tax code of 1997.12-12-05

8/3/2019 TAX CODE OF 1997.12-12-05

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THE NATIONAL INTERNAL REVENUE CODE OF 1997

TABLE OF CONTENTS

TITLE I Organization and Function o t!" Bur"au o Int"rna#

R"$"nu"

TITLE II Ta% on Inco&"C!a't"r I ( D"inition) C!a't"r II ( *"n"ra# +rinci'#") C!a't"r III ( Ta% on Indi$idua#) C!a't"r IV ( Ta% on Cor'oration) C!a't"r V ( Co&'utation o Ta%a,#" Inco&" C!a't"r VI ( Co&'utation o *ro)) Inco&" C!a't"r VII ( A##o-a,#" D"duction)C!a't"r VIII ( Accounting +"riod) and ."t!od) oAccounting C!a't"r I/ ( R"turn) and +a0&"nt o Ta%C!a't"r / ( E)tat") and Tru)t)C!a't"r /I ( Ot!"r Inco&" Ta% R"uir"&"nt) C!a't"r /II ( 2uart"r#0 Cor'orat" Inco&" Ta%3 Annua# D"c#aration and 2uart"r#0 +a0&"nt) oInco&" Ta%") C!a't"r /III ( 4it!!o#ding on 4ag")

TITLE III E)tat" and Donor5) Ta%")C!a't"r I ( E)tat" Ta% C!a't"r II ( Donor5) Ta%")

TITLE IV Va#u" Add"d Ta%C!a't"r I ( I&'o)ition o Ta% C!a't"r II ( Co&'#ianc" R"uir"&"nt)

TITLE V Ot!"r +"rc"ntag" Ta%")

TITLE VI E%ci)" Ta% on C"rtain *ood)C!a't"r I ( *"n"ra# +ro$i)ion)C!a't"r II ( E%"&'tion on Conditiona# Ta%(Fr""R"&o$a# o C"rtain Artic#") C!a't"r III ( E%ci)" Ta% on A#co!o# +roduct) C!a't"r IV ( E%ci)" Ta% on To,acco +roduct) C!a't"r V ( E%ci)" Ta% on +"tro#"u& +roduct) C!a't"r VI ( E%ci)" Ta% on .i)c"##an"ou) Artic#") C!a't"r VII ( E%ci)" Ta% on .in"ra# +roduct) C!a't"r VIII ( Ad&ini)trati$" +ro$i)ion) R"gu#atingBu)in")) o +"r)on) D"a#ing in Artic#") Su,6"ct toE%ci)" Ta%

TITLE VII Docu&"ntar0 Sta&' Ta%

TITLE VIII R"&"di")C!a't"r I ( R"&"di") in *"n"ra# C!a't"r II ( Ci$i# R"&"di") or Co##"ction o Ta%") C!a't"r III ( +rot")ting an A))"))&"nt3 R"und3"tc

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TITLE I/ Co&'#ianc" R"uir"&"nt)C!a't"r I ( 8""'ing Boo) o Account) andR"cord) C!a't"r II ( Ad&ini)trati$" +ro$i)ion) C!a't"r III ( Ru#") and R"gu#ation)

TITLE / Statutor0 O"n)") and +"na#ti")C!a't"r I ( Addition) to t!" Ta% C!a't"r II ( Cri&")3 Ot!"r O"n)") and For"itur")C!a't"r III ( +"na#ti") I&'o)"d on +u,#ic Oic"r) C!a't"r IV ( Ot!"r +"na# +ro$i)ion)

TITLE /I A##ot&"nt o Int"rna# R"$"nu"C!a't"r I ( Di)'o)ition and A##ot&"nt o Nationa# Int"rna# R"$"nu" in *"n"ra# C!a't"r II ( S'"cia# Di)'o)ition o C"rtain Nationa# Int"rna# R"$"nu" Ta%")

TITLE /II O$"r)ig!t Co&&itt""

TITLE /III R"'"a#ing +ro$i)ion)

TITLE /IV Fina# +ro$i)ion)

Ann"%")Ann"% A(1 Ann"% A(:

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TITLE I OR*ANI;ATION AND FUNCTION OF

THE BUREAU OF INTERNAL REVENUE

SECTION 1 Tit#" o t!" Cod". - This Code shall be known as the Nationa# Int"rna# R"$"nu"

Cod" o 1997.

SEC : +o-"r) and duti") o t!" Bur"au o Int"rna# R"$"nu". - The Bureau of InternalRevenue shall be under the supervision and control of the Department of Finance and its powersand duties shall comprehend the assessment and collection of all national internal revenue taxesfees and char!es and the enforcement of all forfeitures penalties and fines connectedtherewith includin! the execution of "ud!ments in all cases decided in its favor b# the Court ofTax $ppeals and the ordinar# courts. The Bureau shall !ive effect to and administer thesupervisor# and police powers conferred to it b# this Code or other laws.

SEC < C!i" Oicia#) o t!" Bur"au o Int"rna# R"$"nu" . - The Bureau of Internal Revenue

shall have a chief to be known as Commissioner of Internal Revenue hereinafter referred to asthe Commissioner and four %&' assistant chiefs to be known as Deput# Commissioners.

SEC = +o-"r o t!" Co&&i))ion"r to Int"r'r"t Ta% La-) and to D"cid" Ta% Ca)") . - Thepower to interpret the provisions of this Code and other tax laws shall be under the exclusive andori!inal "urisdiction of the Commissioner sub"ect to review b# the (ecretar# of Finance.

The power to decide disputed assessments refunds of internal revenue taxes fees or otherchar!es penalties imposed in relation thereto or other matters arisin! under this Code or otherlaws or portions thereof administered b# the Bureau of Internal Revenue is vested in theCommissioner sub"ect to the exclusive appellate "urisdiction of the Court of Tax $ppeals.

SEC > +o-"r o t!" Co&&i))ion"r to O,tain Inor&ation3 and to Su&&on3 E%a&in"3 andTa" T")ti&on0 o +"r)on). - In ascertainin! the correctness of an# return or in makin! areturn when none has been made or in determinin! the liabilit# of an# person for an# internalrevenue tax or in collectin! an# such liabilit# or in evaluatin! tax compliance the Commissioneris authori)ed*

%$' To examine an# book paper record or other data which ma# be relevant or materialto such in+uir#,

%B' To btain on a re!ular basis from an# person other than the person whose internalrevenue tax liabilit# is sub"ect to audit or investi!ation or from an# office or officer of the

national and local !overnments !overnment a!encies and instrumentalities includin! theBan!ko (entral n! ilipinas and !overnment-owned or -controlled corporations an#information such as but not limited to costs and volume of production receipts or salesand !ross income of taxpa#ers and the names addresses and financial statements ofcorporations mutual fund companies insurance companies re!ional operatin!head+uarters of multinational companies "oint accounts associations "oint ventures ofconsortia and re!istered partnerships and their members,

,ac?to?'ag"?1

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%C' To summon the person liable for tax or re+uired to file a return or an# officer oremplo#ee of such person or an# person havin! possession custod# or care of thebooks of accounts and other accountin! records containin! entries relatin! to thebusiness of the person liable for tax or an# other person to appear before theCommissioner or his dul# authori)ed representative at a time and place specified in thesummons and to produce such books papers records or other data and to !ivetestimon#,

%D' To take such testimon# of the person concerned under oath as ma# be relevant ormaterial to such in+uir#, and

%/' To cause revenue officers and emplo#ees to make a canvass from time to time of an#revenue district or re!ion and in+uire after and concernin! all persons therein who ma#be liable to pa# an# internal revenue tax and all persons ownin! or havin! the caremana!ement or possession of an# ob"ect with respect to which a tax is imposed.

The provisions of the fore!oin! para!raphs notwithstandin! nothin! in this (ection shallbe construed as !rantin! the Commissioner the authorit# to in+uire into bank depositsother than as provided for in (ection 0%F' of this Code.

SEC @ +o-"r o t!" Co&&i))ion"r to .a" a))"))&"nt) and +r")cri," additiona#R"uir"&"nt) or Ta% Ad&ini)tration and Enorc"&"nt. -

%$' /xamination of Returns and Determination of Tax Due. - $fter a return has been filedas re+uired under the provisions of this Code the Commissioner or his dul# authori)edrepresentative ma# authori)e the examination of an# taxpa#er and the assessment of thecorrect amount of tax* rovided however, That failure to file a return shall not prevent theCommissioner from authori)in! the examination of an# taxpa#er .

The tax or an# deficienc# tax so assessed shall be paid upon notice and demand fromthe Commissioner or from his dul# authori)ed representative.

$n# return statement of declaration filed in an# office authori)ed to receive the sameshall not be withdrawn* rovided That within three %1' #ears from the date of such filin!the same ma# be modified chan!ed or amended* rovided further That no notice foraudit or investi!ation of such return statement or declaration has in the meantime beenactuall# served upon the taxpa#er.

%B' Failure to (ubmit Re+uired Returns (tatements Reports and other Documents. -2hen a report re+uired b# law as a basis for the assessment of an# national internalrevenue tax shall not be forthcomin! within the time fixed b# laws or rules and re!ulationsor when there is reason to believe that an# such report is false incomplete or erroneousthe Commissioner shall assess the proper tax on the best evidence obtainable.

In case a person fails to file a re+uired return or other document at the time prescribed b#

law or willfull# or otherwise files a false or fraudulent return or other document theCommissioner shall make or amend the return from his own knowled!e and from suchinformation as he can obtain throu!h testimon# or otherwise which shall be prima faciecorrect and sufficient for all le!al purposes.

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%C' $uthorit# to Conduct Inventor#-takin! surveillance and to rescribe resumptive3ross (ales and Receipts. - The Commissioner ma# at an# time durin! the taxable #earorder inventor#-takin! of !oods of an# taxpa#er as a basis for determinin! his internalrevenue tax liabilities or ma# place the business operations of an# person natural or

"uridical under observation or surveillance if there is reason to believe that such person is

not declarin! his correct income sales or receipts for internal revenue tax purposes. Thefindin!s ma# be used as the basis for assessin! the taxes for the other months or+uarters of the same or different taxable #ears and such assessment shall be deemedprima facie correct.

2hen it is found that a person has failed to issue receipts and invoices in violation of there+uirements of (ections 441 and 516 of this Code or when there is reason to believethat the books of accounts or other records do not correctl# reflect the declarations madeor to be made in a return re+uired to be filed under the provisions of this Code theCommissioner after takin! into account the sales receipts income or other taxable baseof other persons en!a!ed in similar businesses under similar situations or circumstancesor after considerin! other relevant information ma# prescribe a minimum amount of such!ross receipts sales and taxable base and such amount so prescribed shall be prima

facie correct for purposes of determinin! the internal revenue tax liabilities of suchperson.

%D' $uthorit# to Terminate Taxable eriod. 7 2hen it shall come to the knowled!e of theCommissioner that a taxpa#er is retirin! from business sub"ect to tax or is intendin! toleave the hilippines or to remove his propert# therefrom or to hide or conceal hispropert# or is performin! an# act tendin! to obstruct the proceedin!s for the collection ofthe tax for the past or current +uarter or #ear or to render the same totall# or partl#ineffective unless such proceedin!s are be!un immediatel# the Commissioner shalldeclare the tax period of such taxpa#er terminated at an# time and shall send thetaxpa#er a notice of such decision to!ether with a re+uest for the immediate pa#ment ofthe tax for the period so declared terminated and the tax for the precedin! #ear or+uarter or such portion thereof as ma# be unpaid and said taxes shall be due and

pa#able immediatel# and shall be sub"ect to all the penalties hereafter prescribed unlesspaid within the time fixed in the demand made b# the Commissioner.

%/' $uthorit# of the Commissioner to rescribe Real ropert# 8alues. - TheCommissioner is hereb# authori)ed to divide the hilippines into different )ones or areasand shall upon consultation with competent appraisers both from the private and publicsectors determine the fair market value of real properties located in each )one or area.For purposes of computin! an# internal revenue tax the value of the propert# shall bewhichever is the hi!her of,

%4' the fair market value as determined b# the Commissioner or %5' the fair market value as shown in the schedule of values of the rovincial andCit# $ssessors.

%F' $uthorit# of the Commissioner to in+uire into Bank Deposit $ccounts. -9otwithstandin! an# contrar# provision of Republic $ct 9o. 4&:; and other !eneral orspecial laws the Commissioner is hereb# authori)ed to in+uire into the bank deposits of*

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%4' a decedent to determine his !ross estate, and %5' an# taxpa#er who has filed an application for compromise of his tax liabilit# under (ec. 5:& %$' %5' of this Code b# reason of financial incapacit# to pa# histax liabilit#.

In case a taxpa#er files an application to compromise the pa#ment of his tax liabilities onhis claim that his financial position demonstrates a clear inabilit# to pa# the tax assessedhis application shall not be considered unless and until he waives in writin! his privile!eunder Republic act 9. 4&:; or under other !eneral or special laws and such waivershall constitute the authorit# of the Commissioner to in+uire into the bank deposits of thetaxpa#er.

%3' $uthorit# to $ccredit and Re!ister Tax $!ents. - The Commissioner shall accredit andre!ister based on their professional competence inte!rit# and moral fitness individualsand !eneral professional partnerships and their representatives who prepare and file taxreturns statements reports protests and other papers with or who appear before theBureau for taxpa#ers. 2ithin one hundred twent# %45:' da#s from <anuar# 4 4==> theCommissioner shall create national and re!ional accreditation boards the members of

which shall serve for three %1' #ears and shall desi!nate from amon! the senior officialsof the Bureau one %4' chairman and two %5' members for each board sub"ect to suchrules and re!ulations as the (ecretar# of Finance shall promul!ate upon therecommendation of the Commissioner.

Individuals and !eneral professional partnerships and their representatives who aredenied accreditation b# the Commissioner and?or the national and re!ional accreditationboards ma# appeal such denial to the (ecretar# of Finance who shall rule on the appealwithin sixt# %0:' da#s from receipt of such appeal. Failure of the (ecretar# of Finance torule on the $ppeal within the prescribed period shall be deemed as approval of theapplication for accreditation of the appellant.

%@' $uthorit# of the Commissioner to rescribe $dditional rocedural or Documentar#

Re+uirements. - The Commissioner ma# prescribe the manner of compliance with an#documentar# or procedural re+uirement in connection with the submission or preparationof financial statements accompan#in! the tax returns.

SEC 7 ( Aut!orit0 o t!" Co&&i))ion"r to D"#"gat" +o-"r . - The Commissioner ma#dele!ate the powers vested in him under the pertinent provisions of this Code to an# or suchsubordinate officials with the rank e+uivalent to a division chief or hi!her sub"ect to suchlimitations and restrictions as ma# be imposed under rules and re!ulations to be promul!ated b#the (ecretar# of finance upon recommendation of the Commissioner* rovided @owever Thatthe followin! powers of the Commissioner shall not be dele!ated*

%a' The power to recommend the promul!ation of rules and re!ulations b# the (ecretar#of Finance,

%b' The power to issue rulin!s of first impression or to reverse revoke or modif# an#existin! rulin! of the Bureau,

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%c' The power to compromise or abate under (ec. 5:& %$' and %B' of this Code an# taxliabilit#* rovided however That assessments issued b# the re!ional offices involvin!basic deficienc# taxes of Five hundred thousand pesos %;:::::' or less and minorcriminal violations as ma# be determined b# rules and re!ulations to be promul!ated b#the (ecretar# of finance upon recommendation of the Commissioner discovered b#

re!ional and district officials ma# be compromised b# a re!ional evaluation board whichshall be composed of the Re!ional Director as Chairman the $ssistant Re!ional Directorthe heads of the Ae!al $ssessment and Collection Divisions and the Revenue Districtfficer havin! "urisdiction over the taxpa#er as members, and %d' The power to assi!n or reassi!n internal revenue officers to establishments wherearticles sub"ect to excise tax are produced or kept.

SEC Dut0 o t!" Co&&i))ion"r to En)ur" t!" +ro$i)ion and Di)tri,ution o or&)3R"c"i't)3 C"rtiicat")3 and A''#ianc")3 and t!" Acno-#"dg&"nt o +a0&"nt o Ta%") .-

%$' rovision and Distribution to roper fficials. - It shall be the dut# of theCommissioner amon! other thin!s to prescribe provide and distribute to the properofficials the re+uisite licenses internal revenue stamps labels all other forms certificates

bonds records invoices books receipts instruments appliances and apparatus used inadministerin! the laws fallin! within the "urisdiction of the Bureau. For this purposeinternal revenue stamps strip stamps and labels shall be caused b# the Commissioner tobe printed with ade+uate securit# features.

Internal revenue stamps whether of a bar code or fuson desi!n shall be firml# andconspicuousl# affixed on each pack of ci!ars and ci!arettes sub"ect to excise tax in themanner and form as prescribed b# the Commissioner upon approval of the (ecretar# ofFinance.

%B' Receipts for a#ment ade. - It shall be the dut# of the Commissioner or his dul#authori)ed representative or an authori)ed a!ent bank to whom an# pa#ment of an# taxis made under the provision of this Code to acknowled!e the pa#ment of such tax

expressin! the amount paid and the particular account for which such pa#ment wasmade in a form and manner prescribed therefor b# the Commissioner.

SEC 9 ( Int"rna# R"$"nu" Di)trict). - 2ith the approval of the (ecretar# of Finance theCommissioner shall divide the hilippines into such number of revenue districts as ma# form timeto time be re+uired for administrative purposes. /ach of these districts shall be under thesupervision of a Revenue District fficer.

SEC 1 ( R"$"nu" R"giona# Dir"ctor . - nder rules and re!ulations policies and standardsformulated b# the Commissioner with the approval of the (ecretar# of Finance the RevenueRe!ional director shall within the re!ion and district offices under his "urisdiction amon! others*

%a' Implement laws policies plans pro!rams rules and re!ulations of the department ora!encies in the re!ional area, %b' $dminister and enforce internal revenue laws and rules and re!ulations includin! theassessment and collection of all internal revenue taxes char!es and fees. %c' Issue Aetters of authorit# for the examination of taxpa#ers within the re!ion, %d' rovide economical efficient and effective service to the people in the area, %e' Coordinate with re!ional offices or other departments bureaus and a!encies in thearea,

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%f' Coordinate with local !overnment units in the area, %!' /xercise control and supervision over the officers and emplo#ees within the re!ion,and %h' erform such other functions as ma# be provided b# law and as ma# be dele!ated b#the Commissioner.

SEC 11 Duti") o R"$"nu" Di)trict Oic"r) and Ot!"r Int"rna# R"$"nu" Oic"r). - It shallbe the dut# of ever# Revenue District fficer or other internal revenue officers and emplo#ees toensure that all laws and rules and re!ulations affectin! national internal revenue are faithfull#executed and complied with and to aid in the prevention detection and punishment of frauds ofdelin+uencies in connection therewith. It shall be the dut# of ever# Revenue District fficer toexamine the efficienc# of all officers and emplo#ees of the Bureau of Internal Revenue under hissupervision and to report in writin! to the Commissioner throu!h the Re!ional Director an#ne!lect of dut# incompetence delin+uenc# or malfeasance in office of an# internal revenueofficer of which he ma# obtain knowled!e with a statement of all the facts and an# evidencesustainin! each case.

SEC 1: Ag"nt) and D"'uti") or Co##"ction o Nationa# Int"rna# R"$"nu" Ta%") . - Thefollowin! are hereb# constituted a!ents of the Commissioner*

%a' The Commissioner of Customs and his subordinates with respect to the collection ofnational internal revenue taxes on imported !oods, %b' The head of the appropriate !overnment office and his subordinates with respect tothe collection of ener!# tax, and %c' Banks dul# accredited b# the Commissioner with respect to receipt of pa#mentsinternal revenue taxes authori)ed to be made thru bank.

$n# officer or emplo#ee of an authori)ed a!ent bank assi!ned to receive internal revenuetax pa#ments and transmit tax returns or documents to the Bureau of Internal Revenueshall be sub"ect to the same sanctions and penalties prescribed in (ections 50= and 56:of this Code.

SEC 1< ( Aut!orit0 o a R"$"nu" Oic"). - sub"ect to the rules and re!ulations to beprescribed b# the (ecretar# of Finance upon recommendation of the Commissioner a Revenuefficer assi!ned to perform assessment functions in an# district ma# pursuant to a Aetter of

$uthorit# issued b# the Revenue Re!ional Director examine taxpa#ers within the "urisdiction ofthe district in order to collect the correct amount of tax or to recommend the assessment of an#deficienc# tax due in the same manner that the said acts could have been performed b# theRevenue Re!ional Director himself.

SEC 1= Aut!orit0 o Oic"r) to Ad&ini)t"r Oat!) and Ta" T")ti&on0 . - TheCommissioner Deput# Commissioners (ervice Chiefs $ssistant (ervice Chiefs Revenue

Re!ional Directors $ssistant Revenue Re!ional Directors Chiefs and $ssistant Chiefs ofDivisions Revenue District fficers special deputies of the Commissioner internal revenueofficers and an# other emplo#ee of the Bureau thereunto especiall# deputi)ed b# theCommissioner shall have the power to administer oaths and to take testimon# in an# officialmatter or investi!ation conducted b# them re!ardin! matters within the "urisdiction of the Bureau.

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SEC 1> Aut!orit0 o Int"rna# R"$"nu" Oic"r) to .a" Arr")t) and S"izur"). - TheCommissioner the Deput# Commissioners the Revenue Re!ional Directors the Revenue Districtfficers and other internal revenue officers shall have authorit# to make arrests and sei)ures forthe violation of an# penal law rule or re!ulation administered b# the Bureau of Internal Revenue.

$n# person so arrested shall be forthwith brou!ht before a court there to be dealt with accordin!to law.

SEC 1@ A))ign&"nt o Int"rna# R"$"nu" Oic"r) In$o#$"d in E%ci)" Ta% Function) toE)ta,#i)!&"nt) 4!"r" Artic#") )u,6"ct to E%ci)" Ta% ar" +roduc"d or 8"'t . - TheCommissioner shall emplo# assi!n or reassi!n internal revenue officers involved in excise taxfunctions as often as the exi!encies of the revenue service ma# re+uire to establishments orplaces where articles sub"ect to excise tax are produced or kept* rovided That an internalrevenue officer assi!ned to an# such establishment shall in no case sta# in his assi!nment formore than two %5' #ears sub"ect to rules and re!ulations to be prescribed b# the (ecretar# ofFinance upon recommendation of the Commissioner.

SEC 17 A))ign&"nt o Int"rna# R"$"nu" Oic"r) and Ot!"r E&'#o0"") to Ot!"r Duti"). -The Commissioner ma# sub"ect to the provisions of (ection 40 and the laws on civil service aswell as the rules and re!ulations to be prescribed b# the (ecretar# of Finance upon therecommendation of the Commissioner assi!n or reassi!n internal revenue officers andemplo#ees of the Bureau of Internal Revenue without chan!e in their official rank and salar# toother or special duties connected with the enforcement or administration of the revenue laws asthe exi!encies of the service ma# re+uire* rovided That internal revenue officers assi!ned toperform assessment or collection function shall not remain in the same assi!nment for more thanthree %1' #ears, rovided further That assi!nment of internal revenue officers and emplo#ees ofthe Bureau to special duties shall not exceed one %4' #ear.

SEC 1 R"'ort) o $io#ation o La-). - 2hen an internal revenue officer discovers evidence of a violation of this Code or of an# law rule or re!ulations administered b# the Bureau of InternalRevenue of such character as to warrant the institution of criminal proceedin!s he shallimmediatel# report the facts to the Commissioner throu!h his immediate superior !ivin! thename and address of the offender and the names of the witnesses if possible* rovided That inur!ent cases the Revenue Re!ional director or Revenue District fficer as the case ma# bema# send the report to the correspondin! prosecutin! officer in the latter case a cop# of hisreport shall be sent to the Commissioner.

SEC 19 Cont"nt) o Co&&i))ion"r5) Annua# R"'ort. - The annual Report of theCommissioner shall contain detailed statements of the collections of the Bureau withspecifications of the sources of revenue b# t#pe of tax b# manner of pa#ment b# revenue re!ion

and b# industr# !roup and its disbursements b# classes of expenditures.

In case the actual collection exceeds or falls short of tar!et as set in the annual national bud!etb# fifteen percent %4;' or more the Commissioner shall explain the reason for such excess orshortfall.

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SEC : Su,&i))ion o R"'ort and +"rtin"nt Inor&ation ,0 t!" Co&&i))ion"r .

%$' (ubmission of ertinent Information to Con!ress. - The provision of (ection 56: ofthis Code to the contrar# notwithstandin! the Commissioner shall upon re+uest ofCon!ress and in aid of le!islation furnish its appropriate Committee pertinent informationincludin! but not limited to* industr# audits collection performance data status reports in

criminal actions initiated a!ainst persons and taxpa#erEs returns* rovided however Thatan# return or return information which can be associated with or otherwise identif#directl# or indirectl# a particular taxpa#er shall be furnished the appropriate Committee of Con!ress onl# when sittin! in /xecutive (ession nless such taxpa#er otherwiseconsents in writin! to such disclosure.

%B' Report to versi!ht Committee. - The Commissioner shall with reference to (ection5:& of this Code submit to the versi!ht Committee referred to in (ection 5=: hereofthrou!h the Chairmen of the Committee on 2a#s and eans of the (enate and @ouse of Representatives a report on the exercise of his powers pursuant to the said sectionever# six %0' months of each calendar #ear.

SEC :1 Sourc") o R"$"nu". - The followin! taxes fees and char!es are deemed to benational internal revenue taxes*

%a' Income tax, %b' /state and donorEs taxes, %c' 8alue-added tax, %d' ther percenta!e taxes, %e' /xcise taxes, %f' Documentar# stamp taxes, and %!' (uch other taxes as are or hereafter ma# be imposed and collected b# the Bureau ofInternal Revenue.

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TITLE II TA/ ON INCO.E

CHA+TER I ( DEFINITIONS

SEC ::. D"inition) - 2hen used in this Title*

%$' The term 5'"r)on5 means an individual a trust estate or corporation.

%B' The term 5cor'oration5 shall include partnerships no matter how created or or!ani)ed "oint-stock companies "oint accounts %cuentas en participacion' association or insurance companiesbut does not include !eneral professional partnerships and a "oint venture or consortium formedfor the purpose of undertakin! construction pro"ects or en!a!in! in petroleum coal !eothermaland other ener!# operations pursuant to an operatin! consortium a!reement under a servicecontract with the 3overnment 5*"n"ra# 'ro"))iona# 'artn"r)!i')5 are partnerships formed b#persons for the sole purpose of exercisin! their common profession no part of the income ofwhich is derived from en!a!in! in an# trade or business.

%C' The term 5do&")tic35 when applied to a corporation means created or or!ani)ed in thehilippines or under its laws.

%D' The term 5or"ign35 when applied to a corporation means a corporation which is not domestic.

%/' The term 5nonr")id"nt citiz"n5 means*

%4' $ citi)en of the hilippines who establishes to the satisfaction of the Commissionerthe fact of his ph#sical presence abroad with a definite intention to reside therein. %5' $ citi)en of the hilippines who leaves the hilippines durin! the taxable #ear toreside abroad either as an immi!rant or for emplo#ment on a permanent basis. %1' $ citi)en of the hilippines who works and derives income from abroad and whoseemplo#ment thereat re+uires him to be ph#sicall# present abroad most of the time durin!the taxable #ear.

%&' $ citi)en who has been previousl# considered as nonresident citi)en and who arrivesin the hilippines at an# time durin! the taxable #ear to reside permanentl# in thehilippines shall likewise be treated as a nonresident citi)en for the taxable #ear in whichhe arrives in the hilippines with respect to his income derived from sources abroad untilthe date of his arrival in the hilippines. %;' The taxpa#er shall submit proof to the Commissioner to show his intention of leavin!the hilippines to reside permanentl# abroad or to return to and reside in the hilippinesas the case ma# be for purpose of this (ection.

%F' The term 5r")id"nt a#i"n5 means an individual whose residence is within the hilippines andwho is not a citi)en thereof.

%3' The term 5nonr")id"nt a#i"n5 means an individual whose residence is not within thehilippines and who is not a citi)en thereof.

%@' The term 5r")id"nt or"ign cor'oration5 applies to a forei!n corporation en!a!ed in trade orbusiness within the hilippines.

%I' The term 5nonr")id"nt or"ign cor'oration5 applies to a forei!n corporation not en!a!ed intrade or business within the hilippines.

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%<' The term 5iduciar05 means a !uardian trustee executor administrator receiver conservatoror an# person actin! in an# fiduciar# capacit# for an# person.

%' The term 5-it!!o#ding ag"nt5 means an# person re+uired to deduct and withhold an# taxunder the provisions of (ection ;6.

%A' The term 5)!ar") o )toc5 shall include shares of stock of a corporation warrants and?oroptions to purchase shares of stock as well as units of participation in a partnership %except!eneral professional partnerships' "oint stock companies "oint accounts "oint ventures taxableas corporations associations and recreation or amusement clubs %such as !olf polo or similarclubs' and mutual fund certificates.

%' The term 5)!ar"!o#d"r E shall include holders of a share?s of stock warrant?s and?or option?sto purchase shares of stock of a corporation as well as a holder of a unit of participation in apartnership %except !eneral professional partnerships' in a "oint stock compan# a "oint account ataxable "oint venture a member of an association recreation or amusement club %such as !olf

polo or similar clubs' and a holder of a mutual fund certificate a member in an association "oint-stock compan# or insurance compan#.

%9' The term 5ta%'a0"r5 means an# person sub"ect to tax imposed b# this Title.

%' The terms 5inc#uding5 and 5inc#ud")53 when used in a definition contained in this Title shallnot be deemed to exclude other thin!s otherwise within the meanin! of the term defined.

%' The term 5ta%a,#" 0"ar5 means the calendar #ear or the fiscal #ear endin! durin! suchcalendar #ear upon the basis of which the net income is computed under this Title. ETaxable #earEincludes in the case of a return made for a fractional part of a #ear under the provisions of thisTitle or under rules and re!ulations prescribed b# the (ecretar# of Finance upon

recommendation of the commissioner the period for which such return is made.

%G' The term 5i)ca# 0"ar5 means an accountin! period of twelve %45' months endin! on the lastda# of an# month other than December.

%R' The terms 5'aid or incurr"d5 and Epaid or accruedE shall be construed accordin! to themethod of accountin! upon the basis of which the net income is computed under this Title.

%(' The term 5trad" or ,u)in"))5 includes the performance of the functions of a public office.

%T' The term 5)"curiti")5 means shares of stock in a corporation and ri!hts to subscribe for or toreceive such shares. The term includes bonds debentures notes or certificates or otherevidence or indebtedness issued b# an# corporation includin! those issued b# a !overnment or

political subdivision thereof with interest coupons or in re!istered form.

%' The term 5d"a#"r in )"curiti")5 means a merchant of stocks or securities whether anindividual partnership or corporation with an established place of business re!ularl# en!a!ed inthe purchase of securities and the resale thereof to customers, that is one who as a merchantbu#s securities and re-sells them to customers with a view to the !ains and profits that ma# bederived therefrom.

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%8' The term 5,an5 means ever# bankin! institution as defined in (ection 5 of Republic $ct 9o.116 as amended otherwise known as the 3eneral Bankin! $ct. $ bank ma# either be acommercial bank a thrift bank a development bank a rural bank or speciali)ed !overnmentbank.

%2' The term 5non(,an inancia# int"r&"diar05 means a financial intermediar# as defined in(ection 5%D'%C' of Republic $ct 9o. 116 as amended otherwise known as the 3eneral Bankin!

$ct authori)ed b# the Ban!ko (entral n! ilipinas %B(' to perform +uasi-bankin! activities.

%H' The term 5ua)i(,aning acti$iti")5 means borrowin! funds from twent# %5:' or morepersonal or corporate lenders at an# one time throu!h the issuance endorsement oracceptance of debt instruments of an# kind other than deposits for the borrowerEs own account or throu!h the issuance of certificates of assi!nment or similar instruments with recourse or ofrepurchase a!reements for purposes of relendin! or purchasin! receivables and other similarobli!ations* rovided however That commercial industrial and other non-financial companieswhich borrow funds throu!h an# of these means for the limited purpose of financin! their ownneeds or the needs of their a!ents or dealers shall not be considered as performin! +uasi-

bankin! functions.

%' The term 5d"'o)it )u,)titut")5 shall mean an alternative from of obtainin! funds from thepublic %the term EpublicE means borrowin! from twent# %5:' or more individual or corporate lendersat an# one time' other than deposits throu!h the issuance endorsement or acceptance of debtinstruments for the borrowers own account for the purpose of relendin! or purchasin! ofreceivables and other obli!ations or financin! their own needs or the needs of their a!ent ordealer. These instruments ma# include but need not be limited to bankersE acceptancespromissor# notes repurchase a!reements includin! reverse repurchase a!reements enteredinto b# and between the Ban!ko (entral n! ilipinas %B(' and an# authori)ed a!ent bankcertificates of assi!nment or participation and similar instruments with recourse* rovidedhowever That debt instruments issued for interbank call loans with maturit# of not more than five%;' da#s to cover deficienc# in reserves a!ainst deposit liabilities includin! those between or

amon! banks and +uasi-banks shall not be considered as deposit substitute debt instruments.

%J' The term 5ordinar0 inco&"5 includes an# !ain from the sale or exchan!e of propert# which isnot a capital asset or propert# described in (ection 1=%$'%4'. $n# !ain from the sale or exchan!eof propert# which is treated or considered under other provisions of this Title as Eordinar#incomeE shall be treated as !ain from the sale or exchan!e of propert# which is not a capital assetas defined in (ection 1=%$'%4'. The term Eordinar# lossE includes an# loss from the sale orexchan!e of propert# which is not a capital asset. $n# loss from the sale or exchan!e of propert#which is treated or considered under other provisions of this Title as Eordinar# lossE shall betreated as loss from the sale or exchan!e of propert# which is not a capital asset.

%$$' The term 5ran and i#" "&'#o0"")5 shall mean all emplo#ees who are holdin! neithermana!erial nor supervisor# position as defined under existin! provisions of the Aabor Code of the

hilippines as amended.

%BB' The term 5&utua# und co&'an05 shall mean an open-end and close-end investmentcompan# as defined under the Investment Compan# $ct.

%CC' The term 5trad"3 ,u)in")) or 'ro"))ion5 shall not include performance of services b# thetaxpa#er as an emplo#ee.

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%DD' The term 5r"giona# or ar"a !"aduart"r)5 shall mean a branch established in thehilippines b# multinational companies and which head+uarters do not earn or derive incomefrom the hilippines and which act as supervisor# communications and coordinatin! center fortheir affiliates subsidiaries or branches in the $sia-acific Re!ion and other forei!n markets.

%//' The term 5r"giona# o'"rating !"aduart"r)5 shall mean a branch established in thehilippines b# multinational companies which are en!a!ed in an# of the followin! services*!eneral administration and plannin!, business plannin! and coordination, sourcin! andprocurement of raw materials and components, corporate finance advisor# services, marketin!control and sales promotion, trainin! and personnel mana!ement, lo!istic services, research anddevelopment services and product development, technical support and maintenance, dataprocessin! and communications, and business development.

%FF' The term 5#ong(t"r& d"'o)it or in$")t&"nt c"rtiicat")5 shall refer to certificate of timedeposit or investment in the form of savin!s common or individual trust funds depositsubstitutes investment mana!ement accounts and other investments with a maturit# period ofnot less than five %;' #ears the form of which shall be prescribed b# the Ban!ko (entral n!

ilipinas %B(' and issued b# banks onl# %not b# nonbank financial intermediaries and financecompanies' to individuals in denominations of Ten thousand pesos %4::::' and otherdenominations as ma# be prescribed b# the B(.


CHA+TER II ( *ENERAL +RINCI+LES

SEC :< *"n"ra# +rinci'#") o Inco&" Ta%ation in t!" +!i#i''in") - /xcept when otherwise

provid in this Code*

%$' $ citi)en of the hilippines residin! therein is taxable on all income derived from sourceswithin and without the hilippines,

%B' $ nonresident citi)en is taxable onl# on income derived from sources within the hilippines,

%C' $n individual citi)en of the hilippines who is workin! and derivin! income from abroad as anoverseas contract worker is taxable onl# on income derived from sources within the hilippines*rovided That a seaman who is a citi)en of the hilippines and who receives compensation forservices rendered abroad as a member of the complement of a vessel en!a!ed exclusivel# ininternational trade shall be treated as an overseas contract worker,

%D' $n alien individual whether a resident or not of the hilippines is taxable onl# on incomederived from sources within the hilippines,

%/' $ domestic corporation is taxable on all income derived from sources within and without thehilippines, and

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%F' $ forei!n corporation whether en!a!ed or not in trade or business in the hilippines istaxable onl# on income derived from sources within the hilippines.


CHA+TER III ( TA/ ON INDIVIDUALS

SEC := Inco&" Ta% Rat")

%$' Rates of Income Tax on Individual Citi)en and Individual Resident $lien of the hilippines.

%4' $n income tax is hereb# imposed*

%a' n the taxable income defined in (ection 14 of this Code other than income

sub"ect to tax under (ubsections %B' %C' and %D' of this (ection derived for eachtaxable #ear from all sources within and without the hilippines be ever#individual citi)en of the hilippines residin! therein,

%b' n the taxable income defined in (ection 14 of this Code other than incomesub"ect to tax under (ubsections %B' %C' and %D' of this (ection derived for eachtaxable #ear from all sources within the hilippines b# an individual citi)en of thehilippines who is residin! outside of the hilippines includin! overseas contractworkers referred to in (ubsection%C' of (ection 51 hereof, and

%c' n the taxable income defined in (ection 14 of this Code other than incomesub"ect to tax under (ubsections %b' %C' and %D' of this (ection derived for eachtaxable #ear from all sources within the hilippines b# an individual alien who is aresident of the hilippines.

The tax shall be computed in accordance with and at the rates established in thefollowin! schedule*

9ot over 4::::KKKKKKKKKKKKK ; ver 4:::: but not over 1::::KKKKKK ;::L4: of theexcess over 4:::: ver 1:::: but not over 6::::KKKKKK 5;::L4; of theexcess over 1:::: ver 6:::: but not over 4&::::KK..KKK >;::L5: of the

excess over 6:::: ver 4&:::: but not over 5;::::KKKKK 55;::L5; of theexcess over 4&:::: ver 5;:::: but not over ;:::::KKKKK ;::::L1: of theexcess over 5;:::: ver ;::::: KKKKKKKKKKKKKK 45;:::L1& of theexcess over ;::::: in 4==>.

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rovided That effective <anuar# 4 4=== the top mar!inal rate shall be thirt#-three percent %11' and effective <anuar# 4 5::: the said rate shall be thirt#-two percent %15'. For married individuals the husband and wife sub"ect to theprovision of (ection ;4 %D' hereof shall compute separatel# their individualincome tax based on their respective total taxable income* rovided That if an#income cannot be definitel# attributed to or identified as income exclusivel#earned or reali)ed b# either of the spouses the same shall be divided e+uall#between the spouses for the purpose of determinin! their respective taxableincome.

%B' Rate of Tax on Certain assive Income. %4' Interests Ro#alties ri)es and ther 2innin!s. - $ final tax at the rate of twent#percent %5:' is hereb# imposed upon the amount of interest from an# currenc# bankdeposit and #ield or an# other monetar# benefit from deposit substitutes and from trustfunds and similar arran!ements, ro#alties except on books as well as other literar#works and musical compositions which shall be imposed a final tax of ten percent %4:',pri)es %except pri)es amountin! to Ten thousand pesos %4::::' or less which shall besub"ect to tax under (ubsection %$' of (ection 5&, and other winnin!s %except hilippineCharit# (weepstakes and Aotto winnin!s' derived from sources within the hilippines*rovided however That interest income received b# an individual taxpa#er %except a

nonresident individual' from a depositor# bank under the expanded forei!n currenc#deposit s#stem shall be sub"ect to a final income tax at the rate of seven and one-halfpercent %6 4?5' of such interest income* rovided further That interest income fromlon!-term deposit or investment in the form of savin!s common or individual trust fundsdeposit substitutes investment mana!ement accounts and other investments evidencedb# certificates in such form prescribed b# the Ban!ko (entral n! ilipinas %B(' shall beexempt from the tax imposed under this (ubsection* rovided finall# That should theholder of the certificate pre-terminate the deposit or investment before the fifth %;th' #eara final tax shall be imposed on the entire income and shall be deducted and withheld b#the depositor# bank from the proceeds of the lon!-term deposit or investment certificatebased on the remainin! maturit# thereof*

Four %&' #ears to less than five %;' #ears - ;,

Three %1' #ears to less than %&' #ears - 45, and Aess than three %1' #ears - 5:

%5' Cash and?or ropert# Dividends - $ final tax at the followin! rates shall be imposedupon the cash and?or propert# dividends actuall# or constructivel# received b# anindividual from a domestic corporation or from a "oint stock compan# insurance or mutualfund companies and re!ional operatin! head+uarters of multinational companies or onthe share of an individual in the distributable net income after tax of a partnership %excepta !eneral professional partnership' of which he is a partner or on the share of anindividual in the net income after tax of an association a "oint account or a "oint ventureor consortium taxable as a corporation of which he is a member or co-venturer*

(ix percent %0' be!innin! <anuar# 4 4==>, /i!ht percent %>' be!innin! <anuar# 4 4===,

Ten percent %4: be!innin! <anuar# 4 5:::.

rovided however That the tax on dividends shall appl# onl# on income earned on orafter <anuar# 4 4==>. Income formin! part of retained earnin!s as of December 14 4==6shall not even if declared or distributed on or after <anuar# 4 4==> be sub"ect to thistax.

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%C' Capital 3ains from (ale of (hares of (tock not Traded in the (tock /xchan!e. - Theprovisions of (ection 1=%B' notwithstandin! a final tax at the rates prescribed below is hereb#imposed upon the net capital !ains reali)ed durin! the taxable #ear from the sale barterexchan!e or other disposition of shares of stock in a domestic corporation except shares sold or disposed of throu!h the stock exchan!e.

9ot over 4:::::KKKKKKKKKKK.. ; n an# amount in excess of 4:::::KKKK 4:

%D' Capital 3ains from (ale of Real ropert#. - %4' In 3eneral. - The provisions of (ection 1=%B' notwithstandin! a final tax of six percent%0' based on the !ross sellin! price or current fair market value as determined inaccordance with (ection 0%/' of this Code whichever is hi!her is hereb# imposed uponcapital !ains presumed to have been reali)ed from the sale exchan!e or otherdisposition of real propert# located in the hilippines classified as capital assetsincludin! pacto de retro sales and other forms of conditional sales b# individualsincludin! estates and trusts* rovided That the tax liabilit# if an# on !ains from sales orother dispositions of real propert# to the !overnment or an# of its political subdivisions ora!encies or to !overnment-owned or controlled corporations shall be determined eitherunder (ection 5& %$' or under this (ubsection at the option of the taxpa#er.

%5' /xception. - The provisions of para!raph %4' of this (ubsection to the contrar#notwithstandin! capital !ains presumed to have been reali)ed from the sale ordisposition of their principal residence b# natural persons the proceeds of which is full#utili)ed in ac+uirin! or constructin! a new principal residence within ei!hteen %4>'calendar months from the date of sale or disposition shall be exempt from the capital!ains tax imposed under this (ubsection* rovided That the historical cost or ad"ustedbasis of the real propert# sold or disposed shall be carried over to the new principalresidence built or ac+uired* rovided further That the Commissioner shall have beendul# notified b# the taxpa#er within thirt# %1:' da#s from the date of sale or dispositionthrou!h a prescribed return of his intention to avail of the tax exemption hereinmentioned* +ro$id"d still further That the said tax exemption can onl# be availed ofonce ever# ten %4:' #ears* +ro$id"d finall# that if there is no full utili)ation of theproceeds of sale or disposition the portion of the !ain presumed to have been reali)edfrom the sale or disposition shall be sub"ect to capital !ains tax. For this purpose the

!ross sellin! price or fair market value at the time of sale whichever is hi!her shall bemultiplied b# a fraction which the unutili)ed amount bears to the !ross sellin! price inorder to determine the taxable portion and the tax prescribed under para!raph %4' of this(ubsection shall be imposed thereon.

SEC :> Ta% on Nonr")id"nt A#i"n Indi$idua# (

%$' 9onresident $lien /n!a!ed in trade or Business 2ithin the hilippines. -

%4' In 3eneral. - $ nonresident alien individual en!a!ed in trade or business in thehilippines shall be sub"ect to an income tax in the same manner as an individual citi)enand a resident alien individual on taxable income received from all sources within thehilippines. $ nonresident alien individual who shall come to the hilippines and sta#therein for an a!!re!ate period of more than one hundred ei!ht# %4>:' da#s durin! an#calendar #ear shall be deemed a Enonresident alien doin! business in the hilippinesE.(ection 55 %3' of this Code notwithstandin!.

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%C' $lien Individual /mplo#ed b# Re!ional or $rea @ead+uarters and Re!ional peratin!@ead+uarters of ultinational Companies. - There shall be levied collected and paid for eachtaxable #ear upon the !ross income received b# ever# alien individual emplo#ed b# re!ional orarea head+uarters and re!ional operatin! head+uarters established in the hilippines b#

multinational companies as salaries wa!es annuities compensation remuneration and otheremoluments such as honoraria and allowances from such re!ional or area head+uarters andre!ional operatin! head+uarters a tax e+ual to fifteen percent %4;' of such !ross income*rovided however That the same tax treatment shall appl# to Filipinos emplo#ed and occup#in!the same position as those of aliens emplo#ed b# these multinational companies. For purposes of this Chapter the term Emultinational compan#E means a forei!n firm or entit# en!a!ed ininternational trade with affiliates or subsidiaries or branch offices in the $sia-acific Re!ion andother forei!n markets.

%D' $lien Individual /mplo#ed b# ffshore Bankin! nits. - There shall be levied collected andpaid for each taxable #ear upon the !ross income received b# ever# alien individual emplo#ed b#offshore bankin! units established in the hilippines as salaries wa!es annuities compensationremuneration and other emoluments such as honoraria and allowances from such off-shore

bankin! units a tax e+ual to fifteen percent %4;' of such !ross income* rovided however Thatthe same tax treatment shall appl# to Filipinos emplo#ed and occup#in! the same positions asthose of aliens emplo#ed b# these offshore bankin! units.

%/' $lien Individual /mplo#ed b# etroleum (ervice Contractor and (ubcontractor. - $n $lienindividual who is a permanent resident of a forei!n countr# but who is emplo#ed and assi!ned inthe hilippines b# a forei!n service contractor or b# a forei!n service subcontractor en!a!ed inpetroleum operations in the hilippines shall be liable to a tax of fifteen percent %4;' of thesalaries wa!es annuities compensation remuneration and other emoluments such ashonoraria and allowances received from such contractor or subcontractor* rovided howeverThat the same tax treatment shall appl# to a Filipino emplo#ed and occup#in! the same positionas an alien emplo#ed b# petroleum service contractor and subcontractor.

$n# income earned from all other sources within the hilippines b# the alien emplo#ees referredto under (ubsections %C' %D' and %/' hereof shall be sub"ect to the pertinent income tax as thecase ma# be imposed under this Code.

SEC :@ Ta% Lia,i#it0 o ."&,"r) o *"n"ra# +ro"))iona# +artn"r)!i'). - $ !eneralprofessional partnership as such shall not be sub"ect to the income tax imposed under thisChapter. ersons en!a!in! in business as partners in a !eneral professional partnership shall beliable for income tax onl# in their separate and individual capacities.

For purposes of computin! the distributive share of the partners the net income of thepartnership shall be computed in the same manner as a corporation.

/ach partner shall report as !ross income his distributive share actuall# or constructivel#received in the net income of the partnership.

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CHA+TER IV ( TA/ ON COR+ORATIONS

SEC :7 Rat") o Inco&" ta% on Do&")tic Cor'oration) (

%$' In 3eneral. - /xcept as otherwise provided in this Code an income tax of thirt#-five percent%1;' is hereb# imposed upon the taxable income derived durin! each taxable #ear from allsources within and without the hilippines b# ever# corporation as defined in (ection 55%B' ofthis Code and taxable under this Title as a corporation or!ani)ed in or existin! under the laws ofthe hilippines* rovided That effective <anuar# 4 5::= the rate of income tax shall be thirt#percent %1:'.

In the case of corporations adoptin! the fiscal-#ear accountin! period the taxable income shallbe computed without re!ard to the specific date when specific sales purchases and othertransactions occur. Their income and expenses for the fiscal #ear shall be deemed to have beenearned and spent e+uall# for each month of the period.

The corporate income tax rate shall be applied on the amount computed b# multipl#in! thenumber of months covered b# the new rate within the fiscal #ear b# the taxable income of thecorporation for the period divided b# twelve.

rovided further That the resident upon the recommendation of the (ecretar# of Finance ma#effective <anuar# 4 5::: allow corporations the option to be taxed at fifteen percent %4;' of!ross income as defined herein after the followin! conditions have been satisfied*

%4' $ tax effort ratio of twent# percent %5:' of 3ross 9ational roduct %39', %5' $ ratio of fort# percent %&:' of income tax collection to total tax revenues, %1' $ 8$T tax effort of four percent %&' of 39, and

%&' $ :.= percent %:.=' ratio of the Consolidated ublic (ector Financial osition%C(F' to 39.

The option to be taxed based on !ross income shall be available onl# to firms whose ratio of costof sales to !ross sales or receipts from all sources does not exceed fift#-five percent %;;'.

The election of the !ross income tax option b# the corporation shall be irrevocable for three %1'consecutive taxable #ears durin! which the corporation is +ualified under the scheme.

For purposes of this (ection the term E!ross incomeE derived from business shall be e+uivalent to!ross sales less sales returns discounts and allowances and cost of !oods sold. MCost of !oodssoldE shall include all business expenses directl# incurred to produce the merchandise to brin!them to their present location and use.

For a tradin! or merchandisin! concern 5co)t o good)5 sold shall include the invoice cost of the!oods sold plus import duties frei!ht in transportin! the !oods to the place where the !oods areactuall# sold includin! insurance while the !oods are in transit.

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For a manufacturin! concern Ecost of !oods manufactured and soldE shall include all costs ofproduction of finished !oods such as raw materials used direct labor and manufacturin!overhead frei!ht cost insurance premiums and other costs incurred to brin! the raw materials tothe factor# or warehouse.

In the case of taxpa#ers en!a!ed in the sale of service E!ross incomeE means !ross receipts lesssales returns allowances and discounts.

%B' roprietar# /ducational Institutions and @ospitals. - roprietar# educational institutions andhospitals which are nonprofit shall pa# a tax of ten percent %4:' on their taxable income exceptthose covered b# (ubsection %D' hereof* rovided that if the !ross income from unrelated tradebusiness or other activit# exceeds fift# percent %;:' of the total !ross income derived b# sucheducational institutions or hospitals from all sources the tax prescribed in (ubsection %$' hereofshall be imposed on the entire taxable income. For purposes of this (ubsection the termEunrelated trade business or other activit#E means an# trade business or other activit# theconduct of which is not substantiall# related to the exercise or performance b# such educational

institution or hospital of its primar# purpose or function. $ Eroprietar# educational institutionE isan# private school maintained and administered b# private individuals or !roups with an issuedpermit to operate from the Department of /ducation Culture and (ports %D/C(' or theCommission on @i!her /ducation %C@/D' or the Technical /ducation and (kills Development

$uthorit# %T/(D$' as the case ma# be in accordance with existin! laws and re!ulations.

%C' 3overnment-owned or Controlled-Corporations $!encies or Instrumentalities. - Theprovisions of existin! special or !eneral laws to the contrar# notwithstandin! all corporationsa!encies or instrumentalities owned or controlled b# the 3overnment except the 3overnment(ervice Insurance (#stem %3(I(' the (ocial (ecurit# (#stem %(((' the hilippine @ealthInsurance Corporation %@IC' and the hilippine Charit# (weepstakes ffice %C(' shall pa#such rate of tax upon their taxable income as are imposed b# this (ection upon corporations or

associations en!a!ed in s similar business industr# or activit#.

%D' Rates of Tax on Certain assive Incomes. -

%4' Interest from Deposits and ield or an# other onetar# Benefit from Deposit(ubstitutes and from Trust Funds and (imilar $rran!ements and Ro#alties. - $ final taxat the rate of twent# percent %5:' is hereb# imposed upon the amount of interest oncurrenc# bank deposit and #ield or an# other monetar# benefit from deposit substitutesand from trust funds and similar arran!ements received b# domestic corporations andro#alties derived from sources within the hilippines* rovided however That interestincome derived b# a domestic corporation from a depositor# bank under the expandedforei!n currenc# deposit s#stem shall be sub"ect to a final income tax at the rate of seven

and one-half percent %6 4?5' of such interest income.

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%5' Capital 3ains from the (ale of (hares of (tock 9ot Traded in the (tock /xchan!e. - $final tax at the rates prescribed below shall be imposed on net capital !ains reali)eddurin! the taxable #ear from the sale exchan!e or other disposition of shares of stock ina domestic corporation except shares sold or disposed of throu!h the stock exchan!e*

9ot over 4:::::KKKKKKKKKK. ; $mount in excess of 4:::::KKKKK.. 4:

%1' Tax on Income Derived under the /xpanded Forei!n Currenc# Deposit (#stem. -Income derived b# a depositor# bank under the expanded forei!n currenc# deposits#stem from forei!n currenc# transactions with nonresidents offshore bankin! units inthe hilippines local commercial banks includin! branches of forei!n banks that ma# beauthori)ed b# the Ban!ko (entral n! ilipinas %B(' to transact business with forei!ncurrenc# deposit s#stem units and other depositor# banks under the expanded forei!ncurrenc# deposit s#stem shall be exempt from all taxes except net income from suchtransactions as ma# be specified b# the (ecretar# of Finance upon recommendation b#the onetar# Board to be sub"ect to the re!ular income tax pa#able b# banks* Provided,however, That interest income from forei!n currenc# loans !ranted b# such depositor#

banks under said expanded s#stem to residents under than offshore units in thehilippines or other depositor# banks under the expanded s#stem shall be sub"ect to afinal tax at the rate of ten percent %4:'.

$n# income of nonresidents whether individuals or corporations from transactions withdepositor# banks under the expanded s#stem shall be exempt from income tax.

%&' Intercorporate Dividends. - Dividends received b# a domestic corporation fromanother domestic corporation shall not be sub"ect to tax.

%;' Capital 3ains Reali)ed from the (ale /xchan!e or Disposition of Aands and?orBuildin!s. - $ final tax of six percent %0' is hereb# imposed on the !ain presumed tohave been reali)ed on the sale exchan!e or disposition of lands and?or buildin!s which

are not actuall# used in the business of a corporation and are treated as capital assetsbased on the !ross sellin! price of fair market value as determined in accordance with(ection 0%/' of this Code whichever is hi!her of such lands and?or buildin!s.

%/' inimum Corporate Income Tax on Domestic Corporations. - %4' Imposition of Tax. - $ minimum corporate income tax of two percent %5: of the !rossincome as of the end of the taxable #ear as defined herein is hereb# imposed on acorporation taxable under this Title be!innin! on the fourth taxable #ear immediatel#followin! the #ear in which such corporation commenced its business operations whenthe minimum income tax is !reater than the tax computed under (ubsection %$' of this(ection for the taxable #ear.

%5' Carr# Froward of /xcess inimum Tax. - $n# excess of the minimum corporateincome tax over the normal income tax as computed under (ubsection %$' of this (ectionshall be carried forward and credited a!ainst the normal income tax for the three %1'immediatel# succeedin! taxable #ears.

%1' Relief from the inimum Corporate Income Tax nder Certain Conditions. - The(ecretar# of Finance is hereb# authori)ed to suspend the imposition of the minimumcorporate income tax on an# corporation which suffers losses on account of prolon!edlabor dispute or because of force ma"eure or because of le!itimate business reverses.

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The (ecretar# of Finance is hereb# authori)ed to promul!ate upon recommendation ofthe Commissioner the necessar# rules and re!ulation that shall define the terms andconditions under which he ma# suspend the imposition of the minimum corporate incometax in a meritorious case.

%&' 3ross Income Defined. - For purposes of appl#in! the minimum corporate income taxprovided under (ubsection %/' hereof the term E!ross incomeE shall mean !ross salesless sales returns discounts and allowances and cost of !oods sold. MCost of !oods soldEshall include all business expenses directl# incurred to produce the merchandise to brin!them to their present location and use.

For a tradin! or merchandisin! concern Ecost of !oods soldE shall include the invoice costof the !oods sold plus import duties frei!ht in transportin! the !oods to the place wherethe !oods are actuall# sold includin! insurance while the !oods are in transit.

For a manufacturin! concern cost of E!oods manufactured and soldE shall include allcosts of production of finished !oods such as raw materials used direct labor and

manufacturin! overhead frei!ht cost insurance premiums and other costs incurred tobrin! the raw materials to the factor# or warehouse.

In the case of taxpa#ers en!a!ed in the sale of service E!ross incomeE means !rossreceipts less sales returns allowances discounts and cost of services. ECost of servicesEshall mean all direct costs and expenses necessaril# incurred to provide the servicesre+uired b# the customers and clients includin! %$' salaries and emplo#ee benefits ofpersonnel consultants and specialists directl# renderin! the service and %B' cost offacilities directl# utili)ed in providin! the service such as depreciation or rental ofe+uipment used and cost of supplies* rovided however That in the case of banks Ecostof servicesE shall include interest expense.

SEC : Rat") o Inco&" Ta% on For"ign Cor'oration) (

%$' Tax on Resident Forei!n Corporations. -

%4' In 3eneral. - /xcept as otherwise provided in this Code a corporation or!ani)edauthori)ed or existin! under the laws of an# forei!n countr# en!a!ed in trade orbusiness within the hilippines shall be sub"ect to an income tax e+uivalent to thirt#-fivepercent %1;' of the taxable income derived in the precedin! taxable #ear from allsources within. the hilippines* rovided That effective <anuar# 4 5::= the rate ofincome tax shall be thirt# percent %1:'.

In the case of corporations adoptin! the fiscal-#ear accountin! period the taxable income

shall be computed without re!ard to the specific date when sales purchases and othertransactions occur. Their income and expenses for the fiscal #ear shall be deemed tohave been earned and spent e+uall# for each month of the period.

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The corporate income tax rate shall be applied on the amount computed b# multipl#in!the number of months covered b# the new rate within the fiscal #ear b# the taxableincome of the corporation for the period divided b# twelve.

rovided however That a resident forei!n corporation shall be !ranted the option to betaxed at fifteen percent %4;' on !ross income under the same conditions as provided in

(ection 56 %$'.

%5' inimum Corporate Income Tax on Resident Forei!n Corporations. - $ minimumcorporate income tax of two percent %5' of !ross income as prescribed under (ection56 %/' of this Code shall be imposed under the same conditions on a resident forei!ncorporation taxable under para!raph %4' of this (ubsection.

%1' International Carrier. - $n international carrier doin! business in the hilippines shallpa# a tax of two and one-half percent %5 4?5' on its E3ross hilippine Billin!sE as definedhereunder*

%a' International $ir Carrier. - E3ross hilippine Billin!sE refers to the amount of

!ross revenue derived from carria!e of persons excess ba!!a!e car!o and mailori!inatin! from the hilippines in a continuous and uninterrupted fli!htirrespective of the place of sale or issue and the place of pa#ment of the ticket orpassa!e document* rovided That tickets revalidated exchan!ed and?orindorsed to another international airline form part of the 3ross hilippine Billin!sif the passen!er boards a plane in a port or point in the hilippines* rovidedfurther That for a fli!ht which ori!inates from the hilippines but transshipmentof passen!er takes place at an# port outside the hilippines on another airlineonl# the ali+uot portion of the cost of the ticket correspondin! to the le! flownfrom the hilippines to the point of transshipment shall form part of 3rosshilippine Billin!s.

%b' International (hippin!. - E3ross hilippine Billin!sE means !ross revenue

whether for passen!er car!o or mail ori!inatin! from the hilippines up to finaldestination re!ardless of the place of sale or pa#ments of the passa!e or frei!htdocuments.

