as income exclusively earned
or realized by eit her of t he spouses, t he same shall be divided equally

bet ween t he spouses for t he purpose of det ermining t heir respect ive t axable
income.
(B) Rate of Tax on Certain Passive Income (1) Interests, Royalties, Prizes, and
Other Winnings. - A final t ax at t he rat e of t went y percent (20%) is hereby
imposed upon t he amount of int erest from any currency bank deposit and
yield or any ot her monet ary benefit from deposit subst it ut es and from t rust
funds and similar arrangement s; royalt ies, except on books, as well as ot her
lit erary works and musical composit ions, which shall be imposed a final t ax of
t en percent (10%); prizes (except prizes amount ing t o Ten t housand pesos
(P10,000) or less which shall be subject t o t ax unde r Subsect ion (A) of
Sect ion 24; and ot her winnings (except Philippine Charit y Sweepst akes and
Lot t o winnings), derived from sources wit hin t he P hilippines: Provided,
however, That int erest income received by an individual t axpayer (except a
nonresident individual) from a deposit ory bank under t he expanded foreign
currency deposit syst em shall be subject t o a final income t ax at t he rat e of
seven and one-half percent (7 1/2%) of such int erest income: Provided,
further, That int erest income from long-t erm deposit or invest ment in t he
form of savings, common or individual t rust funds, deposit subst it ut es,
invest ment management account s and ot her invest ment s evidenced by
cert ificat es in such form prescribed by t he Bangko Sent ral ng Pilipinas (BSP)
shall be exempt from t he t ax imposed under t his Subsect ion: Provided,
finally, That should t he holder of t he cert ificat e pre-t erminat e t he deposit or
invest ment before t he fift h (5th) year, a final t ax shall be imposed on t he
ent ire income and shall be deduct ed and wit hheld by t he deposit ory bank
from t he proceeds of t he long-t erm deposit or invest ment cert ificat e based
on t he remaining mat urit y t hereof:
Four (4) years t o less t han five (5) years - 5%;
Three (3) years t o less t han (4) years - 12%;
and Less t han t hree (3) years - 20%
(2) Cash and/or Property Dividends - A final t ax at t he following rat es shall be
imposed upon t he cash and/or propert y dividends act ually or const ruct ively
received by an individual from a domest ic corporat ion or from a joint st ock
c o mpa ny, insurance or mut ual fund companies and regional operat ing
headquart ers of mult inat ional companies, or on t he share of an individual in
t he dist ribut able net income aft er t ax of a part nership (except a general
professional part nership) of which he is a part ner, or on t he share of an
individual in t he net income aft er t ax of an associat ion, a joint account , or a
joint vent ure or consort ium t axable as a corporat ion of which he is a member
or co-vent urer:
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 t he t ax on dividends shall apply only on income
earned on or aft er January 1, 1998.
Income forming part of ret ained earnings as of December 31, 1997 shall not ,
even if declared or dist ribut ed on or aft er January 1, 1998, be subject t o t his
t ax.
(C) Capital Gains from Sale of Shares of Stock not Traded in the Stock
Exchange - The provisions of Sect ion 39(B) not wit hst anding, a final t ax at
t he rat es prescribed below is hereby imposed upon t he net capit al gains
realized during t he t axable year from t he sale, bart er, exchange or ot her
disposit ion of shares of st ock in a domest ic corporat ion, except shares sold,
or disposed of t hrough t he st ock 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 Sect ion 39(B) not wit hst anding, a final t ax of six percent (6%) based on

t he gross selling price or current fair market value as det ermined in

accordance wit h Sect ion 6(E) of t his Code, whichever is higher, is hereby
imposed upon capit al gains presumed t o have been realized from t he sale,
exchange, or ot her disposit ion of real propert y locat ed in t he Philippines,
classified as capit al asset s, including pact o de ret ro sales and ot her forms of
condit ional sales, by individuals, including est at es and t rust s: Provided, That
t he t ax liabilit y, if any, on gains from sales o r ot her disposit ions of real
propert y t o t he government or any of it s polit ical subdivisions or agencies or
t o government -owned or cont rolled corporat ions shall be det ermined eit her
under Sect ion 24 (A) or under t his Subsect ion, at t he opt ion of t he t axpayer.
( 2 ) Exception - The provisions of paragraph (1) of t his Subsect ion t o t he
cont rary not wit hst anding, capit al gains presumed t o have been realized from
t he sale or disposit ion of t heir principal residence by nat ural persons, t he
proceeds of which is fully ut ilized in acquiring or const ruct ing a new principal
residence wit hin eight een (18) calendar mont hs from t he dat e of sale or
disposit ion, shall be exempt from t he capit al gains t ax imposed under t his
Subsect ion: Provided, That t he hist orical cost or adjust ed basis of t he real
propert y sold or disposed shall be carried over t o t he new principal residence
built or acquired: Provided, further, That t he Commissioner shall have been
duly not ified by t he t axpayer wit hin t hirt y (30) days from t he dat e of sale or
disposit ion t hrough a prescribed ret urn of his int ent ion t o avail of t he t ax
exempt ion herein ment ioned: Provided, still further, That t he said t ax
exempt ion can only be availed of once every t en (10) years: Provided, finally,
t hat if t here is no full ut ilizat ion o f t he proceeds of sale or disposit ion, t he
port ion of t he gain presumed t o have been realized from t he sale or
disposit ion shall be subject t o capit al gains t ax.
For t his purpose, t he gross selling price or fair market value at t he t ime of
sale, whichever is higher, shall be mult iplied by a fract ion which t he unut ilized
amount bears t o t he gross selling price in order t o det ermine t he t axable
port ion and t he t ax prescribed under paragraph (1) of t his Subsect ion shall
be imposed t hereon.
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 t rade or business in
t he Philippines shall be subject t o an income t ax in t he same manner as an
individual cit izen and a resident alien individual, on t axable income received
from all sources wit hin t he Philippines.
A nonresident alien individual who shall come t o t he Philippines and st ay
t herein for an aggregat e period of more t han one hundred eight y (180) days
during any calendar year shall be deemed a 'nonresident alien doing business
in t he Philippines'. Sect ion 22 (G) of t his Code not wit hst anding.
(2) Cash and/or P ropert y Dividends from a Domest ic Corporat ion or Joint
St ock Company, or Insurance or M ut ual Fund Company or Regional Operat ing
Headquart ers or M ult inat ional Company, or Share in t he Dist ribut able Net
Income of a Part nership (Except a General Professional Part nership), Joint
Account , Joint Vent ure Taxable as a Corporat ion or Associat ion., Int erest s,
Royalt ies, Prizes, and Ot her Winnings. - Cash and/or propert y dividends from
a domest ic corporat ion, or from a joint st ock company, or from an insurance
or mut ual fund c ompa ny or from a regional operat ing headquart ers of
mult inat ional company, or t he share of a nonresident alien individual in t he
dist ribut able net inc o me aft er t ax of a part nership (except a general
professional part nership) of which he is a part ner, or t he share of a
nonresident alien individual in t he net income aft er t ax of an associat ion, a
joint account , or a joint vent ure t axable as a corporat ion of which he is a
member or a co-vent urer; int erest s; royalt ies (in any form); and prizes
(except prizes amount ing t o Ten t housand pesos (P10,000) or less which
shall be subject t o t ax under Subsect ion (B)(1) of Sect ion 24) and ot her
winnings (except Philippine Charit y Sweepst akes and Lot t o winnings); shall
be subject t o an income t ax of t went y percent (20%) on t he t ot al amount
t hereof: Provided, however, t hat royalt ies on books as well as ot her lit erary
works, and royalt ies on musical composit ions shall be subject t o a final t ax of
t en percent (10%) on t he t ot al amount t hereof: Provided, further, That
cinemat ographic films and similar works shall be subject t o t he t ax provided
under Sect ion 28 of t his Code: Provided, furthermore, That int erest income
f ro m long-t erm deposit or invest ment in t he form of savings, common or
individual t rust funds, deposit subst it ut es, invest ment management account s

and ot her invest ment s evidenced by cert ificat es in such form prescribed by
t he Bangko Sent ral ng Pilipinas (BSP) shall be exempt from t he t ax imposed
u n d e r t h i s Subsect ion: Provided, finally, t hat should t he holder of t he
cert ificat e pre-t erminat e t he deposit or invest ment before t he fift h (5th)
year, a final t ax shall be imposed on t he ent ire income and shall be deduct ed
and wit hheld by t he deposit ory bank from t he proceeds of t he long-t erm
deposit or invest ment cert ificat e based on t he remaining mat urit y t hereof:
Four (4) years t o less t han five (5) years - 5%;
Three (3) years t o less t han four (4) years - 12%; and
Less t han t hree (3) years - 20%.
(3) Capital Gains. - Capit al gains realized from sale, bart er or exchange of
shares of st ock in domest ic corporat ions not t raded t hrough t he local st ock
exchange, and real propert ies shall be subject t o t he t ax prescribed under
Subsect ions (C) and (D) of Sect ion 24.
(B ) Nonresident Alien Individual Not Engaged in Trade or Business Within the
Philippines. - There shall be levied, collect ed and paid for each t axable year
upon t he ent ire income received from all sources wit hin t he Philippines by
every nonresident alien individual not engaged in t rade or business wit hin t he
Philippines as int erest , cash and/or propert y dividends, rent s, salaries,
wages, premiums, annuit ies, compensat ion, remunerat ion, emolument s, or
ot her fixed or det erminable annual or periodic or casual gains, profit s, and
income, and capit al gains, a t ax equal t o t went y-five percent (25%) of such
income.
Capit al gains realized by a nonresident alien individual not engaged in t rade
or business in t he Philippines from t he sale of shares of st ock in any domest ic
corporat ion and real propert y shall be subject t o t he income t ax prescribed
under Subsect ions (C) and (D) of Sect ion 24.
(C) Alien Individual Employed by Regional or Area Headquarters and Regional
Operating Headquarters of Multinational Companies. - There shall be levied,
collect ed and paid for each t axable year upon t he gross income received by
every alien individual employed by regional or area headquart ers and regional
ope rat ing headquart ers est ablished in t he Philippines by mult inat ional
companies as salaries, wages, annuit ies, compensat ion, remunerat ion and
ot her emolument s, such as honoraria and allowances, from such regional or
a r e a headquart ers and regional operat ing headquart ers, a t ax equal t o
fift een percent (15%) of such gross income: Provided, however, That t he
same t ax t reat ment shall apply t o Filipinos employed and occupying t he same
posit ion as t hose of aliens employed by t hese mult inat ional companies.
For purposes of t h is Chapt er, t he t erm 'mult inat ional company' means a
foreign firm or e nt it y engaged in int ernat ional t rade wit h affiliat es or
subsidiaries or branch offices in t he Asia-Pacific Region and ot her foreign
market s.
c ra l a w

( D ) Alien Individual Employed by Offshore Banking Units. - There shall be

levied, collect ed and paid for each t axable year upon t he gross income
received by every alien individual employed by offshore banking unit s
est ablished in t he Philippines as salaries, wages, annuit ies, compensat ion,
remunerat ion and ot her emolument s, such as honoraria and allowances, from
such off-shore banking unit s, a t ax equal t o fift een percent (15%) of such
gross income: Provided, however, That t he same t ax t reat ment shall apply t o
F ilipinos employed and occupying t he same posit ions as t hose of aliens
employed by t hese offshore banking unit s.
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( E ) Alien
Individual Employed by Petroleum Service Contractor and
Subcontractor - An Alien individual who is a permanent resident of a foreign
count ry but who is employed and assigned in t he Philippines by a foreign
s e r vic e c ont rac t or or by a foreign service subcont ract or engaged in
pet roleum operat ions i n t he Philippines shall be liable t o a t ax of fift een
percent (15%) of t he salaries, wages, annuit ies, compensat ion, remunerat ion
and ot her emolument s, such as honoraria and allowances, received from such
cont ract or
or subcont ract or: Provided, however, That t he same t ax
t reat ment shall apply t o a Filipino employed and occupying t he same posit ion
as an alien employed by pet roleum service cont ract or and subcont ract or.
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Any income earned from all ot her sources wit hin t he Philippines by t he alien
employees referred t o under Subsect ions (C), (D) and (E) hereof shall be
subject t o t he pert inent income t ax, as t he case may be, imposed under t his
Code.
SEC. 26. Tax Liability of Members of General Professional Partnerships.
- A general professional part nership as such shall not be subject t o t he
income t ax imposed under t his Chapt er.
Persons engaging in business as part ners in a general professional
part nership shall be liable for income t ax only in t heir separat e and individual
capacit ies.
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For purposes of comput ing t he dist ribut ive share of t he part ners, t he net
income of t he part nership shall be comput ed in t he same manner as a
corporat ion.
Each part ner shall report as gross income his dist ribut ive share, act ually or
const ruct ively received, in t he net income of t he part nership.
CHAPTER IV
TAX ON CORPORATIONS
SEC. 27. Rates of Income tax on Domestic Corporations. (A) In General. - Except as ot herwise provided in t his Code, an income t ax of
t hirt y-five percent (35%) is hereby imposed upon t he t axable income derived
during each t axable year from all sources wit hin and wit hout t he Philippines
b y every corporat ion, as defined in Sect ion 22(B) of t his Code and t axable
under t his Tit le as a corporat ion, organized in, or exist ing under t he laws of
t he Philippines: Provided, That effect ive January 1, 1998, t he rat e of income
t ax shall be t hirt y-four percent (34%); effect ive January 1, 1999, t he rat e
shall be t hirt y-t hree percent (33%); and effect ive J anuary 1, 2000 and
t hereaft er, t he rat e shall be t hirt y-t wo percent (32%).
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In t he case of corporat ions adopt ing t he fiscal-year account ing period, t he

t axable income shall be comput ed wit hout regard t o t he specific dat e when
specific sales, purchases and ot her t ransact ions occur.
Their income and expenses for t he fiscal year shall be deemed t o have been
earned and spent equally for each mont h of t he period.
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The reduced corporat e income t ax rat es shall be applied on t he amount

comput ed by mult iplying t he number of mont hs covered by t he new rat es
wit hin t he fiscal year by t he t axable income of t he corporat ion for t he period,
divided by t welve Provided, further, That t he President , upon t he
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recommendat ion of t he Secret ary of Finance, may effect ive January 1, 2000,
allow corporat ions t he opt ion t o be t axed at fift een percent (15%) of gross
income as defined herein, aft er t he following condit ions have been sat isfied:
(1) A t ax effort rat io of t went y percent (20%) of Gross Nat ional Product
(GNP);
(2) A rat io of fort y percent (40%) of income t ax collect ion t o t ot al t ax
revenues;
(3) A VAT t ax effort of four percent (4%) of GNP; and
(4) A 0.9 percent (0.9%) rat io of t he Consolidat ed Public Sect or Financial
Posit ion (CPSFP) t o GNP.
The opt ion t o be t axed based on gross income shall be available only t o firms
whose rat io of cost of sales t o gross sales or receipt s from all sources does
not exceed fift y-five percent (55%).
The elect ion of t he gross income t ax opt ion by t he corporat ion shall be
irrevocable
for t h r e e (3) consecut ive t axable years during which t he
corporat ion is qualified under t he scheme.
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For purposes of t his Sect ion, t he t erm 'gross income' derived from business
shall be equivalent t o gross sales less sales ret urns, discount s and
allowances and cost of goods sold"Cost of goods sold" shall include all

business expenses direct ly incurred t o produce t he merchandise t o bring

t hem t o t heir present locat ion and use.
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For a t rading or merchandising concern, "cost of goods" sold shall include t he

invoice cost of t he goods sold, plus import dut ies, freight in t ransport ing t he
goods t o t he place where t he goods are act ually sold, including insurance
while t he goods are in t ransit .
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For a manufact uring concern, "cost of goods manufactured and sold" shall
include all cost s of product ion of finished goods, such as raw mat erials used,
direct labor and manufact uring overhead, freight cost , insurance premiums
a n d ot her cost s incurred t o bring t he raw mat erials t o t he fact ory or
warehouse.
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In t he case of t axpayers engaged in t he sale of service, 'gross income' means

gross receipt s less sales ret urns, allowances and discount s.
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(B) Proprietary Educational Institutions and Hospitals. - Propriet ary educat ional
inst it ut ions and hospit als which are nonprofit shall pay a t ax of t en percent
(10%) on t heir t axable income except t hose covered by Subsect ion (D)
hereof: Provided, t hat if t he gross income from unrelat ed t rade, business or
ot her act ivit y exceeds fift y percent (50%) of t he t ot al gross income derived
by such educat ional inst it ut ions or hospit als from all sources, t he t ax
prescribed in Subsect ion (A) hereof shall be imposed on t he ent ire t axable
income.
For purposes of t his Subsect ion, t he t erm 'unrelat ed t rade, business or ot her
act ivit y' means any t rade, business or ot her act ivit y, t he conduct of which is
not subst ant ially relat ed t o t he exercise or performance by such educat ional
inst it ut ion or hospit al of it s primary purpose or funct ion.
A "Proprietary educational institution" is any privat e school maint ained and
administ ered by privat e individuals or groups wit h an issued permit t o
operat e from t he Depart ment of Educat ion, Cult ure and Sport s (DECS), or
t he Commission on Higher Educat ion (CHED), or t he Technical Educat ion and
Skills Development Aut horit y (TESDA), as t he case may be, in accordance
wit h exist ing laws and regulat ions.
( C ) Go ve r n m e n t-o w n e d or
Controlled-Corporations,
Agencies
or
Instrumentalities - The provisions of exist ing special or general laws t o t he
cont rary not wit hst anding, a l l corporat ions, agencies, or inst rument alit ies
owned or cont rolled by t he Government , except t he Government Service
Insurance Syst em (GSIS), t he Social Securit y Syst em (SSS), t he Philippine
Healt h Insurance Corporat ion (PHIC), t he Philippine Charit y Sweepst akes
Office (PCSO) and t he P hilippine Amusement and Gaming Corporat ion
(PAGCOR), shall pay such rat e of t ax u p o n t heir t axable income as are
imposed by t his Sect ion upon corporat ions o r associat ions engaged in s
similar business, indust ry, or act ivit y.
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(D) Rates of Tax on Certain Passive Incomes. ( 1 ) Interest f r o m Deposits and Yield or any other Monetary Benefit from
Deposit Substitutes and from Trust Funds and Similar Arrangements, and
Royalties - A final t ax at t he rat e of t went y percent (20%) is hereby imposed
upon t he amount of int erest on currency bank deposit and yield or any ot her
monet ary benefit from deposit subst it ut es and from t rust funds and similar
arrangement s received by domest ic corporat ions, and royalt ies, derived from
s ourc es wit hin t he Philippines: Provided, however, That int erest income
derived by a domest ic corporat ion from a deposit ory bank under t he
expanded foreign currency deposit syst em shall be subject t o a final income
t a x at t he rat e of seven and one-half percent (7 1/2%) of such int erest
income.
(2) Capital Gains from the Sale of Shares of Stock Not Traded in the Stock
Exchange. - A final t ax at t he rat es prescribed below shall be imposed on net
capit al gains realized during t he t axable year from t he sale, exchange or
ot her disposit ion of shares of st ock in a domest ic corporat ion except shares
sold or disposed of t hrough t he st ock exchange:
Not over P100,000.5%
Amount in excess of P100,000.10%

( 3 ) Tax on Income Derived under the Expanded Foreign Currency Deposit

System. - Income derived by a deposit ory bank under t he expanded foreign
c urre nc y de po s it syst em from foreign currency t ransact ions wit h local
commercial
banks, including branches of foreign banks t hat may be
aut horized by t he B angko Sent ral ng Pilipinas (BSP) t o t ransact business
wit h foreign currency deposit ory syst em unit s and ot her deposit ory banks
under t he expanded foreign c urrenc y deposit syst em, including int erest
income from foreign currency loans grant ed by such deposit ory banks under
said expanded foreign currency deposit syst em t o resident s, shall be subject
t o a final income t ax at t he rat e of t en percent (10%) of such income.
Any income of nonresident s, whet her individuals or corporat ions, from
t ransact ions wit h deposit ory banks under t he expanded syst em shall be
exempt from income t ax.
(4) Intercorporate Dividends. - Dividends received by a domest ic corporat ion
from anot her domest ic corporat ion shall not be subject t o t ax.
(5) Capital Gains Realized from the Sale, Exchange or Disposition of Lands
and/or Buildings. - A final t ax of six percent (6%) is hereby imposed on t he
gain presumed t o have been realized on t he sale, exchange or disposit ion of
la nds and/or buildings which are not act ually used in t he business of a
corporat ion and are t reat ed as capit al asset s, based on t he gross selling
price of fair market value as det ermined in accordance wit h Sect ion 6(E) of
t his Code, whichever is higher, of such lands and/or buildings.
(E) Minimum Corporate Income Tax on Domestic Corporations. (1) Imposition of Tax - A minimum corporat e income t ax of t wo percent (2%0
of t he gross income as of t he end of t he t axable year, as defined herein, is
hereby imposed on a corporat ion t axable under t his Tit le, beginning on t he
fourt h t axable year immediat ely following t he year in which such corporat ion
commenced it s business operat ions, when t he minimum income t ax is great er
t han t he t ax comput ed under Subsect ion (A) of t his Sect ion for t he t axable
year.
( 2 ) Carry Forward of Excess Minimum Tax. - Any excess of t he minimum
corporat e income t ax over t he normal income t ax as comput ed under
Subsect ion (A) of t his Sect ion shall be carried forward and credit ed against
t he normal income t ax for t he t hree (3) immediat ely succeeding t axable
years.
(3) Relief from the Minimum Corporate Income Tax Under Certain Conditions. The Secret ary of Finance is hereby aut horized t o suspend t he imposit ion of
t he minimum corporat e income t ax on any corporat ion which suffers losses on
account of prolonged labor disput e, or because of force majeure, or because
of legit imat e business reverses.
The Secret ary
recommendat ion
t hat shall define
imposit ion of t he

of F in a n c e is hereby aut horized t o promulgat e, upon

of t he Commissioner, t he necessary rules and regulat ion
t he t erms and condit ions under which he may suspend t he
minimum corporat e income t ax in a merit orious case.

(4) Gross Income Defined - For purposes of applying t he minimum corporat e

income t a x provided under Subsect ion (E) hereof, t he t erm 'gross income'
shall mean gross sales less sales ret urns, discount s and allowances and cost
of goods sold"Cost of goods sold' shall include all business expenses direct ly
incurred t o produce t he merchandise t o bring t hem t o t heir present locat ion
and use.
For a t rading or merchandising concern, "cost of goods sold' shall include t he
invoice cost of t he goods sold, plus import dut ies, freight in t ransport ing t he
goods t o t he place where t he goods are act ually sold including insurance
while t he goods are in t ransit .
For a manufact uring concern, cost of "goods manufactured and sold" shall
include all cost s of product ion of finished goods, such as raw mat erials used,
direct labor and manufact uring overhead, freight cost , insurance premiums
a n d ot her cost s incurred t o bring t he raw mat erials t o t he fact ory or
warehouse.
In t he case of t axpayers engaged in t he sale of service, 'gross income' means

gross
receipt s l e s s sales ret urns, allowances, discount s and cost of
services"Cost of services" shall mean all direct cost s and expenses necessarily
incurred t o provide t he services required by t he cust omers and client s
including (A) salaries and employee benefit s of personnel, consult ant s and
specialist s direct ly rendering t he service and (B) cost of facilit ies direct ly
ut ilized in providing t he service such as depreciat ion or rent al of equipment
us ed and cost of supplies: Provided, however, That in t he case of banks,
"cost of services" shall include int erest expense.
SEC. 28. Rates of Income Tax on Foreign Corporations. (A) Tax on Resident Foreign Corporations. - .
(1) In General. - Except as ot herwise provided in t his Code, a corporat ion
organized, aut horized, or exist ing under t he laws of any foreign count ry,
engaged in t rade or business wit hin t he Philippines, shall be subject t o an
income t ax equivalent t o t hirt y-five percent (35%) of t he t axable income
derived in t he preceding t axable year from all sources wit hin t he Philippines:
Provided, That effect ive January 1, 1998, t he rat e of income t ax shall be
t hirt y-four percent (34%); effect ive January 1, 1999, t he rat e shall be t hirt yt hree percent (33%), and effect ive January 1, 2000 and t hereaft er, t he rat e
shall be t hirt y-t wo percent (32%).
In t he case of corporat ions adopt ing t he fiscal-year account ing period, t he
t axable income shall be comput ed wit hout regard t o t he specific dat e when
sales, purchases and ot her t ransact ions occur.
Their income and expenses for t he fiscal year shall be deemed t o have been
earned and spent equally for each mont h of t he period.
The reduced corporat e income t ax rat es shall be applied on t he amount
comput ed by mult iplying t he number of mont hs covered by t he new rat es
wit hin t he fiscal year by t he t axable income of t he corporat ion for t he period,
divided by t welveProvided, however, That a resident foreign corporat ion shall
be grant ed t he opt ion t o be t axed at fift een percent (15%) on gross income
under t he same condit ions, as provided in Sect ion 27 (A).
( 2 ) Minimum Corporate Income Tax on Resident Foreign Corporations. - A
minimum corporat e income t ax of t wo percent (2%) of gross income, as
prescribed under Sect ion 27 (E) of t his Code, shall be imposed, under t he
same condit ions, on a resident foreign corporat ion t axable under paragraph
(1) of t his Subsect ion.
( 3 ) International Carrier. - An int ernat ional carrier doing business in t he
Philippines shall pay a t ax of t wo and one-half percent (2 1/2%) on it s "Gross
Philippine Billings" as defined hereunder: (a) International Air Carrier. - "Gross
Philippine Billings" refers t o t he amount of gross revenue derived from
carriage of persons, excess baggage, cargo a n d mail originat ing from t he
Philippines in a cont inuous and unint errupt ed flight , irrespect ive of t he place
of sale or issue and t he place of payment of t he t icket or passage document :
Provided, That t icket s revalidat ed, exchanged and/or indorsed t o anot her
int ernat ional airline form part of t he Gross Philippine Billings if t he passenger
boards a plane in a port or point in t he Philippines: Provided, further, That for
a flight which originat es from t he Philippines, but t ransshipment of passenger
t akes place at any port out side t he Philippines on anot her airline, only t he
aliquot port ion of t he cost of t he t icket corresponding t o t he leg flown from
t he Philippines t o t he point of t ransshipment shall form part of Gross
Philippine Billings.
(b) International Shipping. - "Gross Philippine Billings" means gross revenue
whet her for passenger, cargo or mail originat ing from t he Philippines u p t o
final dest inat ion, regardless of t he place of sale or payment s of t he passage
or freight document s.
( 4 ) Offshore Banking Units - The provisions of any law t o t he cont rary
not wit hst anding, income derived by offshore banking unit s aut horized by t he
Bangko Sent ral ng Pilipinas (BSP) t o t ransact business wit h offshore banking
unit s , including any int erest income derived from foreign currency loans
grant ed t o resident s, shall be subject t o a final income t ax at t he rat e of t en
percent (10%) of such income.
Any

income

of nonresident s, whet her individuals or corporat ions, from

t ransact ions wit h said offshore banking unit s shall be exempt from income
t ax.
(5) Tax on Branch Profits Remittances. - Any profit remit t ed by a branch t o it s
head office shall be subject t o a t ax of fift een (15%) which shall be based on
t he t ot al profit s applied or earmarked for remit t ance wit hout any deduct ion
for t he t ax component t hereof (except t hose act ivit ies which are regist ered
wit h t he Philippine Economic Zone Aut horit y).
The t ax shall be collect ed and paid in t he same manner as provided in
Sect ions 57 and 58 of t his Code: provided, t hat int erest s, dividends, rent s,
royalt ies, including remunerat ion for t echnical services, salaries, wages
premiums, annuit ies, emolument s or ot her fixed or det erminable annual,
periodic or casual gains, profit s, income and capit al gains received by a
foreign corporat ion during each t axable year from all sources wit hin t he
Philippines shall not be t reat ed as branch profit s unless t he same are
effect ively connect ed wit h t he c onduc t of it s t rade or business in t he
Philippines.
(6) Regional or Area Headquarters and Regional Operating Headquarters of
Multinational Companies. - (a) Regional or area headquart ers as defined in
Sect ion 22(DD) shall not be subject t o income t ax.
(b) Regional operat ing headquart ers as defined in Sect ion 22(EE) shall pay a
t ax of t en percent (10%) of t heir t axable income.
(7) Tax on Certain Incomes Received by a Resident Foreign Corporation. - (a)
Interest from Deposits and Yield or any other Monetary Benefit from Deposit
Substitutes, Trust Funds and Similar Arrangements and Royalties - Int erest
from any currency bank deposit and yield or any ot her monet ary benefit from
deposit subst it ut es and from t rust funds and similar arrangement s and
royalt ies derived from sources wit hin t he Philippines shall be subject t o a final
income t ax at t he rat e of t went y percent (20%) of such int erest : Provided,
however, That int erest income derived by a resident foreign corporat ion from
a deposit ory bank under t he expanded foreign currency deposit syst em shall
be subject t o a final income t ax at t he rat e of seven and one-half percent (7
1/2%) of such int erest income.
(b ) Income Derived under the Expanded Foreign Currency Deposit System Income derived by a deposit ory bank under t he expanded foreign currency
deposit syst em from foreign currency t ransact ions wit h local commercial
banks including branches of foreign banks t hat may be aut horized by t he
Bangko Sent ral ng Pilipinas (BSP) t o t ransact business wit h foreign currency
deposit syst em unit s, including int erest income from foreign currency loans
grant ed by such deposit ory banks under said expanded foreign currency
deposit syst em t o resident s, shall be subject t o a final income t ax at t he
rat e of t en percent (10%) of such income.
Any income of nonresident s, whet her individuals or corporat ions, from
t ransact ions wit h deposit ory banks under t he expanded syst em shall be
exempt from income t ax.
( c ) Capital Ga ins from Sale of Shares of Stock Not Traded in the Stock
Exchange. - A final t ax at t he rat es prescribed below is hereby imposed upon
t he net capit al gains realized during t he t axable year from t he sale, bart er,
exchange or ot her disposit ion of shares of st ock in a domest ic corporat ion
except shares sold or disposed of t hrough t he st ock exchange:
Not over P100,000. 5%
On any amount in excess of P100,000.10%
( d ) Intercorporate Dividends. - Dividends received by a resident foreign
corporat ion from a domest ic corporat ion liable t o t ax under t his Code shall
not be subject t o t ax under t his Tit le.
(B) Tax on Nonresident Foreign Corporat ion. - (1) In General. - Except as
ot herwise provided in t his Code, a foreign corporat ion not engaged in t rade
or business in t he Philippines shall pay a t ax equal t o t hirt y-five percent
(35%) of t he gross income received during each t axable year from all sources
wit hin t he Philippines, such as int erest s, dividends, rent s, royalt ies, salaries,
premiums (except reinsurance premiums), annuit ies, emolument s or ot her
fixed or det erminable annual, periodic or casual gains, profit s and income, and

capit al gains, except capit al gains subject t o t ax under subparagraphs (C)

and (d): Provided, That effect ive 1 , 1998, t he rat e of income t ax shall be
t hirt y-four percent (34%); effect ive January 1, 1999, t he rat e shall be t hirt yt hree percent (33%); and, effect ive January 1, 2000 and t hereaft er, t he rat e
shall be t hirt y-t wo percent (32%).
( 2 ) Nonresident Cinematographic Film Owner, Lessor or Distributor. - A
cinemat ographic film owner, lessor, or dist ribut or shall pay a t ax of t went yfive percent (25%) of it s gross income from all sources wit hin t he Philippines.
(3) Nonresident Owner or Lessor of Vessels Chartered by Philippine Nationals. A nonresident owner or lessor of vessels shall be subject t o a t ax of four and
one-half percent (4 1/2%) of gross rent als, lease or chart er fees from leases
or chart ers t o Filipino cit izens or corporat ions, as approved by t he M arit ime
Indust ry Aut horit y.
(4) Nonresident Owner or Lessor of Aircraft, Machineries and Other Equipment.
- Rent als, chart ers and ot her fees derived by a nonresident lessor of aircraft ,
machineries and ot her equipment shall be subject t o a t ax of seven and onehalf percent (7 1/2%) of gross rent als or fees.
(5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation. (a) Interest on Foreign Loans. - A final wit hholding t ax at t he rat e of t went y
percent (20%) is hereby imposed on t he amount of int erest on foreign loans
cont ract ed on or aft er August 1, 1986; (b) Intercorporate Dividends - A final
wit hholding t ax at t he rat e of fift een percent (15%) is hereby imposed on t he
amount of cash and/or propert y dividends received from a domest ic
corporat ion, which shall be collect ed and paid as provided in Sect ion 57 (A) of
t his Code, subject t o t he condit ion t hat t he count ry in which t he nonresident
foreign corporat ion is domiciled, shall allow a credit against t he t ax due from
t he nonresident foreign corporat ion t axes deemed t o have been paid in t he
Philippines equivalent t o t went y percent (20%) for 1997, ninet een percent
(19%) for 1998, eight een percent (18%) for 1999, and sevent een percent
(17%) t hereaft er, which represent s t he difference bet ween t he regular
income t ax of t hirt y-five percent (35%) in 1997, t hirt y-four percent (34%) in
1998, and t hirt y-t hree percent (33%) in 1999, and t hirt y-t wo percent (32%)
t hereaft er on corporat ions and t he fift een percent (15%) t ax on dividends as
provided in t his subparagraph; (c) Capital Gains from Sale of Shares of Stock
not Traded in the Stock Exchange. - A final t ax at t he rat es prescribed below
is hereby imposed upon t he net capit al gains realized during t he t axable year
from t he sale, bart er, exchange or ot her disposit ion of shares of st ock in a
domest ic corporat ion, except shares sold, or disposed of t hrough t he st ock
exchange:
Not over P100,000..5%
On any amount in excess of P100,000 10%
SEC. 29. Imposition of Improperly Accumulated Earnings Tax (A) In General. - In addit ion t o ot her t axes imposed by t his Tit le, t here is
hereby imposed for each t axable year on t he improperly accumulat ed t axable
income of each corporat ion described in Subsect ion B hereof, an improperly
accumulat ed earnings t ax equal t o t en percent (10%) of t he improperly
accumulat ed t axable income.
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(B) Tax on Corporations Subject to Improperly Accumulated Earnings Tax. ( 1 ) I n General - The improperly accumulat ed earnings t ax imposed in t he
preceding Sect ion shall apply t o every corporat ion formed or availed for t he
purpose of avoiding t he income t ax wit h respect t o it s shareholders or t he
shareholders of any ot her corporat ion, by permit t ing earnings and profit s t o
accumulat e inst ead of being divided or dist ribut ed.
( 2 ) Exceptions - The improperly accumulat ed earnings t ax as provided for
under t his Sect ion shall not apply t o:.
(a) Publicly-held corporat ions;
(b) Banks and ot her nonbank financial int ermediaries; and
(c) Insurance companies.
(C) Evidence of Purpose to Avoid Income Tax. - (1) Prima Facie Evidence. - t he
fact t hat any corporat ion is a mere holding company or invest ment company

shall be prima facie evidence of a purpose t o a vo id t he t ax upon it s

shareholders or members.
(2) Evidence Determinative of Purpose. - The fact t hat t he earnings or profit s
of a corporat ion are permit t ed t o accumulat e beyond t he reasonable needs
of t he business shall be det erminat ive of t he purpose t o avoid t he t ax upon
i t s s hare holde rs or members unless t he corporat ion, by t he clear
preponderance of evidence, shall prove t o t he cont rary.
(D ) Improperly Accumulated Taxable Income - For purposes of t his Sect ion,
t he t erm 'improperly accumulat ed t axable income' means t axable income'
adjust ed by:
(1) Income exempt from t ax;
(2) Income excluded from gross income;
(3) Income subject t o final t ax; and
(4) The amount of net operat ing loss carry-over deduct ed; And reduced by
t he sum of:
(1) Dividends act ually or const ruct ively paid; and
(2) Income t ax paid for t he t axable yearProvided, however, That for
corporat ions using t he calendar year basis, t he accumulat ed earnings under
t ax shall not apply on improperly accumulat ed income as of December 31,
1997.
In t he case of corporat ions adopt ing t he fiscal year account ing period, t he
improperly accumulat ed income not subject t o t his t ax, shall be reckoned, as
of t he end of t he mont h comprising t he t welve (12)-mont h period of fiscal
year 1997-1998.
(E) Reasonable Needs of the Business - For purposes of t his Sect ion, t he t erm
'reasonable needs of t he business' includes t he reasonably ant icipat ed needs
of t he business.
S E C . 30Exemptions from Tax on Corporations

c hanr obl es

v ir tu a l

l aw

l ib r a r y

- The following

organizat ions shall not be t axed under t his Tit le in re s pe c t t o income

received by t hem as such:
(A) Labor, agricult ural or hort icult ural organizat ion not organized principally
for profit ;
(B) M ut ual savings bank not having a capit al st ock represent ed by shares,
and cooperat ive bank wit hout capit al st ock organized and operat ed for
mut ual purposes and wit hout profit ;
(C) A beneficiary societ y, order or associat ion, operat ing fort he exclusive
benefit of t he members such as a frat ernal organizat ion operat ing under t he
lodge syst em, or mut ual aid associat ion or a nonst ock corporat ion organized
by employees providing for t he payment of life, sickness, accident , or ot her
benefit s exclusively t o t he members of such societ y, order, or associat ion, or
nonst ock corporat ion or t heir dependent s;
(D) Cemet ery company owned and operat ed exclusively for t he benefit of it s
members;
(E) Nonst ock corporat ion or associat ion organized and operat ed exclusively
for religious, charit able, scient ific, at hlet ic, or cult ural purposes, or for t he
rehabilit at ion of vet erans, no part of it s net income or asset shall belong t o
or inures t o t he benefit of any member, organizer, officer or any specific
person;
(F) Business league chamber of commerce, or board of t rade, not organized
for profit and no part of t he net income of which inures t o t he benefit of any
privat e st ock-holder, or individual;
(G) Civic league or organizat ion not organized for profit but operat ed
exclusively for t he promot ion of social welfare;
(H) A nonst ock and nonprofit educat ional inst it ut ion;
(I) Government educat ional inst it ut ion;

(J) Farmers' or ot her mut ual t yphoon or fire insurance company, mut ual dit ch
or irrigat ion company, mut ual or cooperat ive t elephone company, or like
organizat ion of a purely local charact er, t he income of which consist s solely
of assessment s, dues, and fees collect ed from members for t he sole purpose
of meet ing it s expenses; and
(K) Farmers', fruit growers', or like associat ion organized and operat ed as a
sales agent for t he purpose of market ing t he product s of it s members and
t urning back t o t hem t he proceeds of sales, less t he necessary selling
expenses on t he basis of t he quant it y of produce finished by t hem;
Not wit hst anding t he provisions in t he preceding paragraphs, t he income of
what ever kind and charact er of t he foregoing organizat ions from any of t heir
propert ies, real or personal, or from any of t heir act ivit ies conduct ed for
profit regardless of t he disposit ion made of such income, shall be subject t o
t ax imposed under t his Code.
CHAPTER V
COMPUTATION OF TAXABLE INCOME

S EC . 31Taxable Income Defined - T h e t erm t axable income means t he

pert inent it ems of gross income specified in t his Code, less t he deduct ions
and/or personal and addit ional exempt ions, if any, aut horized for such t ypes
of income by t his Code or ot her special laws.
CHAPTER VI
COMPUTATION OF GROSS INCOME
SEC. 32Gross Income. (A) General Definition. - Except when ot herwise provided in t his Tit le, gross
income means all income derived from what ever source, including (but not
limit ed t o) t he following it ems:
( 1 ) Compensat ion for services in what ever form paid, including, but not
limit ed t o fees, salaries, wages, commissions, and similar it ems;
(2) Gross income derived from t he conduct of t rade or business or t he
exercise of a profession;
(3) Gains derived from dealings in propert y;
(4) Int erest s;
(5) Rent s;
(6) Royalt ies;
(7) Dividends;
(8) Annuit ies;
(9) Prizes and winnings;
(10) Pensions; and
(11) Part ner's dist ribut ive share from t he net income of t he general
professional part nership.
( B ) Exclusions from Gross Income. - The following it ems shall not be
included in gross income and shall be exempt from t axat ion under t his t it le:
(1) Life Insurance - The proceeds of life insurance policies paid t o t he heirs or
beneficiaries upon t he deat h of t he insured, whet her in a single sum or
ot herwise, but if such amount s are held by t he insurer under an agreement
t o pay int erest t hereon, t he int erest payment s shall be included in gross
income.
(2) Amount Received by Insured as Return of Premium - The amount received
b y t he insured, as a ret urn of premiums paid by him under life insurance,
endowment , or annuit y cont ract s, eit her during t he t erm or at t he mat urit y
of t he t erm ment ioned in t he cont ract or upon surrender of t he cont ract .
(3) Gifts, Bequests, and Devises. - The value of propert y acquired by gift ,
bequest , devise, or descent : Provided, however, That income from such
propert y, as well as gift , bequest , devise or descent of income from any
propert y, in cases of t ransfers of divided int erest , shall be included in gross
income.
( 4 ) Compensation for Injuries or Sickness - amount s received, t hrough
Accident or H ealt h Insurance or under Workmen's Compensat ion Act s, as

compensat ion for personal injuries or sickness, plus t he amount s of any

damages received, whet her by suit or agreement , on account of such injuries
or sickness.
( 5 ) Incom e Exempt under Treaty. - Income of any kind, t o t he ext ent
required b y any t reat y obligat ion binding upon t he Government of t he
Philippines.
(6) Retirement Benefits, Pensions, Gratuities, etc. ( a ) Ret irement benefit s received under Republic Act No. 7641 and t hose
received by officials and employees of privat e firms, whet her individual or
corporat e, in accordance wit h a reasonable privat e benefit plan maint ained
by t he employer: Provided, That t he ret iring official or employee has been in
t he service of t he same employer for at least t en (10) years and is not less
t han fift y (50) years of age at t he t ime of his ret irement : Provided, further,
That t he benefit s grant ed under t his subparagraph shall be availed of by an
official or employee only once.
For purposes of t his Subsect ion, t he t erm 'reasonable privat e benefit plan'
means a pension, grat uit y, st ock bonus or profit -sharing plan maint ained by
an employer for t he benefit of some or all of his officials or employees,
wherein cont ribut ions are made by such employer for t he offic ials or
employees, or bot h, for t he purpose of dist ribut ing t o such officials and
employees t he earnings and principal of t he fund t hus accumulat ed, and
wherein it s is provided in said plan t hat at no t ime shall any part of t he
corpus or income of t he fund be used for, or be divert ed t o, any purpose
ot her t han for t he exclusive benefit of t he said officials and employees.
(b) Any amount received by an official or employee or by his heirs from t he
employer a s a consequence of separat ion of such official or employee from
t h e service of t he employer because of deat h sickness or ot her physical
disabilit y or for any cause beyond t he cont rol of t he said official or employee.
(c) The provisions of any exist ing law t o t he cont rary not wit hst anding, social
securit y benefit s, ret irement grat uit ies, pensions and ot her similar benefit s
received by resident or nonresident cit izens of t he Philippines or aliens who
c o me t o reside permanent ly in t he Philippines from foreign government
agencies and ot her inst it ut ions, privat e or public.
(d) Payment s of benefit s due or t o become due t o any person residing in t he
P hilippines under t he laws of t he Unit ed St at es administ ered by t he Unit ed
St at es Vet erans Administ rat ion.
(e) Benefit s received from or enjoyed under t he Social Securit y Syst em in
accordance wit h t he provisions of Republic Act No. 8282.
(f) Benefit s received from t he GSIS under Republic Act No. 8291, including
ret irement grat uit y received by government officials and employees.
( 7 ) Miscellaneous Items. - (a) Income Derived by Foreign Government Income derived from invest ment s in t he Philippines in loans, st ocks, bonds or
ot her domest ic securit ies, o r from int erest on deposit s in banks in t he
Philippines by (i) foreign government s, (ii) financing inst it ut ions owned,
cont rolled, or enjoying refinancing from foreign government s, and (iii)
int ernat ional or regional financial inst it ut ions est ablished by foreign
government s.
(b) Income Derived by the Government or its Political Subdivisions. - Income
de rive d from any public ut ilit y or from t he exercise of any essent ial
government al funct ion accruing t o t he Government of t he Philippines or t o
any polit ical subdivision t hereof.
(c) Prizes and Awards - Prizes and awards made primarily in recognit ion of
re ligious , charit able, scient ific, educat ional, art ist ic, lit erary, or civic
achievement but only if: (i) The recipient was select ed wit hout any act ion on
his part t o ent er t he cont est or proceeding; and (ii) The recipient is not
required t o render subst ant ial fut ure services as a condit ion t o receiving t he
prize or award.
(d) Prizes and Awards in Sports Competition. - All prizes and awards grant ed
t o at hlet es in local and int ernat ional sport s compet it ions and t ournament s
whet her held in t he Philippines or abroad and sanct ioned by t heir nat ional

whet her held in t he Philippines or abroad and sanct ioned by t heir nat ional
sport s associat ions.
(e) 13th Month Pay and Other Benefits. - Gross benefit s received by officials
and employees of public and privat e ent it ies: Provided, however, That t he
t ot al exclusion under t his subparagraph shall not exceed Thirt y t housand
pesos (P30,000) which shall cover: ( i ) B enefit s received by officials and
employees of t he nat ional and local government pursuant t o Republic Act No.
6686; (ii) Benefit s received by employees pursuant t o President ial Decree
No. 851, as amended by M emorandum Order No. 28, dat ed August 13, 1986;
(iii) Benefit s received by officials and employees not covered by President ial
decree No. 851, as amended by M emorandum Order No. 28, dat ed August
13, 1986; and (iv) Ot her benefit s such as product ivit y incent ives and
Christ mas bonus: Provided, further, That t he ceiling of Thirt y t housand pesos
(P30,000) may be increased t hrough rules and regulat ions issued by t he
Secret ary of Finance, upon recommendat ion of t he Commissioner, aft er
considering among ot hers, t he effect on t he same of t he inflat ion rat e at t he
end of t he t axable year.
(f ) GSIS, SSS, Medicare and Other Contributions. - GSIS, SSS, M edicare and
Pag-ibig cont ribut ions, and union dues of individuals.
( g ) G a i n s from the Sale of Bonds, Debentures or other Certificate of
Indebtedness. - Gains realized from t he same or exchange or ret irement of
bonds, debent ures or ot her cert ificat e of indebt edness wit h a mat urit y of
more t han five (5) years.
(h) Gains from Redemption of Shares in Mutual Fund. - Gains realized by t he
invest or upon redempt ion of shares of st ock in a mut ual fund company as
defined in Sect ion 22 (BB) of t his Code.
SEC. 33. Special Treatment of Fringe Benefit. ( A) Imposition of Tax.- A final t ax of t hirt y-four percent (34%) effect ive
January 1, 1998; t hirt y-t hree percent (33%) effect ive January 1, 1999; and
t hirt y-t wo percent (32%) effect ive January 1, 2000 and t hereaft er, is hereby
imposed on t he grossed-up monet ary value of fringe benefit furnished or
grant ed t o t he employee (except rank and file employees as defined herein)
by t he employer, whet her an individual or a corporat ion (unless t he fringe
benefit is required by t he nat ure of, or necessary t o t he t rade, business or
profession of t he employer, or when t he fringe benefit is for t he convenience
or advant age of t he employer).
The t ax herein imposed is payable by t he employer which t ax shall be paid in
t he same manner as provided for under Sect ion 57 (A) of t his Code.
The grossed-up monet ary value of t he fringe benefit shall be det ermined by
dividing t he act ual monet ary value of t he fringe benefit by sixt y-six percent
(66%) effect ive January 1, 1998; sixt y-seven percent (67%) effect ive
January 1, 1999; and sixt y-eight percent (68%) effect ive January 1, 2000
a n d t he re aft e r: Provided,
however, That fringe benefit furnished t o
employees and t axable under Subsect ions (B), (C), (D) and (E) of Sect ion 25
shall be t axed at t he applicable rat es imposed t hereat : Provided, further,
That t he grossed -Up value of t he fringe benefit shall be det ermined by
dividing t he act ual monet ary value of t he fringe benefit by t he difference
bet ween one hundred percent (100%) and t he applicable rat es of income t ax
under Subsect ions (B), (C), (D), and (E) of Sect ion 25.
c ra l a w

(B) Fringe Benefit defined. - For purposes of t his Sect ion, t he t erm "fringe
benefit" means a ny good, service or ot her benefit furnished or grant ed in
cash or in kind by an employer t o an individual employee (except rank and file
employees as defined herein) such as, but not limit ed t o, t he following:.
(1) Housing;
(2) Expense account ;
(3) Vehicle of any kind;
(4) Household personnel, such as maid, driver and ot hers;
(5) Int erest on loan at less t han market rat e t o t he ext ent of t he difference
bet ween t he market rat e and act ual rat e grant ed;
(6) M embership fees, dues and ot her expenses borne by t he employer for t he
employee in social and at hlet ic clubs or ot her similar organizat ions;
(7) Expenses for foreign t ravel;
(8) Holiday and vacat ion expenses;

(9) Educat ional assist ance t o t he employee or his dependent s; and

(10) Life or healt h insurance and ot her non-life insurance premiums or similar
amount s in excess of what t he law allows.
( C ) Fringe Benefits Not Taxable. - The following fringe benefit s are not
t axable under t his Sect ion:
(1) fringe benefit s which are aut horized and exempt ed from t ax under special
laws;
( 2 ) Cont ribut ions of t he employer for t he benefit of t he employee t o
ret irement , insurance and hospit alizat ion benefit plans;
(3) Benefit s given t o t he rank and file employees, whet her grant ed under a
collect ive bargaining agreement or not ; and
(4) De minimis benefit s as defined in t he rules and regulat ions t o be
promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner.
The Secret ary of Finance is hereby aut horized t o promulgat e, upon
recommendat ion of t he Commissioner, such rules and regulat ions as are
necessary t o carry out efficient ly a nd fairly t he provisions of t his Sect ion,
t aking int o account t he peculiar nat ure and special need of t he t rade,
business or profession of t he employer.
CHAPTER VII
ALLOWABLE DEDUCTIONS
SEC. 34. Deductions from Gross Income. - Except for t axpayers earning
compensat ion income arising from pers onal services rendered under an
employer-employee relat ionship where no deduct ions shall be allowed under
t his Sect ion ot her t han under subsect ion (M ) hereof, in comput ing t axable
income subject t o income t ax under Sect ions 24 (A); 25 (A); 26; 27 (A), (B)
and (C); and 28 (A) (1), t here shall be allowed t he following deduct ions from
gross income;
(A) Expenses. ( 1) Ordinary and Necessary Trade, Business or Professional Expenses.
- (a) In General. - There shall be allowed as deduct ion from gross income all
t he ordinary and necessary expenses paid or incurred during t he t axable year
i n c arrying on or which are direct ly at t ribut able t o, t he development ,
management , operat ion and/or conduct of t he t rade, business or exercise of
a profession, including: (i) A reasonable allowance for salaries, wages, and
ot her forms of compensat ion for personal s e rvic e s act ually rendered,
including t he grossed-up monet ary value of fringe be ne f it furnished or
grant ed by t he employer t o t he employee: Provided, T h a t t he final t ax
imposed under Sect ion 33 hereof has been paid; (ii) A reasonable allowance
for t ravel expenses, here and abroad, while away from home in t he pursuit of
t rade, business or profession; (iii) A reasonable allowance for rent als and/or
ot her payment s which are required as a condit ion for t he cont inued use or
possession, for purposes of t he t rade, business or profession, of propert y t o
which t he t axpayer has not t aken or is not t aking t it le or in which he has no
equit y ot her t han t hat of a lessee, user or possessor; (iv) A reasonable
allowance for ent ert ainment , amusement and recreat ion expenses during t he
t axable year, t hat are direct ly connect ed t o t he development , management
and operat ion of t he t rade, business or profession of t he t axpayer, or t hat
are direct ly relat ed t o or in furt herance of t he conduct of his or it s t rade,
business or exercise of a profession not t o exceed such ceilings as t he
Secret ary of Finance may, by rules and regulat ions prescribe, upon
recommendat ion of t he Commissioner, t aking int o account t he needs as well
as t he special circumst ances, nat ure and charact er of t he indust ry, t rade,
business, or profession of t he t axpayer: Provided, That any expense incurred
for ent ert ainment , amusement or recreat ion t hat is cont rary t o law, morals
public policy or public order shall in no case be allowed as a deduct ion.
(b) Substantiation Requirements. - No deduct ion from gross income shall be
allowed under Subsect ion (A) hereof unless t he t axpayer shall subst ant iat e
wit h sufficient evidence, such as official receipt s or ot her adequat e records:
(i) t he amount of t he expense being deduct ed, and (ii) t he direct connect ion
or relat ion of t he expense being deduct ed t o t he development , management ,
operat ion and/or conduct of t he t rade, business or profession of t he
t axpayer.