%&' ffshore Bankin! nits. - The provisions of an# law to the contrar# notwithstandin!income derived b# offshore bankin! units authori)ed b# the Ban!ko (entral n! ilipinas%B(' from forei!n currenc# transactions with nonresidents other offshore bankin! unitslocal commercial banks includin! branches of forei!n banks that ma# be authori)ed b#the Ban!ko (entral n! ilipinas %B(' to transact business with offshore bankin! unitsshall be exempt from all taxes except net income from such transactions as ma# bespecified b# the (ecretar# of Finance upon recommendation of the onetar# Boardwhich shall be sub"ect to the re!ular income tax pa#able b# banks, Provided, however,That an# interest income derived from forei!n currenc# loans !ranted to residents otherthan offshore bankin! units or local commercial banks includin! local branches of forei!nbanks that ma# be authori)ed b# the B( to transact business with offshore bankin!units shall be sub"ect onl# to a final tax at the rate of ten percent %4:'.

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M$n# income of nonresidents whether individuals or corporations from transactions withsaid offshore bankin! units shall be exempt from income tax.

%;' Tax on Branch rofits Remittances. - $n# profit remitted b# a branch to its head officeshall be sub"ect to a tax of fifteen %4;' which shall be based on the total profits applied

or earmarked for remittance without an# deduction for the tax component thereof %exceptthose activities which are re!istered with the hilippine /conomic Jone $uthorit#'. Thetax shall be collected and paid in the same manner as provided in (ections ;6 and ;> ofthis Code* provided that interests dividends rents ro#alties includin! remuneration fortechnical services salaries wa!es premiums annuities emoluments or other fixed ordeterminable annual periodic or casual !ains profits income and capital !ains receivedb# a forei!n corporation durin! each taxable #ear from all sources within the hilippinesshall not be treated as branch profits unless the same are effectivel# connected with theconduct of its trade or business in the hilippines.

%0' Re!ional or $rea @ead+uarters and Re!ional peratin! @ead+uarters of ultinational

Companies. -

%a' Re!ional or area head+uarters as defined in (ection 55%DD' shall not besub"ect to income tax. %b' Re!ional operatin! head+uarters as defined in (ection 55%//' shall pa# a taxof ten percent %4:' of their taxable income.

%6' Tax on Certain Incomes Received b# a Resident Forei!n Corporation. -

%a' Interest from Deposits and ield or an# other onetar# Benefit from Deposit(ubstitutes Trust Funds and (imilar $rran!ements and Ro#alties. - Interest froman# currenc# bank deposit and #ield or an# other monetar# benefit from depositsubstitutes and from trust funds and similar arran!ements and ro#alties derivedfrom sources within the hilippines shall be sub"ect to a final income tax at therate of twent# percent %5:' of such interest* rovided however That interest

income derived b# a resident forei!n corporation from a depositor# bank underthe expanded forei!n currenc# deposit s#stem shall be sub"ect to a final incometax at the rate of seven and one-half percent %6 4?5' of such interest income.

%b' Income Derived under the /xpanded Forei!n Currenc# Deposit (#stem. -Income Derived under the Expanded Foreign Currency Deposit System. –Income derived b# a depositor# bank under the expanded forei!n currenc#deposit s#stem from forei!n currenc# transactions with nonresidents offshorebankin! units in the hilippines local commercial banks includin! branches offorei!n banks that ma# be authori)ed b# the Ban!ko (entral n! ilipinas %B('to transact business with forei!n currenc# deposit s#stem units and otherdepositor# banks under the expanded forei!n currenc# deposit s#stem shall beexempt from all taxes except net income from such transactions as ma# be

specified b# the (ecretar# of Finance upon recommendation b# the onetar#Board to be sub"ect to the re!ular income tax pa#able b# banks* Provided,however, That interest income from forei!n currenc# loans !ranted b# suchdepositor# banks under said expanded s#stem to residents other than offshorebankin! units in the hilippines or other depositor# banks under the expandeds#stem shall be sub"ect to a final tax at the rate of ten percent %4:'.

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$n# income of nonresidents whether individuals or corporations fromtransactions with depositor# banks under the expanded s#stem shall be exemptfrom income tax.

%c' Capital 3ains from (ale of (hares of (tock 9ot Traded in the (tock

/xchan!e. - $ final tax at the rates prescribed below is hereb# imposed upon thenet capital !ains reali)ed durin! the taxable #ear from the sale barter exchan!eor other disposition of shares of stock in a domestic corporation except sharessold or disposed of throu!h the stock exchan!e*

9ot over 4:::::KKKKKKKKKK ; n an# amount in excess of 4:::::KK. 4:

%d' Intercorporate Dividends. - Dividends received b# a resident forei!ncorporation from a domestic corporation liable to tax under this Code shall not besub"ect to tax under this Title.

%B' Tax on 9onresident Forei!n Corporation. N

%4' In 3eneral. - /xcept as otherwise provided in this Code a forei!n corporation noten!a!ed in trade or business in the hilippines shall pa# a tax e+ual to thirt#-five percent%1;' of the !ross income received durin! each taxable #ear from all sources within thehilippines such as interests dividends rents ro#alties salaries premiums %exceptreinsurance premiums' annuities emoluments or other fixed or determinable annualperiodic or casual !ains profits and income and capital !ains except capital !ainssub"ect to tax under subpara!raph ;%c'* rovided That effective <anuar# 4 5::= the rateof income tax shall be thirt# percent %1:'.

%5' 9onresident Cinemato!raphic Film wner Aessor or Distributor. - $ cinemato!raphicfilm owner lessor or distributor shall pa# a tax of twent#-five percent %5;' of its !rossincome from all sources within the hilippines.

%1' 9onresident wner or Aessor of 8essels Chartered b# hilippine 9ationals. - $nonresident owner or lessor of vessels shall be sub"ect to a tax of four and one-halfpercent %& 4?5' of !ross rentals lease or charter fees from leases or charters to Filipinociti)ens or corporations as approved b# the aritime Industr# $uthorit#.

%&' 9onresident wner or Aessor of $ircraft achineries and ther /+uipment. -Rentals charters and other fees derived b# a nonresident lessor of aircraft machineriesand other e+uipment shall be sub"ect to a tax of seven and one-half percent %6 4?5' of!ross rentals or fees.

%;' Tax on Certain Incomes Received b# a 9onresident Forei!n Corporation. -

%a' Interest on Forei!n Aoans. - $ final withholdin! tax at the rate of twent#percent %5:' is hereb# imposed on the amount of interest on forei!n loanscontracted on or after $u!ust 4 4=>0,

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%b' Intercorporate Dividends. - $ final withholdin! tax at the rate of fifteen percent%4;' is hereb# imposed on the amount of cash and?or propert# dividendsreceived from a domestic corporation which shall be collected and paid asprovided in (ection ;6%$' of this Code sub"ect to the condition that the countr# inwhich the nonresident forei!n corporation is domiciled shall allow a credit

a!ainst the tax due from the nonresident forei!n corporation taxes deemed tohave been paid in the hilippines e+uivalent to twent# percent %5:' whichrepresents the difference between the re!ular income tax of thirt#-five percent%1;O' and the fifteen percent %4;' tax on dividends as provided in thissubpara!raph* rovided That effective <anuar# 4. 5::= the credit a!ainst thetax due shall be e+uivalent to fifteen percent %4;' which represents thedifference between the re!ular income tax of thirt# percent %1:' and the fifteenpercent %4;' tax on dividends,

%c' Capital 3ains from (ale of (hares of (tock not Traded in the (tock/xchan!e. - $ final tax at the rates prescribed below is hereb# imposed upon thenet capital !ains reali)ed durin! the taxable #ear from the sale barter exchan!eor other disposition of shares of stock in a domestic corporation except shares

sold or disposed of throu!h the stock exchan!e*

9ot over 4:::::KKKK..KKKKKKK ; n an# amount in excess of 4:::::KKKK 4:

SEC :9 I&'o)ition o I&'ro'"r#0 Accu&u#at"d Earning) Ta% -

%$' In 3eneral. - In addition to other taxes imposed b# this Title there is hereb# imposed for eachtaxable #ear on the improperl# accumulated taxable income of each corporation described in(ubsection B hereof an improperl# accumulated earnin!s tax e+ual to ten percent %4:' of theimproperl# accumulated taxable income.

%B' Tax on Corporations (ub"ect to Improperl# $ccumulated /arnin!s Tax. -

%4' In 3eneral. - The improperl# accumulated earnin!s tax imposed in the precedin!(ection shall appl# to ever# corporation formed or availed for the purpose of avoidin! theincome tax with respect to its shareholders or the shareholders of an# other corporationb# permittin! earnin!s and profits to accumulate instead of bein! divided or distributed.

%5' /xceptions. - The improperl# accumulated earnin!s tax as provided for under this(ection shall not appl# to*

%a' ublicl#-held corporations, %b' Banks and other nonbank financial intermediaries, and

%c' Insurance companies.%C' /vidence of urpose to $void Income Tax. -

%4' rima Facie /vidence. - the fact that an# corporation is a mere holdin! compan# orinvestment compan# shall be prima facie evidence of a purpose to avoid the tax upon itsshareholders or members.

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%5' /vidence Determinative of urpose. - The fact that the earnin!s or profits of acorporation are permitted to accumulate be#ond the reasonable needs of the businessshall be determinative of the purpose to avoid the tax upon its shareholders or members

unless the corporation b# the clear preponderance of evidence shall prove to thecontrar#.

%D' Improperl# $ccumulated Taxable Income. - For purposes of this (ection the term Eimproperl#accumulated taxable incomeE means taxable incomeE ad"usted b#*

%4' Income exempt from tax, %5' Income excluded from !ross income, %1' Income sub"ect to final tax, and %&' The amount of net operatin! loss carr#-over deducted,

$nd reduced b# the sum of*

%4' Dividends actuall# or constructivel# paid, and %5' Income tax paid for the taxable #ear.

rovided however That for corporations usin! the calendar #ear basis the accumulatedearnin!s under tax shall not appl# on improperl# accumulated income as of December14 4==6. In the case of corporations adoptin! the fiscal #ear accountin! period theimproperl# accumulated income not sub"ect to this tax shall be reckoned as of the endof the month comprisin! the twelve %45'-month period of fiscal #ear 4==6-4==>.

%/' Reasonable 9eeds of the Business. - For purposes of this (ection the term Ereasonableneeds of the businessE includes the reasonabl# anticipated needs of the business.

SEC < E%"&'tion) ro& Ta% on Cor'oration) - The followin! or!ani)ations shall not betaxed under this Title in respect to income received b# them as such*

%$' Aabor a!ricultural or horticultural or!ani)ation not or!ani)ed principall# for profit,

%B' utual savin!s bank not havin! a capital stock represented b# shares and cooperative bankwithout capital stock or!ani)ed and operated for mutual purposes and without profit,

%C' $ beneficiar# societ# order or association operatin! fort he exclusive benefit of the memberssuch as a fraternal or!ani)ation operatin! under the lod!e s#stem or mutual aid association or anonstock corporation or!ani)ed b# emplo#ees providin! for the pa#ment of life sicknessaccident or other benefits exclusivel# to the members of such societ# order or association ornonstock corporation or their dependents,

%D' Cemeter# compan# owned and operated exclusivel# for the benefit of its members,

%/' 9onstock corporation or association or!ani)ed and operated exclusivel# for reli!iouscharitable scientific athletic or cultural purposes or for the rehabilitation of veterans no part ofits net income or asset shall belon! to or inures to the benefit of an# member or!ani)er officer or an# specific person,

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%F' Business lea!ue chamber of commerce or board of trade not or!ani)ed for profit and no partof the net income of which inures to the benefit of an# private stock-holder or individual,

%3' Civic lea!ue or or!ani)ation not or!ani)ed for profit but operated exclusivel# for the promotionof social welfare,

%@' $ nonstock and nonprofit educational institution,

%I' 3overnment educational institution,

%<' FarmersE or other mutual t#phoon or fire insurance compan# mutual ditch or irri!ationcompan# mutual or cooperative telephone compan# or like or!ani)ation of a purel# localcharacter the income of which consists solel# of assessments dues and fees collected frommembers for the sole purpose of meetin! its expenses, and

%' FarmersE fruit !rowersE or like association or!ani)ed and operated as a sales a!ent for thepurpose of marketin! the products of its members and turnin! back to them the proceeds ofsales less the necessar# sellin! expenses on the basis of the +uantit# of produce finished b#them,

9otwithstandin! the provisions in the precedin! para!raphs the income of whatever kind andcharacter of the fore!oin! or!ani)ations from an# of their properties real or personal or from an#of their activities conducted for profit re!ardless of the disposition made of such income shall besub"ect to tax imposed under this Code.


CHA+TER V ( CO.+UTATION OF TA/ABLE INCO.E

SEC <1 Ta%a,#" Inco&" D"in"d ( The term taxable income means the pertinent items of!ross income specified in this Code less the deductions and?or personal and additionalexemptions if an# authori)ed for such t#pes of income b# this Code or other special laws.

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%0' Retirement Benefits ensions 3ratuities etc.-

%a' Retirement benefits received under Republic $ct 9o. 60&4 and thosereceived b# officials and emplo#ees of private firms whether individual or

corporate in accordance with a reasonable private benefit plan maintained b#the emplo#er* rovided That the retirin! official or emplo#ee has been in theservice of the same emplo#er for at least ten %4:' #ears and is not less than fift#%;:' #ears of a!e at the time of his retirement* rovided further That the benefits!ranted under this subpara!raph shall be availed of b# an official or emplo#eeonl# once. For purposes of this (ubsection the term Ereasonable private benefitplanE means a pension !ratuit# stock bonus or profit-sharin! plan maintained b#an emplo#er for the benefit of some or all of his officials or emplo#ees whereincontributions are made b# such emplo#er for the officials or emplo#ees or bothfor the purpose of distributin! to such officials and emplo#ees the earnin!s andprincipal of the fund thus accumulated and wherein its is provided in said planthat at no time shall an# part of the corpus or income of the fund be used for orbe diverted to an# purpose other than for the exclusive benefit of the said

officials and emplo#ees.

%b' $n# amount received b# an official or emplo#ee or b# his heirs from theemplo#er as a conse+uence of separation of such official or emplo#ee from theservice of the emplo#er because of death sickness or other ph#sical disabilit# orfor an# cause be#ond the control of the said official or emplo#ee.

%c' The provisions of an# existin! law to the contrar# notwithstandin! socialsecurit# benefits retirement !ratuities pensions and other similar benefitsreceived b# resident or nonresident citi)ens of the hilippines or aliens whocome to reside permanentl# in the hilippines from forei!n !overnment a!enciesand other institutions private or public.

%d' a#ments of benefits due or to become due to an# person residin! in thehilippines under the laws of the nited (tates administered b# the nited (tates8eterans $dministration.

%e' Benefits received from or en"o#ed under the (ocial (ecurit# (#stem inaccordance with the provisions of Republic $ct 9o. >5>5.

%f' Benefits received from the 3(I( under Republic $ct 9o. >5=4 includin!retirement !ratuit# received b# !overnment officials and emplo#ees.

%6' iscellaneous Items. -

%a' Income Derived b# Forei!n 3overnment. - Income derived from investmentsin the hilippines in loans stocks bonds or other domestic securities or frominterest on deposits in banks in the hilippines b# %i' forei!n !overnments %ii'financin! institutions owned controlled or en"o#in! refinancin! from forei!n!overnments and %iii' international or re!ional financial institutions established b#forei!n !overnments.

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%b' Income Derived b# the 3overnment or its olitical (ubdivisions. - Incomederived from an# public utilit# or from the exercise of an# essential !overnmentalfunction accruin! to the 3overnment of the hilippines or to an# politicalsubdivision thereof.

%c' ri)es and $wards. - ri)es and awards made primaril# in reco!nition ofreli!ious charitable scientific educational artistic literar# or civic achievementbut onl# if*

%i' The recipient was selected without an# action on his part to enter thecontest or proceedin!, and %ii' The recipient is not re+uired to render substantial future services as acondition to receivin! the pri)e or award.

%d' ri)es and $wards in sports Competition. - $ll pri)es and awards !ranted toathletes in local and international sports competitions and tournaments whetherheld in the hilippines or abroad and sanctioned b# their national sports

associations.

%e' 41th onth a# and ther Benefits. - 3ross benefits received b# officials andemplo#ees of public and private entities* rovided however That the totalexclusion under this subpara!raph shall not exceed Thirt# thousand pesos

%1::::' which shall cover*

%i' Benefits received b# officials and emplo#ees of the national and local!overnment pursuant to Republic $ct 9o. 00>0, %ii' Benefits received b# emplo#ees pursuant to residential Decree 9o.>;4 as amended b# emorandum rder 9o. 5> dated $u!ust 41 4=>0,

%iii' Benefits received b# officials and emplo#ees not covered b#residential decree 9o. >;4 as amended b# emorandum rder 9o.5> dated $u!ust 41 4=>0, and %iv' ther benefits such as productivit# incentives and Christmas bonus*rovided further That the ceilin! of Thirt# thousand pesos %1::::'ma# be increased throu!h rules and re!ulations issued b# the (ecretar#of Finance upon recommendation of the Commissioner afterconsiderin! amon! others the effect on the same of the inflation rate atthe end of the taxable #ear.

%f' 3(I( ((( edicare and ther Contributions. - 3(I( ((( edicare anda!-ibi! contributions and union dues of individuals.

%!' 3ains from the (ale of Bonds Debentures or other Certificate ofIndebtedness. - 3ains reali)ed from the same or exchan!e or retirement ofbonds debentures or other certificate of indebtedness with a maturit# of morethan five %;' #ears.

%h' 3ains from Redemption of (hares in utual Fund. - 3ains reali)ed b# theinvestor upon redemption of shares of stock in a mutual fund compan# asdefined in (ection 55 %BB' of this Code.

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SEC << S'"cia# Tr"at&"nt o Fring" B"n"it(

A I&'o)ition o Ta%.( $ final tax of thirt#-four percent %1&' effective <anuar# 4 4==>, thirt#-three percent %11' effective <anuar# 4 4===, and thirt#-two percent %15' effective <anuar# 45::: and thereafter is hereb# imposed on the !rossed-up monetar# value of frin!e benefitfurnished or !ranted to the emplo#ee %except rank and file emplo#ees as defined herein' b# the

emplo#er whether an individual or a corporation %unless the frin!e benefit is re+uired b# thenature of or necessar# to the trade business or profession of the emplo#er or when the frin!ebenefit is for the convenience or advanta!e of the emplo#er'. The tax herein imposed is pa#ableb# the emplo#er which tax shall be paid in the same manner as provided for under (ection ;6 %$'of this Code. The !rossed-up monetar# value of the frin!e benefit shall be determined b# dividin!the actual monetar# value of the frin!e benefit b# sixt#-six percent %00' effective <anuar# 44==>, sixt#-seven percent %06' effective <anuar# 4 4===, and sixt#-ei!ht percent %0>'effective <anuar# 4 5::: and thereafter* rovided however That frin!e benefit furnished toemplo#ees and taxable under (ubsections %B' %C' %D' and %/' of (ection 5; shall be taxed atthe applicable rates imposed thereat* rovided further That the !rossed -p value of the frin!ebenefit shall be determined b# dividin! the actual monetar# value of the frin!e benefit b# thedifference between one hundred percent %4::' and the applicable rates of income tax under(ubsections %B' %C' %D' and %/' of (ection 5;.

B Fring" B"n"it d"in"d.- For purposes of this (ection the term 5ring" ,"n"it5 means an#!ood service or other benefit furnished or !ranted in cash or in kind b# an emplo#er to anindividual emplo#ee %except rank and file emplo#ees as defined herein' such as but not limitedto the followin!*

%4' @ousin!, %5' /xpense account, %1' 8ehicle of an# kind, %&' @ousehold personnel such as maid driver and others, %;' Interest on loan at less than market rate to the extent of the difference between themarket rate and actual rate !ranted, %0' embership fees dues and other expenses borne b# the emplo#er for the emplo#ee

in social and athletic clubs or other similar or!ani)ations, %6' /xpenses for forei!n travel, %>' @olida# and vacation expenses, %=' /ducational assistance to the emplo#ee or his dependents, and %4:' Aife or health insurance and other non-life insurance premiums or similar amounts inexcess of what the law allows.

C Fring" B"n"it) Not Ta%a,#". - The followin! frin!e benefits are not taxable under this(ection*

%4' frin!e benefits which are authori)ed and exempted from tax under special laws, %5' Contributions of the emplo#er for the benefit of the emplo#ee to retirement insuranceand hospitali)ation benefit plans, %1' Benefits !iven to the rank and file emplo#ees whether !ranted under a collectivebar!ainin! a!reement or not, and

%&' De minimis benefits as defined in the rules and re!ulations to be promul!ated b# the(ecretar# of Finance upon recommendation of the Commissioner.

The (ecretar# of Finance is hereb# authori)ed to promul!ate upon recommendation of theCommissioner such rules and re!ulations as are necessar# to carr# out efficientl# and fairl# theprovisions of this (ection takin! into account the peculiar nature and special need of the tradebusiness or profession of the emplo#er.

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CHA+TER VII ( ALLO4ABLE DEDUCTIONS

SEC <= D"duction) ro& *ro)) Inco&" - /xcept for taxpa#ers earnin! compensation income

arisin! from personal services rendered under an emplo#er-emplo#ee relationship where nodeductions shall be allowed under this (ection other than under subsection %' hereof incomputin! taxable income sub"ect to income tax under (ections 5& %$', 5; %$', 50, 56 %$' %B'and %C', and 5> %$' %4' there shall be allowed the followin! deductions from !ross income,

A E%'"n)"). -

1 Ordinar0 and N"c"))ar0 Trad"3 Bu)in")) or +ro"))iona# E%'"n)") .- %a' In 3eneral. - There shall be allowed as deduction from !ross income all theordinar# and necessar# expenses paid or incurred durin! the taxable #ear incarr#in! on or which are directl# attributable to the development mana!ementoperation and?or conduct of the trade business or exercise of a professionincludin!*

%i' $ reasonable allowance for salaries wa!es and other forms ofcompensation for personal services actuall# rendered includin! the!rossed-up monetar# value of frin!e benefit furnished or !ranted b# theemplo#er to the emplo#ee* rovided That the final tax imposed under(ection 11 hereof has been paid,

%ii' $ reasonable allowance for travel expenses here and abroad whileawa# from home in the pursuit of trade business or profession,

%iii' $ reasonable allowance for rentals and?or other pa#ments which arere+uired as a condition for the continued use or possession for purposesof the trade business or profession of propert# to which the taxpa#erhas not taken or is not takin! title or in which he has no e+uit# other thanthat of a lessee user or possessor,

%iv' $ reasonable allowance for entertainment amusement andrecreation expenses durin! the taxable #ear that are directl# connectedto the development mana!ement and operation of the trade business or profession of the taxpa#er or that are directl# related to or in furtheranceof the conduct of his or its trade business or exercise of a profession notto exceed such ceilin!s as the (ecretar# of Finance ma# b# rules andre!ulations prescribe upon recommendation of the Commissioner takin!into account the needs as well as the special circumstances nature andcharacter of the industr# trade business or profession of the taxpa#er*rovided That an# expense incurred for entertainment amusement orrecreation that is contrar# to law morals public polic# or public order shallin no case be allowed as a deduction.

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%b' (ubstantiation Re+uirements. - 9o deduction from !ross income shall beallowed under (ubsection %$' hereof unless the taxpa#er shall substantiate withsufficient evidence such as official receipts or other ade+uate records* %i' the

amount of the expense bein! deducted and %ii' the direct connection or relationof the expense bein! deducted to the development mana!ement operationand?or conduct of the trade business or profession of the taxpa#er.

%c' Bribes ickbacks and ther (imilar a#ments. - 9o deduction from !rossincome shall be allowed under (ubsection %$' hereof for an# pa#ment madedirectl# or indirectl# to an official or emplo#ee of the national !overnment or toan official or emplo#ee of an# local !overnment unit or to an official or emplo#eeof a !overnment-owned or -controlled corporation or to an official or emplo#ee or representative of a forei!n !overnment or to a private corporation !eneralprofessional partnership or a similar entit# if the pa#ment constitutes a bribe orkickback.

: E%'"n)") A##o-a,#" to +ri$at" Educationa# In)titution). - In addition to theexpenses allowable as deductions under this Chapter a private educational institutionreferred to under (ection 56 %B' of this Code ma# at its option elect either* %a' to deductexpenditures otherwise considered as capital outla#s of depreciable assets incurreddurin! the taxable #ear for the expansion of school facilities or %b' to deduct allowance for depreciation thereof under (ubsection %F' hereof.

B Int"r")t(

1 In *"n"ra#. - The amount of interest paid or incurred within a taxable #ear onindebtedness in connection with the taxpa#erEs profession trade or business shall beallowed as deduction from !ross income* rovided however That the taxpa#erEsotherwise allowable deduction for interest expense shall be reduced b# fort#-two percent%&5' of the interest income sub"ected to final tax* rovided That effective <anuar# 4

5::= the percenta!e shall be thirt#-three percent %11'.

: E%c"'tion). - 9o deduction shall be allowed in respect of interest under thesucceedin! subpara!raphs*

%a' If within the taxable #ear an individual taxpa#er reportin! income on the cashbasis incurs an indebtedness on which an interest is paid in advance throu!hdiscount or otherwise* rovided That such interest shall be allowed a adeduction in the #ear the indebtedness is paid* rovided further That if the

indebtedness is pa#able in periodic amorti)ations the amount of interest whichcorresponds to the amount of the principal amorti)ed or paid durin! the #ear shallbe allowed as deduction in such taxable #ear,

%b'If both the taxpa#er and the person to whom the pa#ment has been made or isto be made are persons specified under (ection 10 %B', or

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%c'If the indebtedness is incurred to finance petroleum exploration.

< O'tiona# Tr"at&"nt o Int"r")t E%'"n)". - $t the option of the taxpa#er interestincurred to ac+uire propert# used in trade business or exercise of a profession ma# be

allowed as a deduction or treated as a capital expenditure.

C Ta%")(

1 In *"n"ra#. - Taxes paid or incurred within the taxable #ear in connection with thetaxpa#erEs profession trade or business shall be allowed as deduction except

%a' The income tax provided for under this Title,

%b' Income taxes imposed b# authorit# of an# forei!n countr#, but this deductionshall be allowed in the case of a taxpa#er who does not si!nif# in his return hisdesire to have to an# extent the benefits of para!raph %1' of this subsection

%relatin! to credits for taxes of forei!n countries',

%c' /state and donorEs taxes, and

%d' Taxes assessed a!ainst local benefits of a kind tendin! to increase the valueof the propert# assessed.

rovided That taxes allowed under this (ubsection when refunded or creditedshall be included as part of !ross income in the #ear of receipt to the extent ofthe income tax benefit of said deduction.

: Li&itation) on D"duction). - In the case of a nonresident alien individual en!a!edin trade or business in the hilippines and a resident forei!n corporation the deductionsfor taxes provided in para!raph %4' of this (ubsection %C' shall be allowed onl# if and tothe extent that the# are connected with income from sources within the hilippines.

< Cr"dit Again)t Ta% or Ta%") o For"ign Countri"). - If the taxpa#er si!nifies in hisreturn his desire to have the benefits of this para!raph the tax imposed b# this Title shallbe credited with*

%a' Citi)en and Domestic Corporation. - In the case of a citi)en of the hilippinesand of a domestic corporation the amount of income taxes paid or incurreddurin! the taxable #ear to an# forei!n countr#, and

%b' artnerships and /states. - In the case of an# such individual who is amember of a !eneral professional partnership or a beneficiar# of an estate ortrust his proportionate share of such taxes of the !eneral professionalpartnership or the estate or trust paid or incurred durin! the taxable #ear to aforei!n countr# if his distributive share of the income of such partnership or trustis reported for taxation under this Title.

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$n alien individual and a forei!n corporation shall not be allowed the creditsa!ainst the tax for the taxes of forei!n countries allowed under this para!raph.

= Li&itation) on Cr"dit. - The amount of the credit taken under this (ection shall besub"ect to each of the followin! limitations*

%a' The amount of the credit in respect to the tax paid or incurred to an#countr# shall not exceed the same proportion of the tax a!ainst whichsuch credit is taken which the taxpa#erEs taxable income from sourceswithin such countr# under this Title bears to his entire taxable income forthe same taxable #ear, and

%b' The total amount of the credit shall not exceed the same proportion of the tax a!ainst which such credit is taken which the taxpa#erEs taxableincome from sources without the hilippines taxable under this Titlebears to his entire taxable income for the same taxable #ear.

> Ad6u)t&"nt) on +a0&"nt o Incurr"d Ta%") . - If accrued taxes when paid differfrom the amounts claimed as credits b# the taxpa#er or if an# tax paid is refunded inwhole or in part the taxpa#er shall notif# the Commissioner, who shall redetermine theamount of the tax for the #ear or #ears affected and the amount of tax due upon suchredetermination if an# shall be paid b# the taxpa#er upon notice and demand b# theCommissioner or the amount of tax overpaid if an# shall be credited or refunded to thetaxpa#er. In the case of such a tax incurred but not paid the Commissioner as acondition precedent to the allowance of this credit ma# re+uire the taxpa#er to !ive abond with sureties satisfactor# to and to be approved b# the Commissioner in such sumas he ma# re+uire conditioned upon the pa#ment b# the taxpa#er of an# amount of taxfound due upon an# such redetermination. The bond herein prescribed shall contain suchfurther conditions as the Commissioner ma# re+uire.

@ "ar in 4!ic! Cr"dit Ta"n. - The credits provided for in (ubsection %C'%1' of this(ection ma# at the option of the taxpa#er and irrespective of the method of accountin!emplo#ed in keepin! his books be taken in the #ear which the taxes of the forei!ncountr# were incurred sub"ect however to the conditions prescribed in (ubsection %C'%;'of this (ection. If the taxpa#er elects to take such credits in the #ear in which the taxes ofthe forei!n countr# accrued the credits for all subse+uent #ears shall be taken upon thesame basis and no portion of an# such taxes shall be allowed as a deduction in the sameor an# succeedin! #ear.

7+roo o Cr"dit). - The credits provided in (ubsection %C'%1' hereof shall be allowedonl# if the taxpa#er establishes to the satisfaction of the Commissioner the followin!*

%a' The total amount of income derived from sources without the hilippines,

%b' The amount of income derived from each countr# the tax paid or incurred towhich is claimed as a credit under said para!raph such amount to bedetermined under rules and re!ulations prescribed b# the (ecretar# of Finance,and

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%c' $ll other information necessar# for the verification and computation of suchcredits.

D Lo))") ( 1 In *"n"ra#.- Aosses actuall# sustained durin! the taxable #ear and not compensated

for b# insurance or other forms of indemnit# shall be allowed as deductions*

%a' If incurred in trade profession or business,

%b' f propert# connected with the trade business or profession if the loss arisesfrom fires storms shipwreck or other casualties or from robber# theft orembe))lement.

The (ecretar# of Finance upon recommendation of the Commissioner is hereb#authori)ed to promul!ate rules and re!ulations prescribin! amon! other thin!sthe time and manner b# which the taxpa#er shall submit a declaration of losssustained from casualt# or from robber# theft or embe))lement durin! thetaxable #ear* rovided however That the time limit to be so prescribed in the

rules and re!ulations shall not be less than thirt# %1:' da#s nor more than ninet#%=:' da#s from the date of discover# of the casualt# or robber# theft orembe))lement !ivin! rise to the loss.

%c' 9o loss shall be allowed as a deduction under this (ubsection if at the time ofthe filin! of the return such loss has been claimed as a deduction for estate taxpurposes in the estate tax return.

: +roo o Lo)). - In the case of a nonresident alien individual or forei!n corporationthe losses deductible shall be those actuall# sustained durin! the #ear incurred inbusiness trade or exercise of a profession conducted within the hilippines when suchlosses are not compensated for b# insurance or other forms of indemnit#. The secretar#of Finance upon recommendation of the Commissioner is hereb# authori)ed topromul!ate rules and re!ulations prescribin! amon! other thin!s the time and mannerb# which the taxpa#er shall submit a declaration of loss sustained from casualt# or fromrobber# theft or embe))lement durin! the taxable #ear* rovided That the time to be soprescribed in the rules and re!ulations shall not be less than thirt# %1:' da#s nor morethan ninet# %=:' da#s from the date of discover# of the casualt# or robber# theft orembe))lement !ivin! rise to the loss, and

< N"t O'"rating Lo)) Carr0(O$"r . - The net operatin! loss of the business orenterprise for an# taxable #ear immediatel# precedin! the current taxable #ear which hadnot been previousl# offset as deduction from !ross income shall be carried over as adeduction from !ross income for the next three %1' consecutive taxable #ears immediatel#followin! the #ear of such loss* rovided however That an# net loss incurred in a taxable#ear durin! which the taxpa#er was exempt from income tax shall not be allowed as adeduction under this (ubsection* rovided further That a net operatin! loss carr#-overshall be allowed onl# if there has been no substantial chan!e in the ownership of thebusiness or enterprise in that -

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%i' 9ot less than sevent#-five percent %6;' in nominal value of outstandin!issued shares. if the business is in the name of a corporation is held b#or on behalf of the same persons, or

%ii' 9ot less than sevent#-five percent %6;' of the paid up capital of thecorporation if the business is in the name of a corporation is held b# oron behalf of the same persons.

MFor purposes of this subsection the term Enot operatin! lossE shall mean theexcess of allowable deduction over !ross income of the business in a taxable#ear. rovided That for mines other than oil and !as wells a net operatin! losswithout the benefit of incentives provided for under /xecutive rder 9o. 550 asamended otherwise known as the mnibus Investments Code of 4=>6 incurredin an# of the first ten %4:' #ears of operation ma# be carried over as a deductionfrom taxable income for the next five %;' #ears immediatel# followin! the #ear ofsuch loss. The entire amount of the loss shall be carried over to the first of the

five %;' taxable #ears followin! the loss and an# portion of such loss whichexceeds the taxable income of such first #ear shall be deducted in like mannerform the taxable income of the next remainin! four %&' #ears.

= Ca'ita# Lo))") (

%a' Aimitation. - Aoss from sales or /xchan!es of capital assets shall be allowedonl# to the extent provided in (ection 1=.

%b' (ecurities Becomin! worthless. - If securities as defined in (ection 55 %T'become worthless durin! the taxable #ear and are capital assets the lossresultin! therefrom shall for purposes of this Title be considered as a loss fromthe sale or exchan!e on the last da# of such taxable #ear of capital assets.

> Lo))") Fro& 4a)! Sa#") o Stoc or S"curiti") . - Aosses from Ewash salesE ofstock or securities as provided in (ection 1>.

@ 4ag"ring Lo))"). - Aosses from wa!erin! transactions shall b allowed onl# to theextent of the !ains from such transactions.

7 A,andon&"nt Lo))"). -

%a' In the event a contract area where petroleum operations are undertaken is

partiall# or wholl# abandoned all accumulated exploration and developmentexpenditures pertainin! thereto shall be allowed as a deduction* rovided Thataccumulated expenditures incurred in that area prior to <anuar# 4 4=6= shall beallowed as a deduction onl# from an# income derived from the same contractarea. In all cases notices of abandonment shall be filed with the Commissioner.

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%b' In case a producin! well is subse+uentl# abandoned the unamorti)ed coststhereof as well as the undepreciated costs of e+uipment directl# used therein shall be allowed as a deduction in the #ear such well e+uipment or facilit# isabandoned b# the contractor* rovided That if such abandoned well is reenteredand production is resumed or if such e+uipment or facilit# is restored into

service the said costs shall be included as part of !ross income in the #ear ofresumption or restoration and shall be amorti)ed or depreciated as the case ma#be.

E Bad D",t) ( 1 In *"n"ra#. - Debts due to the taxpa#er actuall# ascertained to be worthless andchar!ed off within the taxable #ear except those not connected with profession trade orbusiness and those sustained in a transaction entered into between parties mentionedunder (ection 10 %B' of this Code* rovided That recover# of bad debts previousl#allowed as deduction in the precedin! #ears shall be included as part of the !ross incomein the #ear of recover# to the extent of the income tax benefit of said deduction.: S"curiti") B"co&ing 4ort!#")). - If securities as defined in (ection 55 %T' are

ascertained to be worthless and char!ed off within the taxable #ear and are capitalassets the loss resultin! therefrom shall in the case of a taxpa#er other than a bank ortrust compan# incorporated under the laws of the hilippines a substantial part of whosebusiness is the receipt of deposits for the purpose of this Title be considered as a lossfrom the sale or exchan!e on the last da# of such taxable #ear of capital assets.

F D"'r"ciation ( 1 *"n"ra# Ru#". - There shall be allowed as a depreciation deduction a reasonableallowance for the exhaustion wear and tear %includin! reasonable allowance forobsolescence' of propert# used in the trade or business. In the case of propert# held b#one person for life with remainder to another person the deduction shall be computed asif the life tenant were the absolute owner of the propert# and shall be allowed to the lifetenant. In the case of propert# held in trust the allowable deduction shall be apportioned

between the income beneficiaries and the trustees in accordance with the pertinentprovisions of the instrument creatin! the trust or in the absence of such provisions onthe basis of the trust income allowable to each.

: U)" o C"rtain ."t!od) and Rat"). - The term Ereasonable allowanceE as used inthe precedin! para!raph shall include but not limited to an allowance computed inaccordance with rules and re!ulations prescribed b# the (ecretar# of Finance uponrecommendation of the Commissioner under an# of the followin! methods*

%a' The strai!ht-line method, %b' Declinin!-balance method usin! a rate not exceedin! twice the rate whichwould have been used had the annual allowance been computed under the

method described in (ubsection %F' %4', %c' The sum-of-the-#ears-di!it method, and %d' an# other method which ma# be prescribed b# the (ecretar# of Finance uponrecommendation of the Commissioner.

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< Agr""&"nt a) to U)"u# Li" on 4!ic! D"'r"ciation Rat" i) Ba)"d . - 2hereunder rules and re!ulations prescribed b# the (ecretar# of Finance uponrecommendation of the Commissioner the taxpa#er and the Commissioner have enteredinto an a!reement in writin! specificall# dealin! with the useful life and rate ofdepreciation of an# propert# the rate so a!reed upon shall be bindin! on both the

taxpa#er and the national 3overnment in the absence of facts and circumstances nottaken into consideration durin! the adoption of such a!reement. The responsibilit# ofestablishin! the existence of such facts and circumstances shall rest with the part#initiatin! the modification. $n# chan!e in the a!reed rate and useful life of the depreciablepropert# as specified in the a!reement shall not be effective for taxable #ears prior to thetaxable #ear in which notice in writin! b# certified mail or re!istered mail is served b# thepart# initiatin! such chan!e to the other part# to the a!reement* rovided however thatwhere the taxpa#er has adopted such useful life and depreciation rate for an#depreciable and claimed the depreciation expenses as deduction from his !ross incomewithout an# written ob"ection on the part of the Commissioner or his dul# authori)edrepresentatives the aforesaid useful life and depreciation rate so adopted b# thetaxpa#er for the aforesaid depreciable asset shall be considered bindin! for purposes ofthis (ubsection.

= D"'r"ciation o +ro'"rti") U)"d in +"tro#"u& O'"ration) . - $n allowance fordepreciation in respect of all properties directl# related to production of petroleum initiall#placed in service in a taxable #ear shall be allowed under the strai!ht-line or declinin!-balance method of depreciation at the option of the service contractor.

@owever if the service contractor initiall# elects the declinin!-balance method it ma# atan# subse+uent date shift to the strai!ht-line method.

The useful life of properties used in or related to production of petroleum shall be ten %4:'#ears of such shorter life as ma# be permitted b# the Commissioner.

roperties not used directl# in the production of petroleum shall be depreciated under the

strai!ht-line method on the basis of an estimated useful life of five %;' #ears.

> D"'r"ciation o +ro'"rti") U)"d in .ining O'"ration) - an allowance fordepreciation in respect of all properties used in minin! operations other than petroleum

operations shall be computed as follows*

%a' $t the normal rate of depreciation if the expected life is ten %4:' #ears or less,or

%b' Depreciated over an# number of #ears between five %;' #ears and theexpected life if the latter is more than ten %4:' #ears and the depreciationthereon allowed as deduction from taxable income* rovided That the contractor

notifies the Commissioner at the be!innin! of the depreciation period whichdepreciation rate allowed b# this (ection will be used.

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@ D"'r"ciation D"ducti,#" ,0 Nonr")id"nt A#i"n) Engag"d in Trad" or Bu)in"))or R")id"nt For"ign Cor'oration). - In the case of a nonresident alien individualen!a!ed in trade or business or resident forei!n corporation a reasonable allowance for

the deterioration of ropert# arisin! out of its use or emplo#ment or its non-use in thebusiness trade or profession shall be permitted onl# when such propert# is located in thehilippines.

* D"'#"tion o Oi# and *a) 4"##) and .in") ( 1 In *"n"ra#. - In the case of oil and !as wells or mines a reasonable allowance fordepletion or amorti)ation computed in accordance with the cost-depletion method shallbe !ranted under rules and re!ulations to be prescribed b# the (ecretar# of finance uponrecommendation of the Commissioner. rovided That when the allowance for depletionshall e+ual the capital invested no further allowance shall be !ranted* rovided furtherThat after production in commercial +uantities has commenced certain intan!ibleexploration and development drillin! costs* %a' shall be deductible in the #ear incurred if

such expenditures are incurred for non-producin! wells and?or mines or %b' shall bedeductible in full in the #ear paid or incurred or at the election of the taxpa#er ma# becapitali)ed and amorti)ed if such expenditures incurred are for producin! wells and?ormines in the same contract area.

EIntan!ible costs in petroleum operationsE refers to an# cost incurred in petroleumoperations which in itself has no salva!e value and which is incidental to and necessar#for the drillin! of wells and preparation of wells for the production of petroleum* rovidedThat said costs shall not pertain to the ac+uisition or improvement of propert# of acharacter sub"ect to the allowance for depreciation except that the allowances fordepreciation on such propert# shall be deductible under this (ubsection.

$n# intan!ible exploration drillin! and development expenses allowed as a deduction in

computin! taxable income durin! the #ear shall not be taken into consideration incomputin! the ad"usted cost basis for the purpose of computin! allowable cost depletion.

: E#"ction to D"duct E%'#oration and D"$"#o'&"nt E%'"nditur") . - In computin!taxable income from minin! operations the taxpa#er ma# at his option deductexploration and development expenditures accumulated as cost or ad"usted basis forcost depletion as of date of prospectin! as well as exploration and developmentexpenditures paid or incurred durin! the taxable #ear* rovided That the amountdeductible for exploration and development expenditures shall not exceed twent#-fivepercent %5;' of the net income from minin! operations computed without the benefit ofan# tax incentives under existin! laws. The actual exploration and developmentexpenditures minus twent#-five percent %5;' of the net income from minin! shall becarried forward to the succeedin! #ears until full# deducted.

The election b# the taxpa#er to deduct the exploration and development expenditures isirrevocable and shall be bindin! in succeedin! taxable #ears.

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E9et income from minin! operationsE as used in this (ubsection shall mean !rossincome from operations less Eallowable deductionsE which are necessar# or related tominin! operations. E$llowable deductionsE shall include minin! millin! and marketin!expenses and depreciation of properties directl# used in the minin! operations. Thispara!raph shall not appl# to expenditures for the ac+uisition or improvement of propert#

of a character which is sub"ect to the allowance for depreciation.

In no case shall this para!raph appl# with respect to amounts paid or incurred for theexploration and development of oil and !as.

The term Eexploration expendituresE means expenditures paid or incurred for the purposeof ascertainin! the existence location extent or +ualit# of an# deposit of ore or othermineral and paid or incurred before the be!innin! of the development sta!e of the mineor deposit.

The term Edevelopment expendituresE means expenditures paid or incurred durin! thedevelopment sta!e of the mine or other natural deposits. The development sta!e of amine or other natural deposit shall be!in at the time when deposits of ore or other

minerals are shown to exist in sufficient commercial +uantit# and +ualit# and shall endupon commencement of actual commercial extraction.

< D"'#"tion o Oi# and *a) 4"##) and .in") D"ducti,#" ,0 a Nonr")id"nt A#i"nindi$idua# or For"ign Cor'oration. - In the case of a nonresident alien individualen!a!ed in trade or business in the hilippines or a resident forei!n corporationallowance for depletion of oil and !as wells or mines under para!raph %4' of this(ubsection shall be authori)ed onl# in respect to oil and !as wells or mines located withinthe hilippines.

H C!arita,#" and Ot!"r Contri,ution) (

1 In *"n"ra#. - Contributions or !ifts actuall# paid or made within the taxable #ear to orfor the use of the 3overnment of the hilippines or an# of its a!encies or an# politicalsubdivision thereof exclusivel# for public purposes or to accredited domestic corporationor associations or!ani)ed and operated exclusivel# for reli!ious charitable scientific#outh and sports development cultural or educational purposes or for the rehabilitation of veterans or to social welfare institutions or to non-!overnment or!ani)ations inaccordance with rules and re!ulations promul!ated b# the (ecretar# of finance uponrecommendation of the Commissioner no part of the net income of which inures to thebenefit of an# private stockholder or individual in an amount not in excess of ten percent%4:' in the case of an individual and five percent %' in the case of a corporation ofthe taxpa#erEs taxable income derived from trade business or profession as computedwithout the benefit of this and the followin! subpara!raphs.

: Contri,ution) D"ducti,#" in Fu## - 9otwithstandin! the provisions of the precedin!subpara!raph donations to the followin! institutions or entities shall be deductible in full,

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%a' Donations to the 3overnment. - Donations to the 3overnment of thehilippines or to an# of its a!encies or political subdivisions includin! full#-owned !overnment corporations exclusivel# to finance to provide for or to beused in undertakin! priorit# activities in education health #outh and sportsdevelopment human settlements science and culture and in economicdevelopment accordin! to a 9ational riorit# lan determined b# the 9ational/conomic and Development $uthorit# %9/D$' In consultation with appropriate!overnment a!encies includin! its re!ional development councils and privatephilantrophic persons and institutions* rovided That an# donation which ismade to the 3overnment or to an# of its a!encies or political subdivisions not inaccordance with the said annual priorit# plan shall be sub"ect to the limitationsprescribed in para!raph %4' of this (ubsection,

%b' Donations to Certain Forei!n Institutions or International r!ani)ations. -donations to forei!n institutions or international or!ani)ations which are full#deductible in pursuance of or in compliance with a!reements treaties orcommitments entered into b# the 3overnment of the hilippines and the forei!ninstitutions or international or!ani)ations or in pursuance of special laws,

%c' Donations to $ccredited 9on!overnment r!ani)ations. - the termEnon!overnment or!ani)ationE means a non profit domestic corporation*

%4' r!ani)ed and operated exclusivel# for scientific researcheducational character-buildin! and #outh and sports developmenthealth social welfare cultural or charitable purposes or a combinationthereof no part of the net income of which inures to the benefit of an#private individual,

%5' 2hich not later than the 4;th da# of the third month after the close ofthe accredited non!overnment or!ani)ations taxable #ear in whichcontributions are received makes utili)ation directl# for the active

conduct of the activities constitutin! the purpose or function for which it isor!ani)ed and operated unless an extended period is !ranted b# the(ecretar# of Finance in accordance with the rules and re!ulations to bepromul!ated upon recommendation of the Commissioner,

%1' The level of administrative expense of which shall on an annualbasis conform with the rules and re!ulations to be prescribed b# the(ecretar# of Finance upon recommendation of the Commissioner but inno case to exceed thirt# percent %1:' of the total expenses, and

%&' The assets of which in the even of dissolution would be distributedto another nonprofit domestic corporation or!ani)ed for similar purposeor purposes or to the state for public purpose or would be distributed b#

a court to another or!ani)ation to be used in such manner as in the "ud!ment of said court shall best accomplish the !eneral purpose forwhich the dissolved or!ani)ation was or!ani)ed.

(ub"ect to such terms and conditions as ma# be prescribed b# the(ecretar# of Finance the term Eutili)ationE means*

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%i' $n# amount in cash or in kind %includin! administrativeexpenses' paid or utili)ed to accomplish one or more purposesfor which the accredited non!overnment or!ani)ation wascreated or or!ani)ed.

%ii' $n# amount paid to ac+uire an asset used %or held for use'

directl# in carr#in! out one or more purposes for which theaccredited non!overnment or!ani)ation was created oror!ani)ed.

$n amount set aside for a specific pro"ect which comes within one ormore purposes of the accredited non!overnment or!ani)ation ma# betreated as a utili)ation but onl# if at the time such amount is set asidethe accredited non!overnment or!ani)ation has established to thesatisfaction of the Commissioner that the amount will be paid for thespecific pro"ect within a period to be prescribed in rules and re!ulationsto be promul!ated b# the (ecretar# of Finance upon recommendation of the Commissioner but not to exceed five %;' #ears and the pro"ect is onewhich can be better accomplished b# settin! aside such amount than b#immediate pa#ment of funds.

< Va#uation - The amount of an# charitable contribution of propert# other than mone#shall be based on the ac+uisition cost of said propert#.

= +roo o D"duction) - Contributions or !ifts shall be allowable as deductions onl# ifverified under the rules and re!ulations prescribed b# the (ecretar# of Finance uponrecommendation of the Commissioner.

I R")"arc! and D"$"#o'&"nt( 1 In *"n"ra# - a taxpa#er ma# treat research or development expenditures which arepaid or incurred b# him durin! the taxable #ear in connection with his trade business or

profession as ordinar# and necessar# expenses which are not char!eable to capitalaccount. The expenditures so treated shall be allowed as deduction durin! the taxable#ear when paid or incurred.

: A&ortization o C"rtain R")"arc! and D"$"#o'&"nt E%'"nditur") . - $t theelection of the taxpa#er and in accordance with the rules and re!ulations to be prescribedb# the (ecretar# of Finance upon recommendation of the Commissioner the followin!research and development expenditures ma# be treated as deferred expenses*

%a' aid or incurred b# the taxpa#er in connection with his trade business orprofession, %b' 9ot treated as expenses under para!raph =4' hereof, and

%c' Char!eable to capital account but not char!eable to propert# of a characterwhich is sub"ect to depreciation or depletion.

In computin! taxable income such deferred expenses shall be allowed asdeduction ratabl# distributed over a period of not less than sixt# %0:' months asma# be elected b# the taxpa#er %be!innin! with the month in which the taxpa#erfirst reali)es benefits from such expenditures'.

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The election provided b# para!raph %5' hereof ma# be made for an# taxable #ear be!innin! after the effectivit# of this Code but onl# if made not later than the timeprescribed b# law for filin! the return for such taxable #ear. The method soelected and the period selected b# the taxpa#er shall be adhered to incomputin! taxable income for the taxable #ear for which the election is made andfor all subse+uent taxable #ears unless with the approval of the Commissioner achan!e to a different method is authori)ed with respect to a part or all of suchexpenditures. The election shall not appl# to an# expenditure paid or incurreddurin! an# taxable #ear for which the taxpa#er makes the election.

< Li&itation) on d"duction - This (ubsection shall not appl# to*

%a' $n# expenditure for the ac+uisition or improvement of land or for theimprovement of propert# to be used in connection with research anddevelopment of a character which is sub"ect to depreciation and depletion, and

%b' $n# expenditure paid or incurred for the purpose of ascertainin! theexistence location extent or +ualit# of an# deposit of ore or other mineral

includin! oil or !as.

+"n)ion Tru)t) - $n emplo#er establishin! or maintainin! a pension trust to provide for thepa#ment of reasonable pensions to his emplo#ees shall be allowed as a deduction %in addition tothe contributions to such trust durin! the taxable #ear to cover the pension liabilit# accruin! durin!the #ear allowed as a deduction under (ubsection %$' %4' of this (ection ' a reasonable amounttransferred or paid into such trust durin! the taxable #ear in excess of such contributions but onl#if such amount %4'has not theretofore been allowed as a deduction and %5' is apportioned ine+ual parts over a period of ten %4:' consecutive #ears be!innin! with the #ear in which thetransfer or pa#ment is made.

8 Additiona# R"uir"&"nt) or D"ducti,i#it0 o C"rtain +a0&"nt) . - $n# amount paid orpa#able which is otherwise deductible from or taken into account in computin! !ross income orfor which depreciation or amorti)ation ma# be allowed under this (ection shall be allowed as adeduction onl# if it is shown that the tax re+uired to be deducted and withheld therefrom has beenpaid to the Bureau of Internal Revenue in accordance with this (ection ;> and >4 of this Code.

L O'tiona# Standard D"duction - In lieu of the deductions allowed under the precedin!(ubsections an individual sub"ect to tax under (ection 5& other than a nonresident alien ma#elect a standard deduction in an amount not exceedin! ten percent %4:' of his !ross income.nless the taxpa#er si!nifies in his return his intention to elect the optional standard deductionhe shall be considered as havin! availed himself of the deductions allowed in the precedin!(ubsections. (uch election when made in the return shall be irrevocable for the taxable #ear for

which the return is made* rovided That an individual who is entitled to and claimed for theoptional standard deduction shall not be re+uired to submit with his tax return such financialstatements otherwise re+uired under this Code* rovided further That except when theCommissioner otherwise permits the said individual shall keep such records pertainin! to his!ross income durin! the taxable #ear as ma# be re+uired b# the rules and re!ulationspromul!ated b# the (ecretar# of Finance upon recommendation of the Commissioner.

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. +r"&iu& +a0&"nt) on H"a#t! andGor Ho)'ita#ization In)uranc" o an Indi$idua#Ta%'a0"r . - the amount of premiums not to exceed Two thousand four hundred pesos %5&::'per famil# or Two hundred pesos %5::' a month paid durin! the taxable #ear for health and?orhospitali)ation insurance taken b# the taxpa#er for himself includin! his famil# shall be allowedas a deduction from his !ross income* rovided That said famil# has a !ross income of not morethan Two hundred fift# thousand pesos %5;::::' for the taxable #ear* rovided finall# That inthe case of married taxpa#ers onl# the spouse claimin! the additional exemption for dependentsshall be entitled to this deduction.

9otwithstandin! the provision of the precedin! (ubsections The (ecretar# of Finance uponrecommendation of the Commissioner after a public hearin! shall have been held for thispurpose ma# prescribe b# rules and re!ulations limitations or ceilin!s for an# of the itemi)eddeductions under (ubsections %$' to %<' of this (ection* rovided That for purposes ofdeterminin! such ceilin!s or limitations the (ecretar# of Finance shall consider the followin!factors* %4' ade+uac# of the prescribed limits on the actual expenditure re+uirements of eachparticular industr#, and %5'effects of inflation on expenditure levels* rovided further That noceilin!s shall further be imposed on items of expense alread# sub"ect to ceilin!s under presentlaw.

SEC <> A##o-anc" o +"r)ona# E%"&'tion or Indi$idua# Ta%'a0"r (

A In *"n"ra# - For purposes of determinin! the tax provided in (ection 5& %$' of this Title thereshall be allowed a basic personal exemption as follows*

For sin!le individual or married individual "udiciall# decreed as le!all# separated with no +ualified dependents 5::::

For @ead of Famil# 5;::: For each married individual 15:::

In the case of married individuals where onl# one of the spouses is derivin! !ross income onl#such spouse shall be allowed the personal exemption.

For purposes of this para!raph the term Ehead of famil#E means an unmarried or le!all#separated man or woman with one or both parents or with one or more brothers or sisters orwith one or more le!itimate reco!ni)ed natural or le!all# adopted children livin! with anddependent upon him for their chief support where such brothers or sisters or children are notmore than twent#-one %54' #ears of a!e unmarried and not !ainfull# emplo#ed or where suchchildren brothers or sisters re!ardless of a!e are incapable of self-support because of mental orph#sical defect.

B Additiona# E%"&'tion or D"'"nd"nt) - There shall be allowed an additional exemption of/i!ht thousand pesos %>:::' for each dependent not exceedin! four %&'.

The additional exemption for dependent shall be claimed b# onl# one of the spouses in the caseof married individuals.

In the case of le!all# separated spouses additional exemptions ma# be claimed onl# b# thespouse who has custod# of the child or children* rovided That the total amount of additionalexemptions that ma# be claimed b# both shall not exceed the maximum additional exemptionsherein allowed.

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For purposes of this (ubsection a EdependentE means a le!itimate ille!itimate or le!all# adoptedchild chiefl# dependent upon and livin! with the taxpa#er if such dependent is not more thantwent#-one %54' #ears of a!e unmarried and not !ainfull# emplo#ed or if such dependentre!ardless of a!e is incapable of self-support because of mental or ph#sical defect.

C C!ang" o Statu) - If the taxpa#er marries or should have additional dependent%s' asdefined above durin! the taxable #ear the taxpa#er ma# claim the correspondin! additionalexemption as the case ma# be in full for such #ear.

If the taxpa#er dies durin! the taxable #ear his estate ma# still claim the personal and additionalexemptions for himself and his dependent%s' as if he died at the close of such #ear.

If the spouse or an# of the dependents dies or if an# of such dependents marries becomestwent#-one %54' #ears old or becomes !ainfull# emplo#ed durin! the taxable #ear the taxpa#erma# still claim the same exemptions as if the spouse or an# of the dependents died or as if suchdependents married became twent#-one %54' #ears old or became !ainfull# emplo#ed at theclose of such #ear.

D +"r)ona# E%"&'tion A##o-a,#" to Nonr")id"nt A#i"n Indi$idua# - $ nonresident alienindividual en!a!ed in trade business or in the exercise of a profession in the hilippines shall beentitled to a personal exemption in the amount e+ual to the exemptions allowed in the income taxlaw in the countr# of which he is a sub"ect - or citi)en to citi)ens of the hilippines not residin! insuch countr# not to exceed the amount fixed in this (ection as exemption for citi)ens or residentof the hilippines* rovided That said nonresident alien should file a true and accurate return ofthe total income received b# him from all sources in the hilippines as re+uired b# this Title.

SEC <@ It"&) not D"ducti,#"(

A *"n"ra# Ru#". - In computin! net income no deduction shall in an# case be allowed in

respect to -

%4' ersonal livin! or famil# expenses,

%5' $n# amount paid out for new buildin!s or for permanent improvements orbetterments made to increase the value of an# propert# or estate,

This (ubsection shall not appl# to intan!ible drillin! and development costs incurred inpetroleum operations which are deductible under (ubsection %3' %4' of (ection 1& of thisCode.

%1' $n# amount expended in restorin! propert# or in makin! !ood the exhaustion thereof

for which an allowance is or has been made, or

%&' remiums paid on an# life insurance polic# coverin! the life of an# officer oremplo#ee or of an# person financiall# interested in an# trade or business carried on b#the taxpa#er individual or corporate when the taxpa#er is directl# or indirectl# abeneficiar# under such polic#.

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B Lo))") ro& Sa#") or E%c!ang") o +ro'"rt0 - In computin! net income no deductionsshall in an# case be allowed in respect of losses from sales or exchan!es of propert# directl# orindirectl# -

%4' Between members of a famil#. For purposes of this para!raph the famil# of anindividual shall include onl# his brothers and sisters %whether b# the whole or half-blood'spouse ancestors and lineal descendants, or

%5' /xcept in the case of distributions in li+uidation between an individual andcorporation more than fift# percent %;:' in value of the outstandin! stock of which isowned directl# or indirectl# b# or for such individual, or

%1' /xcept in the case of distributions in li+uidation between two corporations more thanfift# percent %;:' in value of the outstandin! stock of which is owned directl# orindirectl# b# or for the same individual if either one of such corporations with respect tothe taxable #ear of the corporation precedin! the date of the sale of exchan!e was underthe law applicable to such taxable #ear a personal holdin! compan# or a forei!npersonal holdin! compan#,

%&' Between the !rantor and a fiduciar# of an# trust, or

%;' Between the fiduciar# of and the fiduciar# of a trust and the fiduciar# of another trust if the same person is a !rantor with respect to each trust, or

%0' Between a fiduciar# of a trust and beneficiar# of such trust.