(c) Bribes, Kickbacks and Other Similar Payments. - No deduct ion from gross
income shall be allowed under Subsect ion (A) hereof for any payment made,
direct ly or indirect ly, t o an official or employee of t he nat ional government , or
t o an official or employee of any local government unit , or t o an official or
employee of a government -owned or -cont rolled corporat ion, or t o an official
or employee or represent at ive of a foreign government , or t o a privat e
corporat ion, general professional part nership, or a similar e nt it y, if t he
payment const it ut es a bribe or kickback.
( 2) Expenses Allowable to Private Educational Institutions. - In addit ion
t o t he expenses allowable as deduct ions under t his Chapt er, a privat e
educat ional inst it ut ion, referred t o under Sect ion 27 (B) of t his Code, may at
it s opt ion elect eit her: (a) t o deduct expendit ures ot herwise considered as
capit al out lays of depreciable asset s incurred during t he t axable year for t he
expansion of school facilit ies or (b) t o deduct allowance for depreciat ion
t hereof under Subsect ion (F) hereof.
(B) Int erest .- ( 1) I n General. - The amount of int erest paid or incurred
wit hin a t axable year on indebt edness in connect ion wit h t he t axpayer's
profession, t rade or business shall b e allowed as deduct ion from gross
in c o me : Provided, however,
That t he t axpayer's ot herwise allowable
deduct ion for int erest expense shall be reduced by an amount equal t o t he
following percent ages of t he int erest income subject ed t o final t ax: Fort yone percent (41%) beginning January 1, 1998; Thirt y-nine percent (39%)
beginning January 1, 1999; and Thirt y-eight percent (38%) beginning January
1, 2000;
(2) Exceptions. - No deduct ion shall be allowed in respect of int erest under
t he succeeding subparagraphs: (a) If wit hin t he t axable year an individual
t axpayer report ing income on t he cash basis incurs an indebt edness on which
an int erest is paid in advance t hrough discount or ot herwise: Provided, That
such int erest shall be allowed a a deduct ion in t he year t he indebt edness is
p a id : Provided, further, That if t he indebt edness is payable in periodic
amort izat ions, t he amount of int erest which corresponds t o t he amount of
t he principal amort ized or paid during t he year shall be allowed as deduct ion
in such t axable year; (b) If bot h t he t axpayer and t he person t o whom t he
payment has been made or is t o be made are persons specified under Sect ion
36 (B); or (c)If
t he indebt ednes s is incurred t o finance pet roleum
explorat ion.
( 3 ) Optional Treatment of Interest Expense. - At t he opt ion of t he
t axpayer, int erest incurred t o acquire propert y used in t rade business or
exercise of a profession may be allowed as a deduct ion or t reat ed as a
capit al expendit ure.
( C) Taxes. - ( 1) In General. - Taxes paid or incurred wit hin t he t axable
year in connect ion wit h t he t axpayer's profession, t rade or business, shall be
allowed as deduct ion, except
(a) The income t ax provided for under t his Tit le; (b) Income t axes imposed by
aut horit y of any foreign count ry; but t his deduct ion shall be allowed in t he
case of a t axpayer who does not signify in his ret urn his desire t o have t o
any ext ent t he benefit s of paragraph (3) of t his subsect ion (relat ing t o
credit s for t axes of foreign count ries); (c) Est at e and donor's t axes; and (d)
Taxes assessed against local benefit s of a kind t ending t o increase t he value
of
t he p r o p e r t y a s s e s s e d. Provided, T h a t t axes allowed under t his
Subsect ion, when refunded or credit ed, shall b e included as part of gross
income in t he year of receipt t o t he ext ent of t he income t ax benefit of said
deduct ion.
( 2 ) Limitations on Deductions. - In t he case of a nonresident alien
individual engaged in t rade or business in t he Philippines and a resident
foreign corporat ion, t he deduct ions f o r t axes provided in paragraph (1) of
t his Subsect ion (C) shall be allowed only if and t o t he ext ent t hat t hey are
connect ed wit h income from sources wit hin t he Philippines.
( 3) Credit Against Tax for Taxes of Foreign Countries. - If t he t axpayer
signifies in his ret urn his desire t o have t he benefit s of t his paragraph, t he
t ax imposed by t his Tit le shall be credit ed wit h: (a) Citizen and Domestic
Corporation. - In t he case of a cit izen of t he Philippines and of a domest ic
corporat ion, t he amount of income t axes paid or incurred during t he t axable
year t o any foreign count ry; and (b) Partnerships and Estates. - In t he case

of any such individual who is a member of a general professional part nership

or a beneficiary of an est at e or t rust , his proport ionat e share of such t axes
of t he general professional part nership or t he est at e or t rust paid or incurred
during t he t axable year t o a foreign count ry, if his dist ribut ive share of t he
income of such part nership or t rust is report ed for t axat ion under t his Tit le.
An alien individual and a foreign corporat ion shall not be allowed t he credit s
against t he t ax for t he t axes of foreign count ries allowed under t his
paragraph.
( 4 ) Limitations on Credit. - The amount of t he credit t aken under t his
Sect ion shall be subject t o each of t he following limit at ions: (a) The amount
of t he credit in respect t o t he t ax paid or incurred t o any count ry shall not
exceed t he same proport ion of t he t ax against which such credit is t aken,
which t he t axpayer's t axable income from sources wit hin such count ry under
t his Tit le bears t o his ent ire t axable income for t he same t axable year; and
(b) The t ot al amount of t he credit shall not exceed t he same proport ion of
t he t ax against whic h such credit is t aken, which t he t axpayer's t axable
income from sources wit hout t he Philippines t axable under t his Tit le bears t o
his ent ire t axable income for t he same t axable year.
( 5) Adjustments on Payment of Incurred Taxes. - If accrued t axes when
paid differ from t he amount s claimed as credit s by t he t axpayer, or if any t ax
paid is refunded in whole or in part , t h e t axpayer shall not ify t he
Commissioner; who shall redet ermine t he amount of t he t ax for t he year or
years affect ed, and t he amount of t ax due upon such redet erminat ion, if any,
shall be paid by t he t axpayer upon not ice and demand by t he Commissioner,
or t he amount of t ax overpaid, if any, shall be credit ed or refunded t o t he
t axpayer.
In t he case of such a t a x incurred but not paid, t he Commissioner as a
condit ion precedent t o t he allowance of t his credit may require t he t axpayer
t o give a bond wit h suret ies sat isfact ory t o and t o be approved by t he
Commissioner in such sum as he may require, condit ioned upon t he payment
by t he t axpayer of any amount of t ax found due upon any such
redet erminat ion.
The bond herein prescribed shall cont ain such furt her condit ions as t he
Commissioner may require.
(6) Year in Which Credit Taken. - The credit s provided for in Subsect ion
(C)(3) of t his Sect ion may, at t he opt ion of t he t axpayer and irrespect ive of
t he met hod of account ing employed in keeping his books, be t aken in t he
year which t he t axes of t he foreign count ry were incurred, subject , however,
t o t he condit ions prescribed in Subsect ion (C)(5) of t his Sect ion.
If t he t axpayer elect s t o t ake such credit s in t he year in which t he t axes of
t he foreign count ry accrued, t he credit s for all subsequent years shall be
t aken upon t he same basis and no port ion of any such t axes shall be allowed
as a deduct ion in t he same or any succeeding year.
(7) Proof of Credits. - The credit s provided in Subsect ion (C)(3) hereof shall
be allowed o n l y if t he t axpayer est ablishes t o t he sat isfact ion of t he
Commissioner t he following: (a) The t ot al amount of income derived from
sources wit hout t he Philippines; (b) The amount of income derived from each
count ry, t he t ax paid or incurred t o which is claimed as a credit under said
paragraph, such amount t o be det ermined under rules and regulat ions
prescribed by t he Secret ary of Finance; and (c) All ot her informat ion
necessary for t he verificat ion and comput at ion of such credit s.
( D ) Losses. - ( 1 ) I n General. - Losses act ually sust ained during t he
t axable year and not compensat ed f o r by insurance or ot her forms of
indemnit y shall be allowed as deduct ions: (a) If incurred in t rade, profession
or
business; (b) Of propert y c onne c t e d wit h t he t rade, business or
profession, if t he loss arises from fires, st orms, shipwreck, or ot her
casualt ies, or from robbery, t heft or embezzlement .
The Secret ary of Finance, upon recommendat ion of t he Commissioner, is
hereby aut horized t o promulgat e rules and regulat ions prescribing, among
ot her t hings, t he t ime and manner by which t he t axpayer shall submit a
declarat ion of loss sust ained from casualt y or from robbery, t heft or
embezzlement during t he t axable year: Provided, however, That t he t ime

limit t o be so prescribed in t he rules and regulat ions shall not be less t han
t hirt y (30) days nor more t han ninet y (90) days from t he dat e of discovery of
t he casualt y or robbery, t heft or embezzlement giving rise t o t he loss.
(c) No loss shall be allowed as a deduct ion under t his Subsect ion if at t he
t ime of t he filing of t he ret urn, such loss has been claimed as a deduct ion for
est at e t ax purposes in t he est at e t ax ret urn.
(2) Proof of Loss. - In t he case of a nonresident alien individual or foreign
corporat ion, t he losses deduct ible shall be t hose act ually sust ained during
t he year incurred in business, t rade or exercise of a profession conduct ed
w it hin t he Philippines, when such losses are not compensat ed for by
insurance or ot her forms of indemnit y.
The Secret ary of Finance, upon recommendat ion of t he Commissioner, is
hereby aut horized t o promulgat e rules and regulat ions prescribing, among
ot her t hings, t he t ime and manner by which t he t axpayer shall submit a
declarat ion of loss sust ained from casualt y or from robbe ry, t heft or
embezzlement during t he t axable year: Provided, Tha t t h e t ime t o be so
prescribed in t he rules and regulat ions shall not be less t han t hirt y (30) days
nor more t han ninet y (90) days from t he dat e of discovery of t he casualt y or
robbery, t heft or embezzlement giving rise t o t he loss; and
(3) Net Operating Loss Carry-Over. - The net operat ing loss of t he
business or ent erprise for any t axable year immediat ely preceding t he current
t axable year, which had not been previously offset as deduct ion from gross
income shall be carried over as a deduct ion from gross income for t he next
t hree (3) consecut ive t axable years immediat ely following t he year of such
loss: Provided, however, That any net loss incurred in a t axable year during
which t he t axpayer was exempt from income t ax shall not be allowed as a
deduct ion under t his Subsect ion: Provided, further, That a net operat ing loss
carry-over shall be allowed only if t here has been no subst ant ial change in
t h e ownership of t he business or ent erprise in t hat - (i) Not less t han
sevent y-five percent (75%) in nominal value of out st anding issued shares, if
t he business is in t he name of a corporat ion, is held by or on behalf of t he
same persons; or (ii) Not less t han sevent y-five percent (75%) of t he paid up
capit al of t he corporat ion, if t he business is in t he name of a corporat ion, is
held by or on behalf of t he same persons.
For purposes of t his subsect ion, t he t erm "not operating loss" shall mean t he
excess of allowable deduct ion over gross income of t he business in a t axable
year. Provided, That for mines ot her t han oil and gas wells, a net operat ing
loss wit hout t he benefit of incent ives provided for under Execut ive Order No.
226, as amended, ot herwise known as t he Omnibus Invest ment s Code of
1987, incurred in any of t he first t en (10) years of operat ion may be carried
over as a deduc t ion from t axable income for t he next five (5) years
immediat ely following t he year of such loss.
The ent ire amount of t he loss shall be carried over t o t he first of t he five (5)
t axable years following t he loss, and any port ion of such loss which exceeds,
t he t axable income of such first year shall be deduct ed in like manner form
t he t axable income of t he next remaining four (4) years.
(4) Capital Losses. ( a ) Limitation. - Loss from sales or Exchanges of capit al asset s shall be
allowed only t o t he ext ent provided in Sect ion 39.
(b) Securities Becoming Worthless. - If securit ies as defined in Sect ion 22 (T)
become wort hless during t he t axable year and are capit al asset s, t he loss
result ing t herefrom shall, for purposes of t his Tit le, be considered as a loss
from t he sale or exchange, on t he last day of such t axable year, of capit al
asset s.
( 5) Losses From Wash Sales of Stock or Securities. - Losses from "wash
sales" of st ock or securit ies as provided in Sect ion 38.
( 6) Wagering Losses. - Losses from wagering t ransact ions shall b allowed
only t o t he ext ent of t he gains from such t ransact ions.
( 7 ) Abandonment Losses. - (a) In t he event a cont ract area where
pet roleum operat ions are undert aken is part ially or wholly abandoned, all

accumulat ed explorat ion and development expendit ures pert aining t heret o
shall be allowed as a deduct ion: Provided, Tha t accumulat ed expendit ures
incurred in t hat area prior t o January 1, 1979 shall be allowed as a deduct ion
only from any income derived from t he same cont ract area.
In all cases, not ices of abandonment shall be filed wit h t he Commissioner.
(b) In case a producing well is subsequent ly abandoned, t he unamort ized
cost s t hereof, as well as t he undepreciat ed cost s of equipment direct ly used
t herein, shall be allowed as a deduct ion in t he year such well, equipment or
facilit y is abandoned by t he cont ract or: Provided, That if such abandoned
well is reent ered and product ion is resumed, or if such equipment or facilit y is
rest ored int o service, t he said cost s shall be included as part of gross income
in t he year of resumpt ion or rest orat ion and shall be amort ized or
depreciat ed, as t he case may be.
( E ) Bad Debts. - (1) In General. - Debt s due t o t he t axpayer act ually
ascert ained t o be wort hless and charged off wit hin t he t axable year except
t hose not connect ed wit h profession, t rade or business and t hose sust ained
in a t ransact ion ent ered int o bet ween part ies ment ioned under Sect ion 36
(B) of t his Code: Provided, That recovery of bad debt s previously allowed as
deduct ion in t he preceding years s ha ll be included as part of t he gross
income in t he year of recovery t o t he ext ent of t he income t ax benefit of said
deduct ion.
(2) Securities Becoming Worthless. - If securit ies, as defined in Sect ion 22
(T), are ascert ained t o be wort hless and charged off wit hin t he t axable year
and are capit al asset s, t he loss result ing t herefrom shall, in t he case of a
t axpayer ot her t han a bank or t rust company incorporat ed under t he laws of
t he Philippines a subst ant ial part of whose business is t he receipt of
deposit s, for t he purpose of t his Tit le, be considered as a loss from t he sale
or exchange, on t he last day of such t axable year, of capit al asset s.
( F ) Depreciation. - ( 1 ) General Rule. - There shall be allowed as a
depreciat ion deduct ion a reasonable allowance for t he exhaust ion, wear and
t ear (including reasonable allowance for obsolescence) of propert y used in
t he t rade or business.
In t he case of propert y held by one person for life wit h remainder t o anot her
person, t he deduct ion shall be comput ed as if t he life t enant were t he
absolut e owner of t he propert y and shall be allowed t o t he life t enant .
In t he case of propert y held in t rust , t he allowable deduct ion shall be
apport ioned
bet ween
t he income beneficiaries and t he t rust ees in
accordance wit h t he pert inent provisions of t he inst rument creat ing t he
t rust , or in t he absence of such provisions, on t he basis of t he t rust income
allowable t o each.
(2) Use of Certain Methods and Rates. - The t erm "reasonable allowance"
as used in t he preceding paragraph shall include, but not limit ed t o, an
allowance comput ed in accordance wit h rules and regulat ions prescribed by
t he Secret ary of Finance, upon recommendat ion of t he Commissioner, under
any of t he following met hods:
(a) The st raight -line met hod;
(b) Declining-balance met hod, using a rat e not exceeding t wice t he rat e
which would have been used had t he annual allowance been comput ed under
t he met hod described in Subsect ion (F) (1);
(c) The sum-of-t he-years-digit met hod; and
(d) any ot her met hod which may be prescribed by t he Secret ary of Finance
upon recommendat ion of t he Commissioner.
( 3) Agreement as to Useful Life on Which Depreciation Rate is Based. Where under rules and regulat ions prescribed by t he Secret ary of Finance
upon recommendat ion of t he Commissioner, t he t axpayer and t he
Commissioner have ent ered int o an agreement in writ ing specifically dealing
wit h t he useful life and rat e of depreciat ion of any propert y, t he rat e so
a gr e e d upon shall be binding on bot h t he t axpayer and t he nat ional
Government in t he absence of fact s and circumst ances not t aken int o
considerat ion during t he adopt ion of such agreement .
The

responsibilit y

of e s t ablis hing t he

exist ence

of

such

fact s

and

circumst ances shall rest wit h t he part y init iat ing t he modificat ion.
Any change in t he agreed rat e and useful life of t he depreciable propert y as
specified in t he agreement shall not be effect ive for t axable years prior t o
t he t axable year in which not ice in writ ing by cert ified mail or regist ered mail
is served by t he part y init iat ing such change t o t he ot her part y t o t he
agreement : Provided, however, t hat where t he t axpayer has adopt ed such
useful life and depreciat ion r a t e for any depreciable and claimed t he
depreciat ion expenses as deduct ion from his gross income, wit hout any
writ t en object ion on t he part of t he Commissioner or his duly aut horized
represent at ives, t he aforesaid useful life and depreciat ion rat e so adopt ed by
t he t axpayer for t he aforesaid depreciable asset shall be considered binding
for purposes of t his Subsect ion.
( 4 ) Depreciation of Properties Used in Petroleum Operations. - An
allowance for depreciat ion in respect of all propert ies direct ly relat ed t o
product ion of pet roleum init ially placed in service in a t axable year shall be
allowed under t he st raight -line or declining-balance met hod of depreciat ion at
t he opt ion of t he service cont ract or.
However, if t he s e rvic e cont ract or init ially elect s t he declining-balance
met hod, it may at any subsequent dat e, shift t o t he st raight -line met hod.
The useful life of propert ies used in or relat ed t o product ion of pet roleum
shall be t en (10) years of such short er life as may be permit t ed by t he
Commissioner.
Propert ies not u s e d direct ly in t he product ion of pet roleum shall be
depreciat ed under t he st raight -line met hod on t he basis of an est imat ed
useful life of five (5) years.
(5) Depreciation of Properties Used in Mining Operations. - an allowance
for depreciat ion in respect of all propert ies used in mining operat ions ot her
t han pet roleum operat ions, shall be comput ed as follows: (a) At t he normal
rat e of depreciat ion if t he expect ed life is t en (10) years or less; or (b)
Depreciat ed o v e r any number of years bet ween five (5) years and t he
expect ed life if t he lat t er is more t han t en (10) years, and t he depreciat ion
t he re on a llowe d as deduct ion from t axable income: Provided, That t he
cont ract or not ifies t he Commissioner at t he beginning of t he depreciat ion
period which depreciat ion rat e allowed by t his Sect ion will be used.
(6) Depreciation Deductible by Nonresident Aliens Engaged in Trade or
Business or Resident Foreign Corporations. - In t he case of a nonresident
alien individual engaged in t rade or business or resident foreign corporat ion,
a reasonable allowance for t he det eriorat ion of Propert y arising out of it s use
or employment or it s non-use in t he business t rade or profession shall be
permit t ed only when such propert y is locat ed in t he Philippines.
(G) Depletion of Oil and Gas Wells and Mines. - (1) In General. - In t he
case of oil and gas wells or mines, a reasonable allowance for deplet ion or
amort izat ion comput ed in accordance wit h t he cost -deplet ion met hod shall be
grant ed under rules and regulat ions t o be prescribed by t he Secret ary of
finance, upon recommendat ion of t he Commissioner. Provided, That when t he
allowance for deplet ion shall equal t he capit al invest ed no furt her allowance
shall be grant ed: Provided, further, That a f t e r product ion in commercial
quant it ies has commenced, cert ain int angible explorat ion and development
drilling cost s: (a) shall be deduct ible in t he year incurred if such expendit ures
are incurred for non-producing wells and/or mines, or (b) shall be deduct ible
in full in t he year paid or incurred or at t he elect ion of t he t axpayer, may be
capit alized and amort ized if such expendit ures incurred are for producing
wells and/or mines in t he same cont ract area. "Intangible costs in petroleum
operations" refers t o any cost incurred in pet roleum operat ions which in it self
has no salvage value and which is incident al t o and necessary for t he drilling
of wells and preparat ion of wells for t he product ion o f pet roleum: Provided,
That said cost s shall not pert ain t o t he acquisit ion or improvement of
propert y of a charact er subject t o t he allowance for depreciat ion except t hat
t he allowances for depreciat ion on such propert y shall be deduct ible under
t his Subsect ion.
Any int angible explorat ion, drilling and development expenses allowed as a
deduct ion in comput ing t axable income during t he year shall not be t aken
int o considerat ion in comput ing t he adjust ed cost basis for t he purpose of

comput ing allowable cost deplet ion.

( 2) Election to Deduct Exploration and Development Expenditures. - In
comput ing t axable income from mining operat ions, t he t axpayer may at his
opt ion, deduct explorat ion and development expendit ures accumulat ed as
cost or adjust ed basis for cost deplet ion as of dat e of prospect ing, as well as
explorat ion and development expendit ures paid or incurred during t he t axable
year: Provided, That t he amount deduct ible for explorat ion and development
expendit ures shall not exceed t went y-five percent (25%) of t he net income
from mining operat ions comput ed wit hout t he benefit o f any t ax incent ives
under exist ing laws.
The act ual explorat ion and development expendit ures minus t went y-five
percent (25%) of t he net income from mining shall be carried forward t o t he
succeeding years unt il fully deduct ed.
The elect ion by t h e t axpayer t o deduct t he explorat ion and development
expendit ures is irrevocable and shall be binding in succeeding t axable years.
"Net income from mining operations", as used in t his Subsect ion, shall mean
gross income from operat ions less "allowable deductions" which are necessary
or relat ed t o mining operat ions. "Allowable deductions" shall include mining,
milling and market ing expenses, and depreciat ion of propert ies direct ly used
in t he mining operat ions.
This paragraph shall not apply t o expendit ures for t he acquisit ion or
improvement of propert y of a charact er which is subject t o t he allowance for
depreciat ion.
In no case shall t h is paragraph apply wit h respect t o amount s paid or
incurred for t he explorat ion and development of oil and gas.
The t erm "exploration expenditures" means expendit ures paid or incurred for
t he purpose of ascert aining t he exist ence, locat ion, ext ent or qualit y of any
deposit of ore or ot her mineral, and paid or incurred before t he beginning of
t he development st age of t he mine or deposit .
The t erm "development expenditures" means expendit ures paid or incurred
during t he development st age of t he mine or ot her nat ural deposit s.
The development st age of a mine or ot her nat ural deposit shall begin at t he
t ime when deposit s of ore or ot her minerals are shown t o exist in sufficient
commercial quant it y and qualit y and shall end upon commencement of act ual
commercial ext ract ion.
( 3 ) Depletion of Oil and Gas Wells and Mines Deductible by a
Nonresident Alien individual or Foreign Corporation. - In t he case of a
nonresident alien individual engaged in t rade or business in t he Philippines or
a resident foreign corporat ion, allowance for deplet ion of oil and gas wells or
mines under paragraph (1) of t his Subsect ion s hall be aut horized only in
respect t o oil and gas wells or mines locat ed wit hin t he Philippines.
(H) Charitable and Other Contributions. - ( 1) In General. - Cont ribut ions
or gift s act ually paid or made wit hin t he t axable year t o, or for t he use of t he
Government of t he Philippines or any of it s a ge nc ie s or any polit ical
subdivision t hereof exclusively for public purposes, or t o accredit ed domest ic
corporat ion or associat ions organized and operat ed exclusively for religious,
charit able, scient ific, yout h and sport s development , cult ural or educat ional
purposes or for t he rehabilit at ion of vet erans, or t o social welfare
inst it ut ions, or t o non-government organizat ions, in accordance wit h rules
and
regulat ions
promulgat ed
by
t he
Secret ary o f finance, upon
recommendat ion of t he Commissioner, no part of t he net income of which
inures t o t he benefit of any privat e st ockholder or individual in an amount not
in excess of t en percent (10%) in t he case of an individual, and five percent
(%) in t he case of a corporat ion, of t he t axpayer's t axable income derived
from t rade, business or profession as comput ed wit hout t he benefit of t his
and t he following subparagraphs.
(2) Contributions Deductible in Full. - Not wit hst anding t he provisions of
t he preceding subparagraph, donat ions t o t he following inst it ut ions or
ent it ies shall be deduct ible in full;
( a ) Donations t o the Government. - Donat ions t o t he Government of t he

Philippines or t o any of it s agencies or polit ical subdivisions, including fullyowned government corporat ions, exclusively t o finance, t o provide for, or t o
be used in undert aking priorit y act ivit ies in educat ion, healt h, yout h and
sport s development , human set t lement s, science and cult ure, and in
economic development according t o a Nat ional Priorit y Plan det ermined by
t he Nat ional Economic and Development Aut horit y (NEDA), In consult at ion
wit h appropriat e government agencies, including it s regional development
councils and privat e philant rophic persons and inst it ut ions: Provided, That
any donat ion which is made t o t he Government or t o any of it s agencies or
polit ical subdivisions not in accordance wit h t he said annual priorit y plan shall
be subject t o t he limit at ions prescribed in paragraph (1) of t his Subsect ion;
(b) Donations t o Certain Foreign Institutions or International Organizations. Donat ions t o foreign inst it ut ions or int ernat ional organizat ions which are fully
deduct ible in pursuance of or in compliance wit h agreement s, t reat ies, or
commit ment s ent ered int o by t he Government of t he Philippines and t he
foreign inst it ut ions or int ernat ional organizat ions or in pursuance of special
laws;
( c ) Donations t o Accredited Nongovernment Organizations. - The t erm
"nongovernment organization" means a non profit domest ic corporat ion:
(1) Organized and operat ed exclusively for scient ific, research, educat ional,
charact er-building and yout h and sport s development , healt h, social welfare,
cult ural or charit able purposes, or a combinat ion t hereof, no part of t he net
income of which inures t o t he benefit of any privat e individual;
(2) Which, not lat er t han t he 15th day of t he t hird mont h aft er t he close of
t h e accredit ed nongovernment organizat ions t axable year in which
cont ribut ions are received, makes ut ilizat ion direct ly for t he act ive conduct
of t he act ivit ies const it ut ing t he purpose or funct ion for which it is organized
and operat ed, unless an ext ended period is grant ed by t he Secret ary of
Finance in accordance wit h t he rules and regulat ions t o be promulgat ed,
upon recommendat ion of t he Commissioner;
(3) The level of administ rat ive expense of which shall, on an annual basis,
conform wit h t he rules and regulat ions t o be prescribed by t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, but in no case t o
exceed t hirt y percent (30%) of t he t ot al expenses; and
(4) The asset s of which, in t he even of dissolut ion, would be dist ribut ed t o
anot her nonprofit domest ic corporat ion organized for similar purpose or
purposes, or t o t he st at e for public purpose, or would be dist ribut ed by a
court t o anot her organizat ion t o be used in such manner as in t he judgment
of said court shall best accomplish t he general purpose for which t he
dissolved organizat ion was organized.
Subject t o such t erms and condit ions as may be prescribed by t he Secret ary
of Finance, t he t erm "utilization" means:
(i) Any amount in cash or in kind (including administ rat ive expenses) paid or
ut ilized t o accomplish one or more purposes for which t he accredit ed
nongovernment organizat ion was creat ed or organized.
(ii) Any amount paid t o acquire an asset used (or held for use) direct ly in
carrying out one or more purposes for which t he accredit ed nongovernment
organizat ion was creat ed or organized.
An amount set aside for a specific project which comes wit hin one or more
purposes of t he accredit ed nongovernment organizat ion may be t reat ed as a
ut ilizat ion, but only if at t he t ime such amount is set aside, t he accredit ed
nongovernment organizat ion has est ablished t o t he sat isfact ion of t he
Commissioner t hat t he amount will be paid for t he specific project wit hin a
period t o be prescribed in rules and regulat ions t o be promulgat ed by t he
Secret ary of Finance, upon recommendat ion of t he Commissioner, but not t o
exceed five (5) ye a r s , and t he project is one which can be bet t er
accomplished by set t ing aside such amount t han by immediat e payment of
funds.
(3) Valuation.

c hanr obl es

v ir tu a l

l aw

l ib r a r y

- The amount of any charit able cont ribut ion of propert y

ot her t han money shall be based on t he acquisit ion cost of said propert y.

( 4) Proof o f Deductions.

c hanr obl es

v ir tu a l

l aw

l ib r a r y

- Cont ribut ions or gift s shall be allowable as

deduct ions only if verified under t he rules and regulat ions prescribed by t he
Secret ary of Finance, upon recommendat ion of t he Commissioner.
( I) Research and Development. - ( 1) In General. - a t axpayer may t reat
research or development expendit ures which are p a id or incurred by him
during t he t axable year in connect ion wit h his t rade, business or profession
as ordinary and necessary expenses which are not chargeable t o capit al
account .
The expendit ures so t reat ed shall be allowed as deduct ion during t he t axable
year when paid or incurred.
(2) Amortization of Certain Research and Development Expenditures. At t he elect ion of t he t axpayer and in accordance wit h t he rules and
regulat ions t o be prescribed by t he Secret ary of Finance, upon
re c omme nda t ion of t he Commissioner, t he following research and
development expendit ures may be t reat ed as deferred expenses: (a) Paid or
incurred by t he t axpayer in connect ion wit h his t rade, business or profession;
(b) Not t reat ed as expenses under paragraph 91) hereof; and
(c) Chargeable t o c apit al account but not chargeable t o propert y of a
charact er which is subject t o depreciat ion or deplet ion.
In comput ing t axable income, such deferred expenses shall be allowed as
deduct ion rat ably dist ribut ed over a period of not less t han sixt y (60) mont hs
as may be elect ed by t he t axpayer (beginning wit h t he mont h in which t he
t axpayer first realizes benefit s from such expendit ures).
The elect ion provided by paragraph (2) hereof may be made for any t axable
year beginning aft er t he effect ivit y of t his Code, but only if made not lat er
t han t he t ime prescribed by law for filing t he ret urn for such t axable year.
T he met hod so elect ed, and t he period select ed by t he t axpayer, shall be
adhered t o in comput ing t axable income for t he t axable year for which t he
elect ion is made and for all subsequent t axable years unless wit h t he
approval of t he Commissioner, a change t o a different met hod is aut horized
wit h respect t o a part or all of such expendit ures.
The elect ion shall not apply t o any expendit ure paid or incurred during any
t axable year for which t he t axpayer makes t he elect ion.
(3) Limitations on Deduction.

c hanr obl es

v ir tu a l

l aw

l ib r a r y

- This Subsect ion shall not apply t o: (a)

A n y expendit ure for t he acquisit ion or improvement of land, or for t he

improvement of propert y t o be used in connect ion wit h research and
development of a charact er which is subject t o depreciat ion and deplet ion;
and (b) Any expendit ure paid or incurred for t he purpose of ascert aining t he
exist ence, locat ion, ext ent , or qualit y of any deposit of ore or ot her mineral,
including oil or gas.
( J) Pension Trusts.

c hanr obl es

v ir tu a l

l aw

l ib r a r y

- An employer est ablishing or maint aining a pension

t rust t o provide f o r t he payment of reasonable pensions t o his employees

shall be allowed as a deduct ion (in addit ion t o t he cont ribut ions t o such t rust
during t he t axable year t o cover t he pension liabilit y accruing during t he
year, allowed as a deduct ion under Subsect ion (A) (1) of t his Sect ion ) a
reasonable amount t ransferred or paid int o such t rust during t he t axable
year in excess of such cont ribut ions, but only if such amount (1) has not
t heret ofore been allowed as a deduct ion, and (2) is apport ioned in equal
part s over a period of t en (10) consecut ive years beginning wit h t he year in
which t he t ransfer or payment is made.
(K) Additional Requirements for Deductibility of Certain Payments. - Any
amount paid or payable which is ot herwise deduct ible from, or t aken int o
account in comput ing gross income or for which depreciat ion or amort izat ion
may be allowed under t his Sect ion, shall be allowed as a deduct ion only if it is
shown t hat t he t ax required t o be deduct ed and wit hheld t herefrom has been
paid t o t he Bureau of Int ernal Revenue in accordance wit h t his Sect ion 58
and 81 of t his Code.
(L) Optional Standard Deduction. - In lieu of t he deduct ions allowed under
t he preceding Subsect ions, an individual subject t o t ax under Sect ion 24,
ot her t han a nonresident alien, may elect a st andard deduct ion in an amount

not exceeding t en percent (10%) of his gross income.

Unless t he t axpayer signifies in his ret urn his int ent ion t o elect t he opt ional
st andard deduct ion, he shall be considered as having availed himself of t he
deduct ions allowed in t he preceding Subsect ions.
Such elect ion when made in t he ret urn shall be irrevocable for t he t axable
year for which t he ret urn is made: Provided, That an individual who is ent it led
t o and claimed for t he opt ional st andard deduct ion shall not be required t o
submit wit h his t ax ret urn such financial st at ement s ot herwise required
under t his Code: Provided, further, That e xc e pt when t he Commissioner
ot herwise permit s, t he said individual shall keep such records pert aining t o
his gross income during t he t axable year, as may be required by t he rules and
regulat ions promulgat ed by t he Secret ary of Finance, upon recommendat ion
of t he Commissioner.
( M) Premium Payments on Health and/or Hospitalization Insurance of
an Individual Taxpayer. - The amount of premiums not t o exceed Two
t housand four hundred pe s o s (P2,400) per family or Two hundred pesos
(P200) a mont h paid during t he t axable year for healt h and/or hospit alizat ion
insurance t aken by t he t axpayer for himself, including his family, shall be
allowed as a deduct ion from his gross income: Provided, That said family has
a gross inc o me of not more t han Two hundred fift y t housand pesos
(P250,000) for t he t axable year: Provided, finally, That in t he case of married
t axpayers, only t he spouse claiming t he addit ional exempt ion for dependent s
shall be ent it led t o t his deduct ion.
Not wit hst anding t he provision of t he preceding Subsect ions, The Secret ary
of Finance, upon recommendat ion of t he Commissioner, aft er a public hearing
shall have been held for t his purpose, may prescribe by rules and regulat ions,
limit at ions or ceilings for any of t he it emized deduct ions under Subsect ions
(A) t o (J) of t his Sect ion: Provided, That for purposes of det ermining such
ceilings or limit at ions, t he Secret ary of Finance shall consider t he following
fact ors: (1) adequacy of t he prescribed limit s on t he act ual expendit ure
requirement s of each part icular indust ry; and (2) effect s o f inflat ion on
expendit ure levels: Provided, further, That no c e ilings shall furt her be
imposed on it ems of expense already subject t o ceilings under present law.
SEC. 35. Allowance of Personal Exemption for Individual Taxpayer. (A) In General.

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- For purposes of det ermining t he t ax provided in Sect ion

24 (A) of t his Tit le, t here shall be allowed a basic personal exempt ion as
follows:
For
single individual or married individual judicially decreed as legally
separat ed wit h no qualified dependent s P20,000
For Head of Family P25,000
For each married individual P32,000 In t he case of married individuals where
only one of t he spouses is deriving gross income, only such spouse shall be
allowed t he personal exempt ion.
For purposes of t his paragraph, t he t erm "head of family" means an
unmarried or legally separat ed man or woman wit h one or bot h parent s, or
wit h one or more brot hers or sist ers, or wit h one or more legit imat e,
recognized nat ural or legally adopt ed children living wit h and dependent upon
him for t heir chief support , where such brot hers or sist ers or children are not
more t han t went y-one (21) years of age, unmarried and not gainfully
employed or where such children, brot hers or sist ers, regardless of age are
incapable of self-support because of ment al or physical defect .
( B) Additional Exemption for Dependents.

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- There shall be allowed an

addit ional exempt ion of Eight t housand pesos (P8,000) for each dependent
not exceeding four (4).
The addit ional exempt ion for dependent shall be claimed by only one of t he
spouses in t he case of married individuals.
In t he case of legally separat ed spouses, addit ional exempt ions may be
claimed only by t he s pous e who has cust ody of t he child or children:
Provided, That t he t o t a l amount of addit ional exempt ions t hat may be
claimed by bot h shall not exceed t he maximum addit ional exempt ions herein
allowed.
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For purposes of t his Subsect ion, a "dependent" means a legit imat e,

illegit imat e or legally adopt ed child chiefly dependent upon and living wit h t he
t axpayer if such dependent is not more t han t went y-one (21) years of age,
unmarried and not gainfully employed or if such dependent , regardless of age,
is incapable of self-support because of ment al or physical defect .
(C) Change of Status.

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- If t he t axpayer marries or should have addit ional

dependent (s) as defined above during t he t axable year, t he t axpayer may

claim t he corresponding addit ional exempt ion, as t he case may be, in full for
such year.
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If t he t axpayer dies during t he t axable year, his est at e may st ill claim t he
personal and addit ional exempt ions for himself and his dependent (s) as if he
died at t he close of such year.
If t he spouse or any of t he dependent s dies or if any of such dependent s
marries, becomes t went y-one (21) years old or becomes gainfully employed
during t he t axable year, t he t axpayer may st ill claim t he same exempt ions as
if t he spouse or any of t he dependent s died, or as if such dependent s
married, became t went y-one (21) years old or became gainfully employed at
t he close of such year.
( D) Personal Exemption Allowable to Nonresident Alien Individual. - A
nonresident alien individual engaged in t rade, business or in t he exercise of a
profession in t he Philippines shall be ent it led t o a personal exempt ion in t he
amount equal t o t he exempt ions allowed in t he income t ax law in t he count ry
of which he is a subject - or cit izen, t o cit izens of t he Philippines not residing
in such count ry, not t o exceed t he amount fixed in t his Sect ion as exempt ion
for cit izens or resident of t he Philippines: Provided, That said nonresident
alien should file a t rue and accurat e ret urn of t he t ot al income received by
him from all sources in t he Philippines, as required by t his Tit le.
SEC. 36. Items Not Deductible. (A) General Rule. - In comput ing net income, no deduct ion shall in any case
be allowed in respect t o (1) Personal, living or family expenses; (2) Any amount pa id out for new
buildings or for permanent improvement s, or bet t erment s made t o increase
t he value of any propert y or est at e; This Subsect ion s ha ll not apply t o
int angible drilling and development cost s incurred in pet roleum operat ions
which are deduct ible under Subsect ion (G) (1) of Sect ion 34 of t his Code.
(3) Any amount expended in rest oring propert y or in making good t he
exhaust ion t hereof for which an allowance is or has been made; or (4)
Premiums paid on any life insurance policy covering t he life of any officer or
employee, or of any person financially int erest ed in any t rade or business
carried on by t he t axpayer, individual or corporat e, when t he t axpayer is
direct ly or indirect ly a beneficiary under such policy.
( B) Losses from Sales or Exchanges of Property.

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- In comput ing net

income, no deduct ions shall in any case be allowed in respect of losses from
sales or exchanges of propert y direct ly or indirect ly - (1) Bet ween members
of a family.
For purposes of t his paragraph, t he family of an individual shall include only
his brot hers and sist ers (whet her by t he whole or half-blood), spouse,
ancest ors, and lineal descendant s; or (2) Except in t he case of dist ribut ions
in liquidat ion, bet ween an individual and corporat ion more t han fift y percent
(50%) in value of t he out st anding st ock of whic h is owned, direct ly or
indirect ly, by or for such individual; or (3) Except in t he case of dist ribut ions
in liquidat ion, bet ween t wo corporat ions more t han fift y percent (50%) in
value of t he out st anding st ock of which is owned, direct ly or indirect ly, by or
for t he same individual if eit her one of such corporat ions, wit h respect t o t he
t axable year of t he corporat ion preceding t he dat e of t he sale of exchange
was under t he law applicable t o such t axable year, a personal holding
company or a foreign personal holding company; (4) Bet ween t he grant or and
a fiduciary of any t rust ; or (5) Bet ween t he fiduciary of and t he fiduciary of a
t rust and t he fiduciary of anot her t rust if t he same person is a grant or wit h
respect t o each t rust ; or (6) Bet ween a fiduciary of a t rust and beneficiary

of such t rust .
SEC. 37. Special Provisions Regarding Income and Deductions of
Insurance Companies, Whether Domestic or Foreign. ( A) Special Deduction Allowed to Insurance Companies.

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- In t he case

of insurance companies, whet her domest ic or foreign doing business in t he

Philippines, t he net addit ions, if any, required by law t o be made wit hin t he
year t o reserve funds and t he sums ot her t han dividends paid wit hin t he year
on policy and annuit y cont ract s may be deduct ed from t heir gross income:
Provided, however, That t he released reserve be t reat ed as income for t he
year of release.
( B) Mutual Insurance Companies. - In t he case of mut ual fire and mut ual
employers' liabilit y and mut ual workmen's compensat ion and mut ual casualt y
insurance companies requiring t heir members t o make premium deposit s t o
provide for losses and expenses, said companies shall not ret urn as income
any port ion of t he premium deposit s ret urned t o t heir policyholders, but shall
ret urn as t axable income all income received by t hem from all ot her sources
plus such port ion of t he premium deposit s as are ret ained by t he companies
for purposes ot her t han t he payment of losses and expenses and reinsurance
reserves.
( C ) Mutual Marine Insurance Companies. - M ut ual marine insurance
companies shall include in t heir ret urn of gro s s income, gross premiums
collect ed and received by t hem less amount s paid t o policyholders on account
of premiums previously paid by t hem and int erest paid upon t hose amount s
bet ween t he ascert ainment and payment t hereof.
( D ) As s e s s m e nt Insurance Companies.
- Assessment insurance
companies, whet her domest ic or foreign, may deduct from t heir gross income
t he act ual deposit of sums wit h t he officers of t he Government of t he
Philippines pursuant t o law, as addit ions t o guarant ee or reserve funds.
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SEC. 38. Losses from Wash Sales of Stock or Securities. (A) In t he case of any loss claimed t o have been sust ained from any sale or
ot her disposit ion of shares of st ock or securit ies where it appears t hat wit hin
a period beginning t hirt y (30) days before t he dat e of such sale or disposit ion
and ending t hirt y (30) days aft er such dat e, t he t axpayer has acquired (by
purchase or by exchange upon which t he ent ire amount of gain or loss was
recognized by law), or has ent ered int o a cont act or opt ion so t o acquire,
subst ant ially ident ical st ock or securit ies, t hen no deduct ion for t he loss shall
be allowed under Sect ion 34 unless t he claim is made by a dealer in st ock or
securit ies and wit h respect t o a t ransact ion made in t he ordinary course of
t he business of such dealer.
(B) If t he amount of st ock or securit ies acquired (or covered by t he cont ract
or opt ion t o acquire) is less t han t he amount of st ock or securit ies sold or
ot herwise disposed of, t hen t he part icular shares of st ock or securit ies, t he
loss form t he sale or ot her disposit ion of which is not deduct ible, shall be
det ermined under rules and regulat ions prescribed by t he Secret ary of
Finance, upon recommendat ion of t he Commissioner.
(C) If t he amount of st ock or securit ies acquired (or covered by t he cont ract
or opt ion t o acquire which) result ed in t he non-deduct ibilit y of t he loss, shall
b e det ermined under rules and regulat ions prescribed by t he Secret ary of
Finance, upon recommendat ion of t he Commissioner.
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SEC. 39. Capital Gains and Losses. (A) Definitions.

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- As used in t his Tit le -

(1) Capital Assets. - The t erm "capital assets" means propert y held by t he
t axpayer (whet her or not connect ed wit h his t rade or business), but does
not include st ock in t rade of t he t axpayer or ot her propert y of a kind which
would properly be included in t he invent ory of t he t axpayer if on hand at t he
close of t he t axable year, or propert y held by t he t axpayer primarily for sale
t o cust omers in t he ordinary course of his t rade or business, or propert y
used in t he t rade or business, of a charact er which is subject t o t he

allowance for depreciat ion provided in Subsect ion (F) of Sect ion 34; or real
propert y used in t rade or business of t he t axpayer.
(2) Net Capital Gain. - The t erm "net capital gain" means t he excess of t he
gains from sales or exchanges of capit al asset s over t he losses from such
sales or exchanges.
( 3) Net Capital Loss. - The t erm "net capital loss" means t he excess of t he
losses from sales or exchanges of capit al asset s over t he gains from such
sales or exchanges.
( B) Percentage Taken Into Account. - In t he case of a t axpayer, ot her
t han a corporat ion, only t he following percent ages of t he gain or loss
recognized upon t he sale or exchange of a capit al asset shall be t aken int o
account in comput ing net capit al gain, net capit al loss, and net income: (1)
One hundred percent (100%) if t he capit al asset has been held for not more
t han t welve (12) mont hs; and (2) Fift y percent (50%) if t he capit al asset has
been held for more t han t welve (12) mont hs;( C ) Limitation o n Capital
Losses. - Losses from sales or exchanges of capit al asset s shall be allowed
only t o t he ext ent of t he gains from such sales or exchanges.
If a bank or t rust company incorporat ed under t he laws of t he Philippines, a
subst ant ial part of whose business is t he receipt of deposit s, sells any bond,
debent ure, not e, or cert ificat e or ot her evidence of indebt edness issued by
any corporat ion (including one issued by a government or polit ical subdivision
t hereof), wit h int erest coupons or in regist ered form, any loss result ing from
such sale shall not be subject t o t he foregoing limit at ion and shall not be
included in det ermining t he applicabilit y of such limit at ion t o ot her losses.
( D ) Net Capital Loss Carry-over. - If any t axpayer, ot her t han a
corporat ion, sust ains in any t axable year a net capit al loss, such loss (in an
amount not in excess of t he net income for such year) shall be t reat ed in t he
succeeding t axable year as a los s from t he sale or exchange of a capit al
asset held for not more t han t welve (12) mont hs.
( E ) Retirement of Bonds, Etc. - For purposes of t his Tit le, amount s
received by t he holder upon t he ret irement of bonds, debent ures, not es or
cert ificat es or ot her evidences of indebt edness issued by any corporat ion
(including t hose issued by a government or polit ical subdivision t hereof) wit h
int erest coupons or in regist ered form, shall be considered as amount s
received in exchange t herefor.
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(F) Gains or Losses From Short Sales, Etc. - For purposes of t his Tit le (1) Gains or losses from short sales of propert y shall be considered as gains
or losses from sales or exchanges of capit al asset s; and (2) Gains or losses
at t ribut able t o t he failure t o exercise privileges or opt ions t o buy or sell
propert y shall be considered as capit al gains or losses.
SEC. 40. Determination of Amount and Recognition of Gain or Loss. ( A ) Computation of Gain or Loss. - The gain from t he sale or ot her
disposit ion of propert y shall be t he excess of t he amount realized t herefrom
over t he basis or adjust ed basis for det ermining gain, and t he loss shall be
t he excess of t he basis or adjust ed basis for det ermining loss over t he
amount realized.
The amount realized from t he sale or ot her disposit ion of propert y shall be
t he sum of money received plus t he fair market value of t he propert y (ot her
t han money) received;
( B ) Basis for Determining Gain or Loss from Sale or Disposition of
Property. - The basis of propert y shall be (1) The cost t hereof in t he case of propert y acquired on or aft er M arch 1,
1913, if such propert y was acquired by purchase; or (2) The fair market price
or value as of t he dat e of acquisit ion, if t he same was acquired by
inherit ance; or (3) If t he propert y was acquired by gift , t he basis shall be t he
same as if it would be in t he hands of t he donor or t he last preceding owner
by whom it was not acquired by gift , except t hat if such basis is great er t han
t he fair market value of t he propert y at t he t ime of t he gift t hen, for t he
purpose of det ermining loss, t he basis shall be such fair market value; or (4)
If t he propert y was acquired for less t han an adequat e considerat ion in

money or money's wort h, t he basis of such propert y is t he amount paid by

t he t ransferee for t he propert y; or (5) The basis as defined in paragraph
(C)(5) of t his Sect ion, if t he propert y was acquired in a t ransact ion where
gain or loss is not recognized under paragraph (C)(2) of t his Sect ion.
( C ) Exchange of Property. - ( 1 ) Ge ne ral Rule. - Except as herein
provided, upon t he sale or exchange or propert y, t he ent ire amount of t he
gain or loss, as t he case may be, shall be recognized.
(2) Exception. - No gain or loss shall be recognized if in pursuance of a plan
of merger or consolidat ion - (a) A corporat ion, which is a part y t o a merger or
consolidat ion, exchanges propert y solely for st ock in a corporat ion, which is a
part y t o t he merger or consolidat ion; o r (b) A shareholder exchanges st ock
in a corporat ion, which is a part y t o t he merger or consolidat ion, solely for
t he st ock of anot her corporat ion also a part y t o t he merger or consolidat ion;
or (c) A securit y holder of a corporat ion, which is a part y t o t he merger or
consolidat ion, exchanges his securit ies in such corporat ion, solely for st ock
or securit ies in such corporat ion, a part y t o t he merger or consolidat ion.
No gain or loss s ha ll also be recognized if propert y is t ransferred t o a
corporat ion by a person in exchange for st ock or unit of part icipat ion in such
a corporat ion of which as a result of such exchange said person, alone or
t oget her wit h ot hers, not exceeding four (4) persons, gains cont rol of said
corporat ion: Provided, That st ocks issued for services shall not be considered
as issued in ret urn for propert y.
(3) Exchange Not Solely in Kind. (a) If, in connect ion wit h an exchange described in t he above except ions, an
individual, a shareholder, a securit y holder or a corporat ion receives not only
st ock or securit ies permit t ed t o be received wit hout t he recognit ion of gain
or loss, but also money and/or propert y, t he gain, if any, but not t he loss,
shall be recognized but in an amount not in excess of t he sum of t he money
and fair market value of such ot her propert y received: Provided, That as t o
t he shareholder, if t he money and/or ot her propert y received has t he effect
of a dist ribut ion of a t axable dividend, t here shall be t axed as dividend t o t he
shareholder an amount of t he gain recognized not in excess of his
proport ionat e share of t he undist ribut ed earnings and profit s of t he
corporat ion; t he remainder, if any, of t he gain recognized shall be t reat ed as
a capit al gain.
(b) If, in connect ion wit h t he exchange described in t he above except ions,
t he t ransferor corporat ion receives not only st ock permit t ed t o be received
wit hout t he recognit ion of gain or loss but also money and/or ot her propert y,
t hen (i) if t he corporat ion receiving such money and/or ot her propert y
dist ribut es it in pursuance of t he plan of merger or consolidat ion, no gain t o
t he corporat ion s h a ll be recognized from t he exchange, but (ii) if t he
corporat ion receiving such ot her propert y and/or money does not dist ribut e it
in pursuance of t he plan of merger or consolidat ion, t he gain, if any, but not
t he loss t o t he corporat ion shall be recognized but in an amount not in
excess o f t he sum of such money and t he fair market value of such ot her
propert y so received, which is not dist ribut ed.
( 4) Assumption of Liability. - (a) If t he t axpayer, in connect ion wit h t he
exchanges described in t he foregoing except ions, receives st ock or securit ies
which would be permit t ed t o be received wit hout t he recognit ion of t he gain
if it were t he sole considerat ion, and as part of t he considerat ion, anot her
part y t o t he exchange assumes a liabilit y of t he t axpayer, or acquires from
t he t axpayer propert y, subject t o a liabilit y, t hen such assumpt ion or
acquisit ion shall not be t reat ed as money and/or ot her propert y, and shall
not prevent t he exchange from being wit hin t he except ions.
(b) If t he amount of t he liabilit ies assumed plus t he amount of t he liabilit ies
t o which t he propert y is subject exceed t he t ot al of t he adjust ed basis of
t he propert y t ransferred pursuant t o such exchange, t hen such excess shall
b e considered as a gain from t he sale or exchange of a capit al asset or of
propert y which is not a capit al asset , as t he case may be.
( 5 ) Basis - (a) The basis of t h e st ock or securit ies received by t he
t ransferor upon t he exchange specified in t he above except ion shall be t he
same as t he basis of t he propert y, st ock or securit ies exchanged, decreased
by (1) t he money received, and (2) t he fair market value of t he ot her
propert y received, and increased by (a) t he amount t reat ed as dividend of

t he shareholder and (b) t he amount of any gain t hat was recognized on t he

exchange: Provided, That t he propert y received as "boot" shall have as basis
it s fair market value: Provided, further, That if as part of t he considerat ion t o
t he t ransferor, t he t ransferee of propert y assumes a liabilit y of t he
t ransferor or acquires form t he lat t er propert y subject t o a liabilit y, such
assumpt ion or acquisit ion (in t he amount of t he liabilit y) shall, for purposes of
t his paragraph, be t reat ed as money received by t he t ransferor on t he
exchange: Provided, finally, That if t he t ransferor receives several kinds of
st ock or securit ies, t he Commissioner is hereby aut horized t o allocat e t he
basis among t he several classes of st ocks or securit ies.
(b) The basis of t he propert y t ransferred in t he hands of t he t ransferee shall
be t he same as it would be in t he hands of t he t ransferor increased by t he
amount of t he gain recognized t o t he t ransferor on t he t ransfer.
(6) Definitions. (a) The t erm "securities" means bonds and debent ures but not "notes" of
what ever class or durat ion.
(b) The t erm "merger" or "consolidation", when used in t his Sect ion, shall be
underst ood t o mean: (i) t he ordinary merger or consolidat ion, or (ii) t he
acquisit ion by one corporat ion of all or subst ant ially all t he propert ies of
anot her corporat ion solely for st ock: Provided, That for a t ransact ion t o be
regarded as a merger or consolidat ion wit hin t he purview of t his Sect ion, it
must be undert aken for a bona fide business purpose and not solely for t he
purpose of escaping t he burden of t axat ion: Provided, further, That in
det ermining whet her a bona fide business purpose exist s, each a n d every
st ep of t he t ransact ion shall be considered and t he whole t ransact ion or
series of t ransact ion shall be t reat ed as a single unit : Provided, finally , That
in det ermining whet her t he propert y t ransferred const it ut es a subst ant ial
port ion of t he propert y of t he t ransferor, t he t erm 'propert y' shall be t aken
t o include t he cash asset s of t he t ransferor.
(c) The t erm "control", when used in t his Sect ion, shall mean ownership of
st ocks in a corporat ion possessing at least fift y-one percent (51%) of t he
t ot al vot ing power of all classes of st ocks ent it led t o vot e.
(d) The Secret ary of Finance, upon recommendat ion of t he Commissioner, is
h e r e b y a ut ho riz e d t o issue rules and regulat ions for t he purpose
"substantially all" and for t he proper implement at ion of t his Sect ion.
SEC. 41. Inventories.

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- Whenever in t he judgment of t he Commissioner,

t he use of invent ories is necessary in order t o det ermine clearly t he income

of any t axpayer, invent ories shall be t aken by such t axpayer upon such basis
as t he Secret ary of Finance, upon recommendat ion of t he Commissioner,
may, by rules and regulat ions, prescribe as conforming as nearly as may be t o
t he best account ing pract ice in t he t rade or business and as most clearly
reflect ing t he income.
If a t axpayer, aft er having complied wit h t he t erms and a condit ions
prescribed by t he Commissioner, uses a part icular met hod of valuing it s
invent ory for any t axable year, t hen such met hod shall be used in all
subsequent t axable years unless:
(i) wit h t he approval of t he Commissioner, a change t o a different met hod is
aut horized; or (ii) t he Commissioner finds t hat t he nat ure of t he st ock on
hand (e.g., it s scarcit y, liquidit y, market abilit y and price movement s) is such
t hat invent ory gains should be considered realized for t ax purposes and,
t herefore, it is necessary t o modify t he valuat ion met hod for purposes of
ascert aining t he income, profit , or loss in a more realist ic manner: Provided,
however, That t he Commissioner shall not exercise his aut horit y t o require a
change i n invent ory met hod more oft en t han once every t hree (3) years:
Provided, further, That any change in an invent ory valuat ion met hod must be
subject t o approval by t he Secret ary of Finance.
SEC. 42. Income from Sources Within the Philippines. ( A) Gross Income From Sources Within the Philippines. - The following
it ems of gross income shall be t reat ed as gross income from sources wit hin
t he Philippines:

( 1) Interests. - Int erest s derived from sources wit hin t he Philippines, and
int erest s on bonds, not es or ot her int erest -bearing obligat ion of resident s,
corporat e or ot herwise;
(2) Dividends. - The amount received as dividends:.
(a) from a domest ic corporat ion; and
(b) from a foreign corporat ion, unless less t han fift y percent (50%) of t he
gross income o f such foreign corporat ion for t he t hree-year period ending
wit h t he close of it s t axable year preceding t he declarat ion of such dividends
or for such part of such period as t he corporat ion has been in exist ence) was
derived from sources wit hin t he Philippines as det ermined under t he
provisions of t his Sect ion; but only in an amount which bears t he same rat ion
t o s uc h dividends as t he gross income of t he corporat ion for such period
derived from sources wit hin t he Philippines bears t o it s gross income from all
sources.
( 3) Services.

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- Compensat ion for labor or personal services performed in

t h e P hilippines; (4) Rentals and Royalties. - Rent als and royalt ies from
propert y locat ed in t he Philippines or f ro m any int erest in such propert y,
including rent als or royalt ies for - (a) The use of or t he right or privilege t o
use in t he Philippines any copyright , pat ent , design or model, plan, secret
formula or process, goodwill, t rademark, t rade brand or ot her like propert y or
right ; (b) The use of, or t he right t o use in t he Philippines any indust rial,
commercial or scient ific equipment ; (c) The supply of scient ific, t echnical,
indust rial or commercial knowledge or informat ion; (d) The supply of any
assist ance t hat is ancillary and subsidiary t o, and is furnished as a means of
enabling t he applicat ion or enjoyment of, any such propert y or right as is
ment ioned in paragraph (a), any such equipment as is me nt ione d in
paragraph (b) or any such knowledge or informat ion as is ment ioned in
paragraph (c); (e) The supply of services by a nonresident person or his
employee in connect ion wit h t he use of propert y or right s belonging t o, or
t he inst allat ion or operat ion of any brand, machinery or ot her apparat us
purchased from such nonresident person; (f) Technical advice, assist ance or
services rendered in connect ion wit h t echnical management or administ rat ion
of any scient ific, indust rial or commercial undert aking, vent ure, project or
scheme; and (g) The use of or t he right t o use: (i) M ot ion pict ure films;
(ii) Films or video t apes for use in connect ion wit h t elevision; and
(iii) Tapes for use in connect ion wit h radio broadcast ing.
( 5) Sale of Real Property.

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- Gains, profit s and income from t he sale of

real propert y locat ed in t he Philippines; and

(6) Sale of Personal Property.

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- Gains; profit s and income from t he sale

of personal propert y, as det ermined in Subsect ion (E) of t his Sect ion.
( B) Taxable Income From Sources Within the Philippines. - ( 1) General
Rule. - From t he it ems of gross income specified in Subsect ion (A) of t his
Sect ion, t here shall be deduct ed t he expenses, losses and ot her deduct ions
properly allocat ed t heret o and a rat able part of expenses, int erest s, losses
a n d ot her deduct ions effect ively connect ed wit h t he business or t rade
c onduc t ed exclusively wit hin t he Philippines which cannot definit ely be
allocat ed t o some it ems or class of gross income: Provided, That such it ems
of deduct ions shall be allowed only if fully subst ant iat ed by all t he informat ion
necessary for it s calculat ion.
The remainder, if any, shall be t reat ed in full as t axable income from sources
wit hin t he Philippines.
(2) Exception. - No deduct ions for int erest paid or incurred abroad shall be
allowed f ro m t he it em of gross income specified in subsect ion (A) unless
indebt edness was act ually incurred t o provide funds for use in connect ion
wit h t he conduct or operat ion of t rade or business in t he Philippines.
(C) Gross Income From Sources Without the Philippines. - The following
it ems of gross income shall be t reat ed as income from sources wit hout t he
P hilippines: (1) Int erest s ot her t han t hose derived from sources wit hin t he
Philippines as provided in
paragraph (1) of Subsect ion (A) of t his Sect ion; (2) Dividends ot her t han
t hose derived from sources wit hin t he Philippines as provided in

paragraph (2) of Subsect ion (A) of t his Sect ion; (3) Compensat ion for labor
or personal services performed wit hout t he Philippines; (4) Rent als or
royalt ies from propert y locat ed wit hout t he Philippines or from any int erest in
such propert y including rent als or royalt ies for t he use of or for t he privilege
of using
wit hout t he Philippines, pat ent s, copyright s, secret processes and formulas,
goodwill,
t rademarks, t rade brands, franchises and ot her like propert ies; and (5)
Gains, profit s and income from t he sale of real propert y locat ed wit hout t he
Philippines.
(D) Taxable Income From Sources Without the Philippines. - From t he
it ems of gross income specified in Subsect ion (C) of t his Sect ion t here shall
be deduct ed t he expenses, losses, and ot her de duc t io ns properly
apport ioned or allocat ed t heret o and a rat able part of any expense, loss or
ot her deduct ion which cannot definit ely be allocat ed t o some it ems or classes
of gross income.
The remainder, if any, shall be t reat ed in full as t axable income from sources
wit hout t he Philippines.

( E ) Income
From Sources Partly Within and Partly Without the
Philippines. - It ems of gross income, expenses, losses and deduct ions, ot her
t ha n t hose specified in Subsect ions (A) and (C) of t his Sect ion, shall be
allocat ed or apport ioned t o sources wit hin or wit hout t he Philippines, under
t h e rules and regulat ions prescribed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner.
Where it ems of gross income are separat ely allocat ed t o sources wit hin t he
Philippines, t here shall be deduct ed (for t he purpos e of comput ing t he
t axable income t herefrom) t he expenses, losses and o t h e r deduct ions
properly apport ioned or allocat ed t heret o and a rat able part of ot her
expenses, losses or ot her deduct ions which cannot definit ely be allocat ed t o
some it ems or classes of gross income.
The remainder, if any, shall be included in full as t axable income from sources
wit hin t he Philippines.
In t he case of gross income derived from sources part ly wit hin and part ly
wit hout t he Philippines, t he t axable income may first be comput ed by
deduct ing t he expenses, losses or ot her deduct ions apport ioned or allocat ed
t heret o and a rat able part of any expense, loss or ot her deduct ion which
cannot definit ely be allocat ed t o some it ems or classes of gross income; and
t h e port ion of such t axable income at t ribut able t o sources wit hin t he
P hilippines may be det ermined by processes or formulas of general
apport ionment prescribed by t he Secret ary of Finance.
Gains, profit s and income from t he sale of personal propert y produced (in
whole or in part ) by t he t axpayer wit hin and sold wit hout t he Philippines, or
produced (in whole or in part ) by t he t axpayer wit hout and sold wit hin t he
Philippines, shall be t reat ed as derived part ly from sources wit hin and part ly
from sources wit hout t he Philippines.
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Gains, profit s and income derived from t he purchase of personal propert y

wit hin and it s sale wit hout t he Philippines, or from t he purchase of personal
propert y wit hout and it s sale wit hin t he Philippines shall be t reat ed as
derived ent irely f o rm sources wit hin t he count ry in which sold: Provided,
however, T h a t gain from t he sale of shares of st ock in a domest ic
corporat ion shall b e t reat ed as derived ent irely form sources wit hin t he
Philippines regardless of where t he said shares are sold.
The t ransfer by a nonresident alien or a foreign corporat ion t o anyone of any
share of st ock issued by a domest ic corporat ion shall not be effect ed or
made in it s book unless: (1) t he t ransferor has filed wit h t he Commissioner a
bond condit ioned upon t he fut ure payment by him of any income t ax t hat may
be due on t he gains derived from such t ransfer, or (2) t he Commissioner has
cert ified t hat t he t axes, if any, imposed in t his Tit le and due on t he gain
realized from such sale or t ransfer have been paid.
It shall be t he dut y of t he t ransferor and t he corporat ion t he shares of which

are sold or t ransferred, t o advise t he t ransferee of t his requirement .

( F) Definitions. - As used in t his Sect ion t he words "sale" or "sold" include
"exchange" or "exchanged"; and t he word "produced" inc ludes "created",
"fabricated", "manufactured", "extracted", "processed", "cured" or "aged".
CHAPTER VIII
ACCOUNTING PERIODS
AND METHODS OF ACCOUNTING
SEC. 43. General Rule. - The t axable income shall be comput ed upon t he
basis of t he t axpayer's annual account ing period (fiscal year or calendar year,
as t he case may be) in accordance wit h t he met hod of account ing regularly
employed in keeping t he books of such t axpayer, but if no such met hod of
account ing has been so employed, or if t he met hod employed does not clearly
reflect t he income, t he comput at ion shall be made in accordance wit h such
met hod as in t he opinion of t he Commissioner clearly reflect s t he income.
If t he t axpayer's annual account ing period is ot her t han a fiscal year, as
defined in Sect ion 22(Q), or if t he t axpayer has no annual account ing period,
or does not keep books, or if t he t axpayer is an individual, t he t axable
income shall be comput ed on t he basis of t he calendar year.
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SEC. 44. Period in which Items of Gross Income Included. - The amount
of all it ems of gross income shall be included in t he gross income for t he
t axable year in which received by t he t axpayer, unless, under met hods of
account ing permit t ed under Sect ion 43, any such amount s are t o be properly
account ed for as of a different period.
In t he case of t he deat h of a t axpayer, t here shall be included in comput ing
t axable income for t he t axable period in which falls t he dat e of his deat h,
amount s accrued up t o t he dat e of his deat h if not ot herwise properly
includible in respect of such period or a prior period.
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SEC. 45. Period for which Deductions and Credits Taken. - The deduct ions
provided for in t his Tit le shall be t aken for t he t axable year in which "paid or
accrued" or "paid or incurred", dependent upon t he met hod of account ing t he
basis of which t he net income is comput ed, unless in order t o clearly reflect
t he income, t he deduct ions should be t aken as of a different period.
In t he case of t he deat h of a t axpayer, t here shall be allowed as deduct ions
for t he t axable period in which falls t he dat e of his deat h, amount s accrued
up t o t he dat e of his deat h if not ot herwise properly allowable in respect of
such period or a prior period.
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SEC. 46. Change of Accounting Period.

If a t axpayer, ot her t han an individual, changes his account ing period from
fiscal year t o calendar year, from calendar year t o fiscal year, o r from one
fiscal year t o anot her, t he net income shall, wit h t he approval of t he
Commissioner, be comput ed on t he basis of such new account ing period,
subject t o t he provisions of Sect ion 47.
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SEC. 47. Final or Adjustment Returns for a Period of Less than Twelve
(12) Months. ( A ) Returns for Short Period Resulting from Change of Accounting
Period. - If a t axpayer, ot her t han an individual, wit h t he approval of t he
Commissioner, changes t he basis of comput ing net income from fiscal year t o
calendar year, a separat e final or adjust ment ret urn shall be made f o r t he
period bet ween t he close of t he last fiscal year for which ret urn wa s made
and t he following December 31.
If t he change is from calendar year t o fiscal year, a separat e final or
adjust ment ret urn shall be made for t he period bet ween t he close of t he last
calendar year for which ret urn was made and t he dat e designat ed as t he
close of t he fiscal year.
If t he change is from one fiscal year t o anot her fiscal year, a separat e final
or adjust ment ret urn shall be made for t he period bet ween t he close of t he

former fiscal year and t he dat e designat ed as t he close of t he new fiscal

year.
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( B) Income Computed on Basis of Short Period. - Where a separat e final

or adjust ment ret urn is made under Subsect ion (A) on account of a change in
t he account ing period, and in all ot her c a s e s where a separat e final or
adjust ment ret urn is required or permit t ed by rules and regulat ions
prescribed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, t o be made for a fract ional part of a year, t hen t he income
shall be comput ed on t he basis of t he period for which separat e final or
adjust ment ret urn is made.
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SEC. 48. Accounting for Long-Term Contracts. - Income from long-t erm
cont ract s shall be report ed for t ax purposes in t he manner as provided in
t his Sect ion.
As used herein, t he t erm 'long-t erm cont ract s' means building, inst allat ion or
const ruct ion cont ract s covering a period in excess of one (1) year.
Persons whose gross income is derived in whole or in part from such
cont ract s shall report such income upon t h e basis of percent age of
complet ion.
The ret urn should be accompanied by a ret urn cert ificat e of archit ect s or
engineers showing t he percent age of complet ion during t he t axable year of
t he ent ire work performed under cont ract .
There should be deduct ed from such gross income all expendit ures made
during t he t axable year on account of t he cont ract , account being t aken of
t he mat erial and supplies on hand at t he beginning and end of t he t axable
period for use in connect ion wit h t he work under t he cont ract but not yet so
applied.
If upon complet ion of a cont ract , it is found t hat t he t axable net income
arising t hereunder has not been clearly reflect ed for any year or years, t he
Commissioner may permit or require an amended ret urn.
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SEC. 49. Installment Basis. ( A) Sales of Dealers in Personal Property. - Under rules and regulat ions
prescribed by t he Secret ary of Finance, u p o n recommendat ion of t he
Commissioner, a person who regularly sells or ot herwise disposes of personal
propert y on t he inst allment plan may ret urn as inc ome t herefrom in any
t axable year t hat proport ion of t he inst allment payment s act ually received in
t hat year, which t he gross profit realized or t o be realized when payment is
complet ed, bears t o t he t ot al cont ract price.
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(B) Sales of Realty and Casual Sales of Personality. - In t he case (1) of a

casual sale or ot her casual disposit ion of personal propert y (ot her t han
propert y of a kind which would properly be included in t he invent ory of t he
t axpayer if on hand at t he close of t he t axable year), for a price exceeding
One t housand pesos (P1,000), or (2) of a s ale or ot her disposit ion of real
propert y, if in eit her case t he init ial payment s do not exceed t went y-five
percent (25%) of t he selling price, t he income may, under t he rules and
regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of
t he Commissioner, be ret urned on t he basis and i n t he manner above
prescribed in t his Sect ion.
As used in t his Sect ion, t h e t e rm "initial payments" means t he payment s
received in cash or propert y ot her t han evidences of indebt edness of t he
purchaser during t he t axable period in which t he sale or ot her disposit ion is
made.
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(C) Sales of Real Property Considered as Capital Asset by Individuals. An individual who sells or disposes of real propert y, considered as capit al
asset , and is ot herwise qualified t o report t he gain t herefrom under
Subsect ion (B) may pay t he capit al gains t ax in inst allment s under rules and
re gula t ions t o be promulgat ed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner.
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( D) Change from Accrual to Installment Basis. - If a t axpayer ent it led t o

t he benefit s of Subsect ion (A) elect s for a n y t axable year t o report his
t axable income on t he inst allment basis, t hen in comput ing his income for t he
year of change or any subsequent year, amount s act ually received during any
such year on account of sales or ot her disposit ions of propert y made in any
prior year shall not be excluded.
SEC. 50. Allocation of Income and Deductions. - In t he case of t wo or
more organizat ions, t rades or businesses (whet her or not incorporat ed and
whet her or not organized in t he Philippines) owned or cont rolled direct ly or
indirect ly by t he same int erest s, t he Commis s ioner is aut horized t o
dist ribut e, apport ion or allocat e gross income or deduct ions bet ween or
among such organizat ion, t rade or business, if he det ermined t hat such
dist ribut ion, apport ionment or allocat ion is necessary in o rde r t o prevent
evasion of t axes or clearly t o reflect t he income of any s uc h organizat ion,
t rade or business.