SEC <7 S'"cia# +ro$i)ion) R"garding Inco&" and D"duction) o In)uranc" Co&'ani")34!"t!"r Do&")tic or For"ign (

A S'"cia# D"duction A##o-"d to In)uranc" Co&'ani") - In the case of insurance

companies whether domestic or forei!n doin! business in the hilippines the net additions ifan# re+uired b# law to be made within the #ear to reserve funds and the sums other thandividends paid within the #ear on polic# and annuit# contracts ma# be deducted from their !rossincome* rovided however That the released reserve be treated as income for the #ear ofrelease.

B .utua# In)uranc" Co&'ani"). - In the case of mutual fire and mutual emplo#ersE liabilit# andmutual workmenEs compensation and mutual casualt# insurance companies re+uirin! theirmembers to make premium deposits to provide for losses and expenses said companies shallnot return as income an# portion of the premium deposits returned to their polic#holders but shallreturn as taxable income all income received b# them from all other sources plus such portion ofthe premium deposits as are retained b# the companies for purposes other than the pa#ment oflosses and expenses and reinsurance reserves.

C .utua# .arin" In)uranc" Co&'ani"). - utual marine insurance companies shall include intheir return of !ross income !ross premiums collected and received b# them less amounts paidto polic#holders on account of premiums previousl# paid b# them and interest paid upon thoseamounts between the ascertainment and pa#ment thereof.

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DA))"))&"nt In)uranc" Co&'ani").- $ssessment insurance companies whether domesticor forei!n ma# deduct from their !ross income the actual deposit of sums with the officers of the3overnment of the hilippines pursuant to law as additions to !uarantee or reserve funds.

SEC < Lo))") ro& 4a)! Sa#") o Stoc or S"curiti") (

%$' In the case of an# loss claimed to have been sustained from an# sale or other disposition ofshares of stock or securities where it appears that within a period be!innin! thirt# %1:' da#sbefore the date of such sale or disposition and endin! thirt# %1:' da#s after such date thetaxpa#er has ac+uired %b# purchase or b# exchan!e upon which the entire amount of !ain or losswas reco!ni)ed b# law' or has entered into a contact or option so to ac+uire substantiall#identical stock or securities then no deduction for the loss shall be allowed under (ection 1&unless the claim is made b# a dealer in stock or securities and with respect to a transaction madein the ordinar# course of the business of such dealer.

%B' If the amount of stock or securities ac+uired %or covered b# the contract or option to ac+uire'is less than the amount of stock or securities sold or otherwise disposed of then the particularshares of stock or securities the loss form the sale or other disposition of which is not deductibleshall be determined under rules and re!ulations prescribed b# the (ecretar# of Finance uponrecommendation of the Commissioner.

%C' If the amount of stock or securities ac+uired %or covered b# the contract or option to ac+uirewhich' resulted in the non-deductibilit# of the loss shall be determined under rules andre!ulations prescribed b# the (ecretar# of Finance upon recommendation of the Commissioner.

SEC <9 Ca'ita# *ain) and Lo))") (

A D"inition) - $s used in this Title -

1 Ca'ita# A))"t). - the term Ecapital assetsE means propert# held b# the taxpa#er%whether or not connected with his trade or business' but does not include stock in tradeof the taxpa#er or other propert# of a kind which would properl# be included in theinventor# of the taxpa#er if on hand at the close of the taxable #ear or propert# held b#the taxpa#er primaril# for sale to customers in the ordinar# course of his trade orbusiness or propert# used in the trade or business of a character which is sub"ect to theallowance for depreciation provided in (ubsection %F' of (ection 1&, or real propert# usedin trade or business of the taxpa#er.

: N"t Ca'ita# *ain. - The term Enet capital !ainE means the excess of the !ains fromsales or exchan!es of capital assets over the losses from such sales or exchan!es.

< N"t Ca'ita# Lo)). - The term Enet capital lossE means the excess of the losses fromsales or exchan!es of capital assets over the !ains from such sales or exchan!es.

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B +"rc"ntag" Ta"n into Account. - In the case of a taxpa#er other than a corporation onl#the followin! percenta!es of the !ain or loss reco!ni)ed upon the sale or exchan!e of a capitalasset shall be taken into account in computin! net capital !ain net capital loss and net income*

%4'ne hundred percent %4::' if the capital asset has been held for not more thantwelve %45' months, and %5'Fift# percent %;:' if the capital asset has been held for more than twelve %45'months,

C Li&itation on Ca'ita# Lo))"). - Aosses from sales or exchan!es of capital assets shall beallowed onl# to the extent of the !ains from such sales or exchan!es. If a bank or trust compan#incorporated under the laws of the hilippines a substantial part of whose business is the receiptof deposits sells an# bond debenture note or certificate or other evidence of indebtednessissued b# an# corporation %includin! one issued b# a !overnment or political subdivision thereof'with interest coupons or in re!istered form an# loss resultin! from such sale shall not be sub"ectto the fore!oin! limitation and shall not be included in determinin! the applicabilit# of suchlimitation to other losses.

D N"t Ca'ita# Lo)) Carr0(o$"r . - If an# taxpa#er other than a corporation sustains in an#taxable #ear a net capital loss such loss %in an amount not in excess of the net income for such#ear' shall be treated in the succeedin! taxable #ear as a loss from the sale or exchan!e of acapital asset held for not more than twelve %45' months.

E R"tir"&"nt o Bond)3 Etc. - For purposes of this Title amounts received b# the holder uponthe retirement of bonds debentures notes or certificates or other evidences of indebtednessissued b# an# corporation %includin! those issued b# a !overnment or political subdivisionthereof' with interest coupons or in re!istered form shall be considered as amounts received inexchan!e therefor.

F *ain) or #o))") ro& S!ort Sa#")3 Etc. - For purposes of this Title -

%4' 3ains or losses from short sales of propert# shall be considered as !ains or lossesfrom sales or exchan!es of capital assets, and %5' 3ains or losses attributable to the failure to exercise privile!es or options to bu# orsell propert# shall be considered as capital !ains or losses.

SEC = D"t"r&ination o A&ount and R"cognition o *ain or Lo)) (

A Co&'utation o *ain or Lo)). - The !ain from the sale or other disposition of propert# shallbe the excess of the amount reali)ed therefrom over the basis or ad"usted basis for determinin!!ain and the loss shall be the excess of the basis or ad"usted basis for determinin! loss over theamount reali)ed. The amount reali)ed from the sale or other disposition of propert# shall be thesum of mone# received plus the fair market value of the propert# %other than mone#' received,

B Ba)i) or D"t"r&ining *ain or Lo)) ro& Sa#" or Di)'o)ition o +ro'"rt0 . - The basis ofpropert# shall be -

%4' The cost thereof in the case of propert# ac+uired on or after arch 4 4=41 if suchpropert# was ac+uired b# purchase, or

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%5' The fair market price or value as of the date of ac+uisition if the same was ac+uiredb# inheritance, or

%1' If the propert# was ac+uired b# !ift the basis shall be the same as if it would be in thehands of the donor or the last precedin! owner b# whom it was not ac+uired b# !ift

except that if such basis is !reater than the fair market value of the propert# at the time of the !ift then for the purpose of determinin! loss the basis shall be such fair marketvalue, or

%&' If the propert# was ac+uired for less than an ade+uate consideration in mone# ormone#Es worth the basis of such propert# is the amount paid b# the transferee for thepropert#, or

%;' The basis as defined in para!raph %C'%;' of this (ection if the propert# was ac+uiredin a transaction where !ain or loss is not reco!ni)ed under para!raph %C'%5' of this(ection.

C E%c!ang" o +ro'"rt0 (

1 *"n"ra# Ru#". - /xcept as herein provided upon the sale or exchan!e or propert#the entire amount of the !ain or loss as the case ma# be shall be reco!ni)ed.

: E%c"'tion. - 9o !ain or loss shall be reco!ni)ed if in pursuance of a plan of mer!eror consolidation -

%a' $ corporation which is a part# to a mer!er or consolidation exchan!espropert# solel# for stock in a corporation which is a part# to the mer!er orconsolidation, or

%b' $ shareholder exchan!es stock in a corporation which is a part# to themer!er or consolidation solel# for the stock of another corporation also a part# to

the mer!er or consolidation, or

%c' $ securit# holder of a corporation which is a part# to the mer!er orconsolidation exchan!es his securities in such corporation solel# for stock orsecurities in such corporation a part# to the mer!er or consolidation.

9o !ain or loss shall also be reco!ni)ed if propert# is transferred to a corporationb# a person in exchan!e for stock or unit of participation in such a corporation ofwhich as a result of such exchan!e said person alone or to!ether with othersnot exceedin! four %&' persons !ains control of said corporation* rovided Thatstocks issued for services shall not be considered as issued in return for propert#.

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< E%c!ang" Not So#"#0 in 8ind. -

%a' If in connection with an exchan!e described in the above exceptions anindividual a shareholder a securit# holder or a corporation receives not onl#stock or securities permitted to be received without the reco!nition of !ain orloss but also mone# and?or propert# the !ain if an# but not the loss shall bereco!ni)ed but in an amount not in excess of the sum of the mone# and fairmarket value of such other propert# received* rovided That as to theshareholder if the mone# and?or other propert# received has the effect of adistribution of a taxable dividend there shall be taxed as dividend to theshareholder an amount of the !ain reco!ni)ed not in excess of his proportionateshare of the undistributed earnin!s and profits of the corporation, the remainderif an# of the !ain reco!ni)ed shall be treated as a capital !ain.

%b' If in connection with the exchan!e described in the above exceptions thetransferor corporation receives not onl# stock permitted to be received withoutthe reco!nition of !ain or loss but also mone# and?or other propert# then %i' if thecorporation receivin! such mone# and?or other propert# distributes it inpursuance of the plan of mer!er or consolidation no !ain to the corporation shallbe reco!ni)ed from the exchan!e but %ii' if the corporation receivin! such otherpropert# and?or mone# does not distribute it in pursuance of the plan of mer!er or consolidation the !ain if an# but not the loss to the corporation shall bereco!ni)ed but in an amount not in excess of the sum of such mone# and the fair market value of such other propert# so received which is not distributed.

= A))u&'tion o Lia,i#it0 (

%a' If the taxpa#er in connection with the exchan!es described in the fore!oin!exceptions receives stock or securities which would be permitted to be receivedwithout the reco!nition of the !ain if it were the sole consideration and as part ofthe consideration another part# to the exchan!e assumes a liabilit# of thetaxpa#er or ac+uires from the taxpa#er propert# sub"ect to a liabilit# then suchassumption or ac+uisition shall not be treated as mone# and?or other propert#and shall not prevent the exchan!e from bein! within the exceptions.

%b' If the amount of the liabilities assumed plus the amount of the liabilities towhich the propert# is sub"ect exceed the total of the ad"usted basis of thepropert# transferred pursuant to such exchan!e then such excess shall beconsidered as a !ain from the sale or exchan!e of a capital asset or of propert#which is not a capital asset as the case ma# be.

> Ba)i) (

%a' The basis of the stock or securities received b# the transferor upon theexchan!e specified in the above exception shall be the same as the basis of thepropert# stock or securities exchan!ed decreased b# %4' the mone# receivedand %5' the fair market value of the other propert# received and increased b# %a'the amount treated as dividend of the shareholder and %b' the amount of an# !ain

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that was reco!ni)ed on the exchan!e* rovided That the propert# received asEbootE shall have as basis its fair market value* rovided further That if as part ofthe consideration to the transferor the transferee of propert# assumes a liabilit#of the transferor or ac+uires form the latter propert# sub"ect to a liabilit# suchassumption or ac+uisition %in the amount of the liabilit#' shall for purposes of thispara!raph be treated as mone# received b# the transferor on the exchan!e*rovided finall# That if the transferor receives several kinds of stock orsecurities the Commissioner is hereb# authori)ed to allocate the basis amon!the several classes of stocks or securities.

%b' The basis of the propert# transferred in the hands of the transferee shall bethe same as it would be in the hands of the transferor increased b# the amount of the !ain reco!ni)ed to the transferor on the transfer.

@ D"inition) (

%a' The term EsecuritiesE means bonds and debentures but not EnotesM of whatever

class or duration.

%b' The term Emer!erE or EconsolidationE when used in this (ection shall beunderstood to mean* %i' the ordinar# mer!er or consolidation or %ii' theac+uisition b# one corporation of all or substantiall# all the properties of anothercorporation solel# for stock* rovided That for a transaction to be re!arded as amer!er or consolidation within the purview of this (ection it must be undertakenfor a bona fide business purpose and not solel# for the purpose of escapin! theburden of taxation* rovided further That in determinin! whether a bona fidebusiness purpose exists each and ever# step of the transaction shall beconsidered and the whole transaction or series of transaction shall be treated asa sin!le unit* rovided finall# That in determinin! whether the propert#transferred constitutes a substantial portion of the propert# of the transferor the

term Epropert#E shall be taken to include the cash assets of the transferor.

%c' The1term EcontrolE when used in this (ection shall mean ownership of stocksin a corporation possessin! at least fift#-one percent %;4' of the total votin!power of all classes of stocks entitled to vote.

%d' The (ecretar# of Finance upon recommendation of the Commissioner ishereb# authori)ed to issue rules and re!ulations for the purpose Esubstantiall# allEand for the proper implementation of this (ection.

SEC =1 In$"ntori") - whenever in the "ud!ment of the Commissioner the use of inventories isnecessar# in order to determine clearl# the income of an# taxpa#er inventories shall be taken b#such taxpa#er upon such basis as the (ecretar# of Finance upon recommendation of theCommissioner ma# b# rules and re!ulations prescribe as conformin! as nearl# as ma# be to thebest accountin! practice in the trade or business and as most clearl# reflectin! the income.

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If a taxpa#er after havin! complied with the terms and a conditions prescribed b# theCommissioner uses a particular method of valuin! its inventor# for an# taxable #ear then suchmethod shall be used in all subse+uent taxable #ears unless*

%i' with the approval of the Commissioner a chan!e to a different method is authori)ed,

or

%ii' the Commissioner finds that the nature o the stock on hand %e.!. its scarcit# li+uidit#marketabilit# and price movements' is such that inventor# !ains should be consideredreali)ed for tax purposes and therefore it is necessar# to modif# the valuation methodfor purposes of ascertainin! the income profits or loss in a move realistic manner*rovided however That the Commissioner shall not exercise his authorit# to re+uire achan!e in inventor# method more often than once ever# three %1 #ears* rovided furtherThat an# chan!e in an inventor# valuation method must be sub"ect to approval b# the(ecretar# of Finance.

SEC =: Inco&" ro& Sourc") 4it!in t!" +!i#i''in")(

A *ro)) Inco&" Fro& Sourc") 4it!in t!" +!i#i''in") . - The followin! items of !ross incomeshall be treated as !ross income from sources within the hilippines*

1 Int"r")t). - Interests derived from sources within the hilippines and interests onbonds notes or other interest-bearin! obli!ation of residents corporate or otherwise,

: Di$id"nd). - The amount received as dividends*

%a' from a domestic corporation, and

%b' from a forei!n corporation unless less than fift# percent %;:' of the !ross

income of such forei!n corporation for the three-#ear period endin! with the closeof its taxable #ear precedin! the declaration of such dividends or for such part ofsuch period as the corporation has been in existence' was derived from sourceswithin the hilippines as determined under the provisions of this (ection, but onl#in an amount which bears the same ration to such dividends as the !ross incomeof the corporation for such period derived from sources within the hilippines

bears to its !ross income from all sources.

< S"r$ic") - Compensation for labor or personal services performed in the hilippines,

= R"nta#) and ro0a#ti"). - Rentals and ro#alties from propert# located in the

hilippines or from an# interest in such propert# includin! rentals or ro#alties for -

%a' The use of or the ri!ht or privile!e to use in the hilippines an# cop#ri!htpatent desi!n or model plan secret formula or process !oodwill trademarktrade brand or other like propert# or ri!ht,

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%b' The use of or the ri!ht to use in the hilippines an# industrial commercial orscientific e+uipment,

%c' The suppl# of scientific technical industrial or commercial knowled!e orinformation,

%d' The suppl# of an# assistance that is ancillar# and subsidiar# to and isfurnished as a means of enablin! the application or en"o#ment of an# suchpropert# or ri!ht as is mentioned in para!raph %a' an# such e+uipment as ismentioned in para!raph %b' or an# such knowled!e or information as ismentioned in para!raph %c',

%e' The suppl# of services b# a nonresident person or his emplo#ee in connectionwith the use of propert# or ri!hts belon!in! to or the installation or operation ofan# brand machiner# or other apparatus purchased from such nonresidentperson,

%f' Technical advice assistance or services rendered in connection with technical

mana!ement or administration of an# scientific industrial or commercialundertakin! venture pro"ect or scheme, and

%!' The use of or the ri!ht to use*

%i' otion picture films, %ii' Films or video tapes for use in connection with television, and %iii' Tapes for use in connection with radio broadcastin!.

> Sa#" o R"a# +ro'"rt0 - !ains profits and income from the sale of real propert#located in the hilippines, and

@ Sa#" o +"r)ona# +ro'"rt0 - !ains, profits and income from the sale of personalpropert# as determined in (ubsection %/' of this (ection.

B Ta%a,#" Inco&" Fro& Sourc") 4it!in t!" +!i#i''in") ( 1 *"n"ra# Ru#". - From the items of !ross income specified in (ubsection %$' of this(ection there shall be deducted the expenses losses and other deductions properl#allocated thereto and a ratable part of expenses interests losses and other deductionseffectivel# connected with the business or trade conducted exclusivel# within thehilippines which cannot definitel# be allocated to some items or class of !ross income*rovided That such items of deductions shall be allowed onl# if full# substantiated b# allthe information necessar# for its calculation. The remainder if an# shall be treated in fullas taxable income from sources within the hilippines.

: E%c"'tion. - 9o deductions for interest paid or incurred abroad shall be allowed fromthe item of !ross income specified in subsection %$' unless indebtedness was actuall#incurred to provide funds for use in connection with the conduct or operation of trade orbusiness in the hilippines.

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C *ro)) Inco&" Fro& Sourc") 4it!out t!" +!i#i''in") . - The followin! items of !rossincome shall be treated as income from sources without the hilippines*

%4' Interests other than those derived from sources within the hilippines as provided in

para!raph %4' of (ubsection %$' of this (ection,

%5' Dividends other than those derived from sources within the hilippines as provided inpara!raph %5' of (ubsection %$' of this (ection,

%1' Compensation for labor or personal services performed without the hilippines,

%&' Rentals or ro#alties from propert# located without the hilippines or from an# interestin such propert# includin! rentals or ro#alties for the use of or for the privile!e of usin!without the hilippines patents cop#ri!hts secret processes and formulas !oodwilltrademarks trade brands franchises and other like properties, and

%;' 3ains profits and income from the sale of real propert# located without thehilippines.

D Ta%a,#" Inco&" Fro& Sourc") 4it!out t!" +!i#i''in"). - From the items of !ross incomespecified in (ubsection %C' of this (ection there shall be deducted the expenses losses andother deductions properl# apportioned or allocated thereto and a ratable part of an# expense lossor other deduction which cannot definitel# be allocated to some items or classes of !ross income.The remainder if an# shall be treated in full as taxable income from sources without thehilippines.

E Inco&" Fro& Sourc") +art#0 4it!in and +art#0 4it!out t!" +!i#i''in") .- Items of !ross

income expenses losses and deductions other than those specified in (ubsections %$' and %C'of this (ection shall be allocated or apportioned to sources within or without the hilippinesunder the rules and re!ulations prescribed b# the (ecretar# of Finance upon recommendation ofthe Commissioner. 2here items of !ross income are separatel# allocated to sources within thehilippines there shall be deducted %for the purpose of computin! the taxable income therefrom'the expenses losses and other deductions properl# apportioned or allocated thereto and aratable part of other expenses losses or other deductions which cannot definitel# be allocated tosome items or classes of !ross income. The remainder if an# shall be included in full as taxableincome from sources within the hilippines. In the case of !ross income derived from sourcespartl# within and partl# without the hilippines the taxable income ma# first be computed b#deductin! the expenses losses or other deductions apportioned or allocated thereto and aratable part of an# expense loss or other deduction which cannot definitel# be allocated to someitems or classes of !ross income, and the portion of such taxable income attributable to sources

within the hilippines ma# be determined b# processes or formulas of !eneral apportionmentprescribed b# the (ecretar# of Finance. 3ains profits and income from the sale of personalpropert# produced %in whole or in part' b# the taxpa#er within and sold without the hilippines orproduced %in whole or in part' b# the taxpa#er without and sold within the hilippines shall betreated as derived partl# from sources within and partl# from sources without the hilippines.

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3ains profits and income derived from the purchase of personal propert# within and its salewithout the hilippines or from the purchase of personal propert# without and its sale within thehilippines shall be treated as derived entirel# form sources within the countr# in which sold*rovided however That !ain from the sale of shares of stock in a domestic corporation shall betreated as derived entirel# form sources within the hilippines re!ardless of where the said

shares are sold. The transfer b# a nonresident alien or a forei!n corporation to an#one of an#share of stock issued b# a domestic corporation shall not be effected or made in its book unless*%4' the transferor has filed with the Commissioner a bond conditioned upon the future pa#ment b#him of an# income tax that ma# be due on the !ains derived from such transfer or %5' theCommissioner has certified that the taxes if an# imposed in this Title and due on the !ainreali)ed from such sale or transfer have been paid. It shall be the dut# of the transferor and thecorporation the shares of which are sold or transferred to advise the transferee of thisre+uirement.

F D"inition). - $s used in this (ection the words EsaleE or EsoldE include Eexchan!eE orEexchan!edE, and the word EproducedE includes EcreatedE EfabricatedE EmanufacturedE EextractedEEprocessedE EcuredE or Ea!ed.E


CHA+TER VIII ( ACCOUNTIN* +ERIODS AND .ETHODS OF ACCOUNTIN*

SEC =< *"n"ra# Ru#". - The taxable income shall be computed upon the basis of the taxpa#erEsannual accountin! period %fiscal #ear or calendar #ear as the case ma# be' in accordance withthe method of accountin! re!ularl# emplo#ed in keepin! the books of such taxpa#er but if nosuch method of accountin! has been so emplo#ed or if the method emplo#ed does not clearl#reflect the income the computation shall be made in accordance with such method as in the

opinion of the Commissioner clearl# reflects the income. If the taxpa#erEs annual accountin!period is other than a fiscal #ear as defined in (ection 55%G' or if the taxpa#er has no annualaccountin! period or does not keep books or if the taxpa#er is an individual the taxable incomeshall be computed on the basis of the calendar #ear.

SEC == +"riod in -!ic! It"&) o *ro)) Inco&" Inc#ud"d . - The amount of all items of !rossincome shall be included in the !ross income for the taxable #ear in which received b# thetaxpa#er unless under methods of accountin! permitted under (ection &1 an# such amountsare to be properl# accounted for as of a different period. In the case of the death of a taxpa#erthere shall be included in computin! taxable income for the taxable period in which falls the dateof his death amounts accrued up to the date of his death if not otherwise properl# includible in

respect of such period or a prior period.

,ac?to?'ag"?1!

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SEC => +"riod or -!ic! D"duction) and Cr"dit) Ta"n. - The deductions provided for in thisTitle shall be taken for the taxable #ear in which Epaid or accruedE or Epaid or incurredE dependentupon the method of accountin! the basis of which the net income is computed unless in order toclearl# reflect the income the deductions should be taken as of a different period. In the case of the death of a taxpa#er there shall be allowed as deductions for the taxable period in which falls

the date of his death amounts accrued up to the date of his death if not otherwise properl#allowable in respect of such period or a prior period.

SEC =@ C!ang" o Accounting +"riod. If a taxpa#er other than an individual chan!es hisaccountin! period from fiscal #ear to calendar #ear from calendar #ear to fiscal #ear or from onefiscal #ear to another the net income shall with the approval of the Commissioner be computedon the basis of such new accountin! period sub"ect to the provisions of (ection &6.

SEC =7 Fina# or Ad6u)t&"nt R"turn) or a +"riod o L")) t!an T-"#$" 1: .ont!)

A R"turn) or S!ort +"riod R")u#ting ro& C!ang" o Accounting +"riod. - If a taxpa#erother than an individual with the approval of the Commissioner chan!es the basis of computin!net income from fiscal #ear to calendar #ear a separate final or ad"ustment return shall be madefor the period between the close of the last fiscal #ear for which return was made and thefollowin! December 14. If the chan!e is from calendar #ear to fiscal #ear a separate final orad"ustment return shall be made for the period between the close of the last calendar #ear forwhich return was made and the date desi!nated as the close of the fiscal #ear. If the chan!e isfrom one fiscal #ear to another fiscal #ear a separate final or ad"ustment return shall be made forthe period between the close of the former fiscal #ear and the date desi!nated as the close of thenew fiscal #ear.

B Inco&" Co&'ut"d on Ba)i) o S!ort +"riod. - 2here a separate final or ad"ustment returnis made under (ubsection %$' on account of a chan!e in the accountin! period and in all othercases where a separate final or ad"ustment return is re+uired or permitted b# rules andre!ulations prescribed b# the (ecretar# of Finance upon recommendation of the Commissionerto be made for a fractional part of a #ear then the income shall be computed on the basis of theperiod for which separate final or ad"ustment return is made.

SEC = Accounting or Long(t"r& Contract). - Income from lon!-term contracts shall bereported for tax purposes in the manner as provided in this (ection. $s used herein the termElon!-term contractsE means buildin! installation or construction contracts coverin! a period inexcess of one %4' #ear. ersons whose !ross income is derived in whole or in part from such

contracts shall report such income upon the basis of percenta!e of completion. The return shouldbe accompanied b# a return certificate of architects or en!ineers showin! the percenta!e ofcompletion durin! the taxable #ear of the entire work performed under contract. There should bededucted from such !ross income all expenditures made durin! the taxable #ear on account ofthe contract account bein! taken of the material and supplies on hand at the be!innin! and endof the taxable period for use in connection with the work under the contract but not #et so applied.If upon completion of a contract it is found that the taxable net income arisin! thereunder has notbeen clearl# reflected for an# #ear or #ears the Commissioner ma# permit or re+uire an amendedreturn.

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SEC =9 In)ta##&"nt Ba)i). N

A Sa#") o D"a#"r) in +"r)ona# +ro'"rt0. - nder rules and re!ulations prescribed b# the(ecretar# of Finance upon recommendation of the Commissioner a person who re!ularl# sells

or otherwise disposes of personal propert# on the installment plan ma# return as incometherefrom in an# taxable #ear that proportion of the installment pa#ments actuall# received in that#ear which the !ross profit reali)ed or to be reali)ed when pa#ment is completed bears to thetotal contract price.

B Sa#") o R"a#t0 and Ca)ua# Sa#") o +"r)ona#it0. - In the case %4' of a casual sale or othercasual disposition of personal propert# %other than propert# of a kind which would properl# beincluded in the inventor# of the taxpa#er if on hand at the close of the taxable #ear' for a priceexceedin! ne thousand pesos %4:::' or %5' of a sale or other disposition of real propert# if ineither case the initial pa#ments do not exceed twent#-five percent %5;' of the sellin! price theincome ma# under the rules and re!ulations prescribed b# the (ecretar# of Finance uponrecommendation of the Commissioner be returned on the basis and in the manner aboveprescribed in this (ection. $s used in this (ection the term Einitial pa#mentsE means the pa#ments

received in cash or propert# other than evidences of indebtedness of the purchaser durin! thetaxable period in which the sale or other disposition is made.

C Sa#") o R"a# +ro'"rt0 Con)id"r"d a) Ca'ita# A))"t ,0 Indi$idua#) . - $n individual whosells or disposes of real propert# considered as capital asset and is otherwise +ualified to reportthe !ain therefrom under (ubsection %B' ma# pa# the capital !ains tax in installments under rulesand re!ulations to be promul!ated b# the (ecretar# of Finance upon recommendation of theCommissioner.

D C!ang" ro& Accrua# to In)ta##&"nt Ba)i). - If a taxpa#er entitled to the benefits of(ubsection %$' elects for an# taxable #ear to report his taxable income on the installment basisthen in computin! his income for the #ear of chan!e or an# subse+uent #ear amounts actuall#received durin! an# such #ear on account of sales or other dispositions of propert# made in an#

prior #ear shall not be excluded.

SEC > A##ocation o Inco&" and D"duction). - In the case of two or more or!ani)ationstrades or businesses %whether or not incorporated and whether or not or!ani)ed in thehilippines' owned or controlled directl# or indirectl# b# the same interests the Commissioner isauthori)ed to distribute apportion or allocate !ross income or deductions between or amon! suchor!ani)ation trade or business if he determined that such distribution apportionment orallocation is necessar# in order to prevent evasion of taxes or clearl# to reflect the income of an#such or!ani)ation trade or business.

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CHA+TER I/ ( RETURNS AND +A.ENT OF TA/

SEC >1 Indi$idua# R"turn (

A R"uir"&"nt) (

%4' /xcept as provided in para!raph %5' of this (ubsection the followin! individuals arere+uired to file an income tax return*

%a' /ver# Filipino citi)en residin! in the hilippines,

%b' /ver# Filipino citi)en residin! outside the hilippines on his income fromsources within the hilippines,

%c' /ver# alien residin! in the hilippines on income derived from sources within

the hilippines, and

%d' /ver# nonresident alien en!a!ed in trade or business or in the exercise ofprofession in the hilippines.

%5' The followin! individuals shall not be re+uired to file an income tax return, %a' $n individual whose !ross income does not exceed his total personal andadditional exemptions for dependents under (ection 1;* rovided That a citi)enof the hilippines and an# alien individual en!a!ed in business or practice ofprofession within the hilippine shall file an income tax return re!ardless of theamount of !ross income,

%b' $n individual with respect to pure compensation income as defined in (ection15 %$'%4' derived from sources within the hilippines the income tax on whichhas been correctl# withheld under the provisions of (ection 6= of this Code*rovided That an individual derivin! compensation concurrentl# from two ormore emplo#ers at an# time durin! the taxable #ear shall file an income taxreturn* rovided further That an individual whose compensation income derivedfrom sources within the hilippines exceeds (ixt# thousand pesos %0::::'shall also file an income tax return,

%c' $n individual whose sole income has been sub"ected to final withholdin! taxpursuant to (ection ;6%$' of this Code, and

%d' $n individual who is exempt from income tax pursuant to the provisions of thisCode and other laws !eneral or special.

back7to7pa!e74i

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%1' The for!oin! notwithstandin! an# individual not re+uired to file an income tax returnma# nevertheless be re+uired to file an information return pursuant to rules andre!ulations prescribed b# the (ecretar# of Finance upon recommendation of theCommissioner.

%&' The income tax return shall be filed in duplicate b# the followin! persons*

%a' $ resident citi)en - on his income from all sources,%b' $ nonresident citi)en - on his income derived from sources within thehilippines,%c' $ resident alien - on his income derived from sources within the hilippines,and

%d' $ nonresident alien en!a!ed in trade or business in the hilippines - on hisincome derived from sources within the hilippines.

B 4!"r" to Fi#" - /xcept in cases where the Commissioner otherwise permits the return shall

be filed with an authori)ed a!ent bank Revenue District fficer Collection $!ent or dul#authori)ed Treasurer of the cit# or municipalit# in which such person has his le!al residence orprincipal place of business in the hilippines or if there be no le!al residence or place ofbusiness in the hilippines with the ffice of the Commissioner.

C 4!"n to Fi#" (

%4' The return of an# individual specified above shall be filed on or before the fifteenth%4;th' da# of $pril of each #ear coverin! income for the precedin! taxable #ear.

%5' Individuals sub"ect to tax on capital !ains,

%a' From the sale or exchan!e of shares of stock not traded thru a local stockexchan!e as prescribed under (ection 5&%c' shall file a return within thirt# %1:'da#s after each transaction and a final consolidated return on or before $pril 4;of each #ear coverin! all stock transactions of the precedin! taxable #ear, and

%b' From the sale or disposition of real propert# under (ection 5&%D' shall file areturn within thirt# %1:' da#s followin! each sale or other disposition.

D Hu),and and 4i" - arried individuals whether citi)ens resident or nonresident alienswho do not derive income purel# from compensation shall file a return for the taxable #ear to

include the income of both spouses but where it is impracticable for the spouses to file onereturn each spouse ma# file a separate return of income but the returns so filed shall beconsolidated b# the Bureau for purposes of verification for the taxable #ear.

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E R"turn o +ar"nt to Inc#ud" Inco&" o C!i#dr"n - The income of unmarried minors derivedfrom properl# received from a livin! parent shall be included in the return of the parent except %4'when the donorEs tax has been paid on such propert# or %5' when the transfer of such propert# isexempt from donorEs tax.

F +"r)on) Und"r Di)a,i#it0. - If the taxpa#er is unable to make his own return the return ma#be made b# his dul# authori)ed a!ent or representative or b# the !uardian or other personchar!ed with the care of his person or propert# the principal and his representative or !uardianassumin! the responsibilit# of makin! the return and incurrin! penalties provided for erroneousfalse or fraudulent returns.

* Signatur" +r")u&"d Corr"ct. - The fact that an individualEs name is si!ned to a filed returnshall be prima facie evidence for all purposes that the return was actuall# si!ned b# him.

SEC >: Cor'oration R"turn) (

A R"uir"&"nt). - /ver# corporation sub"ect to the tax herein imposed except forei!ncorporations not en!a!ed in trade or business in the hilippines shall render in duplicate a trueand accurate +uarterl# income tax return and final or ad"ustment return in accordance with theprovisions of Chapter HII of this Title. The return shall be filed b# the president vice-president orother principal officer and shall be sworn to b# such officer and b# the treasurer or assistanttreasurer.

B Ta%a,#" "ar o Cor'oration. - $ corporation ma# emplo# either calendar #ear or fiscal #earas a basis for filin! its annual income tax return* rovided That the corporation shall not chan!ethe accountin! period emplo#ed without prior approval from the Commissioner in accordance withthe provisions of (ection &6 of this Code.

C R"turn o Cor'oration Cont"&'#ating Di))o#ution or R"organization . - /ver# corporationshall within thirt# %1:' da#s after the adoption b# the corporation of a resolution or plan for itsdissolution or for the li+uidation of the whole or an# part of its capital stock includin! acorporation which has been notified of possible involuntar# dissolution b# the (ecurities and/xchan!e Commission or for its reor!ani)ation render a correct return to the Commissionerverified under oath settin! forth the terms of such resolution or plan and such other informationas the (ecretar# of Finance upon recommendation of the commissioner shall b# rules andre!ulations prescribe.

The dissolvin! or reor!ani)in! corporation shall prior to the issuance b# the (ecurities and/xchan!e Commission of the Certificate of Dissolution or Reor!ani)ation as ma# be defined b#rules and re!ulations prescribed b# the (ecretar# of Finance upon recommendation of the

Commissioner secure a certificate of tax clearance from the Bureau of Internal Revenue whichcertificate shall be submitted to the (ecurities and /xchan!e Commission.

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D R"turn on Ca'ita# *ain) R"a#iz"d ro& Sa#" o S!ar") o Stoc not Trad"d in t!" Loca#Stoc E%c!ang". - /ver# corporation derivin! capital !ains from the sale or exchan!e of sharesof stock not traded thru a local stock exchan!e as prescribed under (ections 5& %c' 5; %$'%1' 56%/'%5' 5>%$'%>'%c' and 5> %B'%;'%c' shall file a return within thirt# %1:' da#s after eachtransactions and a final consolidated return of all transactions durin! the taxable #ear on or

before the fifteenth %4;th' da# of the fourth %&th' month followin! the close of the taxable #ear.

SEC >< E%t"n)ion o Ti&" to Fi#" R"turn). - The Commissioner ma# in meritorious cases!rant a reasonable extension of time for filin! returns of income %or final and ad"ustment returns incase of corporations' sub"ect to the provisions of (ection ;0 of this Code.

SEC >= R"turn) o R"c"i$"r)3 Tru)t"") in Banru'tc0 or A))ign"") . - In cases whereinreceivers trustees in bankruptc# or assi!nees are operatin! the propert# or business of acorporation sub"ect to the tax imposed b# this Title such receivers trustees or assi!nees shallmake returns of net income as and for such corporation in the same manner and form as such

or!ani)ation is hereinbefore re+uired to make returns and an# tax due on the income as returnedb# receivers trustees or assi!nees shall be assessed and collected in the same manner as ifassessed directl# a!ainst the or!ani)ations of whose businesses or properties the# have custod#or control.

SEC >> R"turn) o *"n"ra# +ro"))iona# +artn"r)!i'). - /ver# !eneral professionalpartnership shall file in duplicate a return of its income except income exempt under (ection 15%B' of this Title settin! forth the items of !ross income and of deductions allowed b# this Title andthe names Taxpa#er Identification 9umbers %TI9' addresses and shares of each of the partners.

SEC >@ +a0&"nt and A))"))&"nt o Inco&" Ta% or Indi$idua#) and Cor'oration (

A +a0&"nt o Ta% (

1 In *"n"ra#. - The total amount of tax imposed b# this Title shall be paid b# the personsub"ect thereto at the time the return is filed. In the case of tramp vessels the shippin!a!ents and?or the husbandin! a!ents and in their absence the captains thereof arere+uired to file the return herein provided and pa# the tax due thereon before theirdeparture. pon failure of the said a!ents or captains to file the return and pa# the taxthe Bureau of Customs is hereb# authori)ed to hold the vessel and prevent its departureuntil proof of pa#ment of the tax is presented or a sufficient bond is filed to answer for thetax due.

: In)ta##&"nt o +a0&"nt - 2hen the tax due is in excess of Two thousand pesos%5:::' the taxpa#er other than a corporation ma# elect to pa# the tax in two %5' e+ualinstallments in which case the first installment shall be paid at the time the return is filedand the second installment on or before <ul# 4; followin! the close of the calendar #ear.If an# installment is not paid on or before the date fixed for its pa#ment the whole amountof the tax unpaid becomes due and pa#able to!ether with the delin+uenc# penalties.

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< +a0&"nt o Ca'ita# *ain) Ta% - The total amount of tax imposed and prescribedunder (ection 5& %c' 5&%D' 56%/'%5' 5>%$'%>'%c' and 5>%B'%;'%c' shall be paid on thedate the return prescribed therefor is filed b# the person liable thereto* rovided That ifthe seller submits proof of his intention to avail himself of the benefit of exemption ofcapital !ains under existin! special laws no such pa#ments shall be re+uired * rovided

further That in case of failure to +ualif# for exemption under such special laws andimplementin! rules and re!ulations the tax due on the !ains reali)ed from the ori!inaltransaction shall immediatel# become due and pa#able sub"ect to the penaltiesprescribed under applicable provisions of this Code* rovided finall# That if the sellerhavin! paid the tax submits such proof of intent within six %0' months from there!istration of the document transferrin! the real propert# he shall be entitled to a refundof such tax upon verification of his compliance with the re+uirements for such exemption.

MIn case the taxpa#er elects and is +ualified to report the !ain b# installments under (ection &= ofthis Code the tax due from each installment pa#ment shall be paid within %1:' da#s from thereceipt of such pa#ments.

9o re!istration of an# document transferrin! real propert# shall be effected b# the Re!ister of

Deeds unless the Commissioner or his dul# authori)ed representative has certified that suchtransfer has been reported and the tax herein imposed if an# has been paid.

B A))"))&"nt and +a0&"nt o D"ici"nc0 Ta%. - $fter the return is filed the Commissionershall examine it and assess the correct amount of the tax. The tax or deficienc# income tax sodiscovered shall be paid upon notice and demand from the Commissioner.

$s used in this Chapter in respect of a tax imposed b# this Title the term Edeficienc#E means*

%4' The amount b# which the tax imposed b# this Title exceeds the amount shown as thetax b# the taxpa#er upon his return, but the amount so shown on the return shall beincreased b# the amounts previousl# assessed %or collected without assessment' as adeficienc# and decreased b# the amount previousl# abated credited returned orotherwise repaid in respect of such tax, or

%5' If no amount is shown as the tax b# the taxpa#er upon this return or if no return ismade b# the taxpa#er then the amount b# which the tax exceeds the amounts previousl#assessed %or collected without assessment' as a deficienc#, but such amounts previousl#assessed or collected without assessment shall first be decreased b# the amountspreviousl# abated credited returned or otherwise repaid in respect of such tax.

SEC >7 4it!!o#ding o Ta% at Sourc" (

A 4it!!o#ding o Fina# Ta% on C"rtain Inco&") - (ub"ect to rules and re!ulations the(ecretar# of Finance ma# promul!ate upon the recommendation of the Commissioner re+uirin!the filin! of income tax return b# certain income pa#ees the tax imposed or prescribed b#(ections 5&%B'%4' 5&%B'%5' 5&%C' 5&%D'%4', 5;%$'%5' 5;%$'%1' 5;%B' 5;%C' 5;%D' 5;%/' 56%D'%P' 56%D'%5' 56%D'%1' 56%D'%;' 5> %$'%&' 5>%$'%;' 5>%$'%6'%a' 5>%$'%6'%b' 5>%$'%6'%c' 5>%B'%4' 5>%B'%5' 5>%B'%1' 5>%B'%&' 5>%B'%;'%a' 5>%B'%;'%b' 5>%B'%;'%c', 11, and 5>5 of this Code onspecified items of income shall be withheld b# pa#or-corporation and?or person and paid in thesame manner and sub"ect to the same conditions as provided in (ection ;> of this Code.

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B 4it!!o#ding o Cr"dita,#" Ta% at Sourc" - The (ecretar# of Finance ma# upon therecommendation of the Commissioner re+uire the withholdin! of a tax on the items of incomepa#able to natural or "uridical persons residin! in the hilippines b# pa#or-corporation?personsas provided for b# law at the rate of not less than one percent %4' but not more than thirt#-twopercent %15' thereof which shall be credited a!ainst the income tax liabilit# of the taxpa#er forthe taxable #ear.

C Ta%(r"" Co$"nant Bond) In an# case where bonds mort!a!es deeds of trust or othersimilar obli!ations of domestic or resident forei!n corporations contain a contract or provisions b#which the obli!or a!rees to pa# an# portion of the tax imposed in this Title upon the obli!ee or toreimburse the obli!ee for an# portion of the tax or to pa# the interest without deduction for an# taxwhich the obli!or ma# be re+uired or permitted to pa# thereon or to retain therefrom under an#law of the hilippines or an# state or countr# the obli!or shall deduct bonds mort!a!es deedsof trust or other obli!ations whether the interest or other pa#ments are pa#able annuall# or atshorter or lon!er periods and whether the bonds securities or obli!ations had been or will beissued or marketed and the interest or other pa#ment thereon paid within or without thehilippines if the interest or other pa#ment is pa#able to a nonresident alien or to a citi)en orresident of the hilippines.

SEC > R"turn) and +a0&"nt o Ta%") 4it!!"#d at Sourc" (

A 2uart"r#0 R"turn) and +a0&"nt) o Ta%") 4it!!"#d - Taxes deducted and withheld under(ection ;6 b# withholdin! a!ents shall be covered b# a return and paid to except in cases wherethe Commissioner otherwise permits an authori)ed Treasurer of the cit# or municipalit# wherethe withholdin! a!ent has his le!al residence or principal place of business or where thewithholdin! a!ent is a corporation where the principal office is located.

The taxes deducted and withheld b# the withholdin! a!ent shall be held as a special fund in trustfor the !overnment until paid to the collectin! officers. The return for final withholdin! tax shall befiled and the pa#ment made within twent#-five %5;' da#s from the close of each calendar +uarterwhile the return for creditable withholdin! taxes shall be filed and the pa#ment made not later

than the last da# of the month followin! the close of the +uarter durin! which withholdin! wasmade* rovided That the Commissioner with the approval of the (ecretar# of Finance ma#re+uire these withholdin! a!ents to pa# or deposit the taxes deducted or withheld at morefre+uent intervals when necessar# to protect the interest of the !overnment.

B Stat"&"nt o Inco&" +a0&"nt) .ad" and Ta%") 4it!!"#d . - /ver# withholdin! a!entre+uired to deduct and withhold taxes under (ection ;6 shall furnish each recipient in respect tohis or its receipts durin! the calendar +uarter or #ear a written statement showin! the income orother pa#ments made b# the withholdin! a!ent durin! such +uarter or #ear and the amount ofthe tax deducted and withheld therefrom simultaneousl# upon pa#ment at the re+uest of thepa#ee but not late than the twentieth %5:th' da# followin! the close of the +uarter in the case ofcorporate pa#ee or not later than arch 4 of the followin! #ear in the case of individual pa#ee for creditable withholdin! taxes. For final withholdin! taxes the statement should be !iven to the

pa#ee on or before <anuar# 14 of the succeedin! #ear.

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C Annua# Inor&ation R"turn. - /ver# withholdin! a!ent re+uired to deduct and withhold taxesunder (ection ;6 shall submit to the Commissioner an annual information return containin! thelist of pa#ees and income pa#ments amount of taxes withheld from each pa#ee and such otherpertinent information as ma# be re+uired b# the Commissioner. In the case of final withholdin!taxes the return shall be filed on or before <anuar# 14 of the succeedin! #ear and for creditable

withholdin! taxes not later than arch 4 of the #ear followin! the #ear for which the annual reportis bein! submitted. This return if made and filed in accordance with the rules and re!ulationsapproved b# the (ecretar# of Finance upon recommendation of the Commissioner shall besufficient compliance with the re+uirements of (ection 0> of this Title in respect to the incomepa#ments.

The Commissioner ma# b# rules and re!ulations !rant to an# withholdin! a!ent a reasonableextension of time to furnish and submit the return re+uired in this (ubsection.

D Inco&" o R"ci'i"nt. - Income upon which an# creditable tax is re+uired to be withheld atsource under (ection ;6 shall be included in the return of its recipient but the excess of theamount of tax so withheld over the tax due on his return shall be refunded to him sub"ect to theprovisions of (ection 5:&, if the income tax collected at source is less than the tax due on his

return the difference shall be paid in accordance with the provisions of (ection ;0.

$ll taxes withheld pursuant to the provisions of this Code and its implementin! rules andre!ulations are hereb# considered trust funds and shall be maintained in a separate account andnot commin!led with an# other funds of the withholdin! a!ent.

E R"gi)tration -it! R"gi)t"r o D""d). - 9o re!istration of an# document transferrin! realpropert# shall be effected b# the Re!ister of Deeds unless the Commissioner or his dul#authori)ed representative has certified that such transfer has been reported and the capital !ainsor creditable withholdin! tax if an# has been paid* rovided however That the information asma# be re+uired b# rules and re!ulations to be prescribed b# the (ecretar# of Finance uponrecommendation of the Commissioner shall be annotated b# the Re!ister of Deeds in the

Transfer Certificate of Title or Condominium Certificate of Title* rovided further That in cases oftransfer of propert# to a corporation pursuant to a mer!er consolidation or reor!ani)ation andwhere the law allows deferred reco!nition of income in accordance with (ection &: theinformation as ma# be re+uired b# rules and re!ulations to be prescribed b# the (ecretar# ofFinance upon recommendation of the Commissioner shall be annotated b# the Re!ister ofDeeds at the back of the Transfer Certificate of Title or Condominium Certificate of Title of the realpropert# involved* rovided finall# That an# violation of this provision b# the Re!ister of Deedsshall be sub"ect to the penalties imposed under (ection 50= of this Code.

SEC >9 Ta% on +roit) Co##"cti,#" ro& O-n"r or Ot!"r +"r)on). - The tax imposed underthis Title upon !ains profits and income not fallin! under the fore!oin! and not returned and paidb# virtue of the fore!oin! or as otherwise provided b# law shall be assessed b# personal returnunder rules and re!ulations to be prescribed b# the (ecretar# of Finance upon recommendationof the Commissioner. The intent and purpose of the Title is that all !ains profits and income of ataxable class as defined in this Title shall be char!ed and assessed with the correspondin! taxprescribed b# this Title and said tax shall be paid b# the owners of such !ains profits andincome or the proper person havin! the receipt custod# control or disposal of the same. Forpurposes of this Title ownership of such !ains profits and income or liabilit# to pa# the tax shallbe determined as of the #ear for which a return is re+uired to be rendered.

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CHA+TER / ( ESTATES AND TRUSTS

SEC @ I&'o)ition o Ta% (

A A''#ication o Ta%. - The tax imposed b# this Title upon individuals shall appl# to the incomeof estates or of an# kind of propert# held in trust includin!*

%4' Income accumulated in trust for the benefit of unborn or unascertained person orpersons with contin!ent interests and income accumulated or held for future distributionunder the terms of the will or trust, %5' Income which is to be distributed currentl# b# the fiduciar# to the beneficiaries andincome collected b# a !uardian of an infant which is to be held or distributed as the courtma# direct,

%1' Income received b# estates of deceased persons durin! the period of administrationor settlement of the estate, and

%&' Income which in the discretion of the fiduciar# ma# be either distributed to thebeneficiaries or accumulated.

B E%c"'tion. - The tax imposed b# this Title shall not appl# to emplo#eeEs trust which forms partof a pension stock bonus or profit-sharin! plan of an emplo#er for the benefit of some or all of hisemplo#ees %4' if contributions are made to the trust b# such emplo#er or emplo#ees or both forthe purpose of distributin! to such emplo#ees the earnin!s and principal of the fund accumulatedb# the trust in accordance with such plan and %5' if under the trust instrument it is impossible atan# time prior to the satisfaction of all liabilities with respect to emplo#ees under the trust for an#

part of the corpus or income to be %within the taxable #ear or thereafter' used for or diverted topurposes other than for the exclusive benefit of his emplo#ees* rovided That an# amountactuall# distributed to an# emplo#ee or distributee shall be taxable to him in the #ear in which sodistributed to the extent that it exceeds the amount contributed b# such emplo#ee or distributee.

C Co&'utation and +a0&"nt. -

%4' In 3eneral. - The tax shall be computed upon the taxable income of the estate or trustand shall be paid b# the fiduciar# except as provided in (ection 01 %relatin! to revocabletrusts' and (ection 0& %relatin! to income for the benefit of the !rantor'.

%5' Consolidation of Income of Two or ore Trusts. - 2here in the case of two or moretrusts the creator of the trust in each instance is the same person and the beneficiar# ineach instance is the same the taxable income of all the trusts shall be consolidated andthe tax provided in this (ection computed on such consolidated income and suchproportion of said tax shall be assessed and collected from each trustee which thetaxable income of the trust administered b# him bears to the consolidated income of theseveral trusts.

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SEC @1 Ta%a,#" Inco&". - The taxable income of the estate or trust shall be computed in thesame manner and on the same basis as in the case of an individual except that*

%$' There shall be allowed as a deduction in computin! the taxable income of the estate or trustthe amount of the income of the estate or trust for the taxable #ear which is to be distributedcurrentl# b# the fiduciar# to the beneficiaries and the amount of the income collected b# a

!uardian of an infant which is to be held or distributed as the court ma# direct but the amount soallowed as a deduction shall be included in computin! the taxable income of the beneficiarieswhether distributed to them or not. $n# amount allowed as a deduction under this (ubsectionshall not be allowed as a deduction under (ubsection %B' of this (ection in the same or an#succeedin! taxable #ear.

%B' In the case of income received b# estates of deceased persons durin! the period ofadministration or settlement of the estate and in the case of income which in the discretion of thefiduciar# ma# be either distributed to the beneficiar# or accumulated there shall be allowed as anadditional deduction in computin! the taxable income of the estate or trust the amount of theincome of the estate or trust for its taxable #ear which is properl# paid or credited durin! such#ear to an# le!atee heir or beneficiar# but the amount so allowed as a deduction shall beincluded in computin! the taxable income of the le!atee heir or beneficiar#.

%C' In the case of a trust administered in a forei!n countr# the deductions mentioned in(ubsections %$' and %B' of this (ection shall not be allowed* rovided That the amount of an#income included in the return of said trust shall not be included in computin! the income of thebeneficiaries.

SEC @: E%"&'tion A##o-"d to E)tat") and Tru)t) . - For the purpose of the tax provided for inthis Title there shall be allowed an exemption of Twent# thousand pesos %5::::' from theincome of the estate or trust.

SEC @< R"$oca,#" tru)t). - 2here at an# time the power to revest in the !rantor title to an#part of the corpus of the trust is vested %4' in the !rantor either alone or in con"unction with an#person not havin! a substantial adverse interest in the disposition of such part of the corpus orthe income therefrom or %5' in an# person not havin! a substantial adverse interest in thedisposition of such part of the corpus or the income therefrom the income of such part of the trustshall be included in computin! the taxable income of the !rantor.

SEC @= Inco&" or B"n"it o *rantor .-

%$' 2here an# part of the income of a trust %4' is or in the discretion of the !rantor or of an#

person not havin! a substantial adverse interest in the disposition of such part of the income ma#be held or accumulated for future distribution to the !rantor or %5' ma# or in the discretion of the!rantor or of an# person not havin! a substantial adverse interest in the disposition of such part of the income be distributed to the !rantor or %1' is or in the discretion of the !rantor or of an#person not havin! a substantial adverse interest in the disposition of such part of the income ma#be applied to the pa#ment of premiums upon policies of insurance on the life of the !rantor suchpart of the income of the trust shall be included in computin! the taxable income of the !rantor.

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%B' $s used in this (ection the term Ein the discretion of the !rantorE means in the discretion of the!rantor either alone or in con"unction with an# person not havin! a substantial adverse interest inthe disposition of the part of the income in +uestion.

SEC @> Fiduciar0 R"turn). - 3uardians trustees executors administrators receiversconservators and all persons or corporations actin! in an# fiduciar# capacit# shall render induplicate a return of the income of the person trust or estate for whom or which the# act and besub"ect to all the provisions of this Title which appl# to individuals in case such person estate ortrust has a !ross income of Twent# thousand pesos %5::::' or over durin! the taxable #ear.(uch fiduciar# or person filin! the return for him or it shall take oath that he has sufficientknowled!e of the affairs of such person trust or estate to enable him to make such return andthat the same is to the best of his knowled!e and belief true and correct and be sub"ect to allthe provisions of this Title which appl# to individuals* rovided That a return made b# or for oneor two or more "oint fiduciaries filed in the province where such fiduciaries reside, under suchrules and re!ulations as the (ecretar# of Finance upon recommendation of the Commissionershall prescribe shall be a sufficient compliance with the re+uirements of this (ection.

SEC @@ Fiduciari") Ind"&nii"d Again)t C#ai&) or Ta%") +aid . - Trustees executorsadministrators and other fiduciaries are indemnified a!ainst the claims or demands of ever#beneficiar# for all pa#ments of taxes which the# shall be re+uired to make under the provisions ofthis Title and the# shall have credit for the amount of such pa#ments a!ainst the beneficiar# orprincipal in an# accountin! which the# make as such trustees or other fiduciaries.


CHA+TER /I ( OTHER INCO.E TA/ RE2UIRE.ENTS

SEC @7 Co##"ction o For"ign +a0&"nt) ( $ll persons corporations dul# re!istered !eneralco-partnerships %companias colectivas' undertakin! for profit or otherwise the collection of forei!npa#ments of interests or dividends b# means of coupons checks or bills of exchan!e shall obtaina license from the Commissioner and shall be sub"ect to such rules and re!ulations enablin! the!overnment to obtain the information re+uired under this Title as the (ecretar# of Finance uponrecommendation of the Commissioner shall prescribe.

SEC @ Inor&ation at Sourc" a) to Inco&" +a0&"nt) . - all persons corporations or dul#re!istered co- partnerships %companias colectivas' in whatever capacit# actin! includin! lessees

or mort!a!ors of real or personal propert# trustees actin! in an# trust capacit# executorsadministrators receivers conservators and emplo#ees makin! pa#ment to another personcorporation or dul# re!istered !eneral co-partnership %compania colectiva' of interests rentssalaries wa!es premiums annuities compensations remunerations emoluments or other fixedor determinable !ains profits and income other than pa#ment described in (ection 0= in an#

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taxable #ear or in the case of such pa#ments made b# the 3overnment of the hilippines theofficers or emplo#ees of the 3overnment havin! information as to such pa#ments and re+uired tomake returns in re!ard thereto are authori)ed and re+uired to render a true and accurate return

to the Commissioner under such rules and re!ulations and in such form and manner as ma# beprescribed b# the (ecretar# of Finance upon recommendation of the Commissioner settin! forththe amount of such !ains profits and income and the name and address of the recipient of suchpa#ments* rovided That such returns shall be re+uired in the case of pa#ments of interest uponbonds and mort!a!es or deeds of trust or other similar obli!ations of corporations and in thecase of collections of items not pa#able in the hilippines of interest upon the bonds of forei!ncountries and interest from the bonds and dividends from the stock of forei!n corporations b#persons corporations or dul# re!istered !eneral co-partnerships %companias colectivas'undertakin! as a matter of business or for profit or otherwise the collection of forei!n pa#ments of such interests or dividends b# means of coupons or bills of exchan!e.

SEC @9 R"turn o Inor&ation o Bro"r) - /ver# person corporation or dul# re!istered

!eneral co-partnership %compania colectiva' doin! business as a broker in an# exchan!e orboard or other similar place of business shall when re+uired b# the Commissioner render acorrect return dul# verified under oath under such rules and re!ulations as the (ecretar# ofFinance upon recommendation of the Commissioner ma# prescribe showin! the names ofcustomers for whom such person corporation or dul# re!istered !eneral co-partnership%compania colectiva' has transacted an# business with such details as to the profits losses orother information which the Commissioner ma# re+uire as to each of such customers as willenable the Commissioner to determine whether all income tax due on profits or !ains of suchcustomers has been paid.

SEC 7 R"turn) o For"ign Cor'oration) (

A R"uir"&"nt). - nder rules and re!ulations prescribed b# the (ecretar# of financeupon the recommendation of the Commissioner an# attorne# accountant fiduciar#bank trust compan# financial institution or other person who aids assists counsels oradvises in o with respect to, the formation or!ani)ation or reor!ani)ation of an# forei!ncorporation shall within thirt# %1:' da#s thereafter file with the Commissioner a return.

B For& and Cont"nt) o R"turn. - (uch return shall be in such form and shall setforth, under oath in respect of each such corporation to the full extent of the informationwithin the possession or knowled!e or under the control of the person re+uired to file thereturn such information as the (ecretar# of Finance upon recommendation of theCommissioner shall prescribe b# rules and re!ulations as necessar# for carr#in! out theprovisions of this Title. 9othin! in this (ection shall be construed to re+uire the divul!in!

of privile!ed communications between attorne# and client.

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SEC 71 Di)'o)ition o Inco&" Ta% R"turn)3 +u,#ication o Li)t) o Ta%'a0"r) and Fi#"r) - $fter the assessment shall have been made as provided in this Title the returns to!ether withan# corrections thereof which ma# have been made b# the Commissioner shall be filed in theffice of the Commissioner and shall constitute public records and be open to inspection as suchupon the order of the resident of the hilippines under rules and re!ulations to be prescribed b#

the (ecretar# of Finance upon recommendation of the Commissioner.

The Commissioner ma# in each #ear cause to be prepared and published in an# newspaper thelists containin! the names and addresses of persons who have filed income tax returns.

SEC 7: Suit to R"co$"r Ta% Ba)"d on Fa#)" or Fraudu#"nt R"turn) - 2hen an assessmentis made in case of an# list statement or return which in the opinion of the Commissioner wasfalse or fraudulent or contained an# understatement or undervaluation no tax collected undersuch assessment shall be recovered b# an# suit unless it is proved that the said list statement or return was not false nor fraudulent and did not contain an# understatement or undervaluation, butthis provision shall not appl# to statements or returns made or to be made in !ood faith re!ardin!

annual depreciation of oil or !as wells and mines.

SEC 7< Di)tri,ution o di$id"nd) or A))"t) ,0 Cor'oration) (

A D"inition o Di$id"nd) - The term Edi$id"nd)5 when used in this Title means an#distribution made b# a corporation to its shareholders out of its earnin!s or profits andpa#able to its shareholders whether in mone# or in other propert#.

2here a corporation distributes all of its assets in complete li+uidation or dissolution the!ain reali)ed or loss sustained b# the stockholder whether individual or corporate is a

taxable income or a deductible loss as the case ma# be.