CHAPTER IX
RETURNS AND PAYMENT OF TAX
SEC. 51. Individual Return. (A) Requirements. (1) Except a s provided in paragraph (2) of t his Subsect ion, t he following
individuals are required t o file an income t ax ret urn: (a) Every Filipino cit izen
residing in t he Philippines; (b) Every Filipino cit izen residing out side t he
Philippines, on his income from sources wit hin t he Philippines; (c) Every alien
res iding in t he Philippines, on income derived from sources wit hin t he
Philippines; and (d) Every nonresident alien engaged in t rade or business or
in t he exercise of profession in t he Philippines.
(2) The following individuals shall not be required t o file an income t ax ret urn;
(a) An individual whose gross income does not exceed his t ot al personal and
addit ional exempt ions for dependent s under Sect ion 35: Provided, That a
cit izen of t h e Philippines and any alien individual engaged in business or
pract ice of profession wit hin t he Philippine shall file an income t ax ret urn,
regardless of t he amount of gross income; (b) An individual wit h respect t o
pure compensat ion income, as defined in Sect ion 32 (A)(1), derived from
sources wit hin t he Philippines, t he income t ax on which ha s been correct ly
wit hheld under t he provisions of Sect ion 79 of t his Code: Provided, That an
individual deriving compensat ion concurrent ly from t wo or more employers at
any t ime during t he t axable year shall file an income t ax ret urn: Provided,
further, That an individual whose compensat ion income derived from sources
wit hin t he Philippines exceeds Sixt y t housand pesos (P60,000) shall also file
an income t ax ret urn; (c) An individual whose sole income has been subject ed
t o final wit hholding t ax pursuant t o Sect ion 57(A) of t his Code; and (d) An
individual who is exempt from income t ax pursuant t o t he provisions of t his
Code and ot her laws, general or special.
(3) The forgoing not wit hst anding, any individual not required t o file an income
t ax ret urn may nevert heless be required t o file an informat ion ret urn
pursuant t o rules and regulat ions prescribed by t he Secret ary of Finance,
upon recommendat ion of t he Commissioner.
(4) The income t ax ret urn shall be filed in duplicat e by t he following persons:
(a) A resident cit izen - on his income from all sources; (b) A nonresident
cit izen - on his income derived from sources wit hin t he Philippines; (c) A
resident alien - on his income derived from sources wit hin t he Philippines; and
(d) A nonresident alien engaged in t rade or business in t he Philippines - on
his income derived from sources wit hin t he Philippines.
( B) Where to File.

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- Except in cases where t he Commissioner ot herwise

permit s, t he ret urn shall be filed wit h an aut horized agent bank, Revenue
Dist rict Officer, Collect ion Agent or duly aut horized Treasurer of t he cit y or
municipalit y in which such person has his legal residence or principal place of
business in t he Philippines, or if t here be no legal residence or place of
business in t he Philippines, wit h t he Office of t he Commissioner.

(C) When to File. (1) The ret urn of any individual specified above shall be filed on or before t he
fift eent h (15t h) day of April of each year covering income for t he preceding
t axable year.
(2) Individuals subject t o t ax on capit al gains; (a) From t he sale or exchange
of shares of st ock not t raded t hru a local st ock exchange as prescribed
under Sect ion 24(c) shall file a ret urn wit hin t hirt y (30) days aft er each
t ransact ion and a final consolidat ed ret urn on or before April 15 of each year
covering all st ock t ransact ions of t he preceding t axable year; and (b) From
t he sale or disposit ion of real propert y under Sect ion 24(D) shall file a ret urn
wit hin t hirt y (30) days following each sale or ot her disposit ion.
( D) Husband and Wife. - M arried individuals, whet her cit izens, resident or
nonresident aliens, who do not derive income purely from compensat ion, shall
file a ret urn for t he t axable year t o include t he income of bot h spouses, but
where it is impract icable for t he spouses t o file one ret urn, each spouse may
file a separat e ret urn of income but t he ret urns so filed shall be consolidat ed
by t he Bureau for purposes of verificat ion for t he t axable year.
( E ) Return of Parent to Include Income of Children. - The income of
unmarried minors derived from properly received from a living parent shall be
included in t he ret urn of t he parent , except (1) when t he donor's t ax has
been paid on such propert y, or (2) when t he t ransfer of such propert y is
exempt from donor's t ax.
(F) Persons Under Disability. - If t he t axpayer is unable t o make his own
ret urn, t he ret urn may be m a d e by his duly aut horized agent or
represent at ive or by t he guardian or ot her person charged wit h t he care of
his person or propert y, t he principal a n d his represent at ive or guardian
assuming t he responsibilit y of making t h e ret urn and incurring penalt ies
provided for erroneous, false or fraudulent ret urns.
( G) Signature Presumed Correct. - The fact t hat an individual's name is
signed t o a filed ret urn shall be prima facie evidence for all purposes t hat t he
ret urn was act ually signed by him.
SEC. 52. Corporation Returns. ( A) Requirements. - Every corporat ion subject t o t he t ax herein imposed,
except foreign corporat ions not engaged in t rade or business in t he
Philippines, shall render, in duplicat e, a t rue and accurat e quart erly income
t ax ret urn and final or adjust ment ret urn in accordance wit h t he provisions of
Chapt er XII of t his Tit le.
The ret urn shall be filed by t he president , vice-president or ot her principal
officer, and shall be sworn t o by such officer and by t he t reasurer or
assist ant t reasurer.
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( B ) Taxable Year of Corporation. - A corporat ion may employ eit her

calendar year or fiscal year as a basis for filing it s annual income t ax ret urn:
Provided, That t he corporat ion shall not change t he account ing period
employed wit hout prior approval from t he Commissioner in accordance wit h
t he provisions of Sect ion 47 of t his Code.
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(C) Return of Corporation Contemplating Dissolution or Reorganization.

- Every corporat ion shall, wit hin t hirt y (30) days aft er t he adopt ion by t he
corporat ion of a resolut ion or plan for it s dissolut ion, or for t he liquidat ion of
t he whole or any part of it s capit al st ock, including a corporat ion which has
been not ified of possible involunt ary dissolut ion by t he Securit ies and
Exchange Commission, or for it s reorganizat ion, render a correct ret urn t o
t he Commissioner, verified under oat h, set t ing f o r t h t he t erms of such
resolut ion or plan and such ot her informat ion as t he Secret ary of Finance,
upon recommendat ion of t he commissioner, shall, b y rules and regulat ions,
prescribe.
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The dissolving or reorganizing corporat ion shall, prior t o t he issuance by t he

Securit ies and Exchange Commission of t he Cert ificat e of Dissolut ion or
Reorganizat ion, as may be defined by rules and regulat ions prescribed by t he
Secret ary of Finance, upon recommendat ion of t he Commissioner, secure a

cert ificat e of t ax clearance from t he Bureau of Int ernal Revenue which

cert ificat e shall be submit t ed t o t he Securit ies and Exchange Commission.
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( D) Return on Capital Gains Realized from Sale of Shares of Stock not

Traded in the Local Stock Exchange. - Every corporat ion deriving capit al
gains from t he sale or exchange of shares of st ock not t raded t hru a local
st ock exchange as prescribed under Sect ions 24 (c), 25 (A)(3), 27 (E)(2),
28(A)(8)(c) and 28 (B)(5)(c), shall file a ret urn wit hin t hirt y (30) days aft er
each t ransact ions and a final consolidat ed ret urn of all t ransact ions during
t he t axable year on or before t he fift eent h (15t h) day of t he fourt h (4t h)
mont h following t he close of t he t axable year.
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SEC. 53. Extension of Time to File Returns. - The Commissioner may, in

merit orious cases, grant a reasonable ext ension of t ime for filing ret urns of
income (or final and adjust ment ret urns in case of corporat ions), subject t o
t he provisions of Sect ion 56 of t his Code.
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SEC. 54. Returns of Receivers, Trustees in Bankruptcy or Assignees. - In

cases wherein receivers, t rust ees in bankrupt cy or assignees a r e operat ing
t he propert y or business of a corporat ion, subject t o t he t ax imposed by t his
Tit le, such receivers, t rust ees or assignees shall make ret urns of net income
as and for such corporat ion, in t he same manner a n d form as such
organizat ion is hereinbefore required t o make ret urns, and any t ax due on
t he income as ret urned by receivers, t rust ees or assignees shall be assessed
and collect ed in t he same manner as if assessed direc t ly against t he
organizat ions of whose businesses or propert ies t hey have c us t o dy or
cont rol.
SEC. 55. Returns of General Professional Partnerships. - Every general
professional part nership shall file, in duplicat e, a ret urn of it s income, except
income exempt under Sect ion 32 (B) of t his Tit le, set t ing fort h t he it ems of
gross income and of deduct ions allowed by t h i s Tit le, and t he names,
Taxpayer Ident ificat ion Numbers (TIN), addresses and shares of each of t he
part ners.
SEC. 56. Payment and Assessment of Income Tax for Individuals and
Corporation. (A) Payment of Tax. (1) In General. - The t ot al amount of t ax imposed by t his Tit le shall be paid
by t he person subject t heret o at t he t ime t he ret urn is filed.
In t he case of t ramp vessels, t he shipping agent s and/or t he husbanding
agent s, and in t heir absence, t he capt ains t hereof are required t o file t he
ret urn herein provided and pay t he t ax due t hereon before t heir depart ure.
Upon failure of t he said agent s or capt ains t o file t he ret urn and pay t he t ax,
t he Bureau of Cust oms is hereby aut horized t o hold t he vessel and prevent
it s depart ure unt il proof of payment of t he t ax is present ed or a sufficient
bond is filed t o answer for t he t ax due.
( 2) Installment of Payment.

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- When t he t ax due is in excess of Two

t housand pesos (P2,000), t he t axpayer ot her t han a corporat ion may elect
t o pay t he t ax in t wo (2) equal inst allment s in which case, t he first
inst allment shall be paid at t he t ime t he ret urn is filed and t he second
inst allment , on or before July 15 following t he close of t he calendar year.
If any inst allment is not paid on or before t he dat e fixed for it s payment , t he
whole amount of t he t ax unpaid becomes due and payable, t oget her wit h t he
delinquency penalt ies.
( 3) Payment of Capital Gains Tax. - The t ot al amount of t ax imposed and
prescribed under Sect ion 24 (c), 24(D), 27(E)(2), 28(A)(8)(c) and 28(B)(5)(c)
shall be paid on t he dat e t he ret urn prescribed t herefor is filed by t he person
liable t heret o: Provided, That if t he seller submit s proof of his int ent ion t o
a va il himself of t he benefit of exempt ion of capit al gains under exist ing
special laws, no such payment s shall be required : Provided, further, That in
case of failure t o qualify for exempt ion under such special laws and
implement ing rules and regulat ions, t he t ax due on t he gains realized from
t he original t ransact ion shall immediat ely become due and payable, subject t o

t he penalt ies prescribed under applicable provisions of t his Code: Provided,

finally, That if t he seller, having paid t he t ax, submit s such proof of int ent
wit hin six (6) mont hs from t he regist rat ion of t he document t ransferring t he
real propert y, he shall be ent it led t o a refund of such t ax upon verificat ion of
his compliance wit h t he requirement s for such exempt ion.
In case t he t axpayer elect s and is qualified t o report t he gain by inst allment s
under Sect ion 49 of t his Code, t he t ax due from each inst allment payment
shall be paid wit hin (30) days from t he receipt of such payment s.
No regist rat ion of any document t ransferring real propert y shall be effect ed
by t he Regist er o f Deeds unless t he Commissioner or his duly aut horized
represent at ive has cert ified t hat such t ransfer has been report ed, and t he
t ax herein imposed, if any, has been paid.
( B ) Assessment and Payment of Deficiency Tax. - Aft er t he ret urn is
filed, t he Commissioner shall examine it and assess t he correct amount of t he
t ax.
The t ax or deficiency income t ax so discovered shall be paid upon not ice and
demand from t he Commissioner.
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As used in t his Chapt er, in respect of a t ax imposed by t his Tit le, t he t erm
"deficiency" means:.
(1) The amount by which t he t ax imposed by t his Tit le exceeds t he amount
shown as t he t ax by t he t axpayer upon his ret urn; but t he amount so shown
on t he ret urn shall b e increased by t he amount s previously assessed (or
collect ed wit hout assessment ) as a deficiency, and decreased by t he amount
previously abat ed, credit ed, ret urned or ot herwise repaid in respect of such
t ax; or
(2) If no amount is shown as t he t ax by t he t axpayer upon t his ret urn, or if
no ret urn is made by t he t axpayer, t hen t he amount by which t he t ax
exceeds t he amount s previously assessed (or collect ed wit hout assessment )
as a deficiency; but such amount s previously assessed or collect ed wit hout
assessment shall first be decreased by t he amount s previously abat ed,
credit ed ret urned or ot herwise repaid in respect of such t ax.
SEC. 57. Withholding of Tax at Source. ( A) Withholding of Final Tax on Certain Incomes. - Subject t o rules and
regulat ions
t he
Secret ary of
Finance
may p r o mulg a t e , upon t he
recommendat ion of t he Commissioner, requiring t he filing of income t ax ret urn
by cert ain income payees, t he t ax imposed or prescribed by Sect ions
24(B)(1), 24(B)(2), 24(C), 24(D)(1); 25(A)(2), 25(A)(3), 25(B), 25(C), 25(D),
25(E), 27(D)(!), 27(D)(2), 27(D)(3), 27(D)(5), 28 (A)(4), 28(A)(5),
28(A)(7)(a), 28(A)(7)(b), 28(A)(7)(c), 28(B)(1), 28(B)(2), 28(B)(3), 28(B)(4),
28(B)(5)(a), 28(B)(5)(b), 28(B)(5)(c); 33; and 282 of t his Code on specified
it ems of income shall be wit hheld by payor-corporat ion and/or person and
paid in t he same manner and subject t o t he same condit ions as provided in
Sect ion 58 of t his Code.
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(B) Withholding of Creditable Tax at Source.

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- The Secret ary of Finance

may, upon t he recommendat ion of t he Commissioner, require t he wit hholding

of a t ax on t he it ems of income payable t o nat ural or juridical persons,
residing in t he Philippines, by payor-corporat ion/persons as provided for by
law, at t he rat e of not less t han one percent (1%) but not more t han t hirt yt wo percent (32%) t hereof, which shall be credit ed against t he income t ax
liabilit y of t he t axpayer for t he t axable year.
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( C ) Tax-free Covenant Bonds.

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In any case where bonds, mort gages,

deeds of t rust or ot her similar obligat ions of domest ic or resident foreign

corporat ions, cont ain a cont ract or provisions by which t he obligor agrees t o
pay any port ion of t he t ax imposed in t his Tit le upon t he obligee or t o
reimburse t he obligee for any port ion of t h e t ax or t o pay t he int erest
wit hout deduct ion for any t ax which t he obligor may be required or permit t ed
t o pay t hereon or t o ret ain t herefrom under any law of t he Philippines, or any
st at e or count ry, t he obligor shall deduct bonds, mort gages, deeds of t rust
or ot her obligat ions, whet her t he int erest or ot her payment s are payable
annually or at short er or longer periods, and whet her t he bonds, securit ies or

obligat ions had been or will be issued or market ed, and t he int erest or ot her
payment t hereon paid, wit hin or wit hout t he Philippines, if t he int erest or
ot her payment is payable t o a nonresident alien or t o a cit izen or resident of
t he Philippines.
SEC. 58. Returns and Payment of Taxes Withheld at Source. ( A ) Quarterly Returns and Payments of Taxes Withheld. - Taxes
deduct ed and wit hheld under Sect ion 57 by wit hholding agent s s ha ll be
covered by a ret urn and paid t o, except in cases where t he Commissioner
ot herwise permit s, an aut horized Treasurer of t he cit y or municipalit y where
t he wit hholding agent has his legal residence or principal place of business, or
where t he wit hholding agent is a corporat ion, where t he principal office is
locat ed.
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The t axes deduct ed and wit hheld by t he wit hholding agent shall be held as a
special fund in t rust for t he government unt il paid t o t he collect ing officers.
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The ret urn for final wit hholding t ax shall be filed and t he payment made
wit hin t went y-five (25) days from t he close of each calendar quart er, while
t he ret urn for credit able wit hholding t axes shall be filed and t he payment
made not lat er t han t he last day of t he mont h following t he close of t he
q u a r t e r d u r i n g which wit hholding was made: Provided, That t he
Commissioner, wit h t he approval of t he Secret ary of Finance, may require
t hese wit hholding agent s t o pay or deposit t he t axes deduct ed or wit hheld
at more frequent int ervals when necessary t o prot ect t he int erest of t he
government .
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( B) Statement of Income Payments Made and Taxes Withheld. - Every

wit hholding agent required t o deduct and wit hhold t axes under Sect ion 57
shall furnish each recipient , in respect t o his or it s receipt s during t he
calendar quart er or year, a writ t en st at ement showing t he income or ot her
payment s made by t he wit hholding agent during such quart er or year, and
t he amount of t he t ax deduct ed and wit hheld t herefrom, simult aneously upon
payment at t he request of t he payee, but not lat e t han t he t went iet h (20t h)
day following t he close of t he quart er in t he case of corporat e payee, or not
lat er t han M arch 1 of t he following year in t he case of individual payee for
credit able wit hholding t axes.
For final wit hholding t axes, t he st at ement should be given t o t he payee on or
before January 31 of t he succeeding year.
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( C ) Annual Information Return. - Every wit hholding agent required t o

deduct and wit hhold t axes under Sect ion 57 shall submit t o t he Commissioner
an annual informat ion ret urn cont aining t he list of payees and income
payment s, amount of t axes wit hheld from e a c h payee and such ot her
pert inent informat ion as may be required by t he Commissioner.
In t he case of final wit hholding t axes, t he ret urn shall be filed on or before
January 31 of t he succeeding year, and for credit able wit hholding t axes, not
lat er t han M arch 1 of t he year following t he year for which t he annual report
is being submit t ed.
This ret urn, if made and filed in accordance wit h t he rules and regulat ions
approved by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, shall be sufficient compliance wit h t he requirement s of Sect ion
68 of t his Tit le in respect t o t he income payment s.
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The Commissioner may, by rules and regulat ions, grant t o any wit hholding
agent a reasonable ext ension of t ime t o furnish and submit t he ret urn
required in t his Subsect ion.
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( D ) Income of Recipient. - Income upon which any credit able t ax is

required t o be wit hheld at source under Sect ion 57 shall be included in t he
ret urn of it s recipient but t he excess of t he amount of t ax so wit hheld over
t he t ax due on his ret urn shall be refunded t o him subject t o t he provisions
of Sect ion 204; if t he income t ax collect ed at source is less t han t he t ax due
on his ret urn, t he difference shall be paid in accordance wit h t he provisions
of Sect ion 56.
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All t axes wit hheld pursuant t o t he provisions of t his Code and it s

implement ing rules and regulat ions are hereby considered t rust funds and
shall be maint ained in a separat e account and not commingled wit h any ot her
funds of t he wit hholding agent .
( E ) Registration with Register of Deeds. - No regist rat ion of any
document t ransferring real propert y shall be effect ed by t he Regist er of
Deeds unless t he Commissioner or his duly aut horized represent at ive has
cert ified t hat such t ransfer has been report ed, and t he capit al gains or
credit able wit hholding t ax, if any, has been paid: Provided, however, That t he
informat ion as may be required by rules and regulat ions t o be prescribed by
t he Secret ary of Finance, upon recommendat ion of t he Commissioner, shall
be annot at ed by t he Regist er of Deeds in t he Transfer Cert ificat e of Tit le or
Condominium Cert ificat e of Tit le: Provided, further, That in cases of t ransfer
of propert y t o a corporat ion, purs ua nt t o a merger, consolidat ion or
reorganizat ion, and where t he law allows deferred recognit ion of income in
accordance wit h Sect ion 40, t he informat ion as may be required by rules and
regulat ions t o be prescribed by t he S e c r e t a r y of Finance, upon
recommendat ion of t he Commissioner, shall be annot at ed by t he Regist er of
Deeds at t he back of t he Transfer Cert ificat e of T it le or Condominium
Cert ificat e of Tit le of t he real propert y involved: Provided, finally, That any
violat ion of t his provision by t he Regist er of Deeds shall be subject t o t he
penalt ies imposed under Sect ion 269 of t his Code.
SEC. 59. Tax on Profits Collectible from Owner or Other Persons. - The
t ax imposed under t his Tit le upon gains, profit s, and income not falling under
t he foregoing and not ret urned and paid by virt ue of t he foregoing or as
ot herwise provided by law shall be assessed by personal ret urn under rules
and regulat ions t o be prescribed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner.
The int ent and purpose of t he Tit le is t hat all gains, profit s and income of a
t axable class, as defined in t his Tit le, shall be charged and assessed wit h t he
corresponding t ax prescribed by t his Tit le, and said t ax shall be paid by t he
owners of such gains, profit s and income, or t he proper person having t he
receipt , cust ody, cont rol or disposal of t he same.
For purposes of t his Tit le, ownership of such gains, profit s and income or
liabilit y t o pay t he t ax shall be det ermined as of t he year for which a ret urn is
required t o be rendered.
CHAPTER X
ESTATES AND TRUSTS
SEC. 60. Imposition of Tax. (A) Application of Tax. - The t ax imposed by t his Tit le upon individuals shall
apply t o t he income of est at es or of any kind of propert y held in t rust ,
including:.
(1) Income accumulat ed in t rust for t he benefit of unborn or unascert ained
person or persons wit h cont ingent int erest s, and income accumulat ed or held
for fut ure dist ribut ion under t he t erms of t he will or t rust ;
(2) Income which i s t o be dist ribut ed current ly by t he fiduciary t o t he
beneficiaries, and income collect ed by a guardian of an infant which is t o be
held or dist ribut ed as t he court may direct ; (3) Income received by est at es
of deceased persons during t he period of administ rat ion or set t lement of t he
est at e; and (4) Income which, in t he discret ion of t he fiduciary, may be
eit her dist ribut ed t o t he beneficiaries or accumulat ed.
( B) Exception. - The t ax imposed by t his Tit le shall not apply t o employee's
t rust which forms part of a pension, st ock bonus or profit -sharing plan of an
employer for t he benefit of some or all of his employees (1) if cont ribut ions
are made t o t he t rust by such employer, or employees, or bot h for t he
purpose of dist ribut ing t o such employees t he earnings and principal of t he
fund accumulat ed by t he t rust in accordance wit h such plan, and (2) if under
t he t rust inst rument it is impossible, at any t ime prior t o t he sat isfact ion of
all liabilit ies wit h respect t o employees under t he t rust , for any part of t he
corpus or income t o be (wit hin t he t axable year or t hereaft er) used for, or
divert ed t o, purposes ot her t han for t he exclusive benefit of his employees:

Provided, That any amount act ually dist ribut ed t o a n y employee or

dist ribut ee shall be t axable t o him in t he year in which so dist ribut ed t o t he
ext ent t hat it exceeds t he amount cont ribut ed by s u c h employee or
dist ribut ee.
( C ) Computation and Payment. - ( 1 ) In General. - The t ax shall be
comput ed upon t he t axable income of t he est at e or t rust and shall be paid
by t he fiduciary, except as provided in Sect ion 63 (relat ing t o revocable
t rust s) and Sect ion 64 (relat ing t o income for t he benefit of t he grant or).
(2) Consolidation of Income of Two or More Trusts. - Where, in t he case of
t wo or more t rust s, t he creat or of t he t rust in each inst ance is t he same
person, and t he beneficiary in each inst ance is t he same, t he t axable income
of all t he t rust s shall be consolidat ed and t he t ax provided in t his Sect ion
comput ed on such consolidat ed income, and such proport ion of said t ax shall
be assessed and collect ed from each t rust ee which t he t axable income of t he
t rust administ ered by him bears t o t he consolidat ed income of t he several
t rust s.
SEC. 61. Taxable Income. - The t axable income of t he est at e or t rust shall
be comput ed in t he same manner and on t he same basis as in t he case of an
individual, except t hat :
(A) There shall be allowed as a deduct ion in comput ing t he t axable income of
t he est at e or t rust t he amount of t he income of t he est at e or t rust for t he
t axable year which is t o be dist ribut ed current ly by t he fiduciary t o t he
beneficiaries, a nd t he amount of t he income collect ed by a guardian of an
infant which is t o be held or dist ribut ed as t he court may direct , but t he
amount so allowed as a deduct ion shall be included in comput ing t he t axable
income of t he beneficiaries, whet her dist ribut ed t o t hem or not .
Any amount allowed a s a deduct ion under t his Subsect ion shall not be
allowed as a deduct ion under Subsect ion (B) of t his Sect ion in t he same or
any succeeding t axable year.
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(B) In t he case of income received by est at es of deceased persons during

t he period of administ rat ion or set t lement of t he est at e, and in t he case of
income which, in t he discret ion of t he fiduciary, may be eit her dist ribut ed t o
t he beneficiary or accumulat ed, t here shall be allowed as an addit ional
deduct ion in comput ing t he t axable income of t he est at e or t rust t he amount
of t he income of t he est at e or t rust for it s t axable year, which is properly
paid or credit ed during such year t o any legat ee, heir or beneficiary but t he
amount so allowed as a deduct ion shall be included in comput ing t he t axable
income of t he legat ee, heir or beneficiary.
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(C) In t he case of a t rust administ ered in a foreign count ry, t he deduct ions
ment ioned in Subsect ions (A) and (B) of t his Sect ion shall not be allowed:
Provided, That t he amount of any income included in t he ret urn of said t rust
shall not be included in comput ing t he income of t he beneficiaries.
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SEC. 62. Exemption Allowed to Estates and Trusts. - For t he purpose of

t he t ax provided for in t his Tit le, t here shall be allowed an exempt ion of
Twent y t housand pesos (P20,000) from t he income of t he est at e or t rust .
SEC. 63. Revocable Trusts. - Where at any t ime t he power t o revest in t he
grant or t it le t o any pa rt of t he corpus of t he t rust is vest ed (1) in t he
grant or eit her alone or in conjunct ion wit h any person not having a
subst ant ial adverse int erest in t he disposit ion of such part of t he corpus or
t he income t herefrom, or (2) in any person not having a subst ant ial adverse
int erest in t he disposit ion of such part of t he corpus or t he income
t herefrom, t he income of such part of t he t rust shall be included in
comput ing t he t axable income of t he grant or.
SEC. 64. Income for Benefit of Grantor. (A) Where any part of t he income of a t rust (1) is, or in t he discret ion of t he
grant or or of any person not having a subst ant ial adverse int erest in t he
disposit ion of such part of t he income may be held or accumulat ed for fut ure
dist ribut ion t o t he grant or, or (2) may, or in t he discret ion of t he grant or or
of any person not having a subst ant ial adverse int erest in t he disposit ion of
such part of t he income, be dist ribut ed t o t he grant or, or (3) is, or i n t he

discret ion of t he grant or or of any person not having a subst ant ial adverse
int erest in t he disposit ion of such part of t he income may be applied t o t he
payment of premiums upon policies of insurance on t he life of t he grant or,
such part of t he income of t he t rust shall be included in comput ing t he
t axable income of t he grant or.
(B) As used in t his Sect ion, t he t erm 'in t he discret ion of t he grant or' means
in t he discret ion of t he grant or, eit her alone or in conjunct ion wit h any
person not having a subst ant ial adverse int erest in t he disposit ion of t he
part of t he income in quest ion.
SEC.
65. Fiduciary Returns.
- Guardians,
t rust ees,
execut ors,
administ rat ors, receivers, conservat ors and all persons or corporat ions,
act ing in any fiduciary capacit y, shall render, in duplicat e, a ret urn of t he
income of t he person, t rust or est at e for whom or which t hey act , and be
subject t o all t he provisions of t his Tit le, which apply t o individuals in case
such person, est at e or t rust has a gross income of Twent y t housand pesos
(P20,000) or over during t he t axable year.
Such fiduciary or person filing t he ret urn for him or it , shall t ake oat h t hat he
has sufficient knowledge of t he affairs of such person, t rust or est at e t o
enable him t o make such ret urn and t hat t he same is, t o t he best of his
knowledge and belief, t rue and correct , and be subject t o all t he provisions
of t his Tit le which apply t o individuals: Provided, That a ret urn made by or for
one or t wo or more joint fiduciaries filed in t he province where such
fiduciaries reside; under such rules and regulat ions as t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, shall prescribe, shall be
a sufficient compliance wit h t he requirement s of t his Sect ion.
SEC. 66. Fiduciaries Indemnified Against Claims for Taxes Paid. Trust ees, execut ors, administ rat ors and ot her fiduciaries are indemnified
against t he claims or demands of every beneficiary for all payment s of t axes
which t hey shall be required t o make under t he provisions of t his Tit le, and
t hey shall have credit for t he amount of such payment s a ga ins t t he
beneficiary or principal in any account ing which t hey make as such t rust ees
or ot her fiduciaries.
CHAPTER XI
OTHER INCOME TAX REQUIREMENTS
SEC. 67. Collection of Foreign Payments. - All persons, corporat ions, duly
regist ered general co-part nerships (companias colect ivas) undert aking for
profit or ot herwise t he collect ion of f o re ign payment s of int erest s or
dividends by means of coupons, checks or bills of exchange shall obt ain a
license from t he Commissioner, and shall be subject t o such rules and
regulat ions enabling t he government t o obt ain t he informat ion required under
t his Tit le, as t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, shall prescribe.
SEC. 68. Information at Source as to Income Payments. - all persons,
corporat ions or duly regist ered co- part nerships (companias colect ivas), in
what ever capacit y act ing, including lessees or mort gagors of real or personal
propert y, t rust ees, act ing in any t rust capacit y, execut ors, administ rat ors,
receivers, conservat ors and employees making payment t o anot her person,
corporat ion or duly regist ered general co-part nership (compania colect iva), of
int erest s, rent s, salaries, wages, premiums, annuit ies, compensat ions,
remunerat ions, emolument s or ot her fixed or det erminable gains, profit s and
income, ot her t han payment described in Sect ion 69, in any t axable year, or
in t he case of such payment s made by t he Government of t he Philippines, t he
officers or employees of t he Government having informat ion as t o such
payment s and required t o make ret urns in regard t heret o, are aut horized
and required t o render a t rue and accurat e ret urn t o t he Commissioner,
under such rules and regulat ions, and in such form and manner as may be
prescribed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, set t ing fort h t he amount of such gains, profit s and income and
t he name and address of t he recipient of such payment s: Provided, That
such ret urns shall be required, in t he case of payment s of int erest upon
bonds and mort gages or deeds of t rust or ot her similar obligat ions of
corporat ions, and in t he case of collect ions of it ems, not payable i n t he
Philippines, of int erest upon t he bonds of foreign count ries and int erest from
t he bonds and dividends from t he st ock of foreign corporat ions by persons,

corporat ions
or
duly regist ered general co-part nerships (companias
colect ivas), undert aking as a mat t er of business or for profit or ot herwise
t he collect ion of foreign payment s of such int erest s or dividends by means of
coupons or bills of exchange.
SEC. 69. Return of Information of Brokers.

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- Every person, corporat ion

or duly regist ered general co-part nership (c o mpa nia colect iva), doing
business as a broker in any exchange or board or ot her similar place of
business, shall, when required by t he Commissioner, render a correct ret urn
duly verified under oat h under such rules and regulat ions as t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, may prescribe, showing
t he names of cust omers for whom such person, c orporat ion or duly
regist ered general co-part nership (compania colect iva) has t ransact ed any
business, wit h such det ails as t o t he profit s, losses or ot her informat ion
which t he Commissioner, may require as t o each of such cust omers as will
enable t he Commissioner t o det ermine whet her all income t ax due on profit s
or gains of such cust omers has been paid.
SEC. 70. Returns of Foreign Corporations. (A) Requirements. - Under rules and regulat ions prescribed by t he
Secret ary of finance, upon t he recommendat ion of t he Commissioner, any
at t orney, account ant , fiduciary, bank, t rust company, financial inst it ut ion or
ot her person, who aids, assist s, counsels or advises in, o wit h respect t o;
t he format ion, organizat ion or reorganizat ion of any foreign corporat ion,
shall, wit hin t hirt y (30) days t hereaft er, file wit h t he Commissioner a ret urn.
( B) Form and Contents of Return. - Such ret urn shall be in such form and
shall set fort h; under oat h, in respect of each such corporat ion, t o t he full
ext ent of t he informat ion wit hin t he possession or knowledge or under t he
cont rol of t he person required t o file t he ret urn, such informat ion as t he
Secret ary of Finance, upon recommendat ion of t he Commissioner, shall
prescribe by rules and regulat ions as necessary for carrying out t he
provisions of t his Tit le.
Not hing in t his Sect ion shall be const rued t o require t he divulging of
privileged communicat ions bet ween at t orney and client .
SEC. 71. Disposition of Income Tax Returns, Publication of Lists of
Taxpayers and Filers. - Aft er t he assessment shall have been made, as
provided in t his Tit le, t he ret urns, t oget her wit h any correct ions t hereof
which may have been made by t he Commissioner, shall be filed in t he Office of
t h e Commissioner and shall const it ut e public records and be open t o
inspect ion as such upon t he order of t he President of t he Philippines, under
rules and regulat ions t o be prescribed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner.
The Commissioner may, in each year, cause t o be prepared and published in
any newspaper t he list s cont aining t he names and addresses of persons who
have filed income t ax ret urns.
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SEC. 72. Suit to Recover Tax Based on False or Fraudulent Returns.

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When an assessment is made in case of any list , st at ement or ret urn, which
in t he opinion of t he Commissioner was false or fraudulent or cont ained any
underst at ement or undervaluat ion, no t ax collect ed under such assessment
shall be recovered by any suit , unless it is proved t hat t he said list ,
st at ement or ret urn was not false nor fraudulent and did not cont ain any
underst at ement or undervaluat ion; but t his provision shall not apply t o
st at ement s or ret urns made or t o be made in good fait h regarding annual
depreciat ion of oil or gas wells and mines.
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SEC. 73. Distribution of dividends or Assets by Corporations. (A) Definition of Dividends.

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- The t erm "dividends" when used in t his

Tit le means any dist ribut ion made by a corporat ion t o it s shareholders out of
it s earnings or profit s and payable t o it s shareholders, whet her in money or
in ot her propert y.
Where a corporat ion dist ribut es all of it s asset s in complet e liquidat ion or
dissolut ion, t he gain realized or loss sust ained by t he st ockholder, whet her
individual or corporat e, is a t axable income or a deduct ible loss, as t he case

may be.
( B) Stock Dividend. - A st ock dividend represent ing t he t ransfer of surplus
t o capit al account shall not be subject t o t ax.
However, if a corporat ion cancels or redeems st ock issued as a dividend at
such t ime and in such manner as t o make t he dist ribut ion and cancellat ion or
redempt ion, in whole or in part , essent ially equivalent t o t he dist ribut ion of a
t axable dividend, t he amount so dist ribut ed in redempt ion or cancellat ion of
t he st ock shall be considered as t axable income t o t he ext ent t hat it
represent s a dist ribut ion of earnings or profit s.
( C ) Dividends Distributed are Deemed Made from Most Recently
Accumulated Profits. - Any dist ribut ion made t o t he shareholders or
members of a corporat ion shall be deemed t o have been made form t he most
recent ly accumulat ed profit s or surplus, and shall const it ut e a part of t he
annual income of t he dist ribut ee for t he year in which received.
( D) Net Income of a Partnership Deemed Constructively Received by
Partners.- The t axable income declared by a part nership for a t axable year
which is subject t o t ax under Sect ion 27 (A) of t his Code, aft er deduct ing t he
corporat e income t ax imposed t herein, shall be deemed t o have been act ually
or const ruct ively received by t he part ners in t he same t axable year and shall
be t axed t o t hem in t heir individual capacit y, whet her act ually dist ribut ed or
not .

CHAPTER XII
QUARTERLY CORPORATE INCOME TAX, ANNUAL DECLARATION
AND QUARTERLY PAYMENTS OF INCOME TAXES
SEC. 74. Declaration of Income Tax for Individuals. ( A) In General.

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- Except as ot herwise provided in t his Sect ion, every

individual subject t o income t ax under Sect ions 24 and 25(A) of t his Tit le,
who is receiving self-employment income, whet her it const it ut es t he sole
source of his income or in combinat ion wit h salaries, wages and ot her fixed or
det erminable income, shall make and file a declarat ion of his est imat ed
income for t he current t axable year on or before April 15 of t he same t axable
year.
I n general, self-employment income consist s of t he earnings derived by t he
individual from t he pract ice of profession or conduct of t rade or business
carried on by him as a sole propriet or or by a part nership of which he is a
member.
Nonresident Filipino cit izens, wit h respect t o income from wit hout t he
Philippines, and nonresident aliens not engaged in t rade or business in t he
Philippines, are not required t o render a declarat ion of est imat ed income t ax.
The declarat ion shall cont ain such pert inent informat ion as t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, ma y, by rules and
regulat ions prescribe.
An individual may make amendment s of a declarat ion filed during t he t axable
year under t he rules and regulat ions prescribed by t he Secret ary of Finance,
upon recommendat ion of t he Commissioner.
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( B) Return and Payment of Estimated Income Tax by Individuals. - The

amount of est imat ed income as defined in Subsect ion (C) wit h respect t o
which a declarat ion is required under Subsect ion (A) shall be paid in four (4)
inst allment s.
The first inst allment shall be paid at t he t ime of t he declarat ion and t he
second and t hird shall be paid on August 15 and November 15 of t he current
year, respect ively.
The fourt h inst allment shall be paid on or before April 15 of t he following
calendar year when t he final adjust ed income t ax ret urn is due t o be filed.
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( C) Definition of Estimated Tax. - In t he case of an individual, t he t erm

"estimated tax" means t he amount which t he individual declared as income

t ax in his final adjust ed and annual income t ax ret urn for t he preceding
t axable year minus t he sum of t he credit s allowed under t his Tit le against t he
said t ax.
If, during t he current t axable year, t he t axpayer reasonable expect s t o pay a
bigger income t ax, he shall file an amended declarat ion during any int erval of
inst allment payment dat es.
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SEC. 75. Declaration of Quarterly Corporate Income Tax. - Every

corporat ion shall file in duplicat e a quart erly summary declarat ion of it s gross
income and deduct ions on a cumulat ive basis for t he preceding quart er or
quart ers upon which t he income t ax, as provided in Tit le II of t his Code, shall
be levied, collect ed and paid.
The t ax so comput ed shall be decreased by t he amount of t ax previously paid
or assessed during t he preceding quart ers and shall be paid not lat er t han
sixt y (60) days from t he close of each of t he first t hree (3) quart ers of t he
t axable year, whet her calendar or fiscal year.
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SEC. 76. Final Adjustment Return.

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- Every corporat ion liable t o t ax

under Sect ion 27 shall file a final adjust ment ret urn covering t he t ot al
t axable income for t he preceding calendar or fiscal year.
If t he sum of t he quart erly t ax payment s made during t he said t axable year
is not equal t o t he t ot al t ax due on t he ent ire t axable income of t hat year,
t he corporat ion shall eit her:
(A) Pay t he balance of t ax st ill due; or
(B) Carry-over t he excess credit ; or
(C) Be credit ed or refunded wit h t he excess amount paid, as t he case may
be.
In case t he corporat ion is ent it led t o a t ax credit or refund of t he excess
est imat ed quart erly income t axes paid, t he excess amount shown on it s final
adjust ment ret urn may be carried over and credit ed against t he est imat ed
quart erly income t ax liabilit ies for t he t axable quart ers of t he succeeding
t axable years.
Once t he opt ion t o carry-over and apply t he excess quart erly income t ax
against income t ax due for t he t axable quart ers of t he succeeding t axable
years has been made, such opt ion shall be considered irrevocable for t hat
t axable period and no applicat ion for cash refund or issuance of a t ax credit
cert ificat e shall be allowed t herefor.
SEC. 77. Place and Time of Filing and Payment of Quarterly Corporate
Income Tax. ( A) Place of Filing.- Except as t he Commissioner ot her wise permit s, t he
quart erly inc o me t ax declarat ion required in Sect ion 75 and t he final
adjust ment ret urn required in Sect ion 76 shall be filed wit h t he aut horized
agent
banks o r Revenue Dist rict Officer or Collect ion Agent or duly
aut horized Treasurer of t he cit y or municipalit y having jurisdict ion over t he
locat ion of t he principal office of t he corporat ion filing t he ret urn or place
where it s main books of account s and ot her dat a from which t he ret urn is
prepared are kept .
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( B ) Time of Filing the Income Tax Return. - The corporat e quart erly
declarat ion shall be filed wit hin sixt y (60) days following t he close of each of
t he first t hree (3) quart ers of t he t axable year.
The final adjust ment ret urn shall be filed on or before t he fift eent h (15th) day
of April, or on or before t he fift eent h (15th) day of t he fourt h (4th) mont h
following t he close of t he fiscal year, as t he case may be.
(C) Time of Payment of the Income Tax.

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- The income t ax due on t he

corporat e quart erly ret urns and t he final adjust ment income t ax ret urns
comput ed in accordance wit h Sect ions 75 and 76 shall be paid at t he t ime

t he declarat ion or ret urn is filed in a manner prescribed by t he Commissioner.

CHAPTER XIII
WITHHOLDING ON WAGES
SEC. 78. Definitions. - As used in t his Chapt er:
(A) Wages. - The t erm 'wages' means all remunerat ion (ot her t han fees paid
t o a public official) for services performed by an employee for his employer,
including t he cash value of all remunerat ion paid in any medium ot her t han
cash, except t hat such t erm shall not include remunerat ion paid:.
(1) For agricult ural labor paid ent irely in product s of t he farm where t he labor
is performed, or(2) For domest ic service in a privat e home, or(3) For casual
labor not in t he course of t he employer's t rade or business, or(4) For
services by a cit izen or resident of t he Philippines for a foreign government or
an int ernat ional organizat ion.
If t he remunerat ion paid by an employer t o an employee for services
performed during one-half (1/2) or more of any payroll period of not more
t han
t hirt y-one
(31) c o ns e c ut ive days const it ut es wages, all t he
remunerat ion paid by such employer t o such employee for such period shall
be deemed t o be wages; but if t he remunerat ion paid by an employer t o an
employee for services performed during more t han one -half (1/2) of any such
payroll period does not const it ut e wages, t hen none of t he remunerat ion paid
by such employer t o such employee for such period shall be deemed t o be
wages.
( B ) Payroll Period. - The t erm 'payroll period' means a period for which
payment of wages i s ordinarily made t o t he employee by his employer, and
t he t erm "miscellaneous payroll period" means a payroll period ot her t han, a
daily, weekly, biweekly, semi-mont hly, mont hly, quart erly, semi-annual, or
annual period.
( C ) Employee. - The t erm 'employee' refers t o any individual who is t he
recipient of wages and includes an officer, employee or elect ed official of t he
G overnment of t he Philippines or any polit ical subdivision, agency or
inst rument alit y t hereof.
The t erm "employee" also includes an officer of a corporat ion.
(D) Employer. - The t erm "employer" means t he person for whom an
individual performs or performed any service, of what ever nat ure, as t he
employee of such person, except t hat : (1) If t he pers on for whom t he
individual performs or performed any service does not have cont rol of t he
payment of t he wages for such services, t he t erm "employer" (except for t he
purpose of Subsect ion (A) means t he person having cont rol of t he payment
of such wages; and(2) In t he case of a person paying wages on behalf of a
nonresident alien individual, foreign part nership or foreign corporat ion not
engaged in t rade or business wit hin t he Philippines, t he t erm "employer"
(except for t he purpose of Subsect ion (A) means such person.
SEC. 79. Income Tax Collected at Source. (A) Requirement of Withholding. - Every employer making payment of
wages shall deduct and wit hhold upon such wages a t ax det ermined in
accordance wit h t he rules and regulat ions t o be prescribed by t he Secret ary
of Finance, upon recommendat ion of t he Commissioner: Provided, however,
That no wit hholding of a t ax shall be required where t he t ot al compensat ion
income of an individual does not exceed t he st at ut ory minimum wage, or five
t housand pesos (P5,000.00) per mont h, whichever is higher.
(B) Tax Paid by Recipient. - If t he employer, in violat ion of t he provisions of
t his Chapt er, fails t o deduct and wit hhold t he t ax as required under t his
Chapt er, and t hereaft er t he t ax against which such t ax may be credit ed is
paid, t he t ax so required t o be deduct ed and wit hheld shall not be collect ed
from t he employer; but t his Subsect ion shall in no case relieve t he employer
from liabilit y f o r any penalt y or addit ion t o t he t ax ot herwise applicable in
respect of such failure t o deduct and wit hhold.
(C) Refunds or Credits. -

(1) Employer. - When t here has been an overpayment of t ax under t his

Sect ion, refund or credit shall be made t o t he employer only t o t he ext ent
t hat t he amount of such overpayment was not deduct ed and wit hheld
hereunder by t he employer.
(2) Employees. -The amount deduct ed and wit hheld under t his Chapt er during
any calendar year shall be allowed as a credit t o t he recipient of such income
against t he t ax imposed under Sect ion 24(A) of t his Tit le.
Refunds and credit s in cases of excessive wit hholding shall be grant ed under
rules and regulat ions promulgat ed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner.
Any excess of t he t axes wit hheld over t he t ax due from t he t axpayer shall be
ret urned or credit ed wit hin t hree (3) mont hs from t he fift eent h (15th) day of
April.
Refunds or credit s made aft er such t ime shall earn int erest at t he rat e of six
percent (6%) per annum, st art ing aft er t he lapse of t he t hree-mont h period
t o t he dat e t he refund of credit is made.
Refunds shall be made upon warrant s drawn by t he Commissioner or by his
duly aut horized represent at ive wit hout t he necessit y of count er-signat ure by
t he Chairman, Commission on Audit or t he lat t er's duly aut horized
represent at ive as an except ion t o t he requirement prescribed by Sect ion 49,
Chapt er 8, Subt it le B, T it le 1 of Book V of Execut ive Order No. 292,
ot herwise known as t he Administ rat ive Code of 1987.
(D) Personal Exemptions. (1) In General. - Unless ot herwise provided by t his Chapt er, t he personal
and addit ional exempt ions applicable under t his Chapt er shall be det ermined
in accordance wit h t he main provisions of t his Tit le.
( 2) Exemption Certificate. - (a) When t o File. - On or before t he dat e of
commencement of employment wit h an employer, t he employee shall furnish
t he employer wit h a signed wit hholding exempt ion cert ificat e relat ing t o t he
personal and addit ional exempt ions t o which he is ent it led.
(b ) Change of Status. - In case of change of st at us of an employee as a
res ult of which he would be ent it led t o a lesser or great er amount of
exempt ion, t he employee shall, wit hin t en (10) days from such change, file
w it h t h e employer a new wit hholding exempt ion cert ificat e reflect ing t he
change.
(c) Use of Certificates. - The cert ificat es filed hereunder shall be used by t he
employer in t he det erminat ion of t he amount of t axes t o be wit hheld.
(d ) Failure to Furnish Certificate. - Where an employee, in violat ion of t his
Chapt er, eit her fails or refuses t o file a wit hholding exempt ion cert ificat e, t he
employer shall wit hhold t he t axes prescribed under t he schedule for zero
exempt ion of t he wit hholding t ax t able det ermined pursuant t o Subsect ion
(A) hereof.
(E) Withholding on Basis of Average Wages. - The Commissioner may,
under rules and regulat ions promulgat ed by t he Secret ary of Finance,
aut horize employers t o: (1) est imat e t he wages which will be paid t o an
employee in any quart er of t he calendar year;(2) det ermine t he amount t o be
deduct ed and wit hheld upon each payment of wages t o such employee during
such quart er as if t he appropriat e average of t he wages so est imat ed
const it ut ed t he act ual wages paid; and(3) deduct and wit hhold upon any
payment of wages t o such employee during ;such quart er such amount as
may be required t o be deduct ed and wit hheld during such quart er wit hout
regard t o t his Subsect ion.
( F) Husband and Wife. - When a husband and wife each are recipient s of
wages, whet her from t h e same or from different employers, t axes t o be
wit hheld shall be det ermined on t he following bases: (1) The husband shall be
deemed t he head of t he family and proper claimant of t he addit ional
exempt ion in respect t o any dependent children, unless he explicit ly waives
his right in favor of his wife in t he wit hholding exempt ion cert ificat e.

(2) Taxes shall be wit hheld from t he wages of t he wife in accordance wit h t he
schedule f o r zero exempt ion of t he wit hholding t ax t able prescribed in
Subsect ion (D)(2)(d) hereof.
( G ) Nonresident Aliens. - Wages paid t o nonresident alien individuals
engaged in t rade or business in t he Philippines shall be subject t o t he
provisions of t his Chapt er.
(H) Year-End Adjustment. - On or before t he end of t he calendar year but
prior t o t he payment of t he compensat ion for t he last payroll period, t he
employer shall det ermine t he t ax due from each employee on t axable
compensat ion income for t he ent ire t axable year in accordance wit h Sect ion
24(A).
The difference bet ween t he t ax due from t he employee for t he ent ire year
and t he sum of t axes wit hheld from January t o November shall eit her be
wit hheld from his salary in December of t he current calendar year or refunded
t o t he employee not lat er t han January 25 of t he succeeding year.
SEC. 80. Liability for Tax. ( A ) Employer. - The employer shall be liable for t he wit hholding and
remit t ance of t h e correct amount of t ax required t o be deduct ed and
wit hheld under t his Chapt er.
If t he employer fails t o wit hhold and remit t he correct amount of t ax as
required t o be wit hheld under t he provision of t his Chapt er, such t ax shall be
collect ed from t he employer t oget her wit h t he penalt ies or addit ions t o t he
t ax ot herwise applicable in respect t o such failure t o wit hhold and remit .
( B) Employee. - Where an employee fails or refuses t o file t he wit hholding
exempt ion cert ificat e or willfully supplies false or inaccurat e informat ion
t hereunder, t he t ax ot herwise required t o be wit hheld by t he employer shall
be collect ed from him including penalt ies or addit ions t o t he t ax from t he due
dat e of remit t ance unt il t he dat e of payment .
On t he ot her hand, excess t axes wit hheld made by t he employer due t o:
(1) failure or refusal t o file t he wit hholding exempt ion cert ificat e; or (2) false
and inaccurat e informat ion shall not be refunded t o t he employee but shall be
forfeit ed in favor of t he Government .
SEC. 81. Filing of Return and Payment of Taxes Withheld. - Except as t he
Commissioner ot herwise permit s, t axes deduct ed and wit hhe ld by t he
employer on wages of employees shall be covered by a ret urn and paid t o an
aut horized agent bank; Collect ion Agent , or t he duly aut horized Treasurer of
t he cit y or municipalit y where t he employer has his legal residence or
principal place of business, or in case t he employer is a corporat ion, where
t he principal office is locat ed.
The ret urn shall be filed and t he payment made wit hin t went y-five (25) days
from t he close of each calendar quart er: Provided, however, That t he
Commissioner may, wit h t he approval of t he Secret ary of Finance, require t he
employers t o pay or deposit t he t axes deduct ed and wit hheld at more
frequent int ervals, in cases where such requirement is deemed necessary t o
prot ect t he int erest of t he Government .
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The t axes deduct ed and wit hheld by employers shall be held in a special fund
in t rust for t he Government unt il t he same are paid t o t he said collect ing
officers.
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SEC. 82. Return and Payment in Case of Government Employees. - If t he

employer is t he Government of t he Philippines or any polit ical subdivision,
agency or inst rument alit y t hereof, t he ret urn of t he amount deduct ed and
wit hheld upon any wage shall be made by t he officer or employee having
cont rol of t he payment of such wage, or by any officer or employee duly
designat ed for t he purpose.
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SEC. 83. Statements and Returns. ( A) Requirements. - Every employer required t o deduct and wit hhold a t ax
shall furnish t o each such employee in respect of his employment during t he

calendar year, on or before January t hirt y-first (31st) of t he succeeding year,

or if his employment is t erminat ed before t he close of such calendar year, on
t he same day of which t he last payment of wages is made, a writ t en
st at ement confirming t he wages paid by t he employer t o such employee
during t he calendar year, and t he amount of t ax deduct ed and wit hheld
under t his Chapt er in respect of such wages.
The st at ement required t o be furnished by t his Sect ion in respect of any
wage shall cont ain such ot her informat ion, and shall be furnished at such
ot her t ime and in such form as t he Secret ary of F ina nc e , upon t he
recommendat ion of t he Commissioner, may, by rules and regulat ion,
prescribe.
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(B) Annual Information Returns. - Every employer required t o deduct and

wit hhold t he t axes in respect o f t he wages of his employees shall, on or
before January t hirt y-first (31st) of t he succeeding year, submit t o t he
Commissioner an annual informat ion ret urn cont aining a list of employees, t he
t ot al amount of compensat ion income of each employee, t he t ot al amount of
t axes wit hheld t herefrom during t he year, accompanied by copies of t he
st at ement referred t o in t he pr e c e ding paragraph, and such ot her
informat ion as may be deemed necessary.
T h i s ret urn, if made and filed in accordance wit h rules and regulat ions
promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner, shall be sufficient compliance wit h t he requirement s of Sect ion
68 of t his Tit le in respect of such wages.
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(C)
Extension of time. - The Commissioner, under such rules and
regulat ions as may be promulgat ed by t he Secret ary of Finance, may grant t o
any employer a reasonable ext ension of t ime t o furnish and submit t he
st at ement s and ret urns required under t his Sect ion.
TITLE III

CHAPTER I
ESTATE TAX
SEC. 84. Rates of Estate Tax. - There shall be levied, assessed, collect ed
and paid upon t he t ransfer of t he net est at e as det ermined in accordance
wit h Sect ions 85 and 86 of every decedent , whet her resident or nonresident
of t he Philippines, a t ax based on t he value of such net est at e, as comput ed
in accordance wit h t he following schedule:
If t he net est at e is:
OVER

P 200,000
500,000
2,000,000
5,000,000
10,000,000

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BUT NOT OVER

P 200,000
550,000
2,000,000
5,000,000
10,000,000
And Over

THE TAX
SHALL BE
Exempt
0
P 15,000
135,000
465,000
1,215,000

PLUS

5%
8%
11%
15%
20%

OF THE EXCESS
OVER
P 200,000
500,000
2,000,000
5,000,000
10,000,000

SEC. 85. Gross Estate. - t he value of t he gross est at e of t he decedent shall

be det ermined by including t he value at t he t ime of his deat h of all propert y,
real
or pe rs onal, t angible or int angible, wherever sit uat ed: Provided,
however, t hat in t he case of a nonresident decedent who at t he t ime of his
deat h was not a cit izen of t he Philippines, only t hat part of t he ent ire gross
est at e which is sit uat ed in t he Philippines shall be included in his t axable
est at e.
( A) Decedent's Interest. - To t he ext ent of t he int erest t herein of t he
decedent at t he t ime of his deat h;
( B) Transfer in Contemplation of Death. - To t he ext ent of any int erest
t herein of which t he decedent has at any t ime made a t ransfer, by t rust or

ot herwise, in cont emplat ion of or int ended t o t ake effect in possession or

enjoyment at or aft er deat h, or of which he has at any t ime made a t ransfer,
by t rust or ot herwise, under which he has ret ained for his life or for any
period which does not in fact e nd before his deat h (1) t he possession or
enjoyment of, or t he right t o t he income from t he propert y, or (2) t he right ,
eit her alone or in conjunct ion wit h any person, t o designat e t he person who
shall possess or enjoy t he propert y or t he income t herefrom; except in case
of a bonafide sale for an adequat e and full considerat ion in money or money's
wort h.
( C ) Revocable Transfer. - (1) To t he ext ent of any int erest t herein, of
which t he decedent has at any t ime made a t ransfer (except in case of a
bona fide sale for an adequat e and full considerat ion in money or money's
wort h) by t rust or ot herwise, where t he enjoyment t hereof was subject at
t he dat e of his deat h t o any change t hrough t he exercise of a power (in
what ever capacit y exerciseable) by t he decedent alone or by t he decedent in
conjunct ion wit h any ot her person (wit hout regard t o when or from what
source t he decedent acquired such power), t o alt er, amend, revoke, or
t erminat e, or where any such power is relinquished in cont emplat ion of t he
decedent 's deat h.
(2) For t he purpose of t his Subsect ion, t he power t o alt er, amend or revoke
shall be considered t o exist on t he dat e of t he decedent 's deat h even t hough
t he exercise of t he power is subject t o a precedent giving of not ice or even
t hough t he alt erat ion, amendment or revocat ion t akes effect only on t he
expirat ion of a st at ed period aft er t he exercise of t he power, whet her or not
on or before t he dat e of t he decedent 's deat h not ice has been given or t he
power has been exercised.
In such cases, proper adjust ment shall be made represent ing t he int erest s
which would have been excluded from t he power if t he decedent had lived,
and for such purpose if t he not ice has not been given or t he power has not
been exercised on or before t he dat e of his
deat h, such not ice shall be considered t o have been given, or t he power
exercised, on t he dat e of his deat h.
( D) Property Passing Under General Power of Appointment. - To t he
ext ent of any propert y passing under a general power of appoint ment
exercised by t he decedent : (1) by will, or (2) by deed execut ed in
cont emplat ion of, or int ended t o t ake effect in possession or enjoyment at ,
or aft er his deat h, or (3) by deed under which he has ret ained for his life or
any period not ascert ainable wit hout reference t o his deat h or for any period
which does not in fact end before his deat h (a) t he possession or enjoyment
of, or t he right t o t he income from, t he propert y, or (b) t he right , eit her
alone or in conjunct ion wit h any person, t o designat e t he persons who shall
possess or enjoy t he propert y or t he income t herefrom; except in case o f a
bona fide sale for an adequat e and full considerat ion in money or money's
wort h.
( E) Proceeds of Life Insurance. - To t he ext ent of t he amount receivable
by t he est at e of t he deceased, his execut or, or administ rat or, as insurance
under policies t aken out b y t he decedent upon his own life, irrespect ive of
whet her or not t he insured ret ained t he power of revocat ion, or t o t he
ext ent of t he amount receivable by any beneficiary designat ed in t he policy of
insurance, except when it is expressly st ipulat ed t hat t he designat ion of t he
beneficiary is irrevocable.
( F ) P rior Interests. - Except as ot herwise specifically provided t herein,
Subsect ions (B), ( C ) and (E) of t his Sect ion shall apply t o t he t ransfers,
t rust s, est at es, int erest s, right s, powers and relinquishment of powers, as
severally enumerat ed and described t herein, whet her made, creat ed, arising,
exist ing, exercised or relinquished before or aft er t he effect ivit y of t his Code.
(G) Transfers of Insufficient Consideration. - If any one of t he t ransfers,
t rust s, int erest s, right s or powers enumerat ed and described in Subsect ions
(B ), (C) and (D) of t his Sect ion is made, creat ed, exercised or relinquished
for a considerat ion in money or money's wort h, but is not a bona fide sale for
an adequat e and full considerat ion in money or money's wort h, t here shall be
included in t he gross est at e only t he excess of t he fair market value, at t he
t ime of deat h, of t he propert y ot herwise t o be included o n account of such
t ransact ion, over t he value of t he considerat ion received t herefor by t he
decedent .

( H) Capital of the Surviving Spouse. - The capit al of t he surviving spouse

of a decedent shall not , for t he purpose of t his Chapt er, be deemed a part of
his or her gross est at e.
SEC. 86. Computation of Net Estate. - For t he purpose of t he t ax imposed
in t his Chapt er, t he value of t he net est at e shall be det ermined:
( A) Deductions Allowed to the Estate of Citizen or a Resident. - In t he
case of a cit izen or resident of t he Philippines, by deduct ing from t he value of
t he gross est at e -.
(1) Expenses, Losses, Indebt edness, and t axes. - Such amount s: (a) For
act ual funeral expenses or in an amount equal t o five percent (5%) of t he
gros s est at e, whichever is lower, but in no case t o exceed Two hundred
t housand pesos (P200,000); (b) For judicial expenses of t he t est ament ary or
int est at e proceedings; (c) For claims against t he est at e: Provided, That at
t he t ime t he indebt edness was incurred t he debt inst rument was duly
not arized and, if t he loan was cont ract ed wit hin t hree (3) years before t he
deat h of t he decedent , t he administ rat or or execut or shall submit a
st at ement showing t he disposit ion of t he proceeds of t he loan; (d) For claims
o f t h e deceased against insolvent persons where t he value of decedent 's
int erest t herein is included in t he value of t he gross est at e; and (e) For
unpaid mort gages upon, or any indebt edness in respect t o, propert y where
t he value of decedent 's int erest t herein, undiminished by such mort gage or
indebt edness, is included in t he value of t he gross est at e, but not including
any income t ax upon income received aft er t he deat h of t he decedent , or
propert y t axes not accrued before his deat h, or any est at e t ax.
The deduct ion herein allowed in t he case of claims against t he est at e, unpaid
mort gages or any indebt edness shall, when founded upon a promise or
agreement , be limit ed t o t he ext ent t hat t hey were cont ract ed bona fide and
for an adequat e and full considerat ion in money or money's wort h.
There shall also be deduct ed losses incurred during t he set t lement of t he
est at e arising from fires, st orms, shipwreck, or ot her casualt ies, or from
robbery, t heft or embezzlement , when such losses are not compensat ed for
by insurance or ot herwise, and if at t he t ime of t he filing of t he ret urn such
losses have not been claimed as a deduct ion for t he income t ax purposes in
an income t ax ret urn, and provided t hat such losses were incurred not lat er
t han t he last day for t he payment of t he est at e t ax as prescribed in
Subsect ion (A) of Sect ion 91.
(2) Property Previously Taxed. - An amount equal t o t he value specified below
of any propert y forming a part of t he gross est at e sit uat ed in t he Philippines
of any pers on who died wit hin five (5) years prior t o t he deat h of t he
decedent , or t ransferred t o t he decedent by gift wit hin five (5) years prior t o
his deat h, where such propert y can be ident ified as having been received by
t he decedent from t he donor by gift , or from such prior decedent by gift ,
bequest , devise or inherit ance, or which can be ident ified as having been
acquired in exchange for propert y so received:One hundred percent (100%)
of t he value, if t he prior decedent died wit hin one (1) year prior t o t he deat h
of t he decedent , or if t he propert y was t ransferred t o him by gift wit hin t he
same period prior t o his deat h;Eight y percent (80%) of t he value, if t he prior
decedent died more t han one (1) year but not more t han t wo (2) years prior
t o t he deat h of t he decedent , or if t he propert y was t ransferred t o him by
gift wit hin t he same period prior t o his deat h;Sixt y percent (60%) of t he
value, if t he prior decedent died more t han t wo (2) years but not more t han
t hree (3) years prior t o t he deat h of t he decedent , or if t he propert y was
t ransferred t o him by gift wit hin t he same period prior t o his deat h;Fort y
percent (40%) of t he value, if t he prior decedent died more t han t hree (3)
years but not more t han four (4) years prior t o t he deat h of t he decedent , or
if t he propert y was t ransferred t o him by gift wit hin t he same period prior t o
his deat h;Twent y percent (20%) of t he value, if t he prior decedent died more
t han four (4) years but not more t han five (5) years prior t o t he deat h of t he
decedent , or if t he propert y was t ransferred t o him by gift wit hin t he same
period prior t o his deat h;These deduct ions s hall be allowed only where a
donor's t ax or est at e t ax imposed under t his Tit le was finally det ermined and
paid by or on behalf of such donor, or t he est at e of such prior decedent , as
t he case may be, and only in t he amount finally det ermined as t he value of
such propert y in det ermining t he value of t he gift , or t he gross est at e of
such prior decedent , and only t o t he ext ent t hat t he value of such propert y
is included in t he decedent 's gross est at e, and only if in det ermining t he

value of t he est at e of t he prior decedent , no deduct ion was allowable under

paragraph (2) in respect of t he propert y or propert ies given in exchange
t herefor.
Where a deduct ion was allowed of any mort gage or ot her lien in det ermining
t he donor's t ax, or t he est at e t ax of t he prior decedent , which was paid in
whole or in part prior t o t he decedent 's deat h, t hen t he deduct ion allowable
under said Subsect ion shall be reduced by t he amount so paid.
Such deduct ion allowable shall be reduced by an amount which bears t he
same rat io t o t he amount s allowed as deduct ions under paragraphs (1) and
(3) of t his Subsect ion as t he a mo unt ot herwise deduct ible under said
paragraph (2) bears t o t he value of t he decedent 's est at e.
Where t he propert y referred t o consist s of t wo or more it ems, t he aggregat e
value of such it ems shall be used for t he purpose of comput ing t he
deduct ion.
( 3 ) Transfers for Public Use. - The amount of all t he bequest s, legacies,
devises or t ransfers t o or for t he use of t he Government of t he Republic of
t h e P hilippines, or any polit ical subdivision t hereof, for exclusively public
purposes.
( 4 ) The Family Home. - An amount equivalent t o t he current fair market
value of t he decedent 's family home: Provided, however, That if t he said
current fair market value exceeds One million pesos (P1,000,000), t he excess
shall be subject t o est at e t ax.
As a sine qua non condit ion for t he exempt ion or deduct ion, said family home
must have been t he decedent 's family home as cert ified by t he barangay
capt ain of t he localit y.
( 5 ) Sta nda rd Deduction. - An amount equivalent t o One million pesos
(P1,000,000).
(6) Medical Expenses. - M edical Expenses incurred by t he decedent wit hin one
(1) year prior t o his deat h which shall be duly subst ant iat ed wit h receipt s:
Provided, That in no case shall t he deduct ible medical expenses exceed Five
Hundred Thousand Pesos (P500,000).
(7) Amount Received by Heirs Under Republic Act No. 4917. - Any amount
received by t he heirs from t he decedent - employee as a consequence of t he
deat h of t he decedent -employee in accordance wit h Republic Act No. 4917:
Provided, That such amount is included in t he gross est at e of t he decedent .
( B ) Deductions Allowed to Nonresident Estates. - In t he case of a
nonresident not a cit izen of t he Philippines, by deduct ing from t he value of
t hat part of his gross est at e which at t he t ime of his deat h is sit uat ed in t he
Philippines: (1) Expenses, Losses, Indebtedness and Taxes. - That proport ion
of t he deduct ions specified in paragraph (1) of Subsect ion (A) of t his Sect ion
which t he value of such part bears t o t he value of his ent ire gross est at e
wherever sit uat ed;(2) Property Previously Taxed. - An amount equal t o t he
value specified below of any propert y forming part of t he gross est at e
sit uat ed in t he Philippines of any person who died wit hin five (5) years prior
t o t he deat h of t he decedent , or t ransferred t o t he decedent by gift wit hin
five (5) years prior t o his deat h, where such propert y can be ident ified as
having been received by t he decedent from t he donor by gift , or from such
prior decedent by gift , bequest , devis e or inherit ance, or which can be
ident ified as having been acquired in exchange for propert y so received:One
hundred percent (100%) of t he value if t he prior decedent died wit hin one (1)
year prior t o t he deat h of t he decedent , or if t he propert y was t ransferred
t o him by gift , wit hin t he same period prior t o his deat h;Eight y percent
(80%) of t he value, if t he prior decedent died more t han one (1) year but not
more t han t wo (2) years prior t o t he deat h of t he decedent , or if t he
propert y was t ransferred t o him by gift wit hin t he same period prior t o his
deat h;Sixt y percent (60%) of t he value, if t he prior decedent died more t han
t wo (2) years but not more t han t hree (3) years prior t o t he deat h of t he
decedent , or if t he propert y was t ransferred t o him by gift wit hin t he same
period prior t o his deat h;Fort y percent (40%) of t he value, if t he prior
decedent died more t han t hree (3) years but not more t han four (4) years
prior t o t he deat h of t he decedent , or if t he propert y was t ransferred t o him
by gift wit hin t he same period prior t o his deat h; andTwent y percent (20%)

of t he value, if t he prior decedent died more t han four (4) years but not more
t han five (5) years prior t o t he deat h of t he decedent , or if t he propert y was
t ransferred t o him by gift wit hin t he same period prior t o his deat h.These
deduct ions shall be allowed only where a donor's t ax, or est at e t ax imposed
under t his Tit le is finally det ermined and paid by or on behalf of such donor,
or t he est at e of such prior decedent , as t he case may be, and only in t he
amount finally det ermined as t he value of such propert y in det ermining t he
value of t he gift , or t he gross est at e of such prior decedent , and only t o t he
ext ent t hat t he value of such propert y is included in t hat part of t he
decedent 's gross est at e which at t he t ime of his deat h is sit uat ed in t he
Philippines; and only if, in det ermining t he value of t he net est at e of t he prior
decedent , no deduct ion is allowable under paragraph (2) of Subsect ion (B) of
t his Sect ion, in respect of t he propert y or propert ies given in exchange
t herefore.
Where a deduct ion was allowed of any mort gage or ot her lien in det ermining
t he donor's t ax, or t he est at e t ax of t he prior decedent , which was paid in
whole or in part prior t o t he decedent 's deat h, t hen t he deduct ion allowable
under said paragraph shall be reduced by t he amount so paid.
Suc h deduct ion allowable shall be reduced by an amount which bears t he
same rat io t o t he amount s allowed as deduct ions under paragraphs (1) and
(3) of t his Subsect ion as t he amount ot herwise deduct ible under paragraph
(2) bears t o t he value of t hat part of t he decedent 's gross est at e which at
t he t ime of his deat h is sit uat ed in t he Philippines.
Where t he propert y referred t o consist s of t wo (2) or more it ems, t he
aggregat e value of such it ems shall be used for t he purpose of comput ing t he
deduct ion.
(3) Transfers for Public Use. - The amount of all bequest s, legacies, devises or
t ransfers t o or for t he use of t he Government of t he Republic of t he
Philippines or any polit ical subdivision t hereof, for exclusively public purposes.
(C) Share in the Conjugal Property. - t he net share of t he surviving spouse
in t he conjugal part nership propert y as diminished by t he obligat ions properly
chargeable t o such propert y s ha ll, for t he purpose of t his Sect ion, be
deduct ed from t he net est at e of t he decedent .
( D) Miscellaneous Provisions. - No deduct ion shall be allowed in t he case
of a nonresident not a c it iz en of t he Philippines, unless t he execut or,
administ rat or, or anyone of t he heirs, as t he case may be, includes in t he
ret urn required t o be filed under Sect ion 90 t he value at t he t ime of his
deat h of t hat part of t he gross est at e of t he nonresident not sit uat ed in t he
Philippines.
(E) Tax Credit for Estate Taxes paid to a Foreign Country. - ( 1 ) In
General. - The t ax imposed by t his Tit le shall be credit ed wit h t he amount s of
any est at e t ax imposed by t he aut horit y of a foreign count ry.
(2) Limitations on Credit. - The amount of t he credit t aken under t his Sect ion
shall be subject t o each of t he following limit at ions: (a) The amount of t he
credit in respect t o t he t ax paid t o any count ry shall not exceed t he same
proport ion of t he t ax against which such credit is t aken, which t he
decedent 's net est at e sit uat ed wit hin such count ry t axable under t his Tit le
bears t o his ent ire net est at e; and (b) The t ot al amount of t he credit shall
not exceed t he same proport ion of t he t ax against whic h such credit is
t aken, which t he decedent 's net est at e sit uat ed out side t he Philippines
t axable under t his Tit le bears t o his ent ire net est at e.
SEC. 87. Exemption of Certain Acquisitions and Transmissions. - The
following shall not be t axed: (A) The merger of usufruct in t he owner of t he
naked t it le;(B) The t ransmission or delivery of t he inherit ance or legacy by
t he fiduciary heir or legat ee t o t he fideicommissary;(C) The t ransmission from
t he first heir, legat ee or donee in favor of anot her beneficiary, in accordance
wit h t he desire of t he predecessor; and(D) All bequest s, devises, legacies or
t ransfers t o social welfare, cult ural and charit able inst it ut ions, no part of t he
net income of which insures t o t he benefit of any individual: Provided,
however, That not more t han t hirt y percent (30%) of t h e said bequest s,
devises, legacies or t ransfers shall be used by such ins t it ut ions for
administ rat ion purposes.

SEC. 88. Determination of the Value of the Estate. ( A ) Usufruct. - To det ermine t he value of t he right of usufruct , use or
habit at ion, as well as t hat of annuit y, t here shall be t aken int o account t he
probable life of t he beneficiary in accordance wit h t he lat est Basic St andard
M ort alit y Table, t o be approved by t he Secret ary of Finance, upon
recommendat ion of t he Insurance Commissioner.
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(B) Properties. - The est at e shall be appraised at it s fair market value as of

t he t ime of deat h.
However, t he appraised value of real propert y as of t he t ime of deat h shall
be, whichever is higher of:
(1) The fair market value as det ermined by t he Commissioner, or
(2) The fair market value as shown in t he schedule of values fixed by t he
Provincial and Cit y Assessors.
SEC. 89. Notice of Death to be Filed. - In all cases of t ransfers subject t o
t ax, or where, t hough exempt f r o m t ax, t he gross value of t he est at e
exceeds Twent y t housand pesos (P 20,000), t he execut or, administ rat or or
any of t he legal heirs, as t he case may be, wit hin t wo (2) mont hs aft er t he
decedent 's deat h, or wit hin a like period aft er qualifying as such execut or or
administ rat or, shall give a writ t en not ice t hereof t o t he Commissioner.
SEC. 90. Estate Tax Returns. ( A) Requirements. - In all cases of t ransfers subject t o t he t ax imposed
herein, or where, t hough exempt from t ax, t he gross value of t he est at e
exceeds Two hundred t housand pesos (P200,000), or regardless of t he gross
value of t he e s t a t e , where t he said est at e consist s of regist ered or
regist rable propert y such as real propert y, mot or vehicle, shares of st ock or
ot her similar propert y for which a clearance from t he Bureau of Int ernal
Revenue is required a s a condit ion precedent for t he t ransfer of ownership
t hereof in t he name of t he t ransferee, t he execut or, or t he administ rat or, or
any of t he legal heirs, as t he case may be, shall file a ret urn under oat h in
duplicat e, set t ing fort h: (1) The value of t he gross est at e of t he decedent at
t he t ime of his deat h, or in case of a nonresident , not a cit izen of t he
Philippines, of t hat part of his gross est at e sit uat ed in t he Philippines;(2)
The deduct ions allowed from gross est at e in det ermining t he est at e as
defined in Sect ion 86; and(3) Such part of such informat ion as may at t he
t ime be ascert ainable and such supplement al dat a as may be necessary t o
est ablish t he correct t axes. Provided, however, That est at e t ax ret urns
showing a gross value exceeding Two million pe s o s (P2,000,000) shall be
support ed wit h a st at ement duly cert ified t o by a Cert ified Public Account ant
cont aining t he following: (a) It emized asset s of t he decedent wit h t heir
corresponding gross value at t he t ime of his deat h, or in t he case of a
nonresident , not a cit izen of t he Philippines, of t hat part of his gross est at e
sit uat ed in t he Philippines; (b) It emized deduct ions from gross est at e
allowed in Sect ion 86; and (c) The amount of t ax due whet her paid or st ill
due and out st anding.
( B ) Time for Filing. - For t he purpose of det ermining t he est at e t ax
provided for in Sect ion 84 of t his Code, t he est at e t ax ret urn required under
t he preceding Subsect ion (A) shall be filed wit hin six (6) mont hs from t he
decedent 's deat h.
A cert ified copy of t he schedule of part it ion and t he order of t he court
approving t he same shall be furnished t he Commissioner wit hin t hirt y (30)
aft er t he promulgat ion of such order.
(C) Extension of Time. - The Commissioner shall have aut horit y t o grant , in
merit orious cases, a reasonable ext ension not exceeding t hirt y (30) days for
filing t he ret urn.
( D) Place of Filing. - Except in cases where t he Commissioner ot herwise
permit s, t he ret urn required under Subsect ion (A) shall be filed wit h an
aut horized agent bank, or Revenue Dist rict Officer, Collect ion Officer, or duly
aut horized Treasurer of t he cit y or municipalit y in which t he decedent was
domiciled at t he t ime of his deat h or if t here be no legal residence in t he
Philippines, wit h t he Office of t he Commissioner.

SEC. 91. Payment of Tax. (A) Time of Payment. - The est at e t ax imposed by Sect ion 84 shall be paid
at t he t ime t he ret urn is filed by t he execut or, administ rat or or t he heirs.
(B) Extension of Time. - When t he Commissioner finds t hat t he payment on
t he due dat e of t he est at e t ax or of any part t hereof would impose undue
hardship upon t he est at e or any of t he heirs, he may ext end t he t ime for
payment of such t ax or any part t hereof not t o exceed five (5) years, in case
t he est at e is set t led t hrough t he court s, or t wo (2) years in case t he est at e
is set t led ext rajudicially.
In such case, t he amount in respect of which t he ext ension is grant ed shall
be paid on or before t he dat e of t he expirat ion of t he period of t he
ext ension, and t he running of t he St at ut e of Limit at ions for assessment as
provided in Sect ion 203 of t his Code shall be suspended for t he period of any
such ext ension.
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Where t he t axes are assessed by reason of negligence, int ent ional disregard
of rules and regulat ions, or fraud on t he part of t he t axpayer, no ext ension
will be grant ed by t he Commissioner.
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If an ext ension is grant ed, t he Commissioner may require t he execut or, or

administ rat or, or beneficiary, as t he case may be, t o furnish a bond in such
amount , not exceeding double t he amount of t he t ax and wit h such suret ies
as t he Commissioner deems necessary, condit ioned upon t he payment of t he
said t ax in accordance wit h t he t erms of t he ext ension.
( C) Liability for Payment.- The est at e t ax imposed by Sect ion 84 shall be
paid by t he execut or or administ rat or before delivery t o any beneficiary of his
dist ribut ive share of t he est at e.
Such beneficiary shall t o t he ext ent of his dist ribut ive share of t he est at e, be
subsidiarily liable for t he payment of such port ion of t he est at e t ax as his
dist ribut ive share bears t o t he value of t he t ot al net est at e.
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For t he purpose of t his Chapt er, t he t erm "executor" or "administrator"

me a ns t h e execut or or administ rat or of t he decedent , or if t here is no
e xe c ut o r o r administ rat or appoint ed, qualified, and act ing wit hin t he
P hilippines, t hen any person in act ual or const ruct ive possession of any
propert y of t he decedent .
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SEC. 92. Discharge of Executor or Administrator from Personal Liability.

- If t he execut or or administ rat or makes a writ t en applicat ion t o t he
Commissioner for det erminat ion of t he amount of t he est at e t ax and
discharge from personal liabilit y t herefore, t he Commissioner (as soon as
possible, and in any event wit hin one (1) year aft er t he making of such
applicat ion, or if t he applicat ion is made before t he ret urn is filed, t hen wit hin
one (1) year aft er t he ret urn is filed, but not aft er t he expirat ion of t he
period prescribed for t he assessment of t he t ax in Sect ion 203 shall not
not ify t he execut or or administ rat or of t he amount of t he t ax.
The execut or or administ rat or, upon payment of t he amount of which he is
not ified, shall be discharged from personal liabilit y for any deficiency in t he
t ax t hereaft er found t o be due and shall be ent it led t o a receipt or writ ing
showing such discharge.
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SEC. 93. Definition of Deficiency. - As used in t his Chapt er, t he t erm

"deficiency" means:
(a) The amount by which t he t ax imposed by t his Chapt er exceeds t he
amount shown as t he t ax by t he execut or, administ rat or or any of t he heirs
upon his ret urn; but t h e amount s so shown on t he ret urn shall first be
increased by t he amount s previously assessed (or collect ed wit hout
assessment ) as a deficiency and decreased by t he amount previously abat ed,
refunded or ot herwise repaid in respect of such t ax; or
(b) If no amount is shown as t he t ax by t he execut or, administ rat or or any of
t he heirs u p o n his ret urn, or if no ret urn is made by t he execut or,
administ rat or, or any heir, t hen t he amount by which t he t ax exceeds t he

a mo unt s previous ly assessed (or collect ed wit hout assessment ) as a

deficiency; but such a mount s previously assessed or collect ed wit hout
assessment shall first be decreased by t he amount s previously abat ed,
refunded or ot herwise repaid in respect of such t ax.
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SEC. 94. Payment Before Delivery by Executor or Administrator. - No

judge shall aut horize t he execut or or judicial administ rat or t o deliver a
dist ribut ive share t o any part y int erest ed in t he est at e unless a cert ificat ion
from t he Commissioner t hat t he est at e t ax has been paid is shown.
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SEC. 95. Duties of Certain Officers and Debtors. - Regist ers of Deeds shall
not regist er in t he Regist ry of Propert y any document t ransferring real
propert y or real right s t herein or any chat t el mort gage, by way of gift s inter
vivos or mortis causa, legacy or inherit ance, unless a cert ificat ion from t he
Commissioner t hat t he t ax fixed in t his Tit le and act ually due t hereon had
been paid is show, and t hey shall immediat ely not ify t he Commissioner,
Regional Direct or, Revenue Dist rict Officer, or Revenue Collect ion Officer or
Treasurer of t he cit y or municipalit y where t heir offices are locat ed, of t he
non payment of t he t ax discovered by t hem.
Any lawyer, not ary public, or any government officer who, by reason of his
official dut ies, int ervenes in t he pre pa ra t ion or acknowledgment of
document s regarding part it ion or disposal of donat ion int er vivos or mort is
causa, legacy or inherit ance, shall have t he dut y of furnishing t he
Commissioner, Regional Direct or, Revenue Dist rict O f f ic e r or Revenue
Collect ion Officer of t he place where he may have his principal office, wit h
copies of such document s and any informat ion what soever w h i c h may
facilit at e t he collect ion of t he aforement ioned t ax.
Neit her shall a debt or of t he deceased pay his debt s t o t he heirs, legat ee,
execut or or administ rat or of his credit or, unless t he cert ificat ion of t he
Commissioner t hat t he t ax fixed in t his Chapt er had been paid is shown; but
he may pay t he execut or or judicial administ rat or wit hout said cert ificat ion if
t he credit is included in t he invent ory of t he est at e of t he deceased.
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SEC. 96. Restitution of Tax Upon Satisfaction of Outstanding Obligations.

- If aft er t he payment of t he est at e t ax, new obligat ions of t he decedent
shall appear, and t he persons int erest ed shall have sat isfied t hem by order of
t he court , t hey shall have a right t o t he rest it ut ion of t he proport ional part
of t he t ax paid.
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SEC. 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds or

Rights.- There shall not be t ransferred t o any new owner in t he books of any
corporat ion, sociedad anonima, part nership, business, or indust ry organized
or est ablished in t he Philippines any share, obligat ion, bond or right by way of
gift inter vivos or mortis causa, legacy or inherit ance, unless a cert ificat ion
from t he Commissioner t hat t he t axes fixed in t his Tit le and due t hereon
have been paid is shownIf a bank has knowledge of t he deat h of a person,
who maint ained a bank deposit account alone, or joint ly wit h anot her, it shall
not allow any wit hdrawal from t he s a i d deposit account , unless t he
Commissioner has cert ified t hat t he t axes imposed t hereon by t his Tit le have
been paid: Provided, however, That t he administ rat or of t he est at e or any
one (1) of t he heirs of t he decedent may, upon aut horizat ion by t he
Commissioner, wit hdraw an amount not exceeding Twent y t housand pesos
(P20,000) wit hout t he said cert ificat ion.
For t his purpose, all wit hdrawal slips shall cont ain a st at ement t o t he effect
t hat all of t he joint deposit ors are st ill living at t he t ime of wit hdrawal by any
one of t he joint deposit ors and such st at ement shall be under oat h by t he
said deposit ors.
CHAPTER II
DONOR'S TAX

SEC. 98. Imposition of Tax. - (A) There shall be levied, assessed, collect ed
and paid upon t he t ransfer by any person, resident or nonresident , of t he
propert y by gift , a t ax, comput ed as provided in Sect ion 99.
(B) The t ax shall apply whet her t he t ransfer is in t rust or ot herwise, whet her

t he gift is direct or indirect , and whet her t he propert y is real or personal,

t angible or int angible.
SEC. 99. Rates of Tax Payable by Donor. ( A) In General. - The t ax for each calendar year shall be comput ed on t he
basis of t he t ot al net gift s made during t he calendar year in accordance wit h
t he following schedule: If t he net gift is:
OVER

BUT NOT
OVER
P 100,000
200,000
500,000
1,000,000
3,000,000
5,000,000
10,000,000

THE TAX
PLUS OF THE EXCESS OVER
SHALL BE
Exempt
P 100,000
0
2% P100,000
200,000
2,000
4% 200,000
500,000
14,000
6% 500,000
1,000,000
44,000
8% 1,000,000
3,000,000
204,000
10% 3,000,000
5,000,000
404,000
12% 5,000,000
10,000,000
1,004,000
15% 10,000,000
( B) Tax Payable by Donor if Donee is a Stranger. - When t he donee or
beneficiary is st ranger, t he t ax payable by t he donor shall be t hirt y percent
(30%) of t he net gift s.
For t he purpose of t his t ax, a "stranger", is a person who is not a: (1)
Brot her, sist er (whet her by whole or half-blood), spouse, ancest or and lineal
descendant ; or (2) Relat ive by consanguinit y in t he collat eral line wit hin t he
fourt h degree of relat ionship.
( C) Any cont ribut ion in cash or in kind t o any candidat e, polit ical part y or
coalit ion of part ies for campaign purposes shall be governed by t he Elect ion
Code, as amended.
SEC. 100. Transfer for Less Than Adequate and Full Consideration. Where propert y, ot her t han real propert y referred t o in Sect ion 24(D), is
t ransferred for less t han an adequat e and full considerat ion in mo ne y or
money's wort h, t hen t he amount by which t he fair market value of t he
propert y exceeded t he value of t he considerat ion shall, for t he purpose of
t he t ax imposed by t his Chapt er, be deemed a gift , and shall be included in
comput ing t he amount of gift s made during t he calendar year.
SEC. 101. Exemption of Certain Gifts. - The following gift s or donat ions
shall be exempt from t he t ax provided for in t his Chapt er:
(A) In t he Case of Gift s Made by a Resident .(1) Dowries or gift s made on account of marriage and before it s celebrat ion
or wit hin one year t hereaft er by parent s t o each of t heir legit imat e,
recognized nat ural, or adopt ed children t o t he ext ent of t he first Ten
t housand pesos (P10,000):
(2) Gift s made t o or for t he use of t he Nat ional Government or any ent it y
creat ed by any of it s agencies which is not conduct ed for profit , or t o any
polit ical subdivision of t he said Government ; and
(3) Gift s in favor of an educat ional and/or charit able, religious, cult ural or
s o c i a l welfare
corporat ion,
inst it ut ion,
accredit ed
nongovernment
organizat ion, t rust or philant hropic organizat ion or research inst it ut ion or
organizat ion: Provided, however, That not more t han t hirt y percent (30%) of
said gift s shall be used by such donee for administ rat ion purposes.
For t he purpose of t he exempt ion, a 'non-profit educat ional and/or charit able
corporat ion, inst it ut ion, accredit ed nongovernment organizat ion, t rust or
philant hropic organizat ion and/or research inst it ut ion or organizat ion' is a
s c h o o l, college or universit y and/or charit able corporat ion, accredit ed
nongovernment organizat ion, t rust or philant hropic organizat ion and/or
research inst it ut ion or organizat ion, incorporat ed as a nonst ock ent it y,
paying no dividends, governed by t rust ees who receive no compensat ion, and
devot ing all it s income, whet her st udent s' fees or gift s, donat ion, subsidies
or ot her forms of philant hropy, t o t he accomplishment and promot ion of t he
purposes enumerat ed in it s Art icles of Incorporat ion.
( B) In the Case of Gifts Made by a Nonresident Not a Citizen of the

Philippines. - (1) Gift s made t o or for t he use of t he Nat ional Government or

any ent it y creat ed by any of it s agencies which is not conduct ed for profit , or
t o any polit ical subdivision of t he said Government .
(2) Gift s in favor of an educat ional and/or charit able, religious, cult ural or
s o c ia l welfare corporat ion, inst it ut ion, foundat ion, t rust or philant hropic
organizat ion or research inst it ut ion or organizat ion: Provided, however, That
not more t han t hirt y percent (30%) of said gift s shall be used by such donee
for administ rat ion purposes.
( C ) Tax Credit for Donor's Taxes Paid to a Foreign Country. - ( 1 ) In
General. - The t ax imposed by t his Tit le upon a donor who was a cit izen or a
resident at t he t ime of donat ion shall be credit ed wit h t he amount of any
donor's t ax of any charact er and descript ion imposed by t he aut horit y of a
foreign count ry.
( 2 ) Limitations on Credit. - The amount of t he credit t aken under t his
Sect ion shall be subject t o each of t he following limit at ions:
(a) The amount of t he credit in respect t o t he t ax paid t o any count ry shall
n o t exceed t he same proport ion of t he t ax against which such credit is
t aken, which t he net gift s sit uat ed wit hin such count ry t axable under t his
Tit le bears t o his ent ire net gift s; and
(b) The t ot al amount of t he credit shall not exceed t he same proport ion of
t he t ax against which such credit is t aken, which t he donor's net gift s
sit uat ed out side t he Philippines t axable under t his t it le bears t o his ent ire
net gift s.
SEC. 102. Valuation of Gifts Made in Property. - If t he gift is made in
propert y, t he fair market value t hereof at t he t ime of t he gift shall be
considered t he amount of t he gift .
In case of real propert y, t he provisions of Sect ion 88(B) shall apply t o t he
valuat ion t hereof.
SEC. 103. Filing of Return and Payment of Tax. ( A) Requirements.- any individual who makes any t ransfer by gift (except
t hose which, under Sect ion 101, are exempt from t he t ax provided for in t his
Chapt er) shall, for t he purpose of t he said t ax, make a ret urn under oat h in
duplicat e.
The ret urn shall se fort h:
(1) Each gift made during t he calendar year which is t o be included in
comput ing net gift s;
(2) The deduct ions claimed and allowable;
(3) Any previous net gift s made during t he same calendar year;
(4) The name of t he donee; and
(5) Such furt her informat ion as may be required by rules and regulat ions
made pursuant t o law.
( B ) Time and Place of Filing and Payment. - The ret urn of t he donor
required in t his Sect ion shall be filed wit hin t hirt y (30) days aft er t he dat e
t he gift is made and t he t ax due t hereon shall be paid at t he t ime of filing.
Except in cases where t he Commissioner ot herwise permit s, t he ret urn shall
be filed and t he t ax paid t o an aut horized agent bank, t he Revenue Dist rict
Officer, Revenue Collect ion Officer or duly aut horized Treasurer of t he cit y or
municipalit y where t he donor was domiciled at t he t ime of t he t ransfer, or if
t here be no legal res idenc e in t he Philippines, wit h t he Office of t he
Commissioner.
In t he case of gift s made by a nonresident , t he ret urn may be filed wit h t he
Philippine Embassy or Consulat e in t he count ry where he is domiciled at t he
t ime of t he t ransfer, or direct ly wit h t he Office of t he Commissioner.
SEC. 104. Definitions. - For purposes of t his Tit le, t he t erms "gross estate"

and "gifts" include real and personal propert y, whet her t angible or int angible,
or mixed, wherever sit uat ed: Provided, however, That where t he decedent or
donor was a nonresident alien at t he t ime of his deat h or donat ion, as t he
case may be, his real and personal propert y so t ransferred but whic h are
sit uat ed out side t he Philippines shall not be included as part of h i s "gross
estate" or "gross gift": Provided, further, That franc his e which must be
exercised in t he Philippines; shares, obligat ions or b o nd s issued by any
corporat ion or sociedad anonima organized or const it ut ed in t he Philippines in
accordance wit h it s laws; shares, obligat ions or bonds by any foreign
corporat ion eight y-five percent (85%) of t he business of which is locat ed in
t he Philippines; shares, obligat ions or bonds i s s u e d by any foreign
corporat ion if such shares, obligat ions or bonds have acquired a business
sit us in t he Philippines; shares or right s in any part nership, business or
indust ry est ablished in t he Philippines, shall be considered as sit uat ed in t he
P hilippines: Provided, still further, t hat n o t ax shall be collect ed under t his
Tit le in respect of int angible personal propert y: (a) if t he decedent at t he
t ime of his deat h or t he donor at t he t ime of t he donat ion was a cit izen and
resident of a foreign count ry which at t he t ime of his deat h or donat ion did
not impose a t ransfer t ax of any charact er, in respect of int angible personal
propert y of cit izens of t he Philippines not residing in t hat foreign count ry, or
(b) if t he laws of t he foreign count ry of which t he decedent or donor was a
cit izen and resident at t he t ime of his deat h or donat ion allows a similar
exempt ion from t ransfer or deat h t axes of every charact er or descript ion in
respect of int angible personal propert y owned by cit izens of t he Philippines
not residing in t hat foreign count ry.
The t erm "deficiency" means: (a) t he amount by which t ax imposed by t his
Chapt er exceeds t he amount shown as t he t ax by t he donor upon his ret urn;
but t he amount so shown on t he ret urn shall first be increased by t he
amount
previously a s s e s s e d (or collect ed wit hout assessment ) as a
deficiency, and decreased by t he amount s previously abat ed, refunded or
ot herwise repaid in respect of such t ax, or (b) if no amount is shown as t he
t ax by t he donor, t hen t he amount by which t he t ax exceeds t he amount s
previously assessed, (or collect ed wit hout assessment ) as a deficiency, but
such amount s previously assessed, or collect ed wit hout assessment , shall
first be decreased by t he amount previously abat ed, refunded or ot herwise
repaid in respect of such t ax.
TITLE IV
VALUE-ADDED TAX
CHAPTER I
IMPOSITION OF TAX

SEC. 105. Persons Liable. - Any person who, in t he course of t rade or

business, sells bart ers, exchanges, leases goods or propert ies, renders
services, and any person who import s goods shall be subject t o t he valueadded t ax (VAT) imposed in Sect ions 106 t o 108 of t his Code.
The value-added t ax is an indirect t ax and t he amount of t ax may be shift ed
or passed on t o t he buyer, t ransferee or lessee of t he goods, propert ies or
services.
This rule shall likewise apply t o exist ing cont ract s of sale or lease of goods,
propert ies or services at t he t ime of t he effect ivit y of Republic Act No. 7716.
c ra l a w

The phrase "in the course of trade or business" means t he regular conduct or
purs uit o f a commercial or an economic act ivit y, including t ransact ions
incident al t heret o, by any person regardless of whet her or not t he person
engaged t herein is a nonst ock, nonprofit privat e organizat ion (irrespect ive of
t he disposit ion of it s net income and whet her or not it sells exclusively t o
members or t heir guest s), or government ent it y.
c ra l a w

The rule of regularit y, t o t he cont rary not wit hst anding, services as defined in
t his Code rendered in t he Philippines by nonresident foreign persons shall be
considered as being course of t rade or business.
c ra l a w

SEC. 106. Value-Added Tax on Sale of Goods or Properties. ( A) Rate and Base of Tax. - There shall be levied, assessed and collect ed

on every sale, bart er o r exchange of goods or propert ies, value-added t ax

equivalent t o t en percent (10%) of t he gross selling price or gross value in
money of t he goods o r propert ies sold, bart ered or exchanged, such t ax t o
be paid by t he seller or t ransferor.
(1) The t erm "goods" o r "properties" shall mean all t angible and int angible
object s which are capable of pecuniary est imat ion and shall include: (a) Real
propert ies held primarily for sale t o cust omers or held for lease in t he
ordinary course of t rade or business; (b) The right or t he privilege t o use
pat ent , copyright , design or model, plan, secret formula or process, goodwill,
t rademark, t rade brand or ot her like propert y or right ; (c) The right or t he
privilege t o use in t he Philippines of any indust rial, commercial or scient ific
equipment ; (d) The right or t he privilege t o use mot ion pict ure films, t apes
and discs; and (e) Radio, t elevis ion, sat ellit e t ransmission and cable
t elevision t ime.
The t erm "gross selling price" means t he t ot al amount of money or it s
equivalent which t he purchaser pays or is obligat ed t o pay t o t he seller in
considerat ion of t he sale, bart er or exchange of t he goods or propert ies,
excluding t he value-added t ax.
The excise t ax, if any, on such goods or propert ies shall form part of t he
gross selling price.
(2) The following sales by VAT-regist ered persons shall be subject t o zero
percent (0%) rat e:
(a) Export Sales. - The t erm "export sales" means:
(1) The sale and act ual shipment of goods from t he Philippines t o a foreign
count ry, irrespect ive of any shipping arrangement t hat may be agreed upon
which may influence or det ermine t he t ransfer of ownership of t he goods so
export ed and paid for in accept able foreign currency or it s equivalent in
go o ds or services, and account ed for in accordance wit h t he rules and
regulat ions of t he Bangko Sent ral ng Pilipinas (BSP);
(2) Sale o f raw mat erials or packaging mat erials t o a nonresident buyer for
de live ry t o a resident local export -orient ed ent erprise t o be used in
manufact uring, processing, packing or repacking in t he Philippines of t he said
buyer's goods and paid for in accept able foreign currency and account ed for
i n accordance wit h t he rules and regulat ions of t he Bangko Sent ral ng
Pilipinas (BSP);
(3)
Sale o f raw mat erials or packaging mat erials t o export -orient ed
ent erprise whose export sales exceed sevent y percent (70%) of t ot al annual
product ion;
(4) Sale of gold t o t he Bangko Sent ral ng Pilipinas (BSP); and
(5) Those considered export sales under Execut ive Order No. 226, ot herwise
known as t he Omnibus Invest ment Code of 1987, and ot her special laws.
(b) Foreign Currency Denominated Sale. - The phrase "foreign currency
denominated sale" means sale t o a nonresident of goods, except t hose
ment ioned in Sect ions 149 and 150, assembled or manufact ured in t he
Philippines for delivery t o a resident in t he Philippines, paid for in accept able
f o re ign currency and account ed for in accordance wit h t he rules and
regulat ions of t he Bangko Sent ral ng Pilipinas (BSP).
(c) Sales t o persons or ent it ies whose exempt ion under special laws or
int ernat ional agreement s t o which t he Philippines is a signat ory effect ively
subject s such sales t o zero rat e.
( B ) Transactions Deemed Sale. - The following t ransact ions shall be
deemed sale: (1) Transfer, use or consumpt ion not in t he course of business
of goods or propert ies originally int ended for sale or for use in t he course of
business;(2) Dist ribut ion or t ransfer t o: ( a ) Shareholders or invest ors as
share in t he profit s of t he VAT-regist ered persons; or (b) Credit ors in
payment of debt ; (3) Consignment of goods if act ual sale is not made wit hin
sixt y (60) days following t h e dat e such goods were consigned; and(4)
Ret irement from or cessat ion of business, wit h respect t o invent ories of
t axable goods exist ing as of such ret irement or cessat ion.

(C) Changes in or Cessation of Status of a VAT-registered Person. - The

t ax imposed in Subsect ion (A) of t his Sect ion shall also a pply t o goods
disposed of or exist ing as of a cert ain dat e if under circumst ances t o be
prescribed in rules and regulat ions t o be promulgat ed by t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, t he st at us of a person
as a VAT-regist ered person changes or is t erminat ed.
(D) Determination of the Tax. - (1) The t ax s h a ll be comput ed by
mult iplying t he t ot al amount indicat ed in t he invoice by one-elevent h (1/11).
(2) Sales Returns, Allowances and Sales Discounts. - The value of goods or
propert ies sold and subsequent ly ret urned or for which allowances were
grant ed by a VAT-regist ered person may be deduct ed from t he gross sales or
receipt s for t he quart er in which a refund is made or a credit memorandum or
refund is issued.
Sales discount grant ed and indicat ed in t he invoice at t he t ime of sale and
t he grant of which does not depend upon t he happening of a fut ure event
may be excluded from t he gross sales wit hin t he same quart er it was given.
(3) Authority of the Commissioner to Determine the Appropriate Tax Base. The Commissioner shall, by rules and regulat ions prescribed by t he Secret ary
of Finance, det ermine t he appropriat e t ax base in cases where a t ransact ion
i s d e e me d a sale, bart er or exchange of goods or propert ies under
Subsect ion (B) hereof, or where t he gross selling price is unreasonably lower
t han t he act ual market value.
SEC. 107. Value-Added Tax on Importation of Goods. ( A) I n General. - There shall be levied, assessed and collect ed on every
import at ion of goods a value-added t ax equivalent t o t en percent (10%)
based on t he t ot al value used by t he Bureau of Cust oms in det ermining t ariff
and cust oms dut ies plus cust oms dut ies, excise t axes, if any, and ot her
charges, such t ax t o be paid by t he import er prior t o t he release of such
goods from cust oms cust ody: Provided, That where t he cust oms dut ies are
det ermined on t he basis of t he quant it y or volume of t he goods, t he valueadded t ax shall be based on t he landed cost plus excise t axes, If any.
( B) Transfer of Goods by Tax-Exempt Persons. - In t he case of t ax-free
import at ion of goods int o t he Philippines by persons, ent it ies or agencies
exempt from t ax where such goods are subsequent ly sold, t ransferred or
exchanged in t he Philippines t o non-exempt persons or ent it ies, t he
purchasers, t ransferees or recipient s shall be considered t he import ers
t hereof, who shall be liable for any int ernal revenue t ax on such import at ion.
The t ax due on such import at ion shall const it ut e a lien on t he goods superior
t o all charges or liens on t he goods, irrespect ive of t he possessor t hereof.
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
Properties. (A) Rate and Base of Tax. - There shall be levied, assessed and collect ed, a
value-added t ax equivalent t o t en percent (10%) of gross receipt s derived
from t he sale or exc hange of services, including t he use or lease of
propert ies.
The phrase "sale or exchange of services" means t he performance of all kinds
o r s e rvic e s in t he Philippines for ot hers for a fee, remunerat ion or
considerat ion, including t hose performed or rendered by const ruct ion and
service cont ract ors; st ock, real est at e, commercial, cust oms and immigrat ion
brokers; lessors of propert y, whet her personal or real; warehousing services;
lessors or dist ribut ors of cinemat ographic films; persons engaged in milling
proc es s ing, manufact uring or repacking goods for ot hers; propriet ors,
operat ors or keepers of hot els, mot els, rest houses, pension houses, inns,
resort s; propriet ors or operat ors of rest aurant s, refreshment parlors, cafes
and ot her eat ing places, including clubs and cat erers; dealers in securit ies;
lending invest ors; t ransport at ion cont ract ors on t heir t ransport of goods or
cargoes, including persons who t ransport goods or cargoes for hire anot her
domest ic common carriers by land, air and wat er relat ive t o t heir t ransport of
goods or cargoes; services of franchise grant ees of t elephone and t elegraph,
radio and t elevision broadcast ing and all ot her franchise grant ees except
t hose under Sect ion 119 of t his Code; services of banks, non-bank financial

int ermediaries and finance companies; and non-life insurance companies

(except t heir c r o p insurances), including suret y, fidelit y, indemnit y and
bonding companies; and similar services regardless of whet her or not t he
performance t hereof calls for t he exercise or use of t he physical or ment al
facult ies.
The phrase 'sale or exchange of services' shall likewise include:
(1) The lease or t he use of or t he right or privilege t o use any copyright ,
pat ent , design or model, plan secret formula or process, goodwill, t rademark,
t rade brand or ot her like propert y or right ;
(2) The lease of t he use of, or t he right t o use of any indust rial, commercial
or scient ific equipment ;
(3) The supply of scient ific, t echnical, indust rial or commercial knowledge or
informat ion;(4) The supply of any assist ance t hat is ancillary and subsidiary
t o and is furnished as a means of enabling t he applicat ion or enjoyment of
any such propert y, or right as is ment ioned in subparagraph (2) or any such
knowledge or informat ion as is ment ioned in subparagraph (3);(5) The supply
of services by a nonresident person or his employee in connect ion wit h t he
use of propert y or right s belonging t o, or t he inst allat ion or operat ion of any
brand, machinery or ot her apparat us purchased from such nonresident
person.
(6) The supply of t echnical advice, assist ance or services rendered in
connect ion wit h t echnical management or administ rat ion of any scient ific,
indust rial or commercial undert aking, vent ure, project or scheme;(7) The
lease of mot ion pict ure films, films, t apes and discs; and(8) The lease or t he
use of or t he right t o use radio, t elevision, sat ellit e t ransmission and cable
t elevision t ime.
Lease of propert ies shall be subject t o t he t ax herein imposed irrespect ive of
t he place where t he cont ract of lease or licensing agreement was execut ed if
t he propert y is leased or used in t he Philippines.
The t erm "gross receipts" means t he t ot al amount of money or it s equivalent
represent ing t he cont ract price, compensat ion, service fee, rent al or royalt y,
including t he amount charged for mat erials supplied wit h t he services and
deposit s and advanced payment s act ually or const ruct ively received during
t he t axable quart er for t he services performed or t o be performed for
anot her person, excluding value-added t ax.
(B) Transactions Subject to Zero Percent (0%) Rate.- The following
services performed in t he Philippines by VAT- regist ered persons shall be
subject t o zero percent (0%) rat e.
(1) Processing, manufact uring or repacking goods for ot her persons doing
business out side t he Philippines which goods are subsequent ly export ed,
where t he services are paid for in accept able foreign currency and account ed
for in accordance wit h t he rules and regulat ions of t he Bangko Sent ral ng
Pilipinas (BSP);(2) Services ot her t han t hose ment ioned in t he preceding
paragraph, t he considerat ion for which is paid for in accept able foreign
currency and account ed for in accordance wit h t he rules and regulat ions of
t he Bangko Sent ral ng Pilipinas (BSP);(3) Services rendered t o persons or
ent it ies whose exempt ion under special laws or int ernat ional agreement s t o
which t he Philippines is a signat ory effect ively subject s t he supply of such
services t o zero percent (0%) rat e;(4) Services rendered t o vessels engaged
exclusively in int ernat ional shipping; and(5) Services performed by
subcont ract ors
and/or
cont ract ors
in
processing, c o n v e r t i n g , of
manufact uring goods for an ent erprise whose export sales exceed sevent y
percent (70%) of t ot al annual product ion.
( C) Determination of the Tax. - The t ax shall be comput ed by mult iplying
t he t ot al amount indicat ed in t he official receipt by one-elevent h (1/11).
SEC. 109. Exempt Transactions. - The following shall be exempt from t he
value-added t ax:
(a) Sale of nonfood agricult ural product s; marine and forest product s in t heir
original st at e by t he primary producer or t he owner of t he land where t he
same are produced;

(b) Sale of cot t on seeds in t heir original st at e; and copra;

(c) Sale or import at ion of agricult ural and marine food product s in t heir
original st at e, livest ock and poult ry of or king generally used as, or yielding
or producing foods for human consumpt ion; and breeding st ock and genet ic
mat erials t herefor.Product s classified under t his paragraph and paragraph (a)
shall be considered in t heir original st at e even if t hey have undergone t he
simple processes of preparat ion o r preservat ion for t he market , such as
freezing, drying, salt ing, broiling, roast ing, smoking or st ripping.Polished
and/or husked rice, corn grit s, raw cane sugar and molasses, and ordinary
salt shall be considered in t heir original st at e;
(d) Sale or import at ion of fert ilizers; seeds, seedlings and fingerlings; fish,
prawn, livest ock and poult ry feeds, including ingredient s, whet her locally
produced or import ed, used in t he manufact ure of finished feeds (except
specialt y feeds for rac e horses, fight ing cocks, aquarium fish, zoo animals
and ot her animals generally considered as pet s);
(e) Sale or import at ion of coal and nat ural gas, in what ever form or st at e,
and pet roleum product s (except lubricat ing oil, processed gas, grease, wax
and pet rolat um) subject t o excise t ax imposed under Tit le VI;
(f) Sale or import at ion of raw mat erials t o be used by t he buyer or import er
himself in t he manufact ure of pet roleum product s subject t o excise t ax,
except lubricat ing oil, processed gas, grease, wax and pet rolat um;
(g) Import at ion of passenger and/or cargo vessels of more t han five
t housand t ons (5,000) whet her coast wise or ocean-going, including engine
and spare part s of said vessel t o be used by t he import er himself as operat or
t hereof;
(h) Import at ion of personal and household effect s belonging t o t he resident s
of t he P hilippines ret urning from abroad and nonresident cit izens coming t o
reset t le in t h e P hilippines: Provided, That such goods are exempt from
cust oms dut ies under t he Tariff and Cust oms Code of t he Philippines;
(i) Import at ion of professional inst rument s and implement s, wearing apparel,
domest ic animals, and personal household effect s (except any vehicle, vessel,
aircraft , machinery ot her goods for use in t he manufact ure and merchandise
of any kind in commercial quant it y) belonging t o persons coming t o set t le in
t he Philippines, for t heir own use and not for sale, bart er or exchange,
accompanying such persons, or arriving wit hin ninet y (90) days before or
aft er t heir arrival, upon t he product ion of evidence sat isfact ory t o t he
Commissioner, t hat such persons are act ually coming t o set t le in t he
Philippines and t hat t he change of residence is bona fide;
(j) Services subject t o percent age t ax under Tit le V;
(k) Services by agricult ural cont ract growers and milling for ot hers of palay
int o rice, corn int o grit s and sugar cane int o raw sugar;
(l) M edical, dent al, hospit al and vet erinary services subject t o t he provisions
of Sect ion 17 of Republic Act No. 7716, as amended;
(m) Educat ional services rendered by privat e educat ional inst it ut ions, duly
accredit ed by t he Depart ment of Educat ion, Cult ure and Sport s (DECS) and
t h e Commis s ion on Higher Educat ion (CHED), and t hose rendered by
government educat ional inst it ut ions;
(n) Sale by t he art ist himself of his works of art , lit erary works, musical
composit ions and similar creat ions, or his services performed for t he
product ion of such works;
(o) Services rendered by individuals pursuant t o an employer-employee
relat ionship;
(p) Services rendered by regional or area headquart ers est ablished in t he
P hilippine s by mult inat ional corporat ions which act as supervisory,
communicat ions and coordinat ing cent ers for t heir affiliat es, subsidiaries or
branches in t he Asia-Pacific Region and do not earn or derive income from
t he Philippines;
(q) Transact ions which are exempt under int ernat ional agreement s t o which

t h e P hilippines is a signat ory or under special laws, except t hose under

President ial Decree Nos. 66, 529 and 1590;
(r) Sales by agricult ural cooperat ives duly regist ered wit h t he Cooperat ive
Development Aut horit y t o t heir members as well as sale of t heir produce,
whet her in it s original st at e or processed form, t o non-members; t heir
import at ion of direct farm input s, machineries and equipment , including spare
part s t hereof, t o be used direct ly and exclusively in t he product ion and/or
processing of t heir produce;
(s) Sales by elect ric cooperat ives duly regist ered wit h t he Cooperat ive
Development aut horit y or Nat ional Elect rificat ion Administ rat ion, relat ive t o
t he generat ion and dist ribut ion of elect ricit y as well as t heir import at ion of
machineries and equipment , including spare part s, which shall be direct ly
used in t he generat ion and dist ribut ion of elect ricit y;
(t )
Gross r e c e ipt s from lending act ivit ies by credit or mult i-purpose
cooperat ives duly regist ered wit h t he Cooperat ive Development Aut horit y
whose lending operat ion is limit ed t o t heir members;
(u) Sales by non-agricult ural, non- elect ric and non-credit cooperat ives duly
regist ered wit h t he Cooperat ive Development Aut horit y: Provided, That t he
share capit al cont ribut ion of each member does not exceed Fift een t housand
pes os (P15,000) and regardless of t he aggregat e capit al and net surplus
rat ably dist ribut ed among t he members;
(v) Export sales by persons who are not VAT-regist ered;
(w) Sale of real propert ies not primarily held for sale t o cust omers or held for
lease in t he ordinary course of t rade or business or real propert y ut ilized for
low-cost and socialized housing as defined by Republic Act No. 7279,
ot herwise known as t he Urban Development and Housing Act of 1992, and
ot her relat ed laws, house and lot and ot her resident ial dwellings valued at
O n e million pesos (P1,000,000) and below: Provided, That not lat er t han
January 31st of t he calendar year subsequent t o t he effect ivit y of t his Act
a n d each calendar year t hereaft er, t he amount of One million pesos
(P1,000,000) shall be adjust ed t o it s present value using t he Consumer Price
Index, as published by t he nat ional St at ist ics Office (NSO);
(x) Lease of a resident ial unit wit h a mont hly rent al not exceeding Eight
t housand pesos (P8,000); Provided, That not lat er t han January 31st of t he
calendar year subsequent t o t he effect ivit y of Republic Act No. 8241 and
each calendar year t hereaft er, t he amount of Eight t housand pesos (P8,000)
shall be adjust ed t o it s present value using t he Consumer Price Index as
published by t he Nat ional St at ist ics Office (NS0);
(y) Sale, import at ion, print ing or publicat ion of books and any newspaper,
magazine review or bullet in which appears at regular int ervals wit h fixed
prices for subscript ion and sale and which is not devot ed principally t o t he
publicat ion of paid advert isement s; and
(z) Sale or lease of goods or propert ies or t he performance of services ot her
t han t he t ransact ions ment ioned in t he preceding paragraphs, t he gross
annual sales and/or receipt s do not exceed t he amount of Five hundred fift y
t housand pesos (P 550,000): Provided, That not lat er t han January 31st of
t he calendar year subsequent t o t he effect ivit y of Republic Act No. 8241 and
eac h calendar year t hereaft er, t he amount of Five hundred fift y t housand
pesos (550,000) shall be adjust ed t o it s present value using t he Consumer
Price Index, as published by t he Nat ional St at ist ics Office (NSO).
The foregoing exempt ions t o t he cont rary not wit hst anding, any person whose
sale of goods or propert ies or services which are ot herwise not subject t o
VAT, but who issues a VAT invoice or receipt t herefor shall, in addit ion t o his
liabilit y t o o t he r applicable percent age t ax, if any, be liable t o t he t ax
imposed in Sect ion 106 or 108 wit hout t he benefit of input t ax credit , and
such t ax shall also be recognized as input t ax credit t o t he purchaser under
Sect ion 110, all of t his Code.
SEC. 110. Tax Credits. (A) Creditable Input Tax. - (1) Any input t ax evidenced by a VAT invoice or
official receipt issued in accordance wit h Sect ion 113 hereof on t he following

t ransact ions shall be credit able against t he out put t ax: (a) Purchase or
import at ion of goods:
(i) For sale; or
(ii) For conversion int o or int ended t o form part of a finished product for sale
including packaging mat erials; or
(iii) For use as supplies in t he course of business; or
(iv) For use as mat erials supplied in t he sale of service; or
( v ) F o r use in t rade or business for which deduct ion for depreciat ion or
amort izat ion is allowed under t his Code, except aut omobiles, aircraft and
yacht s.
(b) Purchase of services on which a value-added t ax has been act ually paid.
(2) The input t ax on domest ic purchase of goods or propert ies shall be
credit able: (a) To t he purc has er upon consummat ion of sale and on
import at ion of goods or propert ies; and (b) To t he import er upon payment of
t he value-added t ax prior t o t he release of t he goods from t he cust ody of
t he Bureau of Cust oms.
However, in t he case of purchase of services, lease or use of propert ies, t he
input t ax s ha ll be credit able t o t he purchaser, lessee or licensee upon
payment of t he compensat ion, rent al, royalt y or fee.
(3) A VAT-regist ered person who is also
t o t he value-added t ax shall be allowed
t ax which can be direct ly at t ribut ed t o
t ax; and (b) A rat able port ion of any
at t ribut ed t o eit her act ivit y.

engaged in t ransact ions not subject

t ax credit as follows: (a) Tot al input
t ransact ions subject t o value-added
input t ax which cannot be direct ly

The t erm "input tax" means t he value-added t ax due from or paid by a VATregist ered person in t he course of his t rade or business on import at ion of
go o ds o r local purchase of goods or services, including lease or use of
propert y, from a VAT-regist ered person.
It shall also include t he t ransit ional input t ax det ermined in accordance wit h
Sect ion 111 of t his Code.The t erm "output tax" means t he value-added t ax
due on t he sale or lease of t axable goods or propert ies or services by any
person regist ered or required t o regist er under Sect ion 236 of t his Code.
( B) Excess Output or Input Tax.- If at t he end of any t axable quart er t he
out put t ax exceeds t he input t ax, t he excess shall be paid by t he VATregist ered person.
If t he input t ax exceeds t he out put t ax, t he excess shall be carried over t o
t he succeeding quart er or quart ers.
any input t ax at t ribut able t o t he purchase of capit al goods or t o zero-rat ed
sales by a VAT-regist ered person may at his opt ion be refunded or credit ed
against ot her int ernal revenue t axes, subject t o t he provisions of Sect ion
112.
(C) Determination of Creditable Input Tax.- The sum of t he excess input
t ax carried over from t he preceding mont h or quart er and t he input t ax
credit able t o a VAT-regist ered person during t he t axable mont h or quart er
shall be reduced by t he amount of claim for refund or t ax credit for valueadded t ax and ot her adjust ment s, such as purchase ret urns or allowances
and input t ax at t ribut able t o exempt sale.
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The claim for t ax credit referred t o in t he foregoing paragraph shall include

not only t hose filed wit h t he Bureau of Int ernal Revenue but also t hose filed
wit h ot her government agencies, such as t he Board of Invest ment s t he
Bureau of Cust oms.
SEC. 111. Transitional/Presumptive Input Tax Credits. (A) Transitional Input Tax Credits.- A person who becomes liable t o valueadded t ax or any person who elect s t o be a VAT-regist ered person shall,
subject t o t he filing of an invent ory according t o rules and regulat ions
prescribed by t he Sec ret ary of finance, upon recommendat ion of t he
Commissioner, be allowed input t a x on his beginning invent ory of goods,
mat erials and supplies equivalent for eight percent (8%) of t he value of such

invent ory or t he act ual value-added t ax paid on such goods, mat erials and
supplies, whichever is higher, which shall be credit able against t he out put
t ax.
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(B) Presumptive Input Tax Credits. (1) Persons or firms engaged in t he processing of sardines, mackerel and
milk, and in manufact uring refined sugar and cooking oil, shall be allowed a
presumpt ive input t ax, credit able against t he out put t ax, equivalent t o one
and one-half percent (1 1/2%) of t he gross value in money of t heir purchases
o f p r ima r y agricult ural product s which are used as input s t o t heir
product ion.As used in t his Subsect ion, t he t erm "processing" shall mean
past eurizat ion, canning and act ivit ies which t hrough physical or chemical
process alt er t he ext erior t ext ure or form or inner subst ance of a product in
such manner as t o prepare it for special use t o which it could not have been
put in it s original form or condit ion.
(2) Public w o r k s cont ract ors shall be allowed a presumpt ive input t ax
equivalent t o one and one-half percent (1 1/2%) of t he cont ract price wit h
respect t o government cont ract s only in lieu of act ual input t axes t herefrom.
SEC. 112. Refunds or Tax Credits of Input Tax. (A) Zero-Rated or Effectively Zero-Rated Sales.- any VAT-regist ered
person, whose sales are zero-rat ed or effect ively zero-rat ed may, wit hin t wo
(2) years aft er t he close of t he t axable quart er when t he sales were made,
apply for t he issuance of a t ax credit cert ificat e or refund of credit able input
t ax due or paid at t ribut able t o such sales, except t ransit ional input t ax, t o
t he ext ent t hat such input t ax has no t been applied against out put t ax:
Provided, however, That in t he case of zero-rat ed sales under Sect ion
106(A)(2)(a)(1), (2) and (B) and Sect ion 108 (B)(1) and (2), t he accept able
foreign currency exchange proceeds t hereof had been duly account ed for in
accordance wit h t he rules and regulat ions of t he Bangko Sent ral ng Pilipinas
(BSP): Provided, furt her, That where t he t axpayer is engaged in zero-rat ed
or effect ively zero-rat ed sale and also in t axable or exempt sale of goods of
propert ies or services, and t he amount of credit able input t ax due or paid
cannot be direct ly and ent irely at t ribut ed t o any one of t he t ransact ions, it
shall be allocat ed proport ionat ely on t he basis of t he volume of sales.
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(B) Capital Goods.- A VAT-regist ered person may apply for t he issuance of a
t ax credit cert ificat e or refund of input t axes paid on capit al goods import ed
o r locally purchased, t o t he ext ent t hat such input t axes have not been
applied against out put t axes.
The applicat ion may be made only wit hin t wo (2) years aft er t he close of t he
t axable quart er when t he import at ion or purchase was made.
( C ) Cancellation of VAT Registration. - A person whose regist rat ion has
been cancelled due t o ret irement from or cessat ion of business, or due t o
changes in or cessat ion of st at us under Sect ion 106(C) of t his Code may,
wit hin t wo (2) years from t he dat e of cancellat ion, apply for t he issuance of a
t ax credit cert ificat e for any unused input t ax which may be used in payment
of his ot her int ernal revenue t axes.
( D) Period Within Which Refund or Tax Credit of Input Taxes Shall be
Made. - In proper cases, t he Commissioner shall grant a refund or issue t he
t a x credit cert ificat e for credit able input t axes wit hin one hundred t went y
(120) days from t he dat e of submission of compet e document s in support of
t he applicat ion filed in accordance wit h Subsect ions (A) and (B) hereof.
In case of full or part ial denial of t he claim for t ax refund or t ax credit , or t he
failure on t he part of t he Commissioner t o act on t he applicat ion wit hin t he
period prescribed above, t he t axpayer affect ed may, wit hin t hirt y (30) days
from t he receipt of t he decision denying t he claim or aft er t he expirat ion of
t he one hundred t went y day-period, appeal t he decision or t he unact ed claim
wit h t he Court of Tax Appeals.
(E) Manner of Giving Refund. - Refunds shall be made upon warrant s drawn
by t he Commissioner or by his duly aut horized represent at ive wit hout t he
necessit y of being count ersigned by t he Chairman, Commission on audit , t he
provisions
of
t he Adminis t ra t ive Code of 1987 t o t he cont rary
not wit hst anding: Provided, That refunds u n d e r t his paragraph shall be

subject t o post audit by t he Commission on Audit .