B Stoc Di$id"nd - $ stock dividend representin! the transfer of surplus to capitalaccount shall not be sub"ect to tax. @owever if a corporation cancels or redeems stockissued as a dividend at such time and in such manner as to make the distribution andcancellation or redemption in whole or in part essentiall# e+uivalent to the distribution ofa taxable dividend the amount so distributed in redemption or cancellation of the stockshall be considered as taxable income to the extent that it represents a distribution ofearnin!s or profits.

C Di$id"nd) Di)tri,ut"d ar" D""&"d .ad" ro& .o)t R"c"nt#0 Accu&u#at"d+roit) - $n# distribution made to the shareholders or members of a corporation shall bedeemed to have been made form the most recentl# accumulated profits or surplus andshall constitute a part of the annual income of the distributee for the #ear in whichreceived.

D N"t Inco&" o a +artn"r)!i' D""&"d Con)tructi$"#0 R"c"i$"d ,0 +artn"r) -The taxable income declared b# a partnership for a taxable #ear which is sub"ect to taxunder (ection 56 %$' of this Code after deductin! the corporate income tax imposedtherein shall be deemed to have been actuall# or constructivel# received b# the partnersin the same taxable #ear and shall be taxed to them in their individual capacit# whetheractuall# distributed or not.

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CHA+TER /II ( 2UARTERL COR+ORATE INCO.E TA/3 ANNUAL DECLARATION AND 2UARTERL +A.ENTS OF INCO.E TA/ES

SEC 7= D"c#aration o Inco&" Ta% or Indi$idua#) (

A In *"n"ra# - /xcept as otherwise provided in this (ection ever# individual sub"ect to incometax under (ections 5& and 5;%$' of this Title who is receivin! self-emplo#ment income whether itconstitutes the sole source of his income or in combination with salaries wa!es and other fixed or determinable income shall make and file a declaration of his estimated income for the currenttaxable #ear on or before $pril 4; of the same taxable #ear. In !eneral self-emplo#ment incomeconsists of the earnin!s derived b# the individual from the practice of profession or conduct oftrade or business carried on b# him as a sole proprietor or b# a partnership of which he is amember. 9onresident Filipino citi)ens with respect to income from without the hilippines andnonresident aliens not en!a!ed in trade or business in the hilippines are not re+uired to rendera declaration of estimated income tax. The declaration shall contain such pertinent information as

the (ecretar# of Finance upon recommendation of the Commissioner ma# b# rules andre!ulations prescribe. $n individual ma# make amendments of a declaration filed durin! thetaxable #ear under the rules and re!ulations prescribed b# the (ecretar# of Finance uponrecommendation of the Commissioner.

B R"turn and +a0&"nt o E)ti&at"d Inco&" Ta% ,0 Indi$idua#). - The amount of estimatedincome as defined in (ubsection %C' with respect to which a declaration is re+uired under(ubsection %$' shall be paid in four %&' installments. The first installment shall be paid at the timeof the declaration and the second and third shall be paid on $u!ust 4; and 9ovember 4; of thecurrent #ear respectivel#. The fourth installment shall be paid on or before $pril 4; of thefollowin! calendar #ear when the final ad"usted income tax return is due to be filed.

C D"inition o E)ti&at"d Ta% - In the case of an individual the term 5")ti&at"d ta%5 meansthe amount which the individual declared as income tax in his final ad"usted and annual incometax return for the precedin! taxable #ear minus the sum of the credits allowed under this Titlea!ainst the said tax. If durin! the current taxable #ear the taxpa#er reasonable expects to pa# abi!!er income tax he shall file an amended declaration durin! an# interval of installment pa#mentdates.

SEC 7> ( D"c#aration o 2uart"r#0 Cor'orat" Inco&" Ta% ( /ver# corporation shall file induplicate a +uarterl# summar# declaration of its !ross income and deductions on a cumulativebasis for the precedin! +uarter or +uarters upon which the income tax as provided in Title II ofthis Code shall be levied collected and paid. The tax so computed shall be decreased b# the

amount of tax previousl# paid or assessed durin! the precedin! +uarters and shall be paid notlater than sixt# %0:' da#s from the close of each of the first three %1' +uarters of the taxable #earwhether calendar or fiscal #ear.

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SEC 7@ ( Fina# Ad6u)t&"nt R"turn - /ver# corporation liable to tax under (ection 56 shall filea final ad"ustment return coverin! the total taxable income for the precedin! calendar or fiscal

#ear. If the sum of the +uarterl# tax pa#ments made durin! the said taxable #ear is not e+ual tothe total tax due on the entire taxable income of that #ear the corporation shall either*

%$'a# the balance of tax still due, or %B'Carr#-over the excess credit, or %C'Be credited or refunded with the excess amount paid as the case ma# be.

In case the corporation is entitled to a tax credit or refund of the excess estimated +uarterl#income taxes paid the excess amount shown on its final ad"ustment return ma# be carried overand credited a!ainst the estimated +uarterl# income tax liabilities for the taxable +uarters of thesucceedin! taxable #ears. nce the option to carr#-over and appl# the excess +uarterl# incometax a!ainst income tax due for the taxable +uarters of the succeedin! taxable #ears has beenmade such option shall be considered irrevocable for that taxable period and no application forcash refund or issuance of a tax credit certificate shall be allowed therefor.

SEC 77 +#ac" and Ti&" o Fi#ing and +a0&"nt o 2uart"r#0 Cor'orat" Inco&" Ta% (

A+#ac" o Fi#ing -/xcept as the Commissioner other wise permits the +uarterl# income taxdeclaration re+uired in (ection 6; and the final ad"ustment return re+uired I (ection 60 shall befiled with the authori)ed a!ent banks or Revenue District fficer or Collection $!ent or dul#authori)ed Treasurer of the cit# or municipalit# havin! "urisdiction over the location of the principaloffice of the corporation filin! the return or place where its main books of accounts and other datafrom which the return is prepared are kept.

BTi&" o Fi#ing t!" Inco&" Ta% R"turn. - The corporate +uarterl# declaration shall be filedwithin sixt# %0:' da#s followin! the close of each of the first three %1' +uarters of the taxable #ear.The final ad"ustment return shall be filed on or before the fifteenth %4;th' da# of $pril or on orbefore the fifteenth %4;th' da# of the fourth %&th' month followin! the close of the fiscal #ear as the

case ma# be.

CTi&" o +a0&"nt o t!" Inco&" Ta% - The income tax due on the corporate +uarterl# returnsand the final ad"ustment income tax returns computed in accordance with (ections 6; and 60shall be paid at the time the declaration or return is filed in a manner prescribed b# theCommissioner.

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CHA+TER /III ( 4ITHHOLDIN* ON 4A*ES

SEC 7 D"inition). - $s used in this Chapter*

A 4ag"). - The term Ewa!esE means all remuneration %other than fees paid to a public official'for services performed b# an emplo#ee for his emplo#er includin! the cash value of allremuneration paid in an# medium other than cash except that such term shall not includeremuneration paid*

%4' For a!ricultural labor paid entirel# in products of the farm where the labor isperformed or %5' For domestic service in a private home or %1' For casual labor not in the course of the emplo#erEs trade or business or %&' For services b# a citi)en or resident of the hilippines for a forei!n !overnment or aninternational or!ani)ation.

If the remuneration paid b# an emplo#er to an emplo#ee for services performed durin! one-half%4?5' or more of an# pa#roll period of not more than thirt#-one %14' consecutive da#s constituteswa!es all the remuneration paid b# such emplo#er to such emplo#ee for such period shall bedeemed to be wa!es, but if the remuneration paid b# an emplo#er to an emplo#ee for servicesperformed durin! more than one -half %4?5' of an# such pa#roll period does not constitute wa!esthen none of the remuneration paid b# such emplo#er to such emplo#ee for such period shall bedeemed to be wa!es.

B +a0ro## +"riod. - The term Epa#roll periodE means a period for which pa#ment of wa!es isordinaril# made to the emplo#ee b# his emplo#er and the term Emiscellaneous pa#roll periodEmeans a pa#roll period other than a dail# weekl# biweekl# semi-monthl# monthl# +uarterl#

semi-annual or annual period.

C E&'#o0"". - The term Eemplo#eeE refers to an# individual who is the recipient of wa!es andincludes an officer emplo#ee or elected official of the 3overnment of the hilippines or an#political subdivision a!enc# or instrumentalit# thereof. The term Eemplo#eeE also includes anofficer of a corporation.

D E&'#o0"r . - The term Eemplo#erE means the person for whom an individual performs orperformed an# service of whatever nature as the emplo#ee of such person except that*

%4' If the person for whom the individual performs or performed an# service does nothave control of the pa#ment of the wa!es for such services the term Eemplo#erE %exceptfor the purpose of (ubsection%$' means the person havin! control of the pa#ment of suchwa!es, and

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%5' In the case of a person pa#in! wa!es on behalf of a nonresident alien individualforei!n partnership or forei!n corporation not en!a!ed in trade or business within thehilippines the term Eemplo#erE %except for the purpose of (ubsection%$' means such

person.

SEC 79 Inco&" Ta% Co##"ct"d at Sourc"(

A R"uir"&"nt o 4it!!o#ding. - /ver# emplo#er makin! pa#ment of wa!es shall deduct andwithhold upon such wa!es a tax determined in accordance with the rules and re!ulations to beprescribed b# the (ecretar# of Finance upon recommendation of the Commissioner* rovidedhowever That no withholdin! of a tax shall be re+uired where the total compensation income ofan individual does not exceed the statutor# minimum wa!e or five thousand pesos %;:::.::'per month whichever is hi!her.

B Ta% +aid ,0 R"ci'i"nt. - If the emplo#er in violation of the provisions of this Chapter fails todeduct and withhold the tax as re+uired under this Chapter and thereafter the tax a!ainst which

such tax ma# be credited is paid the tax so re+uired to be deducted and withheld shall not becollected from the emplo#er, but this (ubsection shall in no case relieve the emplo#er fromliabilit# for an# penalt# or addition to the tax otherwise applicable in respect of such failure todeduct and withhold.

C R"und) or Cr"dit). -

%4' /mplo#er. - 2hen there has been an overpa#ment of tax under this (ection refundor credit shall be made to the emplo#er onl# to the extent that the amount of suchoverpa#ment was not deducted and withheld hereunder b# the emplo#er.

%5' /mplo#ees. -The amount deducted and withheld under this Chapter durin! an#calendar #ear shall be allowed as a credit to the recipient of such income a!ainst the taximposed under (ection 5&%$' of this Title. Refunds and credits in cases of excessivewithholdin! shall be !ranted under rules and re!ulations promul!ated b# the (ecretar# ofFinance upon recommendation of the Commissioner.

$n# excess of the taxes withheld over the tax due from the taxpa#er shall be returned or creditedwithin three %1' months from the fifteenth %4;th' da# of $pril. Refunds or credits made after suchtime shall earn interest at the rate of six percent %0' per annum startin! after the lapse of thethree-month period to the date the refund of credit is made.

Refunds shall be made upon warrants drawn b# the Commissioner or b# his dul# authori)edrepresentative without the necessit# of counter-si!nature b# the Chairman Commission on $udit

or the latterEs dul# authori)ed representative as an exception to the re+uirement prescribed b#(ection &= Chapter > (ubtitle B Title 4 of Book 8 of /xecutive rder 9o. 5=5 otherwise knownas the $dministrative Code of 4=>6.

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D +"r)ona# E%"&'tion) -

1 In *"n"ra#. - nless otherwise provided b# this Chapter the personal and additionalexemptions applicable under this Chapter shall be determined in accordance with themain provisions of this Title.

: E%"&'tion C"rtiicat" . -

%a' 2hen to File. - n or before the date of commencement of emplo#ment withan emplo#er the emplo#ee shall furnish the emplo#er with a si!ned withholdin!exemption certificate relatin! to the personal and additional exemptions to whichhe is entitled.

%b' Chan!e of (tatus. - In case of chan!e of status of an emplo#ee as a result of which he would be entitled to a lesser or !reater amount of exemption the

emplo#ee shall within ten %4:' da#s from such chan!e file with the emplo#er anew withholdin! exemption certificate reflectin! the chan!e.

%c' se of Certificates. - The certificates filed hereunder shall be used b# theemplo#er in the determination of the amount of taxes to be withheld.

%d' Failure to Furnish Certificate. - 2here an emplo#ee in violation of thisChapter either fails or refuses to file a withholdin! exemption certificate theemplo#er shall withhold the taxes prescribed under the schedule for )eroexemption of the withholdin! tax table determined pursuant to (ubsection %$'hereof.

E 4it!!o#ding on Ba)i) o A$"rag" 4ag"). - The Commissioner ma# under rules andre!ulations promul!ated b# the (ecretar# of Finance authori)e emplo#ers to*

%4' estimate the wa!es which will be paid to an emplo#ee in an# +uarter of the calendar#ear,

%5' determine the amount to be deducted and withheld upon each pa#ment of wa!es tosuch emplo#ee durin! such +uarter as if the appropriate avera!e of the wa!es soestimated constituted the actual wa!es paid, and

%1' deduct and withhold upon an# pa#ment of wa!es to such emplo#ee durin! ,such+uarter such amount as ma# be re+uired to be deducted and withheld durin! such+uarter without re!ard to this (ubsection.

F Hu),and and 4i". - 2hen a husband and wife each are recipients of wa!es whether fromthe same or from different emplo#ers taxes to be withheld shall be determined on the followin!bases*

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%4' The husband shall be deemed the head of the famil# and proper claimant of theadditional exemption in respect to an# dependent children unless he explicitl# waives hisri!ht in favor of his wife in the withholdin! exemption certificate.

%5' Taxes shall be withheld from the wa!es of the wife in accordance with the schedulefor )ero exemption of the withholdin! tax table prescribed in (ubsection %D'%5'%d' hereof.

* Nonr")id"nt A#i"n). - 2a!es paid to nonresident alien individuals en!a!ed in trade orbusiness in the hilippines shall be sub"ect to the provisions of this Chapter.

H "ar("nd Ad6u)t&"nt. - n or before the end of the calendar #ear but prior to the pa#mentof the compensation for the last pa#roll period the emplo#er shall determine the tax due fromeach emplo#ee on taxable compensation income for the entire taxable #ear in accordance with(ection 5&%$'. The difference between the tax due from the emplo#ee for the entire #ear and thesum of taxes withheld from <anuar# to 9ovember shall either be withheld from his salar# inDecember of the current calendar #ear or refunded to the emplo#ee not later than <anuar# 5; ofthe succeedin! #ear.

SEC Lia,i#it0 or Ta%. -

A E&'#o0"r . - The emplo#er shall be liable for the withholdin! and remittance of the correctamount of tax re+uired to be deducted and withheld under this Chapter. If the emplo#er fails towithhold and remit the correct amount of tax as re+uired to be withheld under the provision of thisChapter such tax shall be collected from the emplo#er to!ether with the penalties or additions tothe tax otherwise applicable in respect to such failure to withhold and remit.

B E&'#o0"". - 2here an emplo#ee fails or refuses to file the withholdin! exemption certificateor willfull# supplies false or inaccurate information thereunder the tax otherwise re+uired to bewithheld b# the emplo#er shall be collected from him includin! penalties or additions to the taxfrom the due date of remittance until the date of pa#ment. n the other hand excess taxeswithheld made b# the emplo#er due to*

%4' failure or refusal to file the withholdin! exemption certificate, or

%5' false and inaccurate information shall not be refunded to the emplo#ee but shall beforfeited in favor of the 3overnment.

SEC 1 Fi#ing o R"turn and +a0&"nt o Ta%") 4it!!"#d . - /xcept as the Commissioner

otherwise permits taxes deducted and withheld b# the emplo#er on wa!es of emplo#ees shall becovered b# a return and paid to an authori)ed a!ent bank, Collection $!ent or the dul#authori)ed Treasurer of the cit# or municipalit# where the emplo#er has his le!al residence orprincipal place of business or in case the emplo#er is a corporation where the principal office islocated.

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The return shall be filed and the pa#ment made within twent#-five %5;' da#s from the close ofeach calendar +uarter* rovided however That the Commissioner ma# with the approval of the(ecretar# of Finance re+uire the emplo#ers to pa# or deposit the taxes deducted and withheld atmore fre+uent intervals in cases where such re+uirement is deemed necessar# to protect theinterest of the 3overnment.

The taxes deducted and withheld b# emplo#ers shall be held in a special fund in trust for the3overnment until the same are paid to the said collectin! officers.

SEC : R"turn and +a0&"nt in Ca)" o *o$"rn&"nt E&'#o0"") . - If the emplo#er is the3overnment of the hilippines or an# political subdivision a!enc# or instrumentalit# thereof thereturn of the amount deducted and withheld upon an# wa!e shall be made b# the officer oremplo#ee havin! control of the pa#ment of such wa!e or b# an# officer or emplo#ee dul#desi!nated for the purpose.

SEC < Stat"&"nt) and R"turn). -

A R"uir"&"nt). - /ver# emplo#er re+uired to deduct and withhold a tax shall furnish to eachsuch emplo#ee in respect of his emplo#ment durin! the calendar #ear on or before <anuar#thirt#-first %14st' of the succeedin! #ear or if his emplo#ment is terminated before the close ofsuch calendar #ear on the same da# of which the last pa#ment of wa!es is made a writtenstatement confirmin! the wa!es paid b# the emplo#er to such emplo#ee durin! the calendar #earand the amount of tax deducted and withheld under this Chapter in respect of such wa!es. Thestatement re+uired to be furnished b# this (ection in respect of an# wa!e shall contain such other information and shall be furnished at such other time and in such form as the (ecretar# ofFinance upon the recommendation of the Commissioner ma# b# rules and re!ulation prescribe.

B Annua# Inor&ation R"turn). - /ver# emplo#er re+uired to deduct and withhold the taxes inrespect of the wa!es of his emplo#ees shall on or before <anuar# thirt#-first %14st' of thesucceedin! #ear submit to the Commissioner an annual information return containin! a list ofemplo#ees the total amount of compensation income of each emplo#ee the total amount oftaxes withheld therefrom durin! the #ear accompanied b# copies of the statement referred to inthe precedin! para!raph and such other information as ma# be deemed necessar#. This return if made and filed in accordance with rules and re!ulations promul!ated b# the (ecretar# ofFinance upon recommendation of the Commissioner shall be sufficient compliance with there+uirements of (ection 0> of this Title in respect of such wa!es.

C E%t"n)ion o ti&". - The Commissioner under such rules and re!ulations as ma# bepromul!ated b# the (ecretar# of Finance ma# !rant to an# emplo#er a reasonable extension of

time to furnish and submit the statements and returns re+uired under this (ection.

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TITLE III ESTATE AND DONOR5S TA/ES

CHA+TER I ( ESTATE TA/

SEC = Rat") o E)tat" Ta%. - There shall be levied assessed collected and paid upon thetransfer of the net estate as determined in accordance with (ections >; and >0 of ever#decedent whether resident or nonresident of the hilippines a tax based on the value of suchnet estate as computed in accordance with the followin! schedule*

If the net estate is*

O$"r But Not O$"r T!" Ta% )!a## ," +#u) O t!" E%c"))O$"r

5::::: /xempt

5::::: ;;:::: : ; 5:::::

;::::: 5:::::: 4;::: > ;:::::

5:::::: ;:::::: 41;::: 44 5::::::

;:::::: 4::::::: &0;::: 4; ;::::::

4::::::: $nd ver 454;::: 5: 4:::::::

SEC > *ro)) E)tat". - the value of the !ross estate of the decedent shall be determined b#includin! the value at the time of his death of all propert# real or personal tan!ible or intan!iblewherever situated* rovided however that in the case of a nonresident decedent who at the timeof his death was not a citi)en of the hilippines onl# that part of the entire !ross estate which issituated in the hilippines shall be included in his taxable estate.

A D"c"d"nt5) Int"r")t. - To the extent of the interest therein of the decedent at the time of hisdeath,

,ac?to?'ag"?1n

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B Tran)"r in Cont"&'#ation o D"at!. - To the extent of an# interest therein of which thedecedent has at an# time made a transfer b# trust or otherwise in contemplation of or intendedto take effect in possession or en"o#ment at or after death or of which he has at an# time made atransfer b# trust or otherwise under which he has retained for his life or for an# period whichdoes not in fact end before his death %4' the possession or en"o#ment of or the ri!ht to the

income from the propert# or %5' the ri!ht either alone or in con"unction with an# person todesi!nate the person who shall possess or en"o# the propert# or the income therefrom, except incase of a bonafide sale for an ade+uate and full consideration in mone# or mone#Es worth.

C R"$oca,#" Tran)"r (

%4' To the extent of an# interest therein of which the decedent has at an# time made atransfer %except in case of a bona fide sale for an ade+uate and full consideration inmone# or mone#Es worth' b# trust or otherwise where the en"o#ment thereof was sub"ectat the date of his death to an# chan!e throu!h the exercise of a power %in whatevercapacit# exerciseable' b# the decedent alone or b# the decedent in con"unction with an#other person %without re!ard to when or from what source the decedent ac+uired such

power' t o alter amend revoke or terminate or where an# such power is relin+uished incontemplation of the decedentEs death.

%5' For the purpose of this (ubsection the power to alter amend or revoke shall beconsidered to exist on the date of the decedentEs death even thou!h the exercise of thepower is sub"ect to a precedent !ivin! of notice or even thou!h the alterationamendment or revocation takes effect onl# on the expiration of a stated period after theexercise of the power whether or not on or before the date of the decedentEs death noticehas been !iven or the power has been exercised. In such cases proper ad"ustment shallbe made representin! the interests which would have been excluded from the power ifthe decedent had lived and for such purpose if the notice has not been !iven or thepower has not been exercised on or before the date of his death such notice shall be considered to have been !iven or the power exercised on

the date of his death.

D +ro'"rt0 +a))ing Und"r *"n"ra# +o-"r o A''oint&"nt . - To the extent of an# propert#passin! under a !eneral power of appointment exercised b# the decedent* %4' b# will or %5' b#deed executed in contemplation of or intended to take effect in possession or en"o#ment at orafter his death or %1' b# deed under which he has retained for his life or an# period notascertainable without reference to his death or for an# period which does not in fact end beforehis death %a' the possession or en"o#ment of or the ri!ht to the income from the propert# or %b'the ri!ht either alone or in con"unction with an# person to desi!nate the persons who shallpossess or en"o# the propert# or the income therefrom, except in case of a bona fide sale for anade+uate and full consideration in mone# or mone#Es worth.

E +roc""d) o Li" In)uranc". - To the extent of the amount receivable b# the estate of thedeceased his executor or administrator as insurance under policies taken out b# the decedentupon his own life irrespective of whether or not the insured retained the power of revocation orto the extent of the amount receivable b# an# beneficiar# desi!nated in the polic# of insuranceexcept when it is expressl# stipulated that the desi!nation of the beneficiar# is irrevocable.

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F +rior Int"r")t). - /xcept as otherwise specificall# provided therein (ubsections %B' %C' and%/' of this (ection shall appl# to the transfers trusts estates interests ri!hts powers andrelin+uishment of powers as severall# enumerated and described therein whether madecreated arisin! existin! exercised or relin+uished before or after the effectivit# of this Code.

* Tran)"r) o In)uici"nt Con)id"ration. - If an# one of the transfers trusts interests ri!htsor powers enumerated and described in (ubsections %B' %C' and %D' of this (ection is madecreated exercised or relin+uished for a consideration in mone# or mone#Es worth but is not abona fide sale for an ade+uate and full consideration in mone# or mone#Es worth there shall beincluded in the !ross estate onl# the excess of the fair market value at the time of death of thepropert# otherwise to be included on account of such transaction over the value of theconsideration received therefor b# the decedent.

H Ca'ita# o t!" Sur$i$ing S'ou)". - The capital of the survivin! spouse of a decedent shallnot for the purpose of this Chapter be deemed a part of his or her !ross estate.

SEC @ Co&'utation o N"t E)tat". - For the purpose of the tax imposed in this Chapter thevalue of the net estate shall be determined*

A D"duction) A##o-"d to t!" E)tat" o Citiz"n or a R")id"nt. - In the case of a citi)en orresident of the hilippines b# deductin! from the value of the !ross estate -

%4' /xpenses Aosses Indebtedness and taxes. - (uch amounts - %a' For actual funeral expenses or in an amount e+ual to five percent %;' of the!ross estate whichever is lower but in no case to exceed Two hundred thousand

pesos %5:::::',

%b' For "udicial expenses of the testamentar# or intestate proceedin!s,

%c' For claims a!ainst the estate* rovided That at the time the indebtednesswas incurred the debt instrument was dul# notari)ed and if the loan wascontracted within three %1' #ears before the death of the decedent theadministrator or executor shall submit a statement showin! the disposition of theproceeds of the loan,

%d' For claims of the deceased a!ainst insolvent persons where the value ofdecedentEs interest therein is included in the value of the !ross estate, and

%e' For unpaid mort!a!es upon or an# indebtedness in respect to propert#where the value of decedentEs interest therein undiminished b# such mort!a!e or indebtedness is included in the value of the !ross estate but not includin! an#income tax upon income received after the death of the decedent or propert#taxes not accrued before his death or an# estate tax. The deduction hereinallowed in the case of claims a!ainst the estate unpaid mort!a!es or an#indebtedness shall when founded upon a promise or a!reement be limited tothe extent that the# were contracted bona fide and for an ade+uate and full

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consideration in mone# or mone#Es worth. There shall also be deducted lossesincurred durin! the settlement of the estate arisin! from fires storms shipwreck

or other casualties or from robber# theft or embe))lement when such lossesare not compensated for b# insurance or otherwise and if at the time of the filin!of the return such losses have not been claimed as a deduction for the incometax purposes in an income tax return and provided that such losses wereincurred not later than the last da# for the pa#ment of the estate tax asprescribed in (ubsection %$' of (ection =4.

%5' ropert# reviousl# Taxed. - $n amount e+ual to the value specified below of an#propert# formin! a part of the !ross estate situated in the hilippines of an# person whodied within five %;' #ears prior to the death of the decedent or transferred to the decedentb# !ift within five %;' #ears prior to his death where such propert# can be identified ashavin! been received b# the decedent from the donor b# !ift or from such prior decedentb# !ift be+uest devise or inheritance or which can be identified as havin! been ac+uired

in exchan!e for propert# so received*

ne hundred percent %4::' of the value if the prior decedent died within one %4' #earprior to the death of the decedent or if the propert# was transferred to him b# !ift withinthe same period prior to his death,

/i!ht# percent %>:' of the value if the prior decedent died more than one %4' #ear butnot more than two %5' #ears prior to the death of the decedent or if the propert# wastransferred to him b# !ift within the same period prior to his death,

(ixt# percent %0:' of the value if the prior decedent died more than two %5' #ears butnot more than three %1' #ears prior to the death of the decedent or if the propert# wastransferred to him b# !ift within the same period prior to his death,

Fort# percent %&:' of the value if the prior decedent died more than three %1' #ears butnot more than four %&' #ears prior to the death of the decedent or if the propert# wastransferred to him b# !ift within the same period prior to his death,

Twent# percent %5:' of the value if the prior decedent died more than four %&' #ears butnot more than five %;' #ears prior to the death of the decedent or if the propert# wastransferred to him b# !ift within the same period prior to his death,

These deductions shall be allowed onl# where a donorEs tax or estate tax imposed underthis Title was finall# determined and paid b# or on behalf of such donor or the estate ofsuch prior decedent as the case ma# be and onl# in the amount finall# determined as

the value of such propert# in determinin! the value of the !ift or the !ross estate of suchprior decedent and onl# to the extent that the value of such propert# is included in thedecedentEs !ross estate and onl# if in determinin! the value of the estate of the priordecedent no deduction was allowable under para!raph %5' in respect of the propert# orproperties !iven in exchan!e therefor. 2here a deduction was allowed of an# mort!a!e

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or other lien in determinin! the donorEs tax or the estate tax of the prior decedent whichwas paid in whole or in part prior to the decedentEs death then the deduction allowableunder said (ubsection shall be reduced b# the amount so paid. (uch deduction allowableshall be reduced b# an amount which bears the same ratio to the amounts allowed asdeductions under para!raphs %4' and %1' of this (ubsection as the amount otherwise

deductible under said para!raph %5' bears to the value of the decedentEs estate. 2herethe propert# referred to consists of two or more items the a!!re!ate value of such itemsshall be used for the purpose of computin! the deduction.

%1' Transfers for ublic se. - The amount of all the be+uests le!acies devises ortransfers to or for the use of the 3overnment of the Republic of the hilippines or an#political subdivision thereof for exclusivel# public purposes.

%&' The Famil# @ome. - $n amount e+uivalent to the current fair market value of thedecedentEs famil# home* rovided however That if the said current fair market valueexceeds ne million pesos %4::::::' the excess shall be sub"ect to estate tax. $s asine +ua non condition for the exemption or deduction said famil# home must have beenthe decedentEs famil# home as certified b# the baran!a# captain of the localit#.

%;' (tandard Deduction. - $n amount e+uivalent to ne million pesos %4::::::'.

%0' edical /xpenses. - edical /xpenses incurred b# the decedent within one %4' #earprior to his death which shall be dul# substantiated with receipts* rovided That in nocase shall the deductible medical expenses exceed Five @undred Thousand esos%;:::::'.

%6' $mount Received b# @eirs nder Republic $ct 9o. &=46. - $n# amount received b#the heirs from the decedent - emplo#ee as a conse+uence of the death of the decedent-emplo#ee in accordance with Republic $ct 9o. &=46* rovided That such amount isincluded in the !ross estate of the decedent.

B D"duction) A##o-"d to Nonr")id"nt E)tat"). - In the case of a nonresident not a citi)en ofthe hilippines b# deductin! from the value of that part of his !ross estate which at the time ofhis death is situated in the hilippines*

%4' /xpenses Aosses Indebtedness and Taxes. - That proportion of the deductionsspecified in para!raph %4' of (ubsection %$' of this (ection which the value of such partbears to the value of his entire !ross estate wherever situated,

%5' ropert# reviousl# Taxed. - $n amount e+ual to the value specified below of an#propert# formin! part of the !ross estate situated in the hilippines of an# person whodied within five %;' #ears prior to the death of the decedent or transferred to the decedentb# !ift within five %;' #ears prior to his death where such propert# can be identified ashavin! been received b# the decedent from the donor b# !ift or from such prior decedentb# !ift be+uest devise or inheritance or which can be identified as havin! been ac+uiredin exchan!e for propert# so received*

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ne hundred percent %4::' of the value if the prior decedent died within one %4' #earprior to the death of the decedent or if the propert# was transferred to him b# !ift withinthe same period prior to his death,

/i!ht# percent %>:' of the value if the prior decedent died more than one %4' #ear butnot more than two %5' #ears prior to the death of the decedent or if the propert# wastransferred to him b# !ift within the same period prior to his death,

(ixt# percent %0:' of the value if the prior decedent died more than two %5' #ears butnot more than three %1' #ears prior to the death of the decedent or if the propert# wastransferred to him b# !ift within the same period prior to his death,

Fort# percent %&:' of the value if the prior decedent died more than three %1' #ears butnot more than four %&' #ears prior to the death of the decedent or if the propert# wastransferred to him b# !ift within the same period prior to his death, and

Twent# percent %5:' of the value if the prior decedent died more than four %&' #ears butnot more than five %;' #ears prior to the death of the decedent or if the propert# wastransferred to him b# !ift within the same period prior to his death.

These deductions shall be allowed onl# where a donorEs tax or estate tax imposed underthis Title is finall# determined and paid b# or on behalf of such donor or the estate ofsuch prior decedent as the case ma# be and onl# in the amount finall# determined asthe value of such propert# in determinin! the value of the !ift or the !ross estate of suchprior decedent and onl# to the extent that the value of such propert# is included in thatpart of the decedentEs !ross estate which at the time of his death is situated in thehilippines, and onl# if in determinin! the value of the net estate of the prior decedentno deduction is allowable under para!raph %5' of (ubsection %B' of this (ection inrespect of the propert# or properties !iven in exchan!e therefore. 2here a deduction wasallowed of an# mort!a!e or other lien in determinin! the donorEs tax or the estate tax ofthe prior decedent which was paid in whole or in part prior to the decedentEs death thenthe deduction allowable under said para!raph shall be reduced b# the amount so paid.(uch deduction allowable shall be reduced b# an amount which bears the same ratio tothe amounts allowed as deductions under para!raphs %4' and %1' of this (ubsection asthe amount otherwise deductible under para!raph %5' bears to the value of that part ofthe decedentEs !ross estate which at the time of his death is situated in the hilippines.2here the propert# referred to consists of two %5' or more items the a!!re!ate value ofsuch items shall be used for the purpose of computin! the deduction.

%1' Transfers for ublic se. - The amount of all be+uests le!acies devises or transfersto or for the use of the 3overnment of the Republic of the hilippines or an# politicalsubdivision thereof for exclusivel# public purposes.

C S!ar" in t!" Con6uga# +ro'"rt0. - the net share of the survivin! spouse in the con"u!alpartnership propert# as diminished b# the obli!ations properl# char!eable to such propert# shallfor the purpose of this (ection be deducted from the net estate of the decedent.

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D .i)c"##an"ou) +ro$i)ion). - 9o deduction shall be allowed in the case of a nonresident nota citi)en of the hilippines unless the executor administrator or an#one of the heirs as the casema# be includes in the return re+uired to be filed under (ection =: the value at the time of hisdeath of that part of the !ross estate of the nonresident not situated in the hilippines.

E Ta% Cr"dit or E)tat" Ta%") 'aid to a For"ign Countr0. -

%4' In 3eneral. - The tax imposed b# this Title shall be credited with the amounts of an#estate tax imposed b# the authorit# of a forei!n countr#.

%5' Aimitations on Credit. - The amount of the credit taken under this (ection shall besub"ect to each of the followin! limitations*

%a' The amount of the credit in respect to the tax paid to an# countr# shall not

exceed the same proportion of the tax a!ainst which such credit is taken whichthe decedentEs net estate situated within such countr# taxable under this Titlebears to his entir net estate, and

%b' The total amount of the credit shall not exceed the same proportion of the taxa!ainst which such credit is taken which the decedentEs net estate situatedoutside the hilippines taxable under this Title bears to his entire net estate.

SEC 7 E%"&'tion o C"rtain Acui)ition) and Tran)&i))ion). - The followin! shall not betaxed*

%$' The mer!er of usufruct in the owner of the naked title,

%B' The transmission or deliver# of the inheritance or le!ac# b# the fiduciar# heir orle!atee to the fideicommissar#,

%C' The transmission from the first heir le!atee or donee in favor of another beneficiar#in accordance with the desire of the predecessor, and

%D' $ll be+uests devises le!acies or transfers to social welfare cultural and charitableinstitutions no part of the net income of which insures to the benefit of an# individual*rovided however That not more than thirt# percent %1:' of the said be+uestsdevises le!acies or transfers shall be used b# such institutions for administration

purposes.

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SEC D"t"r&ination o t!" Va#u" o t!" E)tat" (

A U)uruct. - To determine the value of the ri!ht of usufruct use or habitation as wellas that of annuit# there shall be taken into account the probable life of the beneficiar# in

accordance with the latest Basic (tandard ortalit# Table to be approved b# the(ecretar# of Finance upon recommendation of the Insurance Commissioner.

B +ro'"rti"). - The estate shall be appraised at its fair market value as of the time ofdeath. @owever the appraised value of real propert# as of the time of death shall bewhichever is hi!her of -

%4' The fair market value as determined b# the Commissioner or

%5' The fair market value as shown in the schedule of values fixed b# therovincial and Cit# $ssessors.

SEC 9 Notic" o D"at! to ," Fi#"d. - In all cases of transfers sub"ect to tax or where thou!hexempt from tax the !ross value of the estate exceeds Twent# thousand pesos %5::::' theexecutor administrator or an# of the le!al heirs as the case ma# be within two %5' months afterthe decedentEs death or within a like period after +ualif#in! as such executor or administratorshall !ive a written notice thereof to the Commissioner.

SEC 9 E)tat" Ta% R"turn) (

A R"uir"&"nt). - In all cases of transfers sub"ect to the tax imposed herein or where thou!hexempt from tax the !ross value of the estate exceeds Two hundred thousand pesos %5:::::'or re!ardless of the !ross value of the estate where the said estate consists of re!istered orre!istrable propert# such as real propert# motor vehicle shares of stock or other similar propert#for which a clearance from the Bureau of Internal Revenue is re+uired as a condition precedentfor the transfer of ownership thereof in the name of the transferee the executor or theadministrator or an# of the le!al heirs as the case ma# be shall file a return under oath induplicate settin! forth*

%4' The value of the !ross estate of the decedent at the time of his death or in case of anonresident not a citi)en of the hilippines of that part of his !ross estate situated in the

hilippines,

%5' The deductions allowed from !ross estate in determinin! the estate as defined in(ection >0, and

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%1' (uch part of such information as ma# at the time be ascertainable and suchsupplemental data as ma# be necessar# to establish the correct taxes.

rovided however That estate tax returns showin! a !ross value exceedin! Two millionpesos %5::::::' shall be supported with a statement dul# certified to b# a Certifiedublic $ccountant containin! the followin!*

%a' Itemi)ed assets of the decedent with their correspondin! !ross value at thetime of his death or in the case of a nonresident not a citi)en of the hilippinesof that part of his !ross estate situated in the hilippines,

%b' Itemi)ed deductions from !ross estate allowed in (ection >0, and

%c' The amount of tax due whether paid or still due and outstandin!.

B Ti&" or i#ing - For the purpose of determinin! the estate tax provided for in (ection >& ofthis Code the estate tax return re+uired under the precedin! (ubsection %$' shall be filed withinsix %0' months from the decedentEs death.

$ certified cop# of the schedule of partition and the order of the court approvin! the same shall befurnished the Commissioner within thirt# %1:' after the promul!ation of such order.

C E%t"n)ion o Ti&". - The Commissioner shall have authorit# to !rant in meritorious cases areasonable extension not exceedin! thirt# %1:' da#s for filin! the return.

D +#ac" o Fi#ing. - /xcept in cases where the Commissioner otherwise permits the returnre+uired under (ubsection %$' shall be filed with an authori)ed a!ent bank or Revenue Districtfficer Collection fficer or dul# authori)ed Treasurer of the cit# or municipalit# in which thedecedent was domiciled at the time of his death or if there be no le!al residence in thehilippines with the ffice of the Commissioner.

SEC 91 +a0&"nt o Ta% (

A Ti&" o +a0&"nt. - The estate tax imposed b# (ection >& shall be paid at the time the returnis filed b# the executor administrator or the heirs.

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B E%t"n)ion o Ti&". - 2hen the Commissioner finds that the pa#ment on the due date of theestate tax or of an# part thereof would impose undue hardship upon the estate or an# of the heirshe ma# extend the time for pa#ment of such tax or an# part thereof not to exceed five %;' #ears in

case the estate is settled throu!h the courts or two %5' #ears in case the estate is settledextra"udiciall#. In such case the amount in respect of which the extension is !ranted shall be paidon or before the date of the expiration of the period of the extension and the runnin! of the(tatute of Aimitations for assessment as provided in (ection 5:1 of this Code shall be suspendedfor the period of an# such extension.

2here the taxes are assessed b# reason of ne!li!ence intentional disre!ard of rules andre!ulations or fraud on the part of the taxpa#er no extension will be !ranted b# theCommissioner.

If an extension is !ranted the Commissioner ma# re+uire the executor or administrator orbeneficiar# as the case ma# be to furnish a bond in such amount not exceedin! double theamount of the tax and with such sureties as the Commissioner deems necessar# conditioned

upon the pa#ment of the said tax in accordance with the terms of the extension.

C Lia,i#it0 or +a0&"nt - The estate tax imposed b# (ection >& shall be paid b# the executoror administrator before deliver# to an# beneficiar# of his distributive share of the estate. (uchbeneficiar# shall to the extent of his distributive share of the estate be subsidiaril# liable for thepa#ment of such portion of the estate tax as his distributive share bears to the value of the totalnet estate.

For the purpose of this Chapter the term EexecutorE or EadministratorE means the executor oradministrator of the decedent or if there is no executor or administrator appointed +ualified andactin! within the hilippines then an# person in actual or constructive possession of an# propert#

of the decedent.

SEC 9: Di)c!arg" o E%"cutor or Ad&ini)trator ro& +"r)ona# Lia,i#it0 - If the executor oradministrator makes a written application to the Commissioner for determination of the amount ofthe estate tax and dischar!e from personal liabilit# therefore the Commissioner %as soon aspossible and in an# event within one %4' #ear after the makin! of such application or if theapplication is made before the return is filed then within one %4' #ear after the return is filed butnot after the expiration of the period prescribed for the assessment of the tax in (ection 5:1 shallnot notif# the executor or administrator of the amount of the tax. The executor or administratorupon pa#ment of the amount of which he is notified shall be dischar!ed from personal liabilit# foran# deficienc# in the tax thereafter found to be due and shall be entitled to a receipt or writin!

showin! such dischar!e.

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SEC 9< D"inition o D"ici"nc0. - $s used in this Chapter the term Edeficienc#E means*

%a' The amount b# which the tax imposed b# this Chapter exceeds the amount shown as the tax

b# the executor administrator or an# of the heirs upon his return, but the amounts so shown onthe return shall first be increased b# the amounts previousl# assessed %or collected withoutassessment' as a deficienc# and decreased b# the amount previousl# abated refunded orotherwise repaid in respect of such tax, or

%b' If no amount is shown as the tax b# the executor administrator or an# of the heirs upon hisreturn or if no return is made b# the executor administrator or an# heir then the amount b#which the tax exceeds the amounts previousl# assessed %or collected without assessment' as adeficienc#, but such amounts previousl# assessed or collected without assessment shall first bedecreased b# the amounts previousl# abated refunded or otherwise repaid in respect of such tax.

SEC 9= +a0&"nt ,"or" D"#i$"r0 ,0 E%"cutor or Ad&ini)trator . - 9o "ud!e shall authori)ethe executor or "udicial administrator to deliver a distributive share to an# part# interested in theestate unless a certification from the Commissioner that the estate tax has been paid is shown.

SEC 9> Duti") o C"rtain Oic"r) and D",tor). - Re!isters of Deeds shall not re!ister in theRe!istr# of ropert# an# document transferrin! real propert# or real ri!hts therein or an# chattelmort!a!e b# wa# of !ifts inter vivos or mortis causa le!ac# or inheritance unless a certificationfrom the Commissioner that the tax fixed in this Title and actuall# due thereon had been paid isshow and the# shall immediatel# notif# the Commissioner Re!ional Director Revenue Districtfficer or Revenue Collection fficer or Treasurer of the cit# or municipalit# where their offices

are located of the non pa#ment of the tax discovered b# them. $n# law#er notar# public or an#!overnment officer who b# reason of his official duties intervenes in the preparation oracknowled!ment of documents re!ardin! partition or disposal of donation intervivos or mortiscausa le!ac# or inheritance shall have the dut# of furnishin! the Commissioner Re!ionalDirector Revenue District fficer or Revenue Collection fficer of the place where he ma# havehis principal office with copies of such documents and an# information whatsoever which ma#facilitate the collection of the aforementioned tax. 9either shall a debtor of the deceased pa# hisdebts to the heirs le!atee executor or administrator of his creditor unless the certification of theCommissioner that the tax fixed in this Chapter had been paid is shown, but he ma# pa# theexecutor or "udicial administrator without said certification if the credit is included in the inventor#of the estate of the deceased.

SEC 9@ R")titution o Ta% U'on Sati)action o Out)tanding O,#igation) . - If after thepa#ment of the estate tax new obli!ations of the decedent shall appear and the personsinterested shall have satisfied them b# order of the court the# shall have a ri!ht to the restitutionof the proportional part of the tax paid.

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SEC 97 +a0&"nt o Ta% Ant"c"d"nt to t!" Tran)"r o S!ar")3 Bond) or Rig!t) - Thereshall not be transferred to an# new owner in the books of an# corporation sociedad anonimapartnership business or industr# or!ani)ed or established in the hilippines an# share

obli!ation bond or ri!ht b# wa# of !ift inter vivos or mortis causa le!ac# or inheritance unless acertification from the Commissioner that the taxes fixed in this Title and due thereon have beenpaid is shown.

If a bank has knowled!e of the death of a person who maintained a bank deposit account aloneor "ointl# with another it shall not allow an# withdrawal from the said deposit account unless theCommissioner has certified that the taxes imposed thereon b# this Title have been paid*rovided however That the administrator of the estate or an# one %4' of the heirs of the decedentma# upon authori)ation b# the Commissioner withdraw an amount not exceedin! Twent#thousand pesos %5::::' without the said certification. For this purpose all withdrawal slipsshall contain a statement to the effect that all of the "oint depositors are still livin! at the time ofwithdrawal b# an# one of the "oint depositors and such statement shall be under oath b# the saiddepositors.

TITLE III ESTATE AND DONOR5S TA/ES

CHA+TER II ( DONOR5S TA/

SEC 9 I&'o)ition o Ta% (

%$' There shall be levied assessed collected and paid upon the transfer b# an# person

resident or nonresident of the propert# b# !ift a tax computed as provided in (ection==. %B' The tax shall appl# whether the transfer is in trust or otherwise whether the !ift isdirect or indirect and whether the propert# is real or personal tan!ible or intan!ible.

SEC 99 Rat") o Ta% +a0a,#" ,0 Donor (

A In *"n"ra#. - The tax for each calendar #ear shall be computed on the basis of the total net!ifts made durin! the calendar #ear in accordance with the followin! schedule*

If the net !ift is*

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back_to_page_1o

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ver But 9ot ver The Tax (hall be lus f the /xcess ver

4::::: /xempt

4::::: 5::::: : 5 4::::

5::::: ;::::: 5::: & 5::::

;::::: 4:::::: 4&::: 0 ;::::

4:::::: 1:::::: &&::: > 4:::::

1:::::: ;:::::: 5:&::: 4: 1:::::

;:::::: 4::::::: &:&::: 45 ;:::::

4::::::: 4::&::: 4; 4::::::

B Ta% +a0a,#" ,0 Donor i Don"" i) a Strang"r . - 2hen the donee or beneficiar# is stran!erthe tax pa#able b# the donor shall be thirt# percent %1:' of the net !ifts. For the purpose of thistax a Estran!erE is a person who is not a*

%4' Brother sister %whether b# whole or half-blood' spouse ancestor and linealdescendant, or

%5' Relative b# consan!uinit# in the collateral line within the fourth de!ree of relationship.

C $n# contribution in cash or in kind to an# candidate political part# or coalition of parties forcampai!n purposes shall be !overned b# the /lection Code as amended.

SEC 1 Tran)"r or L")) T!an Ad"uat" and u## Con)id"ration - 2here propert# otherthan real propert# referred to in (ection 5&%D' is transferred for less than an ade+uate and fullconsideration in mone# or mone#Es worth then the amount b# which the fair market value of thepropert# exceeded the value of the consideration shall for the purpose of the tax imposed b# thisChapter be deemed a !ift and shall be included in computin! the amount of !ifts made durin!the calendar #ear.

SEC 11 E%"&'tion o C"rtain *it) - The followin! !ifts or donations shall be exempt fromthe tax provided for in this Chapter*

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A In t!" Ca)" o *it) .ad" ,0 a R")id"nt ( %4' Dowries or !ifts made on account of marria!e and before its celebration orwithin one #ear thereafter b# parents to each of their le!itimate reco!ni)ed

natural or adopted children to the extent of the first Ten thousand pesos%4::::'*

%5' 3ifts made to or for the use of the 9ational 3overnment or an# entit# createdb# an# of its a!encies which is not conducted for profit or to an# politicalsubdivision of the said 3overnment, and

%1' 3ifts in favor of an educational and?or charitable reli!ious cultural or socialwelfare corporation institution accredited non!overnment or!ani)ation trust orphilanthrophic or!ani)ation or research institution or or!ani)ation* rovidedhowever That not more than thirt# percent %1:' of said !ifts shall be used b#such donee for administration purposes. For the purpose of the exemption aEnon-profit educational and?or charitable corporation institution accredited

non!overnment or!ani)ation trust or philanthrophic or!ani)ation and?or researchinstitution or or!ani)ationE is a school colle!e or universit# and?or charitablecorporation accredited non!overnment or!ani)ation trust or philanthrophicor!ani)ation and?or research institution or or!ani)ation incorporated as anonstock entit# pa#in! no dividends !overned b# trustees who receive nocompensation and devotin! all its income whether studentsE fees or !iftsdonation subsidies or other forms of philanthroph# to the accomplishment andpromotion of the purposes enumerated in its $rticles of Incorporation.

B In t!" Ca)" o *it) .ad" ,0 a Nonr")id"nt not a Citiz"n o t!" +!i#i''in"). - %4' 3ifts made to or for the use of the 9ational 3overnment or an# entit# createdb# an# of its a!encies which is not conducted for profit or to an# politicalsubdivision of the said 3overnment.

%5' 3ifts in favor of an educational and?or charitable reli!ious cultural or socialwelfare corporation institution foundation trust or philanthrophic or!ani)ation orresearch institution or or!ani)ation* rovided however That not more than thirt#percent %1: of said !ifts shall be used b# such donee for administrationpurposes.

C Ta% Cr"dit or Donor5) Ta%") +aid to a For"ign Countr0 ( 1 In *"n"ra#. - The tax imposed b# this Title upon a donor who was a citi)en or a resident at the time of donation shall be credited with the amount of an# donorEs

tax of an# character and description imposed b# the authorit# of a forei!ncountr#.

: Li&itation) on Cr"dit - The amount of the credit taken under this (ectionshall be sub"ect to each of the followin! limitations*

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%a' The amount of the credit in respect to the tax paid to an# countr#shall not exceed the same proportion of the tax a!ainst which such creditis taken which the net !ifts situated within such countr# taxable under

this Title bears to his entire net !ifts, and

%b' The total amount of the credit shall not exceed the same proportionof the tax a!ainst which such credit is taken which the donorEs net !iftssituated outside the hilippines taxable under this title bears to his entirenet !ifts.

SEC 1: Va#uation o *it) .ad" in +ro'"rt0 - If the !ift is made in propert# the fair marketvalue thereof at the time of the !ift shall be considered the amount of the !ift. In case of realpropert# the provisions of (ection >>%B' shall appl# to the valuation thereof.

SEC 1< Fi#ing o R"turn and +a0&"nt o Ta% (

A R"uir"&"nt) - an# individual who makes an# transfer b# !ift %except those whichunder (ection 4:4 are exempt from the tax provided for in this Chapter' shall for thepurpose of the said tax make a return under oath in duplicate. The return shall se forth*

%4' /ach !ift made durin! the calendar #ear which is to be included in computin!net !ifts,

%5' The deductions claimed and allowable,

%1' $n# previous net !ifts made durin! the same calendar #ear,

%&' The name of the donee, and

%;' (uch further information as ma# be re+uired b# rules and re!ulations madepursuant to law.

B Ti&" and +#ac" o Fi#ing and +a0&"nt - The return of the donor re+uired in this(ection shall be filed within thirt# %1:' da#s after the date the !ift is made and the tax duethereon shall be paid at the time of filin!. /xcept in cases where the Commissioner

otherwise permits the return shall be filed and the tax paid to an authori)ed a!ent bankthe Revenue District fficer Revenue Collection fficer or dul# authori)ed Treasurer ofthe cit# or municipalit# where the donor was domiciled at the time of the transfer or ifthere be no le!al residence in the hilippines with the ffice of the Commissioner. In thecase of !ifts made b# a nonresident the return ma# be filed with the hilippine /mbass#or Consulate in the countr# where he is domiciled at the time of the transfer or directl#with the ffice of the Commissioner.

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SEC 1= D"inition) - For purposes of this Title the terms E!ross estateE and E!iftsE include realand personal propert# whether tan!ible or intan!ible or mixed wherever situated* rovidedhowever That where the decedent or donor was a nonresident alien at the time of his death ordonation as the case ma# be his real and personal propert# so transferred but which are

situated outside the hilippines shall not be included as part of his 5gro)) ")tat"5 or 5gro)) git5*rovided further That franchise which must be exercised in the hilippines, shares obli!ationsor bonds issued b# an# corporation or sociedad anonima or!ani)ed or constituted in thehilippines in accordance with its laws, shares obli!ations or bonds b# an# forei!n corporationei!ht#-five percent %>;' of the business of which is located in the hilippines, sharesobli!ations or bonds issued b# an# forei!n corporation if such shares obli!ations or bonds haveac+uired a business situs in the hilippines, shares or ri!hts in an# partnership business orindustr# established in the hilippines shall be considered as situated in the hilippines*rovided still further that no tax shall be collected under this Title in respect of intan!iblepersonal propert#* %a' if the decedent at the time of his death or the donor at the time of thedonation was a citi)en and resident of a forei!n countr# which at the time of his death or donationdid not impose a transfer tax of an# character in respect of intan!ible personal propert# ofciti)ens of the hilippines not residin! in that forei!n countr# or %b' if the laws of the forei!n

countr# of which the decedent or donor was a citi)en and resident at the time of his death ordonation allows a similar exemption from transfer or death taxes of ever# character or descriptionin respect of intan!ible personal propert# owned b# citi)ens of the hilippines not residin! in thatforei!n countr#.

The term 5d"ici"nc05 means* %a' the amount b# which tax imposed b# this Chapter exceeds theamount shown as the tax b# the donor upon his return, but the amount so shown on the returnshall first be increased b# the amount previousl# assessed %or Collected without assessment' asa deficienc# and decreased b# the amounts previousl# abated refunded or otherwise repaid inrespect of such tax or %b' if no amount is shown as the tax b# the donor then the amount b#which the tax exceeds the amounts previousl# assessed %or collected without assessment' as adeficienc# but such amounts previousl# assessed or collected without assessment shall first bedecreased b# the amount previousl# abated refunded or otherwise repaid in respect of such tax.

TITLE IV VALUE( ADDED TA/

CHA+TER I ( I.+OSITION OF TA/

SEC 1> +"r)on) Lia,#" - $n# person who in the course of trade or business sells bartersexchan!es leases !oods or properties renders services and an# person who imports !oodsshall be sub"ect to the value-added tax %8$T' imposed in (ections 4:0 to 4:> of this Code.

The value-added tax is an indirect tax and the amount of tax ma# be shifted or passed on to thebu#er transferee or lessee of the !oods properties or services. This rule shall likewise appl# toexistin! contracts of sale or lease of !oods properties or services at the time of the effectivit# ofRepublic $ct 9o. 6640.

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The phrase 5in t!" cour)" o trad" or ,u)in"))5 means the re!ular conduct or pursuit of acommercial or an economic activit# includin! transactions incidental thereto b# an# personre!ardless of whether or not the person en!a!ed therein is a nonstock nonprofit privateor!ani)ation %irrespective of the disposition of its net income and whether or not it sellsexclusivel# to members or their !uests' or !overnment entit#.

The rule of re!ularit# to the contrar# notwithstandin! services as defined in this Code renderedin the hilippines b# nonresident forei!n persons shall be considered as bein! course of trade orbusiness.

SEC 1@ Va#u"(Add"d Ta% on Sa#" o *ood) or +ro'"rti") (

A Rat" and Ba)" o Ta% - There shall be levied assessed and collected on ever# sale barteror exchan!e of !oods or properties a value-added tax e+uivalent to ten percent %4:' of the!ross sellin! price or !ross value in mone# of the !oods or properties sold bartered orexchan!ed such tax to be paid b# the seller or transferor* rovided That the resident upon the

recommendation of the (ecretar# of Finance shall ""cti$" anuar0 13 :@ raise the rate ofvalue-added tax to twelve percent %1:' after an# of the followin! conditions has been satisfied*

M%i' 8alue-added tax collection as a percenta!e of 3ross Domestic roduct %3D' of theprevious #ear exceeds two and four-fifth percent %5 &?;', or

M%ii' 9ational !overnment deficit as a percenta!e of 3D of the previous #ear exceeds oneand one-half percent %4 4?5'.

%4' The term Egood)E or EpropertiesE shall mean all tan!ible and intan!ible ob"ects whichare capable of pecuniar# estimation and shall include*

%a' Real properties held primaril# for sale to customers or held for lease in theordinar# course of trade or business,

%b' The ri!ht or the privile!e to use patent cop#ri!ht desi!n or model plansecret formula or process !oodwill trademark trade brand or other like propert#or ri!ht,

%c' The ri!ht or the privile!e to use in the hilippines of an# industrialcommercial or scientific e+uipment,

%d' The ri!ht or the privile!e to use motion picture films tapes and discs, and

%e' Radio television satellite transmission and cable television time.

The term 5gro)) )"##ing 'ric"5 means the total amount of mone# or its e+uivalent whichthe purchaser pa#s or is obli!ated to pa# to the seller in consideration of the sale barteror exchan!e of the !oods or properties excluding the valueadded tax . The excise tax ifan# on such !oods or properties shall form part of the !ross sellin! price.

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%5' The followin! sales b# 8$T-re!istered persons shall be sub"ect to )ero percent %:'rate*

%a' E%'ort Sa#") - The term Eexport salesE means*

%4' The sale and actual shipment of !oods from the hilippines to aforei!n countr# irrespective of an# shippin! arran!ement that ma# bea!reed upon which ma# influence or determine the transfer of ownershipof the !oods so exported and paid for in acceptable forei!n currenc# orits e+uivalent in !oods or services and accounted for in accordance withthe rules and re!ulations of the Ban!ko (entral n! ilipinas %B(',

%5' (ale of raw materials or packa!in! materials to a nonresident bu#erfor deliver# to a resident local export-oriented enterprise to be used inmanufacturin! processin! packin! or repackin! in the hilippines of thesaid bu#erEs !oods and paid for in acceptable forei!n currenc# andaccounted for in accordance with the rules and re!ulations of the Ban!ko(entral n! ilipinas %B(',

%1' (ale of raw materials or packa!in! materials to export-orientedenterprise whose export sales exceed sevent# percent %6:' of totalannual production,

%&' (ale of !old to the Ban!ko (entral n! ilipinas %B(',

%;' Those considered export sales under /xecutive rder 9. 550otherwise known as the mnibus Investment Code of 4=>6 and otherspecial laws, and

%0' The sale of !oods supplies e+uipment and fuel to persons en!a!ed

in international shippin! or international air transport operations.

%b' For"ign Curr"nc0 D"no&inat"d Sa#". - The phrase Eforei!n currenc#denominated saleE means sale to a nonresident of !oods except thosementioned in (ections 4&= and 4;: assembled or manufactured in thehilippines for deliver# to a resident in the hilippines paid for in acceptableforei!n currenc# and accounted for in accordance with the rules and re!ulationsof the Ban!ko (entral n! ilipinas %B('.

%c' (ales to persons or entities whose exemption under special laws orinternational a!reements to which the hilippines is a si!nator# effectivel#sub"ects such sales to )ero rate.

B Tran)action) D""&"d Sa#". - The followin! transactions shall be deemed sale* %4' Transfer use or consumption not in the course of business of !oods or propertiesori!inall# intended for sale or for use in the course of business,

%5' Distribution or transfer to*

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%a' (hareholders or investors as share in the profits of the 8$T-re!isteredpersons, or

%b' Creditors in pa#ment of debt,

%1' Consi!nment of !oods if actual sale is not made within sixt# %0:' da#s followin! thedate such !oods were consi!ned, and

%&' Retirement from or cessation of business with respect to inventories of taxable!oods existin! as of such retirement or cessation.

C C!ang") in or C"))ation o Statu) o a VAT(r"gi)t"r"d +"r)on. - The tax imposed in(ubsection %$' of this (ection shall also appl# to !oods disposed of or existin! as of a certaindate if under circumstances to be prescribed in rules and re!ulations to be promul!ated b# the(ecretar# of Finance upon recommendation of the Commissioner the status of a person as a8$T-re!istered person chan!es or is terminated.

D Sa#") R"turn)3 A##o-anc") and Sa#") Di)count) - The value of !oods or properties soldand subse+uentl# returned or for which allowances were !ranted b# a 8$T-re!istered person ma#be deducted from the !ross sales or receipts for the +uarter in which a refund is made or a creditmemorandum or refund is issued. (ales discount !ranted and indicated in the invoice at the timeof sale and the !rant of which does not depend upon the happenin! of a future event ma# beexcluded from the !ross sales within the same +uarter it was !iven.