CHAPTER II
COMPLIANCE REQUIREMENTS

SEC. 113. Invoicing and Accounting Requirements for VAT-Registered

Persons. ( A ) Invoicing Requirements. - A VAT-regist ered person shall, for every
sale, issue an invoice or receipt .
In addit ion t o t he informat ion required under Sect ion 237, t he following
informat ion shall be indicat ed in t he invoice or receipt :
(1) A st at ement t hat t he seller is a VAT-regist ered person, followed by his
t axpayer's ident ificat ion number (TIN); and(2) The t ot al amount which t he
purchaser pays or is obligat ed t o pay t o t he seller wit h t he indicat ion t hat
such amount includes t he value-added t ax.
(B) Accounting Requirements. - Not wit hst anding t he provisions of Sect ion
233, all persons subject t o t he value-added t ax under Sect ions 106 and 108
shall, in addit ion t o t h e regular account ing records required, maint ain a
subsidiary sales journal and subsidiary purchase journal on which t he daily
sales and purchases are recorded.
The subsidiary journals shall cont ain such informat ion as may be required by
t he Secret ary of Finance.
SEC. 114. Return and Payment of Value-Added Tax. ( A) In General. - Every person liable t o pay t he value-added t ax imposed
under t his Tit le shall file a quart erly ret urn of t he amount of his gross sales
o r receipt s wit hin t went y-five (25) days following t he close of each t axable
q u a r t e r prescribed for each t axpayer: Provided, however, T h a t VATregist ered persons shall pay t he value-added t ax on a mont hly basis.
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Any person, whose regist rat ion has been cancelled in accordance wit h
Sect ion 236, shall file a ret urn and pay t he t ax due t hereon wit hin t went yfive (25) days from t he dat e of cancellat ion of regist rat ion: Provided, That
only one consolidat ed ret urn shall be filed by t he t axpayer for his principal
place of business or head office and all branches.
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( B ) Where to File the Return and Pay the Tax. - Except as t he

Commissioner ot herwise permit s, t he ret urn shall be filed wit h and t he t ax
paid t o an aut horized agent bank, Revenue Collec t ion Officer or duly
aut horized cit y or municipal Treasurer in t he P hilippines locat ed wit hin t he
revenue dist rict where t he t axpayer is regist ered or required t o regist er.
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(C) Withholding of Creditable Value-Added Tax. - The Government or any

of
it s
polit ical subdivisions, ins t rument alit ies or agencies, including
government -owned or -cont rolled corporat ions (GOCCs) shall, before making
payment on account of each purchase of goods from sellers and services
rendered by cont ract ors which are subject t o t he value-added t ax imposed in
Sect ions 106 and 108 of t his Code, deduct and wit hhold t he value-added t ax
due at t he rat e of t hree percent (3%) of t he gross payment for t he purchase
of goods and six percent (6%) on gross receipt s for services rendered by
cont ract ors on every sale or inst allment payment which shall be credit able
against t he value-added t ax liabilit y of t he seller or cont ract or: Provided,
however, That in t he case of government public works cont ract ors, t he
wit hholding rat e shall be eight and one-half percent (8.5%): Provided,
further, That t he payment for lease or use of propert ies or propert y right s t o
nonresident owners shall be subject t o t en percent (10%) wit hholding t ax at
t he t ime of payment .
For t his purpose, t he payor or person in cont rol of t he payment shall be
considered as t he wit hholding agent .
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The value-added t ax wit hheld under t his Sect ion shall be remit t ed wit hin t en
(10) days following t he end of t he mont h t he wit hholding was made.
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SEC. 115. Power of the Commissioner to Suspend the Business

Operations
of a Taxpayer. - The Commissioner or his aut horized
represent at ive is hereby empowered t o suspend t he business operat ions and
t emporarily close t he business est ablishment of any person for any of t he
following violat ions:
(a) In t he case of a VAT-regist ered Person. (1) Failure t o issue receipt s or invoices;
(2) Failure t o file a value-added t ax ret urn as required under Sect ion 114; or
(3) Underst at ement of t axable sales or receipt s by t hirt y percent (30%) or
more of his correct t axable sales or receipt s for t he t axable quart er.
(b) Failure of any P erson t o Regist er as Required under Sect ion 236. - The
t emporary closure of t he est ablishment shall be for t he durat ion of not less
t han five (5) days and shall be lift ed only upon compliance wit h what ever
requirement s prescribed by t he Commissioner in t he closure order.

TITLE V
OTHER PERCENTAGE TAXES
SEC. 116. Tax on Persons Exempt From Value-Added Tax (VAT). - Any
person whose sales or receipt s are exempt under Sect ion 109(z) of t his Code
from t he payment of value-added t ax and who is not a VAT-regist ered person
shall pay a t ax equivalent t o t hree percent (3%) of his gross quart erly sales
or receipt s: Provided, That cooperat ives shall be exempt from t he t hree
percent (3%)gross receipt s t ax herein imposed.
SEC. 117. Percentage Tax on Domestic Carriers and Keepers of Garages.
- Cars for rent or hire driven by t he lessee, t ransport at ion cont ract ors,
including persons who t ransport passengers for hire, and ot her domest ic
carriers by land, air or wat er, for t he t ransport of passengers, except owners
of bancas and owner of animal-drawn t wo wheeled vehicle, and keepers of
garages shall pay a t ax equivalent t o t hree percent (3%) of t heir quart erly
gross receipt s.
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The gross receipt s of common carriers derived from t heir incoming and
out going freight shall not be subject ed t o t he local t axes imposed under
Republic Act No. 7160, ot herwise known as t he Local Government Code of
1991.
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In comput ing t he percent age t ax provided in t his Sect ion, t he following shall
be considered t he minimum quart erly gross receipt s in each part icular case:
Jeepney for hire 1. M anila and ot her cit ies P 2,400
2. Provincial 1,200
Public utility bus Not exceeding 30 passengers 3,600
Exceeding 30 but not exceeding 50 passengers 6,000
Exceeding 50 passengers 7,200
Taxis 1. M anila and ot her cit ies P 3,600
2. Provincial 2,400
Car for hire (wit h chauffer) 3,000
Car for hire (wit hout chauffer) 1,800
SEC. 118. Percentage Tax on International Carriers. (A) Int ernat ional air carriers doing business in t he Philippines shall pay a t ax
of t hree percent (3%) of t heir quart erly gross receipt s.
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(B) Int ernat ional shipping carriers doing business in t he Philippines shall pay
a t ax equivalent t o t hree percent (3%) of t heir quart erly gross receipt s.
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SEC. 119. Tax on Franchises. - Any provision of general or special law t o t he

cont rary not wit hst anding, t here shall be levied, assessed and collect ed in
respect t o all franchises on radio and/or t elevision broadcast ing companies
whose annual gross receipt s of t he preceding year does not exceed Ten
million pesos (P10,000.00), subject t o Sect ion 236 of t his Code, a t ax of
t hree percent (3%) and on elect ric, gas and wat er ut ilit ies, a t ax of t wo
percent (2%) on t he gross receipt s derived from t he business covered by t he
law grant ing t he franchise: P rovided, however, That radio and t elevision
broadcast ing companies referred t o in t his Sect ion shall have an opt ion t o be
regist ered as a value-added t axpayer and pay t he t ax due t hereon: Provided,
furt her, That once t he opt ion is exercised, it shall not be revoked.
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The grant ee shall file t he ret urn wit h, and pay t he t ax due t hereon t o t he
Commissioner or his duly aut horized represent at ive, in accordance wit h t he
provisions of Sect ion 128 of t his Code, and t he ret urn shall be subject t o
audit by t he Bureau of Int ernal Revenue, any provision of any exist ing law t o
t he cont rary not wit hst anding.
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SEC.
120. Tax on Overseas Dispatch,
Originating from the Philippines. -

Message

or

Conversation

(A) Persons Liable. - There shall be collect ed upon every overseas dispat ch,
message or conversat ion t ransmit t ed from t he Philippines by t elephone,
t elegraph, t elewrit er exchange, wireless and ot her communicat ion equipment
service, a t ax of t en percent (10%) on t he amount paid for such services.
The t ax imposed in t his Sect ion shall be payable by t he person paying for t he
services rendered and shall be paid t o t he person rendering t he services who
is required t o collect and pay t he t ax wit hin t went y (20) days aft er t he end
of each quart er.
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(B) Exemptions. - The t ax imposed by t his Sect ion shall not apply t o:
( 1 ) Government. - Amount s paid for messages t ransmit t ed by t he
Government of t he R e public of t he Philippines or any of it s polit ical
subdivisions or inst rument alit ies; (2) Diplomatic Services. - Amount s paid for
messages t ransmit t ed by any embassy a n d consular offices of a foreign
government ; ( 3 ) International Organizations. - Amount s paid for messages
t ransmit t ed by a public int ernat ional organizat ion or any of it s agencies
based in t he Philippines enjoying privileges, exempt ions and immunit ies which
t he Government of t he Philippines is commit t ed t o recognize pursuant t o an
int ernat ional agreement ;
and ( 4 ) N e w s Services. - Amount s paid for
messages from any newspaper, press associat ion, r a d i o or t elevision
newspaper, broadcast ing agency, or newst ickers services, t o any ot her
newspaper, press associat ion, radio or t elevision newspaper broadcast ing
agency, or newst icker service or t o a bona fide correspondent , which
messages deal exclusively wit h t he collect ion of news it ems for, or t he
disseminat ion of news it em t hrough, public press, radio or t elevision
broadcast ing or a newst icker service furnishing a general news service similar
t o t hat of t he public press.
SEC. 121. Tax on Banks and Non-Bank Financial Intermediaries. - There
shall be a collect ed t ax on gross receipt s derived from sources wit hin t he
Philippines by all banks and non-bank financial int ermediaries in accordance
wit h t he following schedule:
(a) On int erest , commissions and discount s from lending act ivit ies as well as
income from financial leasing, on t he basis of remaining mat urit ies of
inst rument s from which such receipt s are derived:
Short -t erm mat urit y (non in excess of t wo (2) years) 5%
M edium-t erm mat urit y (over t wo (2) years but not exceeding four (4) years)
3%
Long-t erm mat urit y (1) Over four (4) years but not exceeding seven (7) years 1%

(2) Over seven (7) years 0%.

(b) On dividends 0%
(c) On royalt ies, rent als of propert y, real or personal, profit s, from exchange
and all ot her it ems t reat ed as gross income under Sect ion 32 of t his Code
5%.
Provided, however, That in case t he mat urit y period referred t o in paragraph
(a) is short ened t hru pret erminat ion, t hen t he mat urit y period shall be
reckoned t o end as of t he dat e of pret erminat ion for purposes of classifying
t he t ransact ion as short , medium or long-t erm and t he correct rat e of t ax
shall be applied accordingly.
Not hing in t his Code shall preclude t he Commissioner from imposing t he same
t ax herein provided on persons performing similar banking act ivit ies.
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SEC. 122. Tax on Finance Companies. - There shall be collect ed a t ax of

five percent (5%) on t he gross receipt s derived by all finance companies, as
well as by ot her financial int ermediaries not performing quasi-banking
funct ions dong business in t he P hilippines, from int erest , discount s and all
ot her it ems t reat ed as gross income u n d e r t his Code: Provided, That
int erest s, commissions and discount s f r o m lending act ivit ies, as well as
income from financial leasing, shall be t axed on t he basis of t he remaining
mat urit ies of t he inst rument s from which such receipt s are derived, in
accordance wit h t he following schedule:
Short -t erm mat urit y (non in excess of t wo (2) ye a rs ) 5 % M edium-t erm
mat urit y (over t wo (2) years but not exceeding four (4) years) 3% Long-t erm
mat urit y (1) Over four (4) years but not exceeding seven (7) 1%
(2) Over seven (7) years 0%
Provided, however, That in case t he mat urit y period is short ened t hru
pret erminat ion, t hen t he mat urit y period shall be reckoned t o end as of t he
dat e of pret erminat ion for purposes of classifying t he t ransact ion as short ,
medium or long-t erm and t he correct rat e of t ax shall be applied accordingly.
Not hing in t his Code shall preclude t he Commissioner from imposing t he same
t ax herein provided on persons performing similar financing act ivit ies.
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SEC. 123. Tax on Life Insurance Premiums. - There shall be collect ed from
every person, company or corporat ion (except purely cooperat ive companies
or associat ions) doing life insurance business of any sort in t he Philippines a
t ax of five percent (5%) of t he t ot al premium collect ed, whet her such
premiums are paid in money, not es, credit s or any subst it ut e for money; but
premiums refunded wit hin six (6) mont hs aft er payment on account of
reject ion of risk or ret urned for ot her reason t o a person insured shall not be
included in t he t axable receipt s; nor shall any t ax be paid upon reinsurance
by a company t hat has already paid t he t ax; nor upon doing business out side
t he Philippines on account of any life insurance of t he insured who is a
nonresident , if any t ax on such premium is imposed by t he foreign count ry
where t he branch is est ablished nor upon premiums collect ed or received on
account of any reinsurance , if t he insured, in case of personal insurance,
resides out side t he Philippines, if any t ax on such premiums is imposed by t he
foreign count ry where t he original insurance has been issued or perfect ed;
nor upon t hat port ion of t he premiums collect ed or received by t he insurance
companies on variable cont ract s (as defined in sect ion 232(2) of President ial
Decree No. 612), in excess of t he amount s necessary t o insure t he lives of
t he variable cont ract workers.
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Cooperat ive companies or associat ions are such as are conduct ed by t he

members t hereof wit h t he money collect ed from among t hemselves and solely
for t heir own prot ect ion and not for profit .
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SEC. 124. Tax on Agents of Foreign Insurance Companies. - Every fire,

marine or miscellaneous insurance agent aut horized under t he Insurance
Code t o procure policies of insurance as he may have previously been legally
aut horized t o t ransact on risks locat ed in t he Philippines for companies not
aut horized t o t ransact business in t he Philippines shall pay a t ax equal t o

t wice t he t ax imposed in Sect ion 123: Provided, That t he provision of t his

Sect ion shall not apply t o reinsurance: Provide d, however, That t he
provisions of t his Sect ion shall not affect t he right of an owner of propert y t o
apply for and obt ain for himself policies in foreign companies in cases where
said owner does not make use of t he services of any agent , company or
corporat ion residing or doing business in t he Philippines.
In all cases where owners of propert y obt ain insurance direct ly wit h foreign
companies, it shall be t he dut y of said owners t o report t o t he Insurance
Commissioner and t o t he Commissioner each case where insurance has been
so effect ed, and shall pay t he t ax of five percent (5%) on premiums paid, in
t he manner required by Sect ion 123.
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SEC. 125. Amusement Taxes. - There shall be collect ed from t he propriet or,
lessee or operat or of c oc k pit s , cabaret s, night or day clubs, boxing
exhibit ions, professional basket ball games, Jai-Alai and racet racks, a t ax
equivalent t o:
(a) Eight een percent (18%) in t he case of cockpit s;(b) Eight een percent
(18%) in t he case of cabaret s, night or day clubs;(c) Ten percent (10%) in
t he case of boxing exhibit ions: Provided, however, That boxing exhibit ions
wherein World or Orient al Championships in any division is at st ake shall be
exempt from amusement t ax: Provided, furt her, That at least one of t he
cont enders for World or Orient al Championship is a cit izen of t he Philippines
and said exhibit ions are promot ed by a cit izen/s of t he Philippines or by a
corporat ion or associat ion at least sixt y percent (60%) of t he capit al of
which is owned by such cit izens;(d) Fift een percent (15%) in t he case of
professional basket ball games as envisioned in President ial Decree No. 871:
Provided, however, That t he t ax herein shall be in lieu of all ot her percent age
t axes of what ever nat ure and descript ion; and(e) Thirt y percent (30%) in t he
case of Jai-Alai and racet racks of t heir gross receipt s, irrespect ive, of
whet her or not any amount is charged for admission.
For t he purpose of t he amusement t ax, t he t erm "gross receipts" embraces
all t he receipt s of t he propriet or, lessee or operat or of t he amusement place.
Sa id gros s receipt s also include income from t elevision, radio and mot ion
pict ure right s, if any.
A person or ent it y or associat ion conduct ing any act ivit y subject t o t he t ax
herein imposed shall be similarly liable for said t a x wit h respect t o such
port ion of t he receipt s derived by him or it .
The t axes imposed herein shall be payable at t he end of each quart er and it
shall be t he dut y of t he propriet or, lessee or operat or concerned, as well as
any part y liable, wit hin t went y (20) days aft er t he end of each quart er, t o
make a t rue and complet e ret urn of t he amount of t he gross receipt s derived
during t he preceding quart er and pay t he t ax due t hereon.
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SEC. 126. Tax on Winnings. - Every person who wins in horse races shall
pay a t ax equivalent t o t en percent (10%) of his winnings or 'dividends', t he
t ax t o be based on t he act ual amount paid t o him for every winning t icket
aft er deduct ing t he cost of t he t icket : Provided, That in t he case of winnings
from double, forecast /quinella and t rifect a bet s, t he t ax shall be four percent
(4%).
In t he case of owners of winning race horses, t he t ax shall be t en percent
(10%) of t he prizes.
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The t ax herein prescribed shall be deduct ed from t he 'dividends'

corresponding t o each winning t icket or t he "prize" of each winning race
horse owner and wit hheld by t he operat or, manager or person in charge of
t he horse races before paying t he dividends or prizes t o t he persons ent it led
t heret o.
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The operat or, manager or person in charge of horse races shall, wit hin
t went y (20) days from t he dat e t he t ax was deduct ed and wit hheld in
accordance wit h t he second paragraph hereof, file a t rue and correct ret urn
wit h t he Commissioner in t he manner or form t o be prescribed by t he
Secret ary of Finance, and pay wit hin t he same period t he t ot al amount of t ax
so deduct ed and wit hheld.
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SEC. 127. Tax on Sale, Barter or Exchange of Shares of Stock Listed and
Trade d Through the Local Stock Exchange or Through Initial Public
Offering. ( A ) Tax on Sale, Barter or Exchange of Shares of Stock Listed and
Traded Through the L o ca l Stock Exchange. - There shall be levied,
assessed and collect ed on every sale, bart er, exchange, or ot her disposit ion
of shares of st ock list ed and t raded t hrough t he local st ock exchange ot her
t han t he sale by a dealer in securit ies, a t ax at t he rat e of one-half of one
percent (1/2 of 1%) of t he gross selling price or gross value in money of t he
shares of st ock sold, bart ered, exchanged or ot herwise disposed which shall
be paid by t he seller or t ransferor.
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( B) Tax on Shares of Stock Sold or Exchanged Through Initial Public

Offering. - There shall be levied, assessed and collect ed on every sale,
bart er, exchange or ot her disposit ion t hrough init ial public offering of shares
of st ock in closely held corporat ions, as defined herein, a t ax at t he rat es
provided hereunder based on t he gross selling price or gross value in money
of t he shares of st ock sold, bart ered, exchanged or ot herwise disposed in
accordance wit h t he proport ion of shares of st ock sold, bart ered, exchanged
or ot herwise disposed t o t he t ot al out st anding shares of s t oc k aft er t he
list ing in t he local st ock exchange:
Up t o t went y-five percent (25%)& 4%
Over t went y-five percent (25%) but not over t hirt y-t hree and one t hird
percent (33 1/3%) 2%
Over t hirt y-t hree and one t hird percent (33 1/3%) 1%
The t ax herein imposed shall be paid by t he issuing corporat ion in primary
offering or by t he seller in secondary offering.
For purposes of t his Sect ion, t he t erm "closely held corporation" means any
corporat ion at least fift y percent (50%) in value of out st anding capit al st ock
o r a t least fift y percent (505) of t he t ot al combined vot ing power of all
classes of st ock ent it led t o vot e is owned direct ly or indirect ly by or for not
more t han t went y (20) individuals.
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For purposes of det ermining whet her t he corporat ion is a closely held
corporat ion, insofar as such det erminat ion is based on st ock ownership, t he
following rules shall be applied:
(1) Stock Not Owned by Individuals. - St ock owned direct ly or indirect ly by or
for a corporat ion, part nership, est at e or t rust shall be considered as being
owned proport ionat ely by it s shareholders, part ners or beneficiaries.
(2) Family and Partnership Ownerships. - An individual shall be considered as
owning t he st ock owned, direct ly or indirect ly, by or for his family, or by or
for his part ner.
For purposes of t he paragraph, t he 'family of an individual' includes only his
brot hers and sist ers (whet her by whole or half-blood), spouse, ancest ors and
lineal descendant s.
(3) Option. - If any person has an opt ion acquire st ock, such st ock shall be
considered as owned by such person.
For purposes of t his paragraph, an opt ion t o acquire such an opt ion and each
one of a series of opt ions shall be considered as an opt ion t o acquire such
st ock.
(4) Constructive Ownership as Actual Ownership. - St ock const ruct ively owned
by reason of t he applicat ion of paragraph (1) or (3) hereof shall, for purposes
o f applying paragraph (1) or (2), be t reat ed as act ually owned by such
person; but st ock const ruct ively owned by t he individual by reason of t he
applicat ion of paragraph (2) hereof shall not be t reat ed as owned by him for
purposes of again applying such paragraph in order t o make anot her t he
const ruct ive owner of such st ock.
(C) Return on Capital Gains Realized from Sale of Shares of Stocks. - (1)

Return on Capital Gains Realized from Sale of Shares of Stock Listed and
Traded in the Local Stock Exchange. - It shall be t he dut y of every st ock
broker who effect ed t he sale subject t o t he t ax imposed herein t o collect t he
t ax and remit t he same t o t he Bureau of Int ernal Revenue wit hin five (5)
banking days from t he dat e of collect ion t hereof and t o submit on M ondays
of each week t o t he secret ary of t he st ock exchange, of which he is a
member, a t rue and complet e ret urn which shall cont ain a declarat ion of all
t h e t ransact ions effect ed t hrough him during t he preceding week and of
t axes collect ed by him and t urned over t o t he Bureau Of Int ernal Revenue.
(2) Return on Public Offerings of Share Stock. - In case of primary offering,
t h e corporat e issuer shall file t he ret urn and pay t he corresponding t ax
wit hin t hirt y (30) days from t he dat e of list ing of t he shares of st ock in t he
local st ock exchange.
In t he case of secondary offering, t he provision of Subsect ion (C)(1) of t his
Sect ion shall apply as t o t he t ime and manner of t he payment of t he t ax.
(D) Common Provisions. - Any gain derived from t he sale, bart er, exchange
or ot her disposit ion of shares of st ock under t his Sect ion shall be exempt
from t he t ax imp o s e d in Sect ions 24(C), 27(D)(2), 28(A)(8)(c), and
28(B)(5)(c) of t his Code and from t he regular individual or corporat e income
t ax.
Tax paid under t his Sect ion shall not be deduct ible for income t ax purposes.
SEC. 128. Returns and Payment of Percentage Taxes. - ( A) Returns of
Gross Sales, Receipts or Earnings and Payment of Tax. (1) Persons Liable to Pay Percentage Taxes. - Every person subject t o t he
percent age t axes imposed under t his Tit le shall file a quart erly ret urn of t he
amount of his gross sales, receipt s or earnings and pay t he t ax due t hereon
wit hin t went y-five (25) days aft er t he end of each t axable quart er: Provided,
That in t he case of a person whose VAT regist rat ion is cancelled a nd who
becomes liable t o t he t ax imposed in Sect ion 116 of t his Code, t he t ax shall
accrue from t he dat e of cancellat ion and shall be paid in accordance wit h t he
provisions of t his Sect ion.
( 2 ) Person Retiring from Business. - Any person ret iring from a business
subject t o percent age t ax shall not ify t he nearest int ernal revenue officer,
file his ret urn and pay t he t ax due t hereon wit hin t went y (20) days aft er
closing his business.
(3) Exceptions. - The Commissioner may, by rules and regulat ions, prescribe:
(a) The t ime for filing t he ret urn at int ervals ot her t han t he t ime prescribed
in t he preceding paragraphs for a part icular class or classes of t axpayers
aft er considering such fact ors as volume of sales, financial condit ion,
adequat e measures of securit y, and such ot her relevant informat ion required
t o be submit t ed under t he pert inent provisions of t his Code; and
(b) The manner and t ime of payment of percent age t axes ot her t han as
hereinabove prescribed, including a scheme of t ax prepayment .
( 4 ) Determination o f Correct Sales or Receipts. - When it is found t hat a
person has failed t o issue receipt s or invoices, or when no ret urn is filed, or
when t here is reason t o believe t hat t he books of account s or ot her records
do not correct ly reflect t he declarat ions made or t o be made in a ret urn
required t o be filed under t he provisions of t his Code, t he Commissioner,
aft er t aking int o account t he sales, receipt s or ot her t axable base of ot her
persons engaged in similar businesses under similar sit uat ions or
circumst ances, or aft er considering ot her relevant informat ion may prescribe
a minimum amount of such gross receipt s, sales and t axable base and such
amount so prescribed shall be prima facie correct for purposes of det ermining
t he int ernal revenue t ax liabilit ies of such person.
( B) Where to File. - Except as t he Commissioner ot herwise permit s, every
person liable t o t he percent age t ax under t his Tit le may, at his opt ion, file a
separat e ret urn for each branch or place of business, or a consolidat ed
ret urn for all branches or places of business wit h t he aut horized agent bank,
Revenue Dist rict Officer, Collect ion Agent or duly aut horized Treasurer of t he
cit y or municipalit y where said business or principal place of business is

locat ed, as t he case may be.

TITLE VI
EXCISE TAXES ON CERTAIN GOODS
CHAPTER I
GENERAL PROVISIONS

SEC. 129. Goods Subject to Excise Taxes. - Excise t axes apply t o goods
manufact ured or produced in t he P hilippine s for domest ic sales or
consumpt ion or for any ot her disposit ion and t o t hings import ed.
The excise t ax imposed herein shall be in addit ion t o t he value-added t ax
imposed under Tit le IV.
For purposes of t his Tit le, excise t axes herein imposed and based on weight
or volume capacit y or any ot her physical unit or measurement shall be
referred t o as "specific tax" and an excise t ax herein imposed and based on
selling price or ot her specified value of t he good shall be referred t o as "ad
valorem tax".
SEC. 130. Filing of Return and Payment of Excise Tax on Domestic
Products. ( A) Persons Liable to File a Return, Filing of Return on Removal and
Payment of Tax. (1) Persons Liable to File a Return. - Every person liable t o pay excise t ax
imposed under t his Tit le shall file a separat e ret urn for each place of
product ion set t ing fort h, among ot hers, t he descript ion and quant it y or
volume of product s t o be removed, t he applicable t ax base and t he amount
of t ax due t hereon: Provided, however, That in t he case of indigenous
pet roleum, nat ural gas or liquefied nat ural gas, t he excise t ax shall be paid
by t he first buyer, purchaser or t ransferee for local sale, bart er or t ransfer,
while t he excise t ax on export ed product s shall be paid by t he owner, lessee,
concessionaire or operat or of t he mining claim.Should domest ic product s be
removed from t he place of product ion wit hout t he payment of t he t ax, t he
owner or person having possession t hereof shall be liable for t he t ax due
t hereon.
(2) Time for Filing of Return and Payment of the Tax. - Unless ot herwise
specifically allowed, t he ret urn shall be filed and t he excise t ax paid by t he
manufact urer or producer before removal of domest ic product s form place of
product ion: Provided, That t he excise t ax on locally manufact ured pet roleum
product s and indigenous pet roleum levied under Sect ions 148 and 151(A)(4),
respect ively, of t his Tit le shall be paid wit hin t en (10) days from t he dat e of
removal of such product s for t he period from January 1, 1998 t o June 30,
1998; wit hin five (5) days from t he dat e of removal of such product s for t he
period from July 1, 1998 t o December 31, 1998; and, before removal from t he
place of product ion of such product s from January 1, 1999 and t hereaft er:
Provided, further, That t he excise t ax on nonmet allic mineral o r mineral
product s, or quarry resources shall be due and payable upon removal of such
product s from t he localit y where mined or ext ract ed, but wit h respect t o t he
excise t ax on locally produced or ext ract ed met allic mineral or mineral
product s, t he person liable shall file a ret urn and pay t he t ax wit hin fift een
(15) days aft er t he end of t he calendar quart er when s uc h product s were
removed subject t o such condit ions as may be prescribed b y rules and
regulat ions t o be promulgat ed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner.
For t his purpose, t he t axpayer s h a ll file a bond in an amount which
approximat es t he amount of excise t ax d ue on t he removals for t he said
quart er.
The foregoing rules not wit hst anding, for import ed mineral or mineral
product s, whet her met allic or nonmet allic, t he excise t ax due t hereon shall
be paid before t heir removal from cust oms cust ody.
( 3 ) Place of Filing of Return and Payment of the Tax. - Except as t he
Commissioner ot herwise permit s, t he ret urn shall be filed wit h and t he t ax

paid t o any aut horized agent bank or Revenue Collect ion Officer, or duly
aut horized Cit y or M unicipal Treasurer in t he Philippines.
(4) Exceptions. - The Secret ary of Finance, upon recommendat ion of t he
Commissioner may, by rules and regulat ions, prescribe:
(a) The t ime for filing t he ret urn at int ervals ot her t han t he t ime prescribed
in t he preceding paragraphs for a part icular class or classes of t axpayers
aft er considering fact ors such as volume of removals, adequat e measures of
securit y and such ot her relevant informat ion required t o be submit t ed under
t he pert inent provisions of t his Code; and (b) The manner and t ime of
payment of excise t axes ot her t han as herein prescribed, under a t ax
prepayment , advance deposit or similar schemes.
In t he case of locally produced of ext ract ed minerals and mineral product s or
quarry resources where t he mine sit e or place of ext ract ion is not t he same
as t he place of processing or product ion, t he ret urn shall be filed wit h and
t he t ax paid t o t he Revenue Dist rict Office having jurisdict ion over t he
localit y where t he same are mined, ext ract ed or quarried: Provided, however,
That for met allic minerals processed abroad, t he ret urn shall be filed and t he
t ax due t hereon paid t o t he Revenue Dist rict Office having jurisdict ion over
t he localit y where t he same are mined, ext ract ed or quarried.
(B) Determination of Gross Selling Price of Goods Subject to Ad Valorem
Tax. - Unless ot herwise provided, t he price, excluding t he value-added t ax,
at which t he goods are sold at wholesale in t he place of product ion or
t hrough t heir sales agent s t o t he public shall const it ut e t he gross selling
price.
If t he manufact urer also sells or allows such goods t o be sold at wholesale in
anot her est ablishment of which he is t he owner or in t he profit s of which he
has an int erest , t he wholesale price in such est ablishment shall const it ut e
t he gross selling price.
Should such price be less t h a n t he cost of manufact ure plus expenses
incurred unt il t he goods are finally sold, t hen a proport ionat e margin of
profit , not less t han t en percent (10%) of such manufact uring cost and
expenses, shall be added t o const it ut e t he gross selling price.
(C) Manufacturer's or Producer's Sworn Statement. - Every manufact urer
or producer of goods or product s subject t o excise t axes shall file wit h t he
Commissioner on t he dat e or dat es designat ed by t he lat t er, and as oft en as
may be required, a sworn st at ement showing, among ot her informat ion, t he
different
goods
or product s
manufact ured o r produced and t heir
corresponding gross selling price or market value, t oget her wit h t he cost of
manufact ure or product ion plus expenses incurred or t o be incurred unt il t he
goods or product s are finally sold.
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(D) Credit for Excise Tax on Goods Actually Exported.- When goods locally
produced or manufact ured are removed and a c t ua lly export ed wit hout
ret urning t o t he Philippines, whet her so export ed in t heir original st at e or as
ingredient s or part s of any manufact ured goods or product s, any excise t ax
paid t hereon shall be credit ed or refunded upon submission of t he proof of
act ual export at ion and upon receipt of t he corresponding foreign exchange
payment : Provided, That t he excise t ax on mineral product s, except coal and
coke, imposed under Sect ion 151 shall not be credit able or refundable even if
t he mineral product s are act ually export ed.
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SEC. 131. Payment of Excise Taxes on Importer Articles. (A) Persons Liable.- Excise t axes on import ed art icles shall be paid by t he
owner or import er t o t he Cust oms Officers, conformably wit h t he regulat ions
of t he Depart ment of Finance and before t he release of such art icles from
t he cust oms house, or by t he person who is found in possession of art icles
which are exempt from excise t axes ot her t han t hose legally ent it led t o
exempt ion.In t he case of t ax-free art icles brought or import ed int o t he
Philippines by persons, ent it les, or agencies exempt from t ax which are
subsequent ly sold, t ransferred or exchanged in t he Philippines t o non-exempt
persons or ent it les, t he purchasers or recipient s shall be considered t he
import ers t hereof, and shall be liable for t he dut y and int ernal revenue t ax
due on such import at ion.The provision of any special or general law t o t he
cont rary not wit hst anding, t he import at ion of cigars and cigaret t es, dist illed

spirit s and wines int o t he Philippines, even if dest ined for t ax and dut y free
shops, shall be subject t o all applicable t axes, dut ies, charges, including
excise t axes due t hereon: Provided, however, That t his shall not apply t o
cigars and cigaret t es, dist illed spirit s and wines brought direct ly int o t he duly
chart ered or legislat ed freeport s of t he Subic Special Economic and Freeport
Zone, crat ed under Republic Act No. 7227; t he Cagayan Special Economic
Zone and Freeport , creat ed under Republic Act No. 7922; and t he
Zamboanga Cit y Special Economic Zone, creat ed under Republic Act No.
7903, and are not t ransshipped t o any ot her port in t he Philippines:
Provided, further, That import at ions of cigars and cigaret t es, dist illed spirit s
and wines by a government -owned and operat ed dut y-free shop, like t he
Dut y-Free Philippines (DFP), shall be exempt ed from all applicable t axes,
dut ies, charges, including excise t ax due t hereon: Provided, still further, That
if such art icles direct ly import ed by a government -owned and operat ed dut yfree shop like t he Dut y-Free Philippines, shall be labeled "tax and duty-free"
and "not for resale": Provided, still further, That is such art icles brought int o
t he duly chart ered or legislat ed freeport s under Republic Act s No. 7227,
7922 and 7903 are subsequent ly int roduced int o t he Philippine cust oms
t errit ory, t hen such art icles shall, upon such int roduct ion, be deemed
import ed int o t he Philippines and shall be subject t o all impost s and excise
t axes provided herein and ot her st at ut es: Provided, finally, That t he removal
and t ransfer of t ax and dut y-free goods, product s, machinery, equipment and
ot her similar art icles, from one freeport t o anot her freeport , shall not be
deemed an int roduct ion int o t he Philippine cust oms t errit ory.Art icles
confiscat ed shall be disposed of in accordance wit h t he rules and regulat ions
t o be promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner of Cust oms and Int ernal Revenue, upon consult at ion wit h t he
Secret ary of Tourism and t he General manager of t he Philippine Tourism
Aut horit y.The t ax due on any such goods, product s, machinery, equipment or
ot her similar art icles shall const it ut e a lien on t he art icle it self, and such lien
shall be superior t o all ot her charges or liens, irrespect ive of t he possessor
t hereof.
( B ) Rate and Basis of the Excise Tax on Imported Articles.- Unless
ot herwise specified import ed art icles shall be subject t o t he same rat es and
basis of excise t axes applicable t o locally manufact ured art icles.
SEC. 132. Mode of Computing Contents of Cask or Package. - Every
fract ional part of a proof lit er equal t o or great er t han a half lit er in a cask or
package cont aining more t han one lit er shall be t axed as a lit er, and any
smaller fract ional part shall be exempt ; but any package of spirit s, t he t ot al
cont ent of which are less t han a proof lit er, shall be t axed as one lit er.
CHAPTER II
EXEMPTION OR CONDITIONAL TAX-FREE REMOVAL OF CERTAIN
ARTICLES

SEC. 133. Removal of Wines and Distilled Spirits for Treatment of

Tobacco Leaf. - Upon issuance of a permit from t he Commissioner and
subject t o t he rules and regulat ions prescribed by t he Secret ary of Finance,
manufact urers o f cigars and cigaret t es may wit hdraw from bond, free of
excise local and import ed wines and dist illed spirit s in specific quant it ies and
g r a d e s for use in t he t reat ment of t obacco leaf t o be used in t he
manufact ure of cigars and cigaret t es; but such wines and dist illed spirit s
must first be suit ably denat ured.
SEC. 134. Domestic Denatured Alcohol. - Domest ic alcohol of not less t han
one hundred eight y degrees (180O ) proof (ninet y percent [90%] absolut e
alcohol) shall, when suit ably denat ured and rendered unfit for oral int ake, be
exempt from t he excise t ax prescribed in Sect ion 141: Provided, however,
That such denat ured alcohol shall be subject t o t ax under Sect ion 106(A) of
t his Code: Provided, further, That if such alcohol is t o be used for aut omot ive
power, it shall be t axed under Sect ion 148(d) of t his Code: Provided, finally,
That any alcohol, previously rendered unfit for oral int ake aft er denat uring
but subsequent ly rendered fit for oral int ake aft er undergoing ferment at ion,
dilut ion, purificat ion, mixt ure or any ot her similar process shall be t axed
under Sect ion 141 of t his Code and such t ax shall be paid by t he person in
possession of such reprocessed spirit s.
SEC. 135. Petroleum Products Sold to International Carriers and Exempt

Entities or Agencies. - Pet roleum product s sold t o t he following are exempt

from excise t ax: (a) Int ernat ional carriers of Philippine or foreign regist ry on
t heir use or consumpt ion out side t he Philippines: Provide d, That t he
pet roleum product s sold t o t hese int ernat ional carriers shall be st ored in a
bonded st orage t ank and may be disposed of only in accordance wit h t he
rules and regulat ions t o be prescribed by t he Secret ary of Finance, upon
recommendat ion of t h e Commissioner; (b) Exempt e nt it ie s or agencies
covered by t ax t reat ies, convent ions and ot her int ernat ional agreement s for
t heir use or consumpt ion: Provided, however, T h a t t he count ry of said
foreign int ernat ional carrier or exempt ent it ies or agencies exempt s from
similar t axes pet roleum product s sold t o P hilippine carriers, ent it ies or
agencies; and (c) Ent it ies which are by law exempt from direct and indirect
t axes.
SEC. 136. Denaturation, Withdrawal and Use of Denatured Alcohol. - Any
person who produces, wit hdraws, sells, t ransport s or knowingly uses, or is in
possession of denat ured alcohol, or art icles cont aining denat ured alcohol in
violat ion of laws or regulat ions now or hereaft er in force pert aining t heret o
shall be required t o pay t he corresponding t ax, in addit ion t o t he penalt ies
provided for under Tit le X of t his Code.
SEC. 137. Removal of Spirits Under Bond for Rectification. - Spirit s
requiring rect ificat ion may be removed from t he place of product ion t o
anot her est ablishment for t he purpose of rect ificat ion wit hout prepayment of
t he excise t ax: Provided, That t he dist iller removing such spirit s and t he
rect ifier receiving t hem shall file wit h t he Commissioner t heir joint bond
condit ioned upon t he payment by t he rect ifier of t he excise t ax due on t he
rect ified alcohol: Provided, further, That in cases where alcohol has already
been rect ified eit her by original and cont inuous dist illat ion or by redist illat ion,
no loss for rect ificat ion and handling shall be allowed and t he rect ifier t hereof
shall pay t he excise t ax due on such losses: Provided, finally, That where a
rect ifier makes use of spirit s upon which t he excise t ax has not been paid, he
shall be liable for t he payment of t he t ax ot herwise due t hereon.
SEC. 138. Removal of Fermented Liquors to Bonded Warehouse. - Any
brewer may remove or t ransport from his brewery or ot her place of
manufact ure t o a bonded warehouse used by him exclusively for t he st orage
or sale in bulk of ferment ed liquors of his own manufact ure, any quant it y of
such ferment ed liquors, not less t han one t housand (1,000) lit ers at one
removal, wit hout prepayment of t he t ax t hereon under a permit which shall
be grant ed by t he Commissioner.
Such permit shall be affixed t o e ve ry package so removed and shall be
cancelled or dest royed in such manner as t he Commissioner may prescribe.
Thereaft er, t he manufact urer of such ferment ed liquors shall pay t he t ax in
t he same manner and under t he same penalt y and liabilit y as when paid at
t he brewery.
SEC. 139. Removal of Damaged Liquors Free of Tax. - When any
ferment ed liquor has become sour or ot herwise damaged so as t o be unfit for
use as such, brewers may sell and aft er securing a special permit from t he
Commissioner, under such condit ions as may be prescribed in t he rules and
regulat ions prescribed by t he Secret ary of Finance, remove t he same wit hout
t he payment of t ax t hereon in cask or ot her packages, dist inct from t hose
ordinarily used for ferment ed liquors, each cont aining not less t han one
hundred sevent y-five (175) lit ers wit h a not e of t heir cont ent s permanent ly
affixed t hereon.
SEC. 140. Removal of Tobacco Products Without Prepayment of Tax. Product s of t obacco ent irely unfit for chewing or smoking may be removed
free of t ax for agricult ural or indust rial use, under such condit ions as may be
prescribed in t he rules and regulat ions prescribed by t he Sec ret ary of
Finance.
St emmed leaf t obacco, fine-cut short s, t he refuse of fine -c ut chewing
t obacco, scraps, cut t ings, clippings, st ems, or midribs, and sweepings of
t obacco may be sold in bulk as raw mat erial by one manufact urer direct ly t o

anot her wit hout payment of t he t ax, under such condit ions as may be
prescribed in t he rules and regulat ions prescribed by t he Secret ary of
Finance.
"Stemmed leaf tobacco", as herein used, means leaf t obacco which has had
t he st em or midrib removed.
The t erm does not include broken leaf t obacco.

CHAPTER III
EXCISE TAX ON ALCOHOL PRODUCTS
SEC. 141. Distilled Spirits. - On dist illed spirit s, t here shall be collect ed,
subject t o t he provisions of Sect ion 133 of t his Code, excise t axes as
follows:
(a) If produced from t he sap of nipa, coconut , cassava, camot e, or buri palm
or from t he juice,syrup or sugar of t he cane, provided such mat erials are
produced commercially in t he count ry where t hey are processed int o dist illed
spirit s, per proof lit er, Eight pesos (P8.00): Provided, That if produced in a
pot st ill or ot her similar primary dist illing apparat us by a dist iller producing
not more t han one hundred (100) lit ers a day, cont aining not more t han fift y
percent (50%) of alcohol by volume, per proof lit er, Four pesos (P4.00);
(b) If produced from raw mat erials ot her t han t hose enumerat ed in t he
preceding paragraph, t he t ax shall be in accordance wit h t he net ret ail price
per bot t le of seven hundred fift y millilit er (750 ml.) volume capacit y (excluding
t he excise t ax and t he value-added t ax) as follows:
(1) Less t han Two hundred and fift y pesos (P250) - Sevent y-five pesos (P75),
per proof lit er;
(2) Two hundred and fift y pesos (P250) up t o Six hundred and Sevent y-Five
pesos (P675) - One hundred and fift y pesos (P150), per proof lit er; and
(3) M ore t han Six hundred and sevent y-five pesos (P675) - Three hundred
pesos (P300), per proof lit er.
(c) M edicinal preparat ions, flavoring ext ract s, and all ot her preparat ions,
except t oilet preparat ions, of which, excluding wat er, dist illed spirit s for t he
chief ingredient , shall be subject t o t he same t ax as such chief ingredient .
This t ax shall be proport ionally increased for any st rengt h of t he spirit s t axed
over proof spirit s, and t he t ax shall at t ach t o t his subst ance as soon as it is
in exist ence as such, whet her it be subsequent ly separat ed as pure or
impure spirit s, or t ransformed int o any ot her subst ance eit her in t he process
of original product ion or by any subsequent process"Spirits or distilled spirits"
is t he subst ance known as et hyl alcohol, et hanol or spirit s of wine, including
all dilut ions, purificat ions and mixt ures t hereof, f ro m what ever source, by
what ever process produced, and shall include whisky, brandy, rum, gin and
vodka, and ot her similar product s or mixt ures.
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"Proof spirits" is liquor cont aining one-half (1/2) of it s volume of alcohol of a

specific gravit y of seven t housand nine hundred and t hirt y-nine t housandt hs
(0.7939) at fift een degrees cent igrade (15O C).
A "proof liter" means a lit er of proof spirit s.

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The rat es of t ax imposed under t his Sect ion shall be increased by t welve
percent (12%) on January 1, 2000.
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New brands shall be classified according t o t heir current "net retail price".
For t he above purpose, "net retail price" shall mean t he price at which t he
dist illed s pirit is sold on ret ail in t en (10) major supermarket s in M et ro
M anila, excluding t he amount int ended t o cover t he applicable excise t ax and
t he value-added t ax as of Oct ober 1, 1996.
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The classificat ion of each brand of dist illed spirit s based on t he average net
ret ail price as of Oct ober 1, 1996, as set fort h in Annex "A", shall remain in
force unt il revised by Congress.
SEC. 142. Wines. - On wines, t here shall be collect ed per lit er of volume
capacit y, t he following t axes:
(a) Sparkling wines/champagnes regardless of proof, if t he net ret ail price per
bot t le (excluding t he excise t ax and value-added t ax) is:
(1) Five hundred pesos (P500) or less - One hundred pesos (P100); and
(2) M ore t han Five hundred pesos (P500) - Three hundred pesos (P300).
(b) St ill wines cont aining fourt een percent (14%) of alcohol by volume or less,
Twelve pesos (P12.00); and
(c) St ill wines cont aining more t han fourt een percent (14%) but not more
t han t went y-five percent (25%) of alcohol by volume, Twent y-four pesos
(P24.00).
Fort ified wines cont aining more t han t went y-five percent of alcohol by volume
shall be t axed as dist illed spirit s. "Fortified wines" shall mean nat ural wines t o
which dist illed spirit s are added t o increase t heir alcoholic st rengt h.
The rat es of t ax imposed under t his Sect ion shall be increased by t welve
percent (12%) on January 1, 2000.
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New brands shall be classified according t o t heir current net ret ail price.

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For t he above purpose, "net retail price" shall mean t he price at which wine is
sold on ret ail in t en (10) major supermarket s in M et ro M anila, excluding t he
amount int ended t o cover t he applicable excise t ax and t he value-added t ax
as of Oct ober 1, 1996.
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The classificat ion of each brand of wines based on it s average net ret ail price
as of Oct ober 1, 1996, as set fort h in Annex "B", shall remain in force unt il
revised by Congress.
SEC. 143. Fermented Liquor. - There shall be levied, assessed and collect ed
an excise t ax on beer, lager beer, ale, port er and ot her ferment ed liquors
except t uba, basi, t apuy and similar domest ic ferment ed liquors in
accordance wit h t he following schedule:
(a) If t he net ret ail price (excluding t he excise t ax and value-added t ax) per
lit er of volume capacit y is less t han Fourt een pesos and fift y cent avos
(P14.50), t he t ax shall be Six pesos and fift een cent avos (P6.15) per lit er;
(b) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax)
t he per lit er of volume capacit y is Fourt een pesos and fift y cent avos (P14.50)
up t o Twent y-t wo pesos (P22.00), t he t ax shall be Nine pesos and fift een
cent avos (P9.15) per lit er;
(c) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax)
per lit er of volume capacit y is more t han Twent y-t wo pesos (P22.00), t he t ax
shall be Twelve pesos and fift een cent avos (P12.15) per lit er.
Variant s of exist ing brands which are int roduced in t he domest ic market aft er
t he effect ivit y of Republic Act No. 8240 shall be t axed under t he highest
classificat ion of any variant of t hat brand.
Ferment ed liquor which are brewed and sold at micro-breweries or small
est ablishment s such as pubs and rest aurant s shall be subject t o t he rat e in
paragraph (c) hereof.
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The excise t ax from any brand of ferment ed liquor wit hin t he next t hree (3)
years from t he effect ivit y of Republic Act No. 8240 shall not be lower t han
t he t ax which was due from each brand on Oct ober 1, 1996.
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The rat es of excise t ax on ferment ed liquor under paragraphs (a), (b) and (c)
hereof shall be increased by t welve percent (12%) on January 1, 2000.
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New brands shall be classified according t o t heir current net ret ail price.

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For t he above purpose, "net retail price" shall mean t he price at which t he
ferment ed liquor is sold on ret ail in t went y (20) major supermarket s in M et ro
M anila (f o r brands of ferment ed liquor market ed nat ionally) excluding t he
amount int ended t o cover t he applicable excise t ax and t he value-added t ax.
For brands which are market ed only out side M et ro M anila, t he "net retail
price" shall mean t he price at t he which t he ferment ed liquor is sold in five (5)
major supermarket s in t he region excluding t he amount int ended t o cover
t he applicable excise t ax and t he value-added t ax.
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The classificat ion of each brand of ferment ed liquor based on it s average net
ret ail price as of Oct ober 1, 1996, as set fort h in Annex "C", shall remain in
force unt il revised by Congress.
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"A variant of brand" shall refer t o a brand on which a modifier is prefixed

and/or suffixed t o t he root name of t he brand and/or a different brand which

carries t he same logo or design of t he exist ing brand.
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Every brewer or import er of ferment ed liquor shall, wit hin t hirt y (30) days
from t he effect ivit y of R. A. No. 8240, and wit hin t he first five (5) days of
every mont h t hereaft er, submit t o t he Commissioner a sworn st at ement of
t he volume of sales for each part icular brand of ferment ed liquor sold at his
est ablishment for t he t hree-mont h period immediat ely preceding.
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Any brewer or import er who, in violat ion of t his Sect ion, knowingly
misdeclares or misrepresent s in his or it s sworn st at ement herein required
any pert inent dat a or informat ion shall be penalized by a summary
cancellat ion or wit hdrawal of his or i t s permit t o engage in business as
brewer or import er of ferment ed liquor.
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Any corporat ion, associat ion or part nership liable for any of t he act s or
omissions in violat ion of t his Sect ion shall be fined t reble t he amount of
deficiency t axes, surcharge, and int erest which may be assessed pursuant t o
t his Sect ion.
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Any person liable for any of t he act s or omissions prohibit ed under t his
Sect ion shall be criminally liable and penalized under Sect ion 254 of t his Code.
Any person who willfully aids or abet s in t he commission of any such act or
omission shall be criminally liable in t he same manner as t he principal.
If t he offender is not a cit izen of t he Philippines, he shall be deport ed
immediat ely aft er s erving t he sent ence, wit hout furt her proceedings for
deport at ion.
CHAPTER IV
EXCISE TAX ON TOBACCO PRODUCTS
SEC. 144. Tobacco Products. - There shall be collect ed a t ax of sevent y-five
cent avos (P0.75) on each kilogram of t he following product s of t obacco:
(a) Tobacco t wist ed by hand or reduced int o a condit ion t o be consumed in
any manner ot her t han t he ordinary mode of drying and curing;
(b) Tobacco prepared or part ially prepared wit h or wit hout t he use of any
machine or inst rument s or wit hout being pressed or sweet ened; and
(c) Fine-cut short s and refuse, scraps, clippings, cut t ings, st ems and
sweepings of t obacco.
Fine-cut short s and refuse, scraps, clippings, cut t ings, st ems and sweepings
of t obacco result ing from t he handling or st ripping of whole leaf t obacco may
be t ransferred, disposed of, or ot herwise sold, wit hout prepayment of t he
excise t ax herein provided for under such condit ions as may be prescribed in
t he rules and regulat ions promulgat ed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner, if t he same are t o be export ed or t o
be used in t he manufact ure of ot her t obacco product s on which t he excise

t ax will event ually be paid on t he finished product .

On t obacco specially prepared for chewing so as t o be unsuit able for use in
any ot her manner, on each kilogram, Sixt y cent avos (P0.60).
SEC. 145. Cigars and Cigarettes. (A) Cigars.- There shall be levied, assessed and collect ed on cigars a t ax of
One peso (P1.00) per cigar.
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(B) Cigarettes Packed by Hand.- There shall be levied, assessed and

collect ed on cigaret t es packed by hand a t ax of Fort y cent avos (P0.40) per
pack.
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( C) Cigarettes Packed by Machine. - There shall be levied, assessed and

collect ed on cigaret t es packed by machine a t ax at t he rat es prescribed
below:
(1) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax)
is above Ten pesos (P10.00) per pack, t he t ax shall be Twelve pesos (P12.00)
per pack;
(2) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax)
exceeds Six pesos and fift y cent avos (P6.50) but does not exceed Ten pesos
(P10.00) per pack, t he t ax shall be Eight pesos (8.00) per pack;
(3) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax)
is Five pesos (P5.00) but does not exceed Six pesos and fift y cent avos
(P6.50) per pack, t he t ax shall be Five pesos (P5.00) per pack;
(4) If t he net ret ail price (excluding t he excise t ax and t he value-added t ax is
below Five pesos (P5.00) per pack, t he t ax shall be One peso (P1.00) per
pack;
Variant s of exist ing brands of cigaret t es which are int roduced in t he
domest ic market aft er t he effect ivit y of R.A. No. 8240 shall be t axed under
t he highest classificat ion of any variant of t hat brand.
The excise t ax from any brand of cigaret t es wit hin t he next t hree (3) years
from t he effect ivit y of R. A. No. 8240 shall not be lower t han t he t ax, which
is due from each brand on Oct ober 1, 1996: Provided, however, That in cases
whe re t he excise t ax rat es imposed in paragraphs (1), (2), (3) and (4)
hereinabove will result in an increase in excise t ax of more t han sevent y
percent (70%); for a brand of cigaret t e, t he increase shall t ake effect in t wo
t ranches: fift y percent (50%) of t he increase shall be effect ive in 1997 and
one hundred percent (100%) of t he increase shall be effect ive in 1998.
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Duly regist ered or exist ing brands of cigaret t es or new brands t hereof
packed by machine shall only be packed in t went ies.
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The rat es of excise t ax on cigars and cigaret t es under paragraphs (1), (2),
(3) and (4) hereof, shall be increased by t welve percent (12%) on January 1,
2000.
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New brands shall be classified according t o t heir current net ret ail price.

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For t he above purpose, "net retail price" shall mean t he price at which t he
cigaret t e is sold on ret ail in t went y (20) major supermarket s in M et ro M anila
(for
brands of cigaret t es market ed nat ionally), excluding t he amount
int ended t o cover t he applicable excise t ax and t he value-added t ax.
For brands which are market ed only out side M et ro M anila, t he "net retail
price" shall mean t he price at which t he cigaret t e is sold in five (5) major
supermarket s in t he region excluding t he amount int ended t o cover t he
applicable excise t ax and t he value-added t ax.
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The classificat ion of each brand of cigaret t es based on it s average net ret ail
price as of Oct ober 1, 1996, as set fort h in Annex "D", shall remain in force
unt il revised by Congress.

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"Variant of a brand" shall refer t o a brand on which a modifier is prefixed

and/or suffixed t o t he root name of t he brand and/or a different brand which

carries t he same logo or design of t he exist ing brand.
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M anufact ures and import ers of cigars and cigaret t es shall, wit hin t hirt y (30)
days from t he effect ivit y of R. A. No. 8240 and wit hin t he first five (5) days
of every mont h t hereaft er submit t o t he Commissioner a sworn st at ement of
t he volume of sales for each part icular brand of cigars and/or cigaret t es sold
at his est ablishment for t he t hree-mont h period immediat ely preceding.
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Any manufact urer or import er who, in violat ion of t his Sect ion, knowingly
misdeclares or misrepresent s in his or it s sworn st at ement herein required
any pert inent dat a or informat ion shall, upon discovery, be penalized by a
summary cancellat ion or wit hdrawal of his or it s permit t o engage in business
as manufact urer or import er of cigars or cigaret t es.
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Any corporat ion, associat ion or part nership liable for any of t he act s or
omissions in violat ion of t his Sect ion shall be fined t reble t he amount of
deficiency t axes, surcharges and int erest which may be assessed pursuant t o
t his Sect ion.
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Any person liable for any of t he act s or omissions prohibit ed under t his
Sect ion shall be criminally liable and penalized under Sect ion 254 of t his Code.
Any person who willfully aids or abet s in t he commission of any such act or
omission shall be criminally liable in t he same manner as t he principal.
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If t he offender is not a cit izen of t he Philippines, he shall be deport ed

immediat ely aft er s e rving t he sent ence wit hout furt her proceedings for
deport at ion.
SEC. 146. Inspection Fee. - F o r inspect ion made in accordance wit h t his
Chapt er, t here shall be collect ed a fee of Fift y cent avos (P0.50) for each
t housand cigars or fract ion t hereof; Ten cent avos (P0.10) for each t housand
cigaret t es of fract ion t hereof; Two cent avos (P0.02) for each kilogram of leaf
t obacco or fract ion t hereof; and Three cent avos (P0.03) for each kilogram or
fract ion t hereof, of scrap and ot her manufact ured t obacco.
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The inspect ion fee on leaf t obacco, scrap, cigars, cigaret t es and ot her
t obacco product s as defined in Sect ion 147 of t his Code shall be paid by t he
wholesaler, manufact urer, producer, owner or operat or of redrying plant , as
t he case may be, immediat ely before removal t here of from t he est ablishment
of t he wholesaler, manufact urer, owner or operat or of t he redrying plant .
In case of import ed leaf t obacco and product s t hereof, t he inspect ion fee
shall be paid by t he import er before removal from cust oms' cust ody.
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Fift y percent (50%) of t he t obacco inspect ion fee shall accrue t o t he

Tobacco Inspect ion Fund creat ed by Sect ion 12 of Act No. 2613, as amended
by Act No. 3179, and fift y percent (50%) shall accrue t o t he Cult ural Cent er
of t he Philippines.
SEC. 147. Definition of Terms. - When used herein and in st at ement s or
official forms prescribed hereunder, t h e following t erms shall have t he
meaning indicat ed:
(a) "Cigars" mean all rolls of t obacco or any subst it ut e t hereof, wrapped in
leaf t obacco.
(b ) "Cigarettes" mean all rolls of finely-cut leaf t obacco, or any subst it ut e
t herefor, wrapped in paper or in any ot her mat erial.
(c) "Wholesale price" shall mean t he amount of money or price paid for cigars
or cigaret t es purchased for t he purpose of resale, regardless of quant it y.
(d) "Retail price" shall mean t he amount of money or price which an ult imat e
consumer or end-user pays for cigars or cigaret t es purchased.
CHAPTER V

EXCISE TAX ON PETROLEUM PRODUCTS

SEC. 148. Manufactured Oils and Other Fuels. - There shall be collect ed on
refined and manufact ured mineral oils and mot or fuels, t he following excise
t axes which shall at t ach t o t he goods hereunder enumerat ed as soon as t hey
are in exist ence as such:
(a) Lubricat ing oils and greases, including but not limit ed t o, base st ock for
lube oils and greases, high vacuum dist illat es, aromat ic ext ract s, and ot her
similar preparat ions, and addit ives for lubricat ing oils and greases, whet her
s u c h addit ives are pet roleum based or not , per lit er and kilogram
respect ively, of volume capacit y or weight , Four pesos and fift y cent avos
(P 4.50): Provided, however, That t he excise t axes paid on t he purchased
feedst ock (bunker) used in t he manufact ure of excisable art icles and forming
part t hereof shall be credit ed against t he excise t ax due t herefrom:
Provided, further, That lubricat ing oils and greases produced from base
st ocks and addit ives on which t he excise t ax has already been paid shall no
longer be subject t o excise t ax: Provided, finally, That locally produced or
import ed oils previously t axed as such but are subsequent ly reprocessed,
rerefined or recycled shall likewise be subject t o t he t ax imposed under t his
Sect ion.
(b) Processed gas, per lit er of volume capacit y, Five cent avos (P0.05);(c)
Waxes and pet rolat um, per kilogram, Three pesos and fift y cent avos
(P3.50);(d) On denat ured alcohol t o be used for mot ive power, per lit er of
volume capacit y, Five cent avos (P 0.05): Provided, That unless ot herwise
provided by special laws, if t he denat ured alcohol is mixed wit h gasoline, t he
excise t ax on which has already been paid, only t he alcohol cont ent shall be
subject t o t he t ax herein prescribed.
For purposes of t his Subsect ion, t he removal of denat ured alcohol of not less
t han one hundred eight y degrees (180o ) proof (ninet y percent (90%)
absolut e alcohol) shall be deemed t o have been removed for mot ive power,
unless shown ot herwise;(e) Napht ha, regular gasoline and ot her similar
product s of dist illat ion, per lit er of volume capacit y, Four pesos and eight y
cent avos (P4.80): Provided, however, That napht ha, when used as a raw
mat erial in t he product ion of pet rochemical product s or as replacement fuel
for nat ural-gas-fired-combined cycle power plant , in lieu of locally-ext ract ed
nat ural gas during t he non-availabilit y t hereof, subject t o t he rules and
regulat ions t o be promulgat ed by t he Secret ary of Energy, in consult at ion
wit h t he Secret ary of Finance, per lit er of volume capacit y, Zero (P0.00):
Provided, further, That t he by-product including fuel oil, diesel fuel, kerosene,
pyrolysis gasoline, liquefied pet roleum gases and similar oils having more or
less t he same generat ing power, which are produced in t he processing of
napht ha int o pet rochemical product s shall be subject t o t he applicable excise
t ax specified in t his Sect ion, except when such by-product s are t ransferred
t o any of t he local oil refineries t hrough sale, bart er or exchange, for t he
purpose of furt her processing or blending int o finished product s which are
subject t o excise t ax under t his Sect ion;(f) Leaded premium gasoline, per
lit er of volume capacit y, Five pesos and t hirt y-five c e nt a vo s (P5.35);
unleaded premium gasoline, per lit er of volume capacit y, Four pesos and
t hirt y-five cent avos (P4.35);(g) Aviat ion t urbo jet fuel, per lit er of volume
capacit y, Three pesos and sixt y-seven cent avos (P3.67);(h) Kerosene, per
lit er of volume capacit y, Sixt y cent avos (0.60): Provided, That kerosene,
when used as aviat ion fuel, shall be subject t o t he same t ax on aviat ion
t urbo jet fuel under t he preceding paragraph (g), such t ax t o be assessed on
t he user t hereof;(i) Diesel fuel oil, an on similar fuel oils having more or less
t he same generat ing power, per lit er of volume capacit y, One peso and sixt yt hree cent avos (P1.63);(j) Liquefied pet roleum gas, per lit er, Zero (P0.00):
Provided, That liquefied pet roleum gas used for mot ive power shall be t axed
at t he equivalent rat e as t he excise t ax on diesel fuel oil;(k) Asphalt s, per
kilogram, Fift y-six cent avos (P0.56); and(l) Bunker fuel oil, and on similar fuel
oils having more or less t he same generat ing power, per lit er of volume
capacit y, Thirt y cent avos (P0.30).
CHAPTER VI
EXCISE TAX ON MISCELLANEOUS ARTICLES

SEC. 149. Automobiles. - There shall be levied, assessed and collect ed an

ad valorem t ax on aut omobiles based on t he manufact urers or import ers

selling price, net of excise and value-added t ax, in accordance wit h t he

following schedule:
ENGINE DISPLACEMENT [in cc.]
GASOLINE
DIESEL
TAX RATE
Up t o 1600
Up t o 1800
15%
1601 t o 2000
1801 t o 2300
35%
2001 t o 2700
2301 t o 3000
50%
2701 or over
3001 t o over
100%
Provided, That in t he case of import ed aut omobiles not for sale, t he t ax
imposed herein s hall be based on t he t ot al value used by t he Bureau of
Cust oms in det ermining t ariff and cust oms dut ies, including cust oms dut y and
all ot her charges, plus t en percent (10%) of t he t ot al t hereof.
Aut omobiles acquired for use by persons or ent it ies operat ing wit hin t he
freeport zone shall be exempt from excise t ax: Provided, That ut ilit y vehicles
o f regist ered zone ent erprises, which are indispensable in t he conduct and
operat ions of t heir business, such as delivery t rucks and cargo vans wit h
gross vehicle weight above t hree (3) met ric t ons may be allowed unrest rict ed
u s e out side t he freeport zone: Provided, further, That vehicles owned by
t ourist -orient ed ent erprises, such as t ourist buses and cars wit h yellow
plat es, color-coded, and ut ilized exclusively for t he purpose of t ransport ing
t ourist s
in t ourism-relat ed act ivit ies, and service vehicles of freeport
regist ered ent erprises and execut ives, such as company service cars and
expat riat es and inves t ors aut omobiles brought in t he name of such
ent erprises, may be used out side t he freeport zone for such periods as may
be prescribed by t he Depart ment s of Finance, and Trade and Indust ry, t he
Bureau of Cust oms and t he Freeport aut horit ies concerned, which in no case
shall exceed fourt een (14) days per mont h.
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In case such t ourist buses and cars, service vehicles of regist ered freeport
ent erprises and company service cars are used for more t han an aggregat e
period of fourt een (14) days per mont h out side of t he freeport zone, t he
owner or import er shall pay t he corresponding cust oms dut ies, t axes and
charges.
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In t he case of personally-owned vehicles of resident s, including leaseholders

of residences inside t he freeport zone, t he use of such vehicles out side of
t he freeport zone shall be deemed an int roduct ion int o t he Philippine cust oms
t errit ory, and s uc h int roduct ion shall be deemed an import at ion int o t he
Philippines and s ha ll subject such vehicles t o Cust oms dut ies t axes and
charges, including excise t ax due on such vehicle.
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The Secret aries of Finance, and Trade and Indust ry, t oget her wit h t he
Commissioner of Cust oms and t he administ rat ors of t he freeport s concerned,
shall promulgat e rules and regulat ions for t he proper ident ificat ion and
cont rol of said aut omobiles.
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SEC. 150. Non-Essential Goods. - There shall be levied, assessed and

collect ed a t ax equivalent t o t went y percent (20%) based on t he wholesale
price or t he value of import at ion used by t he Bureau of Cust oms in
det ermining t ariff and cust oms dut ies, net of excise t ax and value-added t ax,
of t he following goods:
(a) All goods commonly or commercially known as jewelry, whet her real or
imit at ion, pearls, precious and semi-precious st ones and imit at ions t hereof;
goods made of, or ornament ed, mount ed or fit t ed wit h, precious met als or
imit at ions t hereof or ivory (not including surgical and dent al inst rument s,
silver-plat ed wares, frames or mount ings for spect acles or eyeglasses, and
dent al gold or gold alloys and ot her precious met als used in filling, mount ing
or fit t ing t he t eet h); opera glasses and lorgnet t es.
The t erm "precious metals" shall include plat inum, gold, silver and ot her
met als of similar or great er value.
The t erm imit at ions t hereof shall include plat ings and alloys of such met als;
(b) Perfumes and t oilet wat ers;
(c) Yacht s and ot her vessels int ended for pleasure or sport s.