E?Aut!orit0 o t!" Co&&i))ion"r to D"t"r&in" t!" A''ro'riat" Ta% Ba)" . - TheCommissioner shall b# rules and re!ulations prescribed b# the (ecretar# of Finance determinethe appropriate tax base in cases where a transaction is deemed a sale barter or exchan!e of!oods or properties under (ubsection %B' hereof or where the !ross sellin! price is unreasonabl#lower than the actual market value.

SEC 17 Va#u"(Add"d Ta% on I&'ortation o *ood) (

A In *"n"ra# - There shall be levied assessed and collected on ever# importation of !oods avalue-added tax e+uivalent to ten percent %4:' based on the total value used b# the Bureau ofCustoms in determinin! tariff and customs duties plus customs duties excise taxes if an# andother char!es such tax to be paid b# the importer prior to the release of such !oods fromcustoms custod#* rovided That where the customs duties are determined on the basis of the+uantit# or volume of the !oods the value-added tax shall be based on the landed cost plusexcise taxes if an#* rovided further That the resident upon the recommendation of the(ecretar# of Finance shall effective <anuar# 4 5::0 raise the rate of value-added tax to twelvepercent %45' after an# of the followin! conditions has been satisfied*

%i' 8alue-added tax collection as a percenta!e of 3ross Domestic roduct %3D' ofthe previous #ear exceeds two and four-fifth percent %5 &?;', or %ii' 9ational !overnment deficit as a percenta!e of 3D of the previous #ear

exceeds one and one-half percent %4 4?5'..

B Tran)"r o *ood) ,0 Ta%("%"&'t +"r)on) - In the case of tax-free importation of !oodsinto the hilippines b# persons entities or a!encies exempt from tax where such !oods aresubse+uentl# sold transferred or exchan!ed in the hilippines to non-exempt persons or entitiesthe purchasers transferees or recipients shall be considered the importers thereof who shall be

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liable for an# internal revenue tax on such importation. The tax due on such importation shallconstitute a lien on the !oods superior to all char!es or liens on the !oods irrespective of thepossessor thereof.

SEC 1 Va#u"(add"d Ta% on Sa#" o S"r$ic") and U)" or L"a)" o +ro'"rti") (

A Rat" and Ba)" o Ta% - There shall be levied assessed and collected a value-added taxe+uivalent to ten percent %4:' of !ross receipts derived from the sale or exchan!e of servicesincludin! the use or lease of properties* rovided That the resident upon the recommendationof the (ecretar# of Finance shall effective <anuar# 4 5::0 raise the rate of value-added tax totwelve percent %45' after an# of the followin! conditions has been satisfied*

%i' 8alue-added tax collection as a percenta!e of 3ross Domestic roduct %3D' ofthe previous #ear exceeds two and four-fifth percent %5 &?;', or%ii' 9ational !overnment deficit as a percenta!e of 3D of the previous #earexceeds one and one-half percent %4 4?5'

The phrase Esale or exchan!e of servicesE means the performance of all kinds of servicesin the hilippines for others for a fee remuneration or consideration includin! thoseperformed or rendered b# construction and service contractors, stock real estatecommercial customs and immi!ration brokers, lessors of propert# whether personal orreal, warehousin! services, lessors or distributors of cinemato!raphic films, personsen!a!ed in millin! processin! manufacturin! or repackin! !oods for others, proprietorsoperators or keepers of hotels motels rest houses pension houses inns resorts,proprietors or operators of restaurants refreshment parlors cafes and other eatin!places includin! clubs and caterers, dealers in securities, lendin! investors,transportation contractors on their transport of !oods or car!oes includin! persons whotransport !oods or car!oes for hire and other domestic common carriers b# land relativeto their transport of !oods or car!oes, common carriers b# air and sea relative to theirtransport of passen!ers !oods or car!oes from one place in the hilippines to anotherplace in the hilippines, sales of electricit# b# !eneration companies transmission anddistribution companies, services of franchise !rantees of electric utilities telephone and

tele!raph radio and television broadcastin! and all other franchise !rantees except thoseunder (ection 44= of this Code and non-life insurance companies %except their cropinsurances' includin! suret# fidelit# indemnit# and bondin! companies, and similarservices re!ardless of whether or not the performance thereof calls for the exercise oruse of the ph#sical or mental faculties. The phrase Esale or exchan!e of servicesE shalllikewise include*

%4' The lease or the use of or the ri!ht or privile!e to use an# cop#ri!ht patent desi!n ormodel plan secret formula or process !oodwill trademark trade brand or other likepropert# or ri!ht,

%5' The lease of the use of or the ri!ht to use of an# industrial commercial or scientifice+uipment,

%1' The suppl# of scientific technical industrial or commercial knowled!e or information,

%&' The suppl# of an# assistance that is ancillar# and subsidiar# to and is furnished as ameans of enablin! the application or en"o#ment of an# such propert# or ri!ht as ismentioned in subpara!raph %5' or an# such knowled!e or information as is mentioned insubpara!raph %1',

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%;' The suppl# of services b# a nonresident person or his emplo#ee in connection withthe use of propert# or ri!hts belon!in! to or the installation or operation of an# brandmachiner# or other apparatus purchased from such nonresident person.

%0' The suppl# of technical advice assistance or services rendered in connection withtechnical mana!ement or administration of an# scientific industrial or commercial

undertakin! venture pro"ect or scheme,

%6' The lease of motion picture films films tapes and discs, and

%>' The lease or the use of or the ri!ht to use radio television satellite transmission andcable television time.

Aease of properties shall be sub"ect to the tax herein imposed irrespective of the placewhere the contract of lease or licensin! a!reement was executed if the propert# is leasedor used in the hilippines.

The term E!ross receiptsE means the total amount of mone# or its e+uivalent representin!the contract price compensation service fee rental or ro#alt# includin! the amount

char!ed for materials supplied with the services and deposits and advanced pa#mentsactuall# or constructivel# received durin! the taxable +uarter for the services performedor to be performed for another person excludin! value-added tax.

B Tran)action) Su,6"ct to ;"ro +"rc"nt Rat" - The followin! services performed in thehilippines b# 8$T- re!istered persons shall be sub"ect to )ero percent %:' rate.

%4' rocessin! manufacturin! or repackin! !oods for other persons doin! businessoutside the hilippines which !oods are subse+uentl# exported where the services arepaid for in acceptable forei!n currenc# and accounted for in accordance with the rulesand re!ulations of the Ban!ko (entral n! ilipinas %B(',

%5' (ervices other than those mentioned in the precedin! para!raph rendered to a personen!a!ed in business conducted outside the hilippines or to a nonresident person noten!a!ed in business who is outside the hilippines when the services are performed theconsideration for which is paid for in acceptable forei!n currenc# and accounted for inaccordance with the rules and re!ulations of the Ban!ko (entral n! ilipinas %B(',

%1' (ervices rendered to persons or entities whose exemption under special laws orinternational a!reements to which the hilippines is a si!nator# effectivel# sub"ects thesuppl# of such services to )ero percent %:' rate,

%&' (ervices rendered to persons en!a!ed in international shippin! or international airtransport operations includin! leases of propert# for use thereof,

%;' (ervices performed b# subcontractors and?or contractors in processin! convertin!or manufacturin! !oods for an enterprise whose export sales exceed sevent# percent%6:' of total annual production,

%0' Transport of passen!ers and car!o b# air or sea vessels from the hilippines to aforei!n countr#, and

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%6' (ale of power or fuel !enerated throu!h renewable sources of ener!# such as butnot limited to biomass solar wind h#dropower !eothermal ocean ener!# and otheremer!in! ener!# sources usin! technolo!ies such as fuel cells and h#dro!en fuels.

SEC 19 E%"&'t Tran)action) - %4' (ub"ect to the provisions of (ubsection %5' hereof thefollowin! transactions shall be exempt from the value-added tax*

M$' (ale or importation of a!ricultural and marine food products in their ori!inal statelivestock and poultr# of a kind !enerall# used as or #ieldin! or producin! foods forhuman consumption, and breedin! stock and !enetic materials therefor.

Mroducts classified under this para!raph shall be considered in their ori!inal state even if the# have under!one the simple processes of preparation or preservation for the marketsuch as free)in! dr#in! saltin! broilin! roastin! smokin! or strippin!. olished and?orhusked rice corn !rits raw cane su!ar and molasses ordinar# salt and copra shall beconsidered in their ori!inal state,

M%B' (ale or importation of fertili)ers, seeds seedlin!s and fin!erlin!s, fish prawnlivestock and poultr# feeds includin! in!redients whether locall# produced or importedused in the manufacture of finished feeds %except specialt# feeds for race horses fi!htin!cocks a+uarium fish )oo animals and other animals !enerall# considered as pets',

M%C' Importation of personal and household effects belon!in! to the residents of thehilippines returnin! from abroad and nonresident citi)ens comin! to resettle in thehilippines* rovided That such !oods are exempt from customs duties under the Tariffand Customs Code of the hilippines,

M%D' Importation of professional instruments and implements wearin! appareldomestic animals and personal household effects %except an# vehicle vessel aircraft

machiner# other !oods for use in the manufacture and merchandise of an# kind incommercial +uantit#' belon!in! to persons comin! to settle in the hilippines for theirown use and not for sale barter or exchan!e accompan#in! such persons or arrivin!within ninet# %=:' da#s before or after their arrival upon the production of evidencesatisfactor# to the Commissioner that such persons are actuall# comin! to settle in thehilippines and that the chan!e of residence is bona fide,

M%/' (ervices sub"ect to percenta!e tax under Title 8,

M%F' (ervices b# a!ricultural contract !rowers and millin! for others of pala# into ricecorn into !rits and su!ar cane into raw su!ar,

M%3' edical dental hospital and veterinar# services except those rendered b#

professionals,

M%@' /ducational services rendered b# private educational institutions dul# accreditedb# the Department of /ducation %Dep/d' the Commission on @i!her /ducation %C@/D'the Technical /ducation and (kills Development $uthorit# %T/(D$' and those renderedb# !overnment educational institutions,

M%I' (ervices rendered b# individuals pursuant to an emplo#er-emplo#ee relationship,

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M%<' (ervices rendered b# re!ional or area head+uarters established in thehilippines b# multinational corporations which act as supervisor# communications andcoordinatin! centers for their affiliates subsidiaries or branches in the $sia-acificRe!ion and do not earn or derive income from the hilippines,

M%' Transactions which are exempt under international a!reements to which the

hilippines is a si!nator# or under special laws except those under residential Decree9o. ;5=,

M%A' (ales b# a!ricultural cooperatives dul# re!istered with the CooperativeDevelopment $uthorit# to their members as well as sale of their produce whether in itsori!inal state or processed form to non-members, their importation of direct farm inputsmachineries and e+uipment includin! spare parts thereof to be used directl# andexclusivel# in the production and?or processin! of their produce,

M%' 3ross receipts from lendin! activities b# credit or multi-purpose cooperatives dul#re!istered with the Cooperative Development $uthorit#,

M%9' (ales b# non-a!ricultural non-electric and non-credit cooperatives dul#

re!istered with the Cooperative Development $uthorit#* rovided That the share capitalcontribution of each member does not exceed Fifteen thousand pesos %4;:::' andre!ardless of the a!!re!ate capital and net surplus ratabl# distributed amon! themembers*

M%' /xport sales b# persons who are not 8$T-re!istered,

M%' (ale of real properties not primaril# held for sale to customers or held for lease inthe ordinar# course of trade or business or real propert# utili)ed for low-cost andsociali)ed housin! as defined b# Republic $ct 9o. 656= otherwise known as the rbanDevelopment and @ousin! $ct of 4==5 and other related laws residential lot valued atne million five hundred thousand pesos %4;:::::' and below house and lot andother residential dwellin!s valued at Two million five hundred thousand pesos

%5;:::::' and below* rovided That not later than <anuar# 14 5::= and ever# three%1' #ears thereafter the amounts herein stated shall be ad"usted to their present valuesusin! the Consumer rice Index as published b# the 9ational (tatistics ffice %9(',

M%G' Aease of a residential unit with a monthl# rental not exceedin! Ten thousandpesos %4::::'* rovided That not later than <anuar# 14 5::= and ever# three %1'#ears thereafter the amount herein stated shall be ad"usted to its present value usin! theConsumer rice Index as published b# the 9ational (tatistics ffice %9(',

M%R' (ale importation printin! or publication of books and an# newspaper ma!a)inereview or bulletin which appears at re!ular intervals with fixed prices for subscription andsale and which is not devoted principall# to the publication of paid advertisements,

M%(' (ale importation or lease of passen!er or car!o vessels and aircraft includin!en!ine e+uipment and spare parts thereof for domestic or international transportoperations,

M%T' Importation of fuel !oods and supplies b# persons en!a!ed in internationalshippin! or air transport operations,

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M%' (ervices of banks non-bank financial intermediaries performin! +uasi-bankin!functions and other non-bank financial intermediaries, and

M%8' (ale or lease of !oods or properties or the performance of services other than

the transactions mentioned in the precedin! para!raphs the !ross annual sales and?orreceipts do not exceed the amount of ne million five hundred thousand pesos%4;:::::'* rovided That not later than <anuar# 14 5::= and ever# three %1' #earsthereafter. the amount herein stated shall be ad"usted to its present value usin! theConsumer rice Index as published b# the 9ational (tatistics ffice %9(',

M%5' $ 8$T-re!istered person ma# elect that (ubsection %4' not appl# to its sale of!oods or properties or services* rovided That an election made under this (ubsectionshall be irrevocable for a period of three %1' #ears from the +uarter the election wasmade.M

SEC 11 Ta% Cr"dit) (

A Cr"dita,#" In'ut Ta% ( %4' $n# input tax evidenced b# a 8$T invoice or official receipt issued in accordance with(ection 441 hereof on the followin! transactions shall be creditable a!ainst the outputtax*

%a' urchase or importation of !oods* %i' For sale, or %ii' For conversion into or intended to form part of a finished product forsale includin! packa!in! materials, or %iii' For use as supplies in the course of business, or %iv' For use as materials supplied in the sale of service, or %v' For use in trade or business for which deduction for depreciation oramorti)ation is allowed under this Code.

%b' urchase of services on which a value-added tax has been actuall# paid.

%5' The input tax on domestic purchase of !oods or properties shall be creditable*

%a' To the purchaser upon consummation of sale and on importation of !oods orproperties, and

%b' To the importer upon pa#ment of the value-added tax prior to the release ofthe !oods from the custod# of the Bureau of Customs.

rovided That the input tax on !oods purchased or imported in a

calendar month for use in trade or business for which deduction for depreciationis allowed under this Code shall be spread evenl# over the month of ac+uisitionand the fift#-nine %;=' succeedin! months if the a!!re!ate ac+uisition cost forsuch !oods excludin! the 8$T component thereof exceeds ne million pesos%4::::::'* rovided however That if the estimated useful life of the capital!ood is less than five %;' #ears as used for depreciation purposes then the input8$T shall be spread over such a shorter period* rovided finall# That in the caseof purchase of services lease or use of properties the input tax shall becreditable to the purchaser lessee or licensee upon pa#ment of the

compensation rental ro#alt# or fee.

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%1' $ 8$T-re!istered person who is also en!a!ed in transactions not sub"ect to the value-added tax shall be allowed tax credit as follows*

%a' Total input tax which can be directl# attributed to transactions sub"ect tovalue-added tax, and

%b' $ ratable portion of an# input tax which cannot be directl# attributed to eitheractivit#.

The term Einput taxE means the value-added tax due from or paid b# a 8$T-re!istered person in the course of his trade or business on importation of !oodsor local purchase of !oods or services includin! lease or use of propert# from a8$T-re!istered person. It shall also include the transitional input tax determinedin accordance with (ection 444 of this Code.

The term Eoutput taxE means the value-added tax due on the sale or lease oftaxable !oods or properties or services b# an# person re!istered or re+uired tore!ister under (ection 510 of this Code.

B E%c")) Out'ut or In'ut Ta% - If at the end of an# taxable +uarter the output tax exceedsthe input tax the excess shall be paid b# the 8$T-re!istered person. If the input tax exceeds theoutput tax the excess shall be carried over to the succeedin! +uarter or +uarters* rovided Thatthe input tax inclusive of input 8$T carried over from the previous +uarter that ma# be credited inever# +uarter shall not exceed sevent# percent %6:' of the output 8$T* rovided however Thatan# input tax attributable to )ero-rated sales b# a 8$T-re!istered person ma# at his option berefunded or credited a!ainst other internal revenue taxes sub"ect to the provisions of (ection445.

C D"t"r&ination o Cr"dita,#" In'ut Ta% - The sum of the excess input tax carried over fromthe precedin! month or +uarter and the input tax creditable to a 8$T-re!istered person durin! thetaxable month or +uarter shall be reduced b# the amount of claim for refund or tax credit forvalue-added tax and other ad"ustments such as purchase returns or allowances and input tax

attributable to exempt sale. The claim for tax credit referred to in the fore!oin! para!raph shall include not onl# those filedwith the Bureau of Internal Revenue but also those filed with other !overnment a!encies such asthe Board of Investments and the Bureau of Customs.

SEC 111 Tran)itiona#G+r")u&'ti$" In'ut Ta% Cr"dit) (

A Tran)itiona# In'ut Ta% Cr"dit) - $ person who becomes liable to value-added tax or an#person who elects to be a 8$T-re!istered person shall sub"ect to the filin! of an inventor#accordin! to rules and re!ulations prescribed b# the (ecretar# of Finance upon recommendationof the Commissioner be allowed input tax on his be!innin! inventor# of !oods materials andsupplies e+uivalent to two percent %5' of the value of such inventor# or the actual value-added

tax paid on such !oods materials and supplies whichever is hi!her which shall be creditablea!ainst the output tax.

B +r")u&'ti$" In'ut Ta% Cr"dit) (

ersons or firms en!a!ed in the processin! of sardines mackerel and milk and inmanufacturin! refined su!ar cookin! oil and packed noodle-based instant meals shall beallowed a presumptive input tax creditable a!ainst the output tax e+uivalent to four percent %&'

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of the !ross value in mone# of their purchases of primar# a!ricultural products which are used asinputs to their production.

$s used in this (ubsection the term !processing! shall mean pasteuri"ation, canning andactivities which through physical or chemical process alter the exterior texture or #orm or innersu$stance o# a product in such manner as to prepare it #or special use to which it could not have

$een put in its original #orm or condition.

SEC 11: R"und) or Ta% Cr"dit) o In'ut Ta% (

A ;"ro(rat"d or E"cti$"#0 ;"ro(rat"d Sa#") - $n# 8$T-re!istered person whose sales are)ero-rated or effectivel# )ero-rated ma# within two %&' years a#ter the close o# the taxa$le (uarterwhen the sales were made appl# for the issuance of a tax credit certificate or refund of creditableinput tax due or paid attributable to such sales except transitional input tax to the extent thatsuch input tax has not been applied a!ainst output tax* rovided however that in the case of)ero-rated sale under (ection 4:0%$'%5'%a'%4' %5' and %b' and (ection 4:>%B'%4' and %5' theacceptable forei!n currenc# exchan!e proceeds thereof had been dul# accounted for inaccordance with the rules and re!ulations of the Ban!ko (entral n! ilipinas %B('* rovided

further that where the taxpa#er is en!a!ed in )ero-rated or effectivel# )ero-rated sale and also intaxable or exempt sale of !oods or properties or services and the amount of creditable input taxdue or paid cannot be directl# and entirel# attributed to an# one of the transactions it shall beallocated proportionatel# on the basis of the volume of sales* rovided finall# that for a personmakin! sales that are )ero-rated under (ection 4:>%B'%0' the input taxes shall be allocatedratabl# between his )ero-rated and non-)ero-rated sales.

B Canc"##ation o VAT R"gi)tration - $ person whose re!istration has been cancelled due toretirement from or cessation of business or due to chan!es in or cessation of status under(ection 4:0%C' of this Code ma# within two %&' years #rom the date o# cancellation, apply #or theissuance o# a tax credit certi#icate #or any unused input tax which ma# be used in pa#ment of hisother internal revenue taxes.

C +"riod -it!in -!ic! R"und or Ta% Cr"dit o In'ut Ta%") )!a## ," .ad" - In propercases the Commissioner shall !rant a refund or issue the tax credit certificate for creditable inputtaxes within one hundred twent# %)&*' days from the date of submission of complete documentsin support of the application filed in accordance with (ubsection %$' hereof.

In case of full or partial denial of the claim for tax refund or tax credit or the failure on the part ofthe Commissioner to act on the application within the period prescribed above the taxpa#eraffected ma# within thirt# %+*' days from the receipt of the decision den#in! the claim or after theexpiration of the one hundred twent# da#-period appeal the decision or the Qunacted claim withthe Court of Tax $ppeals. D .ann"r o *i$ing R"und - Refunds shall be made upon warrants drawn b# theCommissioner or b# his dul# authori)ed representative without the necessit# of bein!countersi!ned b# the Chairman Commission on audit the provisions of the $dministrative Codeof 4=>6 to the contrar# notwithstandin!* rovided That refunds under this para!raph shall besub"ect to post audit b# the Commission on $udit.

TITLE IV VALUE( ADDED TA/

CHA+TER II ( CO.+LIANCE RE2UIRE.ENTS

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SEC 11< In$oicing and Accounting R"uir"&"nt) or VAT(R"gi)t"r"d +"r)on) (

A In$oicing R"uir"&"nt) $ 8$T-re!istered person shall issue*

%4' $ 8$T invoice for ever# sale barter or exchan!e of !oods or properties, and

%5' $ 8$T official receipt for ever# lease of !oods or properties and for ever# salebarter or exchan!e of services.

%B' Inor&ation Contain"d in t!" VAT In$oic" or VAT Oicia# R"c"i't S The followin!information shall be indicated in the 8$T invoice or 8$T official receipt*

%4' $ statement that the seller is a 8$T-re!istered person followed b# his Taxpa#erEsIdentification 9umber %TI9',

%5' The total amount which the purchaser pa#s or is obli!ated to pa# to the sellerwith the indication that such amount includes the value-added tax* rovided that*

%a' The amount of the tax shall be shown as a separate item in the invoice or receipt,

%b' If the sale is exempt from value-added tax the term E8$T-exempt saleEshall be written or printed prominentl# on the invoice or receipt,

%c' If the sale is sub"ect to )ero percent %:' value-added tax the termE)ero-rated saleE shall be written or printed prominentl# on the invoice or receipt,

%d' If the sale involves !oods properties or services some of which aresub"ect to and some of which are 8$T )ero-rated or 8$T-exempt the invoice orreceipt shall clearl# indicate the break-down of the sale price between its taxableexempt and )ero-rated components and the calculation of the value-added tax

on each portion of the sale shall be shown on the invoice or receipt* rovidedThat the seller ma# issue separate invoices or receipts for the taxable exemptand )ero-rated components of the sale.

%1' The date of transaction +uantit# unit cost and description of the !oods or propertiesor nature of the service, and

%&' In the case of sales in the amount of ne thousand pesos %4:::' or morewhere the sale or transfer is made to a 8$T-re!istered person the name business st#leif an# address and Taxpa#er Identification 9umber %TI9' of the purchaser customer orclient.

%C' Accounting R"uir"&"nt) S 9otwithstandin! the provisions of (ection 511 allpersons sub"ect to the value-added tax under (ections 4:0 and 4:> shall in addition to there!ular accountin! records re+uired maintain a subsidiar# sales "ournal and subsidiar# purchase

"ournal on which the dail# sales and purchases are recorded. The subsidiar# "ournals shallcontain such information as ma# be re+uired b# the (ecretar# of Finance.

%D' Con)"u"nc" o I))uing Erron"ou) VAT In$oic" or VAT Oicia# R"c"i't . S

%4' If a person who is not a 8$T-re!istered person issues an invoice or receipt showin! hisTaxpa#er Identification 9umber %TI9' followed b# the word E8$TE*

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%a' The issuer shall in addition to an# liabilit# to other percenta!e taxes be liable to*

%i' The tax imposed in (ection 4:0 or 4:> without the benefit of an# inputtax credit, and

%ii' $ fift# percent %;:' surchar!e under (ection 5&> %B' of this Code,

%b' The 8$T shall if the other re+uisite information re+uired under (ubsection %B'hereof is shown on the invoice or receipt be reco!ni)ed as an input tax credit to thepurchaser under (ection 44: of this Code.

%5' If a 8$T-re!istered person issues a 8$T invoice or 8$T official receipt for a 8$T-exempt transaction but fails to displa# prominentl# on the invoice or receipt the termE8$T-exempt saleE the issuer shall be liable to account for the tax imposed in (ection 4:0or 4:> as if (ection 4:= did not appl#.

%/' Tran)itiona# +"riod S 9otwithstandin! (ubsection %B' hereof taxpa#ers ma# continueto issue 8$T invoices and 8$T official receipts for the period <ul# 4 5::; to December 14 5::;in accordance with Bureau of Internal Revenue administrative practices that existed as of

December 14 5::&.M

SEC 11= R"turn and +a0&"nt o Va#u"(Add"d Ta% (

A In *"n"ra# - /ver# person liable to pa# the value-added tax imposed under this Title shall filea +uarterl# return of the amount of his !ross sales or receipts within twent#-five %5;' da#sfollowin! the close of each taxable +uarter prescribed for each taxpa#er* rovided however That8$T-re!istered persons shall pa# the value-added tax on a monthl# basis.

ny person, whose registration has $een cancelled in accordance with Section &+-, shall #ile areturn and pay the tax due thereon within twenty#ive %&' days #rom the date o# cancellation o#registration/ Provided, 0hat only one consolidated return shall $e #iled $y the taxpayer #or his

principal place o# $usiness or head o##ice and all $ranches.

B 4!"r" to Fi#" t!" R"turn and +a0 t!" Ta% . - /xcept as the Commissioner otherwisepermits the return shall be filed with and the tax paid to an authori)ed a!ent bank RevenueCollection fficer or dul# authori)ed cit# or municipal Treasurer in the hilippines located withinthe revenue district where the taxpa#er is re!istered or re+uired to re!ister.

C 4it!!o#ding o Va#u"(add"d Ta% - S The 3overnment or an# of its political subdivisionsinstrumentalities or a!encies includin! !overnment-owned or -controlled corporations %3CCs'shall before makin! pa#ment on account of each purchase of !oods and services which aresub"ect to the value-added tax imposed in (ections 4:0 and 4:> of this Code deduct andwithhold a final value-added tax at the rate of five percent %;' of the !ross pa#ment thereof*rovided That the pa#ment for lease or use of properties or propert# ri!hts to nonresident

owners shall be sub"ect to ten percent %4:' withholdin! tax at the time of pa#ment. Forpurposes of this (ection the pa#or or person in control of the pa#ment shall be considered as thewithholdin! a!ent.

10he valueadded tax withheld under this Section shall $e remitted within ten %)*' days #ollowingthe end o# the month the withholding was made.

SEC 11> +o-"r o t!" Co&&i))ion"r to Su)'"nd t!" Bu)in")) O'"ration) o a Ta%'a0"r - The Commissioner or his authori)ed representative is hereb# empowered to suspend the

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business operations and temporaril# close the business establishment of an# person for an# ofthe followin! violations*

a In t!" ca)" o a VAT(r"gi)t"r"d +"r)on - %4' Failure to issue receipts or invoices,

%5' Failure to file a value-added tax return as re+uired under (ection 44&, or

%1' nderstatement of taxable sales or receipts b# thirt# percent %<' or more of his correct taxable sales or receipts for the taxable +uarter.

, Fai#ur" o an0 +"r)on to R"gi)t"r a) R"uir"d und"r S"ction :<@ ( The temporar# closure of the establishment shall be for the duration of not less thanfive %;' da#s and shall be lifted onl# upon compliance with whatever re+uirementsprescribed b# the Commissioner in the closure order.

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TITLE V OTHER +ERCENTA*E TA/ES

SEC 11@ Ta% on +"r)on) E%"&'t ro& Va#u"(Add"d Ta% VAT - $n# person whose sales orreceipts are exempt under (ection 4:=%8' of this Code from the pa#ment of value-added tax andwho is not a 8$T-re!istered person shall pa# a tax e+uivalent to three percent %1' of his !ross+uarterl# sales or receipts* rovided That cooperatives shall be exempt from the three percent%1' !ross receipts tax herein imposed.

SEC 117 +"rc"ntag" Ta% on Do&")tic Carri"r) and 8""'"r) o *arag") . - Cars for rent orhire driven b# the lessee, transportation contractors includin! persons who transport passen!ersfor hire and other domestic carriers b# land for the transport of passen!ers %except owners ofbancas and owners of animal-drawn two wheeled vehicle' and keepers of !ara!es shall pa# atax e+uivalent to three percent %1' of their +uarterl# !ross receipts.

The !ross receipts of common carriers derived from their incomin! and out!oin! frei!ht shall notbe sub"ected to the local taxes imposed under Republic $ct 9o. 640: otherwise known as theAocal 3overnment Code of 4==4.

In computin! the percenta!e tax provided in this (ection the followin! shall be considered theminimum +uarterl# !ross receipts in each particular case*

<eepne# for hire - 4.anila and other cities 5&:: 5.rovincial 45::

ublic utilit# bus - 9ot exceedin! 1: passen!ers 10:: /xceedin! 1: but not exceedin! ;: passen!ers 0:::

/xceedin! ;: passen!ers 65:: Taxis -

4.anila and other cities 10:: 5.rovincial 5&::

Car for hire %with chauffer' 1::: Car for hire %without chauffer' 4>::

SEC 11 +"rc"ntag" Ta% on Int"rnationa# Carri"r). -

%$' International air carriers doin! business in the hilippines shall pa# a tax of three percent%1' of their +uarterl# !ross receipts.

%B' International shippin! carriers doin! business in the hilippines shall pa# a tax e+uivalent tothree percent %1' of their +uarterl# !ross receipts.

back7to7pa!e74r

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SEC 119 Ta% on Franc!i)"). - $n# provision of !eneral or special law to the contrar#notwithstandin! there shall be levied assessed and collected in respect to all franchises on radioand?or television broadcastin! companies whose annual !ross receipts of the precedin! #ear donot exceed Ten million pesos %4:::::::' sub"ect to (ection 510 of this Code a tax of threepercent %1' and on !as and water utilities a tax of two percent %5' on the !ross receiptsderived from the business covered b# the law !rantin! the franchise* rovided however Thatradio and television broadcastin! companies referred to in this (ection shall have an option to bere!istered as a value-added taxpa#er and pa# the tax due thereon* rovided further That oncethe option is exercised said option shall be irrevocable.

MThe !rantee shall file the return with and pa# the tax due thereon to the Commissioner or hisdul# authori)ed representative in accordance with the provisions of (ection 45> of this Code andthe return shall be sub"ect to audit b# the Bureau of Internal Revenue an# provision of an#existin! law to the contrar# notwithstandin!.

SEC 1: Ta% on O$"r)"a) Di)'atc!3 ."))ag" or Con$"r)ation Originating ro& t!"+!i#i''in") -

A +"r)on) Lia,#". - There shall be collected upon ever# overseas dispatch messa!e or

conversation transmitted from the hilippines b# telephone tele!raph telewriter exchan!ewireless and other communication e+uipment service a tax of ten percent %4:' on the amountpaid for such services. The tax imposed in this (ection shall be pa#able b# the person pa#in! forthe services rendered and shall be paid to the person renderin! the services who is re+uired tocollect and pa# the tax within twent# %5:' da#s after the end of each +uarter.

B E%"&'tion). - The tax imposed b# this (ection shall not appl# to*

1 *o$"rn&"nt - $mounts paid for messa!es transmitted b# the 3overnment of theRepublic of the hilippines or an# of its political subdivisions or instrumentalities,

: Di'#o&atic S"r$ic"). - $mounts paid for messa!es transmitted b# an# embass# andconsular offices of a forei!n !overnment,

< Int"rnationa# Organization) - $mounts paid for messa!es transmitted b# a publicinternational or!ani)ation or an# of its a!encies based in the hilippines en"o#in!privile!es exemptions and immunities which the 3overnment of the hilippines iscommitted to reco!ni)e pursuant to an international a!reement, and

= N"-) S"r$ic") - $mounts paid for messa!es from an# newspaper pressassociation radio or television newspaper broadcastin! a!enc# or newstickers servicesto an# other newspaper press association radio or television newspaper broadcastin!a!enc# or newsticker service or to a bona fide correspondent which messa!es dealexclusivel# with the collection of news items for or the dissemination of news itemthrou!h public press radio or television broadcastin! or a newsticker service furnishin! a!eneral news service similar to that of the public press.

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SEC 1:1 Ta% on Ban) and Non(,an Financia# Int"r&"diari") +"ror&ing 2ua)i(BaningFunction) – There shall be collected a tax on !ross receipts derived from sources within thehilippines b# all banks and non-bank financial intermediaries in accordance with the followin!

schedule*

a. n interest commissions and discounts from lendin! activities as well as income from

financial leasin! on the basis of remainin! maturities of instruments from which suchreceipts are derived*

aturit# period is five %;' #ears or less K..;

aturit# period is more than five %;' #ears K..1

b. n dividends and e+uit# shares in net income of subsidiaries K.. : c. n ro#alties rentals of propert# real or personal profits from exchan!e and all other

items treated as !ross income under (ection 15 of this Code K.. 6 d. n net tradin! !ains within the taxable #ear on forei!n currenc# debt securities

derivatives and other similar financial instruments K.. 6

Provided, however, That in case the maturit# period referred to in para!raph %a' is shortened thrupretermination then the maturit# period shall be reckoned to end as of the date of preterminationfor purposes of classif#in! the transaction and the correct rate shall be applied accordin!l#.

Provided, #inally, That the !enerall# accepted accountin! principles as ma# be prescribed b# theBanko (entral n! ilipinas for the bank or non-bank financial intermediar# performin! +uasi-bankin! functions shall likewise be the basis for the calculation of !ross receipts.

9othin! in this Code shall preclude the Commissioner from imposin! the same tax hereinprovided on persons performin! similar bankin! activities.*

SEC 1:: 0ax on 2ther 3on4an5 Financial Intermediaries. – There shall be collected a tax offive percent %;' on the !ross receipts derived b# other non-bank financial intermediaries doin!business in the hilippines from interest commissions discounts and all other items treated as!ross income under this code* Provided, That interests commissions and discounts from lendin!activities as well as income from financial leasin! shall be taxed on the basis of remainin!maturities of the instruments from which receipts are derived in accordance with the followin!schedule*

aturit# period is five %;' #ears or less K..;

aturit# period is more than five %;' #earsK.4

Provided, however, That in case the maturit# period is shortened thru pretermination then thematurit# period shall be reckoned to end as of the date for purposes of classif#in! the transactionand the correct rate shall be applied accordin!l#.

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Provided, #inally, That the !enerall# accepted accountin! principles as ma# be prescribed b# the(ecurities and /xchan!e Commission for other non-bank financial intermediaries shall likewisebe the basis for the calculation of !ross receipts.

9othin! in this Code shall preclude the Commissioner from imposin! the same tax herein

provided on persons performin! similar financin! activities.M

SEC 1:< Ta% on Li" In)uranc" +r"&iu&) - There shall be collected from ever# personcompan# or corporation %except purel# cooperative companies or associations' doin! lifeinsurance business of an# sort in the hilippines a tax of five percent %;' of the total premiumcollected whether such premiums are paid in mone# notes credits or an# substitute for mone#,but premiums refunded within six %0' months after pa#ment on account of re"ection of risk orreturned for other reason to a person insured shall not be included in the taxable receipts, norshall an# tax be paid upon reinsurance b# a compan# that has alread# paid the tax, nor upondoin! business outside the hilippines on account of an# life insurance of the insured who is anonresident if an# tax on such premium is imposed b# the forei!n countr# where the branch isestablished nor upon premiums collected or received on account of an# reinsurance if theinsured in case of personal insurance resides outside the hilippines if an# tax on such

premiums is imposed b# the forei!n countr# where the ori!inal insurance has been issued orperfected, nor upon that portion of the premiums collected or received b# the insurancecompanies on variable contracts %as defined in section 515%5' of residential Decree 9o. 045' inexcess of the amounts necessar# to insure the lives of the variable contract workers.

Cooperative companies or associations are such as are conducted b# the members thereof withthe mone# collected from amon! themselves and solel# for their own protection and not for profit.

SEC 1:= Ta% on Ag"nt) o For"ign In)uranc" Co&'ani") - /ver# fire marine ormiscellaneous insurance a!ent authori)ed under the Insurance Code to procure policies ofinsurance as he ma# have previousl# been le!all# authori)ed to transact on risks located in the

hilippines for companies not authori)ed to transact business in the hilippines shall pa# a taxe+ual to twice the tax imposed in (ection 451* rovided That the provision of this (ection shallnot appl# to reinsurance* rovided however That the provisions of this (ection shall not affectthe ri!ht of an owner of propert# to appl# for and obtain for himself policies in forei!n companiesin cases where said owner does not make use of the services of an# a!ent compan# orcorporation residin! or doin! business in the hilippines. In all cases where owners of propert#obtain insurance directl# with forei!n companies it shall be the dut# of said owners to report tothe Insurance Commissioner and to the Commissioner each case where insurance has been soeffected and shall pa# the tax of five percent %;' on premiums paid in the manner re+uired b#(ection 451.

SEC 1:> A&u)"&"nt Ta%") - There shall be collected from the proprietor lessee or operatorof cockpits cabarets ni!ht or da# clubs boxin! exhibitions professional basketball !ames <ai-

$lai and racetracks a tax e+uivalent to*

%a' /i!hteen percent %4>' in the case of cockpits,

%b' /i!hteen percent %4>' in the case of cabarets ni!ht or da# clubs,

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%c' Ten percent %4:' in the case of boxin! exhibitions* rovided however That boxin!exhibitions wherein 2orld or riental Championships in an# division is at stake shall be exemptfrom amusement tax* rovided further That at least one of the contenders for 2orld or rientalChampionship is a citi)en of the hilippines and said exhibitions are promoted b# a citi)en?s ofthe hilippines or b# a corporation or association at least sixt# percent %0:' of the capital of

which is owned b# such citi)ens,

%d' Fifteen percent %4;' in the case of professional basketball !ames as envisioned inresidential Decree 9o. >64* rovided however That the tax herein shall be in lieu of all otherpercenta!e taxes of whatever nature and description, and

%e' Thirt# percent %1:' in the case of <ai-$lai and racetracks of their !ross receipts irrespectiveof whether or not an# amount is char!ed for admission.

For the purpose of the amusement tax the term Mgro)) r"c"i't)M embraces all the receipts of theproprietor lessee or operator of the amusement place. (aid !ross receipts also include incomefrom television radio and motion picture ri!hts if an#. $ person or entit# or association conductin!an# activit# sub"ect to the tax herein imposed shall be similarl# liable for said tax with respect to

such portion of the receipts derived b# him or it.

The taxes imposed herein shall be pa#able at the end of each +uarter and it shall be the dut# ofthe proprietor lessee or operator concerned as well as an# part# liable within twent# %5:' da#safter the end of each +uarter to make a true and complete return of the amount of the !rossreceipts derived durin! the precedin! +uarter and pa# the tax due thereon.

SEC 1:@ Ta% on 4inning) - /ver# person who wins in horse races shall pa# a tax e+uivalentto ten percent %4:' of his winnin!s or EdividendsE the tax to be based on the actual amount paidto him for ever# winnin! ticket after deductin! the cost of the ticket* rovided That in the case ofwinnin!s from double forecast?+uinella and trifecta bets the tax shall be four percent %&'. In thecase of owners of winnin! race horses the tax shall be ten percent %4:' of the pri)es.

The tax herein prescribed shall be deducted from the EdividendsE correspondin! to each winnin!ticket or the Epri)eE of each winnin! race horse owner and withheld b# the operator mana!er orperson in char!e of the horse races before pa#in! the dividends or pri)es to the persons entitledthereto.

The operator mana!er or person in char!e of horse races shall within twent# %5:' da#s from thedate the tax was deducted and withheld in accordance with the second para!raph hereof file atrue and correct return with the Commissioner in the manner or form to be prescribed b# the(ecretar# of Finance and pa# within the same period the total amount of tax so deducted andwithheld.

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SEC 1:7 Ta% on Sa#"3 Bart"r or E%c!ang" o S!ar") o Stoc Li)t"d and Trad"d t!roug!t!" Loca# Stoc E%c!ang" or t!roug! Initia# +u,#ic O"ring -

A Ta% on Sa#"3 Bart"r or E%c!ang" o S!ar") o Stoc Li)t"d and Trad"d t!roug! t!"Loca# Stoc E%c!ang" - There shall be levied assessed and collected on ever# sale barterexchan!e or other disposition of shares of stock listed and traded throu!h the local stockexchan!e other than the sale b# a dealer in securities a tax at the rate of one-half of one percent%4?5 of 4' of the !ross sellin! price or !ross value in mone# of the shares of stock soldbartered exchan!ed or otherwise disposed which shall be paid b# the seller or transferor.

B Ta% on S!ar") o Stoc So#d or E%c!ang"d T!roug! Initia# +u,#ic O"ring - There shallbe levied assessed and collected on ever# sale barter exchan!e or other disposition throu!hinitial public offerin! of shares of stock in closel# held corporations as defined herein a tax at therates provided hereunder based on the !ross sellin! price or !ross value in mone# of the sharesof stock sold bartered exchan!ed or otherwise disposed in accordance with the proportion ofshares of stock sold bartered exchan!ed or otherwise disposed to the total outstandin! shares

of stock after the listin! in the local stock exchan!e*

p to twent#-five percent %5;' &

ver twent#-five percent %5;' but not over thirt#-three and one third percent %11 4?1' 5

ver thirt#-three and one third percent %11 4?1' 4

The tax herein imposed shall be paid b# the issuin! corporation in primar# offerin! or b# the seller in secondar# offerin!.

For purposes of this (ection the term Eclosel# held corporationE means an# corporation at leastfift# percent %;:' in value of outstandin! capital stock or at least fift# percent %;:;' of the totalcombined votin! power of all classes of stock entitled to vote is owned directl# or indirectl# b# orfor not more than twent# %5:' individuals.

For purposes of determinin! whether the corporation is a closel# held corporation insofar as suchdetermination is based on stock ownership the followin! rules shall be applied*

1 Stoc Not O-n"d ,0 Indi$idua#). - (tock owned directl# or indirectl# b# or for acorporation partnership estate or trust shall be considered as bein! ownedproportionatel# b# its shareholders partners or beneficiaries.

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: Fa&i#0 and +artn"r)!i' O-n"r)!i'). - $n individual shall be considered as ownin!the stock owned directl# or indirectl# b# or for his famil# or b# or for his partner. Forpurposes of the para!raph the Efamil# of an individualE includes onl# his brothers andsisters %whether b# whole or half-blood' spouse ancestors and lineal descendants.

< O'tion. - If an# person has an option ac+uire stock such stock shall be consideredas owned b# such person. For purposes of this para!raph an option to ac+uire such anoption and each one of a series of options shall be considered as an option to ac+uiresuch stock.

= Con)tructi$" O-n"r)!i' a) Actua# O-n"r)!i'. - (tock constructivel# owned b#reason of the application of para!raph %4' or %1' hereof shall for purposes of appl#in!para!raph %4' or %5' be treated as actuall# owned b# such person, but stockconstructivel# owned b# the individual b# reason of the application of para!raph %5'hereof shall not be treated as owned b# him for purposes of a!ain appl#in! suchpara!raph in order to make another the constructive owner of such stock.

C R"turn on Ca'ita# *ain) R"a#iz"d ro& Sa#" o S!ar") o Stoc) (

1 R"turn on Ca'ita# *ain) R"a#iz"d ro& Sa#" o S!ar") o Stoc Li)t"d andTrad"d in t!" Loca# Stoc E%c!ang" - It shall be the dut# of ever# stock broker whoeffected the sale sub"ect to the tax imposed herein to collect the tax and remit the sameto the Bureau of Internal Revenue within five %;' bankin! da#s from the date of collectionthereof and to submit on onda#s of each week to the secretar# of the stock exchan!eof which he is a member a true and complete return which shall contain a declaration ofall the transactions effected throu!h him durin! the precedin! week and of taxescollected b# him and turned over to the Bureau f Internal Revenue.

: R"turn on +u,#ic O"ring) o S!ar" Stoc - In case of primar# offerin! thecorporate issuer shall file the return and pa# the correspondin! tax within thirt# %1:' da#sfrom the date of listin! of the shares of stock in the local stock exchan!e. In the case ofsecondar# offerin! the provision of (ubsection %C'%4' of this (ection shall appl# as to the

time and manner of the pa#ment of the tax.

D Co&&on +ro$i)ion) - an# !ain derived from the sale barter exchan!e or other dispositionof shares of stock under this (ection shall be exempt from the tax imposed in (ections 5&%C'56%D'%5' 5>%$'%>'%c' and 5>%B'%;'%c' of this Code and from the re!ular individual or corporateincome tax. Tax paid under this (ection shall not be deductible for income tax purposes.

SEC 1: R"turn) and +a0&"nt o +"rc"ntag" Ta%") (

A R"turn) o *ro)) Sa#")3 R"c"i't) or Earning) and +a0&"nt o Ta% (

1 +"r)on) Lia,#" to +a0 +"rc"ntag" Ta%") - /ver# person sub"ect to the percenta!etaxes imposed under this Title shall file a +uarterl# return of the amount of his !rosssales receipts or earnin!s and pa# the tax due thereon within twent#-five %5;' da#s afterthe end of each taxable +uarter* rovided That in the case of a person whose 8$Tre!istration is cancelled and who becomes liable to the tax imposed in (ection 440 of thisCode the tax shall accrue from the date of cancellation and shall be paid in accordancewith the provisions of this (ection.

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: +"r)on R"tiring ro& Bu)in")) - $n# person retirin! from a business sub"ect topercenta!e tax shall notif# the nearest internal revenue officer file his return and pa# thetax due thereon within twent# %5:' da#s after closin! his business.

< E%c"'tion) - The Commissioner ma# b# rules and re!ulations prescribe*

%a' The time for filin! the return at intervals other than the time prescribed in theprecedin! para!raphs for a particular class or classes of taxpa#ers afterconsiderin! such factors as volume of sales financial condition ade+uatemeasures of securit# and such other relevant information re+uired to besubmitted under the pertinent provisions of this Code, and

%b' The manner and time of pa#ment of percenta!e taxes other than ashereinabove prescribed includin! a scheme of tax prepa#ment.

= D"t"r&ination o Corr"ct Sa#") or R"c"i't) - 2hen it is found that a person hasfailed to issue receipts or invoices or when no return is filed or when there is reason tobelieve that the books of accounts or other records do not correctl# reflect thedeclarations made or to be made in a return re+uired to be filed under the provisions ofthis Code the Commissioner after takin! into account the sales receipts or other taxablebase of other persons en!a!ed in similar businesses under similar situations orcircumstances or after considerin! other relevant information ma# prescribe a minimumamount of such !ross receipts sales and taxable base and such amount so prescribedshall be prima facie correct for purposes of determinin! the internal revenue tax liabilitiesof such person.

B 4!"r" to Fi#" - /xcept as the Commissioner otherwise permits ever# person liable to thepercenta!e tax under this Title ma# at his option file a separate return for each branch or placeof business or a consolidated return for all branches or places of business with the authori)eda!ent bank Revenue District fficer Collection $!ent or dul# authori)ed Treasurer of the cit# ormunicipalit# where said business or principal place of business is located as the case ma# be.

TITLE VI E/CISE TA/ ON CERTAIN *OODS

CHA+TER I ( *ENERAL +ROVISIONS SEC1:9 *ood) )u,6"ct to E%ci)" Ta%") - /xcise taxes appl# to !oods manufactured orproduced in the hilippines for domestic sales or consumption or for an# other disposition and tothin!s imported. The excise tax imposed herein shall be in addition to the value-added tax

imposed under Title I8.

For purposes of this Title excise taxes herein imposed and based on wei!ht or volume capacit#or an# other ph#sical unit of measurement shall be referred to as Especific taxE and an excise taxherein imposed and based on sellin! price or other specified value of the !ood shall be referredto as Ead valorem tax.E

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SEC 1< Fi#ing o R"turn and +a0&"nt o E%ci)" Ta% on Do&")tic +roduct) (

%$' ersons Aiable to File a Return Filin! of Return on Removal and a#ment of Tax. -

1 +"r)on) Lia,#" to Fi#" a R"turn - /ver# person liable to pa# excise tax imposedunder this Title shall file a separate return for each place of production settin! forthamon! others the description and +uantit# or volume of products to be removed theapplicable tax base and the amount of tax due thereon* rovided however That in thecase of indi!enous petroleum natural !as or li+uefied natural !as the excise tax shall bepaid b# the first bu#er purchaser or transferee for local sale barter or transfer while theexcise tax on exported products shall be paid b# the owner lessee concessionaire oroperator of the minin! claim.

(hould domestic products be removed from the place of production without the pa#mentof the tax the owner or person havin! possession thereof shall be liable for the tax duethereon.

: Ti&" or Fi#ing o R"turn and +a0&"nt o t!" Ta% - nless otherwise specificall#allowed the return shall be filed and the excise tax paid b# the manufacturer or producerbefore removal of domestic products form place of production* rovided That the taxexcise on locall# manufactured petroleum products and indi!enous petroleum?leviedunder (ections 4&> and 4;4%$'%&' respectivel# of this Title shall be paid within ten %4:'da#s from the date of removal of such products for the period from <anuar# 4 4==> to<une 1: 4==>, within five %;' da#s from the date of removal of such products for theperiod from <ul# 4 4==> to December 14 4==>, and before removal from the place ofproduction of such products from <anuar# 4 4=== and thereafter* rovided further Thatthe excise tax on nonmetallic mineral or mineral products or +uarr# resources shall bedue and pa#able upon removal of such products from the localit# where mined orextracted but with respect to the excise tax on locall# produced or extracted metallicmineral or mineral products the person liable shall file a return and pa# the tax withinfifteen %4;' da#s after the end of the calendar +uarter when such products were removedsub"ect to such conditions as ma# be prescribed b# rules and re!ulations to bepromul!ated b# the (ecretar# of Finance upon recommendation of the Commissioner.

For this purpose the taxpa#er shall file a bond in an amount which approximates theamount of excise tax due on the removals for the said +uarter. The fore!oin! rulesnotwithstandin! for imported mineral or mineral products whether metallic ornonmetallic the excise tax due thereon shall be paid before their removal from customscustod#.

< +#ac" o Fi#ing o R"turn and +a0&"nt o t!" Ta% - /xcept as the Commissioner

otherwise permits the return shall be filed with and the tax paid to an# authori)ed a!entbank or Revenue Collection fficer or dul# authori)ed Cit# or unicipal Treasurer in thehilippines.

= E%c"'tion) - The (ecretar# of Finance upon recommendation of the Commissionerma# b# rules and re!ulations prescribe*

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%a' The time for filin! the return at intervals other than the time prescribed in theprecedin! para!raphs for a particular class or classes of taxpa#ers afterconsiderin! factors such as volume of removals ade+uate measures of securit#and such other relevant information re+uired to be submitted under the pertinentprovisions of this Code, and

%b' The manner and time of pa#ment of excise taxes other than as hereinprescribed under a tax prepa#ment advance deposit or similar schemes. In thecase of locall# produced of extracted minerals and mineral products or +uarr#resources where the mine site or place of extraction is not the same as the placeof processin! or production the return shall be filed with and the tax paid to theRevenue District ffice havin! "urisdiction over the localit# where the same aremined extracted or +uarried* rovided however That for metallic mineralsprocessed abroad the return shall be filed and the tax due thereon paid to theRevenue District ffice havin! "urisdiction over the localit# where the same aremined extracted or +uarried.

B D"t"r&ination o *ro)) S"##ing +ric" o *ood) Su,6"ct to Ad Va#or"& Ta% - nless

otherwise provided the price excludin! the value-added tax at which the !oods are sold atwholesale in the place of production or throu!h their sales a!ents to the public shall constitute the!ross sellin! price. If the manufacturer also sells or allows such !oods to be sold at wholesale inanother establishment of which he is the owner or in the profits of which he has an interest thewholesale price in such establishment shall constitute the !ross sellin! price. (hould such pricebe less than the cost of manufacture plus expenses incurred until the !oods are finall# sold thena proportionate mar!in of profit not less than ten percent %4:' of such manufacturin! cost andexpenses shall be added to constitute the !ross sellin! price.

C .anuactur"r5) or +roduc"r5) S-orn Stat"&"nt - /ver# manufacturer or producer of!oods or products sub"ect to excise taxes shall file with the Commissioner on the date or datesdesi!nated b# the latter and as often as ma# be re+uired a sworn statement showin! amon!other information the different !oods or products manufactured or produced and their

correspondin! !ross sellin! price or market value to!ether with the cost of manufacture orproduction plus expenses incurred or to be incurred until the !oods or products are finall# sold.

D Cr"dit or E%ci)" ta% on *ood) Actua##0 E%'ort"d - 2hen !oods locall# produced ormanufactured are removed and actuall# exported without returnin! to the hilippines whether soexported in their ori!inal state or as in!redients or parts of an# manufactured !oods or productsan# excise tax paid thereon shall be credited or refunded upon submission of the proof of actualexportation and upon receipt of the correspondin! forei!n exchan!e pa#ment* rovided That theexcise tax on mineral products except coal and coke imposed under (ection 4;4 shall not becreditable or refundable even if the mineral products are actuall# exported.

SEC 1<1 +a0&"nt o E%ci)" Ta%") on I&'ort"r Artic#") J

A +"r)on) Lia,#" - /xcise taxes on imported articles shall be paid b# the owner or importer tothe Customs fficers conformabl# with the re!ulations of the Department of Finance and beforethe release of such articles from the customshouse or b# the person who is found in possessionof articles which are exempt from excise taxes other than those le!all# entitled to exemption.

In the case of tax-free articles brou!ht or imported into the hilippines b# persons entities ora!encies exempt from tax which are subse+uentl# sold transferred or exchan!ed in thehilippines to non-exempt persons or entities the purchasers or recipients shall be considered

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the importers thereof and shall be liable for the dut# and internal revenue tax due on suchimportation.

The provision of an# special or !eneral law to the contrar# notwithstandin! the importation ofci!ars and ci!arettes distilled spirits fermented li+uors and wines into the hilippines even ifdestined for tax and dut#-free shops shall be sub"ect to all applicable taxes duties char!esincludin! excise taxes due thereon. This shall appl# to ci!ars and ci!arettes distilled spiritsfermented li+uors and wines brou!ht directl# into the dul# chartered or le!islated freeports of the(ubic (pecial /conomic and Freeport Jone created under Republic $ct 9o. 6556, the Ca!a#an(pecial /conomic Jone and Freeport created under Republic $ct 9o. 6=55, and the Jamboan!aCit# (pecial /conomic Jone created under Republic $ct 9o. 6=:1 and such other freeports asma# hereafter be established or created b# law* rovided further That importations of ci!ars andci!arettes distilled spirits fermented li+uors and wines made directl# b# a !overnment-ownedand operated dut#-free shop like the Dut#-Free hilippines %DF' shall be exempted from allapplicable duties onl#* rovided still further That such articles directl# imported b# a!overnment-owned and operated dut#-free shop like the Dut#-Free hilippines shall be labeledEdut#-freeE and Enot for resaleE* rovided finall# That the removal and transfer of tax and dut#-free!oods products machiner# e+uipment and other similar articles other than ci!ars and ci!arettesdistilled spirits fermented li+uors and wines from one freeport to another freeport shall not bedeemed on introduction into the hilippine customs territor#.

Ci!ars and ci!arettes distilled spirits and wines within the premises of all dut#-free shops whichare not labelled as hereinabove re+uired as well as tax and dut#-free articles obtained from adut#-free shop and subse+uentl# found in a non-dut#-free shop to be offered for resale shall beconfiscated and the perpetrator of such non-labellin! or re-sellin! shall be punishable under theapplicable provisions of this Code.

$rticles confiscated shall be disposed of in accordance with the rules and re!ulations to bepromul!ated b# the (ecretar# of Finance upon recommendation of the Commissioners ofCustoms and Internal Revenue upon consultation with the (ecretar# of Tourism and the 3eneralana!er of the hilippine Tourism $uthorit#.

The tax due on an# such !oods products machiner# e+uipment or other similar articles shall

constitute a lien on the article itself and such lien shall be superior to all other char!es or liensirrespective of the possessor thereof.

%B' Rate and Basis of the /xcise Tax on Imported $rticles. S nless otherwise specifiedimported articles shall be sub"ect to the same rates and basis of excise taxes applicable to locall#manufactured articles.M

SEC 1<: .od" o Co&'uting Cont"nt) o Ca) or +acag" - /ver# fractional part of a proofliter e+ual to or !reater than a half liter in a cask or packa!e containin! more than one liter shallbe taxed as a liter and an# smaller fractional part shall be exempt, but an# packa!e of spirits thetotal content of which are less than a proof liter shall be taxed as one liter.

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TITLE VIE/CISE TA/ ON CERTAIN *OODS

CHA+TER II ( E/E.+TION OR CONDITIONAL TA/(FREE RE.OVAL OF CERTAINARTICLES

SEC 1<< R"&o$a# o 4in") and di)ti##"d S'irit) or Tr"at&"nt o To,acco L"a - ponissuance of a permit from the Commissioner and sub"ect to the rules and re!ulations prescribedb# the (ecretar# of Finance manufacturers of ci!ars and ci!arettes ma# withdraw from bondfree of excise local and imported wines and distilled spirits in specific +uantities and !rades foruse in the treatment of tobacco leaf to b used in the manufacture of ci!ars and ci!arettes, butsuch wines and distilled spirits must first be suitabl# denatured.

SEC 1<= Do&")tic D"natur"d A#co!o# - Domestic alcohol of not less than one hundred ei!ht#de!rees %4>:' proof %ninet# percent %=:' absolute alcohol' shall when suitabl# denatured andrendered unfit for oral intake be exempt from the excise tax prescribed in (ection 4&4* rovidedhowever That such denatured alcohol shall be sub"ect to tax under (ection 4:0%$' of this Code*rovided further That if such alcohol is to be used for motive power it shall be taxed under

(ection 4&>%d' of this Code* rovided finall# That an# alcohol previousl# rendered unfit for oralintake after denaturin! but subse+uentl# rendered fit or oral intake after under!oin! fermentationdilution purification mixture or an# other similar process shall be taxed under (ection 4&4 of thisCode and such tax shall be paid b# the person in possession of such reprocessed spirits.

SEC 1<> +"tro#"u& +roduct) So#d to Int"rnationa# Carri"r) and E%"&'t Entiti") orAg"nci") ( etroleum products sold to the followin! are exempt from excise tax*

%a' International carriers of hilippine or forei!n re!istr# on their use or consumptionoutside the hilippines* rovided That the petroleum products sold to these internationalcarriers shall be stored in a bonded stora!e tank and ma# be disposed of onl# in

accordance with the rules and re!ulations to be prescribed b# the (ecretar# of Financeupon recommendation of the Commissioner,

%b' /xempt entities or a!encies covered b# tax treaties conventions and otherinternational a!reements for their use of consumption* rovided however That thecountr# of said forei!n international carrier or exempt entities or a!encies exempts fromsimilar taxes petroleum products sold to hilippine carriers entities or a!encies, and

%c' /ntities which are b# law exempt from direct and indirect taxes.

SEC 1<@ D"naturation3 4it!dra-a# and U)" o D"natur"d A#co!o#. - $n# person whoproduces withdraws sells transports or knowin!l# uses or is in possession of denaturedalcohol or articles containin! denatured alcohol in violation of laws or re!ulations now or

hereafter in force pertainin! thereto shall be re+uired to pa# the correspondin! tax in addition tothe penalties provided for under Title H of this Code.

,ac?to?'ag"?1t

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SEC 1<7 R"&o$a# o S'irit) Und"r Bond or R"ctiication.- (pirits re+uirin! rectification ma#be removed from the place of production to another establishment for the purpose of rectificationwithout prepa#ment of the excise tax* rovided That the distiller removin! such spirits and therectifier receivin! them shall file with the Commissioner their "oint bond conditioned upon thepa#ment b# the rectifier of the excise tax due on the rectified alcohol* rovided further That in

cases where alcohol has alread# been rectified either b# ori!inal and continuous distillation or b#redistillation no loss for rectification and handlin! shall be allowed and the rectifier thereof shallpa# the excise tax due on such losses* rovided finall# That where a rectifier makes use ofspirits upon which the excise tax has not been paid he shall be liable for the pa#ment of the taxotherwise due thereon.