CHAPTER VII
EXCISE TAX ON MINERAL PRODUCTS

SEC. 151. Mineral Products. ( A ) Rates of Tax. - There shall be levied, assessed and collect ed on
minerals, mineral product s and quarry resources, excise t ax as follows:
(1) On coal and coke, a t ax of Ten pesos (P10.00) per met ric t on;(2) On all
nonmet allic minerals and quarry resources, a t ax of t wo percent (2%) based
o n t he act ual market value of t he gross out put t hereof at t he t ime of
removal, in t he case of t hose locally ext ract ed or produced; or t he value
used by t he Bureau of Cust oms in det ermining t ariff and cust oms dut ies, net
of excise t ax and value-added t ax, in t he case of import at ion.
Not wit hst anding t he provision of paragraph (4) of Subsect ion (A) of Sect ion
151, locally ext ract ed nat ural gas and liquefied nat ural gas shall be t axed at
t he rat e of t wo percent (2%);
(3) On all met allic minerals, a t ax based on t he act ual market value of t he
gross out put t hereof at t he t ime of removal, in t he case of t hose locally
ext ract ed or produced; or t he value used by t he Bureau of Cust oms in
det ermining t ariff and cust oms dut ies, net of excise t ax and value-added t ax,
in t he case of import at ion, in accordance wit h t he following schedule:
(a) Copper and ot her met allic minerals; (i) On t he first t hree (3) years upon
t he effect ivit y of Republic Act No. 7729,
one percent (1%); (ii) On t he fourt h and t he fift h years, one and a half
percent (1 %); and (iii) On t he s ixt h year and t hereaft er, t wo percent
(2%); (b) Gold and chromit e, t wo percent (2%).
(4) On indigenous pet roleum, a t ax of t hree percent (3%) of t he fair
int ernat ional market price t hereof, on t he first t axable sale, bart er,
exchange or such similar t ransact ion, such t ax t o be paid by t he buyer or
purchaser before removal from t he place of product ion.
The phrase "first taxable sale, barter, exchange or similar transaction" means
t he t ransfer of indigenous pet roleum in it s original st at e t o a first t axable
t ransferee.
The fair int ernat ional market price shall be det ermined in consult at ion wit h an
appropriat e government agency.For t he purpose of t his Subsect ion,
"indigenous petroleum" shall include locally-ext ract ed mineral oil, hydrocarbon
gas, bit umen, crude asphalt , mineral gas and a ll ot her similar or nat urally
associat ed subst ances wit h t he except ion of coal, peat , bit uminous shale
and/or st rat ified mineral deposit s.
( B) For Purposes of This Section, the Term: (1) "Gross output" shall be
int erpret ed as t he act ual market value of minerals or mineral product s or of
bullion from each mine or mineral land operat ed as a separat e ent it y, wit hout
any deduct ion from mining, milling, refining (including all expenses incurred t o
prepare t he said minerals or mineral product s in a market able st at e), as well
as t ransport ing, handling, market ing or any ot her expenses: Provided, That if
t he minerals or mineral product s are sold or consigned abroad by t he lessee
or owner of t he mine under C.I.F.
t erms, t he act ual cost of ocean freight and insurance shall be deduct ed:
Provided, however, That in t he case of mineral concent rat e, no t t raded in
commodit y exchanges in t he Philippines or abroad, such as copper
concent rat e, t he act ual market value shall be t he world price quot at ions of
t he refined mineral product s cont ent t hereof prevailing in t he said commodit y
exchanges, aft er deduct ing t he smelt ing, refining and ot her charges incurred
in t he process of convert ing t he mineral concent rat es int o refined met al
t raded in t hose commodit y exchanges.
(2) "Minerals" shall mean all nat urally occurring inorganic subst ances (found in
nat ure) whet her in solid, liquid, gaseous or any int ermediat e st at e.
( 3 ) "Mine ra l products" shall mean t hings produced and prepared in a
market able st at e by simple t reat ment processes such as washing or drying,

but wit hout undergoing any chemical change or process or manufact uring by
t he lessee, concessionaire or owner of mineral lands.
(4) "Quarry resources" shall mean any common st one or ot her common
mineral subst ances as t he Direct or of t he Bureau of M ines and Geo-Sciences
may declare t o be quarry resources such as, but not rest rict ed t o, marl,
marble, granit e, volcanic cinders, basalt , t uff and rock phosphat e: Provided,
That t hey cont ain no met al or ot her valuable minerals in economically
workable quant it ies.

CHAPTER VIII
ADMINISTRATIVE PROVISIONS REGULATING BUSINESS
OR PERSONS DEALING IN ARTICLES SUBJECT TO EXCISE TAX
SEC. 152. Extent of Supervision Over Establishments Producing Taxable
Output. - The Bureau of Int ernal Revenue has aut horit y t o supervise
est ablishment s where art icles subject t o excise t ax are made or kept .
The Secret ary of Finance shall prescribe rules and regulat ions as t o t he mode
in which t h e process of product ion shall be conduct ed insofar as may be
necessary t o secure a sanit ary out put and t o safeguard t he revenue.
SEC. 153. Records to be Kept by Manufacturers; Assessment Based
Thereon.- M anufact urers of art icles subject t o excise t ax shall keep such
r e c o r d s as required by rules and regulat ions recommended by t he
Commissioner and approved by t he Secret ary of Finance, and such records,
whet her of raw mat erials received int o t he fact ory or of art icles produced
t herein, shall be deemed public and official document s for all purposes.
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The records of raw mat erials kept by such manufact urers may be used as
evidence by which t o det ermine t he amount of excise t axes due from t hem,
and whenever t he amount s of raw mat erial received int o any fact ory exceeds
t he amount of manufact ured or part ially manufact ured product s on hand and
lawfully removed from t he fact ory, plus wast e removed or dest royed, and a
reasonable allowance for unavoidable loss in manufact ure, t he Commissioner
may assess and collect t he t ax due on t he product s which should have been
produced from t he excess.
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The excise t ax due on t he product s as det ermined and assessed in

accordance wit h t his Sect ion shall be payable upon demand or wit hin t he
period specified t herein.
SEC. 154. Premises Subject to Approval by Commissioner. - No person
shall engage in business as a manufact urer of or dealer in art icles subject t o
excise t ax unless t he premises upon which t he business is t o conduct ed shall
have been approved by t he Commissioner.
SEC. 155. Manufacturers to Provide Themselves with Counting or
Metering Devices to Determine Production. - M anufact urers of cigaret t es,
alcoholic product s, oil product s and ot her art icles subject t o excise t ax t hat
can be similarly measured shall provide t hemselves wit h such necessary
number of suit able count ing or met ering devices t o det ermine as accurat ely
as possible t he volume, quant it y or number of t he art icles produced by t hem
under rules and regulat ions promulgat ed by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner.
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This requirement shall be complied wit h before commencement of operat ions.

SEC. 156. Labels and Form of Packages. - All art icles of domest ic
manufact ure subject t o excise t ax and all leaf t obacco shall be put up and
prepared by t he manufact urer or producer, w h e n removed for sale or
consumpt ion, in such packages only and bearing such marks or brand as shall
be prescribed in t he rules and regulat ions promulgat ed by t he Secret ary of
Finance; and goods of similar charact er import ed int o t he Philippines shall
likewise be packed and marked in such a manner as may be required.
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SEC. 157. Removal of Articles After the Payment of Tax. - When t he t ax

has been paid on art icles or product s subject t o excise t ax, t he same shall
not t hereaft er be st ored or permit t ed t o remain in t he dist illery, dist illery

warehouse, bonded warehouse, or ot her fact ory or place where produced.

However, upon prior permit from t he Commissioner, oil refineries and/or
companies may st ore or deposit t ax-paid pet roleum product s and commingle
t he same wit h it s own manufact ured product s not yet subject ed t o excise
t ax.
Import ed pet roleum product s may be allowed t o be wit hdrawn from cust oms
cust ody wit hout t he prepayment of excise t ax, which product s may be
commingled wit h t he t ax-paid or bonded product s of t he import er himself
a f t e r s e c uring a prior permit from t he Commissioner: Provided, That
wit hdrawals shall be t axed and account ed for on a "first-in, first-out" basis.
SEC. 158. Storage of Goods in Internal-Revenue Bonded Warehouses. An int ernal-revenue bonded warehouse may be maint ained in any port of
ent ry for t he st oring of import ed or manufact ured goods which are subject t o
excise t ax.
The t axes on such goods shall be payable only upon removal from such
warehouse and a reasonable charge shall be made for t heir st orage t herein.
The Commissioner, may, in his discret ion, exact a bond t o s e c ur e t he
payment of t he t ax on any goods so st ored.
SEC. 159. Proof of Exportation; Exporter's Bond. - Export ers of goods t hat
would be subject t o excise t ax, if sold or removed for consumpt ion in t he
Philippines, shall submit
proof of export at ion s a t is f a c t o ry t o t he
Commissioner and, when t he same is deemed necessary, shall be required t o
give a bond prior t o t he removal of t he goods for shipment , condit ioned upon
t he export at ion of t he same in good fait h.
SEC. 160. Manufacturers' and Importers' Bond. - M anufact urers and
import ers of art icles subject t o excise t ax shall post a bond subject t o t he
following condit ions:
(A) Initial Bond. - In case of init ial bond, t he amount shall be equal t o One
Hundred t housand pesos (P100,000): Provided, That if aft er six (6) mont hs of
operat ion, t he amount of init ial bond is less t han t he amount of t he t ot al
excise t ax paid during t he period, t he amount of t he bond shall be adjust ed
t o t wice t he t ax act ually paid for t he period.
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( B ) Bond for the Succeeding Years of Operation. - The bonds for t he

succeeding years of operat ion shall be based on t he act ual t ot al excise t ax
paid during t he period t he year immediat ely preceding t he year of operat ion.
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Such bond shall be condit ioned upon fait hful compliance, during t he t ime such
business is followed, wit h laws and rules and regulat ions relat ing t o such
business and for t he sat isfact ion of all fines and penalt ies imposed by t his
Code.
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SEC. 161. Records to be Kept by Wholesale Dealers. - Wholesale dealers

shall keep records of t heir purchases and sales or deliveries of art icles
subject t o excise t ax, in such form as shall be prescribed in t he rules and
regulat ions by t he Secret ary of Finance.
These records and t he ent ire st ock of goods subject t o t ax shall be subject
at all t imes t o inspect ion of int ernal revenue officers.
SEC. 162. Records to be Kept by Dealers in Leaf Tobacco. - Dealers in leaf
t obacco shall keep records of t he product s sold or delivered by t hem t o ot her
persons in such manner as may be prescribed in t he rules and regulat ions by
t he Secret ary of Finance, such records t o be at all t imes subject t o
inspect ion of int ernal revenue officers.
SEC. 163. Preservation of Invoices and Stamps. - All dealers whosoever
shall preserve, for t he period prescribed in Sect ion 235, all official invoices
received by t hem from ot her dealers or from manufact urers, t oget her wit h
t he fract ional part s of st amps affixed t heret o, if any, and upon demand, shall
deliver or t ransmit t he same t o any int erval revenue officer.
SEC. 164. Information to be Given by Manufacturers, Importers,
Indentors, and Wholesalers of any Apparatus or Mechanical Contrivance

Specially f o r the Manufacture of Articles Subject to Excise Tax and

Importers, Indentors, Manufacturers or Sellers of Cigarette Paper in
Bobbins,
Cigarette T i p p i n g Paper or Cigarette Filter Tips. M anufact urers, indent ors, wholesalers and import ers of any apparat us or
mechanical cont rivance specially for t he manufact ure of art icles subject t o
t ax shall, before any such apparat us or mechanical cont rivance is removed
from t he place of manufact ure or from t he cust oms house, give writ t en
informat ion t o t he Commissioner as t o t he nat ure and capacit y of t he same,
t he t ime when it is t o be removed, and t he place for which it is dest ined, as
well as t he name of t he person by whom it is t o be used; and such apparat us
or mechanical cont rivance shall not be set up nor dismant led or t ransferred
wit hout a permit in writ ing from t he Commissioner.
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A writ t en permit from t he Commissioner for import ing, manufact uring or

selling of cigaret t e pa pe r in bobbins or rolls, cigaret t e t ipping paper or
cigaret t e filt er t ips i s required before any person shall engage in t he
import at ion, manufact ure or sale of t he said art icles.
No permit t o sell said art icles shall be grant ed unless t he name and address
of t he prospect ive buyer is first submit t ed t o t he Commissioner and approved
by him.
Records, showing t he st ock of t he said art icles and t he disposal t hereof by
sale of persons wit h t h e i r respect ive addresses as approved by t he
Commissioner, shall be kept by t he seller, and records, showing st ock of said
art icles and consumpt ion t hereof, shall be kept by t he buyer, subject t o
inspect ion by int ernal revenue officers.
SEC. 165. Establishment of Distillery Warehouse. - Every dist iller, when so
required by t he Commissioner, shall provide at his own expense a warehouse,
and shall be sit uat ed in and const it ut e a part of his dist illery premises and t o
be used only for t he st orage of dist illed spirit s of his own manufact ure unt il
t he t ax t hereon shall have been paid; but no dwelling house shall be used for
such purpose.
Such warehouse, when approved by t he Commissioner, is declared t o be a
bonded warehouse, and shall be known as a dist illery warehouse.
SEC. 166. Custody of Distillery or Distillery Warehouse. - Every dist illery
or dist illery warehouse shall be in t he joint cust ody of t he revenue inspect or,
if one is assigned t heret o, and of t he propriet or t hereof.
It shall be kept securely locked, and shall at no t ime be unlocked or opened
or remain unlocked or opened unless in t he presence of such revenue
inspect or or ot her person who may be designat ed t o act for him as provided
by law.
SEC. 167. Limitation on Quantity of Spirits Removed from Warehouse. N o dist illed spirit s shall be removed from any dist illery, dist illery warehouse,
o r bonded warehouse in quant it ies of less t han fift een (15) gauge lit ers at
any one t ime, except bot t led goods, which may be removed by t he case of
not less t han t welve (12) bot t les.
SEC. 168. Denaturing Within Premises. - F o r purposes of t his Tit le, t he
process of denat uring alcohol shall be effect ed only wit hin t he dist illery
premises where t he alcohol t o be denat ured is produced in accordance wit h
formulas duly approved by t he Bureau of Int ernal Revenue and only in t he
presence of duly designat ed represent at ives of said Bureau.
SEC. 169. Recovery of Alcohol for Use in Arts and Industries. M anufact urers employing processes in which denat ured alcohol used in art s
and indust ries is expressed or evaporat ed from t he art icles manufact ured
may, under rules and regulat ions t o be prescribed by t he Secret ary of
Finance, upon recommendat ion of t he Commissioner, be permit t ed t o recover
t he alcohol so used and rest ore it again t o a condit ion suit able solely for use
in manufact uring processes.
SEC. 170. Requirements Governing Rectification and Compounding of
Liquors. - P ersons engaged in t he rect ificat ion or compounding of liquors
shall, as t o t he mode of conduct ing t heir business and supervision over t he
same, be subject t o all t he requirement s of law applicable t o dist illeries:
Provided, That where a rect ifier makes use of spirit s upon which t he excise

t ax has been paid, no furt her t ax shall be collect ed on any rect ified spirit s
produced exclusively t herefrom: Provided, further, That compounders in t he
manufact ure of any int oxicat ing beverage what ever, shall not be allowed t o
make use of spirit s upon which t he excise t ax has not been previously paid.
SEC. 171. Authority of Internal Revenue Officer in Searching for Taxable
Articles. - Any int ernal revenue officer may, in t he discharge of his official
dut ies, ent er any house, building or place where art icles subject t o t ax under
t his Tit le are produced or kept , or are believed by him upon reasonable
grounds t o be produced or kept , so far as may be necessary t o examine,
discover or seize t he same.
He may also st op and search any vehicle or ot her means of t ransport at ion
when upon reasonable grounds he believes t hat t he same carries any art icle
on which t he excise t ax has not been paid.
SEC. 172. Detention of Package Containing Taxable Articles.- Any revenue
officer may det ain any package cont aining or supposed t o cont ain art icles
subject t o excise t ax when he has good reason t o believe t hat t he lawful t ax
has not been paid or t hat t he package has been or is being removed in
violat ion of law, and every such package shall be held by s uc h officer in a
safe place unt il it shall be det ermined whet her t he propert y so det ained is
liable by law t o be proceeded against for forfeit ure; b u t such summary
det ent ion shall not cont inue in any case longer t han seven (7) days wit hout
due process of law or int ervent ion of t he officer t o whom such det ent ion is t o
be report ed.
TITLE VII
DOCUMENTARY STAMP TAX
SEC.
173. Stamp Taxes Upon Documents, Loan Agreements,
Instruments and Papers. - Upon document s, inst rument s, loan agreement s
and papers, and upon accept ances, assignment s, sales and t ransfers of t he
obligat ion, right or propert y incident t heret o, t here shall be levied, collect ed
and paid for, and in respect of t he t ransact ion so had or accomplished, t he
corresponding document ary st amp t axes prescribed in t he following Sect ions
of t his Tit le, by t he person making, signing, issuing, accept ing, or t ransferring
t he same wherever t he document is made, signed, issued, accept ed or
t ransferred when t he obligat ion or right arises from Philippine sources or t he
propert y is sit uat ed in t he Philippines, and t he same t ime such act is done or
t ransact ion had: Provided, That whenever one part y t o t he t axable document
enjoys exempt ion from t he t ax herein imposed, t he ot her part y who is not
exempt shall be t he one direct ly liable for t he t ax.
SEC. 174. Stamp Tax on Debentures and Certificates of Indebtedness. On all debent ures and cert ificat es of indebt edness issued by any associat ion,
company or corporat ion, t here shall be collect ed a document ary st amp t ax of
One peso and fift y cent avos (P1.50) on each Two hundred pesos (P200), or
fract ional part t hereof, of t he face value of such document s.
SEC. 175. Stamp Tax on Original Issue of Shares of Stock. - O n every
original issue, whet her on organizat ion, reorganizat ion or for a n y lawful
purpose, of shares of st ock by any associat ion, company or corporat ion,
t here shall be collect ed a document ary st amp t ax of Two pesos (P2.00) on
each Two hundred pesos (P200), or fract ional part t hereof, of t he par value,
of such shares of st ock: Provided, That in t he case of t he original issue of
shares of st ock wit hout par value t he amount of t he document ary st amp t ax
herein prescribed shall be based upon t he act ual considerat ion for t he
issuance of such shares of st ock: Provided, further, That in t he case of st ock
dividends, on t he act ual value represent ed by each share.
SEC. 176. Stamp Tax on Sales, Agreements to Sell, Memoranda of Sales,
Deliveries or Transfer of Due-bills, Certificates of Obligation, or Shares
of Certificates of Stock. - On all sales, or agreement s t o sell, or memoranda
of sale, or deliveries, or t ransfer of due-bills, cert ificat es of obligat ion, or
shares of cert ificat es of st ock in any associat ion, company, or corporat ion, or
t ransfer of such securit ies by assignment in blank, or by delivery, or by any
paper or agreement , or memorandum or ot her evidences of t ransfer or sale
whet her ent it ling t he holder in any manner t o t he benefit of such due-bills,
cert ificat es of obligat ion or st ock, or t o secure t he fut ure payment of money,
o r for t he fut ure t ransfer of any due-bill, cert ificat e of obligat ion or st ock,

t here shall be collect ed a document ary st amp t ax of One peso and fift y
cent avos (P1.50) on each Two hundred pesos (P200) or fract ional part
t hereof, of t he par value of such due-bill, cert ificat e of obligat ion or st ock;
Provided, That only one t ax shall be collect ed on each sale or t ransfer of
st ock or securit ies from one person t o anot her, regardless of whet her or not
a cert ificat e of st ock or obligat ion is issued, indorsed, or delivered in
pursuance of such sale or t ransfer: and, Provided, further, That in t he case
of st ock wit hout par value t he amount of document ary s t amp t ax herein
prescribed shall be equivalent t o t went y-five percent (25%) of t he
document ary st amp t ax paid upon t he original issue of said st ock.
SEC. 177. Stamp Tax on Bonds, Debentures, Certificate of Stock or
Indebtedness Issued in Foreign Countries. - O n all bonds, debent ures,
cert ificat es of st ock, or cert ificat es of indebt edness issued in any foreign
count ry, t here shall be collect ed from t he person selling or t ransferring t he
same in t he Philippines, such as t ax as is required by law on similar
inst rument s when issued, sold or t ransferred in t he Philippines.
SEC. 178. Stamp Tax on Certificates of Profits or Interest in Property or
Accumulations. - On all cert ificat es of profit s, or any cert ificat e or
memorandum s howing int erest in t he propert y or accumulat ions of any
associat ion, company or corporat ion, and on all t ransfers of such cert ificat es
or memoranda, t here shall be collect ed a document ary st amp t ax of Fift y
cent avos (P0.50) on each Two hundred pesos (P200), or fract ional part
t hereof, of t he face value of such cert ificat e or memorandum.
SEC. 179. Stamp Tax on Bank Checks, Drafts, Certificates of Deposit not
Bearing Interest, and Other Instruments. - On each bank check, draft , or
cert ificat e of deposit not drawing int erest , or order for t he payment of any
sum of money drawn upon or issued by a ny bank, t rust company, or any
person or persons, companies or corporat ions, at sight or on demand, t here
shall be collect ed a document ary st amp t ax of One peso and fift y cent avos
(P1.50).
SEC. 180. Stamp Tax on All Bonds, Loan Agreements, promissory Notes,
Bills of Exchange, Drafts, Instruments and Securities Issued by the
Government or Any of its Instrumentalities, Deposit Substitute Debt
Instruments, Certificates of Deposits Bearing Interest and Others Not
Payable on Sight or Demand. - On all bonds, loan agreement s, including
t hose signed abroad, wherein t he object of t he cont ract is locat ed or used in
t he Philippines, bills of exchange (bet ween point s wit hin t he Philippines),
draft s, inst rument s a nd securit ies issued by t he Government or any of it s
inst rument alit ies, d e p o s it subst it ut e debt inst rument s, cert ificat es of
deposit s drawing int erest , orders for t he payment of any sum of money
ot herwise t han at sight or o n demand, on all promissory not es, whet her
negot iable or non-negot iable, except bank not es issued for circulat ion, and
on each renewal of any such not e, t here shall be collect ed a document ary
st amp t ax of Thirt y cent avos (P0.30) on each Two hundred pesos (P200), or
fract ional part t hereof, o f t he face value of any such agreement , bill of
exchange, draft , cert ificat e of deposit , or not e: Provided, That only one
document ary st amp t a x shall be imposed on eit her loan agreement , or
promissory not es issued t o secure such loan, whichever will yield a higher
t a x : Provided, however, That loan agreement s or promissory not es t he
aggregat e of which does n o t exceed Two hundred fift y t housand pesos
(P250,000) execut ed by an individual for his purchase on inst allment for his
personal use or t hat of his family and not for business, resale, bart er or hire
of a house, lot , mot or vehicle, appliance or furnit ure shall be exempt from t he
payment of t he document ary st amp t ax provided under t his Sect ion.
SEC. 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others. Upon any accept ance or payment of any bill of exchange or order for t he
payment of money purport ing t o be drawn in a foreign count ry but payable in
t he Philippines, t here shall be collect ed a document ary st amp t ax of Thirt y
cent avos (P0.30) on each Two hundred pesos (P200), or fract ional part
t hereof, of t he face value of any such bill of exchange, or order, or t he
Philippine equivalent t o such value, if expressed in foreign currency.
SEC. 182. Stamp Tax on Foreign Bills of Exchange and Letters of Credit. On all foreign bills of exchange and let t ers of credit (including orders, by
t elegraph or ot herwise, for t he payment of money issued by express or
st eamship companies or by any person or persons) drawn in but payable out
of t he Philippines in a set of t hree (3) or more according t o t he cust om of

merchant s and bankers, t here shall be collect ed a document ary st amp t ax of

Thirt y cent avos (P0.30) on each Two hundred pesos (P200), or fract ional part
t hereof, of t he face value of any such bill of exchange or let t er of credit , or
t he Philippine equivalent of such face value, if expressed in foreign currency.
SEC. 183. Stamp Tax on Life Insurance Policies. - On all policies of
insurance or ot her inst rument s by what ever name t he same may be called,
whereby any insurance shall be made or renewed upon any life or lives, t here
shall be collect ed a document ary st amp t ax of Fift y cent avos (P0.50) on each
Two hundred pesos (P200), or fract ional part t hereof, of t he amount insured
by any such policy.
SEC. 184. Stamp Tax on Policies of Insurance Upon Property. - On all
policies of insurance or ot her inst rument s by what ever name t he same may
be called, by which insurance shall be made or renewed upon propert y of any
descript ion, including rent s or profit s, against peril by sea or on inland
wat ers, or by fire or light ning, t here shall be collect ed a document ary st amp
t ax of Fift y cent avos (P0.50) on each Four pesos (P4.00), or fract ional part
t hereof, of t he amount of premium charged: Provided, however, That no
document ary st amp t ax shall be collect ed on reinsurance cont ract s or on any
inst rument by which cession or accept ance of insurance risks under any
reinsurance agreement is effect ed or recorded.
SEC. 185. Stamp Tax on Fidelity Bonds and Other Insurance Policies. On all policies of insurance or bonds or obligat ions of t he nat ure of indemnit y
for loss, damage or liabilit y made or renewed by any person, associat ion,
company or corporat ion t ransact ing t he business of accident , fidelit y,
employers liabilit y, plat e, glass, st eam, boiler, burglar, elevat or, aut omat ic
sprinkler, or ot her branch of insurance (except life, marine, inland, a nd fire
insurance), and all bonds, undert akings, or recognizances, condit ioned for
t he performance of t he dut ies of any office or posit ion, for t he doing or not
doing of anyt hing t herein specified, and on all obligat ions guarant eeing t he
validit y or legalit y of any bond or ot her obligat ions issued by any province,
cit y, municipalit y, or ot her public body or organizat ion, and on all obligat ions
guarant eeing t he t it le t o any real est at e, or guarant eeing any mercant ile
credit s, which may be made or renewed by any such person, company or
corporat ion, t here shall be collect ed a document ary st amp t a x of Fift y
cent avos (P0.50) on each Four pesos (P4.00), or fract ional part t hereof, of
t he premium charged.
SEC. 186. Stamp Tax on Policies of Annuities and Pre-Need Plans. - On
all policies of annuit ies, or ot her inst rument s by what ever name t he same
may be called, whereby an annuit y may be made, t ransferred or redeemed,
t here shall be collect ed a document ary st amp t ax of One peso and fift y
cent avos (P1.50) on each Two hundred pesos (P200) or fract ional part
t hereof, of t he capit al of t he annuit y, or should t his be unknown, t hen on
each Two hundred (P200) pesos, or fract ional part t hereof, of t hirt y-t hree
and one-t hird (33 1/3) t imes t he annual income.
On pre-need plans, t he document ary st amp t ax shall be Fift y cent avos
(P0.50) on each Five hundred pesos (P500), or fract ional part t hereof, of t he
value or amount of t he plan.
SEC. 187. Stamp Tax on Indemnity Bonds. - On all bonds for indemnifying
any person, firm or corporat ion who shall become bound or engaged as suret y
for t he payment of any sum of money o r for t he due execut ion or
performance of t he dut ies of any office or posit ion or t o account for money
received by virt ue t hereof, and on all ot her bonds of any descript ion, except
such as may be required in legal proceedings, or are ot herwise provided for
herein, t here shall be collect ed a document ary st amp t ax of Thirt y cent avos
(P0.30) on each Four pesos (P4.00), or fract ional part t hereof, of t he
premium charged.
SEC. 188. Stamp Tax on Certificates. - On each cert ificat e of damages or
ot herwise, and on every cert ificat e o r document issued by any cust oms
officer, marine surveyor, or ot her pe rs on act ing as such, and on each
cert ificat e issued by a not ary public, and on each cert ificat e of any
descript ion required by law or by rules or regulat ions of a public office, or
which is issued for t he purpose of giving informat ion, or est ablishing proof of
a fact , and not ot herwise specified herein, t h e r e shall be collect ed a
document ary st amp t ax of Fift een pesos (P15.00).

SEC. 189. Stamp Tax on Warehouse Receipts. - On each warehouse

receipt for propert y held in st orage in a public or privat e warehouse or yard
for any person ot her t han t he propriet or of such warehouse or yard, t here
shall be collect ed a document ary st amp t ax of Fift een p e s o s (P15.00):
Provided, That no t ax shall be collect ed on each warehouse receipt issued t o
any one person in any one calendar mont h covering propert y t he value of
which does not exceed Two hundred pesos (P200).
SEC. 190. Stamp Tax on Jai-Alai, Horse Racing Tickets, lotto or Other
Authorized Numbers Games. - On each jai-alai, horse race t icket , lot t o, or
ot her aut horized number games, t here shall be collect ed a document ary
st amp t ax of Ten cent avos (P0.10): Provided, That if t he cost of t he t icket
exceeds One pe s o (P1.00), an addit ional t ax of Ten cent avos (P0.10) on
every One peso (P1.00, or fract ional part t hereof, shall be collect ed.
SEC. 191. Stamp Tax on Bills of Lading or Receipts. - On each set of bills
of lading or receipt s (except chart er part y) for a ny goods, merchandise or
effect s shipped from one port or place in t he P hilippines t o anot her port or
place in t he Philippines (except on ferries across rivers), or t o any foreign
port , t here shall be collect ed document ary st amp t ax of One peso (P1.00), if
t he value of such goods exceeds One hundred pesos (P100) and does not
exceed One Thousand pesos (P1,000); Ten pesos (P10), if t he value exceeds
One t housand pesos (P1,000): Provided, however, That freight t icket s
covering goods, merchandise or effect s carried as accompanied baggage of
passengers on land and wat er carriers primarily engaged in t he
t ransport at ion of passengers are hereby exempt .
SEC. 192. Stamp Tax on Proxies. - On each proxy for vot ing at any elect ion
for officers of any company or associat ion, or for any ot her purpose, except
proxies issued affect ing t he affairs of associat ions or corporat ions organized
for religious, charit able or lit erary purposes, t here shall be collect ed a
document ary st amp t ax of Fift een pesos (P15.00).
SEC. 193. Stamp Tax on Powers of Attorney. - On each power of at t orney
t o perform any act what soever, except act s connect ed wit h t he collect ion of
claims due from or accruing t o t he Government of t he Republic of t he
Philippines, or t he government of any province, c it y or municipalit y, t here
shall be collect ed a document ary st amp t ax of Five pesos (P5.00).
SEC. 194. Stamp Tax on Leases and Other Hiring Agreements. - On each
lease, agreement , memorandum, or cont ract for hire, use or rent of any lands
or t enement s, or port ions t hereof, t here shall be collect ed a document ary
st amp t ax of Three pesos (P3.00) for t he first Two t housand pesos (P2,000),
or fract ional part t hereof, and an addit ional One peso (P1.00) for every One
Thousand pesos (P1,000) or fract ional part t hereof, in excess of t he first Two
t housand pesos (P2,000) for each year of t he t erm of said cont ract or
agreement .
SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. - On
every mort gage or pledge of lands, est at e, or propert y, real or personal,
herit able or movable, what soever, where t he same shall be made as a
securit y for t he payment of any definit e and cert ain sum of money lent at t he
t ime or previously due and owing of forborne t o be paid, being payable and on
any conveyance of land, est at e, or propert y what soever, in t rust or t o be
sold, or ot herwise convert ed int o money which shall be and int ended only as
securit y, eit her by express st ipulat ion or ot herwise, t here shall be collect ed a
document ary st amp t ax at t he following rat es:
(a) When t he amount secured does not exceed Five t housand pesos
(P5,000), Twent y pesos (P20.00).
(b) On each Five t housand pesos (P5,000), or fract ional part t hereof in
excess of Five t housand pesos (P5,000), an addit ional t ax of Ten pesos
(P10.00).
On any mort gage, pledge, or deed of t rust , where t he same shall be made as
a securit y for t he payment of a fluct uat ing account or fut ure advances
wit hout fixed limit , t he document ary st amp t ax on such mort gage, pledge or
deed of t rust shall be comput ed o n t he amount act ually loaned or given at
t he t ime of t he execut ion of t he mort gage, pledge or deed of t rust ,
addit ional document ary st amp t ax shall be paid which shall be comput ed on
t he basis of t he amount advanced or loaned at t he rat es specified above:

Provided, however, That if t he full amount of t he loan or credit , grant ed

under t he mort gage, pledge or deed of t rust shall be comput ed on t he
amount act ually loaned or g ive n at t he t ime of t he execut ion of t he
mort gage, pledge or deed of t rust .
However, if subsequent advances are made on such mort gage, pledge or
deed of t rust , addit ional document ary st amp t ax shall be paid which shall be
comput ed on t he basis of t he amount advanced or loaned at t he rat es
specified above: Provided, however, That if t he full amount of t he loan or
credit , grant ed under t he mort gage, pledge or deed of t rust is specified in
such mort gage, pledge or deed of t rust , t he document ary st amp t ax
prescribed in t his Sect ion shall be paid and comput ed on t he full amount of
t he loan or credit grant ed.
SEC. 196. Stamp tax on Deeds of Sale and Conveyances of Real
Property. - On all conveyances, deeds, inst rument s, or writ ings, ot her t han
g r a nt s , p a t e nt s or original cert ificat es of adjudicat ion issued by t he
Government , whereby any land, t enement , or ot her realt y sold shall be
grant ed, assigned, t ransferred or ot herwise conveyed t o t he purchaser, or
purchasers, or t o any ot her person or persons designat ed by such purchaser
or purchasers, t here s hall be collect ed a document ary st amp t ax, at t he
rat es herein below prescribed, based on t he considerat ion cont ract ed t o be
paid for such realt y or on it s fair market value det ermined in accordance wit h
Sect ion 6(E) of t his Code, whichever is higher: Provided, That when one of
t he cont ract ing part ies is t he Government t he t ax herein imposed shall be
based on t he act ual considerat ion.
(a) When t he considerat ion, or value received or cont ract ed t o be paid for
such realt y aft er making proper allowance of any encumbrance, does not
exceed One t housand pesos (P1,000) fift een pesos (P15.00).
(b) For each addit ional One t housand Pesos (P1,000), or fract ional part
t hereof in excess of One t housand pesos (P1,000) of such considerat ion or
value, Fift een pesos (P15.00).
When it appears t hat t he amount of t he document ary st amp t ax payable
hereunder has been reduced by an incorrect st at ement of t he considerat ion
in any conveyance, deed, inst rument or writ ing subject t o such t ax t he
Commissioner, provincial or cit y Treasurer, or ot her revenue officer shall, from
t he assessment rolls or ot her reliable source of informat ion, assess t he
propert y of it s t rue market value and collect t he proper t ax t hereon.
SEC. 197. Stamp Tax on Charter Parties and Similar Instruments. - On
every chart er part y, cont ract or agreement for t he chart er of any ship,
vessel or st eamer, or any let t er or memorandum or ot her writ ing bet ween
t he capt ain, mast er or owner, or ot her person act ing as agent of any ship,
vessel or st eamer, and any ot her person or persons for or relat ing t o t he
chart er of any such ship, vessel or st eamer, and on any renewal or t ransfer
of such chart er, cont ract , agreement , let t er or memorandum, t here shall be
collect ed a document ary st amp t ax at t he following rat es: (a) If t he
regist ered gross t onnage of t he ship, vessel or st eamer does not exceed one
t housand (1,000) t ons, and t he durat ion of t he chart er or cont ract does not
exceed six (6) mont hs, Five hundred pesos (P500); and for each mont h or
fract ion of a mont h in excess of six (6) mont hs, an addit ional t ax of Fift y
pesos (P50.00) shall be paid.
(b) If t he regist ered gross t onnage exceeds one t housand (1,000) t ons and
does not exceed t en t housand (10,000) t ons, and t he durat ion of t he chart er
or cont ract does not exceed six (6) mont hs, One t housand pesos (P1,000);
and for each mont h or fract ion of a mont h in excess of six (6) mont hs, an
addit ional t ax of One hundred pesos (P100) shall be paid.
(c) If t he regist ered gross t onnage exceeds t en t housand (10,000) t ons and
t he durat ion of t he chart er or cont ract does not exceed six (6) mont hs, One
t housand five hundred pesos (P1,500); and for each mont h or fract ion of a
mont h in excess of six (6) mont hs, an addit ional t ax of One hundred fift y
pesos (P150) shall be paid.
SEC.
198. Stamp Tax on Assignments and Renewals of Certain
Instruments. - U p o n each and every assignment or t ransfer of any
mort gage, lease or policy of insurance, or t he renewal or cont inuance of any
agreement , cont ract , chart er, or any evidence of obligat ion or indebt edness

by alt ering or ot herwis e, t here shall be levied, collect ed and paid a

document ary st amp t ax, at t he same rat e as t hat imposed on t he original
inst rument .
SEC. 199. Documents and Papers Not Subject to Stamp Tax. - The
provisions of Sect ion 173 t o t he cont rary not wit hst anding, t he following
inst rument s, document s and papers shall be exempt from t he document ary
st amp t ax: (a) Policies of insurance or annuit ies made or grant ed by a
frat ernal or beneficiary societ y, order, associat ion or cooperat ive company,
operat ed on t he lodge syst em or local cooperat ion plan and organized and
conduct ed solely by t he members t hereof for t he exclusive benefit of each
member and not for profit .
(b) Cert ificat es of oat hs administ ered t o any government official in his official
capacit y or of acknowledgment by any government official in t he performance
of his official dut ies, writ t en appearance in any court by any government
official, in his official capacit y; cert ificat es of t he administ rat ion of oat hs t o
any person as t o t he aut hent icit y of any paper required t o be filed in court
by any person or part y t heret o, whet her t he proceedings be civil or criminal;
papers and document s filed in court s by or for t he nat ional, provincial, cit y or
municipal government s; affidavit s of poor persons for t he purpose of proving
povert y; st at ement s and ot her compulsory informat ion required of persons or
corporat ions by t he rules and regulat ions of t he nat ional, provincial, cit y or
municipal government s exclusively for st at ist ical purposes and which are
wholly for t he use of t he bureau or office in which t hey are filed, and not at
t he inst ance or for t he use or benefit of t he person filing t hem; cert ified
copies and ot her cert ificat es placed upon doc ument s , inst rument s and
papers for t he nat ional, provincial, cit y, or municipal government s, made at
t h e inst ance and for t he sole use of some ot her branch of t he nat ional,
provincial, cit y or municipal government s; and cert ificat es of t he assessed
value of lands, not exceeding Two hundred pesos (P200) in value assessed,
furnished by t he provincial, cit y or municipal Treasurer t o applicant s for
regist rat ion of t it le t o land.
SEC. 200. Payment of Documentary Stamp Tax. (A) In General.- The provisions of President ial Decree No. 1045
not wit hst anding, any person liable t o pay document ary st amp t ax upon any
document subject t o t ax under Tit le VII of t his Code shall file a t ax ret urn
and pay t he t ax in accordance wit h t he rules and regulat ions t o be
prescribed by t h e Secret ary of Finance, upon recommendat ion of t he
Commissioner.
c ra l a w

( B) Time for Filing and Payment of the Tax.- Except as provided by rules
and
regulat ions
promulgat ed
by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner, t he t ax ret urn prescribed in t his
Sect ion shall be filed wit hin t en (10) days aft er t he close of t he mont h when
t he t axable document was made, signed, issued, accept ed, or t ransferred,
and t he t ax t hereon shall be paid at t he same t ime t he aforesaid ret urn is
filed.
c ra l a w

( C ) Where to File.- Except in cases where t he Commissioner ot herwise

permit s, t he aforesaid t ax ret urn shall be filed wit h and t he t ax due shall be
paid t hrough t he aut horized agent bank wit hin t he t errit orial jurisdict ion of
t he Revenue Dist rict Office which has jurisdict ion over t he residence or
principal place of business of t he t axpayer.
In places where t here is no aut horized agent bank, t he ret urn shall be filed
wit h t he Revenue D is t ric t Officer, collect ion agent , or duly aut horized
Treasurer of t he cit y or municipalit y in which t he t axpayer has his legal
residence or principal place of business.
( D) Exception.- In lieu of t he foregoing provisions of t his Sect ion, t he t ax
may be paid eit her t hrough purchase and act ual affixt ure; or by imprint ing
t he st amps t hrough a document ary st amp met ering machine, on t he t axable
document , in t he manner as may be prescribed by rules and regulat ions t o be
promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner.
SEC. 201. Effect of Failure to Stamp Taxable Document. - An inst rument ,
document or paper which is required by law t o be st amped and which has
been signed, issued, accept ed or t ransferred wit hout being duly st amped,

shall not be recorded, nor shall it or any copy t hereof o r any record of
t ransfer of t he same be admit t ed or used in evidence in any court unt il t he
requisit e st amp or st amps are affixed t heret o and cancelled.
TITLE VIII
REMEDIES
CHAPTER I
REMEDIES IN GENERAL
SEC. 202. Final Deed to Purchaser.- In case t he t axpayer shall not redeem
t he propert y as herein provided t he Revenue Dist rict Officer shall, as
grant or, execut e a deed conveying t o t he purchaser so much of t he propert y
as has been sold, free from all liens of any kind what soever, and t he deed
shall succint ly recit e all t he proceedings upon which t he validit y of t he sale
depends.
SEC. 203. Period of Limitation Upon Assessment and Collection. - Except
as provided in Sect ion 222, int ernal revenue t axes shall be assessed wit hin
t hree (3) years aft er t he last day prescribed by law for t he filing of t he
ret urn, and no proceeding in court wit hout assessment for t he collect ion of
such t axes shall be begun aft er t he expirat ion of such period: Provided, That
in a case where a ret urn is filed beyond t he period prescribed by law, t he
t hree (3)-year period shall be count ed from t he day t he ret urn was filed.
For purposes of t his Sect ion, a ret urn filed before t he last day prescribed by
law for t he filing t hereof shall be considered as filed on such last day.
SEC. 204. Authority of the Commissioner to Compromise, Abate and
Refund or Credit Taxes. - The Commissioner may (A) Compromise t he Payment of any Int ernal Revenue Tax, when:
(1) A reasonable doubt as t o t he validit y of t he claim against t he t axpayer
exist s; or(2) The financial posit ion of t he t axpayer demonst rat es a clear
inabilit y t o pay t he assessed t ax.
The compromise set t lement of any t ax liabilit y shall be subject t o t he
following minimum amount s:
For cases of financial incapacit y, a minimum compromise rat e equivalent t o
t en percent (10%) of t he basic assessed t ax; and
For ot her cases, a minimum compromise rat e equivalent t o fort y percent
(40%) of t he basic assessed t ax.
Where t he basic t ax involved exceeds One million pesos (P1,000.000) or
where t he set t lement offered is less t han t he prescribed minimum rat es, t he
compromise shall be subject t o t he approval of t he Evaluat ion Board which
shall be composed of t he Commissioner and t he four (4) Deput y
Commissioners.
(B) Abat e or Cancel a Tax Liabilit y, when:
(1) The t ax or any port ion t hereof appears t o be unjust ly or excessively
assessed; or(2) The administ rat ion and collect ion cost s involved do not
just ify t he collect ion of t he amount due.
All criminal violat ions may be compromised except : (a) t hose already filed in
court , or (b) t hose involving fraud.
(C) Credit or refund t axes erroneously or illegally received or penalt ies
imposed wit hout aut horit y, refund t he value of int ernal revenue st amps when
t hey are ret urned in good condit ion by t he purchaser, and, in his discret ion,
redeem or change unused st amps t hat have been rendered unfit for use and
refund t heir value upon proof of dest ruct ion.
No credit or refund of t axes or penalt ies shall be allowed unless t he t axpayer
files in writ ing wit h t he Commissioner a claim for credit or refund wit hin t wo
(2) years aft er t he payment of t he t ax or penalt y: Provided, however, That a
ret urn filed showing an overpayment shall be considered as a writ t en claim
for credit or refund.

A Tax Credit Cert ificat e validly issued under t he provisions of t his Code may
be applied against any int ernal revenue t ax, excluding wit hholding t axes, for
which t he t axpayer is direct ly liable.
Any request for conversion int o refund of unut ilized t ax credit s may be
allowed, subject t o t he provisions of Sect ion 230 of t his Code: Provided, That
t he original copy of t he Tax Credit Cert ificat e showing a credit able balance is
surrendered t o t he appropriat e revenue officer for verificat ion and
cancellat ion: Provided, further, That in no case shall a t ax refund be given
result ing from availment of incent ives grant ed pursuant t o special laws for
which no act ual payment was made.
The Commissioner shall submit t o t he Chairmen of t he Commit t ee on Ways
and M eans of bot h t he Senat e and House of Represent at ives, every six (6)
mont hs, a report on t he exercise of his powers under t his Sect ion, st at ing
t herein t he following fact s a n d informat ion, among ot hers: names and
addresses of t axpayers whose cases have been t he subject of abat ement or
compromise; amount involved; amount compromised or abat ed; and reasons
for t he exercise of power: Provided, That t he said report shall be present ed
t o t he Oversight Commit t ee in Congres s t hat shall be const it ut ed t o
det ermine t hat said powers are reasonably exercised and t hat t he
government is not unduly deprived of revenues.
CHAPTER II
CIVIL REMEDIES FOR COLLECTION OF TAXES
SEC. 205. Remedies for the Collection of Delinquent Taxes. - T h e civil
remedies for t he collect ion of int ernal revenue t axes, fees or charges, and
any increment t heret o result ing from delinquency shall be:
(a) By dist raint of goods, chat t els, or effect s, and ot her personal propert y of
what ever charact er, including st ocks and ot her securit ies, debt s, credit s,
bank account s and int erest in and right s t o personal propert y, and by levy
upon real propert y and int erest in right s t o real propert y; and
(b) By civil or criminal act ion.
Eit her of t hese remedies or bot h simult aneously may be pursued in t he
discret ion of t he aut horit ies charged wit h t he collect ion of such t axes:
Provided, however, T h a t t he remedies of dist raint and levy shall not be
availed of where t he amount of t ax involve is not more t han One hundred
pesos (P100).
The judgment in t he criminal case shall not only impose t he penalt y but shall
also order payment of t he t axes subject of t he criminal case as finally
decided by t he Commissioner.
The Bureau of Int ernal Revenue shall advance t he amount s needed t o defray
cost s of collect ion by means of civil or criminal act ion, including t he
preservat ion or t ransport at ion of personal propert y dist rained and t he
advert isement and sale t hereof, as well as of real propert y and improvement s
t hereon.
SEC. 206. Constructive Distraint of the Property of a Taxpayer. - To
safeguard t he int erest of t he Government , t he Commissioner may place
under const ruct ive dist raint t he propert y of a delinquent t axpayer or any
t axpayer who, in his opinion, is ret iring from any business subject t o t ax, or
is int ending t o leave t he Philippines or t o remove his propert y t herefrom or t o
hide or conceal his propert y or t o perform any act t ending t o obst ruct t he
proceedings for collect ing t he t ax due or which may be due from him.
The const ruct ive dist raint of personal propert y shall be affect ed by requiring
t he t axpayer or any person having possession or cont rol of such propert y t o
sign a receipt covering t he propert y dist rained and obligat e himself t o
preserve t he same int act and unalt ered and not t o dispose of t he same ;in
any manner what ever, wit hout t he express aut horit y of t he Commissioner.
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In case t he t axpayer or t he person having t he possession and cont rol of t he

propert y sought t o be placed under const ruct ive dist raint refuses or fails t o
sign t he receipt herein referred t o, t he revenue officer effect ing t he

const ruct ive dist raint shall proceed t o prepare a list of such propert y and, in
t he presence of t wo (2) wit nessed, leave a copy t hereof in t he premises
where t he propert y dist rained is locat ed, aft er which t he said propert y shall
be deemed t o have been placed under const ruct ive dist raint .
SEC. 207. Summary Remedies. ( A) Distraint of Personal Property. - Upon t he failure of t he person owing
any delinquent t ax or delinquent revenue t o pay t he same at t he t ime
required, t he Commissioner or his d u l y aut horized represent at ive, if t he
amount involved is in excess of One million pesos (P1,000,000), or t he
Revenue Dist rict Officer, if t he amount involve d is One million pesos
(P1,000,000) or less, shall seize and dist raint any goods, chat t els or effect s,
and t he personal propert y, including st ocks and ot her securit ies, debt s,
credit s, bank account s, and int erest s in and right s t o personal propert y of
such persons ;in sufficient quant it y t o sat isfy t he t ax, or charge, t oget her
wit h any increment t heret o incident t o delinquency, and t he expenses of t he
dist raint and t he cost of t he subsequent sale.
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A report on t he dist raint shall, wit hin t en (10) days from receipt of t he
warrant , be submit t ed b y t he dist raining officer t o t he Revenue Dist rict
Officer, and t o t he R e ve n u e Regional
Direct or: P r o vide d, That t he
Commissioner or his duly aut horized represent at ive shall, subject t o rules and
regulat ions promulgat ed by t he Secret ary of Finance, upon recommendat ion
of t he Commissioner, have t he power t o lift such order of dist raint : Provided,
further, That a consolidat ed report by t he Revenue Regional Direct or may be
required by t he Commissioner as oft en as necessary.
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(B) Levy on Real Property.- Aft er t he expirat ion of t he t ime required t o pay
t he delinquent t ax or delinquent revenue as prescribed in t his Sect ion, real
propert y may be levied upon, before simult aneously or aft er t he dist raint of
personal propert y belonging t o t he delinquent .
To t his end, any int ernal revenue officer designat ed by t he Commissioner or
his duly aut horized represent at ive shall prepare a duly aut hent icat ed
cert ificat e showing t he name of t he t axpayer and t he amount s of t he t ax and
penalt y due from him.
Said cert ificat e shall operat e wit h t he force of a legal execut ion t hroughout
t he Philippines.
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Levy shall be affect ed by writ ing upon said cert ificat e a descript ion of t he
propert y upon which levy is made.
At t he same t ime, writ t en not ice of t he levy shall be mailed t o or served upon
t he Regist er of Deeds for t he province or cit y where t he propert y is locat ed
and upon t he delinquent t axpayer, or if he be absent from t he Philippines, t o
his agent or t he manager of t he business in respect t o which t he liabilit y
arose, or if t here be none, t o t he occupant of t he propert y in quest ion.
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In case t he warrant of levy on real propert y is not issued before or

simult aneously wit h t he warrant of dist raint on personal propert y, and t he
personal propert y of t he t axpayer is not sufficient t o sat isfy his t ax
delinquency, t he Commissioner or his duly aut horized represent at ive shall,
wit hin t hirt y (30) days aft er execut ion of t he dist raint , proceed wit h t he levy
on t he t axpayer's real propert y.
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Wit hin t en (10) days aft er receipt of t he warrant , a report on any levy shall
be submit t ed b y t he levying officer t o t he Commissioner or his duly
aut horized represent at ive: Provided, however, That a consolidat ed report by
t he Revenue Regional Direct or may be required by t he Commissioner as oft en
as
necessary: P ro vide d, furt her, That t he Commissioner or his duly
aut horized represent at ive, subject t o rules and regulat ions promulgat ed by
t he Secret ary of Finance, upon recommendat ion of t he Commissioner, shall
have t he aut horit y t o lift warrant s of levy issued in accordance wit h t he
provisions hereof.
SEC. 208. Procedure for Distraint and Garnishment. - The officer serving
t he warrant of dist raint shall make or cause t o be made an account of t he
goods, chat t els, effect s or ot her personal propert y dist rained, a copy of
which, signed by himself, shall be left eit her wit h t he owner or person from

whose possession such goods, chat t els, or effect s or ot her personal propert y
were t aken, or at t he dwelling or place of business of such person and wit h
someone of suit able age and discret ion, t o whic h list shall be added a
st at ement of t he sum demanded and not e of t he t ime and place of sale.
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St ocks and ot her securit ies shall be dist rained by serving a copy of t he
warrant of dist raint upon t he t axpayer and upon t he president , manager,
t reasurer or ot her responsible officer of t he corporat ion, company or
associat ion, which issued t he said st ocks or securit ies.
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Debt s and credit s shall be dist rained by leaving wit h t he person owing t he
debt s or having in his possession or under his cont rol such credit s, or wit h
his agent , a copy of t he warrant of dist raint .
The warrant of dist raint shall be sufficient aut horit y t o t he person owning
t he debt s or having in his possession or under his cont rol any credit s
belonging t o t he t axpayer t o pay t o t he Commissioner t he amount of such
debt s or credit s.
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Bank account s shall be garnished by serving a warrant of garnishment upon

t he t axpayer and upon t he president , manager, t reasurer or ot her
responsible officer of t he bank.
Upon receipt of t he warrant of garnishment , t he bank shall t un over t o t he
Commissioner so much of t he bank account s as may be sufficient t o sat isfy
t he claim of t he Government .
SEC. 209. Sale of Property Distrained and Disposition of Proceeds. - The
Revenue Dist rict Officer or his duly aut horized represent at ive, ot her t han t he
officer referred t o in Sect ion 208 of t his Code shall, according t o rules and
regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of
t he Commissioner, fort hwit h cause a not ificat ion t o be exhibit ed in not less
t han t wo (2) public places in t he municipalit y or cit y where t he dist raint is
made, specifying; t he t ime and place of sale and t he art icles dist rained.
The t ime of sale shall not be less t han t went y (20) days aft er not ice.
One place for t he post ing of such not ice shall be at t he Office of t he M ayor
of t he cit y or municipalit y in which t he propert y is dist rained.
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At t he t ime and place fixed in such not ice, t he said revenue officer shall sell
t he goods, chat t els, or effect s, or ot her personal propert y, including st ocks
and ot her securit ies so dist rained, at public auct ion, t o t he highest bidder for
cash, or w i t h t he approval of t he Commissioner, t hrough duly licensed
commodit y or st ock exchanges.
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In t he case of St ocks and ot her securit ies, t he officer making t he sale shall
execut e a bill of sale which he shall deliver t o t he buyer, and a copy t hereof
furnished t he corporat ion, company or associat ion which issued t he st ocks or
ot her securit ies.
Upon receipt of t he copy of t he bill of sale, t he corporat ion, company or
associat ion shall make t he corresponding ent ry in it s books, t ransfer t he
st ocks or ot her securit ies sold in t he name of t he buyer, and issue, if
required t o do so, t he corresponding cert ificat es of st ock or ot her securit ies.
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Any residue over and above what is required t o pay t he ent ire claim, including
expenses, shall be ret urned t o t he owner of t he propert y sold.
The expenses chargeable upon each seizure and sale shall embrace only t he
act ual expenses of seizure and preservat ion of t he propert y pending ;t he
sale, and no charge shall be imposed for t he services of t he local int ernal
revenue officer or his deput y.
SEC. 210. Release of Distrained Property Upon Payment Prior to Sale. If at any t ime prior t o t he consummat ion of t he sale all proper charges are
paid t o t he officer conduct ing t he sale, t he goods or effect s dist rained shall
be rest ored t o t he owner.
SEC. 211. Report of Sale to Bureau of Internal Revenue. - Wit hin t wo (2)

days aft er t he sale, t he officer making t he same shall make a report of his
proceedings in writ ing t o t he Commissioner and shall himself preserve a copy
of such report as an official record.
SEC. 212. Purchase by Government at Sale Upon Distraint. - When t he
amount bid for t he propert y under dist raint is not equal t o t he amount of t he
t ax or is very much less t han t he act ual market value of t he art icles offered
for sale, t he Commissioner or his deput y may purchase t he same in behalf of
t he nat ional Government for t he amount of t axes, penalt ies and cost s due
t hereon.
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Propert y so purchased may be resold by t he Commissioner or his deput y,

subject t o t he rules and regulat ions prescribed by t he Secret ary of Finance,
t he net proceeds t herefrom shall be remit t ed t o t he Nat ional Treasury and
account ed for as int ernal revenue.
SEC. 213. Advertisement and Sale. - Wit hin t went y (20) days aft er levy,
t he officer conduct ing t he proceedings s h a l l proceed t o advert ise t he
propert y or a usable port ion t hereof as may be necessary t o sat isfy t he claim
and cost of sale; and such advert isement shall cover a period of a least
t hirt y (30) days.
It shall be effect uat ed by post ing a not ice at t he main ent rance of t he
municipal building or cit y hall and in public and conspicuous place in t he barrio
or dist rict in which t he real est at e lies and ;by publicat ion once a week for
t hree (3) weeks in a newspaper of general circulat ion in t he municipalit y or
cit y where t he propert y is locat ed.
The advert isement shall cont ain a st at ement of t he amount of t axes and
penalt ies so due and t he t ime and place of sale, t he name of t he t axpayer
against whom t axes are levied, and a short descript ion of t he propert y t o be
sold.
At any t ime before t he day fixed for t he sale, t he t axpayer may discont inue
all proceedings by paying t he t axes, penalt ies and int erest .
If he does not do so, t he sale shall proceed and shall be held eit her at t he
main ent rance of t he municipal building or cit y hall, or on t he premises t o be
sold, as t he officer conduct ing t he proceedings shall det ermine and as t he
not ice of sale shall specify.
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Wit hin five (5) days aft er t he sale, a ret urn by t he dist raining or levying
officer of t he proceedings shall be ent ered upon t he records of t he Revenue
Collect ion Officer, t h e Revenue Dist rict officer and t he Revenue Regional
Direct or.
The Revenue Collect ion Officer, in consult at ion wit h t he Revenue dist rict
Officer, shall t hen make out and deliver t o t he purchaser a cert ificat e from
his records, showing t he proceedings of t he sale, describing t he propert y sold
st at ing t he name of t he purchaser and set t ing out t he exact amount of all
t axes, penalt ies and int erest : Provided, however, That in case t he proceeds
of t he sale exceeds t he claim and cost of sale, t he excess shall be t urned
over t o t he owner of t he propert y.
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The Revenue Collect ion Officer, upon approval by t he Revenue Dist rict Officer
may, out of his collect ion, advance an amount sufficient t o defray t he cost s
o f collect ion by means of t he summary remedies provided for in t his Code,
including ; t he preservat ion or t ransport at ion in case of personal propert y,
and t he advert isement and subsequent sale, bot h in cases of personal and
real propert y including improvement s found on t he lat t er.
In his mont hly collect ion report s, s u c h advances shall be reflect ed and
support ed by receipt s.
SEC. 214. Redemption of Property Sold. - Wit hin one (1) year from t he
dat e of sale, t he delinquent t axpayer, or any one for him, shall have t he right
of paying t o t he Revenue Dist rict Officer t he amount of t he public t axes,
penalt ies, and int erest t hereon from t he dat e of delinquency t o t he dat e of
sale, t oget her wit h int erest on said purchase price at t he rat e of fift een
percent (15%) per annum from t he dat e of purchase t o t he dat e of
redempt ion, and such payment shall ent it le t he person paying t o t he delivery

of t he cert ificat e issued t o t he purchaser and a cert ificat e from t he said

Revenue Dist rict Officer t hat he has t hus redeemed t he propert y, and t he
Revenue Dist rict Officer shall fort hwit h pay over t o t he purchaser t he
amount by which such propert y has t hus been redeemed, and said propert y
t hereaft er shall be free form t he lien of such t axes and penalt ies.
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The owner shall not , however, be deprived of t he possession of t he said

propert y and shall be ent it led t o t he rent s and ot her income t hereof unt il t he
expirat ion of t he t ime allowed for it s redempt ion.
SEC. 215. Forfeiture to Government for Want of Bidder. - In case t here is
no bidder for real propert y exposed for sale as herein above provided or if t he
highest bid is for an amount insufficient t o p a y t he t axes, penalt ies and
cost s, t he Int ernal Revenue Officer conduct ing t he sale shall declare t he
propert y forfeit ed t o t he Government in sat isfact ion of t he claim in quest ion
and wit hin t wo (2) days t hereaft er, shall make a ret urn of his proceedings
and t he forfeit ure which shall be spread upon t he records of his office.
It shall be t he dut y of t he Regist er of Deeds concerned, upon regist rat ion
wit h his office of any such declarat ion of forfeit ure, t o t ransfer t he t it le of
t he propert y forfeit ed t o t he Government wit hout t he necessit y of an order
from a compet ent court .
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Wit hin one (1) year from t he dat e of such forfeit ure, t he t axpayer, or any
one for him may redeem said propert y by paying t o t he Commissioner or t he
lat t er's Revenue Collect ion Officer t he full amount of t he t axes and penalt ies,
t oget her wit h int erest t hereon and t he cost s of sale, but if t he propert y be
not t hus redeemed, t he forfeit ure shall become absolut e.
SEC. 216. Resale of Real Estate Taken for Taxes. - The Commissioner shall
have charge of any real est at e obt ained by t he Government of t he Philippines
in payment or sat isfact ion of t axes, penalt ies or c os t s arising under t his
Code or in compromise or adjust ment of any claim t herefore, and said
Commissioner may, upon t he giving of not less t han t went y (20) days not ice,
sell and dispose of t he same of public auct ion or wit h prior approval of t he
Secret ary of Finance, dispose of t he same at privat e sale.
In eit her case, t he proceeds of t he sale shall be deposit ed wit h t he Nat ional
Treasury, and an account ing of t he same shall rendered t o t he Chairman of
t he Commission on Audit .
SEC. 217. Further Distraint or Levy. - The remedy by dist raint of personal
propert y and levy on realt y may be repeat ed if necessary unt il t he full
amount due, including all expenses, is collect ed.
SEC. 218. Injunction not Available to Restrain Collection of Tax. - No
court shall have t he aut horit y t o grant an injunct ion t o rest rain t he
collect ion of any nat ional int ernal revenue t ax, fee or charge imposed by t his
Code.
SEC. 219. Nature and Extent of Tax Lien. - If any person, corporat ion,
part nership, joint -account (cuentas en participacion), associat ion or insurance
company liable t o pay an int ernal revenue t ax, neglect s or refuses t o pay t he
same aft er demand, t he amount shall be a lien in favor of t he Government of
t he Philippines from t he t ime when t h e assessment was made by t he
Commissioner unt il paid, wit h int erest s, penalt ies, and cost s t hat may accrue
in addit ion t heret o upon all propert y and right s t o propert y belonging t o t he
t axpayer: Provided, That t his lien shall not be valid against any mort gagee
purchaser or judgment credit or unt il not ice of such lien shall be filed by t he
Commissioner in t he office of t he Regist er of Deeds of t he province or cit y
where t he propert y of t he t axpayer is sit uat ed or locat ed.
SEC. 220. Form and Mode of Proceeding in Actions Arising under this
Code. - Civil and criminal act ions and proceedings inst it ut ed in behalf of t he
Government under t he aut horit y of t his Code or ot her law enforced by t he
Bureau of Int ernal Revenue shall be brought in t he name of t he Government
of t he Philippines and shall be conduct ed by legal officers of t he Bureau of
Int ernal Revenue but no civil or criminal act ion for t he recovery of t axes or
t he enforcement of any fine, penalt y or forfeit ure under t his Code shall be
filed in court wit hout t he approval of t he Commissioner.
SEC. 221. Remedy for Enforcement of Statutory Penal Provisions. - The

remedy for enforcement of st at ut ory penalt ies of all sort s shall be by criminal
or civil act ion, as t he part icular sit uat ion may require, s ubj e c t t o t he
approval of t he Commissioner.
SEC. 222. Exceptions as to Period of Limitation of Assessment and
Collection of Taxes. (a) In t he case of a false or fraudulent ret urn wit h int ent t o evade t ax or of
failure t o file a ret urn, t he t ax may be assessed, or a proceeding in court for
t he collect ion of such t ax may be filed wit hout assessment , at any t ime
wit hin t en (10) years aft er t he discovery of t he falsit y, fraud or omission:
Provided, That in a fraud assessment which has become final and execut ory,
t he fact of fraud shall be judicially t aken cognizance of in t he civil or criminal
act ion for t he collect ion t hereof.
(b) If before t he expirat ion of t he t ime prescribed in Sect ion 203 for t he
assessment of t he t ax, bot h t he Commissioner and t he t axpayer have agreed
in writ ing t o it s assessment aft er such t ime, t he t ax may be assessed wit hin
t he period agreed upon.
The period so agreed upon may be ext ended by subsequent writ t en
agreement made before t he expirat ion of t he period previously agreed upon.
(c) Any int ernal revenue t ax which has been assessed wit hin t he period of
limit at ion as prescribed in paragraph (a) hereof may be collect ed by dist raint
o r l e v y or by a proceeding in court wit hin five (5) years following t he
assessment of t he t ax.
(d) Any int ernal revenue t ax, which has been assessed wit hin t he period
agreed upon as provided in paragraph (b) hereinabove, may be collect ed by
dist raint or levy or by a proceeding in court wit hin t he period agreed upon in
writ ing before t he expirat ion of t he five (5) -year period.
The period so agreed upon may be ext ended by subsequent writ t en
agreement s made before t he expirat ion of t he period previously agreed upon.
( e ) Provided, however, That not hing in t he immediat ely preceding and
paragraph (a ) hereof shall be const rued t o aut horize t he examinat ion and
invest igat ion or inquiry int o any t ax ret urn filed in accordance wit h t he
provisions of any t ax amnest y law or decree.
SEC. 223. Suspension of Running of Statute of Limitations. - The running
of t he St at ut e of Limit at ions provided in Sect ions 203 and 222 on t he making
of assessment and t he beginning of dist raint or levy a proceeding in court for
collect ion, in respect of any deficiency, s hall be suspended for t he period
during which t he Commissioner is prohibit ed from making t he assessment or
beginning dist raint or levy or a proceeding in court and for sixt y (60) days
t hereaft er; when t he t axpayer request s for a reinvest igat ion which is
grant ed by t he Commissioner; when t he t axpayer cannot be locat ed in t he
address given by him in t he ret urn filed upon which a t ax is being assessed or
collect ed: Provided, t hat , if t he t axpayer informs t he Commissioner of any
change in address, t he running of t he St at ut e of Limit at ions will not be
suspended; when t he warrant o f dist raint or levy is duly served upon t he
t axpayer, his aut horized represent at ive, or a member of his household wit h
sufficient discret ion, and no propert y could be locat ed; and when t he
t axpayer is out of t he Philippines.
SEC. 224. Remedy for Enforcement of Forfeitures. - T h e forfeit ure of
chat t els and removable fixt ures of any sort shall be enforced by t he seizure
and sale, or dest ruct ion, of t he specific forfeit ed propert y.
The forfeit ure of real propert y shall be enforced by a judgment of
condemnat ion and sale in a legal act ion or proceeding, civil or criminal, as t he
case may require.
SEC. 225. When Property to be Sold or Destroyed. - Sales of forfeit ed
chat t els and removable fixt ures shall be effect ed, so far as pract icable, in
t he same manner and under t he same condit ions as t he public not ice and t he
t ime and manner of sale as are prescribed for s ales of personal propert y
dist rained for t he non-payment of t axes.
Dist illed spirit s, liquors, cigars, cigaret t es, ot her manufact ured product s of
t obacco, and all apparat us used I or about t he illicit product ion of such

t obacco, and all apparat us used I or about t he illicit product ion of such
art icles may, upon forfeit ure, be dest royed by order of t he Commissioner,
when t he sale of t he same f o r consumpt ion or use would be injurious t o
public healt h or prejudicial t o t he enforcement of t he law.
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All ot her art icles subject t o excise t ax, which have been manufact ured or
removed in violat ion of t his Code, as well as dies for t he print ing or making of
int ernal revenue st amps and labels which are in imit at ion of or purport t o be
lawful st amps, or labels may, upon forfeit ure, be sold or dest royed in t he
discret ion of t he Commissioner.
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Forfeit ed propert y shall not be dest royed unt il at least t went y (20) days
aft er seizure.
SEC. 226. Disposition of funds Recovered in Legal Proceedings or
Obtained from Forfeitures. - a l l judgment s and monies recovered and
received for t axes, cost s, forfeit ures, fines and penalt ies shall be paid t o t he
Commissioner or his aut horized deput ies as t he t axes t hemselves are
required t o be paid, and except as specially provided, shall be account ed for
and dealt wit h t he same way.
SEC. 227. Satisfaction of Judgment Recovered Against any Internal
Revenue Officer. - When an act ion is brought against any Int ernal Revenue
officer t o recover damages by reason of any act done in t he performance of
official dut y, and t he Commissioner is not ified of such act ion in t ime t o make
defense against t he same, t hrough t he Solicit or General, any judgment ,
da ma ge s or cost s recovered in such act ion shall be sat isfied by t he
Commissioner, upon approval of t he Secret ary of Finance, or if t he same be
paid by t he person used shall be repaid or reimbursed t o him.
No such judgment , damages, or cost s shall be paid or reimbursed in behalf of
a person who has act ed negligent ly or in bad fait h, or wit h willful oppression.
CHAPTER III
PROTESTING AN ASSESSMENT, REFUND, ETC.
c h a n ro b l e s v irtu a l l a w l ib ra ry

SEC. 228. Protesting of Assessment. - When t he Commissioner or his duly

aut horized represent at ive finds t hat proper t axes should be assessed, he
shall first not ify t he t axpayer of his findings: Provided, however, That a
preassessment not ice shall not be required in t he following cases:
(a) When t he finding for any deficiency t ax is t he result of mat hemat ical error
in t he comput at ion of t he t ax as appearing on t he face of t he ret urn; or(b)
When a discrepancy has been det ermined bet ween t he t ax wit hheld and t he
amount act ually remit t ed by t he wit hholding agent ; or(c) When a t axpayer
who opt ed t o claim a refund or t ax credit of excess credit able wit hholding t ax
for a t axable period was det ermined t o have carried over and aut omat ically
applied t he same amount claimed against t he est imat ed t ax liabilit ies for t he
t axable quart er or quart ers of t he succeeding t axable year; or(d) When t he
excise t ax due on exciseable art icles has not been paid; or(e) When t he
art icle locally purchased or import ed by an exempt person, such as, but not
limit ed t o, vehicles, capit al equipment , machineries and spare part s, has been
sold, t raded or t ransferred t o non-exempt persons.
The t axpayers shall be informed in writ ing of t he law and t he fact s on which
t he assessment is made; ot herwise, t he assessment shall be void.
Wit hin a period t o be prescribed by implement ing rules and regulat ions, t he
t axpayer shall be required t o respond t o said not ice.
If t he t axpayer fails t o respond, t h e Commissioner or his duly aut horized
represent at ive shall issue an assessment based on his findings.
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Such assessment may be prot est ed administ rat ively by filing a request for
reconsiderat ion or reinvest igat ion wit hin t hirt y (30) days from receipt of t he
assessment in such form and manner as may be prescribed by implement ing
rules and regulat ions.
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Wit hin sixt y (60) days from filing of t he prot est , all relevant support ing
document s shall h a v e been submit t ed; ot herwise, t he assessment shall
become final.
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If t he prot est is denied in whole or in part , or is not act ed upon wit hin one
hundred eight y (180) days from submission of document s, t he t axpayer
adversely affect ed by t he decision or inact ion may appeal t o t he Court of Tax
Appeals wit hin t hirt y (30) days from receipt of t he said decision, or from t he
lapse of one hundred eight y (180)-day period; ot herwise, t he decision shall
become final, execut ory and demandable.
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - no suit or
proceeding shall be maint ained in any court for t he recovery of any nat ional
int ernal revenue t ax hereaft er alleged t o have been erroneously or illegally
assessed or collect ed, or of any penalt y claimed t o have b e e n collect ed
wit hout aut horit y, of any sum alleged t o have been excessively or in any
manner wrongfully collect ed wit hout aut horit y, or of any sum alleged t o have
been excessively or in any manner wrongfully collect ed, unt il a claim for
refund or credit has been duly filed wit h t he Commissioner; but such suit or
proceeding may be maint ained, whet her or not such t ax, penalt y, or sum has
been paid under prot est or duress.
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In any case, no such suit or proceeding shall be filed aft er t he expirat ion of
t wo (2) years from t he dat e of payment of t he t ax or penalt y regardless of
a n y supervening cause t hat may arise aft er payment : Provided, however,
That t he Commissioner may, even wit hout a writ t en claim t herefor, refund or
credit any t ax, where on t he face of t he ret urn upon which payment was
made, such payment appears clearly t o have been erroneously paid.
SEC. 230. Forfeiture of Cash Refund and of Tax Credit. ( A) Forfeiture of Refund.- A refund check or warrant issued in accordance
wit h t he pert inent provisions of t his Code, which shall remain unclaimed or
uncashed wit hin five (5) years from t he dat e t he said warrant or check was
mailed or delivered, shall be forfeit ed in favor of t he Government and t he
amount t hereof shall revert t o t he general fund.
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(B) Forfeiture of Tax Credit. - A t ax credit cert ificat e issued in accordance

wit h t he pert inent provisions of t his Code, which shall remain unut ilized aft er
five (5) years from t he dat e of issue, shall, unless revalidat ed, be considered
invalid, and shall not be allowed as payment for int ernal revenue t ax liabilit ies
of t he t axpayer, and t he amount covered by t he cert ificat e shall revert t o
t he general fund.
(C) Transitory Provision. - For purposes of t he preceding Subsect ion, a t ax
c r e d it cert ificat e issued by t he Commissioner or his duly aut horized
represent at ive prior t o January 1, 1998, which remains unut ilized or has a
credit able balance as of said dat e, shall be present ed for revalidat ion wit h
t he Commissioner or his duly aut horized represent at ive or on before June 30,
1998.
SEC. 231. Action to Contest Forfeiture of Chattel. - In case of t he seizure
of personal propert y under claim of forfeit ure, t he owner desiring t o cont est
t he validit y of t he forfeit ure may, at any t ime before sale or dest ruct ion of
t he propert y, bring an act ion against t he person seizing t he propert y or
having possession t hereof t o recover t he same, and upon giving proper bond,
may enjoin t he sale; or aft er t he sale and wit hin six (6) mont hs, he may bring
an act ion t o recover t he net proceeds realized at t he sale.
TITLE IX
COMPLIANCE REQUIREMENTS
CHAPTER I
KEEPING OF BOOKS OF ACCOUNTS AND RECORDS
SEC. 232. Keeping of Books of Accounts. (A) Corporations, Companies, Partnerships or Persons Required to
Keep Books of Accounts. - All corporat ions, companies, part nerships or
persons required by law t o pay int ernal revenue t axes shall keep a journal
and a ledger or t heir equivalent s: Provided, however, That t hose whose

quart erly sales, earnings, receipt s, or out put do not exceed Fift y t housand
pesos (P50,000) shall keep and use simplified set of bookkeeping records duly
aut horized by t he Secret ary of Finance where in all t ransact ions and result s
of operat ions are shown and from which all t axes due t he Government may
readily and accurat ely be ascert ained and det ermined any t ime of t he year:
Provided, further, That corporat ions, companies, part nerships or persons
whose gross quart erly sales, earnings, receipt s or out put exceed One
hundred fift y t housand pesos (P150,000) shall have t heir books of account s
audit ed and examined yearly by independent Cert ified Public Account ant s and
t heir income t ax ret urns accompanied wit h a duly accomplished Account
Informat ion Form (AIF) which shall cont ain, among ot hers, informat ion lift ed
from cert ified balance sheet s, profit and loss st at ement s, schedules list ing
income-producing propert ies and t he corresponding income t herefrom and
ot her relevant st at ement s.
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( B ) Independent Certified Public Accountant Defined. - The t erm

"Independent Certified Public Accountant",
as u s e d in t he preceding
paragraph, means an account ant who possesses t he independence as
defined in t he rules and regulat ions of t he Board of Account ancy promulgat ed
pursuant t o President ial Decree No. 692, ot herwise known as t he Revised
Account ancy Law.
SEC. 233. Subsidiary Books. - All corporat ions, companies, part nerships or
persons keeping t he books of account s ment ioned in t he preceding Sect ion
may, at t heir opt ion, keep subsidiary books as t he needs of t heir business
may require: Provided, That were such subsidiaries are kept , t hey shall form
part of t he account ing syst em of t he t axpayer and shall be subject t o t he
same rules and regulat ions as t o t heir keeping, t ranslat ion, product ion and
inspect ion as are applicable t o t he journal and t he ledger.
SEC. 234. Language in which Books are to be Kept; Translation. - All such
corporat ions, companies, part nerships or persons shall keep t he books or
records ment ioned in Sect ion 232 hereof in nat ive language, English or
Spanish: Provided, however, That if in addit ion t o said books or records t he
t axpayer keeps ot her books or records in a language ot her t han a nat ive
language, English or Spanish, he shall make a t rue and complet e t ranslat ion
of all t he ent ries in suck ot her books or records int o a nat ive language;
English or Spanish, and t he said t ranslat ion mu s t be made by t he
bookkeeper, or such t axpayer, or in his absence, by his manager and must be
cert ified under oat h as t o it s correct ness by t he s a i d bookkeeper or
manager, and shall form an int egral part of t he aforesaid books of account s.
The keeping of such books or records in any language ot her t han a nat ive
language, English or Spanish, is hereby prohibit ed.
SEC. 235. Preservation of Books and Accounts and Other Accounting
Records. - All t he books of account s, including t he subsidiary books and
ot her account ing records of corporat ions, part nerships, or persons, shall be
preserved b y t hem for a period beginning from t he last ent ry in each book
unt il t he last day prescribed by Sect ion 203 wit hin which t he Commissioner is
aut horized t o make an assessment .
The said books and records shall be subject t o examinat ion and inspect ion by
int ernal revenue officers: Provided, That for income t ax purposes, such
examinat ion and inspect ion shall be made only once in a t axable year, except
in t he following cases:
(a) Fraud, irregularit y or mist akes, as det ermined by t he Commissioner;(b)
The t axpayer request s reinvest igat ion;(c) Verificat ion of compliance wit h
wit hholding t ax laws and regulat ions;(d) Verificat ion of capit al gains t ax
liabilit ies; and(e) In t he exercise of t he Commissioner's power under Sect ion
5(B) t o obt ain informat ion from ot her persons in which case, anot her or
separat e examinat ion and inspect ion may be made.
Examinat ion and inspect ion of books of account s and ot her account ing
records shall be done in t he t axpayer's office or place of business or in t he
office of t he Bureau of Int ernal Revenue.
All corporat ions, part nerships or persons t hat ret ire from business shall,
wit hin t en (10) days from t he dat e of ret irement or wit hin such period of t ime
as may be allowed by t he Commissioner in special cases, submit t heir books
of account s, including t he subsidiary books and ot her account ing records t o

t he Commissioner or any of his deput ies for examinat ion, aft er which t hey
shall be ret urned.
Corporat ions and part nerships cont emplat ing dissolut ion must no t if y t he
Commissioner and shall not be dissolved unt il cleared of any t ax liabilit y.
Any provision of exist ing general or special law t o t he cont rary
not wit hst anding, t he books of account s and ot her pert inent records of t axexempt organizat ions or grant ees of t ax incent ives shall be subject t o
examinat ion by t he Bureau of Int ernal Revenue for purposes of ascert aining
compliance wit h t he condit ions unde r which t hey have been grant ed t ax
exempt ions or t ax incent ives, and t heir t ax liabilit y, if any.

CHAPTER II
ADMINISTRATIVE PROVISIONS
SEC. 236. Registration Requirements. (A) Requirements. - Every person subject t o any int ernal revenue t ax shall
regist er once wit h t he appropriat e Revenue Dist rict Officer:
(1) Wit hin t en (10) days from dat e of employment , or
(2) On or before t he commencement of business,or
(3) Before payment of any t ax due, or
(4) Upon filing of a ret urn, st at ement or declarat ion as required in t his Code.
The regist rat ion shall cont ain t he t axpayer's name, st yle, place of residence,
business and such ot her informat ion as may be required by t he Commissioner
in t he form prescribed t herefor.
A person maint aining a head office, branch or facilit y shall regist er wit h t he
Revenue Dist rict Officer having jurisdict ion over t he head office, brand or
facilit y.
For purposes of t his Sect ion, t he t erm "facility" may include but not be limit ed
t o sales out let s, places of product ion, warehouses or st orage places.
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( B) Annual Registration Fee. - An annual regist rat ion fee in t he amount of

Five hundred pesos (P500) f o r every separat e or dist inct est ablishment or
place of business, including facilit y t ypes where sales t ransact ions occur,
shall be paid upon regist rat ion and every year t hereaft er on or before t he
last day of January: Provided, however, That cooperat ives, individuals earning
p ur e ly compensat ion income, whet her locally or abroad, and overseas
workers are not liable t o t he regist rat ion fee herein imposed.
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The regist rat ion fee shall be paid t o an aut horized agent bank locat ed wit hin
t he revenue dist rict , or t o t he Revenue Collect ion Officer, or duly aut horized
Treasurer of t he cit y of municipalit y where each place of business or branch
is regist ered.
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( C) Registration of Each Type of Internal Revenue Tax. - Every person

who is required t o regist er wit h t he Bureau of Int ernal R evenue under
Subsect ion (A) hereof, shall regist er each t ype of int ernal revenue t ax for
which he is obligat ed, shall file a ret urn and shall pay such t axes, and shall
updat es such regist rat ion of any changes in accordance wit h Subsect ion (E)
hereof.
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( D ) Transfer of Registration. - In case a regist ered person decides t o

t ransfer his place of business o r his head office or branches, it shall be his
dut y t o updat e his regist rat ion st at us by filing an applicat ion for regist rat ion
informat ion updat e in t he form prescribed t herefor.
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(E) Other Updates. - Any person regist ered in accordance wit h t his Sect ion
shall, whenever applicable, updat e his regist rat ion informat ion wit h t he
Revenue Dist rict Office where he is regist ered, specifying t herein any change
in t ype and ot her t axpayer det ails.
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( F ) Cancellation of Registration. - T h e regist rat ion of any person who

ceases t o be liable t o a t ax t ype shall be cancelled upon filing wit h t he
Revenue Dist rict Office where he is regist ered an applicat ion for regist rat ion
informat ion updat e in a form prescribed t herefor.
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( G) Persons Commencing Business. - Any person, who expect s t o realize

gross sales or receipt s subject t o value-added t ax in excess of t he amount
prescribed under Sect ion 109(z) of t his Code for t he next 12-mont h period
from t he commencement of t he business, s hall regist er wit h t he Revenue
Dist rict Office which has jurisdict ion over t he head office or branch and shall
pay t he annual regist rat ion fee prescribed in Subsect ion (B) hereof.
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( H) Persons Becoming Liable to the Value-added Tax. - Any person,

whose gross sales or receipt s in any 12-mont h period exceeds t he amount
prescribed under Subsect ion 109(z) of t his Code for exempt ion from t he
value-added t ax shall regist er in accordance wit h Subsect ion (A) hereof, and
shall pay t he annual regist rat ion fee prescribed wit hin t en (10) days aft er t he
end of t he last mont h of t hat period, and shall be liable t o t he value-added
t ax commencing from t he first day of t he mont h following his regist rat ion.
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( I ) Optional Registration of Exempt Person. - Any person whose

t ransact ions are exempt from value-added t ax under Sect ion 109(z) of t his
Code; or any person whose t ransact ions are exempt from t he value-added
t ax under Sect ion 109(a), (b), (c), and (d) of t his Code, who opt s t o regist er
as a VAT t axpayer wit h respect t o his export sales only, may updat e his
regist rat ion informat ion in accordance wit h Subsect ion (E ) hereof, not lat er
t han t en (10) days before t he beginning of t he t axable quart er and shall pay
t he annual regist rat ion fee prescribed in Subsect ion (B) hereof.
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In any case, t he Commissioner may, for administ rat ive reasons, deny any
applicat ion for regist rat ion including updat es prescribed under Subsect ion (E)
hereof.
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For purposes of Tit le IV of t his Code, any person who has regist ered valueadded t ax as a t ax t ype in accordance wit h t he provisions of Subsect ion (C)
hereof shall b e referred t o as VAT-regist ered person who shall be assigned
only one Taxpayer Ident ificat ion Number.
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( J ) Supplying of Taxpayer Identification Number (TIN). - Any person

required under t he aut horit y of t his Code t o make, render or file a ret urn,
st at ement or ot her document shall be supplied wit h or assigned a Taxpayer
Ident ificat ion Number (TIN) which he shall indicat e in such ret urn, st at ement
or document filed wit h t he Bureau of Int ernal Revenue for his proper
ident ificat ion for t ax purposes, and which he shall indic a t e in cert ain
document s, such as, but not limit ed t o t he following:
(1) Sugar quedans, refined sugar release order or similar inst rument s;(2)
Domest ic bills of lading;(3) Document s t o be regist ered wit h t he Regist er of
Deeds of Assessor's Office;(4) Regist rat ion cert ificat e of t ransport at ion
equipment by land, sea or air;(5) Document s t o be regist ered wit h t he
Securit ies and Exchange Commission;(6) Building const ruct ion permit s;(7)
Applicat ion for loan wit h banks, financial inst it ut ions, or ot her financial
int ermediaries;(8) Applicat ion for mayor's permit ;(9) Applicat ion for business
license wit h t he Depart ment of Trade & Indust ry; and(10) Such ot her
document s which may hereaft er be required under rules and regulat ions t o be
promulgat ed by t he Secret ary of Finance, upon recommendat ion of t he
Commissioner.
In cases where a regist ered t axpayer dies, t he administ rat or or execut or
shall regist er t he est at e of t he decedent in accordance wit h Subsect ion (A)
hereof and a new Taxpayer Ident ificat ion Number (TIN) shall be supplied in
accordance wit h t he provisions of t his Sect ion.
In t he case of a nonresident decedent , t he execut or or administ rat or of t he
est at e shall regist er t he est at e wit h t he Revenue Dist rict Office where he is
regist ered: Provided, however, That in case such execut or or administ rat or is
not regist ered, regist rat ion of t he est at e shall be made wit h t he Taxpayer
Ident ificat ion Number (TIN) supplied by t he Revenue Dist rict Office having
jurisdict ion over his legal residence.
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Only one
t axpayer.

Taxpayer

ident ificat ion Number (TIN) shall be assigned t o a

Any person who shall secure more t han one Taxpayer Ident ificat ion Number
shall be criminally liable under t he provision of Sect ion 275 on 'Violat ion of
Ot her Provisions of t his Code or Regulat ions in General'.
SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. -All
persons subject t o an int ernal revenue t ax shall, for each sale or t ransfer of
merchandise or for services rendered valued at Twent y-five pesos (P25.00) or
more, issue duly regist ered receipt s or sales or commercial invoices, prepared
at least in duplicat e, showing t he dat e of t ransact ion, quant it y, unit cost and
descript ion of merchandise or nat ure of service: Provided, however, That in
t he case of sales, receipt s or t ransfers in t he amount of One hundred pesos
(P100.00) or more, or regardless of t he amount , where t he sale or t ransfer is
made by a person liable t o value-added t ax t o anot her person also liable t o
value-added t ax; or where t he receipt is issued t o cover payment made as
rent als, commissions, compensat ions or fees, receipt s or invoices shall be
issued which shall show t he name, business st yle, if any, and address of t he
purchaser, cust omer or client : Provided, further, That where t he purchaser is
a VAT-regist ered person, in addit ion t o t he informat ion herein required, t he
invoice or receipt shall furt her show t he Taxpayer Ident ificat ion Number
(TIN) of t he purchaser.
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The original of each receipt or invoice shall be issued t o t he purchaser,

cust omer or client at t he t ime t he t ransact ion is effect ed, who, if engaged in
business or in t he exercise of profession, shall keep and preserve t he same in
his place of business for a period of t hree (3) years from t he close of t he
t axable year in which such invoice or receipt was issued, while t he duplicat e
shall be kept and preserved by t he issuer, also in his place of business, for a
like period.
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The Commissioner may, in merit orious cases, exempt any person subject t o
int ernal revenue t ax from compliance wit h t he provisions of t his Sect ion.
SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All
persons who are engaged in business shall secure from t he Bureau of
Int ernal Revenue an aut horit y t o print receipt s or sales or commercial
invoices before a print er can print t he same.
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No aut horit y t o print receipt s or sales or commercial invoices shall be

grant ed unless t he receipt s or invoices t o be print ed are serially numbered
and shall show, among ot her t hings, t he name, business st yle, Taxpayer
Ident ificat ion Number (TIN) and business address of t he person or ent it y t o
use t he same, and such ot her informat ion t hat may be required by rules and
regulat ions
to
be promulga t e d by t he Secret ary of Finance, upon
recommendat ion of t he Commissioner.
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All persons who print receipt or sales or commercial invoices shall maint ain a
logbook/regist er of t axpayers who availed of t heir print ing services.
The logbook/regist er shall cont ain t he following informat ion:
(1) Names, Taxpayer Ident ificat ion Numbers of t he persons or ent it ies for
whom t he receipt s or sales or commercial invoices were print ed; and
(2) Number of booklet s, number of set s per booklet , number of copies per
set and t he serial numbers of t he receipt s or invoices in each booklet .
SEC. 239. Sign to be Exhibited by Distiller, Rectifier, Compounder,
Repacker and Wholesale Liquor Dealer. - Every person engaged in dist illing
or rect ifying spirit s, compounding liquors, repacking wines or dist illed spirit s,
and every wholesale liquor dealer shall keep conspicuously on t he out side of
his place of business a sign exhibit ing, in let t ers not less t han six cent imet ers
(6 cms.) high, his name or firm st yle, wit h t he words "Registered Distiller",
"Rectifier of Spirits", "Compounder of Liquors", "Repacker of Wines or Distilled
Spirits", or "Wholesale Liquor Dealer", as t he case may be, and his
assessment number.
SEC. 240. Sign to be Exhibited by Manufacturer of Products of Tobacco. Everymanufact urer of cigars, cigaret t es or t obacco, and every wholesale

dealer in leaf t obacco or manufact ured product s of t obacco shall place and
keep on out side of t he building wherein his business is carried on, so t hat it
can be dist inct ly seen, a sign st at ing his full name and business in let t ers not
less t han six cent imet ers (6 cms.) high and also giving his assessment
number.
SEC. 241. Exhibition of Certificate of Payment at Place of Business. - The
cert ificat e or receipt s showing payment of t axes issued t o a person engaged
in
a bus ine s s subject t o an annual regist rat ion fee shall be kept
conspicuously exhibit ed in plain view in or at t he place where t he business is
conduct ed; and in case of a peddler or ot her persons not having a fixed place
of business, shall be kept in t he possession of t he holder t hereof, subject t o
product ion upon demand of any int ernal revenue officer.
SEC. 242. Continuation of Business of Deceased Person. - When any
individual who has paid t he annual regist rat ion fee dies, and t he same
business is cont inued by t he person or persons int erest ed in his est at e, no
addit ional payment shall be required for t he residue of t he t erm which t he
t ax was paid: Provided, however, That t he person or persons int erest ed in
t he est at e should, wit hin t hirt y (30) days from t he deat h of t he decedent ,
submit t o t he Bureau of Int ernal Revenue or t he regional or revenue Dist rict
Office invent ories of goods or st ocks had at t he t ime of such deat h.
The requirement under t his Sect ion shall also be applicable in t he case of
t ransfer of ownership or change of name of t he business est ablishment .
SEC. 243. Removal of Business to Other Location. - Any business for which
t he annual regist rat ion fee has been paid may, subject t o t he rules and
regulat ions prescribed by t he Secret ary of Finance, upon recommendat ion of
t he Commissioner, be removed and cont inued in any ot her place wit hout t he
payment of addit ional t ax during t he t erm for which t he payment was made.
CHAPTER III
RULES AND REGULATIONS
SEC. 244. Authority of Secretary of Finance to Promulgate Rules and
Regulations. - T h e Secret ary of Finance, upon recommendat ion of t he
Commissioner, shall promulgat e all needful rules and regulat ions for t he
effect ive enforcement of t he provisions of t his Code.
SEC. 245. Specific Provisions to be Contained in Rules and Regulations. The rules and regulat ions of t he Bureau of Int ernal Revenue shall, among
ot her t hins, cont ain provisions specifying, prescribing or defining:
(a) The t ime and manner in which Revenue Regional Direct or shall canvass
t heir respect ive Revenue Regions for t he purpose of discovering persons and
propert y liable t o nat ional int ernal revenue t axes, and t he manner in which
t heir list s and records of t axable persons and t axable object s shall be made
and kept ;(b) The forms of labels, brands or marks t o be required on goods
subject t o an excise t ax, and t he manner in which t he labelling, branding or
marking shall be effect ed;(c) The condit ions under which and t he manner in
which goods int ended for export , which if not export ed would be subject t o
an excise t ax, shall be labelled, branded or marked;(d) The condit ions t o be
observed by revenue officers respect ing t he inst it ut ions and conduct of legal
act ions and proceedings;(e) The condit ions under which goods int ended for
st orage in bonded warehouses shall be conveyed t hit her, t heir manner of
st orage and t he met hod of keeping t he ent ries and records in connect ion
t herewit h, also t he books t o be kept by Revenue Inspect ors and t he report s
t o be made by t hem in connect ion wit h t heir supervision of such houses;(f)
The condit ions under which denat ured alcohol may be removed and dealt in,
t he charact er and quant it y of t he denat uring mat erial t o be used, t he
manner in which t he process of denat uring shall be effect ed, so as t o render
t he alcohol suit ably denat ured and unfit for oral int ake, t he bonds t o be
given, t he books and records t o be kept , t he ent ries t o be made t herein, t he
report s t o be made t o t he Commissioner, and t he signs t o be displayed in t he
business or by t he person for whom such denat uring is done or by whom,
such alcohol is dealt in;(g) The manner in which revenue shall be collect ed
and paid, t he inst rument , document or object t o which revenue st amps shall
be affixed, t he mode of cancellat ion of t he same, t he manner in which t he
proper books, records, invoices and ot her papers shall be kept and ent ries
t herein made by t he person subject t o t he t ax, as well as t he manner in

which licenses and st amps shall be gat hered up and ret urned aft er serving
t heir purposes;(h) The condit ions t o be observed by revenue officers
respect ing t he enforcement of Tit le III imposing a t ax on est at e of a
decedent , and ot her t ransfers mortis causa, as well as on gift s and such
ot her rules and regulat ions which t he Commissioner may consider suit able for
t he enforcement of t he said Tit le III;(i) The manner in which t ax ret urns,
informat ion and report s shall be prepared and report ed and t he t ax collect ed
and paid, as well as t he condit ions under which evidence of payment shall be
furnished t he t axpayer, and t he preparat ion and publicat ion of t ax
st at ist ics;(j) The manner in which int ernal revenue t axes, such as income
t ax, including wit hholding t ax, est at e and donor's t axes, value-added t ax,
ot her percent age t axes, excise t axes and document ary st amp t axes shall be
paid t hrough t he collect ion officers of t he Bureau of Int ernal Revenue or
t hrough duly aut horized agent banks which are hereby deput ized t o receive
payment s of such t axes and t he ret urns, papers and st at ement s t hat may be
filed by t he t axpayers in connect ion wit h t he payment of t he t ax: Provided,
however, That not wit hst anding t he ot her provisions of t his Code prescribing
t he place of filing of ret urns and payment of t axes, t he Commissioner may, by
rules and regulat ions, require t hat t he t ax ret urns, papers and st at ement s
t hat may be filed by t he t axpayers i n connect ion wit h t he payment of t he
t a x. Provided, however, That not wit hst anding t he ot her provisions of t his
Code prescribing t he place of filing of ret urns and payment of t axes, t he
Commissioner may, by rules and regulat ions require t hat t h e t ax ret urns,
papers and st at ement s and t axes of large t axpayers be filed and paid,
respect ively, t hrough collect ion officers or t hrough duly aut horized agent
banks: Provided, further, That t he Commissioner can exercise t his power
wit hin six (6) years from t he approval of Republic Act No. 7646 or t he
complet ion of it s comprehensive comput erizat ion program, whichever comes
earlier: Provided, finally, That separat e venues for t he Luzon, Visayas and
M indanao areas may be designat ed for t he filing of t ax ret urns and payment
of t axes by said large t axpayers.
For t he purpose of t his Sect ion, "large taxpayer" means a t axpayer who
sat isfies any of t he following crit eria;
( 1 ) Value-Added Tax (VAT). - B usiness est ablishment wit h VAT paid or
payable of at least One hundred t housand pesos (P100,000) for any quart er
of t he preceding t axable year;
( 2) Excise Tax. - Business est ablishment wit h excise t ax paid or payable of
at least One million pesos (P1,000,000) for t he preceding t axable year;
( 3) Corporate Income Tax. - Business est ablishment wit h annual income
t ax paid or payable of at least One million pesos (P1,000,000) for t he
preceding t axable year; and
( 4 ) Withholding Tax.
- B us ine s s est ablishment wit h wit hholding t ax
payment or remit t ance of at least O ne million pesos (P1,000,000) for t he
preceding t axable year.
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Provided, however, That t he Secret ary of Finance, upon recommendat ion of

t he Commissioner, may modify or add t o t he above crit eria for det ermining a
large t axpayer aft er considering such fact ors as inflat ion, volume of business,
wage and employment levels, and similar economic fact ors.
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The penalt ies prescribed under Sect ion 248 of t his Code shall be imposed on
any violat ion of t he rules and regulat ions issued by t he Secret ary of Finance,
upon recommendat ion of t he Commissioner, prescribing t he place of filing of
ret urns and payment s of t axes by large t axpayers.
SEC. 246. Non-Retroactivity of Rulings. - Any revocat ion, modificat ion or
reversal of any of t he rules and regulat ions promulgat ed in accordance wit h
t he preceding Sect ions or any of t he rulings or circulars promulgat ed by t he
Commissioner shall not be given ret roact ive applicat ion if t he revocat ion,
modificat ion or reversal will be prejudicial t o t he t axpayers, except in t he
following cases:
(a) Where t he t axpayer deliberat ely misst at es or omit s mat erial fact s from
his ret urn or any document required of him by t he Bureau of Int ernal
Revenue;(b) Where t he fact s subsequent ly gat hered by t he Bureau of
Int ernal Revenue are mat erially different from t he fact s on which t he ruling is
based; or(c) Where t he t axpayer act ed in bad fait h.

TITLE X
STATUTORY OFFENSES AND PENALTIES
CHAPTER I
ADDITIONS TO TAX
SEC. 247. General Provisions. (a) The addit ions t o t he t ax or deficiency t ax prescribed in t his Chapt er shall
apply t o all t axes, fees and charges imposed in t his Code.
The Amount so added t o t he t ax shall be collect ed at t he same t ime, in t he
same manner and as part of t he t ax.
(b) If t he wit hholding agent is t he Government or any of it s agencies,
polit ical
subdivisions or inst rument alit ies, or a government -owned or
cont rolled corporat ion, t he employee t hereof responsible for t he wit hholding
and remit t ance of t he t ax shall be personally liable for t he addit ions t o t he
t ax prescribed herein.
(c) t he t erm "person", as used in t his Chapt er, includes an officer or
employee of a corporat ion who as such officer, employee or member is under
a dut y t o perform t he act in respect of which t he violat ion occurs.
SEC. 248. Civil Penalties. - (A) There shall be imposed, in addit ion t o t he t ax
required t o be paid, a penalt y equivalent t o t went y-five percent (25%) of t he
amount due, in t he following cases: (1) Failure t o file any ret urn and pay t he
t ax due t hereon as required under t he provisions of t his Code or rules and
regulat ions on t he dat e prescribed; or (2) Unless ot herwise aut horized by t he
Commissioner, filing a ret urn wit h an int ernal revenue officer ot her t han
t hose wit h whom t he ret urn is required t o be filed; or (3) Failure t o pay t he
deficiency t ax wit hin t he t ime prescribed for it s payment in t he not ice of
assessment ; or (4) Failure t o pay t he full or part of t he amount of t ax shown
on any ret urn required t o be filed under t he provisions of t his Code or rules
and regulat ions, or t he full amount of t ax due for which no ret urn is required
t o be filed, on or before t he dat e prescribed for it s payment .
(B) In case of willful neglect t o file t he ret urn wit hin t he period prescribed by
t his Code or by rules and regulat ions, or in case a false or fraudulent ret urn
is willfully made, t he penalt y t o be imposed shall be fift y percent (50%) of t he
t ax or of t he deficiency t ax, in case, any payment has been made on t he
basis of such ret urn before t he discovery of t he falsit y or fraud: Provided,
That a subst ant ial underdeclarat ion of t axable sales, receipt s or income, or a
subst ant ial overst at ement of deduct ions, as det ermined by t he Commissioner
pursuant t o t he rules and regulat ions t o be promulgat ed by t he Secret ary of
Finance, shall const it ut e prima facie evidence of a false or fraudulent ret urn:
Provided, further, That failure t o report sales, receipt s or income in an
amount exceeding t hirt y percent (30%) of t hat declared per ret urn, and a
claim of deduct ions in an amount exceeding (30%) of act ual deduct ions, shall
render t he t axpayer liable for subst ant ial underdeclarat ion of sales, receipt s
or income or for overst at ement of deduct ions, as ment ioned herein.
SEC. 249. Interest. ( A ) In General. - There shall be assessed and collect ed on any unpaid
amount of t ax, int erest at t he rat e of t went y percent (20%) per annum, or
such higher rat e as ma y be prescribed by rules and regulat ions, from t he
dat e prescribed for payment unt il t he amount is fully paid.
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( B) Deficiency Interest. - Any deficiency in t he t ax due, as t he t erm is

defined in t his Code, shall be subject t o t he int erest prescribed in Subsect ion
(A) hereof, which int erest shall be assessed and collect ed from t he dat e
prescribed for it s payment unt il t he full payment t hereof.
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(C) Delinquency Interest. - In case of failure t o pay:

(1) The amount of t he t ax due on any ret urn t o be filed, or
(2) The amount of t he t ax due for which no ret urn is required, or

(3) A deficiency t ax, or any surcharge or int erest t hereon on t he due dat e
appearing in t he not ice and demand of t he Commissioner, t here shall be
assessed
and c olle c t e d on t he unpaid amount , int erest at t he rat e
prescribed in Subsect ion (A) hereof unt il t he amount is fully paid, which
int erest shall form part of t he t ax.
(D) Interest on Extended Payment. - If any person required t o pay t he t ax
is qualified and elect s t o pay t he t ax on inst allment under t he provisions of
t his Code, but fails t o pay t he t ax or any inst allment hereof, or any part of
such amount or inst allment on or before t he dat e prescribed for it s payment ,
or where t he Commissioner has aut horized an ext ension of t ime wit hin which
t o pay a t ax or a deficiency t ax or any part t hereof, t here shall be assessed
and collect ed int erest at t he rat e hereinabove prescribed on t he t ax or
deficiency t ax or any part t hereof unpaid from t he dat e of not ice and demand
unt il it is paid.
SEC. 250. Failure to File Certain Information Returns. - In t he case of
each failure t o file an informat ion ret urn, st at ement or list , or keep any
record, or supply any informat ion required by t his Code or by t he
Commissioner on t he dat e prescribed t herefor, unless it is shown t hat such
failure is due t o reasonable cause and not t o willful neglect , t here shall, upon
not ice and demand by t he Commissioner, be paid by t he person failing t o file,
keep or supply t he same, One t housand pe s o s (1,000) for each failure:
Provided, however, That t he aggregat e amount t o be imposed for all such
failures during a calendar year shall not exceed Twent y-five t housand pesos
(P25,000).
SEC. 251. Failure of a Withholding Agent to Collect and Remit Tax. - Any
person required t o wit hhold, account for, and remit any t ax imposed by t his
Code or who willfully fails t o wit hhold such t ax, or account for and remit such
t ax, or aids or abet s in any manner t o evade any such t ax or t he payment
t hereof, shall, in addit ion t o ot her penalt ies provided for under t his Chapt er,
be liable upon convict ion t o a penalt y equal t o t he t ot al amount of t he t ax
not wit hheld, or not account ed for and remit t ed.
SEC. 252. Failure of a Withholding Agent to refund Excess Withholding
Tax. - Any employer/wit hholding agent who fails or refuses t o refund excess
wit hholding t ax shall, in addit ion t o t he penalt ies provided in t his Tit le, be
liable t o a penalt y t o t he t ot al amount of refunds which was not refunded t o
t he employee result ing from any excess of t he amount wit hheld over t he t ax
act ually due on t heir ret urn.

CHAPTER II
CRIMES, OTHER OFFENSES AND FORFEITURES
SEC. 253. General Provisions. (a) Any person convict ed of a crime penalized by t his Code shall, in addit ion
t o being liable for t he payment of t he t ax, be subject t o t he penalt ies
imposed herein: Provided, That payment of t he t ax due aft er apprehension
shall not const it ut e a valid defense in any prosecut ion for violat ion of any
provision of t his Code or in any act ion for t he forfeit ure of unt axed art icles.
(b) Any person who willfully aids or abet s in t he commission of a crime
penalized herein or who causes t he commission of any such offense by
anot her shall be liable in t he same manner as t he principal.
(c) If t he offender is not a cit izen of t he Philippines, he shall be deport ed
immediat ely a f t e r serving t he sent ence wit hout furt her proceedings for
deport at ion.
If he is a public officer or employee, t he maximum penalt y prescribed for t he
offense shall be imposed a nd, in addit ion, he shall be dismissed from t he
public service and perpet ually disqualified from holding any public office, t o
vot e and t o part icipat e in any elect ion.
If t he offender is a Cert ified Public Account ant , his cert ificat e as a Cert ified
P u b lic Account ant
shall, upon convict ion, be aut omat ically revoked or
cancelled.
(d) In t he case of associat ions, part nerships or corporat ions, t he penalt y

(d) In t he case of associat ions, part nerships or corporat ions, t he penalt y

shall be imposed on t he part ner, president , general manager, branch
manager, t reasurer, officer-in-charge, and t he employees responsible for t he
violat ion.
(e) The fines t o be imposed for any violat ion of t he provisions of t his Code
shall not be lower t han t he fines imposed herein or t wice t he amount of
t axes, int erest and surcharges due from t he t axpayer, whichever is higher.
SEC. 254. Attempt to Evade or Defeat Tax. - Any person who willfully
at t empt s in any manner t o evade or defeat any t ax imposed under t his Code
or t he payment t hereof shall, in addit ion t o ot her penalt ies provided by law,
upon convict ion t hereof, be punished by a fine not less t han Thirt y t housand
(P30,000) but not more t han One hunderd t housand pesos (P100,000) and
suffer imprisonment of not less t han t wo (2) years but not more t han four (4)
years: Provided, That t he convict ion or acquit t al obt ained under t his Sect ion
shall not be a bar t o t he filing of a civil suit for t he collect ion of t axes.
SEC.
255. Failure to File Return, Supply Correct and Accurate
Information, Pay Tax Withhold and Remit Tax and Refund Excess Taxes
Withheld on Compensation. - Any person required under t his Code or by
rules and regulat ions promulgat ed t hereunder t o pay any t ax make a ret urn,
keep any record, or supply correct t he accurat e informat ion, who willfully fails
t o pay such t ax, make such ret urn, keep such record, or supply correct and
accurat e informat ion, o r wit hhold or remit t axes wit hheld, or refund excess
t axes wit hheld on compensat ion, at t he t ime or t imes required by law or rules
and regulat ions shall, in addit ion t o ot her penalt ies provided by law, upon
convict ion t hereof, b e punished by a fine of not less t han Ten t housand
pesos (P10,000) and suffer imprisonment of not less t han one (1) year but
not more t han t en (10) years.
Any person who at t empt s t o make it appear for any reason t hat he or
anot her has in fact filed a ret urn or st at ement , or act ually files a ret urn or
st at ement and subsequent ly wit hdraws t he same ret urn or st at ement aft er
securing t he official receiving seal or st amp of receipt of int ernal revenue
office wherein t he same was act ually filed shall, upon convict ion t herefor, be
punished by a fine o f not less t han Ten t housand pesos (P10,000) but not
more t han Twent y t housand pesos (P20,000) and suffer imprisonment of not
less t han one (1) year but not more t han t hree (3) years.
SEC. 256. Penal Liability of Corporations. - Any corporat ion, associat ion or
general co-part nership liable for any of t he act s or omissions penalized under
t his Code, in addit ion t o t he penalt ies imposed herein upon t he responsible
corporat e officers, part ners, or employees shall, upon convict ion for each act
or omission, be punished by a fine of not less t han Fift y t housand pesos
(P50,000) but not more t han One hundred t housand pesos (P100,000).
SEC. 257. Penal Liability for Making False Entries, Records or Reports, or
Using Falsified or Fake Accountable Forms. (A) Any financial officer or independent Cert ified Public Account ant engaged
t o examine and audit books of account s of t axpayers under Sect ion 232 (A)
and any person under his direct ion who:
(1) Willfully falsifies any report or st at ement bearing on any examinat ion or
audit , or renders a report , including exhibit s, st at ement s, schedules or ot her
forms of account ancy work which has not been verified by him personally or
under his supervision or by a member of his firm or by a member of his st aff in
accordance wit h sound audit ing pract ices; or
(2) Cert ifies financial st at ement s of a business ent erprise cont aining an
essent ial misst at ement of fact s or omission in respect of t he t ransact ions,
t axable income, deduct ion and exempt ion of his client ; or
(B) Any person who:
(1) Not being an independent Cert ified Public Account ant according t o
Sect ion 232(B) or a financial officer, examines and audit s books of account s
of t axpayers; or
(2) Offers t o sign and cert ify financial st at ement s wit hout audit ; or
(3) Offers any t axpayer t he use of account ing bookkeeping records for

int ernal revenue purposes not in conformit y wit h t he requirement s prescribed

in t his Code or rules and regulat ions promulgat ed t hereunder; or
(4) Knowingly makes any false ent ry or ent ers any false or fict it ious name in
t he books of account s or record ment ioned in t he preceding paragraphs; or
(5) Keeps t wo (2) or more set s of such records or books of account s; or
(6) In any way commit s an act or omission, in violat ion of t he provisions of
t his Sect ion; or
(7) Fails t o keep t he books of account s or records ment ioned in Sect ion 232
in a nat ive language, English or Spanish, or t o make a t rue and complet e
t ranslat ion as required in Sect ion 234 of t his Code, or whose books of
account s or records kept in a nat ive language, English or Spanish, and found
t o be at mat erial variance wit h books or records kept by him in anot her
language; or
(8) Willfully at t empt s in any manner t o evade or defeat any t ax imposed
under t his Code, or knowingly uses fake or falsified revenue official receipt s,
Let t ers of Aut horit y, cert ificat es aut horizing regist rat ion, Tax Credit
Cert ificat es, Tax Debit M emoranda and ot her account able forms shall, upon
convict ion for each act or omission, be punished by a fine not less t han Fift y
t housand pesos (P50,000) but not more t han One hundred pesos (P100,000)
and suffer imprisonment of not less t han t wo (2) years but not more t han six
(6) years.
If t he offender is a Cert ified Public Account ant , his cert ificat e as a Cert ified
Public
Account ant s h a l l be aut omat ically revoked or cancelled upon
convict ion.
In t he case of foreigners, convict ion under t his Code shall result in his
immediat e deport at ion aft er serving sent ence, wit hout furt her proceedings
for deport at ion.
SEC. 258. Unlawful Pursuit of Business. - Any person who carries on any
business for which an annual regist rat ion fee is imposed wit hout paying t he
t ax as required by law shall, upon convict ion for each act or omission, be
punished by a fine of not less t han Five t housand pesos (P5,000) but not
more t han Twent y t housand pesos (P20,000) and suffer imprisonment of not
less t han six (6) mont hs but not more t han t wo (2) years: Provided, That in
t he case of a person engaged in t he bus ines s of dist illing, rect ifying,
repacking, compounding or manufact uring any art icle subject t o excise t ax,
he shall, upon convict ion for each act o r omission, be punished by a fine of
not less t han Thirt y t housand pesos (P30,000) but not more t han Fift y
t housand pesos (P50,000) and suffer imprisonment of not less t han t wo (2)
years but not more t han four (4) years.
SEC. 259. Illegal Collection of Foreign Payments. - Any person who
knowingly undert akes t he collect ion of foreign payment s as provided under
Sect ion 67 of t his Code wit hout having obt ained a lic ens e t herefor, or
wit hout complying wit h it s implement ing rules and regulat ions, shall, upon
convict ion for each act or omission, be punished by a fine of not less t han
Twent y t housand pesos (P20,000) but not more t han Fift y t housand pesos
(P50,000) and suffer imprisonment of not less t han one (1) year but not more
t han t wo (2) years.
SEC. 260. Unlawful Possession of Cigarette Paper in Bobbins or Rolls,
Etc. - It shall be unlawful for any person t o have in his possession cigaret t e
paper in bobbins or rolls, cigaret t e t ipping paper or cigaret t e filt er t ips,
wit hout t he corresponding aut horit y t herefor issued by t he Commissioner.
Any person, import er, manufact urer of cigar and cigaret t es, who has been
found guilt y under t his Sect ion, shall, upon convict ion for each act or
omission, be punished by a fine of not less t han Twent y t housand pesos
(P20,000) but not more t han One hundred t housand pesos (P1000,000) and
suffer imprisonment for a t erm of not less t han six (6) years and one (1) day
but not more t han t welve (12) years.
SEC. 261. Unlawful Use of Denatured Alcohol. - Any person who for t he
purpose of manufact uring any beverage, uses denat ured alcohol or alcohol
specially denat ured t o be used for mot ive power or wit hdrawn under bond for

indust rial uses or alcohol knowingly misrepresent ed t o b e denat ured t o be

unfit for oral int ake or who knowingly sells or offers for sale any beverage
made in whole or in part from such alcohol or who uses such alcohol for t he
manufact ure of liquid medicinal preparat ions t aken int ernally, or knowingly
sells or offers for sale such preparat ions cont aining as an ingredient such
alcohol, shall upon convict ion for each act or omission be punished by a fine
of not less t han Twent y t housand pesos (P20,000) but not more t han One
hundred t housand pesos (P100,000) and suffer imprisonment for a t erm of
not less t han six (6) years and one (1) day but not more t han t welve (12)
years.
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Any person who shall unlawfully recover or at t empt t o recover by dist illat ion
or ot her process any denat ured alcohol or who knowingly sells or offers for
sale, conceals or ot herwise disposes of alcohol so recovered or redist illed
shall be subject t o t he same penalt ies imposed under t his Sect ion.
SEC. 262. Shipment or Removal of Liquor or Tobacco Products under
False Name or Brand or as an Imitation of any Existing or Otherwise
Known Product Name or Brand. - Any person who ships, t ransport s or
removes spirit uous, compounded or f e r me nt e d liquors, wines or any
manufact ured product s of t obacco under any ot her t han t he proper name or
brand known t o t he t rade as designat ing t he kind and qualit y of t he cont ent s
of t he cask, bot t le or package cont aining t he same or as an imit at ion of any
exist ing or ot herwise known product name or brand or causes such act t o be
done, shall, upon convict ion for each act or omission, be punished by a fine of
not less t han Twent y t housand pesos (P20,000) but not more t han One
hundred t housand pesos (P 1000,000) and suffer imprisonment of not less
t han six (6) years and one (1) day but not more t han t welve (12) years.
SEC. 263. Unlawful Possession or Removal of Articles Subject to Excise
Tax without Payment of the Tax. - Any person who owns and/or is found in
possession of import ed art icles subject t o excise t ax, t he t ax on which has
not been paid in accordance wit h law, or any person who owns and/or is
found in possession of import ed t ax-exempt art icles ot her t han t hose t o
whom t hey are legally issued shall be punished by:
(a) A fine of not less t han One t housand pesos (P1,000) nor more t han Two
t housand pesos (P2,000) and suffer imprisonment of not less t han sixt y (60)
days but not more t han one hundred (100) days, if t he appraised value, t o be
det ermined in t he manner prescribed in t he Tariff and Cust oms Code,
including dut ies and t axes, of t he art icles does not exceed One t housand
pesos (P1,000).
(b) A fine of not less t han Ten t housand pesos (P10,000) but not more t han
Twent y t housand pesos (P20,000) and suffer imprisonment of not less t han
t wo (2) years but not more t han four (4) years, if t he appraised value, t o be
det ermined in t h e manner prescribed in t he Tariff and Cust oms Code,
including dut ies and t axes, of t he art icles exceeds One t housand pesos
(P1,000) but does not exceed Fift y t housand pesos (P50,000);(c) A fine of
n o t le s s t han Thirt y t housand pesos (P30,000) but not more t han Sixt y
t housand pesos (P60,000) and suffer imprisonment of not less t han four (4)
years but n o t more t han six (6) years, if t he appraised value, t o be
det ermined in t h e manner prescribed in t he Tariff and Cust oms Code,
including dut ies and t axes of t he art icles is more t han Fift y t housand pesos
(P50,000)
but d o e s not exceed One hundred fift y t housand pesos
(P150,000); or(d) A fine of not less t han Fift y t housand pesos (P50,000) but
not more t han One hundred t ho us a nd pesos (P100,000) and suffer
imprisonment of not less t han t en (10) years but not more t han t welve (12)
years, if t he appraised value, t o be det ermined in t he manner prescribed in
t he Tariff and Cust oms Code, including dut ies and t axes, of t he art icles
exceeds One hundred fift y t housand pesos (P150,000).
Any person who is found in possession of locally manufact ured art icles
subject t o excise t ax, t he t ax on which has not been paid in accordance wit h
law, or any person w h o is found in possession of such art icles which are
exempt from excise t ax ot her t han t hose t o whom t he same is lawfully issued
shall be punished wit h a fine of not less t han (10) t imes t he amount of excise
t ax due on t he art icles found but not less t han Five hundred pesos (P500)
and suffer imprisonment of not less t han t wo (2) years but not more t han
four (4) years.
Any manufact urer, owner or person in charge of any art icle subject t o excise

t ax who removes or allows or causes t he unlawful removal of any such

art icles from t he place of product ion or bonded warehouse, upon which t he
excise t ax has not been paid at t he t ime and in t he manner required, and any
person who knowingly aids or abet s in t he removal of such art icles as
aforesaid, or conceals t he same aft er illegal removal shall, for t he first
offense, be punished wit h a fine of not less t han t en (10) t imes t he amount
of excise t ax d u e on t he art icles but not less t han One t housand pesos
(P1,000) and suffer imprisonment of not less t han one (1) year but not more
t han t wo (2) years.
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The mere unexplained possession of art icles subject t o excise t ax, t he t ax on

which has not been paid in accordance wit h law, shall be punishable under
t his Sect ion.
Sec. 264. Failure or refusal to Issue Receipts or Sales or Commercial
Invoices, Violations related to the Printing of such Receipts or Invoices
and Other Violations. (a) Any person who, being required under Sect ion 237 t o issue receipt s or
sales or commercial invoices, fails or refuses t o issue such receipt s of
invoices, issues receipt s or invoices t hat do not t ruly reflect and/or cont ain
all t he informat ion required t o be shown t herein, or uses mult iple or double
receipt s or invoices, shall, upon convict ion for each act or omission, be
punished by a fine of not less t han One t housand pesos (P1,000) but not
more t han Fift y t housand pesos (P50,000) and suffer imprisonment of not
less t han t wo (2) years but not more t han four (4) years.
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(b) Any person who commit s any of t he act s enumerat ed hereunder shall be
penalized in t he same manner and t o t he same ext ent as provided for in t his
Sect ion:
(1) Print ing of receipt s or sales or commercial invoices wit hout aut horit y from
t he Bureau of Int ernal Revenue; or
(2) Print ing of double or mult iple set s of invoices or receipt s; or
(3) Print ing of unnumbered receipt s or sales or commercial invoices, not
bearing t he name, business st yle, Taxpayer Ident ificat ion Number, and
business address of t he person or ent it y.
SEC. 265. Offenses Relating to Stamps. - Any person who commit s any of
t he act s enumerat ed hereunder shall, upon convict ion t hereof, be punished
by a fine of not less t han Twent y t housand pesos (P20,000) but not more
t han Fift y t housand pesos (P50,000) and suffer imprisonment of not less
t han four (4) years but not more t han eight (8) years: (a) making, import ing,
selling, using or possessing wit hout express aut horit y from t he Commissioner,
any die for print ing or making st amps, labels, t ags or playing cards;(b)
Erasing t he cancellat ion marks of any st amp previously used, or alt ering t he
w r it t e n figures or let t ers or cancellat ion marks on int ernal revenue
st amps;(c) Possessing false, count erfeit , rest ored or alt ered st amps, labels
or t ags or causing t he commission of any such offense by anot her;(d) Selling
or offering for sale any box or package cont aining art icles subject t o excise
t ax wit h false, spurious or count erfeit st amps or labels or selling from any
such fraudulent box, package or cont ainer as aforement ioned; or(e) Giving
away or accept ing from anot her, or selling, buying or using cont ainers on
which t he st amps are not complet ely dest royed.
Sec. 266. Failure to Obey Summons. - A n y person who, being duly
summoned t o appear t o t est ify, or t o appear and produce books of account s,
records, memoranda or ot her papers, or t o furnish informat ion as required
under t he pert inent provisions of t his Code, neglect s t o appear or t o produce
such books of account s, records, memoranda or ot her papers, or t o furnish
such informat ion, shall, upon convict ion, be punished by a fine of not less
t han Five t housand pesos (P5,000) but not more t han t en t housand pesos
(P10,000) and suffer imprisonment of not less t han one (1) year but not more
t han t wo (2) years.
SEC. 267. Declaration under Penalties of Perjury. - Any declarat ion, ret urn
and ot her st at ement required under t his Code, shall, in lieu of an oat h,
cont ain a writ t en st at ement t hat t hey are made unde r t he penalt ies of
perjury.