SEC 1< R"&o$a# o F"r&"nt"d Liuor) to Bond"d 4ar"!ou)" . - $n# brewer ma# removeor transport from his brewer# or other place of manufacture to a bonded warehouse used b# himexclusivel# for the stora!e or sale in bulk of fermented li+uors of his own manufacture an#+uantit# of such fermented li+uors not less than one thousand %4:::' liters at one removalwithout prepa#ment of the tax thereon under a permit which shall be !ranted b# theCommissioner. (uch permit shall be affixed to ever# packa!e so removed and shall be cancelled

or destro#ed in such manner as the Commissioner ma# prescribe. Thereafter the manufacturerof such fermented li+uors shall pa# the tax in the same manner and under the same penalt# andliabilit# as when paid at the brewer#.

SEC 1<9 R"&o$a# o Da&ag"d Liuor) Fr"" o Ta% - 2hen an# fermented li+uor hasbecome sour or otherwise dama!ed so as to be unfit for use as such brewers ma# sell and aftersecurin! a special permit from the Commissioner under such conditions as ma# be prescribed inthe rules and re!ulations prescribed b# the (ecretar# of Finance remove the same without thepa#ment of tax thereon in cask or other packa!es distinct from those ordinaril# used forfermented li+uors each containin! not less than one hundred sevent#-five %46;' liters with a noteof their contents permanentl# affixed thereon.

SEC 1= R"&o$a# o To,acco +roduct) -it!out +r"'a0&"nt o Ta% - roducts of tobaccoentirel# unfit for chewin! or smokin! ma# be removed free of tax for a!ricultural or industrial useunder such conditions as ma# be prescribed in the rules and re!ulations prescribed b# the(ecretar# of Finance. (temmed leaf tobacco fine-cut shorts the refuse of fine-cut chewin!tobacco scraps cuttin!s clippin!s stems or midribs and sweepin!s of tobacco ma# be sold inbulk as raw material b# one manufacturer directl# to another without pa#ment of the tax undersuch conditions as ma# be prescribed in the rules and re!ulations prescribed b# the (ecretar# ofFinance.

5St"&&"d #"a to,accoE as herein used means leaf tobacco which has had the stem or midribremoved. The term does not include broken leaf tobacco.

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CHA+TER III( E/CISE TA/ ON ALCOHOL +RODUCTS

SEC 1=1 Di)ti##"d S'irit) ( n distilled spirits there shall be collected sub"ect to the provisionsof (ection 411 of this Code excise taxes as follows*

%a' If produced from the sap of nipa coconut cassava camote or buri palm or from the "uice s#rup or su!ar of the cane provided such materials are produced commerciall# in thecountr# where the# are processed into distilled spirits per proof liter /leven pesos and sixt#-fivecentavos %44.0;',

%b' If produced from raw materials other than those enumerated in the precedin! para!raphthe tax shall be in accordance with the net retail price per bottle of seven hundred fift# milliliter%6;: ml.' volume capacit# %excludin! the excise tax and the value-added tax' as follows*

%4' Aess than Two hundred and fift# pesos %5;:.::' S ne hundred twent#-sixpesos %450.::' per proof liter,

%5' Two hundred and fift# pesos %5;:.::' up to (ix hundred and sevent#-five pesos%06;.::' S Two hundred fift#-two pesos %5;5.::' per proof liter, and

%1' ore than (ix hundred and sevent# five pesos %06;.::' S Five hundred fourpesos %;:&.::' per proof liter.

%c' edicinal preparations flavorin! extracts and all other preparations except toiletpreparations of which excludin! water distilled spirits form the chief in!redient shall be sub"ectto the same tax as such chief in!redient.

This tax shall be proportionall# increased for an# stren!th of the spirits taxed over proof spiritsand the tax shall attach to this substance as soon as it is in existence as such whether it besubse+uentl# separated as pure or impure spirits or transformed into an# other substances either in the process of ori!inal production or b# an# subse+uent process.

E(pirits or distilled spiritsE is the substance known as eth#l alcohol ethanol or spirits of wineincludin! all dilutions purifications and mixtures thereof from whatever source b# whateverprocess produced and shall include whisk# brand# rum !in and vodka and other similarproducts of mixtures.

Eroof spiritsE is li+uor containin! one-half %4?5' of its volume of alcohol of a specific !ravit# ofseven thousand nine hundred and thirt#-nine ten thousandths %:.6=1=' at fifteen de!reescenti!rade %4;OC'. $ Eproof literE means a liter of proof spirits.

E9et retail priceE as determined b# the Bureau of Internal Revenue throu!h a price surve# to beconducted b# the Bureau of Internal Revenue itself or b# the 9ational (tatistics ffice whendeputi)ed for the purpose b# the Bureau of Internal Revenue shall mean the price at which thedistilled spirits is sold on retail in at least ten %4:' ma"or supermarkets in etro anila excludin!the amount intended to cover the applicable excise tax and the value-added tax. For brandswhich are marketed outside etro anila the Enet retail priceE shall mean the price at which thedistilled sprits is sold in at least five %;' ma"or supermarkets in the re!ion excludin! the amountintended to cover the applicable excise tax and the value-added tax..

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M8ariants of existin! brands and variants of new brands which are introduced in the domesticmarket after the effectivit# of this $ct shall be taxed under the proper classification thereof basedon the their su!!ested net retail price* rovided however That such classification shall not inan# case be lower than the hi!hest classification of an# variant of that brand.

$ Evariant of a brandE shall refer to a brand on which a modifier is prefixed and?or suffixed to the

root name of the brand.

9ew brands as defined in the immediatel# followin! para!raph shall initiall# be classifiedaccordin! to their su!!ested net retail price.

2illful understatement of the su!!ested net retail price b# as much as fifteen percent %4;' of theactual net retail price shall render the manufacturer liable for additional excise tax e+uivalent tothe tax due and difference between the understated su!!ested net retail price and the actual netretail price.

E9ew brandE shall mean a brand re!istered after the date of effectivit# of R.$. 9o. >5&:.

E(u!!ested net retail priceE shall mean the net retail price at which new brands as defined above

of locall# manufactured or imported distilled spirits are intended b# the manufacturer or importerto be sold on retail in ma"or supermarkets or retail outlets in etro anila for those marketednationwide and in other re!ions for those with re!ional markets. $t the end of three %1' monthsfrom the product launch the Bureau of Internal Revenue shall validate the su!!ested net retailprice as defined herein and determine the correct tax bracket to which a particular new brand ofdistilled spirits as defined above shall be classified. $fter the end of ei!hteen %4>' months fromsuch validation the Bureau of Internal Revenue shall revalidate the initiall# validated net retailprice a!ainst the net retail price of the time of revalidation in order to finall# determine the correcttax bracket which a particular new brand of distilled spirits shall be classified* rovided howeverThat brands of distilled spirits introduced in the domestic market between <anuar# 4 4==6 andDecember 14 5::1 shall remain in the classification under which the Bureau of Internal Revenuehas determined them to belon! as of December 14 5::1. (uch classification of new brands andbrands introduced between <anuar# 4 4==6 and December 14 5::1 shall not be revised except

b# an act of Con!ress.

The rates of tax imposed under this (ection shall be increase b# ei!ht percent %>' ever# two#ears startin! on <anuar# 4 5::6 until <anuar# 4 5:44.

$n# downward reclassification of present cate!ories for tax purposes of existin! brands ofdistilled spirits dul# re!istered at the time of the effectivit# of this $ct which will reduce the taximposed herein or the pa#ment thereof shall be prohibited.

The classification of each brand of distilled spirits based on the avera!e net retail price as ofctober 4 4==0 as set forth in $nnex E$E includin! the classification of brands for the sameproducts which althou!h not set forth in said $nnex E$E were re!istered and were bein!commerciall# produced and marketed on or after ctober 4 4==0 and which continue to becommerciall# produced and marketed after the effectivit# of this $ct shall remain in force untilrevised b# Con!ress.

anufacturers and importers of distilled spirits shall within thirt# %1:' da#s from the effectivit# ofthis $ct and within the first five %;' da#s of ever# third month thereafter submit to theCommissioner a sworn statement of the volume of sales for each particular brand of distilledspirits sold at his establishment for the three-month period immediatel# precedin!.

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$n# manufacturer or importer who in violation of this (ection knowin!l# misdeclares ormisrepresents in his or its sworn statement herein re+uired an# pertinent data or informationshall upon final findin!s b# the Commissioner that the violation was committed be penali)ed b#a summar# cancellation or withdrawal of his or its permit to en!a!e in business as manufactureror importer of distilled spirits.

$n# corporation association or partnership liable for an# of the acts or omissions in violation ofthis (ection shall be fined treble the amount of deficienc# taxes surchar!es and interest whichma# be assessed pursuant to this (ection.

$n# person liable for an# of the acts or omission prohibited under this (ection shall be criminall#liable and penali)ed under (ection 5;& of this Code. $n# person who willfull# aids or abets in thecommission of an# such act or omission shall be criminall# liable in the same manner as theprincipal.

If the offender is not a citi)en of the hilippines he shall be deported immediatel# after servin!the sentence without further proceedin!s for deportation.

SEC 1=: 4in")3 ( n wines there shall be collected per liter of volume capacit# the followin!

taxes.

%a' (parklin! wines?champa!nes re!ardless of proof if the net retail price per bottle%excludin! the excise tax and the value-added tax' is*

%4' Five hundred pesos %;::.::' or less S ne hundred fort#-five pesos and sixt#centavos %4&;.0:', and

%5' ore than Five hundred pesos %;::.::' S Four hundred thirt#-six pesos andei!ht# centavos %&10.>:'.

%b' (till wines containin! fourteen percent %4&' of alcohol b# volume or less (eventeen

pesos and fort#-seven centavos %46.&6', and

%c' (till wines containin! more than fourteen percent %4&' but not more than twent#-fivepercent %5;' of alcohol b# volume Thirt#-four pesos and ninet#-four centavos %1&.=&'.

Fortified wines containin! more than twent#-five percent %5;' of alcohol b# volume shall betaxed as distilled spirits. EFortified winesE shall mean natural wines to which distilled spirits areadded to increase their alcohol stren!th.

E9et retail priceE as determined b# the Bureau of Internal Revenue throu!h a price surve# to beconducted b# the Bureau of Internal Revenue itself or b# the 9ational (tatistics ffice whendeputi)ed for the purpose b# the Bureau of Internal Revenue shall mean the price at which wineis sold on retail in at least ten %4:' ma"or supermarkets in etro anila excludin! the amount

intended to cover the applicable excise tax and the value-added tax. For brands which aremarketed outside etro anila the Enet retail priceE shall mean the price at which the wine is soldin at least five %;' ma"or supermarkets in the re!ion excludin! the amount intended to cover theapplicable excise tax and the value-added tax.

8ariants of existin! brands and variants of new brands which are introduced in the domesticmarket after the effectivit# of this $ct shall be taxed under the proper classification thereof basedon their su!!ested net retail price* rovided however That such classification shall not in an#case be lower than the hi!hest classification of an# variant of that brand.

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$ Evariant of a brandE shall refer to a brand on which a modifier is prefixed and?or suffixed to theroot name of the brand.



E(u!!ested net retail priceE shall mean the net retail price at which new brands as defined aboveof locall# manufactured or imported wines are intended b# the manufacturer or importer to be soldon retail in ma"or supermarkets or retail outlets in etro anila for those marketed nationwideand in other re!ions for those with re!ional markets. $t the end of three %1' months from theproduct launch the Bureau of Internal Revenue shall validate the su!!ested net retail price of thenew brand a!ainst the net retail price as defined herein and determine the correct tax bracket towhich a particular new brand of wine as defined above shall be classified. $fter the end ofei!hteen %4>' months from such validation the Bureau of Internal Revenue shall revalidate theinitiall# validated net retail price a!ainst the net retail price as of the time of revalidation in order tofinall# determine the correct tax bracket which a particular new brand of wines shall be classified*rovided however That brands of wines introduced in the domestic market between <anuar# 4

4==6 and December 14 5::1 shall remain in the classification under which the Bureau of InternalRevenue has determined them to belon! as of December 14 5::1. (uch classification of newbrands and brands introduced between <anuar# 4 4==6 and December 14 5::1 shall not berevised except b# an# act of Con!ress.

The rates of tax imposed under this (ection shall be increased b# ei!ht percent %>' ever# two#ears startin! on <anuar# 4 5::6 until <anuar# 4 5:44.

$n# downward reclassification of present cate!ories for tax purposes of existin! brands of winesdul# re!istered at the time of the effectivit# of this $ct which will reduce the tax imposed herein or the pa#ment thereof shall be prohibited.

The classification of each brand of wines based on the avera!e net retail price as of ctober 4

4==0 as set forth in $nnex EBE includin! the classification of brands for the same products whichalthou!h not set forth in said M$nnex BM were re!istered and were bein! commerciall# producedand marketed after the effectivit# of this $ct shall remain in force until revised b# Con!ress.

anufacturers and importers of wines shall within thirt# %1:' da#s from the effectivit# of this $ctand within the first five %;' da#s of ever# month thereafter submit to the Commissioner a swornstatement of the volume of sales for each particular brand of wines sold at his establishment forthe three-month period immediatel# precedin!.

$n# manufacturer or importer who in violation of this (ection knowin!l# misdeclares ormisrepresents in his or its sworn statement herein re+uired an# pertinent data or informationshall upon discover# be penali)ed b# a summar# cancellation or withdrawal of his or its permit toen!a!e in business as manufacturer or importer of wines.


$n# person liable for an# of the acts or omissions prohibited under this (ection shall be criminall#liable and penali)ed under (ection 5;& of this Code. $n# person who willfull# aids or abets in thecommission of an# such act or omission shall be criminall# liable in the same manner as theprincipal.

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If the offender is not a citi)en of the hilippines he shall be deported immediatel# after servin!the sentence without further proceedin!s for deportation.M

S"c 1=< F"r&"nt"d Liuor ( There shall be levied assessed and collected an excise tax onbeer la!er beer ale porter and other fermented li+uors except tuba basi tapu# and similarfermented li+uors in accordance with the followin! schedule*

%a' If the net retail price %excludin! the excise tax and the value-added tax' per liter of volumecapacit# is less than Fourteen pesos and fift# centavos %4&.;:' the tax shall be /i!ht pesos andtwent#-seven centavos %>.56' per liter,

%b' If the net retail price %excludin! the excise tax and the value-added tax' per liter of volumecapacit# is Fourteen pesos and fift# centavos %4&.;:' up to Twent#-two pesos %55.::' the taxshall be Twelve pesos and thirt# centavos %45.1:' per liter,

%c' If the net retail price %excludin! the excise tax and the value-added tax' per liter of volumecapacit# is more than Twent#-two pesos %55.::' the tax shall be (ixteen pesos and thirt#-threecentavos %40.11' per liter.

8ariants of existin! brands and variants of new brands which are introduced in the domesticmarket after the effectivit# of this $ct shall be taxed under the proper classification thereof basedon their su!!ested net retail price* rovided however That such classification shall not in an#case be lower than the hi!hest classification of an# variant of that brand.


Fermented li+uors which are brewed and sold at micro-breweries or small establishments such aspubs and restaurants shall be sub"ect to the rate in para!raph %c' hereof.

9ew brands as defined in the immediatel# followin! para!raph shall initiall# be classified

accordin! to their su!!ested net retail price.


E(u!!ested net retail priceE shall mean the net retail price at which new brands as defined aboveof locall# manufactured or imported fermented li+uor are intended b# the manufacturer orimporter to be sold on retail in ma"or supermarkets or retail outlets in etro anila for thosemarketed nationwide and in other re!ions for those with re!ional markets. $t the end of three %1'months from the product launch the Bureau of Internal Revenue shall validate the su!!ested netretail price of the new brand a!ainst the net retail price as defined herein and determine thecorrect tax bracket to which a particular new brand of fermented li+uor as defined above shall beclassified. $fter the end of ei!hteen %4>' months from such validation the Bureau of InternalRevenue shall revalidate the initiall# validated net retail price a!ainst the net retail price as of the

time of revalidation in order to finall# determine the correct tax bracket which a particular newbrand of fermented li+uors shall be classified* rovided however That brands of fermentedli+uors introduced in the domestic market between <anuar# 4 4==6 and December 14 5::1 shallremain in the classification under which the Bureau of Internal Revenue has determined them tobelon! as of December 14 5::1. (uch classification of new brands and brands introducedbetween <anuar# 4 4==6 and December 14 5::1 shall not be revised except b# an act ofCon!ress.

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E9et retail priceE as determined b# the Bureau of Internal Revenue throu!h a price surve# to beconducted b# the Bureau of Internal Revenue itself or the 9ational (tatistics ffice whendeputi)ed for the purpose b# the Bureau of Internal Revenue shall mean the price at which thefermented li+uor is sold on retail in at least twent# %5:' ma"or supermarkets in etro anila %forbrands of fermented li+uor marketed nationall#' excludin! the amount intended to cover theapplicable excise tax and the value-added tax. For brands which are marketed outside etroanila the Enet retail priceE shall mean the price at which the fermented li+uor is sold in at leastfive %;' ma"or supermarkets in the re!ion excludin! the amount intended to cover the applicableexcise tax and the value-added tax.

The classification of each brand of fermented li+uor based on its avera!e net retail price as ofctober 4 4==0 as set forth in $nnex ECE includin! the classification of brands for the sameproducts which althou!h not set forth in said $nnex ECE were re!istered and were bein!commerciall# produced and marketed on or after ctober 4 4==0 and which continue to becommerciall# produced and marketed after the effectivit# of this $ct shall remain in force untilrevised b# Con!ress.

The rates of tax imposed under this (ection shall be increased b# ei!ht percent %>' ever# two#ears startin! on <anuar# 4 5::6 until <anuar# 4 5:44.

$n# downward reclassification of present cate!ories for tax purposes of existin! brands offermented li+uor dul# re!istered at the time of the effectivit# of this $ct which will reduce the taximposed herein or the pa#ment thereof shall be prohibited.

/ver# brewer or importer of fermented li+uor shall within thirt# %1:' da#s from the effectivit# ofthis $ct and within the first five %;' da#s of ever# month thereafter submit to the Commissioner asworn statement of the volume of sales for each particular brand of fermented li+uor sold at hisestablishment for the three-month period immediatel# precedin!.

$n# brewer or importer who in violation of this (ection knowin!l# misdeclares or misrepresentsin his or its sworn statement herein re+uired an# pertinent data or information shall be penali)edb# a summar# cancellation or withdrawal of his or its permit to en!a!e in business as brewer or

importer of fermented li+uor.

$n# corporation association or partnership liable for an# the acts or omissions in violation of this(ection shall be fined treble the amount of deficienc# taxes surchar!es and interest which ma#be assessed pursuant to this (ection.


If the offender is not a citi)en of the hilippines he shall be deported immediatel# after servin!the sentence without further proceedin!s for deportation.M


CHA+TER IV ( E/CISE TA/ ON TOBACCO +RODUCTS

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SEC 1== To,acco +roduct) ( There shall be collected a tax of ne peso %4.::' on eachkilo!ram of the followin! products of tobacco*

%a' Tobacco twisted b# hand or reduced into a condition to be consumed in an# manner other than the ordinar# mode of dr#in! and curin!,

%b' Tobacco prepared or partiall# prepared with or without the use of an# machine orinstruments or without bein! pressed or sweetened except as otherwise provided hereunder, and

%c' Fine-cut shorts and refuse scraps clippin!s cuttin!s stems and sweepin!s of tobaccoexcept as otherwise provided hereunder.

(temmed leaf tobacco tobacco prepared or partiall# prepared with or without the use of an#machine or instrument or without bein! pressed or sweetened fine-cut shorts and refuse scrapsclippin!s cuttin!s stems midribs, and sweepin!s of tobacco resultin! from the handlin! orstrippin! of whole leaf tobacco shall be transferred disposed of or otherwise sold without an#prepa#ment of the excise tax herein provided for if the same are to be exported or to be used inthe manufacture of ci!ars ci!arettes or other tobacco products on which the excise tax willeventuall# be paid on the finished product under such conditions as ma# be prescribed in the

rules and re!ulations promul!ated b# the (ecretar# of Finance upon recommendation of theCommissioner.

n tobacco speciall# prepared for chewin! so as to be unsuitable for use in an# other manner oneach kilo!ram (event#-nine centavos %:.6='.

The rates of tax imposed under this (ection shall be increased b# six percent %0' ever# two#ears startin! on <anuar# 4 5::6 until <anuar# 4 5:44.

anufacturers and importers of tobacco products shall within thirt# %1:' da#s from the effectivit#of this $ct and within the first five %;' da#s of ever# month thereafter submit to the Commissioner a sworn statement of the volume of sales for each particular brand of tobacco products sold attheir establishment for the three-month period immediatel# precedin!.

$n# manufacturer or importer who in violation of this (ection knowin!l# misdeclares ormisrepresents in his or its sworn statement herein re+uired an# pertinent data or informationshall upon discover# be penali)ed b# a summar# cancellation or withdrawal of his or its permit toen!a!e in business as manufacturer or importer of ci!ars or ci!arettes.


$n# person liable for an# of the acts or omission prohibited under this (ection shall be criminall#liable and penali)ed under (ection 5;& of this Code. $n# person who willfull# aids or abets in the

commission of an# such act or omission shall be criminall# liable in the same manner as theprincipal.


S"c 1=> Cigar) and Cigar"tt") (

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%$' Ci!ars. S There shall be levied assessed and collected on ci!ars an ad valorem taxbased on the net retail price per ci!ar %excludin! the excise tax and the value-added tax' inaccordance with the followin! schedule*

%4' If the net retail price per ci!ar is Five hundred pesos %;::.::' or less tenpercent %4:', and

%5' If the net retail price per ci!ar %excludin! the excise tax and the value-added tax'is more than Five hundred pesos %;::.::' Fift# pesos %;:.::' plus fifteen percent%4;' of the net retail price in excess of Five hundred pesos %;::.::'.

%B' Ci!arettes acked b# @and. S There shall be levied assessed and collected onci!arettes packed b# hand a tax at the rates prescribed below*

/ffective on <anuar# 4 5::; Two pesos %5.::' per pack,

/ffective on <anuar# 4 5::6 Two pesos and twent#-three centavos %5.51' per pack,

M/ffective on <anuar# 4 5::= Two pesos and fort#-seven centavos %.5.&6' per pack,and

M/ffective on <anuar# 4 5:44 Two pesos and sevent#-two centavos %5.65' per pack.

Dul# re!istered or existin! brands of ci!arettes or new brands thereof packed b# hand shall onl#be packed in thirties.

%C' Ci!arettes acked b# achine. S There shall be levied assessed and collected onci!arettes packed b# machine a tax at the rates prescribed below*

%4' If the net retail price %excludin! the excise tax and the value-added tax' is below Fivepesos %;.::' per pack the tax shall be*

/ffective on <anuar# 4 5::; Two pesos %5.::' per pack,

/ffective on <anuar# 4 5::6 Two pesos and twent#-three centavos %5.51' per pack,

/ffective on <anuar# 4 5::= Two pesos and fort#-seven centavos %5.&6' per pack, and

/ffective on <anuar# 4 5:44 Two pesos and sevent#-two centavos %5.65' per pack.

%5' If the net retail price %excludin! the excise tax and the value-added tax' is Five pesos%;.::' but does not exceed (ix pesos and fift# centavos %0.;:' per pack the tax shall be*

/ffective on <anuar# 4 5::; (ix pesos and thirt#-five centavos %0.1;' per pack,

/ffective on <anuar# 4 5::6 (ix pesos and sevent#-four centavos %0.6&' per pack,

/ffective on <anuar# 4 5::= (even pesos and fourteen centavos %6.4&' per pack, and

/ffective on <anuar# 4 5:44 (even pesos and fift#-six centavos %6.;0' per pack.

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%1' If the net retail price %excludin! the excise tax and the value-added tax' exceeds (ixpesos and fift# centavos %0.;:' but does not exceed Ten pesos %4:.::' per pack the tax shallbe,

/ffective on <anuar# 4 5::; Ten pesos and thirt#-five centavos %4:.1;' per pack,

/ffective on <anuar# 4 5::6 Ten pesos and ei!ht#-ei!ht centavos %4:.>>' per pack,

/ffective on <anuar# 4 5::= /leven pesos and fort#-three centavos %44.&1' per packand,

/ffective on <anuar# 4 5:44 Twelve pesos %45.::' per pack,

%&' If the net retail price %excludin! the excise tax and the value-added tax' exceeds (ixpesos and fift# centavos %0.;:' but does not exceed Ten pesos %4:.::' per pack the tax shallbe*

/ffective on <anuar# 4 5::; Twent#-five pesos %5;.::' per pack,

/ffective on <anuar# 4 5::6 Twent#-six pesos and six centavos %50.:0' per pack,

/ffective on <anuar# 4 5::= Twent#-seven pesos and sixteen centavos %56.40' perpack, and

/ffective on <anuar# 4 5:44 Twent#-ei!ht pesos and thirt# centavos %5>.1:' per pack.

8ariants of existin! brands and variants of new brands of ci!arettes which are introduced in thedomestic market after the effectivit# of this $ct shall be taxed under the proper classificationthereof based on their su!!ested net retail price* rovided however That such classification shallnot in an# case be lower than the hi!hest classification of an# variant of that brand.


Dul# re!istered or existin! brands of ci!arettes or new brands thereof packed b# machine shallonl# be packed in twenties.

$n# downward reclassification of present cate!ories for tax purposes of existin! brands of ci!arsand ci!arettes dul# re!istered at the time of the effectivit# of this $ct which will reduce the taximposed herein or the pa#ment thereof shall be prohibited.



E(u!!ested net retail priceE shall mean the net retail price at which new brands as defined aboveof locall# manufactured or imported ci!arettes are intended b# the manufacturer or importer to besold on retail in ma"or supermarkets or retail outlets in etro anila for those marketednationwide and in other re!ions for those with re!ional markets. $t the end of three %1' monthsfrom the product launch the Bureau of Internal Revenue shall validate the su!!ested net retailprice of the new brand a!ainst the net retail price as defined herein and determine the correct tax

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bracket under which a particular new brand of ci!arette as defined above shall be classified. $fter the end of ei!hteen %4>' months from such validation the Bureau of Internal Revenue shallrevalidate the initiall# validated net retail price a!ainst the net retail price as of the time ofrevalidation in order to finall# determine the correct tax bracket under which a particular newbrand of ci!arettes shall be classified* rovided however That brands of ci!arettes introduced inthe domestic market between <anuar# 4 4==6 and December 14 5::1 shall remain in theclassification under which the Bureau of Internal Revenue has determined them to belon! as ofDecember 14 5::1. (uch classification of new brands and brands introduced between <anuar#4 4==6 and December 14 5::1 shall not be revised except b# an act of Con!ress.

E9et retail priceE as determined b# the Bureau of Internal Revenue throu!h a price surve# to beconducted b# the Bureau of Internal Revenue itself or the 9ational (tatistics ffice whendeputi)ed for the purpose b# the Bureau of Internal Revenue shall mean the price at which theci!arette is sold on retail in at least twent# %5:' ma"or supermarkets in etro anila %for brands of ci!arettes marketed nationall#' excludin! the amount intended to cover the applicable excise taxand value-added tax. For brands which are marketed onl# outside etro anila the Enet retailpriceE shall mean the price at which the ci!arette is sold in at least five %;' ma"or supermarkets inthe re!ion excludin! the amount intended to cover the applicable excise tax and the value-addedtax.

The classification of each brand of ci!arettes based in its avera!e net retail price as of ctober 44==0 as set forth in $nnex EDE includin! the classification of brands for the same products whichalthou!h not set forth in said $nnex EDE were re!istered and were bein! commerciall# producedand marketed on or after ctober 4 4==0 and which continue to be commerciall# produced andmarketed after the effectivit# of this $ct shall remain in force until revised b# Con!ress.

anufacturers and importers of ci!ars and ci!arettes shall within thirt# %1:' da#s from theeffectivit# of this $ct and within the first five %;' da#s of ever# month thereafter submit to theCommissioner a sworn statement of the volume of sales for each particular brand of ci!ars and?or ci!arettes sold at his establishment for the three-month period immediatel# precedin!. I/aCD@

$n# manufacturer or importer who in violation of this (ection knowin!l# misdeclares or

misrepresents in his or its sworn statement herein re+uired an# pertinent data or informationshall upon discover# be penali)ed b# a summar# cancellation or withdrawal of his or its permit toen!a!e in business as manufacturer or importer of ci!ars or ci!arettes.

$n# corporation association or partnership liable for an# of the acts or omissions in violation ofthis (ection shall be fined treble the a!!re!ate amount of deficienc# taxes surchar!es andinterest which ma# be assessed pursuant to this (ection.



SEC 1=@ In)'"ction F"" ( For inspection made in accordance with this Chapter there shall becollected a fee of Fift# centavos %:.;:' for each thousand ci!ars or fraction thereof, Tencentavos %:.4:' for each thousand ci!arettes of fraction thereof, Two centavos %:.:5' for eachkilo!ram of leaf tobacco or fraction thereof, and Three centavos %:.:1' for each kilo!ram orfraction thereof of scrap and other manufactured tobacco.

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The inspection fee on leaf tobacco scrap ci!ars ci!arettes and other tobacco products asdefined in (ection 4&6 of this Code shall be paid b# the wholesaler manufacturer producerowner or operator of redr#in! plant as the case ma# be immediatel# before removal there offrom the establishment of the wholesaler manufacturer owner or operator of the redr#in! plant.In case of imported leaf tobacco and products thereof the inspection fee shall be paid b# theimporter before removal from customsE custod#.

Fift# percent %;:' of the tobacco inspection fee shall accrue to the Tobacco Inspection Fundcreated b# (ection 45 of $ct 9o. 5041 as amended b# $ct 9o. 146= and fift# percent %;:' shallaccrue to the Cultural Center of the hilippines.

SEC 1=7 D"inition o T"r&) ( 2hen used herein and in statements or official formsprescribed hereunder the followin! terms shall have the meanin! indicated*

%a' 5Cigar)5 mean all rolls of tobacco or an# substitute thereof wrapped in leaf tobacco.

%b' 5Cigar"tt")5 mean all rolls of finel#-cut leaf tobacco or an# substitute therefor wrapped inpaper or in an# other material.

%c' 54!o#")a#" 'ric"5 shall mean the amount of mone# or price paid for ci!ars or ci!arettespurchased for the purpose of resale re!ardless of +uantit#.

%d' 5R"tai# 'ric"5 shall mean the amount of mone# or price which an ultimate consumer or end-user pa#s for ci!ars or ci!arettes purchased.


CHA+TER V ( E/CISE TA/ ON +ETROLEU. +RODUCTS

SEC 1= .anuactur"d Oi#) and Ot!"r Fu"#) ( There shall be collected on refined andmanufactured mineral oils and motor fuels the followin! excise taxes which shall attach to the!oods hereunder enumerated as soon as the# are in existence as such*

%a' Aubricatin! oils and !reases includin! but not limited to basestock for lube oils and !reaseshi!h vacuum distillates aromatic extracts and other similar preparations and additives forlubricatin! oils and !reases whether such additives are petroleum based or not per liter andkilo!ram respectivel# of volume capacit# or wei!ht Four pesos and fift# centavos %&.;:'*rovided however That the excise taxes paid on the purchased feedstock %bunker' used in themanufacture of excisable articles and formin! part thereof shall be credited a!ainst the excise taxdue therefrom* rovided further That lubricatin! oils and !reases produced from basestocks andadditives on which the excise tax has alread# been paid shall no lon!er be sub"ect to excise tax*rovided finall# That locall# produced or imported oils previousl# taxed as such but aresubse+uentl# reprocessed rerefined or rec#cled shall likewise be sub"ect to the tax imposedunder this (ection.

%b' rocessed !as per liter of volume capacit# Five centavos %:.:;',

%c' 2axes and petrolatum per kilo!ram Three pesos and fift# centavos %1.;:',

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%d' n denatured alcohol to be used for motive power per liter of volume capacit# Five centavos%:.:;'* rovided That unless otherwise provided b# special laws if the denatured alcohol ismixed with !asoline the excise tax on which has alread# been paid onl# the alcohol content shallbe sub"ect to the tax herein prescribed. For purposes of this (ubsection the removal ofdenatured alcohol of not less than one hundred ei!ht# de!rees %4>:o ' proof %ninet# percent%=:' absolute alcohol' shall be deemed to have been removed for motive power unless shownotherwise,

%e' 9aphtha re!ular !asoline and other similar products of distillation per liter of volume capacit#Four pesos and thirt#-five centavos %&.1;'* rovided however That naphtha when used as araw material in the production of petrochemical products or as replacement fuel for natural-!as-fired-combined c#cle power plant in lieu of locall#-extracted natural !as durin! the non-availabilit# thereof sub"ect to the rules and re!ulations to be promul!ated b# the (ecretar# of/ner!# in consultation with the (ecretar# of Finance per liter of volume capacit# )ero %:.::'*rovided further That the b#-product includin! fuel oil diesel fuel kerosene p#rol#sis !asolineli+uefied petroleum !ases and similar oils havin! more or less the same !eneratin! power whichare produced in the processin! of naphtha into petrochemical products shall be sub"ect to theapplicable excise tax specified in this (ection except when such b#-products are transferred toan# of the local oil refineries throu!h sale barter or exchan!e for the purpose of furtherprocessin! or blendin! into finished products which are sub"ect to excise tax under this (ection,

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%f' Aeaded premium !asoline per liter of volume capacit# Five pesos and thirt#-five centavos%;.1;', unleaded premium !asoline per liter of volume capacit# Four pesos and thirt#-fivecentavos %&.1;',

%!' $viation turbo "et fuel per liter of volume capacit# Three pesos and sixt#-seven centavos%1.06',

%h' erosene per liter of volume capacit# )ero %:.::'* rovided That kerosene when used asaviation fuel shall be sub"ect to the same tax on aviation turbo "et fuel under the precedin!

para!raph %!' such tax to be assessed on the user thereof,

%i' Diesel fuel oil and on similar fuel oils havin! more or less the same !eneratin! power per literof volume capacit# )ero %:.::',

%"' Ai+uefied petroleum !as per liter Jero %:.::'* rovided That li+uefied petroleum !as usedfor motive power shall be taxed at the e+uivalent rate as the excise tax on diesel fuel oil,

%k' $sphalts per kilo!ram Fift#-six centavos %:.;0', and

%l' Bunker fuel oil and on similar fuel oils havin! more or less the same !eneratin! power per liter of volume capacit# )ero %:.::'.


CHA+TER VI J E/CISE TA/ ON .ISCELLANEOUS ARTICLES

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The (ecretaries of Finance and Trade and Industr# to!ether with the Commissioner of Customsand the administrators of the freeports concerned shall promul!ate rules and re!ulations for theproper identification and control of said automobiles.

SEC 1> Non("))"ntia# *ood) ( There shall be levied assessed and collected a taxe+uivalent to twent#-percent %5:' based on the wholesale price or the value of importation usedb# the Bureau of Customs in determinin! tariff and customs duties net of excise tax and value-added tax of the followin! !oods*

%a' $ll !oods commonl# or commerciall# known as "ewelr# whether real or imitation pearlsprecious and semi-precious stones and imitations thereof, !oods made of or ornamentedmounted or fitted with precious metals or imitations thereof or ivor# %not includin! sur!ical anddental instruments silver-plated wares frames or mountin!s for spectacles or e#e!lasses anddental !old or !old allo#s and other precious metals used in fillin! mountin! or fittin! the teeth',opera !lasses and lor!nettes. The term Uprecious metals shall include platinum !old silver andother metals of similar or !reater value. The term Uimitations thereof shall include platin!s andallo#s of such metals,

%b' erfumes and toilet waters,

%c' achts and other vessels intended for pleasure or sports.


CHA+TER VII J E/CISE TA/ ON .INERAL +RODUCTS

SEC 1>1 .in"ra# +roduct) J

A Rat") o Ta% ( There shall be levied assessed and collected on minerals mineral productsand +uarr# resources excise tax as follows*

%4' n coal and coke a tax of Ten pesos %4:.::' per metric ton,

%5' n all nonmetallic minerals and +uarr# resources a tax of two percent %5' based onthe actual market value of the !ross output thereof at the time of removal in the case ofthose locall# extracted or produced, or the value used b# the Bureau of Customs indeterminin! tariff and customs duties net of excise tax and value-added tax in the caseof importation.

9otwithstandin! the provision of para!raph %&' of (ubsection %$' of this (ection locall#extracted natural !as and li+uefied natural !as shall not be sub"ect to the excise taximposed herein.

%1' n all metallic minerals a tax based on the actual market value of the !ross outputthereof at the time of removal in the case of those locall# extracted or produced, or thevalue used b# the Bureau of Customs in determinin! tariff and customs duties net ofexcise tax and value-added tax in the case of importation in accordance with thefollowin! schedule,

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%a' Copper and other metallic minerals,

%i' n the first three %1' #ears upon the effectivit# of Republic $ct 9o.665= one percent %4', %ii' n the fourth and the fifth #ears one and a half percent %4 V', and %iii' n the sixth #ear and thereafter two percent %5',

%b' 3old and chromite two percent %5'.

%&' n indi!enous petroleum a tax of three percent %1' of the fair international marketprice thereof on the first taxable sale barter exchan!e or such similar transaction suchtax to be paid b# the bu#er or purchaser before removal from the place of production. Thephrase Ufirst taxable sale barter exchan!e or similar transaction means the transfer ofindi!enous petroleum in its ori!inal state to a first taxable transferee. The fair internationalmarket price shall be determined in consultation with an appropriate !overnment a!enc#.

For the purpose of this (ubsection Uindi!enous petroleum shall include locall#-extractedmineral oil h#drocarbon !as bitumen crude asphalt mineral !as and all other similar ornaturall# associated substances with the exception of coal peat bituminous shale and?or stratified mineral deposits.

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B For 'ur'o)") o t!i) S"ction3 t!" t"r& J

%4' K*ro)) out'ut shall be interpreted as the actual market value of minerals or mineral productsor of bullion from each mine or mineral land operated as a separate entit# without an# deductionfrom minin! millin! refinin! %includin! all expenses incurred to prepare the said minerals ormineral products in a marketable state' as well as transportin! handlin! marketin! or an# other

expenses* rovided That if the minerals or mineral products are sold or consi!ned abroad b# thelessee or owner of the mine under C.I.F. terms the actual cost of ocean frei!ht and insuranceshall be deducted* provided however That in the case of mineral concentrate not traded incommodit# exchan!es in the hilippines or abroad such as copper concentrate the actualmarket value shall be the world price +uotations of the refined mineral products content thereofprevailin! in the said commodit# exchan!es after deductin! the smeltin! refinin! and otherchar!es incurred in the process of convertin! the mineral concentrates into refined metal tradedin those commodit# exchan!es.

%5 K.in"ra#) shall mean all naturall# occurrin! inor!anic substances %found in nature' whether insolid li+uid !aseous or an# intermediate state.

%1' K.in"ra# 'roduct) shall mean thin!s produced and prepared in a marketable state b# simple

treatment processes such as washin! or dr#in! but without under!oin! an# chemical chan!e orprocess or manufacturin! b# the lessee concessionaire or owner of mineral lands.

%&' K2uarr0 r")ourc") shall mean an# common stone or other common mineral substances asthe Director of the Bureau of ines and 3eo-(ciences ma# declare to be +uarr# resources suchas but not restricted to marl marble !ranite volcanic cinders basalt tuff and rock phosphate*rovided That the# contain no metal or other valuable minerals in economicall# workable+uantities.

TITLE VI

E/CISE TA/ ON CERTAIN *OODS CHA+TER VIII ( AD.INISTRATIVE +ROVISIONS RE*ULATIN* BUSINESS OF +ERSONSDEALIN* IN ARTICLES SUBECT TO E/CISE TA/

SEC 1>: E%t"nt o Su'"r$i)ion O$"r E)ta,#i)!&"nt) +roducing Ta%a,#" Out'ut - TheBureau of Internal Revenue has authorit# to supervise establishments where articles sub"ect toexcise tax are made or kept. The (ecretar# of Finance shall prescribe rules and re!ulations as tothe mode in which the process of production shall be conducted insofar as ma# be necessar# tosecure a sanitar# output and to safe!uard the revenue.

SEC 1>< R"cord) to ," 8"'t ,0 .anuactur"r)M A))"))&"nt Ba)"d T!"r"on -

anufacturers of articles sub"ect to excise tax shall keep such records as re+uired b# rules andre!ulations recommended b# the Commissioner and approved b# the (ecretar# of Finance andsuch records whether of raw materials received into the factor# or of articles produced thereinshall be deemed public and official documents for all purposes.

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The records of raw materials kept b# such manufacturers ma# be used as evidence b# which todetermine the amount of excise taxes due from them and whenever the amounts of raw materialreceived into an# factor# exceeds the amount of manufactured or partiall# manufactured productson hand and lawfull# removed from the factor# plus waste removed or destro#ed and areasonable allowance for unavoidable loss in manufacture the Commissioner ma# assess and

collect the tax due on the products which should have been produced from the excess.

The excise tax due on the products as determined and assessed in accordance with this (ectionshall be pa#able upon demand or within the period specified therein.

SEC 1>= +r"&i)") Su,6"ct to A''ro$a# ,0 Co&&i))ion"r - 9o person shall en!a!e inbusiness as a manufacturer of or dealer in articles sub"ect to excise tax unless the premises uponwhich the business is to conducted shall have been approved b# the Commissioner.

SEC 1>> .anuactur"r) to +ro$id" T!"&)"#$") -it! Counting or ."t"ring D"$ic") toD"t"r&in" +roduction - anufacturers of ci!arettes alcoholic products oil products and other

articles sub"ect to excise tax that can be similarl# measured shall provide themselves with suchnecessar# number of suitable countin! or meterin! devices to determine as accuratel# aspossible the volume +uantit# or number of the articles produced b# them under rules andre!ulations promul!ated b# the (ecretar# of Finance upon recommendation of theCommissioner.

This re+uirement shall be complied with before commencement of operations.

SEC 1>@ La,"#) and For& o +acag") - $ll articles of domestic manufacture sub"ect toexcise tax and all leaf tobacco shall be put up and prepared b# the manufacturer or producerwhen removed for sale or consumption in such packa!es onl# and bearin! such marks or brandas shall be prescribed in the rules and re!ulations promul!ated b# the (ecretar# of Finance, and!oods of similar character imported into the hilippines shall likewise be packed and marked insuch a manner as ma# be re+uired.

SEC 1>7 R"&o$a# o Artic#") At"r t!" +a0&"nt o Ta% ( 2hen the tax has been paid onarticles or products sub"ect to excise tax the same shall not thereafter be stored or permitted toremain in the distiller# distiller# warehouse bonded warehouse or other factor# or place whereproduced. @owever upon prior permit from the Commissioner oil refineries and?or companiesma# store or deposit tax-paid petroleum products and commin!le the same with its ownmanufactured products not #et sub"ected to excise tax. Imported petroleum products ma# beallowed to be withdrawn from customs custod# without the prepa#ment of excise tax whichproducts ma# be commin!led with the tax-paid or bonded products of the importer himself aftersecurin! a prior permit from the Commissioner* rovided That withdrawals shall be taxed andaccounted for on a Efirst-in first-outE basis.

SEC 1> Storag" o *ood) in Int"rna#(r"$"nu" Bond"d 4ar"!ou)") - $n internal-revenuebonded warehouse ma# be maintained in an# port of entr# for the storin! of imported ormanufactured !oods which are sub"ect to excise tax. The taxes on such !oods shall be pa#ableonl# upon removal from such warehouse and a reasonable char!e shall be made for their stora!etherein. The Commissioner ma# in his discretion exact a bond to secure the pa#ment of the tax

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on an# !oods so stored.

SEC 1>9 +roo o E%'ortationM E%'ort"r5) Bond - /xporters of !oods that would be sub"ect toexcise tax if sold or removed for consumption in the hilippines shall submit proof of exportationsatisfactor# to the Commissioner and when the same is deemed necessar# shall be re+uired to

!ive a bond prior to the removal of the !oods for shipment conditioned upon the exportation ofthe same in !ood faith.

SEC 1@ .anuactur"r)5 and I&'ort"r)5 Bond - anufacturers and importers of articlessub"ect to excise tax shall post a bond sub"ect to the followin! conditions*

A Initia# Bond - In case of initial bond the amount shall be e+ual to ne @undred thousandpesos %4:::::'* Provided That if after six %0' months of operation the amount of initial bond isless than the amount of the total excise tax paid durin! the period the amount of the bond shallbe ad"usted to twice the tax actuall# paid for the period.

B Bond or t!" Succ""ding "ar) o O'"ration - The bonds for the succeedin! #ears of

operation shall be based on the actual total excise tax paid durin! the period the #earimmediatel# precedin! the #ear of operation.

(uch bond shall be conditioned upon faithful compliance durin! the time such business isfollowed with laws and rules and re!ulations relatin! to such business and for the satisfaction ofall fines and penalties imposed b# this Code.

SEC 1@1R"cord) to ," 8"'t ,0 4!o#")a#" D"a#"r) - 2holesale dealers shall keep records of their purchases and sales or deliveries of articles sub"ect to excise tax in such form as shall beprescribed in the rules and re!ulations b# the (ecretar# of Finance. These records and the entirestock of !oods sub"ect to tax shall be sub"ect at all times to inspection of internal revenue officers.

SEC 1@: R"cord) to ," 8"'t ,0 D"a#"r) in L"a To,acco - Dealers in leaf tobacco shallkeep records of the products sold or delivered b# them to other persons in such manner as ma#be prescribed in the rules and re!ulations b# the (ecretar# of Finance such records to be at alltimes sub"ect to inspection of internal revenue officers.

SEC 1@< +r")"r$ation o In$oic") and Sta&') ( $ll dealers whosoever shall preserve for theperiod prescribed in (ection 51; all official invoices received b# them from other dealers or frommanufacturers to!ether with the fractional parts of stamps affixed thereto if an# and upondemand shall deliver or transmit the same to an# interval revenue officer.

SEC 1@= Inor&ation to ," *i$"n ,0 .anuactur"r)3 I&'ort"r)3 Ind"ntor)3 and4!o#")a#"r) o an0 A''aratu) or ."c!anica# Contri$anc" S'"cia##0 or t!" .anuactur" oArtic#") Su,6"ct to E%ci)" Ta% and I&'ort"r)3 Ind"ntor)3 .anuactur"r) or S"##"r) oCigar"tt" +a'"r in Bo,,in)3 Cigar"tt" Ti''ing +a'"r or Cigar"tt" Fi#t"r Ti') ( anufacturers indentors wholesalers and importers of an# apparatus or mechanical contrivancespeciall# for the manufacture of articles sub"ect to tax shall before an# such apparatus ormechanical contrivance is removed from the place of manufacture or from the customs house

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!ive written information to the Commissioner as to the nature and capacit# of the same the timewhen it is to be removed and the place for which it is destined as well as the name of the personb# whom it is to be used, and such apparatus or mechanical contrivance shall not be set up nordismantled or transferred without a permit in writin! from the Commissioner.

$ written permit from the Commissioner for importin! manufacturin! or sellin! of ci!arette paper

in bobbins or rolls ci!arette tippin! paper or ci!arette filter tips is re+uired before an# person shallen!a!e in the importation manufacture or sale of the said articles. 9o permit to sell said articlesshall be !ranted unless the name and address of the prospective bu#er is first submitted to theCommissioner and approved b# him. Records showin! the stock of the said articles and thedisposal thereof b# sale of persons with their respective addresses as approved b# theCommissioner shall be kept b# the seller and records showin! stock of said articles andconsumption thereof shall be kept b# the bu#er sub"ect to inspection b# internal revenue officers.

SEC 1@> E)ta,#i)!&"nt o Di)ti##"r0 4ar"!ou)" ( /ver# distiller when so re+uired b# theCommissioner shall provide at his own expense a warehouse and shall be situated in andconstitute a part of his distiller# premises and to be used onl# for the stora!e of distilled spirits of

his own manufacture until the tax thereon shall have been paid, but no dwellin! house shall beused for such purpose. (uch warehouse when approved b# the Commissioner is declared to bea bonded warehouse and shall be known as a distiller# warehouse.

SEC 1@@ Cu)tod0 o Di)ti##"r0 or Di)ti##"r0 4ar"!ou)" ( /ver# distiller# or distiller#warehouse shall be in the "oint custod# of the revenue inspector if one is assi!ned thereto and of the proprietor thereof. It shall be kept securel# locked and shall at no time be unlocked or openedor remain unlocked or opened unless in the presence of such revenue inspector or other personwho ma# be desi!nated to act for him as provided b# law.

SEC 1@7 Li&itation on 2uantit0 o S'irit) R"&o$"d ro& 4ar"!ou)" ( 9o distilled spirits

shall be removed from an# distiller# distiller# warehouse or bonded warehouse in +uantities ofless than fifteen %4;' !au!e liters at an# one time except bottled !oods which ma# be removedb# the case of not less than twelve %45' bottles.

SEC 1@ D"naturing 4it!in +r"&i)") ( For purposes of this Title the process of denaturin!alcohol shall be effected onl# within the distiller# premises where the alcohol to be denatured isproduced in accordance with formulas dul# approved b# the Bureau of Internal Revenue and onl#in the presence of dul# desi!nated representatives of said Bureau.

SEC 1@9 R"co$"r0 o A#co!o# or U)" in Art) and Indu)tri") ( anufacturers emplo#in!processes in which denatured alcohol used in arts and industries is expressed or evaporated

from the articles manufactured ma# under rules and re!ulations to be prescribed b# the(ecretar# of Finance upon recommendation of the Commissioner be permitted to recover thealcohol so used and restore it a!ain to a condition suitable solel# for use in manufacturin!processes.

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SEC 17 R"uir"&"nt) *o$"rning R"ctiication and Co&'ounding o Liuor) ( ersonsen!a!ed in the rectification or compoundin! of li+uors shall as to the mode of conductin! theirbusiness and supervision over the same be sub"ect to all the re+uirements of law applicable todistilleries* rovided That where a rectifier makes use of spirits upon which the excise tax hasbeen paid no further tax shall be collected on an# rectified spirits produced exclusivel# therefrom*

rovided further That compounders in the manufacture of an# intoxicatin! bevera!e whatevershall not be allowed to make use of spirits upon which the excise tax has not been previousl#paid.

SEC 171 Aut!orit0 o Int"rna# R"$"nu" Oic"r in S"arc!ing or Ta%a,#" Artic#") ( $n#internal revenue officer ma# in the dischar!e of his official duties enter an# house buildin! orplace where articles sub"ect to tax under this Title are produced or kept or are believed b# himupon reasonable !rounds to be produced or kept so far as ma# be necessar# to examinediscover or sei)e the same.

@e ma# also stop and search an# vehicle or other means of transportation when upon reasonable!rounds he believes that the same carries an# article on which the excise tax has not been paid.

SEC 17: D"t"ntion o +acag" Containing Ta%a,#" Artic#") - $n# revenue officer ma#detain an# packa!e containin! or supposed to contain articles sub"ect to excise tax when he has!ood reason to believe that the lawful tax has not been paid or that the packa!e has been or isbein! removed in violation of law and ever# such packa!e shall be held b# such officer in a safeplace until it shall be determined whether the propert# so detained is liable b# law to beproceeded a!ainst for forfeiture, but such summar# detention shall not continue in an# caselon!er than seven %6' da#s without due process of law or intervention of the officer to whom suchdetention is to be reported.

TITLE VII DOCU.ENTAR STA.+ TA/

SEC 17< Sta&' Ta%") U'on Docu&"nt)3 Loan Agr""&"nt)3 In)tru&"nt) and +a'"r) (pon documents instruments loan a!reements and papers and upon acceptancesassi!nments sales and transfers of the obli!ation ri!ht or propert# incident thereto there shallbe levied collected and paid for and in respect of the transaction so had or accomplished thecorrespondin! documentar# stamp taxes prescribed in the followin! (ections of this Title b# theperson makin! si!nin! issuin! acceptin! or transferrin! the same wherever the document ismade si!ned issued accepted or transferred when the obli!ation or ri!ht arises from hilippinesources or the propert# is situated in the hilippines and the same time such act is done or

transaction had* rovided That whenever one part# to the taxable document en"o#s exemptionfrom the tax herein imposed the other part# who is not exempt shall be the one directl# liable forthe tax.

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SEC 17=. Sta&' Ta% on Origina# I))u" o S!ar") o Stoc – n ever# ori!inal issue whether on or!ani)ation reor!ani)ation or for an# lawful purpose of shares of stock b# an# associationcompan# or corporation there shall be collected a documentar# stamp of ne peso %4.::' on

each Two hundred pesos %5::' or fractional part thereof of the par value of such shares ofstock* Provided, That in the case of the ori!inal issue of shares of stock without par value theamount of the documentar# stamp tax herein prescribed shall be based upon the actualconsideration for the issuance of such shares of stock* Provided, #urther, That in the case of stockdividends on the actual value represented b# each share.

SEC 17> Sta&' Ta% on Sa#")3 Agr""&"nt) to S"## ."&oranda o Sa#")3 D"#i$"ri") orTran)"r o S!ar") or C"rtiicat") o Stoc – n all sales or a!reements to sell ormemoranda of sales or deliveries. r transfer of shares or certificates of stock in an# associationcompan# or corporation or transfer of such securities b# assi!nment in blank or b# deliver# orb# an# paper or a!reement or memorandum or other evidences of transfer or sale whether

entitlin! the holder in an# manner to the benefit of such stock or to secure the future pa#ment ofmone# or for the future transfer of an# stock there shall be collected a documentar# stamp tax of (event#-five-centavos %:.6;' on each Two hundred pesos %5::' or fractional part thereof ofthe par value of such stock* Provided, That onl# one tax shall be collected on each sale ortransfer of stock from one person to another re!ardless of whether or not a certificate of stock isissued indorsed or delivered in pursuance of such sale or transfer* and Provided, #urther, That inthe case of stock without par value the amount of the documentar# stamp tax herein prescribedshall be e+uivalent to twent#-five percent %5;' of the documentar# stamp tax paid upon theori!inal issue of said stock.M

SEC 17@ Sta&' Ta% on Bond)3 D","ntur")3 C"rtiicat" o Stoc or Ind",t"dn")) I))u"d inFor"ign Countri") ( n all bonds debentures certificates of stock or certificates ofindebtedness issued in an# forei!n countr# there shall be collected from the person sellin! ortransferrin! the same in the hilippines such as tax as is re+uired b# law on similar instrumentswhen issued sold or transferred in the hilippines.

SEC 177 Sta&' Ta% on C"rtiicat") o +roit) or Int"r")t in +ro'"rt0 or Accu&u#ation) ( n all certificates of profits or an# certificate or memorandum showin! interest in the propert# oraccumulations of an# association compan# or corporation and on all transfers of suchcertificates or memoranda there shall be collected a documentar# stamp tax of Fift# centavos%:.;:' on each Two hundred pesos %5::' or fractional part thereof of the face value of suchcertificate or memorandum.

SEC 17 Sta&' Ta% on Ban C!"c)3 Drat)3 C"rtiicat") o D"'o)it not B"aring Int"r")t3and Ot!"r In)tru&"nt) ( n each bank check draft or certificate of deposit not drawin!interest or order for the pa#ment of an# sum of mone# drawn upon or issued b# an# bank trustcompan# or an# person or persons companies or corporations at si!ht or on demand thereshall be collected a documentar# stamp tax of ne peso and fift# centavos %4.;:'.

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SEC 179 Sta&' Ta% on A## D",t In)tru&"nt) – n ever# ori!inal issue of debt instrumentsthere shall be collected a documentar# stamp tax on ne peso %4.::' on each Two hundredpesos %5::' or fractional part thereof of the issue price of an# such debt instruments* Provided,That for such debt instruments with terms of less than one %4' #ear the documentar# stamp tax to

be collected shall be of a proportional amount in accordance with the ration of its term in numberof da#s to three hundred sixt#-five %10;' da#s* Provided, #urther, That onl# one documentar#stamp tax shall be imposed on either loan a!reement or promissor# notes issued to secure suchloan.

For purposes of this section the term debt instrument shall mean instruments representin!borrowin! and lendin! transactions includin! but not limited to debentures certificates ofindebtedness due bills bonds loan a!reements includin! those si!ned abroad wherein theob"ect of contract is located or used in the hilippines instruments and securities issued b# the!overnment of an# of its instrumentalities deposit substitute debt instruments certificates orother evidences of deposits that are either drawin! interest si!nificantl# hi!her than the re!ularsavin!s deposit takin! into consideration the si)e of the deposit and the risks involved or drawin!interest and havin! a specific maturit# date orders for pa#ment of an# sum of mone# otherwise

than at si!ht or on demand promissor# notes whether ne!otiable or non-ne!otiable except banknotes issued for circulation.

SEC 1 Sta&' Ta% on A## Bi##) o E%c!ang" or Drat) – n all bills of exchan!e %betweenpoints within the hilippines' or drafts there shall be collected a documentar# stamp tax of Thirt#centavos %:.1:' on each Two hundred pesos %5::' or fractional part thereof of the face valueof an# such bill of exchan!e or draft.M

SEC 11 Sta&' Ta% U'on Acc"'tanc" o Bi##) o E%c!ang" and Ot!"r) ( pon an#acceptance or pa#ment of an# bill of exchan!e or order for the pa#ment of mone# purportin! tobe drawn in a forei!n countr# but pa#able in the hilippines there shall be collected adocumentar# stamp tax of Thirt# centavos %:.1:' on each Two hundred pesos %5::' orfractional part thereof of the face value of an# such bill of exchan!e or order or the hilippinee+uivalent to such value if expressed in forei!n currenc#.

SEC 1: Sta&' Ta% on For"ign Bi##) o E%c!ang" and L"tt"r) o Cr"dit ( n all forei!n billsof exchan!e and letters of credit %includin! orders b# tele!raph or otherwise for the pa#ment ofmone# issued b# express or steamship companies or b# an# person or persons' drawn in butpa#able out of the hilippines in a set of three %1' or more accordin! to the custom of merchantsand bankers there shall be collected a documentar# stamp tax of Thirt# centavos %:.1:' on

each Two hundred pesos %5::' or fractional part thereof of the face value of an# such bill ofexchan!e or letter of credit or the hilippine e+uivalent of such face value if expressed in forei!ncurrenc#.

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SEC 1< Sta&' Ta% on Li" In)uranc" +o#ici") n all policies of insurance or otherinstruments b# whatever name the same ma# be called whereb# an# insurance shall be made or renewed upon an# life or lives there shall be collected a documentar# stamp tax of Fift# centavos%:.;:' on each Two hundred pesos %5::' or fractional part thereof of the amount of premiumcollected.M

SEC 1= Sta&' Ta% on +o#ici") o In)uranc" U'on +ro'"rt0 ( n all policies of insurance or other instruments b# whatever name the same ma# be called b# which insurance shall be madeor renewed upon propert# of an# description includin! rents or profits a!ainst peril b# sea or oninland waters or b# fire or li!htnin! there shall be collected a documentar# stamp tax of Fift#centavos %:.;:' on each Four pesos %&.::' or fractional part thereof of the amount ofpremium char!ed* rovided however That no documentar# stamp tax shall be collected onreinsurance contracts or on an# instrument b# which cession or acceptance of insurance risksunder an# reinsurance a!reement is effected or recorded.

SEC 1> Sta&' Ta% on Fid"#it0 Bond) and Ot!"r In)uranc" +o#ici") ( n all policies ofinsurance or bonds or obli!ations of the nature of indemnit# for loss dama!e or liabilit# made orrenewed b# an# person association compan# or corporation transactin! the business ofaccident fidelit# emplo#ers liabilit# plate !lass steam boiler bur!lar elevator automaticsprinkler or other branch of insurance %except life marine inland and fire insurance' and allbonds undertakin!s or reco!ni)ances conditioned for the performance of the duties of an#office or position for the doin! or not doin! of an#thin! therein specified and on all obli!ations!uaranteein! the validit# or le!alit# of an# bond or other obli!ations issued b# an# province cit#municipalit# or other public bod# or or!ani)ation and on all obli!ations !uaranteein! the title toan# real estate or !uaranteein! an# mercantile credits which ma# be made or renewed b# an#such person compan# or corporation there shall be collected a documentar# stamp tax of Fift#centavos %:.;:' on each Four pesos %&.::' or fractional part thereof of the premium char!ed.

SEC 1@ Sta&' Ta% on +o#ici") o Annuiti") and +r"(N""d +#an) – n all policies ofannuities or other instruments b# whatever name the same ma# be called whereb# an annuit#ma# be made transferred or redeemed there shall be collected a documentar# stamp tax of Fift#centavos %:.;:' on each Two hundred pesos %5::' or fractional part thereof of the premiumor installment pa#ment or contract price collected. n pre-need plans the documentar# stamp taxshall be Twent# centavos %:.5:' on teach Two hundred pesos %5::' or fractional part thereofof the premium or contribution collected.

SEC 17 Sta&' Ta% on Ind"&nit0 Bond) ( n all bonds for indemnif#in! an# person firm or

corporation who shall become bound or en!a!ed as suret# for the pa#ment of an# sum of mone#or for the due execution or performance of the duties of an# office or position or to account formone# received b# virtue thereof and on all other bonds of an# description except such as ma#be re+uired in le!al proceedin!s or are otherwise provided for herein there shall be collected adocumentar# stamp tax of Thirt# centavos %:.1:' on each Four pesos %&.::' or fractional partthereof of the premium char!ed.

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SEC 1 Sta&' Ta% on C"rtiicat") ( n each certificate of dama!es or otherwise and onever# certificate or document issued b# an# customs officer marine surve#or or other personactin! as such and on each certificate issued b# a notar# public and on each certificate of an#

description re+uired b# law or b# rules or re!ulations of a public office or which is issued for thepurpose of !ivin! information or establishin! proof of a fact and not otherwise specified hereinthere shall be collected a documentar# stamp tax of Fifteen pesos %4;.::'.

SEC 19 Sta&' Ta% on 4ar"!ou)" R"c"i't) ( n each warehouse receipt for propert# heldin stora!e in a public or private warehouse or #ard for an# person other than the proprietor ofsuch warehouse or #ard there shall be collected a documentar# stamp tax of Fifteen pesos%4;.::'* rovided That no tax shall be collected on each warehouse receipt issued to an# oneperson in an# one calendar month coverin! propert# the value of which does not exceed Twohundred pesos %5::'.

SEC 19 Sta&' Ta% on ai(A#ai3 Hor)" Racing Tic"t)3 #otto or Ot!"r Aut!oriz"d Nu&,"r)*a&") ( n each "ai-alai horse race ticket lotto or other authori)ed number !ames there shallbe collected a documentar# stamp tax of Ten centavos %:.4:'* rovided That if the cost of theticket exceeds ne peso %4.::' an additional tax of Ten centavos %:.4:' on ever# ne peso%4.:: or fractional part thereof shall be collected.

SEC 191 Sta&' Ta% on Bi##) o Lading or R"c"i't) ( n each set of bills of ladin! or receipts%except charter part#' for an# !oods merchandise or effects shipped from one port or place in thehilippines to another port or place in the hilippines %except on ferries across rivers' or to an#forei!n port there shall be collected documentar# stamp tax of ne peso %4.::' if the value ofsuch !oods exceeds ne hundred pesos %4::' and does not exceed ne Thousand pesos

%4:::', Ten pesos %4:' if the value exceeds ne thousand pesos %4:::'* rovidedhowever That frei!ht tickets coverin! !oods merchandise or effects carried as accompaniedba!!a!e of passen!ers on land and water carriers primaril# en!a!ed in the transportation ofpassen!ers are hereb# exempt.

SEC 19: Sta&' Ta% on +ro%i") ( n each prox# for votin! at an# election for officers of an#compan# or association or for an# other purpose except proxies issued affectin! the affairs ofassociations or corporations or!ani)ed for reli!ious charitable or literar# purposes there shall becollected a documentar# stamp tax of Fifteen pesos %4;.::'.

SEC 19< Sta&' Ta% on +o-"r) o Attorn"0 ( n each power of attorne# to perform an# actwhatsoever except acts connected with the collection of claims due from or accruin! to the3overnment of the Republic of the hilippines or the !overnment of an# province cit# ormunicipalit# there shall be collected a documentar# stamp tax of Five pesos %;.::'.

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SEC 19= Sta&' ta% on L"a)") and Ot!"r Hiring Agr""&"nt) ( n each lease a!reementmemorandum or contract for hire use or rent of an# lands or tenements or portions thereofthere shall be collected a documentar# stamp tax of Three pesos %1.::' for the first Twothousand pesos %5:::' or fractional part thereof and an additional ne peso %4.::' for ever#ne Thousand pesos %4:::' or fractional part thereof in excess of the first Two thousand

pesos %5:::' for each #ear of the term of said contract or a!reement.

SEC 19> Sta&' Ta% on .ortgag")3 +#"dg") and D""d) o Tru)t ( n ever# mort!a!e orpled!e of lands estate or propert# real or personal heritable or movable whatsoever where thesame shall be made as a securit# for the pa#ment of an# definite and certain sum of mone# lentat the time or previousl# due and owin! of forborne to be paid bein! pa#able and on an#conve#ance of land estate or propert# whatsoever in trust or to be sold or otherwise convertedinto mone# which shall be and intended onl# as securit# either b# express stipulation orotherwise there shall be collected a documentar# stamp tax at the followin! rates*

%a' 2hen the amount secured does not exceed Five thousand pesos %;:::' Twent#pesos %5:.::'.

%b' n each Five thousand pesos %;:::' or fractional part thereof in excess of Fivethousand pesos %;:::' an additional tax of Ten pesos %4:.::'.

n an# mort!a!e pled!e or deed of trust where the same shall be made as a securit# for thepa#ment of a fluctuatin! account or future advances without fixed limit the documentar# stamptax on such mort!a!e pled!e or deed of trust shall be computed on the amount actuall# loanedor !iven at the time of the execution of the mort!a!e pled!e or deed of trust. @owever ifsubse+uent advances are made on such mort!a!e pled!e or deed of trust additionaldocumentar# stamp tax shall be paid which shall be computed on the basis of the amountadvanced or loaned at the rates specified above* rovided however That if the full amount of theloan or credit !ranted under the mort!a!e pled!e or deed of trust is specified in such mort!a!epled!e or deed of trust the documentar# stamp tax prescribed in this (ection shall be paid and

computed on the full amount of the loan or credit !ranted.

SEC 19@ Sta&' ta% on D""d) o Sa#" and Con$"0anc") o R"a# +ro'"rt0 ( n allconve#ances deeds instruments or writin!s other than !rants patents or ori!inal certificates ofad"udication issued b# the 3overnment whereb# an# land tenement or other realt# sold shall be!ranted assi!ned transferred or otherwise conve#ed to the purchaser or purchasers or to an#other person or persons desi!nated b# such purchaser or purchasers there shall be collected adocumentar# stamp tax at the rates herein below prescribed based on the considerationcontracted to be paid for such realt# or on its fair market value determined in accordance with(ection 0%/' of this Code whichever is hi!her* rovided That when one of the contractin! partiesis the 3overnment the tax herein imposed shall be based on the actual consideration.

%a' 2hen the consideration or value received or contracted to be paid for such realt#after makin! proper allowance of an# encumbrance does not exceed ne thousandpesos %4:::' fifteen pesos %4;.::'.

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%b' For each additional ne thousand esos %4:::' or fractional part thereof in excessof ne thousand pesos %4:::' of such consideration or value Fifteen pesos %4;.::'.

2hen it appears that the amount of the documentar# stamp tax pa#able hereunder has beenreduced b# an incorrect statement of the consideration in an# conve#ance deed instrument or

writin! sub"ect to such tax the Commissioner provincial or cit# Treasurer or other revenue officershall from the assessment rolls or other reliable source of information assess the propert# of itstrue market value and collect the proper tax thereon.

SEC 197 Sta&' Ta% on C!art"r +arti") and Si&i#ar In)tru&"nt) J n ever# charter part#contract or a!reement for the charter of an# ship vessel or steamer or an# letter ormemorandum or other writin! between the captain master or owner or other person actin! asa!ent of an# ship vessel or steamer and an# other person or persons for or relatin! to thecharter of an# such ship vessel or steamer and on an# renewal or transfer of such chartercontract a!reement letter or memorandum there shall be collected a documentar# stamp tax atthe followin! rates*

%a' If the re!istered !ross tonna!e of the ship vessel or steamer does not exceed one

thousand %4:::' tons and the duration of the charter or contract does not exceed six %0'months Five hundred pesos %;::', and for each month or fraction of a month in excessof six %0' months an additional tax of Fift# pesos %;:.::' shall be paid.

%b' If the re!istered !ross tonna!e exceeds one thousand %4:::' tons and does notexceed ten thousand %4::::' tons and the duration of the charter or contract does notexceed six %0' months ne thousand pesos %4:::', and for each month or fraction of amonth in excess of six %0' months an additional tax of ne hundred pesos %4::' shallbe paid.

%c' If the re!istered !ross tonna!e exceeds ten thousand %4::::' tons and the durationof the charter or contract does not exceed six %0' months ne thousand five hundredpesos %4;::', and for each month or fraction of a month in excess of six %0' months an

additional tax of ne hundred fift# pesos %4;:' shall be paid.

SEC 19 Sta&' Ta% on A))ign&"nt) and R"n"-a#) o C"rtain In)tru&"nt) ( pon eachand ever# assi!nment or transfer of an# mort!a!e lease or polic# of insurance or the renewal orcontinuance of an# a!reement contract charter or an# evidence of obli!ation or indebtedness b#alterin! or otherwise there shall be levied collected and paid a documentar# stamp tax at thesame rate as that imposed on the ori!inal instrument.

SEC 199 Docu&"nt) and +a'"r) Not Su,6"ct to Sta&' Ta% – The provisions of (ection 461to the contrar# notwithstandin! the followin! instruments documents and papers shall be exemptfrom the documentar# stamp tax*

a. olicies of insurance or annuities made or !ranted b# a fraternal or beneficiar# societ#order association or cooperative compan# operated on the lod!e s#stem or localcooperation plan and or!ani)ed and conducted solel# b# the members thereof for theexclusive benefit of each member and not for profit.

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b. Certificates of oaths administered to an# !overnment official in his official capacit# or of

acknowled!ment b# an# !overnment official in the performance of his official dutieswritten appearance in an# court b# an# !overnment official in his official capacit#,certificates of the administration of oaths to an# person as to the authenticit# of an# paper re+uired to be filed in court b# an# person or part# thereto whether the proceedin!s becivil or criminal, papers and documents filed in courts b# or for the national provincialcit# or municipal !overnments, affidavits of poor persons for the purpose of provin!povert#, statements and other compulsor# information re+uired of persons orcorporations b# the rules and re!ulations of the national provincial cit# or municipal!overnments exclusivel# for statistical purposes and which are wholl# for the use of thebureau or office in which the# are filed and not at the instance or for the use or benefit ofthe person filin! them, certified copies and other certificates placed upon documentsinstruments and papers for the national provincial cit# or municipal !overnments madeat the instance and for the sole use of some other branch of the national provincial cit#or municipal !overnments, and certificates of the assessed value of lands not exceedin!Two hundred pesos %5::' in value assessed furnished b# the provincial cit# or

municipal Treasurer to applicants for re!istration of title to land. c. Borrowin! and lendin! of securities executed under the (ecurities Borrowin! and lendin!

ro!ram of a re!istered exchan!e or in accordance with re!ulations prescribed b# theappropriate re!ulator# authorit#* Provided, however, That an# borrowin! or lendin! ofsecurities a!reement as contemplated hereof shall be dul# covered b# a mastersecurities borrowin! and lendin! a!reement acceptable to the appropriate re!ulator#authorit# and which a!reements is dul# re!istered and approved b# the Bureau ofInternal Revenue. %BIR'.

d. Aoan a!reements or promissor# notes the a!!re!ate of which does not exceed Two

hundred fift# thousand pesos %5;::::' or an# such amount as ma# be determined b#he (ecretar# of Finance executed b# an individual for his purchase on installment for hispersonal use or that of his famil# and not for business or resale barter or hire of a houselot motor vehicle appliance or furniture* Provided, however, That the amount to be set b#

the (ecretar# of Finance shall be in accordance with a relevant price index but not toexceed ten percent %4:' of the current amount and shall remain in force at least forthree %1' #ears.

e. (ale barter or exchan!e of shares of stock listed and traded throu!h the local stock

exchan!e for a period of five %;' #ears from the effectivit# of this $ct. f. $ssi!nment or transfer of an# mort!a!e lease or polic# of insurance or the renewal or

continuance of an# a!reement contract charter or an# evidence of obli!ation orindebtedness if there is no chan!e in the maturit# date or remainin! period of covera!efrom that of the ori!inal instrument.

g. Fixed income and other securities traded in the secondar# market or throu!h an

exchan!e. h. Derivatives* Provided, That for purposes of this exemption repurchase a!reements and

reverse repurchase a!reements shall be treated similarl# as derivatives. i. Interbranch or interdepartmental advances within the same le!al entit#.

j. $ll forebearances arisin! from sales or service contracts includin! credit card and trade

receivables* Provided, That the exemption be limited to those executed b# the seller orservice provider itself.

k. Bank deposit accounts without a fixed term or maturit#.

l. $ll contracts deeds documents and transactions related to the conduct of business of

the Banko (entral n! ilipinas.

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m. Transfer of propert# pursuant to (ection &:%c'%5' of the 9ational Internal Revenue Code

of 4==6 as amended. n. Interbank call loans with maturit# of not more than seven %6' da#s to cover deficienc# in

reserves a!ainst deposit liabilities includin! those between or amon! banks and+uasibanks.

SEC : +a0&"nt o Docu&"ntar0 Sta&' Ta% J

A In *"n"ra# ( The provisions of residential Decree 9o. 4:&; notwithstandin! an# personliable to pa# documentar# stamp tax upon an# document sub"ect to tax under Title 8II of thisCode shall file a tax return and pa# the tax in accordance with the rules and re!ulations to beprescribed b# the (ecretar# of Finance upon recommendation of the Commissioner.

B Ti&" or Fi#ing and +a0&"nt o t!" Ta%. ( /xcept as provided b# rules and re!ulationspromul!ated b# the (ecretar# of Finance upon recommendation of the Commissioner the tax

return prescribed in this (ection shall be filed within ten %4:' da#s after the close of the monthwhen the taxable document was made si!ned issued accepted or transferred and the taxthereon shall be paid at the same time the aforesaid return is filed.

C 4!"r" to Fi#". ( /xcept in cases where the Commissioner otherwise permits the aforesaidtax return shall be filed with and the tax due shall be paid throu!h the authori)ed a!ent bankwithin the territorial "urisdiction of the Revenue District ffice which has "urisdiction over theresidence or principal place of business of the taxpa#er. In places where there is no authori)eda!ent bank the return shall be filed with the Revenue District fficer collection a!ent or dul#authori)ed Treasurer of the cit# or municipalit# in which the taxpa#er has his le!al residence orprincipal place of business.

D E%c"'tion. - In lieu of the fore!oin! provisions of this (ection the tax ma# be paid either

throu!h purchase and actual affixture, or b# imprintin! the stamps throu!h a documentar# stampmeterin! machine on the taxable document in the manner as ma# be prescribed b# rules andre!ulations to be promul!ated b# the (ecretar# of Finance upon recommendation of theCommissioner.

SEC :1 E"ct o Fai#ur" to Sta&' Ta%a,#" Docu&"nt ( $n instrument document or paperwhich is re+uired b# law to be stamped and which has been si!ned issued accepted ortransferred without bein! dul# stamped shall not be recorded nor shall it or an# cop# thereof oran# record of transfer of the same be admitted or used in evidence in an# court until the re+uisitestamp or stamps are affixed thereto and cancelled.

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TITLE VIII RE.EDIES

CHA+TER I ( RE.EDIES IN *ENERAL

SEC :: Fina# D""d to +urc!a)"r . - In case the taxpa#er shall not redeem the propert# asherein provided the Revenue District fficer shall as !rantor execute a deed conve#in! to thepurchaser so much of the propert# as has been sold free from all liens of an# kind whatsoeverand the deed shall succintl# recite all the proceedin!s upon which the validit# of the saledepends.

SEC :< +"riod o Li&itation U'on A))"))&"nt and Co##"ction . - /xcept as provided in(ection 555 internal revenue taxes shall be assessed within three %1' #ears after the last da#prescribed b# law for the filin! of the return and no proceedin! in court without assessment forthe collection of such taxes shall be be!un after the expiration of such period* rovided That in a

case where a return is filed be#ond the period prescribed b# law the three %1'-#ear period shallbe counted from the da# the return was filed. For purposes of this (ection a return filed beforethe last da# prescribed b# law for the filin! thereof shall be considered as filed on such last da#.

SEC := Aut!orit0 o t!" Co&&i))ion"r to Co&'ro&i)"3 A,at" and R"und or Cr"ditTa%"). - The Commissioner ma# -

%$' Compromise the pa#ment of an# internal revenue tax when*

%4' $ reasonable doubt as to the validit# of the claim a!ainst the taxpa#er exists, or %5' The financial position of the taxpa#er demonstrates a clear inabilit# to pa# theassessed tax.

The compromise settlement of an# tax liabilit# shall be sub"ect to the followin! minimumamounts*

For cases of financial incapacit# a minimum compromise rate e+uivalent to tenpercent %4:' of the basic assessed tax, and For other cases a minimum compromise rate e+uivalent to fort# percent %&:' of the basic assessed tax.

2here the basic tax involved exceeds ne million pesos %4:::.:::' or where thesettlement offered is less than the prescribed minimum rates the compromise shall besub"ect to the approval of the /valuation Board which shall be composed of the

Commissioner and the four %&' Deput# Commissioners.

%B' $bate or cancel a tax liabilit# when* %4' The tax or an# portion thereof appears to be un"ustl# or excessivel# assessed, or %5' The administration and collection costs involved do not "ustif# the collection of theamount due.

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$ll criminal violations ma# be compromised except* %a' those alread# filed in court or %b'those involvin! fraud.

%C' Credit or refund taxes erroneousl# or ille!all# received or penalties imposed without authorit#refund the value of internal revenue stamps when the# are returned in !ood condition b# the

purchaser and in his discretion redeem or chan!e unused stamps that have been rendered unfitfor use and refund their value upon proof of destruction. 9o credit or refund of taxes or penaltiesshall be allowed unless the taxpa#er files in writin! with the Commissioner a claim for credit orrefund within two %5' #ears after the pa#ment of the tax or penalt#* rovided however That areturn filed showin! an overpa#ment shall be considered as a written claim for credit or refund.

$ Tax Credit Certificate validl# issued under the provisions of this Code ma# be applied a!ainstan# internal revenue tax excludin! withholdin! taxes for which the taxpa#er is directl# liable. $n#re+uest for conversion into refund of unutili)ed tax credits ma# be allowed sub"ect to theprovisions of (ection 51: of this Code* rovided That the ori!inal cop# of the Tax CreditCertificate showin! a creditable balance is surrendered to the appropriate revenue officer forverification and cancellation* rovided further That in no case shall a tax refund be !ivenresultin! from availment of incentives !ranted pursuant to special laws for which no actual

pa#ment was made.

The Commissioner shall submit to the Chairmen of the Committee on 2a#s and eans of boththe (enate and @ouse of Representatives ever# six %0' months a report on the exercise of hispowers under this (ection statin! therein the followin! facts and information amon! others*names and addresses of taxpa#ers whose cases have been the sub"ect of abatement orcompromise, amount involved, amount compromised or abated, and reasons for the exercise ofpower* rovided That the said report shall be presented to the versi!ht Committee in Con!ressthat shall be constituted to determine that said powers are reasonabl# exercised and that the!overnment is not undul# deprived of revenues.

TITLE VIII RE.EDIES

CHA+TER II ( CIVIL RE.EDIES FOR COLLECTION OF TA/ES

SEC :> R"&"di") or t!" Co##"ction o D"#inu"nt Ta%") - The civil remedies for thecollection of internal revenue taxes fees or char!es and an# increment thereto resultin! fromdelin+uenc# shall be*

%a' B# distraint of !oods chattels or effects and other personal propert# of whatevercharacter includin! stocks and other securities debts credits bank accounts andinterest in and ri!hts to personal propert# and b# lev# upon real propert# and interest in

ri!hts to real propert#, and

%b' B# civil or criminal action.

/ither of these remedies or both simultaneousl# ma# be pursued in the discretion of theauthorities char!ed with the collection of such taxes* rovided however That theremedies of distraint and lev# shall not be availed of where the amount of tax involve isnot more than ne hundred pesos %4::'.

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The "ud!ment in the criminal case shall not onl# impose the penalt# but shall also orderpa#ment of the taxes sub"ect of the criminal case as finall# decided b# the Commissioner.

The Bureau of Internal Revenue shall advance the amounts needed to defra# costs of

collection b# means of civil or criminal action includin! the preservation or transportationof personal propert# distrained and the advertisement and sale thereof as well as of realpropert# and improvements thereon.

SEC :@ Con)tructi$" Di)traint o t!" +ro'"rt0 o A Ta%'a0"r - To safe!uard the interest ofthe 3overnment the Commissioner ma# place under constructive distraint the propert# of adelin+uent taxpa#er or an# taxpa#er who in his opinion is retirin! from an# business sub"ect totax or is intendin! to leave the hilippines or to remove his propert# therefrom or to hide orconceal his propert# or to perform an# act tendin! to obstruct the proceedin!s for collectin! thetax due or which ma# be due from him.

The constructive distraint of personal propert# shall be affected b# re+uirin! the taxpa#er or an#

person havin! possession or control of such propert# to si!n a receipt coverin! the propert#distrained and obli!ate himself to preserve the same intact and unaltered and not to dispose ofthe same ,in an# manner whatever without the express authorit# of the Commissioner.

In case the taxpa#er or the person havin! the possession and control of the propert# sou!ht to beplaced under constructive distraint refuses or fails to si!n the receipt herein referred to therevenue officer effectin! the constructive distraint shall proceed to prepare a list of such propert#and in the presence of two %5' witnessed leave a cop# thereof in the premises where thepropert# distrained is located after which the said propert# shall be deemed to have been placedunder constructive distraint.

SEC :7 Su&&ar0 R"&"di") (

A Di)traint o +"r)ona# +ro'"rt0 - pon the failure of the person owin! an# delin+uent tax ordelin+uent revenue to pa# the same at the time re+uired the Commissioner or his dul# authori)edrepresentative if the amount involved is in excess of ne million pesos %4::::::' or theRevenue District fficer if the amount involved is ne million pesos %4::::::' or less shallsei)e and distraint an# !oods chattels or effects and the personal propert# includin! stocks andother securities debts credits bank accounts and interests in and ri!hts to personal propert# ofsuch persons ,in sufficient +uantit# to satisf# the tax or char!e to!ether with an# incrementthereto incident to delin+uenc# and the expenses of the distraint and the cost of the subse+uentsale.

$ report on the distraint shall within ten %4:' da#s from receipt of the warrant be submitted b# the

distrainin! officer to the Revenue District fficer and to the Revenue Re!ional Director* rovidedThat the Commissioner or his dul# authori)ed representative shall sub"ect to rules andre!ulations promul!ated b# the (ecretar# of Finance upon recommendation of theCommissioner have the power to lift such order of distraint* rovided further That a consolidatedreport b# the Revenue Re!ional Director ma# be re+uired b# the Commissioner as often asnecessar#.

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B L"$0 on R"a# +ro'"rt0 - $fter the expiration of the time re+uired to pa# the delin+uent tax or delin+uent revenue as prescribed in this (ection real propert# ma# be levied upon beforesimultaneousl# or after the distraint of personal propert# belon!in! to the delin+uent. To this endan# internal revenue officer desi!nated b# the Commissioner or his dul# authori)edrepresentative shall prepare a dul# authenticated certificate showin! the name of the taxpa#er

and the amounts of the tax and penalt# due from him. (aid certificate shall operate with the forceof a le!al execution throu!hout the hilippines.

Aev# shall be affected b# writin! upon said certificate a description of the propert# upon whichlev# is made. $t the same time written notice of the lev# shall be mailed to or served upon theRe!ister of Deeds for the province or cit# where the propert# is located and upon the delin+uenttaxpa#er or if he be absent from the hilippines to his a!ent or the mana!er of the business inrespect to which the liabilit# arose or if there be none to the occupant of the propert# in +uestion.

In case the warrant of lev# on real propert# is not issued before or simultaneousl# with thewarrant of distraint on personal propert# and the personal propert# of the taxpa#er is notsufficient to satisf# his tax delin+uenc# the Commissioner or his dul# authori)ed representativeshall within thirt# %1:' da#s after execution of the distraint proceed with the lev# on the

taxpa#erEs real propert#.

2ithin ten %4:' da#s after receipt of the warrant a report on an# lev# shall be submitted b# thelev#in! officer to the Commissioner or his dul# authori)ed representative* rovided howeverThat a consolidated report b# the Revenue Re!ional Director ma# be re+uired b# theCommissioner as often as necessar#* rovided further That the Commissioner or his dul#authori)ed representative sub"ect to rules and re!ulations promul!ated b# the (ecretar# ofFinance upon recommendation of the Commissioner shall have the authorit# to lift warrants oflev# issued in accordance with the provisions hereof.

SEC : +roc"dur" or Di)traint and *arni)!&"nt. - The officer servin! the warrant ofdistraint shall make or cause to be made an account of the !oods chattels effects or other

personal propert# distrained a cop# of which si!ned b# himself shall be left either with theowner or person from whose possession such !oods chattels or effects or other personalpropert# were taken or at the dwellin! or place of business of such person and with someone ofsuitable a!e and discretion to which list shall be added a statement of the sum demanded andnote of the time and place of sale.

(tocks and other securities shall be distrained b# servin! a cop# of the warrant of distraint uponthe taxpa#er and upon the president mana!er treasurer or other responsible officer of thecorporation compan# or association which issued the said stocks or securities.

Debts and credits shall be distrained b# leavin! with the person owin! the debts or havin! in hispossession or under his control such credits or with his a!ent a cop# of the warrant of distraint.The warrant of distraint shall be sufficient authorit# to the person ownin! the debts or havin! inhis possession or under his control an# credits belon!in! to the taxpa#er to pa# to theCommissioner the amount of such debts or credits.

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Bank accounts shall be !arnished b# servin! a warrant of !arnishment upon the taxpa#er andupon the president mana!er treasurer or other responsible officer of the bank. pon receipt ofthe warrant of !arnishment the bank shall tun over to the Commissioner so much of the bankaccounts as ma# be sufficient to satisf# the claim of the 3overnment.

SEC :9 Sa#" o +ro'"rt0 Di)train"d and Di)'o)ition o +roc""d). - The Revenue Districtfficer or his dul# authori)ed representative other than the officer referred to in (ection 5:> ofthis Code shall accordin! to rules and re!ulations prescribed b# the (ecretar# of Finance uponrecommendation of the Commissioner forthwith cause a notification to be exhibited in not lessthan two %5' public places in the municipalit# or cit# where the distraint is made specif#in!, thetime and place of sale and the articles distrained. The time of sale shall not be less than twent#%5:' da#s after notice. ne place for the postin! of such notice shall be at the ffice of the a#orof the cit# or municipalit# in which the propert# is distrained.

$t the time and place fixed in such notice the said revenue officer shall sell the !oods chattelsor effects or other personal propert# includin! stocks and other securities so distrained at publicauction to the hi!hest bidder for cash or with the approval of the Commissioner throu!h dul#

licensed commodit# or stock exchan!es.

In the case of (tocks and other securities the officer makin! the sale shall execute a bill of salewhich he shall deliver to the bu#er and a cop# thereof furnished the corporation compan# orassociation which issued the stocks or other securities. pon receipt of the cop# of the bill of salethe corporation compan# or association shall make the correspondin! entr# in its books transferthe stocks or other securities sold in the name of the bu#er and issue if re+uired to do so thecorrespondin! certificates of stock or other securities.

$n# residue over and above what is re+uired to pa# the entire claim includin! expenses shall bereturned to the owner of the propert# sold. The expenses char!eable upon each sei)ure and saleshall embrace onl# the actual expenses of sei)ure and preservation of the propert# pendin! ,thesale and no char!e shall be imposed for the services of the local internal revenue officer or his

deput#.

SEC :1 R"#"a)" o Di)train"d +ro'"rt0 U'on +a0&"nt +rior to Sa#". - If at an# time prior tothe consummation of the sale all proper char!es are paid to the officer conductin! the sale the!oods or effects distrained shall be restored to the owner.

SEC :11 R"'ort o Sa#" to Bur"au o Int"rna# R"$"nu" - 2ithin two %5' da#s after the salethe officer makin! the same shall make a report of his proceedin!s in writin! to the Commissioner and shall himself preserve a cop# of such report as an official record.

SEC :1: +urc!a)" ,0 *o$"rn&"nt at Sa#" U'on Di)traint - 2hen the amount bid for thepropert# under distraint is not e+ual to the amount of the tax or is ver# much less than the actualmarket value of the articles offered for sale the Commissioner or his deput# ma# purchase thesame in behalf of the national 3overnment for the amount of taxes penalties and costs duethereon.

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ropert# so purchased ma# be resold b# the Commissioner or his deput# sub"ect to the rules andre!ulations prescribed b# the (ecretar# of Finance the net proceeds therefrom shall be remittedto the 9ational Treasur# and accounted for as internal revenue.

SEC :1< Ad$"rti)"&"nt and Sa#" - 2ithin twent# %5:' da#s after lev# the officer conductin!the proceedin!s shall proceed to advertise the propert# or a usable portion thereof as ma# benecessar# to satisf# the claim and cost of sale, and such advertisement shall cover a period of aleast thirt# %1:' da#s. It shall be effectuated b# postin! a notice at the main entrance of themunicipal buildin! or cit# hall and in public and conspicuous place in the barrio or district in whichthe real estate lies and ,b# publication once a week for three %1' weeks in a newspaper of !eneralcirculation in the municipalit# or cit# where the propert# is located. The advertisement shallcontain a statement of the amount of taxes and penalties so due and the time and place of salethe name of the taxpa#er a!ainst whom taxes are levied and a short description of the propert#to be sold. $t an# time before the da# fixed for the sale the taxpa#er ma# discontinue allproceedin!s b# pa#in! the taxes penalties and interest. If he does not do so the sale shallproceed and shall be held either at the main entrance of the municipal buildin! or cit# hall or onthe premises to be sold as the officer conductin! the proceedin!s shall determine and as the

notice of sale shall specif#.

2ithin five %;' da#s after the sale a return b# the distrainin! or lev#in! officer of the proceedin!sshall be entered upon the records of the Revenue Collection fficer the Revenue District officerand the Revenue Re!ional Director. The Revenue Collection fficer in consultation with theRevenue district fficer shall then make out and deliver to the purchaser a certificate from hisrecords showin! the proceedin!s of the sale describin! the propert# sold statin! the name of thepurchaser and settin! out the exact amount of all taxes penalties and interest* rovidedhowever That in case the proceeds of the sale exceeds the claim and cost of sale the excessshall be turned over to the owner of the propert#.

The Revenue Collection fficer upon approval b# the Revenue District fficer ma# out of hiscollection advance an amount sufficient to defra# the costs of collection b# means of the

summar# remedies provided for in this Code includin! ,the preservation or transportation in caseof personal propert# and the advertisement and subse+uent sale both in cases of personal andreal propert# includin! improvements found on the latter. In his monthl# collection reports suchadvances shall be reflected and supported b# receipts.

SEC :1= R"d"&'tion o +ro'"rt0 So#d - 2ithin one %4' #ear from the date of sale thedelin+uent taxpa#er or an# one for him shall have the ri!ht of pa#in! to the Revenue Districtfficer the amount of the public taxes penalties and interest thereon from the date ofdelin+uenc# to the date of sale to!ether with interest on said purchase price at the rate of fifteenpercent %4;' per annum from the date of purchase to the date of redemption and such pa#mentshall entitle the person pa#in! to the deliver# of the certificate issued to the purchaser and acertificate from the said Revenue District fficer that he has thus redeemed the propert# and the

Revenue District fficer shall forthwith pa# over to the purchaser the amount b# which suchpropert# has thus been redeemed and said propert# thereafter shall be free form the lien of suchtaxes and penalties.

The owner shall not however be deprived of the possession of the said propert# and shall beentitled to the rents and other income thereof until the expiration of the time allowed for itsredemption.

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SEC :1> For"itur" to *o$"rn&"nt or 4ant o Bidd"r - In case there is no bidder for realpropert# exposed for sale as herein above provided or if the hi!hest bid is for an amountinsufficient to pa# the taxes penalties and costs the Internal Revenue fficer conductin! the saleshall declare the propert# forfeited to the 3overnment in satisfaction of the claim in +uestion and

within two %5' da#s thereafter shall make a return of his proceedin!s and the forfeiture whichshall be spread upon the records of his office. It shall be the dut# of the Re!ister of Deedsconcerned upon re!istration with his office of an# such declaration of forfeiture to transfer thetitle of the propert# forfeited to the 3overnment without the necessit# of an order from acompetent court.

2ithin one %4' #ear from the date of such forfeiture the taxpa#er or an# one for him ma# redeemsaid propert# b# pa#in! to the Commissioner or the latterEs Revenue Collection fficer the fullamount of the taxes and penalties to!ether with interest thereon and the costs of sale but if thepropert# be not thus redeemed the forfeiture shall become absolute.

SEC :1@ R")a#" o R"a# E)tat" Ta"n or Ta%") - The Commissioner shall have char!e of

an# real estate obtained b# the 3overnment of the hilippines in pa#ment or satisfaction of taxespenalties or costs arisin! under this Code or in compromise or ad"ustment of an# claim thereforeand said Commissioner ma# upon the !ivin! of not less than twent# %5:' da#s notice sell anddispose of the same of public auction or with prior approval of the (ecretar# of Finance disposeof the same at private sale. In either case the proceeds of the sale shall be deposited with the9ational Treasur# and an accountin! of the same shall rendered to the Chairman of theCommission on $udit.

SEC :17 Furt!"r Di)traint or L"$0. - The remed# b# distraint of personal propert# and lev# onrealt# ma# be repeated if necessar# until the full amount due includin! all expenses is collected.

SEC :1 In6unction not A$ai#a,#" to R")train Co##"ction o Ta% - 9o court shall have theauthorit# to !rant an in"unction to restrain the collection of an# national internal revenue tax fee or char!e imposed b# this Code.

SEC :19 Natur" and E%t"nt o Ta% Li"n - If an# person corporation partnership "oint-account%cuentas en participacion' association or insurance compan# liable to pa# an internal revenuetax ne!lects or refuses to pa# the same after demand the amount shall be a lien in favor of the3overnment of the hilippines from the time when the assessment was made b# theCommissioner until paid with interests penalties and costs that ma# accrue in addition theretoupon all propert# and ri!hts to propert# belon!in! to the taxpa#er* rovided That this lien shallnot be valid a!ainst an# mort!a!ee purchaser or "ud!ment creditor until notice of such lien shall

be filed b# the Commissioner in the office of the Re!ister of Deeds of the province or cit# wherethe propert# of the taxpa#er is situated or located.

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SEC :: For& and .od" o +roc""ding in Action) Ari)ing und"r t!i) Cod" . - Civil andcriminal actions and proceedin!s instituted in behalf of the 3overnment under the authorit# of thisCode or other law enforced b# the Bureau of Internal Revenue shall be brou!ht in the name ofthe 3overnment of the hilippines and shall be conducted b# le!al officers of the Bureau ofInternal Revenue but no civil or criminal action for the recover# of taxes or the enforcement of an#

fine penalt# or forfeiture under this Code shall be filed in court without the approval of theCommissioner.

SEC ::1 R"&"d0 or Enorc"&"nt o Statutor0 +"na# +ro$i)ion). - The remed# forenforcement of statutor# penalties of all sorts shall be b# criminal or civil action as the particularsituation ma# re+uire sub"ect to the approval of the Commissioner.

SEC ::: E%c"'tion) a) to +"riod o Li&itation o A))"))&"nt and Co##"ction o Ta%")

%a' In the case of a false or fraudulent return with intent to evade tax or of failure to file a returnthe tax ma# be assessed or a preceedin! in court for the collection of such tax ma# be filedwithout assessment at an# time within ten %4:' #ears after the discover# of the falsit# fraud oromission* rovided That in a fraud assessment which has become final and executor# the fact of fraud shall be "udiciall# taken co!ni)ance of in the civil or criminal action for the collection thereof.

%b' If before the expiration of the time prescribed in (ection 5:1 for the assessment of the taxboth the Commissioner and the taxpa#er have a!reed in writin! to its assessment after such timethe tax ma# be assessed within the period a!reed upon. The period so a!reed upon ma# beextended b# subse+uent written a!reement made before the expiration of the period previousl#a!reed upon.

%c' $n# internal revenue tax which has been assessed within the period of limitation asprescribed in para!raph %a' hereof ma# be collected b# distraint or lev# or b# a proceedin! in

court within five %;' #ears followin! the assessment of the tax.

%d' $n# internal revenue tax which has been assessed within the period a!reed upon asprovided in para!raph %b' hereinabove ma# be collected b# distraint or lev# or b# a proceedin! incourt within the period a!reed upon in writin! before the expiration of the five %;' -#ear period.The period so a!reed upon ma# be extended b# subse+uent written a!reements made before theexpiration of the period previousl# a!reed upon.

%e' rovided however That nothin! in the immediatel# precedin! and para!raph %a' hereof shallbe construed to authori)e the examination and investi!ation or in+uir# into an# tax return filed inaccordance with the provisions of an# tax amnest# law or decree.

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SEC ::7 Sati)action o udg&"nt R"co$"r"d Again)t an0 Int"rna# R"$"nu" Oic"r -2hen an action is brou!ht a!ainst an# Internal Revenue officer to recover dama!es b# reason ofan# act done in the performance of official dut# and the Commissioner is notified of such action intime to make defense a!ainst the same throu!h the (olicitor 3eneral an# "ud!ment dama!es or costs recovered in such action shall be satisfied b# the Commissioner upon approval of the

(ecretar# of Finance or if the same be paid b# the person used shall be repaid or reimbursed tohim.

9o such "ud!ment dama!es or costs shall be paid or reimbursed in behalf of a person who hasacted ne!li!entl# or in bad faith or with willful oppression.

TITLE VIII RE.EDIES

CHA+TER III J +ROTESTIN* AN ASSESS.ENT3 REFUND3 ETC

SEC :: +rot")ting o A))"))&"nt ( 2hen the Commissioner or his dul# authori)edrepresentative finds that proper taxes should be assessed he shall first notif# the taxpa#er of hisfindin!s* provided however That a preassessment notice shall not be re+uired in the followin!cases*

%a' 2hen the findin! for an# deficienc# tax is the result of mathematical error in thecomputation of the tax as appearin! on the face of the return, or

%b' 2hen a discrepanc# has been determined between the tax withheld and the amountactuall# remitted b# the withholdin! a!ent, or

%c' 2hen a taxpa#er who opted to claim a refund or tax credit of excess creditablewithholdin! tax for a taxable period was determined to have carried over andautomaticall# applied the same amount claimed a!ainst the estimated tax liabilities forthe taxable +uarter or +uarters of the succeedin! taxable #ear, or

%d' 2hen the excise tax due on exciseable articles has not been paid, or

%e' 2hen the article locall# purchased or imported b# an exempt person such as but notlimited to vehicles capital e+uipment machineries and spare parts has been soldtraded or transferred to non-exempt persons.

The taxpa#ers shall be informed in writin! of the law and the facts on which the assessment ismade, otherwise the assessment shall be void.

2ithin a period to be prescribed b# implementin! rules and re!ulations the taxpa#er shall bere+uired to respond to said notice. If the taxpa#er fails to respond the Commissioner or his dul#authori)ed representative shall issue an assessment based on his findin!s.

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(uch assessment ma# be protested administrativel# b# filin! a re+uest for reconsideration orreinvesti!ation within thirt# %1:' da#s from receipt of the assessment in such form and manner asma# be prescribed b# implementin! rules and re!ulations. 2ithin sixt# %0:' da#s from filin! of theprotest all relevant supportin! documents shall have been submitted, otherwise the assessmentshall become final.

If the protest is denied in whole or in part or is not acted upon within one hundred ei!ht# %4>:'da#s from submission of documents the taxpa#er adversel# affected b# the decision or inactionma# appeal to the Court of Tax $ppeals within thirt# %1:' da#s from receipt of the said decision or from the lapse of one hundred ei!ht# %4>:'-da# period, otherwise the decision shall become finalexecutor# and demandable.

SEC ::9 R"co$"r0 o Ta% Erron"ou)#0 or I##"ga##0 Co##"ct"d - no suit or proceedin! shall bemaintained in an# court for the recover# of an# national internal revenue tax hereafter alle!ed tohave been erroneousl# or ille!all# assessed or collected or of an# penalt# claimed to have beencollected without authorit# of an# sum alle!ed to have been excessivel# or in an# mannerwron!full# collected without authorit# or of an# sum alle!ed to have been excessivel# or in an#

manner wron!full# collected until a claim for refund or credit has been dul# filed with theCommissioner, but such suit or proceedin! ma# be maintained whether or not such tax penalt#or sum has been paid under protest or duress.

In an# case no such suit or proceedin! shall be filed after the expiration of two %5' #ears from thedate of pa#ment of the tax or penalt# re!ardless of an# supervenin! cause that ma# arise afterpa#ment* rovided however That the Commissioner ma# even without a written claim thereforrefund or credit an# tax where on the face of the return upon which pa#ment was made suchpa#ment appears clearl# to have been erroneousl# paid.

SEC :< For"itur" o Ca)! R"und and o Ta% Cr"dit J

A For"itur" o R"und - $ refund check or warrant issued in accordance with the pertinentprovisions of this Code which shall remain unclaimed or uncashed within five %;' #ears from thedate the said warrant or check was mailed or delivered shall be forfeited in favor of the3overnment and the amount thereof shall revert to the !eneral fund.

B For"itur" o Ta% Cr"dit - $ tax credit certificate issued in accordance with the pertinentprovisions of this Code which shall remain unutili)ed after five %;' #ears from the date of issueshall unless revalidated be considered invalid and shall not be allowed as pa#ment for internalrevenue tax liabilities of the taxpa#er and the amount covered b# the certificate shall revert to the!eneral fund.

C Tran)itor0 +ro$i)ion - For purposes of the precedin! (ubsection a tax credit certificate

issued b# the Commissioner or his dul# authori)ed representative prior to <anuar# 4 4==> whichremains unutili)ed or has a creditable balance as of said date shall be presented for revalidationwith the Commissioner or his dul# authori)ed representative or on before <une 1: 4==>.

SEC :<1 Action to Cont")t For"itur" o C!att"# - In case of the sei)ure of personal propert#under claim of forfeiture the owner desirin! to contest the validit# of the forfeiture ma# at an#time before sale or destruction of the propert# brin! an action a!ainst the person sei)in! thepropert# or havin! possession thereof to recover the same and upon !ivin! proper bond ma#

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en"oin the sale, or after the sale and within six %0' months he ma# brin! an action to recover thenet proceeds reali)ed at the sale.

TITLE I/ CO.+LIANCE RE2UIRE.ENTS

CHA+TER I ( 8EE+IN* OF BOO8S OF ACCOUNTS AND RECORDS

SEC :<: 8""'ing o Boo) o Account) (

A Cor'oration)3 Co&'ani")3 +artn"r)!i') or +"r)on) R"uir"d to 8""' Boo) oAccount) - $ll corporations companies partnerships or persons re+uired b# law to pa# internalrevenue taxes shall keep a "ournal and a led!er or their e+uivalents* rovided however Thatthose whose +uarterl# sales earnin!s receipts or output do not exceed Fift# thousand pesos%;::::' shall keep and use simplified set of bookkeepin! records dul# authori)ed b# the(ecretar# of Finance where in all transactions and results of operations are shown and fromwhich all taxes due the 3overnment ma# readil# and accuratel# be ascertained and determinedan# time of the #ear* rovided further That corporations companies partnerships or personswhose !ross +uarterl# sales earnin!s receipts or output exceed ne hundred fift# thousandpesos %4;::::' shall have their books of accounts audited and examined #earl# b#independent Certified ublic $ccountants and their income tax returns accompanied with a dul#accomplished $ccount Information Form %$IF' which shall contain amon! others informationlifted from certified balance sheets profit and loss statements schedules listin! income-producin! properties and the correspondin! income therefrom and other relevant statements.

B Ind"'"nd"nt C"rtii"d +u,#ic Accountant D"in"d - The term EIndependent Certified ublic $ccountantE3 as used in the precedin! para!raph means an accountant who possesses theindependence as defined in the rules and re!ulations of the Board of $ccountanc# promul!atedpursuant to residential Decree 9o. 0=5 otherwise known as the Revised $ccountanc# Aaw.

SEC :<< Su,)idiar0 Boo) ( $ll corporations companies partnerships or persons keepin! thebooks of accounts mentioned in the precedin! (ection ma# at their option keep subsidiar# booksas the needs of their business ma# re+uire* rovided That were such subsidiaries are kept the#shall form part of the accountin! s#stem of the taxpa#er and shall be sub"ect to the same rulesand re!ulations as to their keepin! translation production and inspection as are applicable to the

"ournal and the led!er.

SEC :<= Languag" in -!ic! Boo) ar" to ," 8"'tM Tran)#ation ( $ll such corporationscompanies partnerships or persons shall keep the books or records mentioned in (ection 515hereof in native lan!ua!e /n!lish or (panish* rovided however That if in addition to saidbooks or records the taxpa#er keeps other books or records in a lan!ua!e other than a native

lan!ua!e /n!lish or (panish he shall make a true and complete translation of all the entries insuck other books or records into a native lan!ua!e, /n!lish or (panish and the said translationmust be made b# the bookkeeper or such taxpa#er or in his absence b# his mana!er and mustbe certified under oath as to its correctness b# the said bookkeeper or mana!er and shall forman inte!ral part of the aforesaid books of accounts. The keepin! of such books or records in an#lan!ua!e other than a native lan!ua!e /n!lish or (panish is hereb# prohibited.

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SEC :<> +r")"r$ation o Boo) and Account) and Ot!"r Accounting R"cord) ( $ll thebooks of accounts includin! the subsidiar# books and other accountin! records of corporationspartnerships or persons shall be preserved b# them for a period be!innin! from the last entr# in

each book until the last da# prescribed b# (ection 5:1 within which the Commissioner isauthori)ed to make an assessment. The said books and records shall be sub"ect to examinationand inspection b# internal revenue officers* rovided That for income tax purposes suchexamination and inspection shall be made onl# once in a taxable #ear except in the followin!cases*

%a' Fraud irre!ularit# or mistakes as determined b# the Commissioner,

%b' The taxpa#er re+uests reinvesti!ation,

%c' 8erification of compliance with withholdin! tax laws and re!ulations,

%d' 8erification of capital !ains tax liabilities, and

%e' In the exercise of the CommissionerEs power under (ection ;%B' to obtain informationfrom other persons in which case another or separate examination and inspection ma#be made. /xamination and inspection of books of accounts and other accountin! recordsshall be done in the taxpa#erEs office or place of business or in the office of the Bureau ofInternal Revenue. $ll corporations partnerships or persons that retire from businessshall within ten %4:' da#s from the date of retirement or within such period of time as ma#be allowed b# the Commissioner in special cases submit their books of accountsincludin! the subsidiar# books and other accountin! records to the Commissioner or an#of his deputies for examination after which the# shall be returned. Corporations andpartnerships contemplatin! dissolution must notif# the Commissioner and shall not bedissolved until cleared of an# tax liabilit#.

$n# provision of existin! !eneral or special law to the contrar# notwithstandin! the books ofaccounts and other pertinent records of tax-exempt or!ani)ations or !rantees of tax incentivesshall be sub"ect to examination b# the Bureau of Internal Revenue for purposes of ascertainin!compliance with the conditions under which the# have been !ranted tax exemptions or taxincentives and their tax liabilit# if an#.


CHA+TER II ( AD.INISTRATIVE +ROVISIONS

SEC :<@ R"gi)tration R"uir"&"nt) (

A R"uir"&"nt) - /ver# person sub"ect to an# internal revenue tax shall re!ister once with theappropriate Revenue District fficer*

%4' 2ithin ten %4:' da#s from date of emplo#ment or

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%5' n or before the commencement of businessor

%1' Before pa#ment of an# tax due or

%&' pon filin! of a return statement or declaration as re+uired in this Code.

The re!istration shall contain the taxpa#erEs name st#le place of residence business and suchother information as ma# be re+uired b# the Commissioner in the form prescribed therefor.

$ person maintainin! a head office branch or facilit# shall re!ister with the Revenue Districtfficer havin! "urisdiction over the head office brand or facilit#. For purposes of this (ection theterm Efacilit#E ma# include but not be limited to sales outlets places of production warehouses orstora!e places.

B Annua# R"gi)tration F"" - $n annual re!istration fee in the amount of Five hundred pesos%;::' for ever# separate or distinct establishment or place of business includin! facilit# t#peswhere sales transactions occur shall be paid upon re!istration and ever# #ear thereafter on orbefore the last da# of <anuar#* rovided however That cooperatives individuals earnin! purel#compensation income whether locall# or abroad and overseas workers are not liable to there!istration fee herein imposed.

The re!istration fee shall be paid to an authori)ed a!ent bank located within the revenue districtor to the Revenue Collection fficer or dul# authori)ed Treasurer of the cit# of municipalit# whereeach place of business or branch is re!istered.

C R"gi)tration o Eac! T0'" o Int"rna# R"$"nu" Ta% - /ver# person who is re+uired tore!ister with the Bureau of Internal Revenue under (ubsection %$' hereof shall re!ister each t#peof internal revenue tax for which he is obli!ated shall file a return and shall pa# such taxes andshall updates such re!istration of an# chan!es in accordance with (ubsection %/' hereof.

D Tran)"r o R"gi)tration - In case a re!istered person decides to transfer his place ofbusiness or his head office or branches it shall be his dut# to update his re!istration status b#filin! an application for re!istration information update in the form prescribed therefor.

E Ot!"r U'dat") - $n# person re!istered in accordance with this (ection shall wheneverapplicable update his re!istration information with the Revenue District ffice where he isre!istered specif#in! therein an# chan!e in t#pe and other taxpa#er details.

%F' Cancellation of Re!istration. S

%4' 3eneral Rule. S The re!istration of an# person who ceases to be liable to a taxt#pe shall be cancelled upon filin! with the Revenue District ffice where he is re!istered

an application for re!istration information update in a form prescribed therefor,

%5' Cancellation of 8alue-added Tax Re!istration. S $ 8$T-re!istered person ma#cancel his re!istration for 8$T if*

%a' @e makes written application and can demonstrate to theCommissionerEs satisfaction that his !ross sales or receipts for the followin!twelve %45' months other than those that are exempt under (ection 4:=%$' to%' will not exceed ne million five hundred thousand pesos %4;:::::' or

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%b' @e has ceased to carr# on his trade or business and does not expect torecommence an# trade or business within the next twelve %45' months.

The cancellation of re!istration will be effective from the first da# of the followin! month.

%3' ersons Re+uired to Re!ister for 8alue-added Tax. S

%4' $n# person who in the course of trade or business sells barters or exchan!es!oods or properties or en!a!es in the sale or exchan!e of services shall be liable tore!ister for value-added tax if*

%a' @is !ross sales or receipts for the past twelve %45' months other thanthose that are exempt under (ection 4:=%$' to %' have exceeded ne millionfive hundred thousand pesos %4;:::::', or

%b' There are reasonable !rounds to believe that his !ross sales or receiptsfor the next twelve %45' months other than those that are exempt under (ection4:=%$' to %' will exceed ne million five hundred thousand pesos %4;:::::'.

%5' /ver# person who becomes liable to be re!istered under para!raph %4' of this(ubsection shall re!ister with the Revenue District ffice which has "urisdiction over thehead office or branch of that person and shall pa# the annual re!istration fee prescribedin (ubsection %B' hereof. If he fails to re!ister he shall be liable to pa# the tax under TitleI8 as if he were a 8$T-re!istered person but without the benefit of input tax credits forthe period in which he was not properl# re!istered.

%@' ptional Re!istration for 8alue-added Tax of /xempt erson. S

%4' $n# person who is not re+uired to re!ister for value-added tax under (ubsection %3'hereof ma# elect to re!ister for value-added tax b# re!isterin! with the Revenue Districtffice that has "urisdiction over the head office of that person and pa#in! the annual

re!istration fee in (ubsection %B' hereof.

%5' $n# person who elects to re!ister under this (ubsection shall not be entitled tocancel his re!istration under (ubsection %F'%5' for the next three %1' #ears.

For purposes of Title I8 of this Code an# person who has re!istered value-added tax as a taxt#pe in accordance with the provisions of (ubsection %C' hereof shall be referred to as a E8$T-re!istered personE who shall be assi!ned onl# one Taxpa#er Identification 9umber %TI9'.

I Su''#0ing o Ta%'a0"r Id"ntiication Nu&,"r TIN - $n# person re+uired under theauthorit# of this Code to make render or file a return statement or other document shall besupplied with or assi!ned a Taxpa#er Identification 9umber %TI9' which he shall indicate in suchreturn statement or document filed with the Bureau of Internal Revenue for his proper

identification for tax purposes and which he shall indicate in certain documents such as but notlimited to the followin!*

%4' (u!ar +uedans refined su!ar release order or similar instruments,

%5' Domestic bills of ladin!,

%1' Documents to be re!istered with the Re!ister of Deeds of $ssessorEs ffice,

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%&' Re!istration certificate of transportation e+uipment b# land sea or air,

%;' Documents to be re!istered with the (ecurities and /xchan!e Commission,

%0' Buildin! construction permits,

%6' $pplication for loan with banks financial institutions or other financial intermediaries,

%>' $pplication for ma#orEs permit,

%=' $pplication for business license with the Department of Trade W Industr#, and

%4:' (uch other documents which ma# hereafter be re+uired under rules and re!ulationsto be promul!ated b# the (ecretar# of Finance upon recommendation of theCommissioner.

In cases where a re!istered taxpa#er dies the administrator or executor shall re!ister the estateof the decedent in accordance with (ubsection %$' hereof and a new Taxpa#er Identification

9umber %TI9' shall be supplied in accordance with the provisions of this (ection.

In the case of a nonresident decedent the executor or administrator of the estate shall re!isterthe estate with the Revenue District ffice where he is re!istered* rovided however That incase such executor or administrator is not re!istered re!istration of the estate shall be made withthe Taxpa#er Identification 9umber %TI9' supplied b# the Revenue District ffice havin!

"urisdiction over his le!al residence.

nl# one Taxpa#er identification 9umber %TI9' shall be assi!ned to a taxpa#er. $n# person whoshall secure more than one Taxpa#er Identification 9umber shall be criminall# liable under theprovision of (ection 56; on E8iolation of ther rovisions of this Code or Re!ulations in 3eneralE.

SEC :<7 I))uanc" o R"c"i't) or Sa#") or Co&&"rcia# In$oic") ( $ll persons sub"ect to aninternal revenue tax shall for each sale and transfer of merchandise or for services renderedvalued at Twent#-five pesos %5;.::' or more issue dul# re!istered receipts or sale orcommercial invoices prepared at least in duplicate showin! the date of transaction +uantit# unitcost and description of merchandise or nature of service* rovided however That where thereceipt is issued to cover pa#ment made as rentals commissions compensation or fees receiptsor invoices shall be issued which shall show the name business st#le if an# and address of thepurchaser customer or client.

The ori!inal of each receipt or invoice shall be issued to the purchaser customer or client at thetime the transaction is effected who if en!a!ed in business or in the exercise of profession shallkeep and preserve the same in his place of business for a period of three %1' #ears from the closeof the taxable #ear in which such invoice or receipt was issued while the duplicate shall be kept

and preserved b# the issuer also in his place of business for a like period.

The Commissioner ma# in meritorious cases exempt an# person sub"ect to internal revenue taxfrom compliance with the provisions of this (ection.

SEC :< +rinting o R"c"i't) or Sa#") or Co&&"rcia# In$oic") ( $ll persons who areen!a!ed in business shall secure from the Bureau of Internal Revenue an authorit# to printreceipts or sales or commercial invoices before a printer can print the same.

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9o authorit# to print receipts or sales or commercial invoices shall be !ranted unless the receiptsor invoices to be printed are seriall# numbered and shall show amon! other thin!s the namebusiness st#le Taxpa#er Identification 9umber %TI9' and business address of the person or entit#to use the same and such other information that ma# be re+uired b# rules and re!ulations to bepromul!ated b# the (ecretar# of Finance upon recommendation of the Commissioner.

$ll persons who print receipt or sales or commercial invoices shall maintain a lo!book?re!ister oftaxpa#ers who availed of their printin! services. The lo!book?re!ister shall contain the followin!information*

%4' 9ames Taxpa#er Identification 9umbers of the persons or entities for whom thereceipts or sales or commercial invoices were printed, and

%5' 9umber of booklets number of sets per booklet number of copies per set and theserial numbers of the receipts or invoices in each booklet.

SEC :<9 Sign to ," E%!i,it"d ,0 Di)ti##"r3 R"ctii"r3 Co&'ound"r3 R"'ac"r and4!o#")a#" Liuor D"a#"r ( /ver# person en!a!ed in distillin! or rectif#in! spirits compoundin!li+uors repackin! wines or distilled spirits and ever# wholesale li+uor dealer shall keep

conspicuousl# on the outside of his place of business a si!n exhibitin! in letters not less than sixcentimeters %0 cms.' hi!h his name or firm st#le with the words ERe!istered DistillerE ERectifier of(piritsE ECompounder of Ai+uorsE ERepacker of 2ines or Distilled (piritsE or E2holesale Ai+uorDealerE as the case ma# be and his assessment number.

SEC := Sign to ," "%!i,it"d ,0 &anuactur"r o +roduct) o To,acco ( /ver# manufacturer of ci!ars ci!arettes or tobacco and ever# wholesale dealer in leaf tobacco ormanufactured products of tobacco shall place and keep on outside of the buildin! wherein hisbusiness is carried on so that it can be distinctl# seen a si!n statin! his full name and businessin letters not less than six centimeters %0 cms.' hi!h and also !ivin! his assessment number.

SEC :=1 E%!i,ition o C"rtiicat" o +a0&"nt at +#ac" o Bu)in")) ( The certificate orreceipts showin! pa#ment of taxes issued to a person en!a!ed in a business sub"ect to anannual re!istration fee shall be kept conspicuousl# exhibited in plain view in or at the place wherethe business is conducted, and in case of a peddler or other persons not havin! a fixed place ofbusiness shall be kept in the possession of the holder thereof sub"ect to production upondemand of an# internal revenue officer.

SEC :=: Continuation o Bu)in")) o D"c"a)"d +"r)on ( 2hen an# individual who has paidthe annual re!istration fee dies and the same business is continued b# the person or personsinterested in his estate no additional pa#ment shall be re+uired for the residue of the term whichthe tax was paid* rovided however That the person or persons interested in the estate shouldwithin thirt# %1:' da#s from the death of the decedent submit to the Bureau of Internal Revenue

or the re!ional or revenue District ffice inventories of !oods or stocks had at the time of suchdeath.

The re+uirement under this (ection shall also be applicable in the case of transfer of ownershipor chan!e of name of the business establishment.

SEC :=< R"&o$a# o Bu)in")) to Ot!"r Location ( $n# business for which the annualre!istration fee has been paid ma# sub"ect to the rules and re!ulations prescribed b# the

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(ecretar# of Finance upon recommendation of the Commissioner be removed and continued inan# other place without the pa#ment of additional tax durin! the term for which the pa#ment wasmade.


CHA+TER III ( RULES AND RE*ULATIONS

SEC :== Aut!orit0 o S"cr"tar0 o Financ" to +ro&u#gat" Ru#") and R"gu#ation) ( The(ecretar# of Finance upon recommendation of the Commissioner shall promul!ate all needfulrules and re!ulations for the effective enforcement of the provisions of this Code.