Any person who willfully files a declarat ion, ret urn or st at ement cont aining
informat ion which is not t rue and correct as t o every mat erial mat t er shall,
upon convict ion, be subject t o t he penalt ies prescribed for perjury under t he
Revised Penal Code.
SEC. 268. Other Crimes and Offenses. ( A ) Misdeclaration or Misrepresentation of Manufacturers Subject to
Excise Tax.- Any manufact urer who, in violat ion of t he provisions of Tit le VI
of t his Code, misdeclares in t he sworn st at ement required t herein or in t he
sales invoice, any pert inent dat a or informat ion shall be punished by a
summary cancellat ion or wit hdrawal of t he permit t o engage in business as a
manufact urer of art icles subject t o excise t ax.
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(B) Forfeiture of Property Used in Unlicensed Business or Dies Used for

Printing False Stamps, Etc.- All chat t els, machinery, and removable fixt ures
of any sort used in t he unlicensed product ion of art icles subject t o excise t ax
shall be forfeit ed.
Dies and ot her equipment used for t he print ing or making of any int ernal
revenue st amp, label or t ag which is in imit at ion of or purport s t o be a lawful
st amp, label or t ag shall also be forfeit ed.
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( C) Forfeiture of Goods Illegally Stored or Removed. - Unless ot herwise

specifically aut horized by t he Commissioner, all art icles subject t o excise t ax
should not be st ored or allowed t o remain in t he dist illery warehouse, bonded
warehouse or ot her place where made, aft er t he t ax t hereon has been paid;
ot herwise, all such art icles shall be forfeit ed.
Art icles wit hdrawn from any such place or from cust oms cust ody or import ed
int o t he count ry wit hout t he payment of t he required t ax shall likewise be
forfeit ed.

CHAPTER III
PENALTIES IMPOSED ON PUBLIC OFFICERS
SEC. 269. Violations Committed by Government Enforcement Officers. Every official, agent , or employee of t he Bureau of Int ernal Revenue or any
o t he r agency of t he Government charged wit h t he enforcement of t he
provisions of t his Code, who is guilt y of any of t he offenses herein below
specified shall, upon convict ion for each act or omission, be punished by a
fine of not less t han Fift y t housand pesos (P50,000) but not more t han One
hundred t housand pesos (P100,000) and suffer imprisonment of not less t han
t en (10) years but not more t han fift een (15) years and shall likewise suffer
an addit ional penalt y of perpet ual disqualificat ion t o hold public office, t o
vot e, and t o part icipat e in any public elect ion:
(a) Ext ort ion or willful oppression t hrough t he use of his office or willful
oppression and harassment of a t axpayer who refused, declined, t urned down
or reject ed any of his offers specified in paragraph (d) hereof;(b) Knowingly
demanding or receiving any fee, ot her or great er sums t hat are aut horized by
law or receiving any fee, compensat ion or reward, except as by law
prescribed, for t he performance of any dut y;(c) Willfully neglect ing t o give
receipt s, as by law required, for any sum collect ed in t he performance of dut y
or willfully neglect ing t o perform any ot her dut ies enjoined by law;(d) Offering
o r undert aking t o accomplish, file or submit a report or assessment on a
t axpayer wit hout t he appropriat e examinat ion of t he books of account s or
t ax liabilit y, or offering or undert aking t o submit a report or assessment less
t han t he amount due t he Government for any considerat ion or compensat ion,
or conspiring or colluding wit h anot her or ot hers t o defraud t he revenues or
ot herwise violat e t he provisions o f t his Code;(e) Neglect ing or by design
permit t ing t he violat ion of t he law by any ot her person;(f) M aking or signing
any false ent ry or ent ries in any book, or making or signing any false
cert ificat e or ret urn;
(g) Allowing or conspiring or colluding wit h anot her t o allow t he unaut horized
ret rieval, wit hdrawal or recall of any ret urn, st at ement or declarat ion aft er
t he same has been officially received by t he Bureau of Int ernal Revenue;
(h) Having knowledge or informat ion of any violat ion of t his Code or of any

fraud commit t ed on t he revenues collect ible by t he Bureau of Int ernal

Revenue, failure t o report such knowledge or informat ion t o t heir superior
officer, or failure t o report as ot herwise required by law; and.
(i) Wit hout t he aut horit y of law, demanding or accept ing or at t empt ing t o
collect , direct ly or indirect ly, as payment or ot herwise any sum of money or
ot her t hing of value for t he compromise, adjust ment or set t lement of any
charge or complaint for any violat ion or alleged violat ion of t his Code.
Provided, That t he provisions of t he foregoing paragraph not wit hst anding,
any int ernal revenue officer for which a prima facie case of grave misconduct
has been est ablished shall, aft er due not ice and hearing of t he administ rat ive
case and subject t o Civil Service Laws, be dismissed from t he revenue
service: Provided, further, That t he t erm "grave misconduct", as defined in
Civil Service Law, shall include t he issuance of fake let t ers of aut horit y and
receipt s, forgery of signat ure, usurpat ion of aut horit y and habit ual issuance
of unreasonable assessment s.
SEC. 270. Unlawful Divulgence of Trade Secrets. - Except as provided in
Sect ion 71 of t his Code and Sect ion 26 of Republic Act No. 6388, any officer
or employee of t he Bureau of Int ernal Revenue who divulges t o any person or
makes known in any ot her manner t han may be provided by law informat ion
regarding t he business, income or est at e of any t axpayer, t he secret s,
operat ion, st yle or work, or apparat us of any manufact urer or producer, or
confident ial informat ion regarding t he business of any t axpayer, knowledge of
which was acquired by him in t he discharge of his official dut ies, shall upon
convict ion for each act or omission, be punished by a fine of not less t han
Fift y t housand pesos (P 50,000) but not more t han One hundred t housand
pesos (P100,000), or suffer imprisonment of not less t han t wo (2) years but
not more t han five (5) years, or bot h.
SEC. 271. Unlawful Interest of Revenue Law Enforcers in Business. - Any
int ernal revenue officer who is or shall become int erest ed, dire c t ly or
indirect ly, in t he manufact ure, sale or import at ion of any art icle subject t o
excise t ax under Tit le VI of t his Code or in t he manufact ure or repair or sale,
of any die for print ing, or making of st amps, or labels shall upon convict ion
for each act or omission, be punished by a fine of not less t han Five t housand
pesos (P5,000) but not more t han Ten t housand pesos (P10,000), or suffer
imprisonment of not less t han t wo (2) years and one (1) day but not more
t han four (4) years, or bot h.
SEC. 272. Violation of Withholding Tax Provision. - Every officer or
employee of t he Government of t he Republic of t he Philippines or any of it s
agencies and inst rument alit ies, it s polit ical s ubdivis ions , as well as
government -owned or cont rolled corporat ions, including t he B angko Sent ral
ng Pilipinas (BSP), who, under t he provisions of t his Code or r ule s and
regulat ions promulgat ed t hereunder, is charged wit h t he dut y t o deduct and
wit hhold any int ernal revenue t ax and t o remit t he same in accordance wit h
t he provisions of t his Code and ot her laws is guilt y of any offense herein
below specified shall, upon convict ion for each act or omission be punished by
a fine of not less t han Five t housand pesos (P5,000) but not more t han Fift y
t housand pesos (P50,000) or suffer imprisonment of not less t han six (6)
mont hs and one (1) day but not more t han t wo (2) years, or bot h: (a) Failing
or causing t he failure t o deduct and wit hhold any int ernal revenue t ax under
any of t he wit hholding t ax laws and implement ing rules and regulat ions;(b)
Failing or causing t he failure t o remit t axes deduct ed and wit hheld wit hin t he
t ime prescribed by law, and implement ing rules and regulat ions; and(c) Failing
or causing t he failure t o file ret urn or st at ement wit hin t he t ime prescribed,
or rendering or furnishing a false or fraudulent ret urn or st at ement required
under t he wit hholding t ax laws and rules and regulat ions.
SEC. 273. Penalty for Failure to Issue and Execute Warrant. - Any official
who fails t o issue or execut e t he warrant of dist raint or levy wit hin t hirt y
(30) days aft er t he expirat ion of t he t ime prescribed in Sect ion 207 or who is
found guilt y of abusing t he exercise t hereof by compet ent aut horit y shall be
aut omat ically dismissed from t he service aft er due not ice and hearing.
CHAPTER IV
OTHER PENAL PROVISIONS
SEC. 274. Penalty for Second and Subsequent Offenses. - In t he case of
reincidence, t he maximum of t he penalt y prescribed for t he offense shall be

imposed.
SEC. 275. Violation of Other Provisions of this Code or Rules and
Regulations in General. - Any person who violat es any provision of t his Code
or any rule or regulat ion promulgat ed by t he Depart ment of Finance, for
which no specific penalt y is provided by law, shall, upon convict ion for each
act or omission, be punished by a fine of not more t han One t housand pesos
(P1,000) or suffer imprisonment of not more t han six (6) mont hs, or bot h.
SEC. 276. Penalty for Selling, Transferring, Encumbering or in Any Way
Dis pos ing of Property Placed Under Constructive Distraint. - Any
t axpayer, whose propert y has been placed under const ruct ive dist raint , who
sells, t ransfers, encumbers or in any way disposes of said propert y, or any
part t hereof, wit hout t he knowledge and consent of t he Commissioner, shall,
upon convict ion for each act or omission, be punished by a fine of not less
t han t wice t he value of t he propert y so sold, encumbered or disposed of but
not less t han Five Thousand pesos (P5,000), or suffer imprisonment of not
less t han t wo (2) years and one (1) day but not more t han four (4) years, of
bot h.
SEC. 277. Failure to Surrender Property Placed Under Distraint and Levy.
- Any person having in his possession or under his cont rol any propert y or
right s t o propert y, upon which a warrant of const ruct ive dist raint , or act ual
dist raint and levy has been issued shall, upon demand by t he Commissioner or
any of his deput ies execut ing such warrant , surrender such propert y or right
t o propert y t o t he Commissioner or any of his deput ies, unless such propert y
or right is, at t he t ime of such demand, subject t o an at t achment or
execut ion under any judicial process.
Any person who fails or refuses t o surrender any of such propert y or right
shall be liable in his own person and est at e t o t he Government in a sum equal
t o t he value of t he propert y or right s not so surrendered but not exceeding
t he amount of t he t axes (including penalt ies and int erest ) for t he collect ion
of which such warrant had been issued, t oget her wit h cost and int erest if
any, from t he dat e of such warrant .
In addit ion, such person shall, upon convict ion for each act or omission, be
punished by a fine of not less t han Five t housand pesos (P5,000), or suffer
imprisonment of not less t han six (6) mont hs and one (1) day but not more
t han t wo (2) years, or bot h.
SEC. 278. Procuring Unlawful Divulgence of Trade Secrets. - Any person
who causes or procures an officer or employee of t he Bureau of Int ernal
Revenue t o divulge any confident ial informat ion regarding t he business,
income or inherit ance of any t axpayer, knowledge of which was acquired by
him in t he discharge of his official dut ies, and which it is unlawful for him t o
reveal, and any person who publishes or print s in any manner what ever, not
provided by law, any income, profit , loss or expendit ure appearing in any
income t ax ret urn, shall be punished by a fine of not more t han Two t housand
pesos (P2,000), or suffer imprisonment of not less t han six (6) mont hs nor
more t han five (5) years, or bot h.
SEC. 279. Confiscation and Forfeiture of the Proceeds or Instruments of
Crime. - I n addit ion t o t he penalt y Imposed for t he violat ion of t he
provisions of Tit le X of t his Code, t he same shall carry wit h it t he confiscat ion
a nd forfeit ure in favor of t he government of t he proceeds of t he crime or
value of t he goods, and t he inst rument s or t ools wit h which t he crime was
commit t ed: Provided, however, That if in t he course of t he proceedings, it is
est ablished t hat t he inst rument s or t ools used in t he illicit act belong t o a
t hird person, t he same shall be confiscat ed and forfeit ed aft er d u e not ice
and hearing in a separat e proceeding in favor of t he Government if such t hird
person leased, let , chart ered or ot herwise ent rust ed t he same t o t he
offender: Provided, further, That in case t he le s s e e subleased, or t he
borrower, chart erer, or t rust ee allowed t he use of t he inst rument s or t ools
t o t he offender, such inst rument s or t ools shall, likewise, be confiscat ed and
forfeit ed: Provided, finally, Tha t propert y of common carriers shall not be
subject t o forfeit ure when used in t he t ransact ion of t heir business as such
common carrier, unless t he owner or operat or of said common carrier was, at
t he t ime of t he illegal act , a consent ing part y or privy t heret o, wit hout
prejudice t o t he owner's right of recovery against t he offender in a civil or
criminal act ion.

Art icles which are not subject of lawful commerce shall be dest royed.
SEC. 280. Subsidiary Penalty. - If t he person convict ed for violat ion of any
of t he provisions of t his Code has no propert y wit h which t o meet t he fine
imposed upon him by t he court , or is unable t o pay such fine, he shall be
subject t o a subsidiary personal liabilit y at t he rat e of one (1) day for each
Eight pesos and fift y cent avos (P8.50) subject t o t he rules est ablished in
Art icle 39 of t he Revised Penal Code.
SEC. 281. Prescription for Violations of any Provision of this Code. - All
violat ions of any provision of t his Code shall prescribe aft er Five (5) years.
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Prescript ion shall begin t o run from t he day of t he commission of t he violat ion
of t he law, and if t he same be not known at t he t ime, from t he discovery
t hereof and t he inst it ut ion of judicial proceedings for it s invest igat ion and
punishment .
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The prescript ion shall be int errupt ed when proceedings are inst it ut ed against
t he guilt y pers ons and shall begin t o run again if t he proceedings are
dismissed for reasons not const it ut ing jeopardy.
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The t erm of prescript ion shall not run when t he offender is absent from t he
Philippines.
SEC. 282. Informer's Reward to Persons Instrumental in the Discovery
of Violations of the National Internal Revenue Code and in the Discovery
and Seizure of Smuggled Goods. ( A) For Violations of the National Internal Revenue Code. - Any person,
except an int ernal revenue official or employee, or ot her public official or
employee, or his relat ive wit hin t he sixt h degree of consanguinit y, who
volunt arily gives definit e and sworn informat ion, not yet in t he possession of
t he Bureau of Int ernal Revenue, leading t o t he discovery of frauds upon t he
int ernal revenue laws or violat ions of any of t he provisions t hereof, t hereby
result ing in t he recovery of revenues, surcharges and fees and/or t he
convict ion of t he guilt y part y and/or t h e imposit ion of any of t he fine or
penalt y, shall be rewarded in a sum equivalent t o t en percent (10%) of t he
revenues, surcharges or fees recovered and/or fine or penalt y imposed and
collect ed or One M illion Pesos (P1,000,000) per case, whichever is lower.
The same amount of reward shall also be given t o an informer where t he
offender has offered t o compromise t he violat ion of law commit t ed by him and
his offer has been accept ed by t he Commissioner and collect ed from t he
offender: Provided, That should no revenue, surcharges or fees be act ually
recovered or collect ed, such person s ha ll not be ent it led t o a reward:
Provided, further, That t he informat ion ment ioned herein shall not refer t o a
case already pending or pre vious ly invest igat ed or examined by t he
Commissioner or any of his deput ies, agent s or examiners, or t he Secret ary
of Finance or any of his deput ies or agent s: Provided, finally, That t he reward
provided herein shall be paid under rules and regulat ions issued by t he
Secret ary of Finance, upon recommendat ion of t he Commissioner.
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( B) For Discovery and Seizure of Smuggled Goods. - To encourage t he

public t o ext end full cooperat ion in eradicat ing smuggling, a cash reward
equivalent t o t en percent (10%) of t he fair market value of t he smuggled and
confiscat ed goods or One M illion Pesos (P1,000,000) per case, whichever is
lower, shall be given t o persons inst rument al in t he discovery and seizure of
such smuggled goods.
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The cash rewards of informers shall be subject t o income t ax, collect ed as a

final wit hholding t ax, at a rat e of t en percent (10%).
The provisions of t he foregoing Subsect ions not wit hst anding, all public
officials, whet her incumbent or ret ired, who acquired t he informat ion in t he
course of t he performance of t heir dut ies during t heir incumbency, are
prohibit ed from claiming informer's reward.
TITLE XI
ALLOTMENT OF INTERNAL REVENUE
CHAPTER I

DISPOSITION AND ALLOTMENT OF NATIONAL INTERNAL REVENUE IN

GENERAL
SEC. 283. Disposition of National Internal Revenue. - N at ional Int ernal
revenue collect ed and not applied as herein above provided or ot herwise
specially disposed of by law shall accrue t o t he Nat ional Treasury and shall be
available for t he general purposes of t he Government , wit h t he except ion of
t he amount s set apart by way of allot ment as provided for under Republic
Act No. 7160, ot herwise known as t he Local Government Code of 1991.
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In addit ion t o t he int ernal revenue allot ment as provided for in t he preceding
paragraph, fift y percent (50%) of t he nat ional t axes collect ed under Sect ions
106, 108 and 116 of t his Code in excess of t he increase in collect ions for t he
immediat ely preceding year shall be dist ribut ed as follows:
(a) Twent y percent (20%) shall accrue t o t he cit y or municipalit y where such
t axes are collect ed and shall be allocat ed in accordance wit h Sect ion 150 of
Republic Act No. 7160, ot herwise known as t he Local Government Code of
1991; and(b) Eight y percent (80%) shall accrue t o t he Nat ional Government .
SEC. 284. Allotment for the Commission on Audit. - One-half of one
percent (1/2 of 1%) of t he collect ions from t he nat ional int ernal revenue
t axes not ot herwise accruing t o special account s in t he general fund of t he
nat ional government shall accrue t o t he Commission on Audit as a fee for
audit ing services rendered t o local government unit s, excluding maint enance,
equipment , and ot her operat ing expenses as provided for in Sect ion 21 of
President ial Decree No. 898.
The Secret ary of Finance is hereby aut horized t o deduct from t he mont hly
int ernal revenue t ax collect ions an amount equivalent t o t he percent age as
herein fixed, and t o remit t he same direct ly t o t he Commission on Audit under
such rules and regulat ions as may be promulgat ed by t he Secret ary of
Finance and t he Chairman of t he Commission on Audit .
SEC. 285. Allotment for the Bureau of Internal Revenue. - A n amount
equivalent t o five percent (5%) of t he excess of act ual collect ions of nat ional
int ernal revenue t axes over t he collect ion goal shall accrue t o t he special
fund of t he Bureau of Int ernal Revenue and shall be t reat ed as receipt s
aut omat ically appropriat ed.
Said amount shall be ut ilized a s incent ive bonus for revenue personnel,
purchase of necessary equipment and facilit ies for t he improvement of t ax
administ rat ion, as approved b y t he
Commissioner: Provide d, That t he
President may, upon recommendat ion of t he Commissioner, direct t hat t he
excess be credit ed t o a Special Account in t he Nat ional Treasury t o be held
in t he reserve available for dist ribut ion as incent ive bonus in t he subsequent
years.
The Secret ary of Finance is hereby aut horized t o t ransfer from t he Treasury
an amount equivalent t o t he percent age as herein fixed and t o remit t he
same direct ly t o t he Bureau of Int ernal Revenue under such rules and
regulat ions as may be promulgat ed by t he Secret ary of Finance.
CHAPTER II
SPECIAL DISPOSITION OF CERTAIN NATIONAL INTERNAL REVENUE
TAXES
SEC. 286. Disposition of Proceeds of insurance Premium Tax. - Twent yfive percent (25%) of t he premium t ax collect ed under Sect ion 123 of t his
Code shall accrue t o t he Insurance Fund as cont emplat ed in Sect ion 418 of
President ial Decree No. 612 which shall be used for t he purpose of defraying
t he expenses of t he Insurance Commission.
The Commissioner shall t urn over and deliver t he said Insurance Fund t o t he
Insurance Commissioner as soon as t he collect ion is made.
SEC. 287. Shares of Local Government Units in the Proceeds from the
Development and Utilization of the National Wealth. - Local Government
unit s shall have an equit able share in t he proceeds de rive d from t he
ut ilizat ion and development of t he nat ional wealt h, wit hin t heir respect ive
areas, including sharing t he same wit h t he inhabit ant s by w a y of direct

benefit s.

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(A) Amount of Share of Local Government Units. - Local government unit s

shall, in addit ion t o t he int ernal revenue allot ment , have a share of fort y
percent (40%) of t he gross collect ion derived by t he nat ional government
from t he preceding fiscal year from excise t a xe s on mineral product s,
royalt ies, and such ot her t axes, fees or charges, including relat ed
surcharges, int erest s or fines, and from it s share in any co-product ion, joint
vent ure or product ion sharing agreement in t he ut ilizat ion and development
of t he nat ional wealt h wit hin t heir t errit orial jurisdict ion.
c ra l a w

( B) Share of the Local Governments from Any Government Agency or

Government-Owned o r Controlled Corporation. - L ocal Government Unit s
shall have a share, based on t he preceding fiscal year, from t he proceeds
derived by any government agency or government -owned or cont rolled
corporat ion engaged in t he ut ilizat ion and development of t he nat ional wealt h
based on t he following formula, whichever will produce a higher share for t he
local government unit :
(1) One percent (1%) of t he gross sales or receipt s of t he preceding
calendar year, or(2) Fort y percent (40%) of t he excise t axes on mineral
product s, royalt ies, and such ot her t axes, fees or charges, including relat ed
surcharges, int erest s or fines t he government agency or government -owned
or -cont rolled corporat ions would have paid if it were not ot herwise exempt .
( C ) Allocation of Shares. - The share in t he preceding Sect ion shall be
dist ribut ed in t he following manner: (1) Where t he nat ural resources are
locat ed in t he province: (a) Province - t went y percent (20%) (b) Component
cit y/municipalit y - fort y-five percent (45%); and (c) Barangay - t hirt y-five
percent (35%)
Provided, however, That where t he nat ural resources are locat ed in t wo (2)
or more cit ies, t he allocat ion of shares shall be based on t he formula on
populat ion and land area as specified in subsect ion (C)(1) hereof.
(2) Where t he nat ural resources are locat ed in a highly urbanized or
independent component cit y: (a) Cit y - sixt y - five percent (65%); and (b)
Barangay - t hirt y - five percent (35%)
Provided, however, That where t he nat ural resources are locat ed in t wo (2)
or more cit ies, t he allocat ion of shares shall be based on t he formula on
populat ion and land area as specified in subsect ion (c)(1) hereof.
SEC. 288. Disposition of Incremental Revenues. - ( A ) Incremental
Revenues from Republic Act No. 7660. - The increment al revenues from
t he increase in t he document ary st amp t axes under R.A. No. 7660 shall be
set aside for t he following purposes:
(1) In 1994 and 1995, t went y five percent (25%) t hereof respect ively, shall
accrue t o t he Unified Home-Lending Program under Execut ive Order No. 90
part icularly for mass socialized housing program t o be allocat ed as follows:
fift y percent (50%) for mass-socialized housing; t hirt y percent (30%) for t he
communit y mort gage program; and t went y percent (20%) for land banking
and development t o be administ ered b y t he Nat ional Housing Aut horit y:
Provided, That no more t han one percent (1%) of t he respect ive allocat ions
hereof shall be used for administ rat ive expenses;(2) In 1996, t went y five
percent (25%) t hereof t o be ut ilized for t he Nat ional Healt h Insurance
Program t hat hereaft er may be mandat ed by law;(3) In 1994 and every year
t hereaft er, t went y five percent (25%) t hereof shall accrue t o a Special
Educat ion Fund t o be Administ ered by t he Depart ment of Educat ion, Cult ure
and Sport s for t he const ruct ion and repair of school facilit ies, t raining or
t eac hers , and procurement or product ion of inst ruct ional mat erials and
t eaching aids; and(4) In 1994 and every year t hereaft er, fift y percent (50%)
t hereof shall accrue t o a Special Infrast ruct ure Fund for t he Const ruct ion
and repair of roads, bridges, dams and irrigat ion, seaport s and hydroelect ric
and ot her indigenous power project s: however, That for t he years 1994 and
1995, t hirt y percent (30%), and for t he years 1996, 1997 and 1998, t went y
percent (20%), of t his fund shall be allocat ed for depressed provinces as
declared by t he President as of t he t ime of t he effect ivit y of R. A. No. 7660:
Provided, further, That availment s under t his fund shall be det ermined by t he
President on t he basis of equit yProvided, finally, That in paragraphs (2), (3),
and (4) of t his Sect ion, not more one percent (1%) of t he allocat ed funds

t hereof shall be used for administ rat ive expens es by t he implement ing
agencies.
(B) Incremental Revenues from Republic Act No. 8240. - Fift een percent
(15%) of t he increment al revenue collect ed from t he excise t ax on t obacco
product s under R. A. No. 8240 shall be allocat ed and divided among t he
provinces producing burley and nat ive t obacco in accordance wit h t he volume
of t obacco leaf product ion.
The fund shall be exclusively ut ilized for programs in pursuit of t he following
object ives:
(1) Cooperat ive project s t hat will enhance bet t er qualit y of agricult ural
product s and increase income and product ivit y of farmers;(2) Livelihood
projec t s , part icularly t he development of alt ernat ive farming syst em t o
enhance farmer's income; and(3) Agro-indust rial project s t hat will enable
t obacco farmers t o be involved in t he manage me nt and subsequent
ownership of project s, such as post -harvest and secondary processing like
cigaret t e manufact uring and by-product ut ilizat ion.
The Depart ment of Budget and M anagement , in consult at ion wit h t he
Oversight Commit t ee creat ed unde r said R.A. No. 8240, shall issue t he
corresponding
rules
and
regulat ions governing t he allocat ion and
disbursement of t his fund.
SEC. 289. Special Financial Support to Beneficiary Provinces Producing
Virginia Tobacco. - The financial support given by t he Nat ional Government
for t he beneficiary provinces shall be const it ut ed and collect ed from t he
proceeds
of f if t e e n percent (15%) of t he excise t axes on locally
manufact ured Virginia-t ype of cigaret t es.
The funds allot t ed shall be divided among t he beneficiary provinces pro-rata
according t o t he volume of Virginia t obacco product ion.
c ra l a w

Product ion producing Virginia t obacco shall be t he beneficiary provinces under

Republic Act No. 7171. Provided, however, t hat t o qualify as beneficiary
under R. A. No. 7171, a province must have an average annual product ion of
Virginia leaf t obacco in an amount not less t han one million kilos: Provided,
further, t hat t he Depart ment of Budget and M anagement (DBM ) shall each
year det ermine t he beneficiary provinces and t heir comput ed share of t he
funds under R. A. No. 7171, referring t o t he Nat ional Tobacco Administ rat ion
(NTA) records of t obacco accept ances, at t he t obacco t rading cent ers for
t he immediat e past year.
c ra l a w

The Secret ary of Budget and M anagement is hereby direct ed t o ret ain
annually t he said funds equivalent t o fift een percent (15%) of excise t axes
on locally manufact ured Virginia t ype cigaret t es t o be remit t ed t o t he
beneficiary provinces qualified under R. A. No. 7171.
c ra l a w

The provision of exist ing laws t o t he cont rary not wit hst anding, t he fift een
percent (15%) share from government revenues ment ioned in R. A. No. 7171
and due t o t he Virginia t obacco-producing provinces shall be direct ly remit t ed
t o t he provinces concerned.
c ra l a w

Provided, That t his Sect ion shall be implement ed in accordance wit h t he

guidelines of M emorandum Circular No. 61-A dat ed November 28, 1993, which
amended M emorandum Circular No. 61, ent it led "Prescribing Guidelines for
Implementing Republic Act No. 7171", dat ed January 1, 1992.
Provided, further, That in addit ion t o t he local government unit s ment ioned in
t he above circular, t he concerned officials in t he province shall be consult ed
as regards t he ident ificat ion of project s t o be financed.
TITLE XII
OVERSIGHT COMMITTEE

SEC.
290. Congressional Oversight Committee. - A Congressional
Oversight Commit t ee, hereinaft er referred t o as t he Commit t ee, is hereby
const it ut ed in accordance wit h t he provisions of t his Code.

The Commit t ee shall be composed of t he Chairmen of t he Commit t ee on Ways

and M eans of t he Senat e and House Represent at ives and four (4) addit ional
members from each house, t o be designat ed by t he Speaker of t he House of
Represent at ives and t he Senat e President , respect ively.
c ra l a w

The Commit t ee shall, among ot hers, in aid of legislat ion:

(1) M onit or and e ns ure t he proper implement at ion of Republic Act
8240;(2) Det ermine t hat t he power of t he Commissioner t o compromise
abat e is reasonably exercised;(3) Review t he collect ion performance of
Bureau of Int ernal Revenue; and(4) Review t he implement at ion of
programs of t he Bureau of Int ernal Revenue.

No.
and
t he
t he

In furt herance of t he hereinabove cit ed object ives, t he Commit t ee is

empowered t o require of t he Bureau o f Int ernal Revenue, submission of all
pert inent informat ion, including but not limit ed t o: indust ry audit s; collect ion
performance dat a; st at us r e p o r t on criminal act ions init iat ed against
persons; and submission of t axpayer ret urns: Provided, however, That any
ret urn or ret urn informat ion which can be associat ed wit h, or ot herwise
ident ify, direct ly or indirect ly, a part icular t axpayer shall be furnished t he
Commit t ee only when s it t ing in Execut ive Session unless such t axpayer
ot herwise consent s in writ ing t o such disclosure.
TITLE XIII
REPEALING PROVISIONS
SEC. 291. In General. - All laws, decrees, execut ive orders, rules and
regulat ions or part s t hereof which are cont rary t o or inconsist ent wit h t his
Code are hereby repealed, amended or modified accordingly.
TITLE XIV
FINAL PROVISIONS
SEC. 292. Separability Clause. - If any clause, sent ence, paragraph or part
of t his Code shall be adjudged by any Court of compet ent jurisdict ion t o be
invalid, such judgment shall not affect , impair or invalidat e t he remainder of
said Code, but shall be confined in it s operat ion t o t he clause, sent ence,
paragraph or part t hereof direct ly involved in t he cont roversy.
SEC. 4. The Secret ary of Finance shall, upon recommendat ion of t he
Commissioner of Int ernal Revenue, promulgat e and publish t he necessary
rules and regulat ions for t he effect ive implement at ion of t his Act .
SEC. 5. Transitory Provisions. - Deferment of t he Effect ivit y of t he
Imposit ion of VAT on Cert ain Services. - The effect ivit y of t he imposit ion of
t he value-added t ax on services as prescribed in Sect ion 17(a) and (b) of
Republic Act No. 7616, as amended by Republic Act 8241, is hereby furt her
deferred unt il December 31, 1999, unless Congress deems ot herwise:
Provided, That t he said services shall cont inue t o pay t he applicable t ax
prescribed under t he present provisions of t he Nat ional Int ernal Revenue
Code, as amended.
SEC. 6. Separability Clause. - If any provision of t his Act is subsequent ly
declared unconst it ut ional, t he validit y of t he remaining provisions hereof shall
remain in full force and effect .
SEC. 7. Repealing Clauses. - (A) The provision of Sect ion 17 of Republic Act
No. 7906, ot herwise known as t he "Thrift Banks Act of 1995" shall cont inue t o
be in force and effect only unt il December 31, 1999.
c ra l a w

Effect ive January 1, 2000, all t hrift banks, whet her in operat ion as of t hat
dat e or t hereaft er, shall no longer enjoy t ax exempt ion as provided under
Sect ion 17 of R. A. No. 7906, t hereby subject ing all t hrift banks t o t axes,
fees and charges in t he same manner and at t he same rat e as banks and
ot her financial int ermediaries.
(B) The provisions of t he Nat ional Int ernal Revenue Code, as amended, and
all ot her laws, including chart ers of government -owned or cont rolled
corporat ions, decrees, orders, or regulat ions or part s t hereof, t hat are
inconsist ent wit h t his Act are hereby repealed or amended accordingly.

SEC. 8. Effectivity. - This Act shall t ake effect on January 1, 1998.

Annexes:
ANNEX A- 1
LO CAL DIST ILLED SPIRIT S BRANDS PRO DUCED FRO M SAP
O F NIPA, CO CO NUT , ET C. CO VERED BY SECT IO N 141 [b ]

BRAND/T YPE O F SPIRIT S

SIZ E

[All in 750 ml. Bo t t le]

PRO O F PRO O F RET AIL

LIT ER

VAT

EXCISE

PERCENT AGE

NET RET AIL

T AX

EXCISE T AX IN

PRICE

PER

RELAT IO N T O [EXCLUDING

PRICE [10% ]

PER
BO T T LE

80

0.200

BO T T LE RET AIL PRICE

VAT AND

[b x8.00]

[e/c ]

EXCISE T AX]
P 7.40

Gine bra S a n Migue l (bilog)

250 ml

1.600

16.00%

Gine bra S a n Migue l (bilog)

350 ml

0.280

P 10.00 P 1.00
13.00

1.30

2.240

17.23%

9.46

Gine bra S a n Migue l (qua tro

350 ml

0.280

14.00

1.40

2.240

16.00%

10.36

700 ml

0.560

28.00

2.80

4.480

16.00%

20.72

12.45

ca ntos)
Gine bra S a n Migue l (qua tro
ca ntos
Ane jo lRum 65 Fla t 5 Ye a rs

375 ml

80

0.300

16.50

1.65

2.400

14.55%

Ane jo Rum 65

375 ml

65

0.240

11.50

1.15

1.920

16.70%

8.43

White C a stle 5 Ye a rs

375 ml

80

0.300

21.00

2.10

2.400

11.43%

16.50

White C a stle Whisky

750 ml

80

0.600

42.00

4.20

4.800

11.43%

33.00

C he rry Bra ndy

750 ml

65

0.488

34.50

3.45

3.900

11.30%

27.15

Ta ndua y Rhum 5 Ye a rs

375 ml

80

0.300

11.75

1.18

2.400

20.43%

8.18

0.600

34.25

3.43

4.800

14.01%

26.03

750 ml
Tonde na Ma nila Rum S ilve r LN

750 ml

80

0.600

44.50

4.45

4.800

10.79%

35.25

C oole r

300 ml

20

0.060

18.50

1.85

0.480

2.59%

16.17

ANNEX A- 2
LO CAL DIST ILLED SPIRIT S BRANDS PRO DUCED FRO M SAP
O F NIPA, CO CO NUT , ET C. CO VERED BY SECT IO N 141 [b ]
BRAND/T YPE

SIZ E

PRO O F

PRO O F

RET AIL

VAT

EXCISE

PERCENT AGE

NET RET AIL

[All in 750 ml.

LIT ER

PRICE

[10% ]

T AX

EXCISE T AX IN

PRICE

/Bo t t le]

PER

PER

RELAT IO N T O

[EXCLUDING

BO T T LE

RET AIL PRICE

VAT AND

[b x8.00]

[e/c ]

EXCISE T AX]

O F SPIRIT S

BO T T LE

Empe ra dor

187ml

80

P 0.150

P 12.50

P 1.25

1.200

9.60%

P 10.05

Bra ndy

375 ml

80

0.300

19.50

1.95

2.400

12.31%

15.15

750 ml

80

0.600

38.50

3.85

4.800

12.47%

29.85

375 ml

84

0.315

71.00

P 7.10

2.520

3.55%

61.38

750 ml

84

0.630

145.00

14.50

5.040

3.48%

125.46

375 ml

84

0.315

18.50

1.85

2.520

13.62%

14.13

375 ml

80

0.300

19.00

1.90

2.400

12.63%

14.70

375 ml

00

0.300

17.50

1.75

2.400

13.71

13.35

White C a stle

187 ml

80

0.149

12.25

1.23

1.192

9.73%

9.83

Whiske y

375 ml

80

0.300

21.00

2.10

2.400

11.43%

16.50

750 ml

80

0.600

42.00

4.20

4.800

11.43%

33.00

750 ml

80

0.600

44.50

4.45

4.800

10.79%

35.25

750 ml

80

0.600

44.50

4.45

4.800

10.79%

35.25

1 lite r

90

0.900

114.50

11.45

7.200

6.29%

95.85

0.675

89.50

8.95

5.400

6.03%

75.15

0.243

11.50

1.15

1.944

16.90%

8.41

0.467

23.00

2.30

3.736

16.24%

16.96

0.300

11.50

1.15

2.400

20.87%

7.95

0.600

23.00

2.30

4.800

20.87%

15.90

0.240

11.50

1.15

1.920

16.70%

8.43

0.487

23.00

2.30

3.896

16.94%

16.80

Na pole on VS O P

Na pole on 5
ye a rs
VO S Bra ndy 5
ye a rs
VO S Bra ndy
S pe cia l Edition

Ma nila Tonde na
Rhum
Ma nila Tonde na
Gold
Gilbe y's Gin

750 ml
Ta ndua y ES Q

375 ml

65

750 ml
Ta ndua y White

375 ml

80

750 ml
Ta ndua y Rhum

375 ml

65

750 ml

65

ANNEX A- 3

DIST ILLED SPIRIT S BRANDS PRO DUCED FRO M GRAINS,

CEREALS AND GRAINS CO VERED BY SECT IO N 141 [b ]
BRAND/T YPE O F SPIRIT S T YPE
[All in 750 ml. /Bo t t le]

PRO O F PRO O F RET AIL

VAT

EXCISE

PERCENT AGE

NET RET AIL

LIT ER

PRICE

[10% ]

T AX

EXCISE T AX IN

PRICE

PER

[PhP]

[PhP]

PER

RELAT IO N T O

[EXCLUDING

BO T T LE

RET AIL PRICE

VAT AND

[e/c ]

EXCISE T AX]

BO T T LE
[ax.75]

[PhP]
I. Pr emium [Hig h- Pr ic ed ]

(b x P 300)

Ma rte ll XO

Whisky 80

0.600

3,500.00 350.00

180.00

5.143%

2,970.00

Johnny Wa lke r Blue La be l

Whisky 86

0.645

3,500.00 350.00

193.50

5.529%

2,956.50

C a rlos I

Whisky 80

0.600

948.25

94.83

180.00

18.982%

673.43

O ld P a rr

Whisky 86

0.645

850.00

85.00

193.50

22.765%

571.50

S wing

Whisky 86

0.645

850.00

85.00

193.50

22.765%

571.50

Gle nlive t

Whisky 86

0.645

817.65

81.77

193.50

23.665%

542.39

Johhny Wa lke r

Whisky 86

0.645

800.00

80.00

193.50

24.188%

526.50

II. De- Luxe [Med ium

(b x P 150)

Pr ic ed ]
C a rdhu

Whisky 80

0.600

772.75

77.28

90.00

11.647%

605.48

S t. Ge orge

Whisky 80

0.600

750.00

75.00

90.00

12.000%

585.00

Te a che rs

Whisky 86

0.645

701.60

70.16

96.75

13.790%

534.69

C a na dia n C lub

Whisky 80

0.600

668.20

66.82

90.00

13.469%

511.38

C hiva s Re ga l

Whisky 86

0.645

635.00

63.50

96.75

15.236%

474.75

C utty S a rk

Whisky 86

0.645

632.50

63.25

96.75

15.296%

472.50

Bla ck La be l

Whisky 86

0.645

620.00

62.00

96.75

15.605%

461.25

Asba ch Ura li

Bra ndy 70

0.525

480.00

48.00

78.75

16.406%

353.25

S ome thing S pe cia l

Whisky 86

0.645

450.00

45.00

96.75

21.500%

308.25

Fa mous Gruise

Whisky 86

0.645

426.00

42.60

96.75

22.711%

286.65

Ba la ntine s

Whisky 86

0.645

423.50

42.35

96.75

22.845%

284.40

Bush Mills

Whisky 86

0.645

416.50

41.65

96.75

23.229%

278.10

J&B

Whisky 86

0.645

405.50

40.55

96.75

23.859%

268.20

Re d La be l

Whisky 86

0.645

370.00

37.00

96.75

26.149%

236.25

Jim Be a m

Whisky 86

0.645

360.00

36.00

96.75

26.875%

227.25

Bla ck a nd White

Whisky 86

0.645

340.00

34.00

96.75

28.456%

209.25

White Rose

Whisky 86

0.645

330.00

33.00

96.75

29.318%

200.25

ANNEX A- 4
DIST ILLED SPIRIT S BRANDS PRO DUCED FRO M GRAINS,
CEREALS AND GRAINS CO VERED BY SECT IO N 141 [b ]
BRAND/T YPE O F

T YPE

PRO O F PRO O F

RET AIL

VAT [10% ]

[All in 750 ml.

LIT ER

PRICE

[PhP]

/Bo t t le]

PER

[PhP]

SPIRIT S

BO T T LE
[ax.75]

EXCISE PERCENT AGE NET RET AIL

T AX

EXCISE T AX

PRICE

PER

IN

[EXCLUDING

BO T T LE

RELAT IO N

VAT AND

(b x75.00) T O RET AIL EXCISE T AX]

PRICE [e/c ]

[PhP]

III. St and ar d [Lo wPr ic ed ]

Va t 69

Whisky 86

0.645

300.00

30.00

48.38

16.125%

221.63

White Ma cka y

Whisky 86

0.645

290.00 276.50 29.00

48.38

16.681%

212.63

Na pole on

Bra ndy 84

0.630

275.00

27.65

47.25

17.089%

201.60

P a ssport S cotch

Whisky 86

0.645

269.50

27.50

48.38

17.591%

199.13

Funda dor

Bra ndy 72

0.540

267.00

26.95

40.50

15.028%

202.05

S cottish Le a de r

Whisky 80

0.600

264.00

26.70

45.00

16.854%

195.30

S mirnoff

Vodka 80

0.600

235.00

26.40

45.00

17.045%

192.60

Ve te ra no O sborne

Bra ndy 72

0.540

225.00

23.50 22.50

40.50

17.234%

171.00

C ossa ck

Vodka 86

0.645

220.00

22.00

48.38

21.500%

154.13

Borzoi

Vodka 80

0.600

180.00 178.00 18.00 17.80

45.00

20.455%

153.00

Vonnie C lyde

Whisky 80

0.600

161.00 155.00 16.10

45.00

25.000%

117.00

John Lint

Whisky 80

0.600

142.00 86.60 15.50

45.00

25.281%

115.20

Loya l Lodge

Whisky 80

0.600

14.20

45.00

27.950%

99.90

Wolfschmt

Vodka 80

0.600

8.66

45.00

29.032%

94.50

Rossia

Vodka 80

0.600

45.00

31.690%

82.80

Gordon Gin

Gin

0.675

50.63

58.458%

27.32

90

ANNEX C- 1
MFT R

BRAND

VO LUME IN
1995
REMO VALS

VALUE

BNP RET AIL CURRENT RET AIL

PRICE AVT /lit er PRICE
Net o f

PRESENT
SYST EM
CO MPUT ED

LIT ERS

VAT

REVENUE
WIT H
AVT at 60%

TO TAL

1,396,261,167 33,575,374,605

10,212,549,435

High P rice d Bra nds

5,282,317

226,449,791

67,018,843

4,452,245

192,603,181

RP T in ca ns 330 ml. (24) 4,313,779

183,723,856

20.87

42.59

12.52

38.72 54,017,143

P re mium Bottle s 355ml

82,218

5,034,223

30.83

61.23

18.50

55.66 1,520,873

(24)

56,248

3,845,102

33.18

68.36

19.91

62.15 1,119,782

830,071

33,846,609

327,302

14,231,087

22.38

43.48

13.43

39.53 4,395,010

244,807

9,887,763

20.67

40.39

12.40

36.72 3,036,099

Asia Bre we ry, S ta g Be e r in C a ns 330 ml 257,962

9,727,759

18.93

37.71

11.36

34.28 2,929,936

S a n Migue l
C orp
S a n Migue l
C orp

56,657,798

P re mium C a n 330ml (24)

S a n Migue l
C orp

Asia Bre we ry, C a rlsbe rg Be e r C a n

Inc

Inc

320ml (24)

10,361,046

(24)

Asia Bre we ry, Be e r In ca ns 330 ml (24)

Inc
Me dium P rice d Bra nds

827,707,258

21,927,005,768

825,223,084

21,855,616,400

S upe r Dry 355 ml (24)

3,267,086

106,801,054

15.60

32.69

9.36

29.72 30,579,929

C orp

Ke g 30 lite rs

3,661,966

101,857,731

13.17

27.82

7.90

25.29 28,936,855

S a n Migue l

Ke g 50 lite rs

12,687,200

352,894,975

13.17

27.82

7.90

25.29 100,254,254

P a le P ilse n 320 ml (24)

590,684,383

16,007,546,772 13.83

27.10

8.30

24.64 4,901,499,008

Gra nde 1000 ml (6)

211,551,120

5,195,695,507

12.63

24.56

7.58

22.33 1,603,134,387

C e rve za Ne gra 320 ml

203,136

5,500,923

13.92

27.08

8.35

24.62 1,696,592

(24)

3,168,193

85,319,437

13.00

26.93

7.80

24.48 24,711,905

2,484,174

71,389,368

1,126,097

29,706,446

13.28

26.38

7.97

23.98 8,972,743

415,200

11,550,864

12.68

27.82

7.61

25.29 3,158,842

78,452

12.68

27.82

7.61

25.29 21,455

30,053,606

16.63

31.97

9.98

29.06 9,379,884

S a n Migue l

C orp
S a n Migue l
C orp
S a n Migue l
C orp

6,712,345,854
6,690,812,931

Blue Ice

S a n Migue l
C orp
S a n Migue l
C orp
S a n Migue l
C orp

Asia Bre we ry, C a rlsbe rg Be e r 330 ml

Inc

(24)

Asia Bre we ry, C a rlsbe rg Dra ft Ke g 30L 2,820

Inc

C a rlsbe rg Dra ft Ke g 15L 940,056

21,532,923

Asia Bre we ry, La ba tt Ice Be e r 330 ml

Inc
Asia Bre we ry,
Inc
Low P rice d Bra nds

S a n Migue l
C orp.
S a n Migue l
C orp.
S a n Migue l

563,271,593

11,421,919,046

307,416,589

6,618,046,421

Gold Ea gle 320 ml. (24)

79,947,787

1,525,403,776

Mucho 750 ml. (6)

98,879,013

Re d Horse 500 ml (12)

122,840,772

RH S ta llion 330 ml. (24)

Te xa s

3,433,184,738
1,941,124,041
9.92

19.08

5.95

17.35 475,849,228

2,124,909,989

9.42

21.49

5.65

19.54 558,864,181

2,840,078,649

11.78

23.12

7.07

21.02 868,238,576

4,975,407

112,344,698

11.33

22.58

6.80

20.53 33,822,819

773,610

15,309,309

9.37

19.79

5.62

17.99 4,349,235

255,855,003

4,803,872,625

84,548,154

1,583,586,923

9.62

18.73

5.77

17.03 48,011,944

2,921,472

59,451,955

10.13

20.35

6.08

18.50 17,756,707

6,243,666

124,873,320

9.28

20.00

5.57

18.18 34,764,732

2,646,461,290

9.70

18.32

5.82

16.65 840,742,615

773,712

15,474,240

9.28

20.00

5.57

18.18 4,308,028

192

3,763

9.28

19.60

5.57

17.82 1,069

9,330,722

204,156,196

10.13

21.88

6.08

19.89 56,712,128

4,682,658

109,199,585

11.48

23.32

6.89

21.20 32,254,148

241,614

5,436,315

11.37

22.50

6.82

20.45 1,648,291

1,525,248

32,030,208

10.13

21.00

6.08

19.09 9,270,457

1,130,072

23,198,831

9.72

20.53

5.83

18.66 6,590,577

C orp.
S a n Migue l
C orp.
S a n Migue l
C orp.

Asia Bre we ry, Be e r P a le P ilse n 320ml

Inc.

(24)

Asia Bre we ry, S ta g Be e r 320 ml (24)

Inc.

Ma nila Be e r Litro 1000ml 144,457,494

Asia Bre we ry, (6)

Inc.

Be e r Ma cho 1000 ml (6)

Asia Bre we ry, S upe r Ma x 1000 ml (6)

Inc

Admira l Be e r 500 ml (6)

Asia Bre we ry, S ta g Be e r 330 ml (24)

Inc

C olt 45 500 ml

Asia Bre we ry, C olt 45 1000 ml

Inc

S ta g Jumbo

Asia Bre we ry, Be e r 750

Inc
Asia Bre we ry,

1,492,060,697

Inc
Asia Bre we ry,
Inc
Asia Bre we ry,
Inc
Asia Bre we ry,
Inc
S a n Migue l C orp.

1,137,091,919 28,666,266,002

% to Tota l

81.44%

85.38%

Asia Bre we ry, Inc.

259,169,249

4,909,108,603

% to Tota l

18.56%

14.62%

ANNEX C- 2
MFT R

BRAND

RET AIL
PRICE

ST

MAX

FIRST YEAR

INCREMENT

INCREASE

REVENUE

REVENUE

NET O F

CO LLECT IO N

VAT
AND
AVT
TO TAL

11,414,082,751

High P rice d Bra nds

1,201,533,316

67,261,844

243,001

56,657,798

26.20

12.30 12.52 0.00%

54,017,143

37.17

12.30 18.50 0.00%

1,520,873

42.24

12.30 19.91 0.00%

1,119,762

10,604,046

243,001

Asia Bre we ry, Inc. C a rlsbe rg Be e r C a n 320ml (24) 26.10

12.30 13.43 0.00%

4,395,010

24.32

12.30 12.40 0.00%

3,036,099

22.92

12.30 12.30 8.29%

3,172,937

243,001

7,698,510,882

986,165,028

7,674,770,708

983,957,777

S a n Migue l C orp. RP T in ca ns 330ml (24)

P re mium Bottle s 355ml (24)
S a n Migue l C orp. P re mium C a n 330ml (24)

S a n Migue l C orp.

S ta g Be e r in C a ns 330ml (24)
Asia Bre we ry, Inc. Be e r In C a ns 330ml (24)

Asia Bre we ry, Inc

Me dium P rice d Bra nds

S a n Migue l C orp. S upe r Dry 355 ml. (24)

20.36

9.30 9.36 0.00%

30,579,929

Ke g 30 lite rs

17.38

9.30 9.30 17.69%

34,056,284

5,119,428

S a n Migue l C orp. Ke g 50 lite rs

17.38

9.30 9.30 17.69%

117,990,960

17,736,706

16.34

9.30 9.30 12.08%

5,493,364,759

591,865,751

14.75

9.30 9.30 22.72%

1,967,425,416

364,291,029

16.27

9.30 9.30 11.35%

1,889,165

192,573

16.68

9.30 9.30 19.23%

29,464,195

4,752,290

23,740,174

2,207,251

16.01

9.30 9.30 16.72%

10,472,705

1,499962

C a rlsbe rg Dra ft Ke g 30 lite rs

17.68

9.30 9.30 22.24%

3,861,360

702,518

Asia Bre we ry, Inc. C a rlsbe rg Dra ft Ke g 15 lite rs

17.68

9.30 9.30 22.24%

26,226

4,771

19.09

9.30 9.98 0.00%

9,379,884

3,648,310,025

215,125,287

2,033,543,979

92,419,938

Gra nde 1000 ml. (6)

S a n Migue l C orp. P a le P ilse n 320 ml. (24)
C e rve za Ne gra 320 ml. (24)
S a n Migue l C orp. Blue Ice
S a n Migue l C orp.

S a n Migue l C orp.

S a n Migue l C orp.

Asia Bre we ry, Inc. C a rlsbe rg Be e r 330 ml. (24)

La ba tt Ice Be e r 330 ml.

Asia Bre we ry, Inc.

Asia Bre we ry, Inc.

Low P rice d Bra nds

S a n Migue l C orp. Gold Ea gle 320 ml. (24)

Mucho 750 ml. (6)
S a n Migue l C orp. Re d Horse 500 ml. (12)
RH S ta llion 320 ml. (24)
S a n Migue l C orp. Te xa s
S a n Migue l C orp.

S a n Migue l C orp.

11.39

6.30 6.30 5.85%

503,671,058

27,821,830

13.88

6.30 6.30 11.46%

622,937,782

64,073,600

13.95

6.30 7.07 0.00%

868,238,576

13.73

6.30 6.80 0.00%

33,822,819

12.37

6.30 6.30 12.06%

4,873,743

524,508

1,614,766,046

122,705,349

11.26

6.30 6.30 9.15%

532,653,370

44,641,425

12.42

6.30 6.30 3.65%

18,405,274

648,567

12.61

6.30 6.30 13.15%

39,335,096

4,570,364

10.83

6.30 6.30 8.25%

910,082,212

69,339,597

12.61

6.30 6.30 13.15%

4,874,386

566,357

12.25

6.30 6.30 13.15%

1,210

141

13.81

6.30 6.30 3.65%

58,783,548

2,071,420

14.31

6.30 6.30 0.00%

32,254,148

13.63

6.30 6.30 0.00%

1,648,291

13.01

6.30 6.30 3.65%

9,609,062

338,605

12.83

6.30 6.30 8.02%

7,119,450

528,873

San Miguel Corp.

9,764,972,484

1,076,377,715

% to Total

85.55%

89.58%

Asia Brewery, Inc.

1,649,110,266

125,155,601

% to Total

14.45%

10.42%

Asia Bre we ry, Inc. Be e r P a le P ilse n 320ml (24)

S ta g Be e r 320ml (24)
Asia Bre we ry, Inc. Ma nila Be e r Litro 1000ml (6)
Be e r Ma cho 1000ml (6)
Asia Bre we ry, Inc. S upe r Ma x 1000ml (6)
Admira l Be e r 500ml (6)
Asia Bre we ry, Inc. S ta g Be e r 330ml (24)
C olt 45 500ml
Asia Bre we ry, Inc. C olt 45 1000ml
S ta g Jumbo
Asia Bre we ry, Inc. Be e r 750
Asia Bre we ry, Inc.

Asia Bre we ry, Inc.

Asia Bre we ry, Inc.

Asia Bre we ry, Inc.

Asia Bre we ry, Inc.

ANNEX D

1997
Cigaret t e Year 1

MANUFACT URER

BRANDS

Gr and T o t al

CURRENT AVT

NET RET AIL O F VAT & EXT

/Pac k

p er p ac k

(Php )

(Php )

50

1.00

55%
Fortune Toba cco

C a me l KS

5.34

4.71

Fortune Toba cco

S a le m M 100

6.96

4.67

Fortune Toba cco

S a le m M King

5.34

4.82

Fortune Toba cco

Winston Lts.

5.85

5.44

5.85

5.55

Fortune Toba cco

La S ue rte

KS

6.51

6.82

La S ue rte

Winston Re d KS

6.51

6.84

La S ue rte

Ma rlboro Lts.

6.51

6.78

6.26

7.39

7.45

7.48

6.24

6.05

La S ue rte
La S ue rte

KS
Ma rlboro Lts.

M KS
Ma rboro Re d KS
P hillip Morris KS
P hillip Morris M 100's
No. of Bra nds

10
Subtotal
45%

Fortune Toba cco

3.49

5.51

Fortune Toba cco

C ha mpion Int'l.

3.25

4.56

Fortune Toba cco

4.85

7.37

Fortune Toba cco

C ha mpion M 100

3.69

5.86

Fortune Toba cco

Hope Lux.

3.49

5.66

3.21

6.33

Fortune Toba cco

Fortune Toba cco

M 100's

3.25

5.37

Fortune Toba cco

Hope Lux.

3.25

5.29

3.25

6.29

2.54

7.00

Fortune Toba cco

S te rling Toba cco

M KS
Ma rk M 100's
Ma rk M King

More P re mium Int'l.

More P re mium M 100's

Montre a l F King
Bowling Gre e n M 100's
No. of Bra nds

10
Subtotal

3.40

5.92

20%
Fortune Toba cco

Boss KS

0.90

4.10

Fortune Toba cco

C ha mpion Lts.

0.90

4.45

Fortune Toba cco

0.95

4.77

Fortune Toba cco

0.84

3.93

0.76

4.46

0.78

3.99

Fortune Toba cco

Fortune Toba cco

KS
C ha mpion MK

Fortune Toba cco

Eve rgre e n M 100's

0.78

4.47

Fortune Toba cco

Fortune Int'l.

0.90

4.03

0.84

4.89

Fortune Toba cco

Fortune Toba cco

M KS

0.84

4.89

Fortune Toba cco

Ja ckpot M 100's

0.78

3.99

La S ue rte

Libe rty M 100's

0.93

6.15

La S ue rte

P e a k M 100's

0.90

5.01

La S ue rte

P la za M 100's

0.90

5.14

S te rling Toba cco

We stpoint KS

0.64

4.58

S te rling Toba cco

Winte r M 100's

0.89

7.43

S te rling Toba cco

C a nnon M 100's

0.72

4.28

S te rling Toba cco

C a nnon M KS

0.64

4.61

S te rling Toba cco

Forbe s KS

1.09

4.64

S te rling Toba cco

Mille r Int'l.

0.92

4.80

0.41

3.80

Anglo Ame rica n

Anglo Ame rica n

M 100's

0.41

3.91

Anglo Ame rica n

Morga n Int'l.

0.41

4.25

0.63

3.46

Anglo Ame rica n

Anglo Ame rica n

M 100's

0.46

2.89

Anglo Ame rica n

S tork Int'l.

0.51

3.28

0.46

3.41

0.44

2.60

0.45

2.81

0.46

3.02

0.50

3.11

0.47

3.39

0.69

4.20

Mighty C orp
M 100's

Mighty C orp

S tork S pe cia l Lts.

Mighty C orp
Mighty C orp

M 100's

Mighty C orp

Union Ame rica n Ble nd

Mighty C orp

Union KS
Asia Boston KS
C a na dia n C lub M 100's
Na vy C lub KS
Ra mbo M 100's
S potlight M 100's
Triple A Fre e dom M 100's
Blue S e a l M 100's
Ga llo KS
L.A.

S pe cia l M 100's
Ma rve l M 100's
Ma rve l Re d KS
Right M 100's
No. of Bra nds

32
Subtotal

ANNEX B

BRAND/T YPE/SIZ E

RET AIL

VAT

EXCISE

PERCENT AGE O F

NET RET AIL

PRICE

(10% )

T AX PER

EXCISE T AX IN

PRICE

BO T T LE

RELAT IO N T O

[exc lud ing VAT

RET AIL PRICE

and Exc is e T ax]

(e/a)
Sp ar kling Wines /Champ ag nes
[Regardless of Proof]
Mumm C ordon Rouge Vinta ge

1,760.00

176.00

300.00

17.05%

1,284.00

[All in 750 ml. /Bottle ]

1,070.00

107.00

300.00

28.04%

663.00

574.00

57.40

100.00

17.42%

416.60

(700 ml)

1070.00

107.00

300.00

28.04%

663.00

Mumm C ordon Rouge R.

580.00

58.00

100.00

17.24%

422.00

B&G P a rta ge r Bla nc (750 ml)

170.00

17.00

12.00

7.06%

141.00

B&G P a rta ge r (750 ml)

170.00

17.00

12.00

7.06%

141.00

B&G C ha rdonna y (750 ml)

385.00

38.50

24.00

6.23%

322.50

B&G C a be rne t (750 ml)

385.00

38.50

24.00

6.23%

322.50

B&G P a rta ge r S t.

495.00

49.50

24.00

4.85%

421.50

310.00

31.00

24.00

7.74%

255.00

Emillion (750 ml)

275.00

27.50

24.00

8.73%

223.50

B&G P a rta ge r Me doc (750 ml)

616.00

61.60

24.00

3.90%

530.40

B&G P a rta ge r Be a ujola is (750 ml)

655.00

65.50

24.00

3.66%

565.50

B&G P a rta ge r C ha blis (750 ml)

500.00

50.00

24.00

4.80%

426.00

(375 ml)
P e rrie r Joue t (700 ml)
P e rrie r Joue t (375 ml)
St ill Wines
14% or less proof

More than 14% proof

B&G P a rta ge r P oe irlly Fuisse (750 ml)

B&G C ha te a u Ne uf du P a pe (750 ml)

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