SEC :=> S'"ciic +ro$i)ion) to ," Contain"d in Ru#") and R"gu#ation) - The rules andre!ulations of the Bureau of Internal Revenue shall amon! other thins contain provisions

specif#in! prescribin! or definin!*

%a' The time and manner in which Revenue Re!ional Director shall canvass theirrespective Revenue Re!ions for the purpose of discoverin! persons and propert# liableto national internal revenue taxes and the manner in which their lists and records oftaxable persons and taxable ob"ects shall be made and kept,

%b' The forms of labels brands or marks to be re+uired on !oods sub"ect to an excise taxand the manner in which the labellin! brandin! or markin! shall be effected,

%c' The conditions under which and the manner in which !oods intended for export whichif not exported would be sub"ect to an excise tax shall be labelled branded or marked,

%d' The conditions to be observed b# revenue officers respectin! the institutions andconduct of le!al actions and proceedin!s,

%e' The conditions under which !oods intended for stora!e in bonded warehouses shallbe conve#ed thither their manner of stora!e and the method of keepin! the entries andrecords in connection therewith also the books to be kept b# Revenue Inspectors andthe reports to be made b# them in connection with their supervision of such houses,

%f' The conditions under which denatured alcohol ma# be removed and dealt in thecharacter and +uantit# of the denaturin! material to be used the manner in which theprocess of denaturin! shall be effected so as to render the alcohol suitabl# denaturedand unfit for oral intake the bonds to be !iven the books and records to be kept the

entries to be made therein the reports to be made to the Commissioner and the si!ns tobe displa#ed in the business ort b# the person for whom such denaturin! is done or b#whom such alcohol is dealt in,

%!' The manner in which revenue shall be collected and paid the instrument documentor ob"ect to which revenue stamps shall be affixed the mode of cancellation of the samethe manner in which the proper books records invoices and other papers shall be keptand entries therein made b# the person sub"ect to the tax as well as the manner in whichlicenses and stamps shall be !athered up and returned after servin! their purposes,

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%h' The conditions to be observed b# revenue officers respectin! the enforcement of TitleIII imposin! a tax on estate of a decedent and other transfers mortis causa as well as on!ifts and such other rules and re!ulations which the Commissioner ma# consider suitable

for the enforcement of the said Title III,

%i' The manner in which tax returns information and reports shall be prepared and

reported and the tax collected and paid as well as the conditions under which evidenceof pa#ment shall be furnished the taxpa#er and the preparation and publication of taxstatistics,

%"' The manner in which internal revenue taxes such as income tax includin! withholdin!tax estate and donorEs taxes value-added tax other percenta!e taxes excise taxes anddocumentar# stamp taxes shall be paid throu!h the collection officers of the Bureau ofInternal Revenue or throu!h dul# authori)ed a!ent banks which are hereb# deputi)ed toreceive pa#ments of such taxes and the returns papers and statements that ma# be filedb# the taxpa#ers in connection with the pa#ment of the tax* rovided however Thatnotwithstandin! the other provisions of this Code prescribin! the place of filin! of returnsand pa#ment of taxes the Commissioner ma# b# rules and re!ulations re+uire that thetax returns papers and statements that ma# be filed b# the taxpa#ers in connection with

the pa#ment of the tax. rovided however That notwithstandin! the other provisions ofthis Code prescribin! the place of filin! of returns and pa#ment of taxes theCommissioner ma# b# rules and re!ulations re+uire that the tax returns papers andstatements and taxes of lar!e taxpa#ers be filed and paid respectivel# throu!h collectionofficers or throu!h dul# authori)ed a!ent banks* rovided further That the Commissioner can exercise this power within six %0' #ears from the approval of Republic $ct 9o. 60&0 or the completion of its comprehensive computeri)ation pro!ram whichever comes earlier*rovided finall# That separate venues for the Au)on 8isa#as and indanao areas ma#be desi!nated for the filin! of tax returns and pa#ment of taxes b# said lar!e taxpa#ers.

For the purpose of this (ection Elar!e taxpa#erE means a taxpa#er who satisfies an# of thefollowin! criteria,

1 Va#u"(Add"d Ta% VAT - Business establishment with 8$T paid or pa#able of at least nehundred thousand pesos %4:::::' for an# +uarter of the precedin! taxable #ear,

: E%ci)" ta% - Business establishment with excise tax paid or pa#able of at least ne millionpesos %4::::::' for the precedin! taxable #ear,

< Cor'orat" Inco&" Ta% - Business establishment with annual income tax paid or pa#able of atleast ne million pesos %4::::::' for the precedin! taxable #ear, and

= 4it!!o#ding ta% - Business establishment with withholdin! tax pa#ment or remittance of atleast ne million pesos %4::::::' for the precedin! taxable #ear.

rovided however That the (ecretar# of Finance upon recommendation of the Commissionerma# modif# or add to the above criteria for determinin! a lar!e taxpa#er after considerin! suchfactors as inflation volume of business wa!e and emplo#ment levels and similar economicfactors.

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The penalties prescribed under (ection 5&> of this Code shall be imposed on an# violation of therules and re!ulations issued b# the (ecretar# of Finance upon recommendation of theCommissioner prescribin! the place of filin! of returns and pa#ments of taxes b# lar!e taxpa#ers.

SEC :=@ Non( R"troacti$it0 o Ru#ing) - $n# revocation modification or reversal of an# of therules and re!ulations promul!ated in accordance with the precedin! (ections or an# of the rulin!sor circulars promul!ated b# the Commissioner shall not be !iven retroactive application if therevocation modification or reversal will be pre"udicial to the taxpa#ers except in the followin!cases*

%a' 2here the taxpa#er deliberatel# misstates or omits material facts from his return oran# document re+uired of him b# the Bureau of Internal Revenue,

%b' 2here the facts subse+uentl# !athered b# the Bureau of Internal Revenue aremateriall# different from the facts on which the rulin! is based, or

%c' 2here the taxpa#er acted in bad faith.

TITLE / STATUTOR OFFENSES AND +ENALTIES

CHA+TER I ( ADDITIONS TO THE TA/

SEC :=7 *"n"ra# +ro$i)ion) (

%a' The additions to the tax or deficienc# tax prescribed in this Chapter shall appl# to all taxesfees and char!es imposed in this Code. The $mount so added to the tax shall be collected at thesame time in the same manner and as part of the tax.

%b' If the withholdin! a!ent is the 3overnment or an# of its a!encies political subdivisions orinstrumentalities or a !overnment-owned or controlled corporation the emplo#ee thereofresponsible for the withholdin! and remittance of the tax shall be personall# liable for theadditions to the tax prescribed herein.

%c' the term 5'"r)on5 as used in this Chapter includes an officer or emplo#ee of a corporationwho as such officer emplo#ee or member is under a dut# to perform the act in respect of whichthe violation occurs.

SEC := ( Ci$i# +"na#ti") (

%$' There shall be imposed in addition to the tax re+uired to be paid a penalt# e+uivalent totwent#-five percent %5;' of the amount due in the followin! cases*

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%4' Failure to file an# return and pa# the tax due thereon as re+uired under the provisionsof this Code or rules and re!ulations on the date prescribed, or

%5' nless otherwise authori)ed b# the Commissioner filin! a return with an internalrevenue officer other than those with whom the return is re+uired to be filed, or

%1' Failure to pa# the deficienc# tax within the time prescribed for its pa#ment in thenotice of assessment, or

%&' Failure to pa# the full or part of the amount of tax shown on an# return re+uired to befiled under the provisions of this Code or rules and re!ulations or the full amount of taxdue for which no return is re+uired to be filed on or before the date prescribed for itspa#ment.

%B' In case of willful ne!lect to file the return within the period prescribed b# this Code or b# rulesand re!ulations or in case a false or fraudulent return is willfull# made the penalt# to be imposedshall be fift# percent %;:' of the tax or of the deficienc# tax in case an# pa#ment has been

made on the basis of such return before the discover# of the falsit# or fraud* rovided That asubstantial under declaration of taxable sales receipts or income or a substantial overstatementof deductions as determined b# the Commissioner pursuant to the rules and re!ulations to bepromul!ated b# the (ecretar# of Finance shall constitute prima facie evidence of a false orfraudulent return* rovided further That failure to report sales receipts or income in an amountexceedin! thirt# percent %1:' of that declared per return and a claim of deductions in anamount exceedin! %1:' of actual deductions shall render the taxpa#er liable for substantialunder declaration of sales receipts or income or for overstatement of deductions as mentionedherein.

SEC :=9 Int"r")t (

A In *"n"ra# - There shall be assessed and collected on an# unpaid amount of tax interest atthe rate of twent# percent %5:' per annum or such hi!her rate as ma# be prescribed b# rulesand re!ulations from the date prescribed for pa#ment until the amount is full# paid.

B D"ici"nc0 Int"r")t - $n# deficienc# in the tax due as the term is defined in this Code shallbe sub"ect to the interest prescribed in (ubsection %$' hereof which interest shall be assessedand collected from the date prescribed for its pa#ment until the full pa#ment thereof.

C D"#inu"nc0 Int"r")t - In case of failure to pa#*

%4' The amount of the tax due on an# return to be filed or

%5' The amount of the tax due for which no return is re+uired or

%1' $ deficienc# tax or an# surchar!e or interest thereon on the due date appearin! in thenotice and demand of the Commissioner there shall be assessed and collected on theunpaid amount interest at the rate prescribed in (ubsection %$' hereof until the amount isfull# paid which interest shall form part of the tax.

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D Int"r")t on E%t"nd"d +a0&"nt - If an# person re+uired to pa# the tax is +ualified and electsto pa# the tax on installment under the provisions of this Code but fails to pa# the tax or an#installment hereof or an# part of such amount or installment on or before the date prescribed forits pa#ment or where the Commissioner has authori)ed an extension of time within which to pa#a tax or a deficienc# tax or an# part thereof there shall be assessed and collected interest at therate hereinabove prescribed on the tax or deficienc# tax or an# part thereof unpaid from the dateof notice and demand until it is paid.

SEC :> Fai#ur" to Fi#" C"rtain Inor&ation R"turn) ( In the case of each failure to file aninformation return statement or list or keep an# record or suppl# an# information re+uired b# thisCode or b# the Commissioner on the date prescribed therefore unless it is shown that suchfailure is due to reasonable cause and not to willful ne!lect there shall upon notice and demandb# the Commissioner be paid b# the person failin! to file keep or suppl# the same nethousand pesos %4:::' for each failure* rovided however That the a!!re!ate amount to beimposed for all such failures durin! a calendar #ear shall not exceed Twent#-five thousand pesos%5;:::'.

SEC :>1 Fai#ur" o a 4it!!o#ding Ag"nt to Co##"ct and R"&it Ta% ( $n# person re+uired towithhold account for and remit an# tax imposed b# this Code or who willfull# fails to withholdsuch tax or account for and remit such tax or aids or abets in an# manner to evade an# such taxor the pa#ment thereof shall in addition to other penalties provided for under this Chapter beliable upon conviction to a penalt# e+ual to the total amount of the tax not withheld or notaccounted for and remitted.

SEC :>: Fai#ur" o a 4it!!o#ding Ag"nt to r"und E%c")) 4it!!o#ding Ta% ( $n#emplo#er?withholdin! a!ent who fails or refuses to refund excess withholdin! tax shall in additionto the penalties provided in this Title be liable to a penalt# to the total amount of refunds whichwas not refunded to the emplo#ee resultin! from an# excess of the amount withheld over the taxactuall# due on their return.


CHA+TER II ( CRI.ES3 OTHER OFFENSES AND FORFEITURES

SEC :>< *"n"ra# +ro$i)ion) (

%a' $n# person convicted of a crime penali)ed b# this Code shall in addition to bein! liable for thepa#ment of the tax be sub"ect to the penalties imposed herein* rovided That pa#ment of the taxdue after apprehension shall not constitute a valid defense in an# prosecution for violation of an#provision of this Code or in an# action for the forfeiture of untaxed articles.

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%b' $n# person who willfull# aids or abets in the commission of a crime penali)ed herein or whocauses the commission of an# such offense b# another shall be liable in the same manner as theprincipal.

%c' If the offender is not a citi)en of the hilippines he shall be deported immediatel# after servin!

the sentence without further proceedin!s for deportation. If he is a public officer or emplo#ee themaximum penalt# prescribed for the offense shall be imposed and in addition he shall bedismissed from the public service and perpetuall# dis+ualified from holdin! an# public office tovote and to participate in an# election. If the offender is a Certified ublic $ccountant hiscertificate as a Certified ublic $ccountant shall upon conviction be automaticall# revoked orcancelled.

%d' In the case of associations partnerships or corporations the penalt# shall be imposed on thepartner president !eneral mana!er branch mana!er treasurer officer-in-char!e and theemplo#ees responsible for the violation.

%e' The fines to be imposed for an# violation of the provisions of this Code shall not be lower thanthe fines imposed herein or twice the amount of taxes interest and surchar!es due from the

taxpa#er whichever is hi!her.

SEC :>= Att"&'t to E$ad" or D""at Ta% ( $n# person who willfull# attempts in an# manner toevade or defeat an# tax imposed under this Code or the pa#ment thereof shall in addition toother penalties provided b# law upon conviction thereof be punished b# a fine not less thanThirt# thousand %1::::' but not more than ne hunderd thousand pesos %4:::::' and suffer imprisonment of not less than two %5' #ears but not more than four %&' #ears* rovided That theconviction or ac+uittal obtained under this (ection shall not be a bar to the filin! of a civil suit forthe collection of taxes.

SEC :>> Fai#ur" to Fi#" R"turn3 Su''#0 Corr"ct and Accurat" Inor&ation3 +a0 Ta%4it!!o#d and R"&it Ta% and R"und E%c")) Ta%") 4it!!"#d on Co&'"n)ation ( $n#person re+uired under this Code or b# rules and re!ulations promul!ated thereunder to pa# an#tax make a return keep an# record or suppl# correct the accurate information who willfull# failsto pa# such tax make such return keep such record or suppl# correct and accurate informationor withhold or remit taxes withheld or refund excess taxes withheld on compensation at the timeor times re+uired b# law or rules and re!ulations shall in addition to other penalties provided b#law upon conviction thereof be punished b# a fine of not less than Ten thousand pesos%4::::' and suffer imprisonment of not less than one %4' #ear but not more than ten %4:' #ears.

$n# person who attempts to make it appear for an# reason that he or another has in fact filed areturn or statement or actuall# files a return or statement and subse+uentl# withdraws the samereturn or statement after securin! the official receivin! seal or stamp of receipt of internal revenueoffice wherein the same was actuall# filed shall upon conviction therefor be punished b# a fine of not less than Ten thousand pesos %4::::' but not more than Twent# thousand pesos %5::::'and suffer imprisonment of not less than one %4' #ear but not more than three %1' #ears.

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SEC :>@ +"na# Lia,i#it0 o Cor'oration) ( $n# corporation association or !eneral co-partnership liable for an# of the acts or omissions penali)ed under this Code in addition to thepenalties imposed herein upon the responsible corporate officers partners or emplo#ees shall

upon conviction for each act or omission be punished b# a fine of not less than Fift# thousandpesos %;::::' but not more than ne hundred thousand pesos %4:::::'.

SEC :>7 +"na# Lia,i#it0 or .aing Fa#)" Entri")3 R"cord) or R"'ort)3 or U)ing Fa#)ii"dor Fa" Accounta,#" For&) (

%$' $n# financial officer or independent Certified ublic $ccountant en!a!ed to examine and auditbooks of accounts of taxpa#ers under (ection 515 %$' and an# person under his direction who*

%4' 2illfull# falsifies an# report or statement bearin! on an# examination or audit or renders areport includin! exhibits statements schedules or other forms of accountanc# work which hasnot been verified b# him personall# or under his supervision or b# a member of his firm or b# amember of his staff in accordance with sound auditin! practices, or

%5' Certifies financial statements of a business enterprise containin! an essential misstatement of facts or omission in respect of the transactions taxable income deduction and exemption of hisclient, or

%B' $n# person who* %4' 9ot bein! an independent Certified ublic $ccountant accordin! to (ection 515%B' ora financial officer examines and audits books of accounts of taxpa#ers, or %5' ffers to si!n and certif# financial statements without audit, or

%1' ffers an# taxpa#er the use of accountin! bookkeepin! records for internal revenue

purposes not in conformit# with the re+uirements prescribed in this Code or rules andre!ulations promul!ated thereunder, or

%&' nowin!l# makes an# false entr# or enters an# false or fictitious name in the books ofaccounts or record mentioned in the precedin! para!raphs, or

%;' eeps two %5' or more sets of such records or books of accounts, or

%0' In an# wa# commits an act or omission in violation of the provisions of this (ection, or

%6' Fails to keep the books of accounts or records mentioned in (ection 515 in a nativelan!ua!e /n!lish or (panish or to make a true and complete translation as re+uired in(ection 51& of this Code or whose books of accounts or records kept in a nativelan!ua!e /n!lish or (panish and found to be at material variance with books or recordskept b# him in another lan!ua!e, or

%>' 2illfull# attempts in an# manner to evade or defeat an# tax imposed under this Codeor knowin!l# uses fake or falsified revenue official receipts Aetters of $uthorit#certificates authori)in! re!istration Tax Credit Certificates Tax Debit emoranda andother accountable forms shall upon conviction for each act or omission be punished b#a fine not less than Fift# thousand pesos %;::::' but not more than ne hundred

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pesos %4:::::' and suffer imprisonment of not less than two %5' #ears but not morethan six %0' #ears.

If the offender is a Certified ublic $ccountant his certificate as a Certified ublic $ccountantshall be automaticall# revoked or cancelled upon conviction.

In the case of forei!ners conviction under this Code shall result in his immediate deportation after servin! sentence without further proceedin!s for deportation.

SEC :> Un#a-u# +ur)uit o Bu)in")) ( $n# person who carries on an# business for whichan annual re!istration fee is imposed without pa#in! the tax as re+uired b# law shall uponconviction for each act or omission be punished b# a fine of not less than Five thousand pesos%;:::' but not more than Twent# thousand pesos %5::::' and suffer imprisonment of not lessthan six %0' months but not more than two %5' #ears* rovided That in the case of a personen!a!ed in the business of distillin! rectif#in! repackin! compoundin! or manufacturin! an#article sub"ect to excise tax he shall upon conviction for each act or omission be punished b# afine of not less than Thirt# thousand pesos %1::::' but not more than Fift# thousand pesos%;::::' and suffer imprisonment of not less than two %5' #ears but not more than four %&' #ears.

SEC :>9 I##"ga# Co##"ction o For"ign +a0&"nt) ( $n# person who knowin!l# undertakes thecollection of forei!n pa#ments as provided under (ection 06 of this Code without havin! obtaineda license therefor or without compl#in! with its implementin! rules and re!ulations shall uponconviction for each act or omission be punished b# a fine of not less than Twent# thousandpesos %5::::' but not more than Fift# thousand pesos %;::::' and suffer imprisonment ofnot less than one %4' #ear but not more than two %5' #ears.

SEC :@ Un#a-u# +o))"))ion o Cigar"tt" +a'"r in Bo,,in) or Ro##)3 Etc ( It shall beunlawful for an# person to have in his possession ci!arette paper in bobbins or rolls ci!arettetippin! paper or ci!arette filter tips without the correspondin! authorit# therefor issued b# theCommissioner. $n# person importer manufacturer of ci!ar and ci!arettes who has been found!uilt# under this (ection shall upon conviction for each act or omission be punished b# a fine ofnot less than Twent# thousand pesos %5::::' but not more than ne hundred thousand pesos%4::::::' and suffer imprisonment for a term of not less than six %0' #ears and one %4' da# butnot more than twelve %45' #ears.

SEC :@1 Un#a-u# U)" o D"natur"d A#co!o# ( $n# person who for the purpose ofmanufacturin! an# bevera!e uses denatured alcohol or alcohol speciall# denatured to be usedfor motive power or withdrawn under bond for industrial uses or alcohol knowin!l#misrepresented to be denatured to be unfit for oral intake or who knowin!l# sells or offers for salean# bevera!e made in whole or in part from such alcohol or who uses such alcohol for themanufacture of li+uid medicinal preparations taken internall# or knowin!l# sells or offers for salesuch preparations containin! as an in!redient such alcohol shall upon conviction for each act oromission be punished b# a fine of not less than Twent# thousand pesos %5::::' but not morethan ne hundred thousand pesos %4:::::' and suffer imprisonment for a term of not lessthan six %0' #ears and one %4' da# but not more than twelve %45' #ears.

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$n# person who shall unlawfull# recover or attempt to recover b# distillation or other process an#denatured alcohol or who knowin!l# sells or offers for sale conceals or otherwise disposes ofalcohol so recovered or redistilled shall be sub"ect to the same penalties imposed under this(ection.

SEC :@: S!i'&"nt or R"&o$a# o Liuor or To,acco +roduct) und"r Fa#)" Na&" or

Brand or a) an I&itation o an0 E%i)ting or Ot!"r-i)" 8no-n +roduct Na&" or Brand ( $n#person who ships transports or removes spirituous compounded or fermented li+uors wines oran# manufactured products of tobacco under an# other than the proper name or brand known tothe trade as desi!natin! the kind and +ualit# of the contents of the cask bottle or packa!econtainin! the same or as an imitation of an# existin! or otherwise known product name or brandor causes such act to be done shall upon conviction for each act or omission be punished b# afine of not less than Twent# thousand pesos %5::::' but not more than ne hundred thousandpesos %4::::::' and suffer imprisonment of not less than six %0' #ears and one %4' da# but notmore than twelve %45' #ears.

SEC :@< Un#a-u# +o))"))ion or R"&o$a# o Artic#") Su,6"ct to E%ci)" Ta% -it!out+a0&"nt o t!" Ta% ( $n# person who owns and?or is found in possession of imported articlessub"ect to excise tax the tax on which has not been paid in accordance with law or an# personwho owns and?or is found in possession of imported tax-exempt articles other than those to whomthe# are le!all# issued shall be punished b#*

%a' $ fine of not less than ne thousand pesos %4:::' nor more than Two thousandpesos %5:::' and suffer imprisonment of not less than sixt# %0:' da#s but not morethan one hundred %4::' da#s if the appraised value to be determined in the mannerprescribed in the Tariff and Customs Code includin! duties and taxes of the articlesdoes not exceed ne thousand pesos %4:::'.

%b' $ fine of not less than Ten thousand pesos %4::::' but not more than Twent#thousand pesos %5::::' and suffer imprisonment of not less than two %5' #ears but notmore than four %&' #ears if the appraised value to be determined in the mannerprescribed in the Tariff and Customs Code includin! duties and taxes of the articlesexceeds ne thousand pesos %4:::' but does not exceed Fift# thousand pesos%;::::',

%c' $ fine of not less than Thirt# thousand pesos %1::::' but not more than (ixt#thousand pesos %0::::' and suffer imprisonment of not less than four %&' #ears but notmore than six %0' #ears if the appraised value to be determined in the mannerprescribed in the Tariff and Customs Code includin! duties and taxes of the articles ismore than Fift# thousand pesos %;::::' but does not exceed ne hundred fift#thousand pesos %4;::::', or

%d' $ fine of not less than Fift# thousand pesos %;::::' but not more than ne hundredthousand pesos %4:::::' and suffer imprisonment of not less than ten %4:' #ears butnot more than twelve %45' #ears if the appraised value to be determined in the mannerprescribed in the Tariff and Customs Code includin! duties and taxes of the articlesexceeds ne hundred fift# thousand pesos %4;::::'.

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$n# person who is found in possession of locall# manufactured articles sub"ect to excise tax thetax on which has not been paid in accordance with law or an# person who is found in possessionof such articles which are exempt from excise tax other than those to whom the same is lawfull#issued shall be punished with a fine of not less than %4:' times the amount of excise tax due onthe articles found but not less than Five hundred pesos %;::' and suffer imprisonment of notless than two %5' #ears but not more than four %&' #ears.

$n# manufacturer owner or person in char!e of an# article sub"ect to excise tax who removes orallows or causes the unlawful removal of an# such articles from the place of production or bondedwarehouse upon which the excise tax has not been paid at the time and in the manner re+uiredand an# person who knowin!l# aids or abets in the removal of such articles as aforesaid orconceals the same after ille!al removal shall for the first offense be punished with a fine of notless than ten %4:' times the amount of excise tax due on the articles but not less than nethousand pesos %4:::' and suffer imprisonment of not less than one %4' #ear but not more thantwo %5' #ears.

The mere unexplained possession of articles sub"ect to excise tax the tax on which has not beenpaid in accordance with law shall be punishable under this (ection.

S"c :@= Fai#ur" or r"u)a# to I))u" R"c"i't) or Sa#") or Co&&"rcia# In$oic")3 Vio#ation)r"#at"d to t!" +rinting o )uc! R"c"i't) or In$oic") and Ot!"r Vio#ation) (

%a' $n# person who bein! re+uired under (ection 516 to issue receipts or sales or commercialinvoices fails or refuses to issue such receipts of invoices issues receipts or invoices that do nottrul# reflect and?or contain all the information re+uired to be shown therein or uses multiple ordouble receipts or invoices shall upon conviction for each act or omission be punished b# a fineof not less than ne thousand pesos %4:::' but not more than Fift# thousand pesos %;::::'and suffer imprisonment of not less than two %5' #ears but not more than four %&' #ears.

%b' $n# person who commits an# of the acts enumerated hereunder shall be penali)ed in thesame manner and to the same extent as provided for in this (ection*

%4' rintin! of receipts or sales or commercial invoices without authorit# from the Bureauof Internal Revenue, or

%5' rintin! of double or multiple sets of invoices or receipts, or

%1' rintin! of unnumbered receipts or sales or commercial invoices not bearin! thename business st#le Taxpa#er Identification 9umber and business address of theperson or entit#.

SEC :@> O"n)") R"#ating to Sta&') ( $n# person who commits an# of the acts enumeratedhereunder shall upon conviction thereof be punished b# a fine of not less than Twent# thousand

pesos %5::::' but not more than Fift# thousand pesos %;::::' and suffer imprisonment ofnot less than four %&' #ears but not more than ei!ht %>' #ears* %a' makin! importin! sellin! usin! or possessin! without express authorit# from theCommissioner an# die for printin! or makin! stamps labels ta!s or pla#in! cards,

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%b' /rasin! the cancellation marks of an# stamp previousl# used or alterin! the writtenfi!ures or letters or cancellation marks on internal revenue stamps,

%c' ossessin! false counterfeit restored or altered stamps labels or ta!s or causin! thecommission of an# such offense b# another,

%d' (ellin! or offerin! for sale an# box or packa!e containin! articles sub"ect to excise taxwith false spurious or counterfeit stamps or labels or sellin! from an# such fraudulentbox packa!e or container as aforementioned, or

%e' 3ivin! awa# or acceptin! from another or sellin! bu#in! or usin! containers on whichthe stamps are not completel# destro#ed.

S"c :@@ Fai#ur" to O,"0 Su&&on) ( $n# person who bein! dul# summoned to appear totestif# or to appear and produce books of accounts records memoranda or other papers or tofurnish information as re+uired under the pertinent provisions of this Code ne!lects to appear orto produce such books of accounts records memoranda or other papers or to furnish suchinformation shall upon conviction be punished b# a fine of not less than Five thousand pesos

%;:::' but not more than ten thousand pesos %4::::' and suffer imprisonment of not lessthan one %4' #ear but not more than two %5' #ears.

SEC :@7 D"c#aration und"r +"na#ti") o +"r6ur0 ( $n# declaration return and otherstatement re+uired under this Code shall in lieu of an oath contain a written statement that the#are made under the penalties of per"ur#. $n# person who willfull# files a declaration return orstatement containin! information which is not true and correct as to ever# material matter shallupon conviction be sub"ect to the penalties prescribed for per"ur# under the Revised enal Code.

SEC :@ Ot!"r Cri&") and O"n)") (

A .i)d"c#aration or .i)r"'r")"ntation o .anuactur"r) Su,6"ct to E%ci)" Ta% - $n#manufacturer who in violation of the provisions of Title 8I of this Code misdeclares in the swornstatement re+uired therein or in the sales invoice an# pertinent data or information shall bepunished b# a summar# cancellation or withdrawal of the permit to en!a!e in business as amanufacturer of articles sub"ect to excise tax.

B For"itur" o +ro'"rt0 U)"d in Un#ic"n)"d Bu)in")) or Di") U)"d or +rinting Fa#)"Sta&')3 Etc - $ll chattels machiner# and removable fixtures of an# sort used in the unlicensedproduction of articles sub"ect to excise tax shall be forfeited. Dies and other e+uipment used forthe printin! or makin! of an# internal revenue stamp label or ta! which is in imitation of orpurports to be a lawful stamp label or ta! shall also be forfeited.

C For"itur" o *ood) I##"ga##0 Stor"d or R"&o$"d - nless otherwise specificall#authori)ed b# the Commissioner all articles sub"ect to excise tax should not be stored or allowedto remain in the distiller# warehouse bonded warehouse or other place where made after the taxthereon has been paid, otherwise all such articles shall be forfeited. $rticles withdrawn from an#such place or from customs custod# or imported into the countr# without the pa#ment of there+uired tax shall likewise be forfeited.

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CHA+TER III ( +ENALTIES I.+OSED ON +UBLIC OFFICERS

SEC :@9 Vio#ation) Co&&itt"d ,0 *o$"rn&"nt Enorc"&"nt Oic"r) - /ver# official

a!ent or emplo#ee of the Bureau of Internal Revenue or an# other a!enc# of the 3overnmentchar!ed with the enforcement of the provisions of this Code who is !uilt# of an# of the offensesherein below specified shall upon conviction for each act or omission be punished b# a fine ofnot less than Fift# thousand pesos %;::::' but not more than ne hundred thousand pesos%4:::::' and suffer imprisonment of not less than ten %4:' #ears but not more than fifteen %4;'#ears and shall likewise suffer an additional penalt# of perpetual dis+ualification to hold publicoffice to vote and to participate in an# public election*

%a' /xtortion or willful oppression throu!h the use of his office or willful oppression andharassment of a taxpa#er who refused declined turned down or re"ected an# of hisoffers specified in para!raph %d' hereof,

%b' nowin!l# demandin! or receivin! an# fee other or !reater sums that are authori)ed

b# law or receivin! an# fee compensation or reward except as b# law prescribed for theperformance of an# dut#,

%c' 2illfull# ne!lectin! to !ive receipts as b# law re+uired for an# sum collected in theperformance of dut# or willfull# ne!lectin! to perform an# other duties en"oined b# law,

%d' fferin! or undertakin! to accomplish file or submit a report or assessment on ataxpa#er without the appropriate examination of the books of accounts or tax liabilit# orofferin! or undertakin! to submit a report or assessment less than the amount due the3overnment for an# consideration or compensation or conspirin! or colludin! withanother or others to defraud the revenues or otherwise violate the provisions of thisCode,

%e' 9e!lectin! or b# desi!n permittin! the violation of the law b# an# other person,

%f' akin! or si!nin! an# false entr# or entries in an# book or makin! or si!nin! an# falsecertificate or return,

%!' $llowin! or conspirin! or colludin! with another to allow the unauthori)ed retrievalwithdrawal or recall of an# return statement or declaration after the same has beenofficiall# received b# the Bureau of Internal Revenue,

%h' @avin! knowled!e or information of an# violation of this Code or of an# fraudcommitted on the revenues collectible b# the Bureau of Internal Revenue failure to reportsuch knowled!e or information to their superior officer or failure to report as otherwise

re+uired b# law, and

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%i' 2ithout the authorit# of law demandin! or acceptin! or attemptin! to collect directl#or indirectl# as pa#ment or otherwise an# sum of mone# or other thin! of value for thecompromise ad"ustment or settlement of an# char!e or complaint for an# violation oralle!ed violation of this Code.

rovided That the provisions of the fore!oin! para!raph notwithstandin! an# internal revenueofficer for which a prima facie case of !rave misconduct has been established shall after duenotice and hearin! of the administrative case and sub"ect to Civil (ervice Aaws be dismissedfrom the revenue service* rovided further That the term Egra$" &i)conduct5 as defined in Civil(ervice Aaw shall include the issuance of fake letters of authorit# and receipts for!er# ofsi!nature unsurpation of authorit# and habitual issuance of unreasonable assessments.

SEC :7 Un#a-u# Di$u#g"nc" o Trad" S"cr"t) - /xcept as provided in (ection 64 of thisCode and (ection 50 of Republic $ct 9o. 01>> an# officer or emplo#ee of the Bureau of InternalRevenue who divul!es to an# person or makes known in an# other manner than ma# be providedb# law information re!ardin! the business income or estate of an# taxpa#er the secretsoperation st#le or work or apparatus of an# manufacturer or producer or confidential information

re!ardin! the business of an# taxpa#er knowled!e of which was ac+uired b# him in the dischar!eof his official duties shall upon conviction for each act or omission be punished b# a fine of notless than Fift# thousand pesos %;::::' but not more than ne hundred thousand pesos%4:::::' or suffer imprisonment of not less than two %5' #ears but not more than five %;' #earsor both.

SEC :71 Un#a-u# Int"r")t o R"$"nu" La- Enorc"r) in Bu)in")) - $n# internal revenueofficer who is or shall become interested directl# or indirectl# in the manufacture sale orimportation of an# article sub"ect to excise tax under Title 8I of this Code or in the manufacture orrepair or sale of an# die for printin! or makin! of stamps or labels shall upon conviction for eachact or omission be punished b# a fine of not less than Five thousand pesos %;:::' but notmore than Ten thousand pesos %4::::' or suffer imprisonment of not less than two %5' #ears

and one %4' da# but not more than four %&' #ears or both.

SEC :7: Vio#ation o 4it!!o#ding Ta% +ro$i)ion - /ver# officer or emplo#ee of the3overnment of the Republic of the hilippines or an# of its a!encies and instrumentalities itspolitical subdivisions as well as !overnment-owned or controlled corporations includin! theBan!ko (entral n! ilipinas %B(' who under the provisions of this Code or rules andre!ulations promul!ated thereunder is char!ed with the dut# to deduct and withhold an# internalrevenue tax and to remit the same in accordance with the provisions of this Code and other lawsis !uilt# of an# offense herein below specified shall upon conviction for each act or omission bepunished b# a fine of not less than Five thousand pesos %;:::' but not more than Fift#thousand pesos %;::::' or suffer imprisonment of not less than six %0' months and one %4' da#but not more than two %5' #ears or both*

%a' Failin! or causin! the failure to deduct and withhold an# internal revenue tax underan# of the withholdin! tax laws and implementin! rules and re!ulations,

%b' Failin! or causin! the failure to remit taxes deducted and withheld within the timeprescribed b# law and implementin! rules and re!ulations, and

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%c' Failin! or causin! the failure to file return or statement within the time prescribed orrenderin! or furnishin! a false or fraudulent return or statement re+uired under thewithholdin! tax laws and rules and re!ulations.

SEC :7< +"na#t0 or Fai#ur" to I))u" and E%"cut" 4arrant - $n# official who fails to issue or

execute the warrant of distraint or lev# within thirt# %1:' da#s after the expiration of the timeprescribed in (ection 5:6 or who is found !uilt# of abusin! the exercise thereof b# competentauthorit# shall be automaticall# dismissed from the service after due notice and hearin!.


CHA+TER IV ( OTHER +ENAL +ROVISIONS

SEC :7= +"na#t0 or S"cond and Su,)"u"nt O"n)") - In the case of reincidence themaximum of the penalt# prescribed for the offense shall be imposed.

SEC :7> Vio#ation o Ot!"r +ro$i)ion) o t!i) Cod" or Ru#") and R"gu#ation) in *"n"ra# - $n# person who violates an# provision of this Code or an# rule or re!ulation promul!ated b# theDepartment of Finance for which no specific penalt# is provided b# law shall upon conviction for each act or omission be punished b# a fine of not more than ne thousand pesos %4:::' orsuffer imprisonment of not more than six %0' months or both.

SEC :7@ +"na#t0 or S"##ing3 Tran)"rring3 Encu&,"ring or in an0 -a0 Di)'o)ing o+ro'"rt0 +#ac"d und"r Con)tructi$" Di)traint - $n# taxpa#er whose propert# has beenplaced under constructive distraint who sells transfers encumbers or in an# wa# disposes ofsaid propert# or an# part thereof without the knowled!e and consent of the Commissioner shall

upon conviction for each act or omission be punished b# a fine of not less than twice the value of the propert# so sold encumbered or disposed of but not less than Five Thousand pesos%;:::' or suffer imprisonment of not less than two %5' #ears and one %4' da# but not more thanfour %&' #ears of both.

SEC :77 Fai#ur" to Surr"nd"r +ro'"rt0 +#ac"d und"r Di)traint and L"$0 - $n# personhavin! in his possession or under his control an# propert# or ri!hts to propert# upon which awarrant of constructive distraint or actual distraint and lev# has been issued shall upon demandb# the Commissioner or an# of his deputies executin! such warrant surrender such propert# orri!ht to propert# to the Commissioner or an# of his deputies unless such propert# or ri!ht is atthe time of such demand sub"ect to an attachment or execution under an# "udicial process. $n#person who fails or refuses to surrender an# of such propert# or ri!ht shall be liable in his ownperson and estate to the 3overnment in a sum e+ual to the value of the propert# or ri!hts not sosurrendered but not exceedin! the amount of the taxes %includin! penalties and interest' for thecollection of which such warrant had been issued to!ether with cost and interest if an# from thedate of such warrant. In addition such person shall upon conviction for each act or omission bepunished b# a fine of not less than Five thousand pesos %;:::' or suffer imprisonment of notless than six %0' months and one %4' da# but not more than two %5' #ears or both.

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SEC :7 +rocuring Un#a-u# Di$u#g"nc" o Trad" S"cr"t) - $n# person who causes orprocures an officer or emplo#ee of the Bureau of Internal Revenue to divul!e an# confidentialinformation re!ardin! the business income or inheritance of an# taxpa#er knowled!e of whichwas ac+uired b# him in the dischar!e of his official duties and which it is unlawful for him toreveal and an# person who publishes or prints in an# manner whatever not provided b# law an#income profit loss or expenditure appearin! in an# income tax return shall be punished b# a fineof not more than Two thousand pesos %5:::' or suffer imprisonment of not less than six %0'months nor more than five %;' #ears or both.

SEC :79 Coni)cation and For"itur" o t!" +roc""d) or In)tru&"nt) o Cri&" - In additionto the penalt# Imposed for the violation of the provisions of Title H of this Code the same shallcarr# with it the confiscation and forfeiture in favor of the !overnment of the proceeds of the crimeor value of the !oods and the instruments or tools with which the crime was committed*rovided however That if in the course of the proceedin!s it is established that the instrumentsor tools used in the illicit act belon! to a third person the same shall be confiscated and forfeitedafter due notice and hearin! in a separate proceedin! in favor of the 3overnment if such thirdperson leased let chartered or otherwise entrusted the same to the offender* rovided furtherThat in case the lessee subleased or the borrower charterer or trustee allowed the use of the

instruments or tools to the offender such instruments or tools shall likewise be confiscated andforfeited* rovided finall# That propert# of common carriers shall not be sub"ect to forfeiturewhen used in the transaction of their business as such common carrier unless the owner oroperator of said common carrier was at the time of the ille!al act a consentin! part# or priv#thereto without pre"udice to the ownerEs ri!ht of recover# a!ainst the offender in a civil or criminalaction. $rticles which are not sub"ect of lawful commerce shall be destro#ed.

SEC : Su,)idiar0 +"na#t0 - If the person convicted for violation of an# of the provisions ofthis Code has no propert# with which to meet the fine imposed upon him b# the court or is unableto pa# such fine he shall be sub"ect to a subsidiar# personal liabilit# at the rate of one %4' da# foreach /i!ht pesos and fift# centavos %>.;:' sub"ect to the rules established in $rticle 1= of theRevised enal Code.

SEC :1 +r")cri'tion or Vio#ation) o an0 +ro$i)ion o t!i) Cod" - $ll violations of an#provision of this Code shall prescribe after Five %;' #ears.

rescription shall be!in to run from the da# of the commission of the violation of the law and ifthe same be not known at the time from the discover# thereof and the institution of "udicialproceedin!s for its investi!ation and punishment.

The prescription shall be interrupted when proceedin!s are instituted a!ainst the !uilt# personsand shall be!in to run a!ain if the proceedin!s are dismissed for reasons not constitutin!

"eopard#.

The term of prescription shall not run when the offender is absent from the hilippines.

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In addition to the internal revenue allotment as provided for in the precedin! para!raph fift#percent %;:' of the national taxes collected under (ections 4:0 4:> and 440 of this Code inexcess of the increase in collections for the immediatel# precedin! #ear shall be distributed asfollows*

%a' Twent# percent %5:' shall accrue to the cit# or municipalit# where such taxes arecollected and shall be allocated in accordance with (ection 4;: of Republic $ct 9o. 640:otherwise known as the Aocal 3overnment Code of 4==4, and

%b' /i!ht# percent %>:' shall accrue to the 9ational 3overnment.

SEC := A##ot&"nt or t!" Co&&i))ion on Audit - ne-half of one percent %4?5 of 4' of thecollections from the national internal revenue taxes not otherwise accruin! to special accounts inthe !eneral fund of the national !overnment shall accrue to the Commission on $udit as a fee forauditin! services rendered to local !overnment units excludin! maintenance e+uipment andother operatin! expenses as provided for in (ection 54 of residential Decree 9o. >=>.

The (ecretar# of Finance is hereb# authori)ed to deduct from the monthl# internal revenue tax

collections an amount e+uivalent to the percenta!e as herein fixed and to remit the same directl#to the Commission on $udit under such rules and re!ulations as ma# be promul!ated b# the(ecretar# of Finance and the Chairman of the Commission on $udit.

SEC :> A##ot&"nt or t!" Bur"au o Int"rna# R"$"nu" - $n amount e+uivalent to fivepercent %;' of the excess of actual collections of national internal revenue taxes over thecollection !oal shall accrue to the special fund of the Bureau of Internal Revenue and shall betreated as receipts automaticall# appropriated. (aid amount shall be utili)ed as incentive bonusfor revenue personnel purchase of necessar# e+uipment and facilities for the improvement of taxadministration as approved b# the Commissioner* rovided That the resident ma# uponrecommendation of the Commissioner direct that the excess be credited to a (pecial $ccount inthe 9ational Treasur# to be held in the reserve available for distribution as incentive bonus in thesubse+uent #ears.

The (ecretar# of Finance is hereb# authori)ed to transfer from the Treasur# an amounte+uivalent to the percenta!e as herein fixed and to remit the same directl# to the Bureau ofInternal Revenue under such rules and re!ulations as ma# be promul!ated b# the (ecretar# ofFinance.

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TITLE /IALLOT.ENT OF INTERNAL REVENUE

CHA+TER II ( S+ECIAL DIS+OSITION OF CERTAIN NATIONAL INTERNAL REVENUE TA/ES

SEC :@ Di)'o)ition o +roc""d) o in)uranc" +r"&iu& Ta% ( Twent#-five percent %5;' ofthe premium tax collected under (ection 451 of this Code shall accrue to the Insurance Fund ascontemplated in (ection &4> of residential Decree 9o. 045 which shall be used for the purposeof defra#in! the expenses of the Insurance Commission. The Commissioner shall turn over anddeliver the said Insurance Fund to the Insurance Commissioner as soon as the collection ismade.

SEC :7 S!ar") o Loca# *o$"rn&"nt Unit) in t!" +roc""d) ro& t!" D"$"#o'&"nt andUti#ization o t!" Nationa# 4"a#t! ( Aocal 3overnment units shall have an e+uitable share inthe proceeds derived from the utili)ation and development of the national wealth within their

respective areas includin! sharin! the same with the inhabitants b# wa# of direct benefits.

A A&ount o S!ar" o Loca# *o$"rn&"nt Unit) - Aocal !overnment units shall in addition tothe internal revenue allotment have a share of fort# percent %&:' of the !ross collection derivedb# the national !overnment from the precedin! fiscal #ear from excise taxes on mineral productsro#alties and such other taxes fees or char!es includin! related surchar!es interests or finesand from its share in an# co-production "oint venture or production sharin! a!reement in theutili)ation and development of the national wealth within their territorial "urisdiction.

B S!ar" o t!" Loca# *o$"rn&"nt) ro& An0 *o$"rn&"nt Ag"nc0 or *o$"rn&"nt(o-n"dor ( Contro##"d Cor'oration - Aocal 3overnment nits shall have a share based on theprecedin! fiscal #ear from the proceeds derived b# an# !overnment a!enc# or !overnment-owned or controlled corporation en!a!ed in the utili)ation and development of the national wealth

based on the followin! formula whichever will produce a hi!her share for the local !overnmentunit*

%4' ne percent %4' of the !ross sales or receipts of the precedin! calendar #ear or

%5' Fort# percent %&:' of the excise taxes on mineral products ro#alties and such other taxes fees or char!es includin! related surchar!es interests or fines the !overnmenta!enc# or !overnment-owned or -controlled corporations would have paid if it were nototherwise exempt.

C A##ocation o S!ar"). - The share in the precedin! (ection shall be distributed in thefollowin! manner*

%4' 2here the natural resources are located in the province* %a' rovince - twent# percent %5:'

%b' Component cit#?municipalit# - fort#-five percent %&;', and

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%c' Baran!a# - thirt#-five percent %1;'

rovided however That where the natural resources are located in two %5' or more cities theallocation of shares shall be based on the formula on population and land area as specified insubsection %C'%4' hereof.

%5' 2here the natural resources are located in a hi!hl# urbani)ed or independentcomponent cit#*

%a' Cit# - sixt# - five percent %0;', and

%b' Baran!a# - thirt# - five percent %1;'

rovided however That where the natural resources are located in two %5' or more cities theallocation of shares shall be based on the formula on population and land area as specified insubsection %c'%4' hereof.

SEC : Di)'o)ition o Incr"&"nta# R"$"nu") (

A Incr"&"nta# R"$"nu") ro& R"'u,#ic Act No 7@@. - The incremental revenues from theincrease in the documentar# stamp taxes under R.$. 9o. 600: shall be set aside for the followin!purposes*

%4' In 4==& and 4==; twent# five percent %5;' thereof respectivel# shall accrue to thenified @ome-Aendin! ro!ram under /xecutive rder 9o. =: particularl# for masssociali)ed housin! pro!ram to be allocated as follows* fift# percent %;:' for mass-sociali)ed housin!, thirt# percent %1:' for the communit# mort!a!e pro!ram, and twent#percent %5:' for land bankin! and development to be administered b# the 9ational@ousin! $uthorit#* rovided That no more than one percent %4' of the respectiveallocations hereof shall be used for administrative expenses,

%5' In 4==0 twent# five percent %5;' thereof to be utili)ed for the 9ational @ealth

Insurance ro!ram that hereafter ma# be mandated b# law,

%1' In 4==& and ever# #ear thereafter twent# five percent %5;' thereof shall accrue to a(pecial /ducation Fund to be $dministered b# the Department of /ducation Culture and(ports for the construction and repair of school facilities trainin! or teachers andprocurement or production of instructional materials and teachin! aids, and

%&' In 4==& and ever# #ear thereafter fift# percent %;:' thereof shall accrue to a (pecialInfrastructure Fund for the Construction and repair of roads brid!es dams and irri!ationseaports and h#droelectric and other indi!enous power pro"ects* rovided however Thatfor the #ears 4==& and 4==; thirt# percent %1:' and for the #ears 4==0 4==6 and4==> twent# percent %5:' of this fund shall be allocated for depressed provinces asdeclared b# the resident as of the time of the effectivit# of R.$. 9o. 600:* rovided

further That availments under this fund shall be determined b# the resident on the basisof e+uit#.

rovided finall# That in para!raphs %5' %1' and %&' of this (ection not more one percent %4' of the allocated funds thereof shall be used for administrative expenses b# the implementin!a!encies.

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B Incr"&"nta# R"$"nu") ro& R"'u,#ic Act No := - Fifteen percent %4;' of theincremental revenue collected from the excise tax on tobacco products under R.$. 9o. >5&: shallbe allocated and divided amon! the provinces producin! burle# and native tobacco in accordancewith the volume of tobacco leaf production. The fund shall be exclusivel# utili)ed for pro!rams inpursuit of the followin! ob"ectives*

%4' Cooperative pro"ects that will enhance better +ualit# of a!ricultural products andincrease income and productivit# of farmers,

%5' Aivelihood pro"ects particularl# the development of alternative farmin! s#stem toenhance farmerEs income, and

%1' $!ro-industrial pro"ects that will enable tobacco farmers to be involved in themana!ement and subse+uent ownership of pro"ects such as post-harvest and secondar#processin! like ci!arette manufacturin! and b#-product utili)ation.

The Department of Bud!et and ana!ement in consultation with the versi!ht Committeecreated under said R.$. 9o. >5&: shall issue the correspondin! rules and re!ulations !overnin!the allocation and disbursement of this fund.

C Incr"&"nta# R"$"nu") ro& t!" E%ci)" Ta% on A#co!o# and To,acco +roduct)

%4' Two and a half percent %5.;' of the incremental revenue from the excise tax onalcohol and tobacco products statin! <anuar# 5::; shall be remitted directl# to thehilippine @ealth Insurance Corporation for the purpose of meetin! and sustainin! the!oal of universal covera!e of the 9ational @ealth Insurance ro!ram, and $/(c@a

%5' Two and a half percent %5.;' of the incremental revenue from the excise tax onalcohol and tobacco products startin! <anuar# 5::; shall be credited to the account ofthe Department of @ealth and constituted as a trust fund for its disease preventionpro!ram.

The earmarkin! provided under this provision shall be observed for five %;' #ears startin! from<anuar# 5::;.M

D Incr"&"nta# R"$"nu") ro& t!" Va#u"(Add"d Ta% S Fift# percent %;:' of the local!overnment unitEs share from the incremental revenue from the value-added tax shall beallocated and used exclusivel# for the followin! purposes*

%4' Fifteen percent %4;' for public elementar# and secondar# education to financethe construction of buildin!s purchases of school furniture and in-service teachertrainin!s,

%5' Ten percent %4:' for health insurance premiums of enrolled indi!ents as acounterpart contribution of the local !overnment to sustain the universal covera!e of the

national health insurance pro!ram,

%1' Fifteen percent %4;' for environmental conservation to full# implement acomprehensive national reforestation pro!ram, and

%&' Ten percent %4:' for a!ricultural moderni)ation to finance the construction offarm-to-market roads and irri!ation facilities.

(uch allocations shall be se!re!ated as separate trust funds b# the national treasur# and shall beover and above the annual appropriation for similar purposes.

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%/' The amount of Fifteen million pesos %4;::::::' shall be allocated for a ublicInformation and /ducation ro!ram to be administered b# the Bureau of Internal Revenueexplainin! clearl# to businesses their re!istration invoicin! and reportin! re+uirements under thevalue-added tax rules. (uch pro!ram should include seminars and visits to taxpa#ers tofamiliari)e them with the tax and the development and publication of eas#-to-read !uides on thevalue-added tax.

SEC :9 S'"cia# Financia# Su''ort to B"n"iciar0 +ro$inc") +roducing Virginia To,acco.- The financial support !iven b# the 9ational 3overnment for the beneficiar# provinces shall beconstituted and collected from the proceeds of fifteen percent %4;' of the excise taxes on locall#manufactured 8ir!inia-t#pe of ci!arettes.

The funds allotted shall be divided amon! the beneficiar# provinces pro-rata accordin! to thevolume of 8ir!inia tobacco production.

roduction producin! 8ir!inia tobacco shall be the beneficiar# provinces under Republic $ct 9o.6464. rovided however that to +ualif# as beneficiar# under R.$. 9o. 6464 a province musthave an avera!e annual production of 8ir!inia leaf tobacco in an amount not less than one million

kilos* rovided further that the Department of Bud!et and ana!ement %DB' shall each #eardetermine the beneficiar# provinces and their computed share of the funds under R.$. 9o. 6464referrin! to the 9ational Tobacco $dministration %9T$' records of tobacco acceptances at thetobacco tradin! centers for the immediate past #ear.

The (ecretar# of Bud!et and ana!ement is hereb# directed to retain annuall# the said fundse+uivalent to fifteen percent %4;' of excise taxes on locall# manufactured 8ir!inia t#peci!arettes to be remitted to the beneficiar# provinces +ualified under R.$. 9o. 6464.

The provision of existin! laws to the contrar# notwithstandin! the fifteen percent %4;' sharefrom !overnment revenues mentioned in R.$. 9o. 6464 and due to the 8ir!inia tobacco-producin! provinces shall be directl# remitted to the provinces concerned.

rovided That this (ection shall be implemented in accordance with the !uidelines ofemorandum Circular 9o. 04-$ dated 9ovember 5> 4==1 which amended emorandumCircular 9o. 04 entitled Mrescribin! 3uidelines for Implementin! Republic $ct 9o. 6464M dated<anuar# 4 4==5.

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rovided further That in addition to the local !overnment units mentioned in the above circularthe concerned officials in the province shall be consulted as re!ards the identification of pro"ectsto be financed.

TITLE /II OVERSI*HT CO..ITTEE

SEC :9 Congr"))iona# O$"r)ig!t Co&&itt"" (

$ Con!ressional versi!ht Committee hereinafter referred to as the Committee is hereb#constituted in accordance with the provisions of this Code. The Committee shall be composed ofthe Chairmen of the Committee on 2a#s and eans of the (enate and @ouse Representativesand four %&' additional members from each house to be desi!nated b# the (peaker of the @ouseof Representatives and the (enate resident respectivel#.

The Committee shall amon! others in aid of le!islation*

%4' onitor and ensure the proper implementation of Republic $ct 9o. >5&:,

%5' Determine that the power of the Commissioner to compromise and abate isreasonabl# exercised,

%1' Review the collection performance of the Bureau of Internal Revenue, and

%&' Review the implementation of the pro!rams of the Bureau of Internal Revenue.

In furtherance of the hereinabove cited ob"ectives the Committee is empowered to re+uire of theBureau of Internal Revenue submission of all pertinent information includin! but not limited to*industr# audits, collection performance data, status report on criminal actions initiated a!ainstpersons, and submission of taxpa#er returns* rovided however That an# return or returninformation which can be associated with or otherwise identif# directl# or indirectl# a particulartaxpa#er shall be furnished the Committee onl# when sittin! in /xecutive (ession unless suchtaxpa#er otherwise consents in writin! to such disclosure.

TITLE /III RE+EALIN* +ROVISIONS

SEC :91 In *"n"ra# - $ll laws decrees executive orders rules and re!ulations or parts thereof which are contrar# to or inconsistent with this Code are hereb# repealed amended or modifiedaccordin!l#.

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TITLE /IV FINAL +ROVISIONS

SEC :9: S"'ara,i#it0 C#au)" - If an# clause sentence para!raph or part of this Code shall bead"ud!ed b# an# Court of competent "urisdiction to be invalid such "ud!ment shall not affectimpair or invalidate the remainder of said Code but shall be confined in its operation to theclause sentence para!raph or part thereof directl# involved in the controvers#.

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ANNE/ES

Ann"% A(1 Loca# Di)ti##"d S'irit) Brand) +roduc"d ro& Sa' o Ni'a3 Coconut3 "tc co$"r"d ,0S"ction 1=1 ,

BrandGT0'" o S'irit) A##in 7> &#GBott#" Siz"

a

+roo

,

+roo Lit"r '"r

Bott#"

c R"tai#+ric"

d VAT

1

" E%ci)"Ta% '"r ,ott#"

,%

+"rc"ntag"E%ci)"Ta% in R"#ation toR"tai# +ric" "Gc

g N"t R"ta

+ric""%c#udinVAT andE%ci)"Ta%

3inebra (an i!uel %bilo!' 5;:ml

>: :.5:: 4:.:: 4.::

4.0:: 40.:: 6.&:

3inebra (an i!uel %bilo!' 1;:

ml

:.5>: 41.:: 4.1: 5.5&: 46.51 =.&0

3inebra (an i!uel %+uatrocantos'

1;:ml

:.5>: 4&.:: 4.&: 5.5&: 40.:: 4:.10

3inebra (an i!uel %+uatrocantos

6::ml

:.;0: 5>.:: 5.>: &.&>: 40.:: 5:.65

$ne"o lRum 0; Flat ; ears 16;ml

>: :.1:: 40.;: 4.0; 5.&:: 4&.;; 45.&;

$ne"o Rum 0; 16;ml

0; :.5&: 44.;: 4.4; 4.=5: 40.6: >.&1

2hite Castle ; ears 16;ml

>: :.1:: 54.:: 5.4: 5.&:: 44.&1 40.;:

2hite Castle 2hisk# 6;:ml

>: :.0:: &5.:: &.5: &.>:: 44.&1 11.::

Cherr# Brand# 6;:ml

0; :.&>> 1&.;: 1.&; 1.=:: 44.1: 56.4;

Tandua# Rhum ; ears 16;ml

6;:ml

>: :.1:: :.0::

44.6; 1&.5;

4.4> 1.&1

5.&:: &.>::

5:.&1 4&.:4

>.4> 50.:1

Tondena anila Rum (ilverA9

6;:ml

>: :.0:: &&.;: &.&; &.>:: 4:.6= 1;.5;

Cooler 1::ml

5: :.:0: 4>.;: 4.>; :.&>: 5.;= 40.46

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ANNE/ESAnn"% A(: Loca# Di)ti##"d S'irit) Brand) +roduc"d ro& Sa' o Ni'a3 Coconut3 "tc co$"r"d ,0S"ction 1=1,

BrandGT0'" o S'irit)A## in 7> &#GBott#"

Siz" a +roo , +roo Lit"r '"r

Bott#"

c R"tai#+ric"

d VAT1

" E%ci)" Ta%'"r ,ott#",%

+"rc"ntag"E%ci)"Ta% in R"#ation toR"tai# +ric" "Gc

g N"t R"tai# "%c#udingand E%ci)"

mperador Brand# 4>6ml

16; ml

6;: ml

>: >: >:

:.4;: :.1:: :.0::

45.;: 4=.;: 1>.;:

4.5; 4.=; 1.>;

4.5:: 5.&:: &.>::

=.0: 45.14 45.&6

4:.:; 4;.4;5=.>;

apoleon 8( 16; ml

6;: ml

>& >& :.14; :.01: 64.:: 4&;.:: 6.4: 4&.;: 5.;5: ;.:&: 1.;; 1.&> 04.1> 45;.&0

apoleon ; #ears 16; ml >& :.14; 4>.;: 4.>; 5.;5: 41.05 4&.41

( Brand# ; #ears 16; ml >: :.1:: 4=.:: 4.=: 5.&:: 45.01 4&.6:

( Brand# (pecialition

16; ml :: :.1:: 46.;: 4.6; 5.&:: 41.64 41.1;

hite Castle 2hiske# 4>6 ml

16; ml

6;: ml

>: >: >:

:.4&= :.1:: :.0::

45.5; 54.:: &5.::

4.51 5.4: &.5:

4.4=5 5.&:: &.>::

=.61 44.&1 44.&1

=.>1 40.;:11.::

anila Tondena Rhum 6;: ml >: :.0:: &&.;: &.&; &.>:: 4:.6= 1;.5;

anila Tondena 3old 6;: ml >: :.0:: &&.;: &.&; &.>:: 4:.6= 1;.5;

be#Es 3in 4 liter 6;: ml

=: :.=:: :.06;

44&.;: >=.;:

44.&; >.=;

6.5:: ;.&::

0.5= 0.:1

=;.>;6;.4;

ndua# /(G 16; ml

6;: ml

0; :.5&1 :.&06 44.;: 51.:: 4.4; 5.1: 4.=&& 1.610 40.=: 40.5& >.&4 40.=0

ndua# 2hite 16; ml

6;: ml

>: :.1:: :.0::

44.;: 51.::

4.4; 5.1:

5.&:: &.>::

5:.>6 5:.>6

6.=; 4;.=:

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ndua# Rhum 0; 16; ml

6;: ml

0; :.5&: :.&>6

44.;: 51.::

4.4; 5.1:

4.=5: 1.>=0

40.6: 40.=&

>.&1 40.>:

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